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Performance

The following table summarizes the performance of Enel SpA in 2016 and 2015.

Millions of euro   
 20162015Change
Revenue   
Revenue from services197237(40)
Other revenue and income1082
Total207245(38)
Costs   
Consumables11-
Services, leases and rentals152199(47)
Personnel166176(10)
Other operating expenses1724(7)
Total336400(64)
Gross operating margin(129)(155)26 
Depreciation, amortization and impairment losses448327121
Operating income(577)(482)(95)
Net financial income/(expense) and income from equity investments   
Income from equity investments2,8822,024858
Financial income3,3433,535(192)
Financial expense4,1064,267(161)
Total2,1191,292 827
Income before taxes1,542810732
Income taxes(178)(201)23
NET INCOME FOR THE YEAR1,7201,011 709

Revenue from services amounted to €197 million (€237 million in 2015) and essentially regards services provided to subsidiaries as part of Enel SpA’s management and coordination functions and the rebilling of costs incurred by Enel SpA but pertaining to the subsidiaries.
The overall decrease of €40 million is attributable to the combined impact of a decline in pass-through rebilling of costs connected with communication activities as a result of the new organizational structure adopted by the Group, which involved the shifting of part of communication activities from the Parent Company to the Countries, only partly offset by an increase in revenue from management fees and technical fees in respect of a number of the Group’s foreign companies.

Other revenue and income amounted to €10 million, up €2 million compared with the previous year. In both years, the item is essentially composed of the rebilling of costs for the personnel of Enel SpA seconded to other Group companies.

Costs for consumables amounted to €1 million in 2016, unchanged on the previous year. They are accounted for by purchases of consumables from third-party suppliers.

Costs for services, leases and rentals amounted to €152 million in 2016 (€199 million in 2015), of which charges from third parties in the amount of €75 million and from Group companies in the amount of €77 million. The former mainly regarded communication expenses, technical and professional services as well as strategic, management and corporate organization consulting and IT services. Those in respect of services provided by Group companies regard IT and administrative services and purchasing, as well as rentals and personnel training received from Enel Italia Srl, and costs for the personnel of a number of Group companies seconded to Enel SpA.
The decrease compared with 2015 amounted to €47 million and is essentially attributable to the decline in expenses for advertising, promotional activities and printing as well as to the decrease in event organization costs as a result of the Group’s new organizational structure, which involved the shifting of part of communication activities from the Parent Company to the Countries.

Personnel costs totaled €166 million in 2016, a decrease of €10 million compared with the previous year. The change is mainly attributable to the decline in costs connected with lack of participation, compared with 2015, in the new agreements for the early retirement of personnel (€36 million). The improvement was partly offset by the reversal of the provision for electricity discounts (€10 million) following the unilateral revocation of the benefit for former employees, and the overall increase of €16 million in wages and salaries and associated social contributions associated entirely with the expansion of the workforce.

Other operating expenses amounted to €17 million in 2016, down €7 million compared with 2015, mainly as a result of the decline in association dues paid during the year and of the updating of estimates for the provision for litigation in respect of positions that arose in previous years, which are made on the basis of information provided by internal and external legal counsel.

The gross operating margin was a negative €129 million, an improvement of €26 million compared with the previous year, mainly attributable to the reduction in operating expenses, especially costs for services and personnel, partly offset by the decline in revenue from services provided to Group companies.

Depreciation, amortization and impairment losses amounted to €448 million in 2016, essentially reflecting the writedown of the interest in Enel Produzione SpA (€474 million) and the writeback of the interest in Enel Trade SpA (€42 million), an increase of €121 million on 2015. The change is essentially attributable to the change in the value of impairment losses, which in 2015 had involved the investments in Enel Trade SpA (€250 million) and Enel Ingegneria e Ricerca SpA (€65 million).

The operating result showed a loss of €577 million, a deterioration of €95 million compared with 2015.

Income from equity investments amounted to €2,882 million (€2,024 million in 2015). The item regards dividends approved in 2016 by subsidiaries and associates in the amount of €2,876 million and by other companies in the amount of €6 million and shows an increase of €858 million on the previous year.

Net financial expense amounted to €763 million and essentially reflects interest expense on financial debt (€926 million), partly offset by interest and other income on current and non-current financial assets (totaling €150 million).
The increase in net financial expense on the previous year, equal to €31 million, was essentially the result of the net negative change in transactions in financial derivatives (€674 million), partly offset by the net positive change in exchange differences (€628 million).

Income taxes showed a tax receivable of €178 million, mainly due to the reduction in taxable income for IRES purposes compared with statutory taxable income as a result of the exclusion of 95% of dividends received from subsidiaries and the deductibility of Enel SpA interest expense for the Group’s consolidated taxation mechanism in accordance with corporate income tax law (Article 96 of the Uniform Income Tax Code). Compared with 2015 (a tax receivable of €201 million), the decrease of €23 million is essentially attributable to non-recurring items.

Net income for the year totaled €1,720 million, compared with €1,011 million the previous year.