Snam presents in the management report, in addition to the financial results envisaged by the IFRS, certain variables deriving from the latter, even if not envisaged by the IFRS or by other standard setters (Non-GAAP measures).
Snam’s management believes that these measures facilitate the analysis of the Group’s performance and of the business segments, ensuring better comparability of results over time.
Non-GAAP financial information must be considered as complementary and does not replace the information prepared in accordance with IFRS.
In accordance with the Consob Communication DEM/6064293 of 28 July 2006 and subsequent amendments and additions (Consob Communications no. 0092543 of 3 December 2015 which incorporates the ESMA/2015/1415 guidelines on alternative performance indicators), the following paragraphs provide indications relating to the composition of the main alternative performance indicators used in this document, not directly deducible from reclassifications or algebraic sums of conventional indicators23 and compliant with international accounting standards24.
Adjusted EBIT and net profit
Adjusted EBIT and net profit are obtained by excluding the special items (respectively gross and net of the related taxes) from the operating profit and the reported net profit, as per the legal scheme of the Income Statement.
Income entries classified as special items for 2019 refer to: (i) financial expense resulting from the buy back on the market of bonds under the scope of the liability management operation implemented by Snam in December 2019 (€38 million, €29 million excluding the tax effect, €47 million in 2018, €35 million excluding the tax effect). The expenses are essentially attributable to the difference between the outlay for the buy back of the bonds on the market and the valuation at amortised cost of the actual bonds; (ii) the release to the income statement of the provision for impairment losses (€35 million) following the announcement by the Council of State on 5 March 2020 which, confirming the ruling of the Milan Regional Administrative Court of 2017, ratified the recognition, by the Authority to the company, of part of the receivables not collected relating to the balancing activities for the period 1 December 2011-23 October 201225.
Income statement items are classified as special items, if they are material and when: (i) they result from non-recurring events or transactions or from transactions or events which do not occur frequently in the ordinary course of business; or (ii) they result from events or transactions which are not representative of the normal course of business.
The tax rate applied to the items excluded from the calculation of adjusted net profit is determined on the basis of the nature of each revenue item subject to exclusion.
Free cash flow
Free cash flow is the measure that allows the connection between the obligatory financial statement, which expresses the change in liquidity between the beginning and end of the period, and the change in net financial debt between the beginning and end of the reclassified cash flow statement. The free cash flow represents the surplus or cash deficit remaining after the investment financing and close alternatively: (i) on the cash change for the period, after the cash flows related to the financial payables/assets (credit/debit repayments/financial payables) have been added/subtracted, to the equity capital (payment of dividends/net acquisition of own shares/capital injections), as well as the effects on cash and cash equivalents of changes in the scope of consolidation and exchange differences arising from conversion; (ii) on the change in net financial debt for the period, after the flows relating to own capital have been added/subtracted, as well as the effects on net financial debt of changes in the scope of consolidation and exchange differences arising on conversion.
23 According to the CESR/05-178b recommendation of October 2005, all the data included in the financial statements audited in accordance with IFRS or in the balance sheet, the income statement, the statement of changes in equity and the cash flow statement are conventional indicators or in the commentary notes.
25 For more details, see Note 26, “Guarantees, commitments and risks — Disputes”, of the Notes to the consolidated financial statements.