Consolidated income statement (*)

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2015

 

 

2016

2017

 

 

Pro-forma adjusted

 

(millions of €)

Reported (**)

Pro-forma adjusted

Reported (**)

Adjusted

Change

Change %

(*)

Changes in the income statement results shown in the table, as well as in those later in this Report, unless otherwise indicated, must be understood as changes in the results for the adjusted 2017 financial year compared to the 2016 pro-forma adjusted year.Percentage changes, unless otherwise specified, are calculated in relation to the data indicated in the related tables.

(**)

The Legal table of the Financial Statement.

(***)

Entirely held by Snam shareholders

2,502

 

Regulated revenue

2,444

2,444

2,434

2,434

(10)

(0.4)

125

 

Non-regulated revenue

57

116

99

99

(17)

(14.7)

2,627

 

Total revenue

2,501

2,560

2,533

2,533

(27)

(1.1)

2,509

 

Total revenue – net pass through items

2,356

2,415

2,441

2,441

26

1.1

(570)

 

Operating costs

(557)

(573)

(526)

(511)

62

(10.8)

(452)

 

Operating expenses-NET pass through items

(412)

(428)

(434)

(419)

9

(2.1)

2,057

 

EBITDA

1,944

1,987

2,007

2,022

35

1.8

(576)

 

Amortisation, depreciation and impairment

(651)

(651)

(659)

(659)

(8)

1.2

1,481

 

Operating profit (EBIT)

1,293

1,336

1,348

1,363

27

2.0

(332)

 

Net financial expenses

(510)

(263)

(283)

(227)

36

(13.7)

153

 

Net income from equity investments

116

135

161

150

15

11.1

1,302

 

Pre-tax profit

899

1,208

1,226

1,286

78

6.5

(392)

 

Income tax

(308)

(363)

(329)

(346)

17

(4.7)

910

 

Net profit (***)

591

845

897

940

95

11.2

 

 

Net Profit – discontinued operations (***)

270

 

 

 

 

 

910

 

Group net income (***)

861

845

897

940

95

11.2

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Reconciled summary of adjusted results (*)

2015

 

(€ million)

2016

2017

Change

Change %

(*)

For reconciliation of the nature of the individual adjustments, read the paragraph: "Non-GAAP measures" of this Report.

(**)

Entirely held by Snam shareholders.

1,427

 

Operating profit (EBIT)

1,293

1,348

55

4.3

54

 

Movement of the elisions originating from intercompany transactions to discontinued operations

43

 

(43)

(100.0)

 

 

Excluding special items

 

15

15

 

1,481

 

Adjusted EBIT

1,336

1,363

27

2.0

 

 

 

 

 

 

 

796

 

Net profit (**)

591

897

306

51.8

48

 

Movement of the elisions originating from intercompany transactions to discontinued operations

80

 

(80)

(100.0)

19

 

Excluding special items

137

43

(94)

(68.6)

47

 

Pro-forma adjustmentsItalgas Group results by share (13.5%) for the entire year

37

 

(37)

(100.0)

910

 

Adjusted net profit

845

940

95

11.2

The adjusted24 operating profit for the financial year 2017, which excludes special items represented by chargesconnected to the application of advance instrument for pensions, regulated by Art. 4 paragraphs 1-7 of Italian Law No. 92/2012, the so-called “Fornero Law” (€ 15 million, including exit incentives) amounted to 1,363, an increase of 27 million euros, equal to 2.0%, compared to the 2016 pro-forma adjusted operating profit. The higher revenues (+€ 26 million, 1.1%), mainly attributable to the natural gas transportation and storage sectors, and lower operating costs (+€ 9 million, or 2.1%), were partially offset by the increase in amortisations and depreciations for the period (-€ 8 million, or 1.2%), mainly due to the amortisation deriving from the entry into service of new infrastructure, which was partly absorbed by lower impairment of tangible assets.

In particular, the reduction in operating costs was mainly due to the impact of the efficiency plan (+ € 19 million) and lower capital losses from assets (+ € 15 million), partly offset byhigher net provisions for risks and charges (- € 12 million), which was mainly attributableto tax disputes for indirect taxes, as well as greater provisions for adjustments to asset items (- € 10 million).

The adjusted net profit that, in addition to the aforementioned charges for Isopensione (€11 million net of the tax effect), excludes special items represented by the charges connected to the repurchase of bonds in the last quarter of 2017 (€ 43 million net of the tax effect) and income related to the one-off adjustment of deferred tax liabilities of the investee TIGF (€ 11 million), it atteststo €940 million, up by €95 million (+ 11.2%;) compared to the adjusted pro-forma net profit for the financial year 2016.

The increase, in addition to the greater operating profit, was due to:(i) lower net financial expenses (+36 million euros, or 13.7%), which benefitted from a reduction in the average cost of debt, as well as benefits deriving from optimisation actions carried out during the period 2016 and 2017, in particular the liability management operation completed in October 2016 and the financing operations carried out during the year, as well as the reduction in average debt for the period; (ii) higher net income from investments (+ € 15 million, +11.1%); (iii) lower income taxes (+ € 17 million, or 4.7%) mainly attributable to the reduction from 1 January 2017 of the IRES rate from 27.5 to 24.0%, partially offset by the higher pre-tax profits.

Analysis of the entries on the adjusted financial statement

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Total revenue

2015

 

(€ million)

2016

2017

Change

Change %

(*)

The figures for 2015 and 2016 include the restoration of the eliminations deriving from intercompany transactions with discontinued operations.

 

 

Business segments

 

 

 

 

2,145

 

Transportation

2,035

2,039

4

0.2

25

 

Regasification

19

22

3

15.8

535

 

Storage

584

601

17

2.9

209

 

Corporate and other activities

226

233

7

3.1

(287)

 

Elisions from consolidation (*)

(304)

(362)

(58)

19.1

2,627

 

 

2,560

2,533

(27)

(1.1)

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Regulated and non-regulated revenue

2015

 

(€ million)

2016

2017

Change

Change %

(*)

The main revenue items offset in costs relate to interconnection and sales of natural gas carried out for balancing purposes.

(**)

The figures for 2015 and 2016 include restoration of the adjustments deriving from inter-company transactions with discontinued operations.

2,502

 

Regulated revenue

2,444

2,434

(10)

(0.4)

 

 

Business segments

 

 

 

 

1,977

 

Transportation

1,855

1,889

34

1.8

18

 

Regasification

18

18

 

 

389

 

Storage

426

435

9

2.1

118

 

Revenue items offset in costs (*)

145

92

(53)

(36.6)

125

 

Non-regulated revenue (**)

116

99

(17)

(14.7)

2,627

 

Total revenue

2,560

2,533

(27)

(1.1)

Regulated Revenue (€2,434 million) declined by €10 million in respect to the fiscal year 2016 (-0.4%).Net the components that have a counterpart in costs, the regulated revenue total €2,342 million, an increase of €43 million, equal to 1.9%, thanks to the continuous investment and greater volumes of injected gas, and relate to transport (€1,889 million), storage (€435 million) and re-gasification (€18 million).

The non-regulated revenues (€99 million euros, net of consolidation adjustments) decreased by €17 million compared to 2016, equal to 14.7%, and mainly refer to revenues from services rendered to the Italgas Group (€ 60 million), technical and specialist services to unconsolidated foreign companies (€ 11 million) and income from the rental and maintenance of fibre optic telecommunications cables (€13 million).The reduction was mainly due to lower revenues from services provided to the Italgas Group, settled through several contracts concluded as of 31 December 2017.

Operating costs

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Operating Costs by Business segments

2015

 

(€ million)

2016

2017

Change

Change %

(*)

The figures for 2015 and 2016 include the restoration of the eliminations deriving from intercompany transactions with discontinued operations.

(**)

With reference to 2017, the cost of interconnections to Gas Transport Infrastructures was adjusted by the corresponding revenue from Snam Rete Gas (€ 5 million in the period October-December 2017).

 

 

Business segments

 

 

 

 

485

 

Transportation

469

441

(28)

(6.0)

19

 

Regasification

12

15

3

25.0

145

 

Storage

151

165

14

9.3

208

 

Corporate and other activities

245

252

7

2.9

(287)

 

Elisions from consolidation (*) (**)

(304)

(362)

(58)

19.1

570

 

 

573

511

(62)

(10.8)

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Operating costs – Regulated and non-regulated activities

2015

 

(€ million)

2016

2017

Change

Change %

(*)

Net special items.

(**)

The main revenue items offset in revenue relate to interconnection and sales of natural gas carried out for balancing purposes.

(***)

The figures for 2015 and 2016 include restoring the adjustments deriving from inter-company transactions with discontinued operations.

463

 

Costs of regulated activities

456

404

(52)

(11.4)

268

 

Controllable fixed costs

271

267

(4)

(1.5)

13

 

Variable costs

9

7

(2)

(22.2)

64

 

Other costs (*)

31

38

7

22.6

118

 

Cost items offset in revenue (**)

145

92

(53)

(36.6)

107

 

Costs of non-regulated activities (***)

117

107

(10)

(8.5)

570

 

Total operating costs

573

511

(62)

(10.8)

Operating costs of regulated activities

Operating costs of regulated activities (€404 million) decreased by €52 million, or 11.4% compared to 2016.Net of the components that are offset by revenue, the operating costs of the regulated activities are substantially in line with the year 2016 (+€1 million).

The fixed controllable costs (€267 million) represented by the total of the cost of personnel and external costs of a recurrent nature, record a decrease of €4 million, equal to 1.5% compared to the fiscal year 2016 (€271 million), partly due to the implementation of efficiency measures.

Variable costs (€7 million) decreased by €2 million, or 22.6%, compared to 2016.

Other costs (€ 38 million, net of the special items represented by the provisions of the former Fornero law early retirement plan) increased by € 7 million, or 22.6% compared to 2016.The increase is due essentially to the higher net provisions for risks and charges (-€8 million), mainly attributable to tax disputes for indirect taxes, as well as higher provisions for bad debt provisions (-€2 million).

Operating costs of non-regulated activities

Operating costs of non-regulated assets (€107 million) decreased by €10 million, or 8.5% compared to 2016, mainly as a result of lowerlabour costs, the loss of charges directly related to the division operations completed in November 2016, and lower charges relating to compensation for termination of employment relationships paid in 2016 (€5 million). These effects were partly offset by the higher net provisions for risks and charges and the allowance for bad debt provisions (€12 million overall).

Service personnel

The number of employees as of 31 December 2017 (2,919 people) is analysed below according to professional status.

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2015

 

(no.)

2016

2017

Change

Change %

 

 

Professional status

 

 

 

 

99

 

Executives

87

93

6

6.9

449

 

Managers

421

456

35

8.3

1,736

 

Skilled workers

1,651

1,655

4

0.2

721

 

Manual workers

724

715

(9)

(1.2)

3,005

 

 

2,883

2,919

36

1.2

The change of 36 units compared to 2016 is mainly due to the entry of 27 resources deriving from the entry of Infrastrutture Trasporto Gas into the consolidation area.

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Amortisation, depreciation and impairment

2015

 

(€ million)

2016

2017

Change

Change %

573

 

Total amortisation and depreciation

616

646

30

4.9

 

 

Business segments

 

 

 

 

492

 

Transportation

517

539

22

4.3

5

 

Regasification

5

5

 

 

71

 

Storage

87

95

8

9.2

5

 

Corporate and other activities

7

7

 

 

3

 

Impairment losses (Reversals)

35

13

(22)

(62.9)

576

 

 

651

659

8

1.2

Depreciation and Devaluation (€659 million) increased by €8 million, equal to 1.2% compared to the fiscal year 2016.The increase was principally due to higher depreciation (+€30 million; +4.9%) recorded in all sectors of activities, essentially as a result of the effective date of new infrastructure and higher devaluation (€22 million; -62.9%) relating to the transport and regasification sectors.

Adjusted EBIT

Below is a breakdown of adjusted EBIT by business segment:

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2015

 

(€ million)

2016

2017

Change

Change %

 

 

Business segments

 

 

 

 

1,165

 

Transportation

1,021

1,048

27

2.6

1

 

Regasification

(5)

2

7

 

319

 

Storage

346

339

(7)

(2.0)

(4)

 

Corporate and other activities

(26)

(26)

 

 

1,481

 

 

1,336

1,363

27

2.0

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Net financial expense

2015

 

(€ million)

2016

2017

Change

Change %

(*)

The figures for 2015 and 2016 include the restoration of the eliminations deriving from intercompany transactions with discontinued operations.

(**)

Net special items.

344

 

Financial expense (income) related to net financial debt

281

235

(46)

(16.4)

347

 

- Interest and other expense on short- and long-term financial debt (*) (**)

281

236

(45)

(16.0)

(3)

 

Interest on financial receivables not held for operating activities

 

(1)

(1)

 

17

 

Other net adjusted finance charges

4

4

 

 

12

 

- Accretion discount

10

11

1

10.0

5

 

- Other net financial expense (income) (**)

(6)

(7)

(1)

16.7

 

 

Losses (Gains) on hedging derivatives – ineffective portion

1

1

 

 

(29)

 

Financial expense capitalised

(23)

(13)

10

(43.5)

332

 

 

263

227

(36)

(13.7)

The net financial charges (€227 million, net of the special items related to the liability management operation implemented in October 2017) show a reduction of €36 million, or 13.7%, compared to 2016.The reduction is due to lower finance charges correlated to the net financial debt (-€46 million; -16.4%) principally connected to the lower average cost of the debt, also thanks to optimisation interventions in the group’s financial structure put into effect by Snam.

The finance charges capitalized in the fiscal year 2017 total €13 million, a €10 million reduction in respect to the fiscal year 2016.

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Net income from equity investments

2015

 

(€ million)

2016

2017

Change

Change %

(*)

Values for 2015 and 2016 include pro-forma adjustments.

(**)

Net special items.

153

 

Equity method valuation effect (*) (**)

135

150

15

11.1

153

 

 

135

150

15

11.1

The net proceeds on investments (€150 million) refer to the relative contributions pertaining to the interim net results of the companies valued using the equity method. In particular, to the jointly-controlled companies TAG (€ 84 million), TIGF (€ 30 million, net of a one-off adjustment of deferred taxes) and AS Gasinfrastruktur Beteiligung GmbH (€ 11 million) and the associated company Italgas (€ 39 million), as well as the share attributable to the loss for this period by GasBridge 1 BV and Gasbridge 2 BV (-€ 10 million in total), which includes the effects of the write-down on investments of the latter held in Interconnector UK (€18 million).

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Income tax

2015

 

(€ million)

2016

2017

Change

Change %

(*)

Net special items.

426

 

Current taxes (*)

403

373

(30)

(7.4)

 

 

(Prepaid) deferred taxes (*)

 

 

 

 

(17)

 

Deferred taxes

(22)

(16)

6

(27.3)

(17)

 

Prepaid taxes

(18)

(11)

7

(38.9)

(34)

 

 

(40)

(27)

13

(32.5)

392

 

Total taxes

363

346

(17)

(4.7)

The income taxes total €346 million, a €17 million reduction, equal to 4.7%, in respect to the fiscal year 2016. The decrease is essentially attributable to the reduction from 1 January 2017 of the IRES rate from 27.5 to 24.0%, partly offset by the higher pre-tax profit and lower ACE – Economic Growth Aid benefit, introduced by Italian Legislative Decree of 6 December 2011 no. 201 converted by the Law of 22 December 2011, no. 214 and subsequent additions and modifications.

24 EBIT was analysed by isolating only the elements that resulted in a change to that figure. To this end, applying gas sector tariff regulations generates revenue components that are offset in costs. Those components mainly pertained to natural gas interconnections and transfers carried out for purposes of balancing the gas system.

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