BREAKING NEWS – 07.02.2024

In the press release as of January 31st, 2024, Convergenze SpA – a Benefit Company active in the 100% green Telecommunication and Energy sectors, present in the national territory through its patented EVO (Electric Vehicle Only) network and proprietary optic-fibre network with innovative XGS-PON technology and listed on the Euronext Growth Milan market – disclosed data regarding preliminary operating results for 2023 and some main business KPIs, which are unaudited. In 2023, The Company generated revenues of € 22.60 million, marking an improvement over the values estimated in our previous report of € 21.80 million. Sales revenues are attributable to the following break-down: the TLC Business Unit recorded, upon the closing of FY2023, revenues of € 10.50 million, marking a 12.9% growth over the comparable figure for FY22A of € 9.30 million; the Energy Business Unit recorded 2023 revenues of € 12.10 million, down from the 2022 figure (€ 18.80 million, -35.6%) exclusively due to the reduction in energy prices, which marked a -58.0% compared to the figure of the previous year in Italy.  The 2023 fiscal year is also marked by a significant growth in contracted services, amounting to over 61,800. More than 51,000 of these are related to Telecommunications, 16.0% up from the 2022 figure of 44,000, while more than 10,800 are related to Energy, also 10.0% up from 9,800 in 2022. Also, the proprietary optic-fibre network was further expanded during 2023, reaching a total extension of more than 9,200 kilometres, 23.8% up compared to more than 7,500 kilometres as of December 31st, 2022. The number of PODs (electricity pick-up points) increased by 9.4% at the end of 2023, reaching 9,300 points compared to more than 8,500 at the end of 2022. In addition, in December 2023, sales of more than 3.20 million kWh were recorded, marking an increase of 18.5% compared to nearly 2.70 million in December 2022.  In terms of marginality, the estimates of management on the EBITDA margin of the Business Units are quite positive and show the following: the figure processed for the TLC Business Unit, is in line with the trend recorded for the first three quarters of 2023 and is estimated to range between 27.5% and 28.0%; for the Energy Business Unit, an increase in marginality is expected, with an EBITDA margin estimated between 2.0% and 3.0%. These values indicate a significant improvement both from values observed in 1H23A and from previously made estimates especially for the Energy business, for which a positive and progressive recovery from previously recorded losses is expected.  The significant progress can be attributed to the numerous measures to enhance the efficiency of the activities implemented by the Company in 2023 and remaining effective to date. The forecast for the Energy BU includes the impact of social bonuses introduced by the Government, which are subject to frequent regulatory reviews and are granted to consumers in the form of credit notes and then reclaimed on supplier invoices. In addition, the forecast is affected by estimates of the Energy Business unit’s active and passive cycles, which, to date, are not yet definitive due to the delay in the receipt of invoices, which is common in the reference market. To conclude, the Company is experiencing a positive phase, characterized by growth in TLC Business Unit revenues, as well as kilometres of optic-fibre laid, marking tangible progress in infrastructure and in the ability to serve a broader customer base. This expansion of the customer base, together with sustained marginality in both Business Units, indicates an healthy business strategy and future orientation that provides promise for the ongoing strengthening of the business. Taking the press release into consideration, while waiting to meet with management and evaluate the 2023 annual results, we confirm our estimates: target price € 3.65 BUY rating and risk Medium.

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