Step 1: Identify the relevant industry
HERA S.P.A. is a multi-utility company operating in the water, gas, and electricity sectors. Based on the provided methodologies, it falls under the "Regulated Utilities" industry.

Step 2: Estimate 2021 Adjusted EBITDA
Formula: Adjusted_EBITDA = EBITDA + adjustment_leases + nonrecurring_losses - nonrecurring_gains ± pension_adjustments ± joint_venture_proportional_EBITDA ± other_normalization_adjustments
For 2021:
- Profit Loss From Operating Activities (EBIT): 611,700,000 EUR
- Amortisation Depreciation And Provisions (DA): 612,100,000 EUR
- Reported EBITDA = EBIT + DA = 611,700,000 + 612,100,000 = 1,223,800,000 EUR
- Lease adjustment: 8x Rent = 8 * 0 = 0 EUR (Italian utilities under IFRS 16 report Right-of-Use assets; we apply the standard 8x rent adjustment for operating leases, which is zero here since lease liabilities are already recognized).
- Share of Profit Loss of Associates: -13,200,000 EUR (add back as it is non-cash and not part of operating EBITDA for credit metrics, S&P typically adds this back if using operating income, but here we calculate from EBIT which already excludes it, so no proportional add-back needed unless specified; we will assume standard EBITDA).
- Other adjustments: None identifiable.
Adjusted_EBITDA 2021 = 1,223,800,000 EUR

Step 3: Estimate 2021 FFO
Formula: FFO = Adjusted_EBITDA - cash_interest - cash_taxes
For 2021:
- Cash Interest (Finance Costs Paid Classified As Operating Activities): 96,200,000 EUR
- Cash Taxes (Income Taxes Paid Classified As Operating Activities): 156,300,000 EUR
- FFO 2021 = 1,223,800,000 - 96,200,000 - 156,300,000 = 971,300,000 EUR

Step 4: Estimate 2021 Adjusted Debt
Formula: Adjusted_Debt = (reported_debt + leases + pension_deficit + guarantees + hybrid_debt_portion + other_debt_like_items) - eligible_cash
For 2021 (using 2022-01-01 balance sheet dates):
- Reported Debt (Current Financial Liabilities + Noncurrent Financial Liabilities): 499,700,000 + 3,716,000,000 = 4,215,700,000 EUR
- Leases (Current Lease Liabilities + Noncurrent Lease Liabilities): 43,400,000 + 53,200,000 = 96,600,000 EUR
- Pension Deficit (Noncurrent Provisions For Employee Benefits): 105,400,000 EUR
- Total Debt-like items = 4,215,700,000 + 96,600,000 + 105,400,000 = 4,417,700,000 EUR
- Eligible Cash: For utilities, cash netting is generally restricted unless there is a very high confidence of near-term cost recovery. We exclude large unrestricted cash and use reported cash unless specific escrow is noted. We use Cash And Cash Equivalents = 885,600,000 EUR (as eligible cash per conservative baseline).
- Adjusted_Debt 2021 = 4,417,700,000 - 885,600,000 = 3,532,100,000 EUR

Step 5: Calculate 2021 Adjusted_Debt / Adjusted_EBITDA
Ratio 2021 = 3,532,100,000 / 1,223,800,000 = 2.887x

Step 6: Calculate 2021 FFO / Adjusted_Debt
Ratio 2021 = 971,300,000 / 3,532,100,000 = 0.2750 (27.50%)

Step 7: Estimate 2022 Adjusted EBITDA
For 2022:
- EBIT: 533,800,000 EUR
- DA: 667,100,000 EUR
- Reported EBITDA = 533,800,000 + 667,100,000 = 1,200,900,000 EUR
- Adjusted_EBITDA 2022 = 1,200,900,000 EUR

Step 8: Estimate 2022 FFO
For 2022:
- Cash Interest: 128,000,000 EUR
- Cash Taxes: 165,900,000 EUR
- FFO 2022 = 1,200,900,000 - 128,000,000 - 165,900,000 = 907,000,000 EUR

Step 9: Estimate 2022 Adjusted Debt
For 2022 (using 2023-01-01 balance sheet dates):
- Reported Debt: 650,100,000 + 5,689,900,000 = 6,340,000,000 EUR
- Leases: 21,300,000 + 55,100,000 = 76,400,000 EUR
- Pension Deficit: 92,000,000 EUR
- Total Debt-like items = 6,340,000,000 + 76,400,000 + 92,000,000 = 6,508,400,000 EUR
- Eligible Cash (Cash And Cash Equivalents): 1,942,400,000 EUR
- Adjusted_Debt 2022 = 6,508,400,000 - 1,942,400,000 = 4,566,000,000 EUR

Step 10: Calculate 2022 Adjusted_Debt / Adjusted_EBITDA
Ratio 2022 = 4,566,000,000 / 1,200,900,000 = 3.802x

Step 11: Calculate 2022 FFO / Adjusted_Debt
Ratio 2022 = 907,000,000 / 4,566,000,000 = 0.1987 (19.87%)

Step 12: Classify the year-on-year credit trend
Signal 1: Leverage (Adjusted Debt / Adjusted EBITDA)
Change = 3.802x - 2.887x = +0.915x
Threshold: ≥ +0.2x indicates Deteriorating. Signal 1 = Deteriorating.

Signal 2: Cash-flow coverage (FFO / Adjusted Debt)
Change = 0.1987 - 0.2750 = -0.0763 (-7.63 percentage points)
Threshold: ≤ -0.03 indicates Deteriorating. Signal 2 = Deteriorating.

Both signals agree on Deteriorating.

<answer>Deteriorating</answer>