An analysis of the annual accounts of highway finns in Italy applying a comparative approach through income and financial margins assessments

Firms operating in the highway sector in Italy are characterized by high investment and high capital intensity; these firms in fact manage public infrastructure which requires investments in maintenance and Fixed Assets (FA). The highway sector in Italy has undergone increased concentration which has reduced the number of firms operating, increased their average size and created high barriers to entry. In this context, companies in the sector have reported very positive income results in recent years and an exploration of this topic could prove useful in analyzing whether these earnings have generated adequate financial flows to support investments and in defining whether a correlation exists between earnings and cash flow generation. The research analyzes a sample of 12 firms that have licensed 1,776 km of highway (148, on average for each highway). This is about 26% of all highways in Italy or 45% when not considering Autostrade per FItalia concessions. Analysis confirms the high level of capital intensity required for highway activities (the median value of TA:S is 4,425), particularly because of investments in fixed assets (the median value of FA:S is 3,378). The data show that Net Working Capital (NWC) is negative and is-29.71% of Net Invested Capital (NIC), expressing the application of a so-called aggressive strategy of capital management. Again, the analysis shows that income margins (EBITDA, EBIT and profit) are frequently correlated with financial margins (CF, OCF, UFCF and FCFE) but the shift between economic and financial cycles shows that financial margins cannot be properly approximated by applying income margins. These margins differ in a statistically significant way as shown by applying a nonparametric approach for paired samples (Wilcoxon-T) to compare means. To improve the results, future research could analyze cash flow to equity and profit generation which could be useful in developing analyses to compare profitability of highway firms with other types of firms, even in other European and non-European countries.