Financial position, results of operations and cash flows of the Iren S.p.A.

Income statement

Income statement of Iren S.p.A.

(*) Change of more than 100%

Revenue

Total revenue for Iren S.p.A. was € 231.9 million (upwards compared to the 213.6 million in 2019), primarily relating to corporate service activities provided to Group companies.

Operating expenses

Operating expenses amounted to € 219.0 million, upwards compared to the FY 2019 figure (201.1 million) due in particular to costs for services, attributable to the management of staff activities in favour of Group companies and, specifically, the management of information systems. This increase in the cost base is reflected in the revenue trend described above.

Other expenses are higher than in the previous year with reference to property taxes on the property complexes repurchased at the beginning of the year.

Depreciation, amortisation, provisions and impairment losses

Depreciation, amortisation, provisions and impairment losses amounted to 31.3 million euro.

Depreciation and amortization, which amounted to € 31.4 million, compared to € 26.6 million in the previous year, were up due to the effect of the release of recent significant investments in the IT area.

The item of net provisions is substantially nil; the net releases of the previous year, amounting to € 8.1 million, referred instead to the absence of risks for charges relating to office buildings rented from the real estate fund, subject to redemption at the beginning of 2020.

Financial income and expenses

The balance between financial income and expense was positive at 224.2 million euro.

Analysing the breakdown of the items, financial income, amounting to € 290.0, million, mainly includes dividends from subsidiaries of € 236.4 million (€ -30.1 million compared to 2019) and interest income on loans to subsidiaries, associates and joint ventures of € 52 million (€ -10.9 million compared to the previous year, which included throughout the period interest on the shareholders' loan to OLT Offshore LNG Toscana, subject to sale at the beginning of 2020).

Financial expense totalled € 65.8 million, consisting mainly of interest expense paid on long-term bonds (€ 54.7 million) and charges incurred to close out derivative positions that do not qualify for hedge accounting (€ 6.4 million). The significant decrease compared to the figure for 2019, i.e. 87.1 million, is attributable to the lower expenses for liability management operations, reinforced by the reduction in the average cost of financial debt and interest expense, of an accounting nature, related to existing leases.

Profit (loss) before tax

As a consequence of the trends illustrated above, the profit before tax was € 205.9 million, downwards compared to 238.2 million in 2019.

Income tax expense

Income taxes were positive (4.2 million euro), owing to a negative taxable income deriving from the non‐ taxability of 95% of the dividends received.

Net profit (loss) for the period

Including taxes for the year, there was a profit of 210.1 million euro.

 

Statement of Financial Position

Reclassified statement of financial position of Iren S.p.A. (1)

(*) Change of more than 100%

(1) For a reconciliation of the reclassified statement of financial position with that of the financial statements, please refer to the specific annex to the Separate Financial Statements.

The main items of the statement of financial position subject to significant changes in the period are commented on below.

Non‐current assets at 31 December 2020 amounted to € 2,793.1 million, up compared to 31 December 2019, when they were € 2,770.4 million. The increase (+22.7 million) was mainly due to the effect of the following determinants:

• technical investments in tangible and intangible fixed assets (+51.2 million), mainly relating to motor vehicles, property redevelopment and IT implementations, disposals (-2.3 million) and amortization (-31.4 million) for the period;
• the recognition of rights of use in application of IFRS 16 - Leases for € 5.2 million, mostly relating to lease contracts from Group companies for buildings used for management activities.

The decrease in Net Working Capital, which was negative at the end of 2020 (€ -38.8 million), is attributable primarily to the Group's VAT positions with its subsidiaries and, to a lesser extent, to trade receivables due from them in connection with the corporate services provided.

"Provisions for Risks and Employee Benefits" amounted to € 32.5 million and decreased by € 4.9 million compared to 31 December 2019, largely as a result of disbursements in the period of the provision set aside for early retirement of personnel.

Equity amounted to € 1,971.9 million, compared to the € 1,908.2 million of 31 December 2019 (€ +63.7 million). The change in the period mainly refers to net profit (+210.1 million), dividends paid (-119.5 million), actuarial losses (-1.0 million) and purchases of treasury shares (-25.6 million).

Net financial debt at year-end was € 752.3 million, an increase of 138.2 million compared to 31 December 2019 (-15.5%), mainly due to the performance of the net working capital. For more details please see the analysis of the statement of cash flows presented below.

 

Cash flow statement of Iren S.p.A.

Change in net financial debt

The statement below details the movements in the Group’s net financial debt that occurred in the period.

(*) Change of more than 100%

The change in financial debt derives from the following determinants:

• operating cash flow of € +114.3 million, influenced by the performance of net working capital;
• cash flow from investing activities (+186.5 million), which includes dividends received from subsidiaries and investments for the period;
• cash flow from equity amounting to -145.1 million, which includes dividends paid (-119.5 million) and the purchase of treasury shares (-25.6 million);
• the item "Other changes", amounting to -17.5 million, includes financial income and expenses received and paid, the change in the fair value of derivative instruments hedging interest rate risk and the effect of the recognition of new lease agreements falling within the scope of IFRS 16. The 2019 comparative figure of -142.5 million included, among other things, the effect of the first-time application of IFRS 16 (-93.8 million).

We can note finally that the statement of cash flows prepared according to the format of a change in cash and cash equivalents is presented in the Separate Financial Statements at 31 December 2020.

The table below reconciles equity and the result of the Parent Company Iren S.p.A. as at 31 December 2020 and 31 December 2019 with those of the consolidated financial statements.

“Elimination of intra‐group margins” refers to the elimination of capital gains from the sale of business units or companies within the Group. In particular, it is worth noting the transaction related to the Genoa integrated water cycle carried out by the former AMGA (positive effect of € 2.5 million on the income statement and negative by € 31.3 million on Equity).