Non-GAAP measures

Non-GAAP measures

Snam presents in the directors’ 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 indicators30 and compliant with international accounting standards31.

With regard to the impact of Covid-19 on the determination of alternative performance indicators, ESMA32 recommends caution in the use of separate items in the income statement with regard to the impacts of Covid-19 in order to ensure consistency in the determination of alternative performance indicators, and not to affect the intelligibility of a company’s financial performance through new indicators if not adequately justified.

In accordance with these recommendations, also due to the limited impact of Covid-19 on its results, Snam has not changed the Non-GAAP financial disclosure provided previously, simply isolating emerging costs directly related to the current pandemic situation as income components classified under special items, as illustrated below.

EBITDA, EBIT and adjusted net profit

EBITDA, EBIT and adjusted net profit are obtained by excluding the special items (gross and net of the related taxes, respectively) from the respective reported profit measures, as per the legal scheme of the Income Statement.

Income components classified among special items for financial year 202033 involve:

  1. 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 2020 (32 million euros, 24 million euros after the tax effect, 38 million euros in 2019, 29 million euros after the tax effect). These charges are essentially linked to the difference between the outflow deriving from the repurchase of bonds on the market and measurement at the amortised cost of the bonds themselves;
  2. the costs suffered due to the state of emergency linked to the Covid-19 pandemic, for a total of 27 million euros (22 million euros net of tax effects), relative to: (a) donations of healthcare materials (14 million euros) and cash (2 million euros), also through Fondazione Snam, to assist the Italian healthcare system and the third sector; (b) purchases of personal protective equipment for internal use (6 million euros); (c) costs for services (5 million euros), mainly to deep clean working environments and for security.
  3. allocation to the provision for risks and charges (17 million euros) for the estimate of likely tax and financial charges against facts and/or events already existing as of 31 December 2020.

Special items

Income components are classified among special items, if significant, 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.

Any income components deriving from non-recurring transactions in accordance with Consob Resolution no. 15519 of 27 July 2006 are also shown separately in the IFRS financial report.

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 cash surplus or deficit left over after financing the investments and closes either: (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 self-owned capital (payment of dividends/net acquisition of treasury 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; or (ii) on the change in net financial debt for the period, after the flows relating to self-owned 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.

30 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.
31 For the definition of these quantities refer to the Glossary.
32 For more information see ESMA document 32-51-370 “ESMA Guidelines on Alternative Performance Measures (APMs)” of 17 April 2020, Q&A no. 18.
33 With reference to 2019, in addition to the effects of the Liability Management operation referred to above, the special items excluded from the reported results concerned the release to the income statement of the provision for impairment losses (35 million euros) following the recognition by the Regulatory Authority, of part of the receivables not collected relating to the balancing activities for the period 1 December 2011 – 23 October 2012.

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