Financial position, financial performance and cash flows of the Iren Group

Operating profit (EBIT)

Operating profit (EBIT) amounted to 454.1 million euro, up +9.3% compared to 415.4 million euro in 2020. During the year, depreciation and amortisation increased by approximately 37 million euro, mainly due to the start-up of new investments and the expansion of the consolidation scope, and write-downs increased by about 20 million euro mainly related to the assets, already non-operational, of the Scarlino Energia plant, and impairment losses on loans and receivables decreased by approximately 8 million euro, due to an improvement over last year, of the estimated effects of the Covid-19 pandemic on expected losses.

Financial income and expense

Net financial expense came to 46.4 million euro; in 2020, the figure stood at 55.3 million euro.

The change was mainly due to lower financial expense, which stood at 74.6 million euro compared to 93.7 million euro in 2020 (down 20.4%), essentially due to a lower average cost of debt. Financial income amounted to 28.2 million euro (-10.2 million euro compared to the comparative year, when it stood at 38.4 million euro).

Gains to equity investments

These gains amounting to 5.8 million euro (2.7 million euro in 2020) essentially includes the income deriving from the acquisition of the net assets of Nove (4.6 million euro) and the effect of the restatement to fair value, at the date of acquisition of control, of the minority interest in Futura (1.3 million euro). In the comparative year, the item is largely comprised of badwill related to the acquisition of Nord Ovest Servizi.

Share of profit of equity-accounted investees , net of tax effects

This item, which amounts to +10.3 million euro (up from +6.5 million euro in the comparative year), includes the share of the pro-rata profit or loss of the Group’s associates and joint ventures, the most significant of which regard Aguas de San Pedro, ASA, and ASTEA.

Profit before tax

As a result of the above trends the consolidated profit before tax came to 423.8 million euro (369.3 million euro in 2020).

Income taxes

Income taxes for the year amounted to 90.3 million euro (100.0 million euro in the comparative year), with an effective tax rate of 21.3% (27.1% in 2020).

The latter is influenced by non-recurring tax income related to the exercise of the option on the realignment of carrying amounts and tax bases pursuant to Decree law no. 104/20 (“August” Decree Law). Excluding this income, which had a net impact on the Income Statement of approximately 32 million euro, the tax rate would have been around 29%.

Profit for the year

As a result of the above, there was a profit for the year of 333.5 million euro, an increase of +23.8% compared to the profit for 2020.

The figure is due to the profit attributable to the owners of the parent of 303.1 million euro, while profit attributable to non-controlling interests was 30.4 million euro.

 

Statement of Financial Position

(*) Change of more than 100%

The comparative figures at 31 December 2020 have been restated to take into account, at the acquisition date, as required by IFRS 3, the effects of completing the allocation of the purchase price to the final fair value of the acquired assets and liabilities of the companies in the Unieco Waste Management Division and the companies Nord Ovest Servizi and I.Blu. For further information, see section IV "Business combinations". In addition, certain reclassifications deriving from the first-time application of ESEF were made as indicated in section I. Basis of presentation under "Consolidated Financial Statements".

(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 Notes to the Consolidated Financial Statements.

 

The main changes in the statement of financial position are commented on below.

Non-current assets at 31 December 2021 amounted to 7,020.8 million euro, up compared to 31 December 2020, when they were 6,588.3 million euro. The increase (+432.5 million euro) was mainly due to the effect of the following:

• investments in property, plant and equipment and intangible assets (+757.7 million euro) and depreciation and amortisation (-477.9 million euro) in the year;
• write-downs (-24.7 million euro), mainly relating to the Scarlino Energia waste-to-energy plant (-24.3 million euro);
• the assets of Futura, acquired during the year, relating to a mechanical biological waste treatment plant including goodwill (32.6 million euro), the goodwill arising from the consolidation of SidIren (32.9 million euro) and non-current assets, relating to district heating, of Nove (21.4 million euro);
• the change in the portfolio of CO2 emission rights (+73.0 million euro);
• the recognition of right-of-use assets in application of IFRS 16 - Leases for 12.5 million euro, largely relating to lease and rental contracts for buildings and vehicles used for operating activities.

 

For more information on the segment details of investments in the year, reference should be made to the section “Segment Reporting” below.

The decrease in Other non-current assets (liabilities) (-37.3 million euro) is due to the transfer to financial institutions of assets accrued from the tax authorities for deductions on works performed in order to improve energy efficiency in residential buildings (Superbonus 110%, introduced by Decree Law no. 24/2020, so-called "Decreto Rilancio” - Relaunch Decree)

Net Working Capital decreased by 264.7 million euro, to -222.5 million euro compared to 42.2 million euro as at the end of 2020. The change is attributable to components of a commercial nature.

The balance of net deferred tax assets increased to 244.6 million euro (163.5 million at 31 December 2020). The change includes the effect of the release of deferred tax liabilities following the above-mentioned tax realignment of the higher carrying amounts of assets recorded in the financial statements.

Provisions for risks and employee benefits amount to 728.9 million euro and are up compared to the figure at the end of 2020 (equal to 660.8 million euro) mainly due to the increased obligations linked to CO2 emission rights, influenced by increasing price dynamics.

Equity amounted to 2,950.7 million euro, compared with 2,764.7 million euro at 31 December 2020 (+186.4 million euro). The change refers to the profit for the year (+333.5 million euro), dividends distributed (-149.3 million euro), the performance of the hedging reserve linked to interest rate and commodities hedging derivatives (+6.2 million euro), the change in the consolidation scope (+2.1 million euro), the repurchase of treasury shares (-4.1 million euro) and other changes (-2 million euro).

Net financial debt as at 31 December 2021 amounted to 2,905.8 million euro, down compared to the figure at 31 December 2020 (2,948.2 million). For more details please see the analysis of the statement of cash flows presented below.

 

 

STATEMENT OF CASH FLOWS OF THE IREN GROUP

 

Change in net financial debt

 

The statement below details the movements in the Group's net financial debt that occurred in the year.

(*) Change of more than 100%

The comparative figures for 2020 have been restated to take into account, at the acquisition date, as required by IFRS 3, the effects of completing the allocation of the purchase price to the final fair value of the acquired assets and liabilities of the companies in the Unieco Waste Management Division and the companies Nord Ovest Servizi and I.Blu. For further information, see Section IV "Business combinations".

 

The decrease in net financial debt compared to 31 December 2020 of 42.4 million euro is due to the following factors:

• operating cash flow of +950.5 million euro, with a significant improvement compared to 2020, when it stood at +821.1 million euro as a result of the growth recorded in operating profit;
• cash flows used in investing activities of -832.1 million euro, which include in particular technical investments for the year (757.8 million euro, 10.6% higher than in 2020) and the consideration paid and debt assumed for the acquisitions of Futura, SidIren, Nove and Bosch Energy and Building Solutions Italy for a total of 80.7 million euro under the item "Change in consolidation scope" (the comparative figure of 197.5 million euro mainly included the effect of the acquisition of the Unieco Waste Management Division);
• cash flow from own capital of -153.3 million euro (-174.5 million euro in 2020), representing dividends paid and repurchases of treasury shares in the year;
• the item other changes, amounting to +77.3 million euro (-20.1 million euro in 2020), relating mainly to the combined effect of the positive change in the fair value of interest rate and commodity derivative hedging instruments and of interest paid.

Finally, we note that the statement of cash flows prepared according to the format of a change in cash and cash equivalents is presented in the opening section “Consolidated Financial Statements”.