First Half 2005 PDF File

Transcript

Gruppo Editoriale L’Espresso
Società per azioni
Report on the first half of 2005
(Translation from the original issued in Italian)
CONTENTS
Financial Highlights
Report of the Board of Directors on the first six months of 2005
Adoption of international financial reporting standards
Operating performance and consolidated results at June 30, 2005
Results by area
Subsequent events and outlook
Consolidated balance sheet and income statements results
at June 30, 2005
Results of parent company Gruppo Editoriale L’Espresso SpA
page
7
page
page
page
page
11
12
14
20
page 21
page 28
Interim Financial Statements at June 30, 2005
Balance Sheet
Income Statement
Statement of Cash Flows
Statement of Changes in the Shareholders’ Equity
Notes
Attachments
page
page
page
page
page
page
34
35
36
37
41
85
Financial Statements of parent company Gruppo Editoriale
L’Espresso SpA at June 30, 2005
Balance Sheet
Income Statement
Statement of Changes in the Shareholders’ Equity
page
page
page
page
98
99
100
101
Reclassified key financial information of subsidiaries
page 105
Auditors’ Report
page 109
Transition to IFRS
Foreword
Opening Balance Sheet
Effect of the adoption of IFRS
page 113
page 114
page 116
Auditors’ Report on the IFRS reconciliation schedules
page 131
Company
Gruppo Editoriale L’Espresso
Società per Azioni
Share Capital
Euro 65,003,439.45
Tax ID and Rome Company Register
no. 00488680588
VAT
no. 00906801006
Registered office
Secondary office
Rome, Via Cristoforo Colombo, 149
Rome, Via Cristoforo Colombo, 90
Board of Directors:
Chairman
Carlo Caracciolo
Managing Director
Marco Benedetto
Directors
Oliviero Maria Brega
Cristina Busi
Giulia Maria Crespi Mozzoni
Carlo De Benedetti
Rodolfo De Benedetti
Francesco Dini
Pierluigi Ferrero
Milvia Fiorani
Franco Girard
Paolo Mancinelli
Gianluigi Melega
Alberto Milla
Piero Ottone
Alberto Piaser
Vittorio Ripa di Meana
Executive Committee:
Carlo Caracciolo
Marco Benedetto
Oliviero Maria Brega
Rodolfo De Benedetti
Alberto Piaser
Board of Statutory Auditors:
Chairman
Vittorio Bennani
Auditors
Claudio Berliri
Federico Gamna
Independent Auditors
PricewaterhouseCoopers SpA
GRUPPO ESPRESSO
FINANCIAL HIGHLIGHTS
CONSOLIDATED OPERATING DATA
st
(€ million)
Revenues
1 Half
2004
2004
st
1 Half
2005
1,080
546
568
Gross operating profit
239
122
130
Operating profit
192
101
106
Pre-tax profit
175
94
97
99
52
55
Net profit
FINANCIAL DATA
(€ million)
Jan. 1,
2005
June 30,
2004
June 30,
2005
Net capital employed
636
633
755
Shareholders' Equity (Group and minority interests)
495
459
499
484
448
489
11
11
11
Net financial position
(141)
(174)
(256)
Dividends distributed
(47)
(47)
(56)
Group Shareholders' Equity
Minority interests
PERSONNEL
2004
1st Half
2004
1st Half
2005
Employees at period-end
3,271
3,184
3,409
Average no. of employees
3,204
3,181
3,386
RATIOS
st
2004
1 Half
2004
st
1 Half
2005
ROS
17.8%
18.5%
18.7%
ROCE
30.2%
15.9%
14.1%
ROE
20.0%
11.4%
11.0%
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Report of the Board of Directors
Gruppo Editoriale L’Espresso - Interim Financial Statements at June 30, 2005
REPORT OF THE BOARD OF DIRECTORS ON THE FIRST SIX MONTHS OF
2005
ADOPTION OF INTERNATIONAL FINANCIAL REPORTING STANDARDS
Starting with the Interim Financial Statements at June 30, 2005 the Espresso Group
adopted international financial reporting standard (IFRS) in the preparation of its financial
statements. From 2005, the Law requires all companies listed in a European regulated
market to prepare their year-end consolidated financial statements under IFRS. The Group
chose to adopt IFRS also in the preparation of the statutory accounts of the parent
company and its subsidiaries at the same date.
To allow a like-for-like comparison with figures for the previous, the balance sheets at
January 1, 2004, at June 30, 2004 and at December 31, 2004 were restated under IFRS.
Independent auditors PricewaterhouseCoopers SpA issued an Audit Report certifying the
correctness of figures reported.
The adoption of IFRS has had a positive impact on the results of the Group. The most
relevant one is represented by the book value of titles and radio and television frequencies,
that are no longer amortized but subject annually to an impairment test. In the opening
Balance Sheet at January 1, 2004, the historical cost of such items was restored and
accumulated amortization was reversed, resulting in an increase in the Shareholders’
Equity.
The table below shows the main effect of the adoption of IFRS on the Financial
Statements at December 31, 2004.
2004
Italian GAAP
2004
IFRS
1,080.3
1,080.3
Operating profit
177.4
192.2
Pre-tax profit
160.0
174.5
87.7
98.9
Shareholders’ Equity
375.2
484.1 *
Net financial position
(131.1)
(141.4) *
Sales
Net profit
* Figures are at January 1, 2005
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OPERATING PERFORMANCE AND CONSOLIDATED RESULTS AT JUNE 30, 2005
The Espresso Group closed the first six months of 2005 reporting a consolidated net profit
of €54.8 million, up from €52.4 million in the first six months of 2004. In the same period,
consolidated revenues grew by 3.9% from €546.1 million to €567.6 million. Consolidated
operating profit also grew from €100.9 million in the first half of 2004 (18.5% of sales) to
€106.3 million in the first six months of 2005 (18.7% of sales).
The consolidated net financial position at June 30, 2005 was equal to an indebtedness of
€255.5 million, up from a net indebtedness of €141.4 million at January 1, 2005 due
primarily to the disbursement of €110 million for the purchase of the Rete A SpA
television network. Consolidated Shareholders’ Equity increased from €484.1 million at
January 1, 2005, to €488.7 million at June 30, 2005.
Trends registered in the last months of 2004 were confirmed in the first six months of the
year. Advertising revenues grew by 6.7% (up 5.3% on a comparable basis and not
including advertising sales for third parties) on the same period in the previous year, with
the Group’s media registering an increase above the average for the market. Growth was
stronger in the second quarter than in the first. Advertising sales benefited primarily from
the introduction of full color printing by la Repubblica (with national commercial and
local advertising revenues up 7.4%) and stronger advertising sales of the Group’s radio
stations (up 11.2%) and Internet sites (up 33.4%).
The sale of products sold optionally with the Group’s publications met growing success,
not only in the case of products sold in conjunction with la Repubblica and L’espresso,
but also those distributed with local newspapers. Over 16 million of books, DVDs and
music CDs were sold, with revenues growing from €116.8 million to €127.1 million.
Results of national commercial TV network Rete A – All Music were consolidated from
April 2005. After the conclusion of the acquisition, on April 14, 2005, the Group made
investments in the development of a digital terrestrial television broadcasting network and
the upgrade of the existing analogue broadcasting network, while a new corporate
structure was put in place.
The next few months will be dedicated to the reshuffle of the programs and the
strengthening of the image of the network, which will continue to focus on music and
programming for a young audience, while synergies with other Group media are being
sought. From 2006, advertising sales will be managed by a specific sales network within
A.Manzoni&C., the Group’s advertising concessionaire.
In the first half of 2005, RepubblicaRadio started broadcasting solely on the Internet,
becoming in a few months an online information reference point. RepubblicaRadio
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broadcasts three hours of live programs, and users can listen to or download in MP3
format sections of any of its programs throughout the day.
Circulation of Group newspapers was substantially stable in the first six months of the
year. La Repubblica sold an average of 617 thousand copies per issue, local newspapers
an average of 471 thousand and L’espresso an average of 416 thousand copies per week.
The number of readers registered instead an increase: in the last market poll carried out by
Audipress (2005/I Edition), la Repubblica continued to rank first in terms of readers
among information newspapers in Italy, with an average of close to 3 million daily
readers, while L’espresso exceeded 2.3 million readers per issue and local newspapers
registered an average of 3.1 million daily readers.
The Group’s radio stations continue to have the largest audience in Italy with 22.4 million
listeners per week and 8.7 million in the average day. Audiradio figures for the first half of
2005 show the consolidation of the leadership of Radio Deejay which, with an average
weekly listenership of 13.4 million (up from 12.1 million in the first six months of 2004),
confirmed its ranking as the radio station with the largest weekly audience, ahead of Rai
Radio Uno. In the average day Radio Deejay is still the first among the private radio
stations with 5.7 million listeners. Both Radio Capital - with 6.3 million listeners per week
and nearly 2 million listeners in the average day - and m2o with over 1 million in the
average day have consolidated their positions.
Internet site Repubblica.it maintained its leadership position among domestic information
sites with an average of 170 million page views and 3.9 million unique users (over 400
thousand readers per day). Overall, the Kataweb/Gruppo Espresso internet site network
exceeded in June 6.5 million unique users and 248.7 million page views.
At June 30, 2005, the Group employed 3,409 persons, including personnel under term
contracts, 138 more than the 3,271 it employed at the end of 2004. Such increase is due to
the inclusion of personnel of newly acquired Rete A and the insurcing of Padua’s and
Rome’s (Rotocolor) printing centers, still carried out by third parties in the first six months
of 2004.
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RESULTS BY AREA
National newspapers
1st Half
2004
1st Half
2005
% change
275.6
280.9
+1.9%
(216.1)
(219.1)
-1.4%
59.5
61.8
+3.8%
Depreciation, amortization and write-downs
(6.5)
(6.6)
-0.8%
Operating profit
53.0
55.3
+4.2%
Employees
701
701
Revenues
Operating and personnel costs
Figures for the division include the share in revenues and costs that may not be attributed to a specific
activity
The sale of publications and products in conjunction with la Repubblica continued
through sales initiatives that allowed to achieve higher margins than those registered in the
first six months of the previous years. The continuation of the book series launched in
2004 and new series launched in the year, sold a total of 10.7 million copies, as compared
with 12.5 million copies in the first six months of 2004, which were however positively
affected by sales of l’Enciclopedia di Repubblica that alone sold over 4.5 million copies.
Among the most successful initiatives in the first six months of the year were Le Guide
d’Italia tourist guide series and Le Religioni series which sold respectively over 175
thousand and 115 thousand copies on average per issue, while the comics book series, by
now at its 40th issue, sold an average of about 80 thousand copies per issue.
The success of add-on products was accompanied by an increase in advertising revenues
favored primarily by the recovery of national commercial advertising. Many printed press
advertisers, particularly in the automobile and finance sector, attracted by the stronger
availability of color advertising space and formats, resumed campaigns on la Repubblica.
In the first six months of 2005, la Repubblica refined its graphic design as a result of the
introduction of full color and launched two inserts, l’Almanacco dei libri and la Domenica
di Repubblica, that were very well received by the public.
Thanks to the growth in advertising sales and margins achieved on products sold
optionally with publications, operating profit grew from €53 million in the first six months
of 2004, to €55.3 million in the same period in 2005, while the operating margin on sales
increased from 19.2% to 19.7%.
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Periodicals
1st Half
2004
1st Half
2005
% change
55.5
70.1
+26.3%
(46.2)
(62.6)
-35.6%
9.4
7.5
-20.0%
(0.4)
(0.4)
-1.6%
Operating profit
9.0
7.1
-20.9%
Employees
124
125
Revenues
Figures for the division include the share in revenues and costs that may not be attributed to a specific
activity
The Periodicals area includes weekly magazine L’espresso, by-monthly magazine
TvMagazine, the two monthly magazines National Geographic and Le Scienze, the two
quarterly magazines Limes and Micromega, and L’espresso Guide Books.
In the first six months of the year, L’espresso, also thanks to the multimedia products
packaged with the magazine, sold a total of 4.1 million copies, registering at the same time
an improvement in profit margins through pricing policies and careful management of
production costs and returns. The first six months of the year benefited in particular from
the success of Stanley Kubrick’s DVD series (with sales averaging 75 thousand copies per
issue) and the English language course (with average sales in excess of 45 thousand copies
per issue).
Other publications gave a positive contribution to results for the first half of the year, with
circulation and margins in line with the same period in 2004. Monthly magazine National
Geographic sold an average of 124.6 thousand copies per issue, generating a profit of €0.9
million. Among periodicals of affiliate Le Scienze SpA, Mente & Cervello reached
average sales of 20.4 thousand copies per issue, while sales of monthly magazine Le
Scienze averaged 64.5 thousand copies per issue.
A new bi-weekly magazine, TvMagazine, dedicated to TV programming and offering a
guide to TV programs for the two weeks following its publication, was launched on
January 10. Three other competing magazines were launched in the same period, making
the sector of TV magazines all the more competitive. Circulation of TvMagazine averaged
in any case 197 thousand copies per issue.
The investment in the campaign for the launch of TvMagazine affected the operating profit
that declined by 20.9% on the same period in the previous year from €9 million to €7.1
million. The improvement in the profit generated by add-on products, accompanied by the
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increase in advertising revenues, the good level of circulation and a careful monitoring of
subscription management costs (subscriber lists, promotional materials, etc.) allowed to
maintain profit margins of the area high: the operating margin was equal to 10.2%.
Local newspapers
1st Half
2004
1st Half
2005
% change
Revenues
124.8
131.1
+5.0%
(96.5)
(101.5)
-5.2%
28.3
29.6
+4.5%
(5.6)
(7.4)
-30.7%
Operating profit
22.7
22.2
-2.1%
1,290
1,318
Employees
The area includes all local publications published by the Group, consisting in 16
newspapers and a bi-weekly magazine.
In the first six months of the year, circulation declined by 1% on the same period in the
previous year, to an average of 471 thousand copies per issue. Newspapers La Nuova
Sardegna and Le Gazzette encountered some difficulties due to the launch of competing
papers in the respective areas, while circulation of Veneto area newspapers grew by 3.4%.
The decline in circulation was offset by the success of add-on products. In developing
sales initiatives the Group aimed at enhancing local history and traditions while at the
same time offering products involving the largest possible number of publications.
Following this policy, two regional series Il Friuli Venezia Giulia in cucina and La
Grande Musica della Sardegna were launched together with two other series of books,
L’Enciclopedia universale and La Grande Storia della Canzone Italiana that provide for
the participation in subsequent phases of all local newspapers. Sales for the first six
months of the year were close to 1 million copies.
Advertising revenues for the first half of the year fluctuated widely, growing in the first
three months of the year while declining in the second quarter. The sale of color
advertising spaces grew instead steadily throughout the period, up 23% on the first six
months in the previous year.
From April 1, all production processes of the Padua plant, in charge of printing
newspapers Il Mattino di Padova, Tribuna di Treviso and La Nuova di Venezia e Mestre in
addition to the copies of la Repubblica distributed in the Veneto area, are managed
16
directly. The direct management of production processes resulted in a different cost
structure as compared to the previous year, with a decline in printing costs and an increase
in personnel cost due to the hiring of personnel formerly employed with the cooperative
that was in charge of printing in the past. Such change is expected to produce an
improvement in production efficiency and in the saving of production cost.
Radio stations
1st Half
2004
1st Half
2005
% change
33.6
37.5
+11.5%
(17.2)
(18.4)
-7.3%
16.5
19.1
+15.8%
(1.7)
(1.5)
+12.9%
Operating profit
14.8
17.6
+19.1%
Employees
145
146
Revenues
Radio broadcasting activities are grouped under subsidiary Elemedia, holder of the
broadcasting licences for Radio Deejay, Radio Capital and m2o and owner of two radio
broadcasting companies in Eastern Europe, Radio Bonton a.s., broadcasting through radio
station Radio Deejay Prague, and Radio Deejay Kft., broadcasting through Radio Deejay
Budapest.
In the first half of 2005 the radio sector continues to represent one of the most profitable
areas for the Group. Operating profit increased by 19.1% on the first half of 2004,
growing from €14.8 million to €17.6 million, while operating margin was close to 47%.
All three radio stations are steadily gaining audience and Radio Deejay has become the
reference point for the market both in terms of programming and personalities working in
its programs. Advertising revenues continue to grow (up 11.2% on the first half of 2004)
despite the fact that advertising for the radio sector registered a 3.5% contraction in the
first months of 2005, while costs remain stable thanks to ongoing efforts to improve
efficiency.
To maintain a high quality standard in radio broadcasting, investments were made on plant
and equipment, renovating recording studios and introducing signal monitoring equipment
in a large part of the 846 broadcasting plants nationwide.
In line with the strategy followed in the past two years to promote publishing initiatives
under the trademark of the three radios at newsstands and specialized stores, 2 music CDs
and one video CD bearing a double audio and DVD track were published under the m2o
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trademark. Sales exceeded 122 thousand copies and the compilations reached top
rankings.
The Radio Deejay internet site, that contributed to role in the success of the radio station,
was completely renovated in February. In June, unique users of the site approached 500
thousand, while page views were 8 million. Internet site m2o.it also registered a steady
growth and is set to pass the 100 thousand unique user per month mark.
Results achieved in the first half of the year by foreign radio stations were in line with the
same period in the previous year. Czech company Radio Bonton a.s. reported an operating
breakeven, while Hungarian company Radio Deejay Kft reported an operating loss of €0.5
million.
Internet
1st Half
2004
1st Half
2005
% change
6.7
6.2
-7.8%
(7.8)
(6.4)
+17.4%
Gross operating profit/(loss)
(1.1)
(0.2)
+78.4%
(0.4)
(0.2)
+56.2%
Operating profit/(loss)
(1.4)
(0.4)
+72.4%
76
68
Revenues
Employees
The Internet area includes the activities of Kataweb that, in addition to managing the
portal bearing the same name, acts as service provider and supplies contents for all online
activities of the Espresso Group.
In the first six months of 2005 the company continued to streamline costs and services,
reducing further its operating loss, now close to zero.
Among activities carried out, Kataweb contributed to the renewal of the Repubblica.it and
Deejay.it sites, the start of broadcasting of RadioRepubblica on the web and the launch of
il Passaporto, the new online magazine aimed at immigrants.
In the second half of the year, a new portal dedicated to classified ads for all Group
publications will be launched.
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Television
Revenues
Operating profit
Employees
1st Half
2004
1st Half
2005
% change
0.8
6.0
n.s.
(0.5)
(3.8)
n.s.
0.3
2.2
n.s.
(0.1)
(0.6)
n.s.
0.2
1.6
n.s.
5
106
n.s.
Television network Rete A and its subsidiary All Music were included in the consolidation
from April 1, 2005. In the second quarter the two companies reported revenues of €5.7
million and an operating profit of €1.6 million (representing a 27.4% margin on sales).
The operating performance of the network and plans for the next months were discussed
in the first part of the present report to which we refer for further information.
In the first half of 2005, subsidiary Ele Tv, broadcaster of satellite channel Deejay Tv,
reported revenues of €0.7 million, down slightly from €0.8 million in the same period in
2004. Operating profit declined from €0.2 million in the first half of 2004, to €0.1 million
in the first half of 2005. The subsidiary continued to cooperate with satellite network Sky
Italia, while the grafic design of videoclips was enhanced to include subtitles with the
words of songs broadcasted.
Advertising sales
1st Half
2004
1st Half
2005
% change
279.3
290.7
+4.1%
(274.9)
(288.4)
-4.9%
4.4
2.3
-48.2%
(3.4)
(1.3)
+60.3%
Operating profit
1.0
0.9
-6.3%
Employees
456
449
Revenues
Advertising sales of A.Manzoni&C. do not include sales of Rete A, whose advertising for
2005 is still managed by PubliKompass.
The increase in advertising sales is due to Group publications, registering a 5.3% increase
on the first six months of 2004, while advertising sales on third parties’ media declined
(down 12.3%) due to the discontinuation of some publications.
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Advertising revenues for all media recorded a growth above the average for the market.
The growth of advertising expenditure at the national level was in fact slightly higher than
2%, the printed media was equal to 2.7%, television grew by 2.6%, cinema and outdoors
advertising declined by 4.9% and 1.7% respectively, and advertising on radio stations
declined by 3.2% (source: Nielsen Media Research).
SUBSEQUENT EVENTS AND OUTLOOK
Advertising on the Group’s media continued to grow also in the third quarter of 2005.
Publishing initiatives continue to register good sales and the launch of new book series
sold in conjunction with la Repubblica and L’espresso is planned for the fall.
A new monthly magazine named XL will be launched on August 25. The magazine,
targeted at a young public, will be sold as a supplement of la Repubblica.
The economic performance for the whole year is expected to improve on the performance
registered in 2004.
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CONSOLIDATED BALANCE SHEET AND INCOME STATEMENT RESULTS AT JUNE 30, 2005
Income Statement
Below is the Consolidated Income Statement of the Group for the first six months of 2005
compared with the corresponding period of 2004.
st
(€ million)
Revenues
st
1 Half
1 Half
2004
2005
546.1
567.6
4.7
12.6
(80.3)
(79.6)
Services received
(207.7)
(216.4)
Personnel costs
(134.6)
(147.1)
(6.7)
(8.1)
0.7
0.5
(21.3)
(23.2)
Operating income
100.9
106.3
Financial income/(expense)
(6.4)
(9.4)
Pre-tax profit
94.5
96.9
(41.8)
(41.9)
52.7
55.0
0.3
0.2
52.4
54.8
Other operating income
Purchases
Other operating costs
Investments valued at equity
Taxes
NET PROFIT
Minority interests
Group net profit
Revenues and operating performance were already discussed in the first part of the current
report. The section that follows examines costs, results of financial management and those
of subsidiaries.
Other operating income includes €7.9 million of grants on paper purchases (€0.5 million
at June 30, 2004), on the distribution of newspapers abroad and on capital expenditure.
Purchases include paper and supplies for printing, in addition to costs for the acquisition
of products sold optionally with Group publications. These are in line with the same
period in the previous year.
Services received and other operating costs include printing costs and work carried out
by third parties, in addition to the cost of rights, promotion and transport, editorial costs
for photographs, freelance work, traveling expenses and news agencies. The increase on
the first six months of 2004 was equal to €10.1 million due to the launch of TvMagazine,
the production, promotion and sale of the numerous sales inizitives carried out in
conjunction with la Repubblica and L’espresso, the increase in costs due to the
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introduction of color for la Repubblica, and the operating costs related to the newly
acquired Rete A. Savings were instead achieved through the direct management of preprinting and printing at the Rotocolor and Padua printing plants.
Personnel costs amount to €147.1 million, up €12.6 million on the first six months of
2004 due to the combined effect of contractual increases and the hiring by Rotocolor and
the Padua operating division of Finegil Editoriale respectively of personnel of STEC and
of the former printing cooperative. In the first half of 2005, personnel costs include also
€0.9 million of cost relating to personnel of Rete A.
Depreciation, amortization and write-downs increase by €1.8 million due primarily to
the depreciation expense of la Repubblica’s full color rotary presses.
Net financial charges amount to €9.4 million. The increase on the first six months of
2004 is due to the higher average debt and the negative spread between interest paid on
ten-year bond issued in October 2004 and interest earned on the available cash and cash
equivalents.
To limit the effect of the negative spread between the fixed interest paid out and the
floating interest earned, until the expiration of the old bond issue (August 1, 2005) and the
payment for the acquisition of Rete A, the Group entered into interest rate hedging
contracts, swapping the fixed rate into a floating rate. The operation was reversed in
March 2005 with a gain of about €9 million, achieved thanks to a further reduction in
interest rates in the period. In line with IFRS, such gain is accounted for over the residual
term of the bond issue.
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Balance Sheet
Below is presented the Consolidated Balance Sheet of the Group.
ASSETS
(€ million)
Intangible assets with indefinite useful life
Other intangible assets
Total intangible assets
Tangible assets
Other investments
Financial receivables
Deferred tax assets
NON-CURRENT ASSETS
Inventories
Trade receivables
Marketable securities
Tax receivables
Other receivables
Cash and equivalents
CURRENT ASSETS
TOTAL ASSETS
LIABILITIES AND SHAREHOLDERS’ EQUITY
(€ million)
Share capital
Reserves
Retained earnings
Net income
Group Shareholders’ Equity
Minority interests
SHAREHOLDERS’ EQUITY
Financial debt
Provisions for risks and charges
Employee severance reserve and other
retirement benefits
Deferred tax liabilities
NON-CURRENT LIABILITIES
Financial debt
Trade payables
Tax payables
Other payables
CURRENT LIABILITIES
TOTAL LIABILITIES
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
Jan. 1,
2005
460.3
5.5
465.7
259.0
23.9
3.9
9.3
26.8
788.5
30.2
241.7
20.1
1.7
41.5
22.0
383.2
740.4
1,528.9
Jan. 1,
2005
June 30,
2005
613.3
5.4
618.8
259.1
14.5
3.9
3.6
25.2
925.1
27.7
253.5
10.1
3.5
60.3
26.2
306.1
687.4
1,612.5
June 30,
2005
64.9
187.7
132.6
98.9
484.1
11.0
495.1
330.9
13.0
65.0
194.3
174.6
54.8
488.7
10.6
499.3
330.4
13.2
95.9
54.2
493.9
224.8
10.3
209.5
16.5
78.8
539.9
1,033.9
1,528.9
101.2
95.5
540.3
248.4
10.2
183.1
50.7
80.4
572.9
1,113.2
1,612.5
23
Intangible assets amount to €618.8 million, up €153 million on €465.7 million at January
1, 2005. The increase is due primarily to the consolidation of television broadcasting
frequencies of newly acquired network Rete A.
Tangible assets amount to €259.1 million, up €0.1 million on January 1, 2005 (€259
million). Increases in the period amount to €25.2 million, of which €8.8 million resulting
from the consolidation of Rete A, offset by net divestments amounting to €0.2 million, and
depreciation, amortization and write-downs amounting to €24.9 million.
Investments amount to €18.4 million (€27.8 million at January 1, 2005). The €9.3 million
decline is due to the reduction in the share held in Editoriale Libertà SpA, declining from
35% to 19%.
Non-current financial receivables amount to €3.6 million and consist of security
deposits and tax receivables on advances paid on employee termination indemnities. The
€5.7 million decline on the end of 2004 is due primarily to the unwinding in March 2005
of interest rate swaps entered into to hedge interest rate risk relating to the new €300
million bond issue.
Deferred tax assets amount to €25.2 million and include temporary differences between
amounts recorded in the balance sheet and those recognized for tax purposes.
Inventories amount to €27.7 million and include inventories of paper, printing material,
for publications and products sold optionally with publications.
Trade receivables amount to €253.5 million, up €11.8 million on January 1, 2005 due
primarily to higher trade receivables resulting from the growth in advertising sales.
Marketable securities amount to €10.1 million and relate to Government Bonds held by
the parent company. In the first six months of 2005, €9.8 million of bonds were redeemed
upon expiration.
Current financial receivables amount to €3.5 million, up €1.8 million due to higher
interest earned on short-term bank deposits.
Tax receivables amount to €60.3 million, as compared with €41.5 million at January 1,
2005. The change is due primarily to advances paid in the first half of the year and income
tax (Ires) receivables that, in compliance to tax consolidation regulations, will be
transferred to parent company CIR only at the closing of the financial year.
24
Other receivables amount to €26.2 million, up €4.2 million on €22 million at January 1,
2005.
Cash and cash equivalents decline by €77.1 million due to the disbursement of €110
million for the purchase of Rete A.
Shareholders’ Equity at June 30, 2005 amounts to €499.3 million (€495.1 million at
January 1, 2005), of which €488.7 million belonging to the Group (€484.1 million at the
end of 2004), and €10.6 million relating to minority interests (€11 million at January 1,
2005).
Non-current financial debt amounts to €330.4 million and includes €307 million relating
to the bonds issued on October 8, 2004.
Provisions for risks and charges, both current and non-current, are in line with the
previous year.
Employee severance reserve and other retirement benefits amount to €101.2 million
(€95.9 million at January 1, 2005) and cover personnel benefits accrued at June 30, 2005.
Deferred tax liabilities grow by €41.3 million due primarily to the tax impact of the
consolidation of TV broadcasting frequencies of Rete A.
Current financial debt amounts to €248.4 million and includes €212.2 million relating to
the 5-year 2000-2005 bond issue expiring on August 1, 2005.
Trade payables amount to €183.1 million, down €26.4 million due to the reduction in
debt relating to capital expenditure (down €8.9 million), which on January 1, 2005
included the unpaid balance for the purchase of la Repubblica’s full color rotary presses,
and payables on paper and printing supplies purchased (down €16.5 million).
Tax payables amount to €50.7 million and include income tax (Ires) payables which, as a
result of the participation in the fiscal consolidation of parent company CIR, will be
transferred to the same only at the end of the fiscal year.
Other payables amount to €80.4 million, up €1.6 million on January 1, 2005 due to the
increase in payables to personnel on account of deferred retribution (13th monthly salary
payments), partly offset by the reduction in social security payables paid out at the
beginning of the year.
25
Consolidate Statement of Cash Flows
Below are presented the Cash Flows for the first half of 2005 compared with the
corresponding period of 2004.
st
(€ million)
OPERATING ACTIVITIES
Net income
Minority interests
1 Half
2004
st
1 Half
2005
52.4
54.8
0.3
0.2
10.1
11.8
Adjustments:
- Accruals to provisions for personnel, risks and charges
- Accruals to provisions for stock option costs
0.9
1.3
- Depreciation, amortization and write-downs
21.3
23.2
- Other adjustments
(0.6)
(0.5)
Cash flow from operating activities
84.4
90.8
8.4
2.5
(3.9)
(18.0)
9.2
(24.8)
Decrease in tax receivables/Increase in tax payables
10.7
15.4
Decrease in current assets/Increase in current liabilities
24.3
(24.9)
0.7
42.9
Decrease (Increase) in inventories
Decrease (Increase) in current receivables
Decrease (Increase) in current payables
Decrease in deferred tax receivables/Increase in deferred tax payables
Uses of provisions for personnel, risks and charges
(7.4)
(6.4)
102.1
102.4
(0.8)
(154.1)
(60.1)
(20.2)
0.5
9.4
(60.4)
(164.9)
1.5
7.0
4.2
7.8
(4.8)
10.1
6.6
19.2
Dividends paid
(47.1)
(55.8)
CASH FLOW FROM FINANCING ACTIVITIES
(36.9)
(14.6)
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of the period
4.8
69.8
(77.1)
383.2
CASH AND CASH EQUIVALENTS AT END OF THE PERIOD
74.6
306.1
CASH FLOW FROM OPERATING ACTIVITIES
INVESTING ACTIVITIES
(Increase)/Decrease in intangible assets
(Increase)/Decrease in tangible assets
(Increase)/Decrease in equity investments
CASH FLOW FROM INVESTING ACTIVITIES
FINANCING ACTIVITIES
Increases in capital and reserves and other changes in the
Shareholders' Equity
Increase (decrease) in other financial debt
Net change in marketable securities (and own shares in 2004)
Net change in other financial receivables/payables
Cash generated by operating activities is in line with the previous year. Net current assets
decline due to the increase in advertising trade receivables resulting from the growth in
advertising sales, and the simultaneous decline in payables to suppliers due to the payment
26
of the last installment relating to the full color project, in addition to the insurcing of the
printing of part of the copies of la Repubblica. The joint effect of these two components
and the recording of €40 million in provisions for deferred tax liabilities resulted in a
stable operating cash flow.
Cash flow from investing activities is negative by €164.9 million due primarily to the
acquisition of Rete A SpA.
Other investments in the period relate primarily to the television sector (€5.9 million) for
the development of broadcasting equipment of the newly acquired television station and
the development of the digital terrestrial television network, to the printing centers of la
Repubblica and local newspapers (€4.3 million), to the renovation of the new Rome
offices of the Group (€3 million), to the renovation of the offices of Veneto Region
newspapers, La Nuova Sardegna and Il Piccolo (€1 million), in addition to the upgrade of
information systems and the development of i.c.t. network infrastructure (€2.8 million).
Cash flow from financing activities absorbed resources amounting to €14.6 million, due
to the payment of €55.8 million in dividends.
Despite the good cash flow from operations, capital expenditure for the first six months of
the year, together with the disbursement of €110 million for the purchase of national
television network Rete A and the payment of €55.8 million in dividends, determined an
increase in net consolidated debt from €141.4 million at January 1, 2005, to €255.5
million at June 30, 2005. The table that follows shows the breakdown of the net financial
position of the Group.
(€ million)
Jan 1,
June 30,
2005
2005
20.1
10.1
10.9
7. 1
Cash and cash equivalents
383.2
306.1
Total financial assets
414.3
323.3
(511.0)
(526.4)
(37.0)
(45.9)
(7.6)
(6.6)
Total financial liabilities
(555.7)
(578.8)
NET DEBT
(141.4)
(255.5)
Bonds
Bank debt
Other financial debt
27
RESULTS OF PARENT COMPANY -
GRUPPO EDITORIALE L’ESPRESSO SPA
Income Statement
st
(€ million)
Revenues
st
1 Half
1 Half
2004
2005
331.2
351.0
1.6
8.0
(59.0)
(59.1)
(147.1)
(166.9)
(54.4)
(59.1)
(3.3)
(4.6)
(6.9)
(6.9)
Purchases
Services received
Personnel costs
Operating income
62.0
62.4
(6.0)
(9.0)
Dividends
27.2
47.2
Pre-tax profit
83.2
100.6
(22.9)
(22.0)
60.3
78.5
Jan. 1,
2005
June 30,
2005
Taxes
NET PROFIT
Balance Sheet
ASSETS
(€ million)
Intangible assets with indefinite useful life
220.7
220.7
2.9
2.9
223.6
223.6
78.0
77.3
256.0
376.5
6.9
1.5
20.0
19.0
584.5
697.9
Tangible assets
Other investments
Deferred tax assets
NON-CURRENT ASSETS
Inventories
25.8
22.3
103.2
98.8
20.1
10.0
32.0
55.9
Tax receivables
34.0
37.8
Other receivables
14.4
8.5
372.6
291.9
CURRENT ASSETS
602.2
525.3
1,186.7
1,223.2
Trade receivables
TOTAL ASSETS
28
LIABILITIES AND SHAREHOLDERS' EQUITY
(€ million)
Share capital
Jan. 1, 2005
June 30,
2005
2005
64.9
65.0
124.5
121.7
Retained earnings
43.2
68.0
Net income
72.4
78.5
SHAREHOLDERS' EQUITY
305.0
333.3
Financial debt
315.4
315.8
7.3
7.9
41.8
32.6
44.0
31.8
397.1
399.4
Financial debt
285.1
299.1
4.5
5.0
150.6
123.7
8.2
26.6
36.2
36.2
CURRENT LIABILITIES
484.6
490.5
TOTAL LIABILITIES
881.7
889.9
1,186.7
1,223.2
Reserves
retirement benefits
Trade payables
Tax payables
Other payables
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
29
st
(€ million)
Net income
1 Half
2004
st
1 Half
2005
60.3
78.5
4.8
6.1
- Accruals to provision for stock option costs
0.9
1.3
6.9
6.9
(27.1)
(47.2)
45.8
45.7
8.1
3.5
7.1
9.9
(0.5)
(26.9)
7.2
14.6
Adjustments
- Other adjustments
Decrease in deferred tax receivables/Increase in deferred
tax payables
21.9
1.0
(0.1)
(3.0)
0.2
(3.0)
64.5
43.9
(0.4)
(0.6)
(13.3)
(5.2)
(27.0)
(120.5)
27.2
47.2
(13.5)
(79.1)
Increases in capital and reserves and other changes in the
Shareholders' Equity
1.1
(0.6)
4.3
(3.1)
(4.8)
10.1
1.9
(1.0)
Dividends paid
(47.1)
(55.8)
(49.6)
(45.5)
1.4
58.4
(80.7)
372.6
59.8
291.9
Dividends received
Change in other financial receivables/liabilities
30
The operating performance was described in the section on individual divisions to which
we refer. Below we discuss the financial performance of the parent company and that of
its equity investments.
Capital expenditure of the parent company in the first half of 2005 amounts to €5.8
million and relate primarily to the renovation of new offices, the development of
information systems of the Group, and the optimization of the operation of new rotary
presses of La Repubblica Division.
At June 30, 2005, net financial debt of the parent company amounted to €255.7 million, up
on €168.9 million at January 1, 2005. The increase from the end of 2004 is due primarily
to the acquisition of Rete A for €110 million, the distribution of €55.8 million in dividends
and capital expenditure, offset only in part by cash generated by operations (€43.9
million).
At the end of June, the Company employed 952 persons, 12 more than at December 31,
2004. Newly hired personnel was employed primarily in publishing initiatives launched in
the first half of the year – TvMagazine – and in publications to be launched in the near
future – XL, the new monthly supplement of la Repubblica.
31
Interim Financial Statements at June 30, 2005
Espresso Group
Consolidated Balance Sheet
ASSETS
(€ thousand)
Intangible assets with an indefinite useful life
Tangible assets
Other investments
Deferred tax assets
Notes
(1)
(2)
(3)
(4)
(5)
(6)
NON-CURRENT ASSETS
Inventories
Trade receivables
Tax receivables
Other receivables
(7)
(8)
(9)
(5)
(10)
(11)
(12)
CURRENT ASSETS
TOTAL ASSETS
(€ thousand)
Share capital
Reserves
Retained earnings
Net income
Notes
(13)
(14)
Jan. 1,
June 30,
2005
2005
460,275
5,459
465,734
258,972
23,907
3,868
9,254
26,811
613,349
5,418
618,767
259,075
14,547
3,883
3,603
25,209
788,546
925,084
30,189
241,727
20,142
1,671
41,471
21,976
383,214
27,734
253,537
10,068
3,505
60,288
26,157
306,115
740,390
687,404
1,528,936
1,612,488
Jan. 1,
June 30,
2005
2005
64,896
187,738
132,575
98,869
65,003
194,314
174,560
54,810
484,078
488,687
11,005
10,592
495,083
499,279
330,851
13,022
95,887
54,181
330,409
13,236
101,176
95,499
493,941
540,320
224,841
10,273
209,520
16,481
78,797
248,429
10,183
183,146
50,735
80,396
539,912
572,889
TOTAL LIABILITIES
1,033,853
1,113,209
1,528,936
1,612,488
Group Shareholders' Equity
Minority interests
(15)
Financial debt
Employee severance reserve and other retirement benefits
(16)
(17)
(18)
(6)
Financial debt
Trade payables
Tax payables
Other payables
CURRENT LIABILITIES
(16)
(17)
(19)
(20)
(21)
The notes from page 41 to page 81 are an integral part of these interim financial statements.
34
Espresso Group
Consolidated Income Statement
st
(€ thousand)
Notes
1 Half
1 st Half
2004
2005
Revenues
(22)
546,057
567,613
Purchases
(23)
(24)
4,735
(80,303)
12,591
(79,560)
Services received
Personnel costs
(25)
(26)
(27)
(207,665)
(134,576)
(6,705)
(216,395)
(147,129)
(8,069)
(28)
685
(21,327)
460
(23,174)
100,901
106,337
(6,449)
(9,435)
94,452
96,902
(41,772)
(41,856)
NET PROFIT
52,680
55,046
Minority interest share in net profit
Group share in net profit
315
52,365
236
54,810
0.122
0.119
0.128
0.124
Operating income
Financial income (expense)
(29)
Pre-tax profit
Income taxes
Base, income per share
Diluted, income per share
(30)
(31)
(31)
35
Espresso Group
Consolidated Statement of Cash Flows
1st Half
1st Half
2004
2005
52,365
54,810
315
236
Adjustments:
- Other adjustments
10,071
894
21,327
(550)
11,813
1,280
23,174
(495)
84,422
90,818
Decrease in taxreceivables/Increasein tax payables
8,362
(3,862)
9,169
10,660
2,455
(18,036)
(24,775)
15,437
24,329
(24,919)
744
42,920
(€ thousand)
Notes
Net income
Minority interests
(7,365)
(6,400)
102,130
102,419
(764)
(60,148)
466
(154,074)
(20,191)
9,380
(60,446)
(164,885)
1,455
7,049
(4,842)
6.568
(47,114)
4,163
7,791
10,074
19.172
(55,833)
(36,884)
(14,633)
4,800
(77,099)
69,815
383,214
74,615
306,115
Increases in capital and reserves and other changes in the Shareholders' Equity
Dividends paid
(32)
36
-
Net profit (loss)
Other changes
-
Other changes
-
Net profit (loss)
Other changes
Share
77,306
-
-
-
-
2,156
-
-
75,150
-
-
13,192
61,958
-
-
313
-
1,439
-
60,206
-
-
(4,842)
-
1,057
-
63,991
premium
Own
(11,575)
-
-
2,437
-
-
-
-
(14.012)
-
(14,012)
(13,192)
13,192
-
-
(313)
-
-
-
13,505
-
-
4,842
-
-
-
8,663
shares
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(2,323)
(83)
-
-
-
-
-
-
(2.240)
(2,240)
reserve
Fair value
IFRS
114,124
1,559
-
-
-
-
-
-
112,565
1,680
-
110,885
-
-
-
-
-
-
110,885
-
-
-
-
-
-
110,885
reserve *
3,781
-
-
(795)
1,280
-
-
-
3,296
-
-
-
3,296
-
-
-
1,571
-
1,725
-
-
-
894
-
-
831
reserve
Stock option
* Gross of the effect of the adoption of IFRS, amounting to about €2 million, recorded under "Retained earnings".
65,003
-
Own shares transactions
Balance at June 30, 2005
-
Stock options
107
-
Dividends
Capital increases, capital contributed by shareholders
-
Allocation of net profit
64,896
-
Effect of adotion of IAS 39
Balance at January 1, 2005
-
Elimination reserve for own shares under Italian GAAP
64,896
-
Net profit (loss)
Balance at December 31, 2004
-
74
-
Stock options
64,822
-
-
53
Stock options
-
64,769
Dividends
capital
(€ thousand)
Share
Statement of Changes in the Consolidated Shareholders' Equity
Espresso Group
Equity
13,001
22
-
-
-
-
-
12,979
-
-
-
12,979
15
-
-
-
-
-
12,964
10
-
-
-
-
-
12,954
reserves
174,560
(1,552)
-
501
-
-
(55,833)
98,869
132,575
59
820
-
131,696
(46)
-
-
-
-
-
131,742
(7)
-
-
-
-
(47,114)
178,863
earnings
Retained
Net
-
-
-
-
54,810
-
54,810
-
-
-
-
(98,869)
98,869
-
-
-
98,869
-
46,504
-
-
-
-
52,365
-
52,365
profit
Group
488,687
(54)
54,810
2,143
1,280
2,263
(55,833)
-
484,.078
(501)
(13,192)
-
497,771
(31)
46,504
-
1,571
1,513
-
448.214
3
52,365
-
894
1,110
(47,114)
440,956
Sh. Equity
(467)
499,279
(413)
54,810
2,143
1,280
2,263
(55,833)
10,592
-
-
-
-
-
-
495,083
11,005
-
(501)
(13,192)
-
-
-
508,776
11,005
-
382
46,504
-
1,571
1,513
413
-
-
-
-
-
458,806
10,592
-
(25)
52,365
-
894
1,110
(28)
-
-
-
-
(47,114)
451,576
-
10,620
Total
Sh. Equity
Minority
Sh. Equity
Notes to the consolidated financial statements
Gruppo Editoriale L’Espresso – Interim Financial Statement at 30 June, 2005
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL INFORMATION
Gruppo Editoriale L’Espresso SpA (the “parent company”) and those companies in which it
holds either directly or indirectly an interest (further on in the present document referred
jointly to as the “Espresso Group” or the “Group”) operates mainly in the publishing sector
and more specifically publishes newspapers and periodicals, owns and manages radio
stations, sells advertising on various media, has online publishing interests and interests in
terrestrial and satellite television.
Gruppo Editoriale L’Espresso SpA has its registered office in Italy at Via Cristoforo
Colombo, 149, Rome.
The Espresso stock is listed on the screen-based trading circuit (Mercato Telematico
Azionario, MTA) of the Italian Stock Exchange (Reuters code: ESPI.MI, Bloomberg code:
ES IM). The stock is included in the S&P/MIB and MIDEX indexes.
The present interim report for the first six months of 2005 with starting date January 1, 2005
were approved by the Board of Directors of the parent company on July 27, 2005.
2. FORM AND CONTENT OF THE FINANCIAL STATEMENTS
As allowed by article 81 of the Issuers’ Regulation no. 11971, modified by CONSOB
Resolution no. 14990 dated April 14, 2005, the present Consolidated Interim Financial
Statements were prepared in accordance with accounting principles established for the
consolidated accounts of financial year 2005, adopted according to the procedure described
in article 6 of EU Regulation no. 1606/2002 (International Financial Reporting Standards,
referred to in the present document individually as IAS/IFRS or, jointly, as IFRS) and
approved until the reporting date. In application of IAS 34 (“Interim financial reporting”)
and of paragraphs no. 45 and 46 of IFRS 1 (“First-time adoption of International Financial
Reporting Standards”) section “Transition to IFRS” of the present document provides
reconciliations prescribed in paragraphs no. 39 and no. 40 of IFRS 1, and the related notes.
Changes made to the Issuers’ Code follow EU Regulation no. 1606/2002 of July 19, 2002,
requiring, starting with the financial year beginning January 1, 2005, the preparation of
consolidated financial statements of companies whose stock is admitted to listing in a
regulated market of the EU, under IFRS in place of the accounting principles of individual
Member States.
With regard to certain aspects, the implementation and interpretation process carried out by
official organisms in charge, in addition to the necessary approval of measures taken by the
European Commission, is still underway. As a result, at the present date it cannot be ruled
out that further changes or amendments to the said accounting principles and their
interpretation could in the future oblige or allow the Espresso Group to modify accounting,
valuation and classification criteria adopted in the preparation of the present Consolidated
Interim Report.
41
In the first half of 2005, the IASB (International Accounting Standard Board) and the IFRIC
(International Financial Reporting Interpretation Committee) published new Principles and
Interpretations. Despite the fact that at the present date such Principles and Interpretations
have not yet been included in EU legislation, the Group has taken into account their effect,
describing in note 9 of the present document the potential impact on its Balance Sheet and
Income Statement.
As required by IFRS 1, principles of consolidation and valuation criteria described below
were applied in addition to the preparation of the present Consolidated Interim Report, also
to the opening Consolidated Balance Sheet at January 1, 2004, to the Consolidated Financial
Statements at December 31, 2004, the Consolidated Balance Sheet at January 1, 2005 and
the Consolidated Financial Statements at June 30, 2004, with the exception of those relating
to financial instruments, whose application was postponed to January 1, 2005, as allowed
under IFRS 1, and to exemptions to the retroactive application of IFRS allowed under IFRS
1, as reported in the section “Transition to IFRS”.
The principle adopted is that of the historical cost for all assets and liabilities, with the
exception, from January 1, 2005, of derivative instruments and certain financial assets,
accounted for at their fair value.
Unless otherwise specified, amounts reported in the financial statements and tables are stated
in thousands of euro, rounded off to the nearest unit.
3. PRINCIPLES OF CONSOLIDATION
The consolidation includes the Financial Statements of the parent company, its subsidiaries
and affiliated companies without exception. Subsidiaries are those companies in which the
parent company exercises control. Control is deemed to occur when more than half of actual
voting rights or those potentially exercisable at a shareholders’ meeting are held by the
company either directly or indirectly at the date of the financial statements. Affiliated
companies are those in which the parent company exercises a significant influence. Such
influence is deemed to occur when the Group controls 20% or more of actual voting rights or
those potentially exercisable at the date of the financial statements.
Subsidiaries are consolidated from the date at which the Group acquires control and
deconsolidated from the date at which control is lost.
Subsidiaries and affiliated companies are recorded at the acquisition cost, corresponding to
the current value of assets acquired, shares issued or liabilities generated at the time of
acquisition, in addition to other costs directly incurred in the acquisition. The excess of the
acquisition cost over the book value of assets of subsidiaries acquired by the Group is
recorded as goodwill, while that of affiliated companies acquired is included in the value of
the investment. The accounting treatment of goodwill is described in note 5.1.
Subsidiaries were consolidated under the line-by-line method, thus including all assets and
liabilities, costs and revenues of subsidiaries regardless of the share held. The book value of
consolidated companies was therefore netted against the related Shareholders’ Equity.
42
Transactions, balances and unrealized gains and losses among Group companies were
therefore eliminated. The share in the Shareholders’ Equity and profits accruing to minority
shareholders were recorded separately under Shareholders’ Equity in the consolidated
Balance Sheet and under a separate caption in the consolidated Income Statement.
At the time of their acquisition, investments in affiliated companies are recorded under the
equity method, recording the share of the Group in the profit and in the change in reserves,
respectively in the income statement and in the balance sheet under Shareholders’ Equity.
The share in unrealized gains and losses between affiliated companies is eliminated
depending on the quota held. When the Group’s share in the loss of an affiliated company is
equal or higher than the book value of the investment, the Group does not recognize further
losses unless it has obligations to cover losses or has made payments on behalf of the
affiliated company.
All financial statements of Group companies are prepared at the same date and relate to a
financial year of the same duration.
4. FINANCIAL DATA BY SECTOR
Sectors of activity and primary and secondary sectors in which the Group is active were
determined keeping into account the principal source and nature of risks and returns of the
Group, the organizational structure and the internal reporting system. As the Group’s risks
and returns are influenced exclusively by differences in products and services rendered, the
primary reporting schedule adopted by the Group is the breakdown by type of activity, while
information by geographical area is not applicable and is therefore not provided. For assets
or liabilities that cannot be attributed to a specific sector, specific parameters were applied in
their attribution. Assets and liabilities that may not be attributed to specific parameters are
reported separately in the table below.
43
55.3
53.0
Tax liabilities
Total Liabilities
and
Shareholders’
Liabilities
Total assets
Tax assets
(€ million)
Assets
(4.0)
(5.2)
(6.2)
840.9
1,132.7
831.6
1,166.4
National
newspapers and
Periodicals
Dec. 31, Jun. 30,
2004
2005
(5.8)
Non-monetary
costs
5.3
(0.4)
134.4
123.8
13.7
(0.7)
146.5
151.8
Deprec./amortiz.
Write-downs
Net Profit/(loss) for
the period
Net capital
expenditure
Taxes
(€ million)
Revenues from
others
Revenues from
other sectors
Operating
profit/(loss)
Financial
income/(expense)
Adj. to value of
financial assets
st
1 Half
2005
1 Half
2004
st
National
newspapers
st
st
(0.9)
(0.3)
0.0
(0.0)
7.1
17.2
52.9
1 Half
2005
115.1
398.8
Dec. 31,
2004
st
125.4
393.7
Jun. 30,
2005
22.2
66.0
65.1
16.0
97.3
1.8
16.3
92.8
st
6.9
26.8
st
(0.2)
(0.3)
0.0
(0.1)
(1.4)
4.5
2.2
1 Half
2004
5.8
29.9
st
(0.0)
(0.1)
0.3
2.9
0.0
-
0.2
0.6
0.3
17.1
177.9
Jun. 30,
2005
1.6
0.5
5.5
st
(0.8)
(0.3)
(0.1)
(3.1)
1.0
3.8
275.5
1 Half
2004
194.7
217.7
Dec. 31,
2004
207.8
227.8
Jun. 30,
2005
st
(0.4)
(4.0)
14.2
(0.5)
1.7
19.3
11.0
1 Half
2004
52.4
103.5
Dec. 31,
2004
52.8
94.5
Jun. 30,
2005
st
(0.1)
(263.3)
(518.9)
(2.8)
(289.8)
(656.0)
Jun. 30,
2005
0.0
0.4
0.1
(285.6)
st
1 Half
2005
Elisions and adj.
0.0
1.3
0.0
(260.7)
st
1 Half
2004
Elisions and adj.
Dec. 31,
2004
(0.7)
(5.2)
0.7
(0.5)
1.9
28.0
5.5
1 Half
2005
Other activities
Other activities
(0.7)
(0.2)
(0.0)
(1.2)
0.9
2.3
288.3
st
1 Half
2005
Advertising
Advertising
(0.1)
(0.6)
167.1
(0.0)
st
1 Half
2005
Television
1 Half
2004
Television
(0.2)
(0.2)
0.1
-
(0.4)
1.7
4.5
Dec. 31,
2004
st
1 Half
2005
Internet
Jun. 30,
2005
Internet
(0.3)
(1.4)
1.4
(0.1)
17.6
35.4
2.1
1 Half
2005
Dec. 31,
2004
(0.3)
(1.4)
1.1
(0.3)
14.8
31.8
Jun. 30,
2005
st
Radio stations
1 Half
2004
Radio stations
(3.7)
(7.1)
4.2
(0.3)
Dec. 31,
2004
(3.6)
(5.4)
30.7
(0.2)
22.7
60.3
64.5
st
1 Half
2005
Local
newspapers
1 Half
2004
Local newspapers
(0.8)
(0.3)
0.0
(0.1)
9.0
16.6
39.0
1 Half
2004
Periodicals
Operating and financial data by sector
st
st
(0.0)
(41.9)
(0.1)
(41.8)
1,113.2
1,033.9
44
146.2
967.0
1,612.5
85.5
1,527.0
Jun. 30,
2005
(11.8)
(21.1)
178.8
(2.1)
70.7
963.2
1,528.9
68.3
1,460.7
Dec. 31,
2004
TOTAL
(10.1)
(17.6)
59.7
(3.7)
55.0
(9.4)
(6.3)
52.7
106.3
-
567.6
1 Half
2005
100.9
-
546.1
1 Half
2004
TOTAL
Gruppo Editoriale L’Espresso – Interim Financial Statement at June 30, 2005
5. VALUATION CRITERIA
5.1 Intangible assets
Intangible assets are initially recorded at the acquisition or production cost. The acquisition
cost is represented by the fair value of the price paid for the asset, inclusive of any direct cost
incurred to put the asset to use. The acquisition cost is the equivalent of price paid in cash at
the time of the acquisition. In case the amount paid for the acquisition is deferred beyond
normal payment terms, the difference with respect to the equivalent cash price is recorded as
interest over the longer payment term. The cost of intangible assets developed internally is
recorded by separating costs incurred in the research phase (not capitalized) and costs
incurred in the subsequent development phase (capitalized). In case the two phases cannot be
separated, the whole project is accounted for as research. Interest charges on the acquisition
are not capitalized.
The book value of intangible assets is in line with the amount expected to be retrieved
through future use. In case there arise doubts as to possibility to retrieve the book value of an
asset, the latter is subjected to an impairment test, as described in note 5.5.
Publications and frequencies
The useful life of newspaper mastheads, broadcasting frequencies and certain trademarks is
considered as undefined. Such assets are not amortized and are instead subjected annually, or
any time there is an indication that the asset may have experienced a loss in value, to an
impairment test.
Goodwill
Goodwill represents the premium paid over the fair value of the share of assets and liabilities
acquired by the Group. Goodwill arising from the acquisition of affiliated companies is
included in the value of the related equity investment.
Goodwill acquired for a consideration is not amortized and is subjected at least annually to
an impairment test. With such end, goodwill is allocated from the date of acquisition or by
the end of the subsequent financial year, to one or more cash generating units (CGU).
Possible reductions in value resulting from an impairment test do not give rise to
adjustments in subsequent years.
Other intangible assets are represented by industrial patents and intellectual property rights,
concessions, licenses, trademarks and similar rights, and software. They are recorded at cost,
net of accumulated amortization calculated on a straight line over their expected useful life,
and possible durable losses in value.
In view of the homogeneity of assets recorded in the balance sheet, barring specific relevant
cases, the useful life of other intangible assets is estimated at 3 to 5 years. Amortization
criteria applied, assets’ useful life and residual values are reviewed and redefined at least at
the end of each financial period to keep into account possible significant changes.
45
5.2 Tangible assets
Tangible assets are recorded at cost, represented by the fair value of the price paid for the
acquisition of the asset, inclusive of any direct cost incurred to put the asset to use. The
acquisition cost is the equivalent of price paid in cash at the time of the acquisition. In case
the amount paid for the acquisition is deferred beyond normal payment terms, the difference
with respect to the equivalent cash price is recorded as interest over the longer payment term.
Interest charges on the acquisition are not capitalized. The capitalization of costs for the
upgrade, update or improvement of structural elements owned or leased from third parties is
carried out exclusively when the same fulfill the requisites that allow their separate
classification as assets or part of assets.
After the initial recording, tangible assets are carried at cost, net of accumulated depreciation
and possible durable losses in value. The amortizable value of each significant component of
a tangible assets having a different useful life is calculated on a straight line over its
expected useful life. In view of the homogeneity of assets recorded in the balance sheet,
barring specific relevant cases, the expected useful life of tangible assets by category is as
follows:
Land
Industrial buildings
Printing plants
Full color rotary presses
Rotary presses
Editorial systems
indefinite
30 years
7 years
10 years
5 years
4 years
Amortization criteria, the useful life of assets and their residual value are reviewed and
redefined at least at the end of each financial period to keep into account possible significant
changes.
Capitalized costs relating to leasehold improvements are attributed to the classes of assets to
which they relate and amortized over the shorter between the residual term of the lease and
the residual useful life of the asset to which the leasehold improvement relates.
The book value of tangible assets is in line with the amount expected to be retrieved through
future use. In case doubts arise as to possibility to retrieve the book value of an asset, the
latter is subjected to an impairment test, as described in note 5.5. The original value is
restored when the reasons that gave rise to the impairment cease to exist.
5.3 Leasing contracts
Leasing contracts relating to assets for which the Group bears all costs and benefits deriving
from ownership are classified as financial leases. Assets held under a financial lease are
recorded at the lower between the current value of the asset leased and the present value of
minimum lease payments provided for in the lease contract. Such payments are accounted
for as interest and principal so as to obtain a fixed rate of interest on the residual part of the
debt. Residual lease payments, net of interest, are recorded as financial debt. Interest
46
payments are charged to the income statement over the life of the lease. Assets held under a
financial lease are depreciated in line with assets owned.
Leasing contracts in which the lessor holds a significant share of risks and benefits deriving
from ownership are instead classified as operating leases. Lease payments are recorded in the
income statement in equal installments over the life of the lease contract.
In sale and lease-back operations, the difference between the sale price and the book value of
the asset is not recorded, except in the case of a write-down in the value of the asset.
5.4 Grants
Grants are recorded when there exists, regardless of the formal granting of the amount, a
reasonable certainty that the company will meet the conditions for the entitlement to the
grant and that the same will actually be received.
Capital grants are recorded in the balance sheet as deferred income and not as an adjustment
to the value of the item for which the grant has been obtained. The contribution is credited in
the income statement based on the useful life of the asset for which it is granted by
discounting it so as to net out the related amortization expense recorded.
Any grant receivable as compensation for expenses and costs already incurred or aimed at
providing immediate financial help to the company not correlated to future costs is recorded
as income in the year in which it becomes receivable.
5.5 Impairment of assets
A loss in value of an asset originates whenever the book value of an asset is higher than the
amount expected to be retrieved from the same. At each accounting date, the presence of
factors indicating a possible loss in value is assessed. Whenever one of these factors is
present, the retrievable value of the asset is assessed through an impairment test and the
write-down is recorded where appropriate. Assets not yet available for use, those recorded in
the financial statements in the current financial year, intangible assets having an indefinite
useful life and goodwill are subject at least annually to an impairment test, independently
from the presence of factors indicating possible loss in value.
The retrievable value of an asset is the higher between its fair market value, net of sales
costs, and its usage value. The retrievable value is calculated with reference to each
individual asset, unless the said asset is able to generate positive financial flows deriving
from ongoing use independently from positive cash flows generated by other assets or
groups of assets, in which case the test is carried out at the level of the smallest Cash
Generating Unit that includes the said asset. Values are restored if the conditions for the
impairment no longer obtain, except for goodwill.
47
5.6 Financial assets
Valuation criteria from January 1, 2004 to December 31, 2004
Other investments and securities are recorded at cost, written-down as appropriate in case of
durable losses in value. Securities classified under current assets are valued at the lower
between cost and market value.
Valuation criteria from January 1, 2005
Financial assets are classified into the following categories:
•
financial assets valued at fair value, recorded also in the income statement;
•
financial assets held to maturity;
•
loans and other financial receivables;
•
financial assets available for disposal.
The Group carries out the classification of financial assets at the time of acquisition.
Financial assets are classified as follows:
•
financial assets valued at fair value, recorded also in the income statement consist of
financial assets acquired primarily with the intent of realizing a gain from short-term
trading (over a term no longer than 3 months), or financial assets designated as such
from inception;
•
financial assets held to maturity consist of financial assets having a set maturity and
generating a fixed cash flow or one that may be determined, which the Group intends
and has the ability to hold to maturity;
•
loans and other financial receivables consist of financial assets generating a fixed cash
flow or one that may be determined, not listed on a market and different from those
classified from inception as Financial assets valued at fair value, recorded also in the
income statement or Financial assets available for disposal;
•
financial assets available for disposal consist of financial assets other than the above or
those designated as such from inception.
Acquisitions and sales of financial assets are recorded at the settlement date. The acquisition
cost corresponds to the fair value at the acquisition date, inclusive of transaction costs.
After the initial recording, Financial assets valued at fair value, recorded also in the income
statement and Financial assets available for disposal are valued at fair value, while Financial
assets held to maturity and Loans and other financial receivables are valued at the amortized
cost.
Realized and unrealized gains and losses resulting from fluctuations in the fair value of
Financial assets valued at fair value, recorded also in the income statement, are recorded in
the income statement in the year in which they occur. Unrealized gains and losses resulting
from fluctuations in the fair value of Financial assets available for disposal are recorded
under Shareholders’ Equity.
The fair value of financial assets is determined according to listed bid prices or through the
use of financial models. The fair value of unlisted financial assets is estimated using specific
estimation techniques adjusted to the specific condition of the issuer. Financial assets for
48
which the current value cannot be reliably determined are recorded at cost, adjusted
downwards for losses in value.
At each financial closing date, the presence of factors indicating loss of value is assessed.
The write-down is recorded in the Income Statement. Losses in value accounted for are
reversed in case the circumstances that led to their recording no longer exist, with the
exception of assets valued at cost.
5.7 Inventories
Inventories are recorded at the lower of the acquisition cost, determined applying the
weighted average cost method, and the net realizable value. The cost is represented by the
fair value of the price paid and any other cost that may be attributed, with the exception of
interest expenses. The net realizable value is represented by the estimated sale price under
normal conditions, net of completion costs and selling expenses. Write-downs are reversed
in subsequent years when the reasons for their recording cease to exist.
5.8 Trade receivables
Trade receivables are recorded at the fair value of future cash flows, written-down for losses
in value.
5.9 Contract work in progress
Contract work in progress is represented by specific projects being completed.
In the case of projects for which the outcome can be estimated in a reliable manner,
contractual revenues and related costs are recorded under the stages of completion method.
The percentage of completion is determined according to the ratio between costs and time
employed in the activity carried out at the closing date of the accounts and total costs
estimated to the completion. When it appears probable that total costs will exceed
contractual revenues, the expected loss is recorded in the income statement.
In the case of projects for which a reliable estimate is not available, contractual revenues are
recorded in line with costs incurred, provided such costs are expected to be retrieved.
The sum of costs incurred and of profits recorded on each project is compared with invoices
issued against the work carried out up until the date of the financial statements. When costs
incurred and profits recorded (net of losses) are higher that invoices issued, the difference is
recorded among current assets under “Trade receivables”. When invoices issued are higher
than the sum of costs incurred and profits recorded (net of losses), the difference is
accounted for among current liabilities under “Trade payables”.
5.10 Cash and cash equivalents
Cash and cash equivalents are represented by cash and demand or short-term bank and post
office deposits. These are recorded at their nominal value.
49
Cash and cash equivalents are represented by short-term investments (generally having a
term not exceeding 3 months) in highly liquid assets that may easily be converted in known
amounts of cash posing a minimal risk of fluctuation in value. In the context of the
Statement of Cash Flows, cash and cash equivalents consist of cash, demand deposits with
banks, other highly liquid short-term financial assets with an original maturity not exceeding
3 months, and bank overdrafts. In the preparation of the Balance Sheet, the latter are
included under financial debt among current liabilities. Cash and cash equivalents are
recorded at fair value.
5.11 Share capital
The share capital is represented by capital underwritten and paid-up. Costs strictly correlated
with the issue of shares are recorded as a reduction of the share capital, provided they consist
of marginal variable costs directly attributable to operations involving the share capital and
not avoidable. Costs relating to operations involving the share capital subsequently
abandoned are recorded in the income statement.
5.12 Own shares
Within the limits set by article 2357 of the Italian Civil Code and in the manner established
by the Shareholders’ Meeting, own shares are recorded at the acquisition cost, adjusted for
ascertained durable losses in value and recorded under non-current assets.
Own shares are recorded in a specific Shareholders’ Equity reserve. Gains or losses on the
purchase, sale, issue or cancellation of own shares are not recorded in the income statement.
5.13 Fair value reserves
Fair value reserves include changes in the fair value, net of the related tax effect, of items
recorded at fair value and under Shareholders’ Equity.
5.14 Other reserves
Other reserves are represented by specific capital reserves of the parent company.
5.15 Retained earnings (loss carry-forwards)
Retained earnings (loss carry-forwards) include the part not distributed and not accrued to
reserves (in case of profits) or not used to cover losses for the current year and previous
years (in case of loss). The item includes also transfers from other Shareholders’ Equity
reserves freed-up, in addition to the effect of the change in accounting principles and
relevant errors.
50
5.16 Employee benefits
Short-term benefits
Short-term employee benefits are recorded in the income statement in the period in which
the employment takes place.
Defined benefit plans
Employee severance indemnities and Fixed indemnities for managers of newspapers are
determined by independent actuaries to estimate the amount of the future benefits that the
employees have accrued at the balance sheet date.
Net discounting gains (losses) accrued are not recorded until their absolute value exceeds
10% of the present value of the liability (“corridor approach”). In the year in which such
threshold is exceeded, net discounting gains (losses) are recorded in full.
Defined contribution plans
The Group participates in defined contribution plans contributing to mandatory, contractual
or voluntary public or private pension plans. The payment of contributions extinguishes the
obligation of the Group towards its employees. Contributions constitute therefore costs for
the period in which they are due.
Employee benefits contributed in shares
The Group recognizes additional benefits to certain top managers through stock option plans.
The cost of such operations involving shares is calculated based on the fair value of options
at the time at which they are assigned. The cost is recorded in the period included between
the date at which the options are assigned and that at which they become exercisable, and is
recorded also under Shareholders’ Equity.
5.17 Provisions for risks and charges, contingent assets and liabilities
Provisions for risks and charges are accrued against possible liabilities whose amount and/or
timing is uncertain and whose fulfillment requires the use of financial resources. Accruals
are made exclusively when there exists an actual obligation, either legal or implicit, towards
third parties that requires the use of financial resources, and whenever a reliable estimate of
the obligation can be made. The accrual recorded represents the best estimate of the liability
relating to the fulfillment of the obligation at the date of the financial statements. Accruals
made are reviewed at each accounting date and adjusted to the best available estimate.
Where the payment of the obligation takes place beyond normal payment terms and the
discounting effect is relevant, the amount accrued is represented by the present value of
expected future payments needed to extinguish the obligation.
Contingent assets and liabilities are not recorded in the financial statements, though
information about the same is provided.
51
5.18 Financial liabilities
Financial liabilities are valued at cost, adjusted for permanent losses in value.
Financial liabilities are recorded initially at the fair value of amounts received, net of
transaction costs, and subsequently valued at the amortized cost.
5.19 Derivative instruments
Derivative instruments used to hedge risks relating to specific assets or liabilities are valued
at cost, in line with assets and liabilities hedged. Differentials accrued on hedging contracts
relating to assets and liabilities that produce interest, are recorded in the income statement
under the accrual method. Differentials accrued on “paper swap” contracts are recorded as an
increase or deduction of the cost of the supply, as appropriate.
Derivative contracts are recorded in the income statement at fair value. The recording of
differences in the fair value varies according to the purpose of the derivative instrument
(speculative or hedging) and the nature of the risk hedged (Fair Value Hedge or Cash Flow
Hedge).
In the case of contracts designated as speculative, changes in the fair value are recorded
directly in the income statement.
In the case of contracts designated as hedging contracts, the Group documents the
relationship with the instrument hedged at the time it enters into the contract. The
documentation includes the identification of the hedging contract, the item or operation
hedged, the nature of the risk hedged, the criteria with which the effectiveness of the hedging
contract will be evaluated, and the related risk. The effectiveness of the hedge is evaluated
by comparing fluctuations in the fair value or the cash flow of the instrument hedged with
fluctuations in the fair value or the cash flow of the hedging instrument. The effectiveness of
the hedge is evaluated both at the start of the operation and regularly throughout the duration
of the hedge. The evaluation is in any case carried out at least at each accounting date. More
specifically, the hedge is considered as efficient when the fluctuation in the fair value or the
cash flow of the instrument is “almost entirely” offset by the fluctuation in the fair value or
cash flow of the hedging instrument and results are included in an interval between 80% and
125%.
Fair Value Hedge instruments are accounted for by recording in the income statement
changes in the fair value of the hedging instrument and the instrument covered, regardless of
the valuation criteria adopted for the latter. Adjustments to the book value of hedged
financial instruments producing interest are amortized in the income statement over the
residual term of the asset/liability hedged using the effective interest rate method.
52
Cash Flow Hedge instruments are accounted for by suspending under Shareholders’ Equity
the portion of the change in the fair value of the hedging instrument which is recognized as
effective, while recording in the income statement the ineffective part. Changes recorded
directly under Shareholders’ Equity are released to the income statement in the same year or
in the years in which the asset or liability hedged influences the income statement.
The effect on the financial statements of the termination of a hedge contract are recorded
differently for Fair Value Hedges and Cash Flow Hedges. In the case of Fair Value Hedges
the underlying instrument recorded in the financial statements ceases to be hedged from the
date at which the hedging contract is terminated and the instrument is thus again valued
according to the method used in absence of a hedge. In case of financial instruments valued
at the amortized cost, the difference between the valuation at the fair value of the risk
covered and the amortized cost at the date of the termination of the hedge accounting period,
is amortized over the residual life of the financial instruments based on rules used in the
calculation of the effective rate of interest. In the case of Cash Flow Hedge, the gain or loss
suspended in the Shareholders’ Equity remain suspended until the transaction takes place,
when it is no longer probable or it is no longer expected to be carried out, or when flows
originally hedged have an impact on the income statement.
5.20 Cost and revenue recognition
Revenues from the disposal of assets are valued at the fair value of the amount received or
receivable, keeping into account trade discounts.
Revenues from the provision of services are accounted for under the percentage of
completion method, defined as the ratio between the amount of services provided at the
accounting date and the total value of services to be provided.
Revenues from contract work are recorded as described in note 5.9.
Revenues are recorded in accordance with the following criteria:
•
revenues from the sale of publications are recorded at the time of shipping, net of related
returns;
•
revenues from the sale of advertising are recorded at the time of publication.
Costs are recorded according to criteria in line with those applied for revenues, and in any
case under the accrual method.
Interest received and paid is recorded based on the accrual method, keeping into account the
residual principal liability and the effective rate of interest applicable to maturity.
Dividends are recorded in the year in which distribution is resolved.
5.21 Taxes
Income taxes for the year are calculated based on expectable taxable income and current tax
regulations.
53
Deferred and prepaid taxes arising from timing differences between the profit reported in the
financial statements and that reported for tax purposes, the carry-forward of losses and tax
credits not retrieved are also recorded, provided their retrieval (elimination) reduces
(increases) future tax payments with respect to the amount that would be payable in the
future in case such retrieval (elimination) did not have a tax effect. The tax effect of
operations or other events are recorded in the income statement or directly under
Shareholders’ Equity in the same manner as operations or events that originate a tax liability.
5.22 Translation of amounts originally expressed in currencies other than the euro
Entries in the financial statements of each Group company are recorded in the currency of
the primary economic environment in which each company operates (“functional currency”).
The consolidated financial statements are prepared in euro, which is the functional currency
of the parent company.
Transactions denominated in other currencies are translated into the functional currency at
the exchange rate at the date of the transaction. Foreign-exchange gains and losses arising
from the settlement of these transactions and the translation of assets and liabilities
denominated in currencies other than the functional currency are recorded in the income
statement.
6. CHANGE IN ACCOUNTING PRINCIPLES, ERRORS AND ADJUSTMENTS TO
ESTIMATES
Accounting principles adopted are modified from one financial year to the next only in case
the change is required by an accounting principle or it contributes to provide more reliable
and relevant information on the effect of transactions carried out on the financial position,
economic performance or financial flows of the entity involved.
The effect of changes in accounting principles is recorded retrospectively in the
Shareholders’ Equity for the year prior to the one of the accounts, and comparative
information is adapted accordingly. Such approach is adopted only when it is impractical to
restate the accounts for comparative purposes. The application of a new or modified
accounting principle is accounted for as required by the same principle. In case the principle
does not provide for the transition, the change is accounted for under the retrospective
method or, when this is impractical, through the use of projections.
In case of relevant errors, the method described in the paragraph above with reference to
accounting principles applies. In case of immaterial errors, the recording is carried out in the
income statement in the period in which it is detected.
Changes in estimates that have an impact exclusively on the income statement are accounted
for on a prospective basis in the same year in which the change takes place if it impacts on
the income statement, or in the year in which the change takes place and in subsequent years
in case the change also impacts on subsequent accounting periods.
54
7. SUBSEQUENT EVENTS
Events occurred after the date of the financial statements are events occurred between such
date and the date at which the publication of the same is authorized. The date of approval for
the publication of the financial statements is the date at which the Board of Directors
approves them. Such date is indicated in note 1. Subsequent events relate to facts that
provide evidence of situations existing at the date of the financial statements (subsequent
events that imply adjustments) or facts providing evidence of situations after the balance
sheet date (subsequent events that do not require adjustments). The effect related to the first
is recorded in the financial statements and the appropriate note is adjusted accordingly, while
in the second case only relevant information is provided in the notes, where relevant.
8. RISK MANAGEMENT
In the management of financial resources the Group adopts a binding procedure that implies
the application of strict prudence and limited risk criteria in the choice of financial and
investment policies, prohibiting all speculative operations except for those motivated and
approved by the Board of Directors of the parent company.
The parent company manages and coordinates a centralized intragroup current account, in
which all subsidiaries take part, aiming at obtaining economic advantages in relationships
with financial counterparts and stronger operating efficiency. Centralization allows in fact
more efficient planning and control of financial flows, ensures higher consistency in
financing and investment choices, optimizes the risk profile of the overall Group and, above
all, strengthens its contractual power with other parties.
The Group, whose rating issued by Standard&Poors is BBB- with a positive outlook, uses
prevalently two channels to raise financial resources: the international bond market and longterm bank loans extended against subsidized investments in publishing activities, reducing
the interest rate on the loan by several percentage points. In this framework and in view of
the good liquidity of the market and of favorable interest rates, the parent company placed on
the market in October 2004 a €300 million, 10-year bond, bearing a 5.125% fixed rate of
interest to be used to repay the existing €200 million bond expiring August 1, 2005, in
addition to providing liquidity for future acquisitions and investments. Bond issues and
related interest payments are not guaranteed and do not contain covenants or clauses
providing for their early repayment. The proceeds of the bond resulted temporarily in a
strong liquidity, invested in time deposits with primary Italian banks. To limit the effect of
the negative spread between the fixed interest paid out and the floating interest earned until
the expiration of the old bond issue (August 10, 2005) and the settlement of the acquisition
of Rete A, the Group entered into interest rate contracts, swapping the fixed rate into a
floating rate. The operation was reversed in March 2005 with a gain of about €9 million,
achieved thanks to a further reduction in interest rates in the period.
Through the bond issue and the assumption of 10-year loans extended against productive
investments made, the Group ensured sufficient long-term financial resources. In case the
Group requires financial resources in addition to those generated by the operating cash flow,
55
– which in the past years was however consistent – the Group will be in a position to draw
on a number of uncommitted credit lines of about €150 million.
As it operates exclusively in the euro area, the Group is not exposed to financial risk
connected with fluctuations in exchange rates.
As it is active in the publishing sector, the Group acquires large quantities of paper.
Fluctuations in price of paper have had in the past a strong impact on the financial statements
of publishers. Price increases were however connected with the frequent devaluation of the
Italian lira against other European currencies, while, with the introduction of the euro, the
volatility in paper prices was strongly reduced, subject mainly to economic swings. Over the
course of time, the Group stipulated a number of three-year “paper swap” contracts on paper
used to print newspapers and periodicals, with the aim of fixing the price of paper for a
portion of its needs, thus reducing the negative impact of a possible rapid increase in prices.
At the current date, a single contract expiring September 30, 2005 is held by the Group,
though the market price of paper is continuously monitored. Since this contract does not
meet all hedging requirements under IAS 39, it has been recognized at fair value and a
counter-value charged to the income statement. The Group has moreover maintained a high
number of paper suppliers so as to be always in a position to obtain supplies at times in
which there exist price tensions by promoting competition among them.
In view of the sectors in which it operates, the Group does not have a significant credit risk.
9. NEW IFRS AND INTERPRETATIONS OF THE IFRIC
In the first half of 2005, the IASB and the IFRIC published new Principles and
Interpretations. Despite the fact that at the present date such Principles and Interpretations
have not yet been included in EU legislation, the Group has taken into account their effect,
summarizing the potential impact on its balance sheet and income statement as follows:
IFRS FRIC Interpretation
Effect on the accounts of the Group
IAS 39 Amendment fair value option
IFRS 6 Exploration rights and valuation of
mining activities
IFRIC 2 Shares in cooperatives and similar
instruments
None
None: the Group does not carry our exploration and does
not own mining activities
IFRIC 3 Issue rights
IFRIC 4 Assessment of a leasing operation in a
contract
IFRIC 5 Rights over grants for
decommissioning and reclaim of sites
None
None: the Group does not participate to Emission rights
schemes
The Group does not foresee any change in the recording of
current contracts
None: the Group does not have rights over grants for
decommissioning and reclaim of sites
10. MAIN CAUSES OF UNCERTAINTY OVER ESTIMATES
Estimates are made primarily in the context of the recording of write-downs on the value of
assets, accruals to provisions for bad accounts, employee benefits, taxes and other accruals
and provisions. Estimates and assumptions are reviewed periodically and the effect of each
resulting change are reflected immediately in the income statement.
56
CONSOLIDATION AREA
Companies included in the consolidation area are listed in Attachment 1.
The investment in Editoriale La Libertà SpA was accounted for under the equity method as,
despite the fact that the Group holds a 19% share in the company, it exercises a significant
influence over major operating decisions.
On April 14, 2005, the Espresso Group acquired 100% of Rete A SpA, owner of national TV
network Rete A, which in turn holds 100% of company All Music SpA.
The price paid for the acquisition amounts to €115 million, financed using part of the
proceeds of the €300 million bond issue launched in October 2004.
At June 30, 2005, the two companies contributed to consolidated revenues and net profit of
the Group respectively €5,744 thousand and €897 thousand.
Below we report the Balance Sheet of Rete A at March 31, 2005, the closest date to the
conclusion of the acquisition (in thousands of euros).
Assets
Liabilities and Shareholders’ Equity
Intangible assets
Employee severance indemnities
Industrial patents
7
Tangible assets
Employee severance indemnities
1,150
Payables
Land and buildings
1,055
Banks
3,652
Plant and machinery
1,363
Trade payables
3,999
Technical equipment
2
Tax payables
1,308
Other assets
74
Financial assets
Social security payables
98
Other payables
1,089
10,146
Investment in All Music
77
Total payables
Other investments
14
Accrued liabilities and deferred income
Long-term receivables
36
5,619
TOTAL LIABILITIES AND
16,931
Total fixed assets
2,627
Trade receivables
6,188
Tax receivables
360
Other receivables
453
53
Bank deposits
7,088
Cash on hand
5
Total current assets
Accrued income and prepaid
expenses
TOTAL ASSETS
16
14,146
158
16,931
57
The fair value of the portion of a building owned by Rete A, carried at €1,055 thousand, was
estimated through an independent expert opinion at €2,673 thousand.
The value of television broadcasting frequencies, determined using market multiples used in
recent similar transactions, is equal to €118,192 thousand.
The premium paid upon an acquisition over the value of identifiable assets and liabilities
acquired, in addition to potential liabilities, represents goodwill. In the case of Rete A,
goodwill amounted to €30,315 thousand, representing the difference between the €115,000
thousand paid for the acquisition, and the fair value of assets and liabilities acquired,
amounting to €84,685 thousand. Goodwill can be attributed to the creation of synergies with
other trademarks and activities of the Group in the media sector, leading to the integrated use
of all media platforms to publish editorial content.
The cash outflow for the acquisition was financed as follows:
Price paid
Cash of acquired company
Cash outflow
115,000
(7,093)
107,907
58
BALANCE SHEET
ASSETS
Intangible assets (1)
The breakdown and changes occurred in intangible assets are shown in Attachments 2 a), b)
and c).
The impairment test carried out on publications and frequencies, considered assets having an
indefinite useful life, and on goodwills did not result in the emergence of losses in value to
be recorded in the financial statements.
The retrievable value of assets was estimated with reference to the fair value less costs to sell
and the usage value.
The fair value less cost to sell was determined based on direct multipliers and the price
previously recorded in similar transactions.
The usage value was calculated by discounting at an appropriate rate of interest future
financial flows, both positive and negative, generated by the unit in its productive phase and
at the time of its disposal (discounted cash flow method). Cash flows were estimated taking
into account actual data and business plans for years 2005-2009 prepared by management.
Such plans were elaborated on the basis of trends recorded in previous years and making
projections on the performance of the advertising market and more in general the media
sector. The rate used in the discounting was determined according to the weighted average
cost of capital (WACC), net of inflation and gross of taxes, calculated independently from
the financial structure of the acquiring or controlling entity.
Tangible assets (2)
The breakdown and changes in tangible assets and of assets held under a lease is shown in
Attachments 3 a), b) and c).
Investments valued at equity (3)
Book value at January 1, 2004
Share in income/(loss)
23,482
685
(Dividends received)
(1,119)
Book value at June 30, 2004
23,048
859
23,907
(Disposal of investments)
(9,559)
(Dividends received)
460
(261)
14,547
59
The value of investments at June 30, 2005 includes €10,584 thousand relating to goodwill of
Editoriale Libertà SpA and Altrimedia SpA.
Le Scienze SpA
Saire Srl
Editoriale Libertà SpA
Altrimedia SpA
Total investments valued at
equity
Le Scienze SpA
Saire Srl
Altrimedia SpA
Le Scienze SpA
Saire Srl
Altrimedia SpA
Jan 1,
2004
50%
50%
35%
35%
% ownership
Jan. 1,
June 30,
2005
2005
50%
50%
50%
50%
35%
19%
35%
35%
Jan 1,
2004
167
327
22,317
671
23,482
Jan 1,
2004
2,204
826
20,272
4,093
Jan 1,
2004
3,920
110
15,369
10,035
Assets
Jan. 1,
2005
2,878
749
21,376
3,899
Revenues
Jan. 1,
2005
3,358
110
16,131
10,005
June 30,
2005
2,353
772
23,629
3,708
Jan 1,
2004
1,869
166
7,034
2,678
June 30,
2005
1,721
55
8,183
5,204
Jan 1,
2004
230
32
3,162
411
Book value
Jan. 1,
June 30,
2005
2005
185
139
348
356
22,691
13,441
683
611
23,907
Liabilities
Jan. 1,
2005
2,507
60
7,035
2,450
Profit (loss)
Jan. 1,
2005
242
30
3,571
434
14,547
June 30,
2005
2,070
61
7,663
1,221
June 30,
2005
154
22
1,625
195
Other investments (4)
(Disposal of investments)
Acquisition of investments
3,999
3,999
(131)
3,868
14
3,883
Jan. 1,
2004
Sandalyaweb Srl (not operational)
Ansa Soc. Coop.a r.l.
E Ink Corporation Inc.
DAB Servizi SpA
Trento Press Service Srl
A.G.F. Srl
Audiradio Srl
Other investments
Total other investments
100%
16.68
%
0.69%
12.5%
14.4%
10%
4%
% ownership
Jan. 1,
June 30,
2005
2005
100%
16.97%
0.43%
14.4%
10%
4%
100%
16.97%
0.43%
14.4%
10%
4%
Jan. 1,
2004
75
2,209
1,481
114
37
10
26
47
3,999
Book value
Jan. 1,
June 30,
2005
2005
75
2,209
1,481
37
10
26
30
3,868
75
2,209
1,481
37
10
26
45
3,883
60
Financial receivables (5)
Jan. 1, 2005
June 30, 2005
Security deposits
1,441
1,320
Withholding taxes on employee severance indemnities receivable
2,371
2,283
Other receivables
5,442
-
TOTAL NON-CURRENT FINANCIAL RECEIVABLES
9,254
3,603
In application of IAS 39, the fair value of interest rate swap contracts entered into to hedge
the fixed/floating interest rate risk resulting from bonds issued on October 8, 2004,
amounting to €5,435 thousand was recorded under “Other receivables” at January 1, 2005.
A matching liability was recorded under “Non-current financial receivables” as an increase
of the liability resulting from the bond issue.
Jan. 1, 2005
June 30, 2005
Security deposits
131
81
Other receivables
1,540
3,424
TOTAL CURRENT FINANCIAL RECEIVABLES
1,671
3,505
Deferred taxes (6)
January 1, 2005
Temporary
differences
Deferred tax assets:
Provision for legal risks and
adv. on legal expenses
Provision for risks on labor
litigation
Tax rate
June 30, 2005
Tax effect
Temporary
differences
Tax rate
Tax effect
11,271
37.25%
4,064
10,361
37.25%
3,860
10,630
33.00%
3,452
10,815
33.00%
3,569
3,159
37.25%
1,148
2,210
37.25%
823
Other write-downs of fixed
assets
23,102
33.00%
7,624
18,686
33%
6,166
Write-down of inventories
4,870
37.25%
1,814
6,764
37.25%
2,520
Write-down of receivables
Leasing payments
(principal)
Stock options
3,227
33.00%
1,065
3,447
33.00%
1,137
3,874
37.25%
1,443
3,386
37.25%
1,261
3,297
33.00%
1,088
2,813
37.25%
1,048
Fair value swap on bond
issue
5,435
33.00%
1,794
8,109
33.00%
2,676
Other
9,504
33-37%
3,319
6,433
33-37%
2,149
26,811
73,024
Write-down of tangible
assets
Total deferred tax assets
78,369
25,209
61
Deferred tax liabilities:
Accumulated depreciation
and amortization
(123,583)
37.25%
-
-
Rete A frequencies
(46,034)
-
(129,236)
37.25%
(48,140)
(109,643)
37.25%
(40,842)
Discounting of employee
severance indemnities
(4,262)
33.00%
(1,406)
(4,320)
33.00%
(1,426)
Leasing (depreciation)
(9,821)
37.25%
(3,658)
(10,270)
37.25%
(3,826)
Fair value swap on bond
issue
(5,435)
33.00%
(1,794)
Other
(3,703)
33-37%
(1,289)
(3,698)
(54,181)
(257,167)
Total deferred tax
liabilities
(146,804)
NET DEFERRED TAX
LIABILITIES (ASSETS)
-
33-37%
(1,265)
(95,499)
(27,370)
(70,290)
Some Group companies have significant loss carry-forwards. In compliance with IAS 12,
deferred tax assets were not recorded as at the present date these companies are not deemed
likely to generate sufficient taxable income in the future to offset these losses.
Inventories (7)
Paper
Offset and printing materials
Publications
Publications sold optionally and multimedia products
Other goods
TOTAL INVENTORIES
Jan. 1, 2005
June 30, 2005
23,846
20,832
2,179
2,471
384
1,106
2,868
2,206
912
1,119
30,189
27,734
At June 30, 2005, the change in inventories recorded in the income statement amounted to
€2,572 thousand (€5,100 thousand at June 30, 2004), of which €59 thousand relating to the
change in inventories included under “Revenues” (at June 30, 2004 such change was
negative by €1,609 thousand), and €2,513 thousand relating to the change in raw material
inventories and other goods included under “Purchases” (as compared with €6,709 thousand
in the same period in the previous year).
Trade receivables (8)
Newsstands and distributors
Advertising
Other trade receivables
Receivables from Group companies
TOTAL TRADE RECEIVABLES
Jan. 1, 2005
12,783
218,438
10,008
498
241,727
June 30, 2005
10,508
230,103
12,694
232
253,537
62
Marketable securities (9)
Purchase of own shares
Sales
Sales
Revaluations/(write-downs)
Impact of application of IAS 32 and 39
Purchases
Sales
Revaluations/(write-downs)
of which:
• Current portion
• Non-current portion
Issuer
Security
28,989
4,842
(64)
33,767
(120)
(313)
33,334
(13,192)
20,142
52
(9,831)
(295)
10,068
10,068
-
B.T.P. 3.5%
Government bond
2,500
Sept. 15, 2005
Interest
rate
3.5%
B.T.P. 4.0%
Government bond
5,000
July 15, 2005
4.0%
5,014
B.T.P. 4.0%
Government bond
2,500
July 15, 2005
4.0%
2,501
C.C.T. floating
Government bond
150
March 1, 2006
Floating
52
Total
Nominal value
Maturity
10,150
Amount
2,501
10,068
Tax receivables (10)
Corporate income tax (Ires) and regional tax on productive
activities (Irap) receivable
Ires/Irap to be reimbursed
Ires receivables from parent companies
VAT receivable
Receivable from Tax Authorities for grants
Other tax receivables
TOTAL TAX RECEIVABLES
Jan. 1, 2005
June 30, 2005
958
8,659
10,345
10,416
1,734
13,933
552
243
27,685
26,874
197
163
41,471
60,288
Receivable from Tax Authorities for grants relate to tax credits on capital expenditure as
per Law 62/2001 (Law on Publishing), in addition to subsidies on paper purchases granted
by Law 350 dated December 24, 2003.
63
Law 62/2001 grants a 3% tax credit per year on eligible capital investments for the following
five years. Grants not pertaining to the period are discounted and used-up over time based on
the depreciation schedule of the assets to which they relate.
Law 350 dated December 24, 2003 provides subsidies for paper used in 2004 for the printing
of publications, granting a 10% tax credit on total paper purchases.
Other receivables (11)
Jan. 1, 2005
June 30, 2005
Contributions and subsidies receivable
1,855
1,386
Advances to personnel, suppliers and agents
7,009
3,184
372
389
-
9,500
Other
12,740
11,698
TOTAL OTHER RECEIVABLES
21,976
26,157
Jan. 1, 2005
June 30, 2005
383,026
305,947
21
1
167
167
383,214
306,115
Social security receivables
Receivable on disposal of investments
Cash and cash equivalents (12)
Current account balances
Checks
Cash on hand
TOTAL CASH AND EQUIVALENTS
Current account balances are remunerated at an agreed rate of interest based on the Euribor
rate. Short-term deposits have maturities varying between one day and three months,
according to the financial needs of the Group, and interest accrued is paid out at the
respective expiration date.
64
Share capital (13)
The share capital amounts to €65,003,439.45 and is made up of 433,356,263 shares with par
value of €0.15 each. With respect to January 1, 2005, the share capital increased by
€107,381.25 as a result of the underwriting of 715,875 shares in execution of stock option
plans.
Jan. 1, 2005
June 30, 2005
No. of shares resolved
442,882,188
444,367,188
No. of ordinary shares
432,640,388
433,356,263
3,300,000
2,450,000
of which:
No. of own shares
All ordinary shares issued are fully paid-in. There do not exist shares on which there is a
restriction on the distribution of dividends, with the exception of the provisions of article
2357 of the Italian Civil Code regarding own shares.
Reserves (14)
The breakdown of reserves and changes incurred in the period are reported in the “Statement
of Changes in the Consolidated Shareholders’ Equity”.
Minority interests (15)
Editoriale FVG SpA
Jan. 1, 2005
June 30, 2005
9,243
9,052
201
201
1,561
1,339
11,005
10,592
Edigraf Srl
Seta SpA
TOTAL MINORITY INTERESTS
Financial debt (16)
Bonds
Bank loans
Leasing payables
TOTAL NON-CURRENT
FINANCIAL DEBT
Jan. 1,
2005
June 30,
2005
Maturing
between 1 and
2 years
Maturing
between 2 and
5 years
over 5 years
305,435
307,026
-
-
307,026
22,187
19,788
5,725
10,446
3,617
3,229
3,595
1,921
1,585
89
330,851
330,409
7,646
12,031
310,732
65
In application of IAS 39, and in particular applying the hedge accounting method to record
derivative instruments used to hedge in full or in part the profit or loss resulting from a
change in the fair value of an asset or liability, at January 1, 2005, the original €300 million
amount of the bond issue was valued at fair value. To hedge against fluctuations in the fair
value of the fixed-interest bond issue resulting from fluctuations in interest rates, at the time
of the issue the company entered into fixed/floating interest rate swap transactions covering
the full amount and duration of the issue. At June 30, 2005 as a result of the early
termination of such contracts and also in application of IAS 39, in recording the bond issue
at its amortized cost, the value of the same was determined keeping into account issue costs
and discounts, in addition to the current portion (calculated on the basis of the residual life of
the bond) of the difference between the fair value at the time of the termination of the hedge,
and the original cost of the issue.
The bond has a term of 10 years and bears an annual interest of 5.125%. The effective
interest rate is 4.824%.
Jan. 1, 2005
June 30, 2005
205,592
212,183
14,852
26,106
Leasing payables
1,048
2,456
Payables to other financing entities
3,344
506
5
7,178
224,841
248,429
Bonds
Bank loans
Other financial payables
TOTAL CURRENT FINANCIAL DEBT
Item “Bonds” includes the €200 million 2000-2005 bond issue expiring August 1, 2005
(6.25% nominal half-yearly interest rate, equivalent to a 6.68% effective yearly rate).
In application of IAS 39, on January 1, 2005 the value of the paper swap contract with
which the price of part of paper supplies is fixed until September 2005 was recorded on
January 1, 2005 under “Payables to other financing entities”, while a matching reduction in
the Reserve for fair value was recorded at the same date. The impact of the valuation at fair
value of the hedging contract resulted in a €3,344 thousand increase in current financial
liabilities. Subsequent to January 1, 2005, the two payments made reduced such amount to
€506 thousand.
Leasing payables are shown in the table that follows:
Balance at
Jan. 1, 2005
Repayment
of principal
Increases
Balance at
Repurchases June 30, 2005
Short-term portion
1,048
1,904
(496)
Coming due between 1 and 5 years
3,111
942
(547)
118
-
(29)
-
89
4,277
2,846
(1,072)
-
6,051
Coming due over 5 years
TOTAL
-
2,456
3,506
66
Provisions for risks and charges (17)
Legal
proceedings
Social security
litigation
Renewal of
contracts
Early
retirement
incentives
Sundry
risks
Total
provisions
10,831
7,089
-
2,724
4,307
24,951
2,029
248
24
350
63
2,714
Uses and discounting
(1,700)
137
-
(249)
(596)
(2,408)
June 30, 2004
of which:
• Current portion
Accruals
11,160
7,474
24
2,825
3,774
25,257
4,682
6,478
274
317
7,157
165
24
-
2,440
385
-
1,587
2,187
408
9,050
16,207
847
(1,582)
110
(24)
(1,421)
108
(2,809)
Jan. 1, 2005
of which:
• Current portion
9,852
7,749
-
1,404
4,290
23,295
4,530
5,322
2,354
5,395
-
1,404
-
1,985
2,305
10,273
13,022
Accruals
3,148
-
394
-
136
3,678
(1,161)
129
-
(614)
(1,908)
(3,554)
June 30, 2005
of which:
• Current portion
11,839
7,878
394
790
2,518
23,419
5,232
6,607
2,347
5,531
394
-
790
-
1,420
1,098
10,183
13,236
Jan. 1, 2004
Accruals
The long-term components of such provisions were discounted at a 4% rate, gross of the
related tax effect.
Provisions for legal proceedings and social security litigation include risks deriving from
libel suits, common to all publishers, risks connected with trade litigation, labor litigation
and risks connected with social security assessments.
The provision for early retirement incentives relates to the accrual of costs expected to be
incurred in 2005 in the restructuring of Internet subsidiaries Kataweb and Ksolutions, in
addition to the Udine division of Editoriale FVG.
The provision for sundry risks includes accruals for tax contestation on premium
transactions, and other risks.
Employee severance reserve and other retirement benefits (18)
Defined benefit plans
The Provision for Employee Severance and Fixed Indemnities for managers and journalists
of newspapers fall within the defined benefit plan category and are therefore determined
according to actuarial methods.
67
Benefits are calculated based on the following:
Discounting rate
4.5%
Inflation rate
2.0%
Yearly increase in retributions
3.5%
Yearly increase in Employee Severance Provision
3.0%
Advances expected to be paid-out annually
4.0%
Amounts recorded in the balance sheet are made up as follows:
Jan. 1, 2004
ESP
Fixed
indemnity
June 30, 2004
ESP
Fixed
indemnity
Jan. 1, 2005
Fixed
indemnity
ESP
June 30, 2005
ESP
Fixed
indemnity
Nominal value of the fund
90,607
7,300
92,539
7,768
94,884
7,778
95,408
5,768
Net actuarial loss recorded in
the period
(3,614)
(2,603)
(3,614)
(2,603)
(4,060)
(2,715)
n.a.
n.a.
TOTAL EMPLOYEE
SEVERANCE RESERVE
AND OTHER
RETIREMENT BENEFITS
86,993
4,697
88,925
5,165
90,824
5,063
95,408
5,768
Changes in liabilities in the period and their effect on the income statement are shown in the
table that follows:
Employee Severance Provision
Fixed indemnity
86,993
4,697
7,240
487
Interest on obligations assumed
n.a.
n.a.
(Gain)/loss on discounting
n.a.
n.a.
(Indemnities paid)
(5,308)
(19)
Liability at June 30, 2004
88,925
5,165
Current cost of the service
3,038
77
3,939
137
(38)
86
(Indemnities paid)
(5,040)
(402)
Liability at January 1, 2005
90,824
5,063
7,703
826
n.a.
n.a.
n.a.
n.a.
(Indemnities paid)
(3,119)
(121)
Liability at June 30, 2005
95,408
5,768
Liability at January 1, 2004
68
Employee benefits contributed in shares
Stock option plans for managers of the parent company and its subsidiaries holding strategic
positions within the Group assign the right to exercise at a pre-determined price and for a set
term an option for the underwriting of new shares to be issued by the company pursuant to
the related stock option plan resolutions. The related rules regulate, among other terms and
conditions, also the case in which the assignee of the said options ceases for whatever reason
to be employed by the company.
Starting from 2001, ad hoc stock option plans were assigned to the Managing Director of the
company, Marco Benedetto, giving him the right to acquire from the company at a predetermined price and for a set term, a number of shares equal to the options already assigned
to him.
Current stock option plans are:
“2000” Stock option plan
On February 23, 2000, the Board of Directors, in application of the proxy assigned by the
Shareholders’ Meeting on April 29, 1996, resolved a capital increase pursuant to article
2441, last paragraph, of the Italian Civil Code, for a total of 2,155,000 shares at a price of
€25.60 of which €0.15 of nominal value and €25.45 of premium over par, determined in
relation to the higher between the official price and the listed price on the Italian Stock
Market (Borsa Italiana S.p.A.) on February 22, 2000 to service the “2000” Stock Option
Plan. The stock option plan provides for the options to be exercised by each assignee in the
following periods: a) up to a maximum of 12% of the total of options assigned starting from
September 30, 2000 and at subsequent quarterly intervals until September 30, 2010; b) up to
a maximum for each quarter of 6% of options assigned in the period between December 31,
2000 and March 31, 2004, and at subsequent quarterly intervals until September 30, 2010; c)
the residual 4% of options assigned starting from June 30, 2004 and up until September 30,
2010.
To the present date no option was exercised and, pursuant to the stock option plan, 570,000
options have expired. The residual number of shares is thus 1,585,000.
“April 24, 2001” Stock option plan
On April 24, 2001, the Board of Directors, in application of the proxy assigned by the
Shareholders’ Meeting on April 6, 2001, resolved a capital increase pursuant to article 2441,
last comma, of the Italian Civil Code, for a total of 930,000 shares at a price of €6.25 of
which €0.15 of nominal value and €6.10 of premium over par, determined in relation to the
provision article 9, comma IV of the Testo Unico tax law that makes reference to the simple
arithmetic mean of official stock market prices of the company’s shares in the previous
month, to service the “April 24, 2001” Stock Option Plan. The stock option plan provides for
the options to be exercised by each assignee in the following periods: a) up to a maximum of
12% of the total of options assigned starting from September 30, 2001 and at subsequent
quarterly intervals until September 30, 2011; b) up to a maximum for each quarter of 6% of
options assigned in the period between December 31, 2001 and March 31, 2005, and at
69
subsequent quarterly intervals until September 30, 2011; c) the residual 4% of options
assigned starting from June 30, 2005 and up until September 30, 2011.
To the present date no option was exercised and, pursuant to the stock option plan, 175,000
options have expired. The residual number of shares is thus 755,000.
“October 24, 2001” Stock option plan
On October 24, 2001, the Board of Directors, in application of the proxy assigned by the
last comma, of the Italian Civil Code, for a total of 885,000 shares at a price of €2.51 of
month, to service the “October 24, 2001” Stock Option Plan. The stock option plan provides
for the options to be exercised by each assignee in the following periods: a) up to a
maximum of 12% of the total of options assigned starting from March 31, 2002 and at
subsequent quarterly intervals until March 31, 2012; b) up to a maximum for each quarter of
6% of options assigned in the period between June 30, 2002 and September 30, 2005, and at
subsequent quarterly intervals until March 31, 2012; c) the residual 4% of options assigned
starting from December 31, 2005 and up until March 31, 2012.
To the present date 594,075 options were exercised and, pursuant to the stock option plan,
14,200 options have expired. The residual number of shares is thus 276,725.
“March 6, 2002” Stock option plan
On March 6, 2002, the Board of Directors, in application of the proxy assigned by the
last comma, of the Italian Civil Code, for a total of 1,330,000 shares at a price of €3.30 of
month, to service the “March 6, 2002” Stock Option Plan. The stock option plan provides for
12% of the total of options assigned starting from September 30, 2002 and at subsequent
quarterly intervals until September 30, 2012; b) up to a maximum for each quarter of 6% of
options assigned in the period between December 31, 2002 and March 31, 2006, and at
subsequent quarterly intervals until September 30, 2012; c) the residual 4% of options
assigned starting from June 30, 2006 and up until September 30, 2012.
“July 24, 2002” Stock option plan
On July 24, 2002, the Board of Directors, in application of the proxy assigned by the
70
month, to service the “July 24, 2002” Stock Option Plan. The stock option plan provides for
12% of the total of options assigned starting from December 31, 2002 and at subsequent
quarterly intervals until December 31, 2012; b) up to a maximum for each quarter of 6% of
options assigned in the period between March 31, 2003 and June 30, 2006, and at subsequent
quarterly intervals until December 31, 2012; c) the residual 4% of options assigned starting
from September 30, 2006 and up until December 31, 2012.
“February 26, 2003” Stock option plan
month, to service the “February 26, 2003” Stock Option Plan. The stock option plan
provides for the options to be exercised by each assignee in the following periods: a) up to a
maximum of 12% of the total of options assigned starting from September 30, 2003 and at
subsequent quarterly intervals until September 30, 2013; b) up to a maximum for each
quarter of 6% of options assigned in the period between December 31, 2003 and March 31,
2007, and at subsequent quarterly intervals until September 30, 2012; c) the residual 4% of
options assigned starting from June 30, 2007 and up until September 30, 2013.
71
last paragraph, of the Italian Civil Code, for a total of 1,485,000 shares at a price of €4.95 of
maximum of 12% of the total of options assigned starting from September 30, 2004 and at
subsequent quarterly intervals until September 30, 2014; b) up to a maximum for each
quarter of 6% of options assigned in the period between December 31, 2004 and March 31,
2008, and at subsequent quarterly intervals until September 30, 2013; c) the residual 4% of
options assigned starting from June 30, 2008 and up until September 30, 2014.
To the present date no options were exercised and, pursuant to the stock option plan, 75,000
72
maximum of 12% of the total of options assigned starting from six calendar months from the
date of their attribution; b) up to a maximum for each quarter of 6% of options assigned at
the end of each of the fourteen quarters subsequent to six calendar months from the date of
their attribution; c) up to a maximum of 4% of options assigned at the end of the fifteen
quarter subsequent to six calendar months from the date of their attribution and up until
September 30, 2015.
Stock option plans attributed to Marco Benedetto, Managing Director of the Company
On February 23, 2005, Marco Benedetto, Managing Director of the Company, was assigned
750,000 options to acquire an equivalent number of ordinary shares of the Company
according to terms and conditions in line with previous stock option plans.
The 750,000 options may be exercised on a daily basis starting from March 31, 2007 and
until March 31, 2010 at a strike price of €4.75.
Stock options assigned are in addition to those attributed in years 2001, 2002, 2003 and
2004, part of which have been exercised. In the first half of 2005, Marco Benedetto
exercised all of its 600,000 stock options assigned through the February 26, 2003 plan at a
price of €2.86 each, in addition to the 600,000 options assigned pursuant to the July 23, 2003
plan at a price of €3.54.
At June 30, 2005, the following stock option plans were still effective:
1) the April 24, 2001 stock option plan, assigning 500,000 options for the acquisition of an
equivalent number of shares at €6.25, exercisable on a daily basis until April 30, 2006.
2) the February 25, 2004 stock option plan, assigning 600,000 options for the acquisition
of an equivalent number of shares at €4.95, exercisable on a daily basis from March 31,
2006 until March 31, 2009.
3) the July 28, 2004 stock option plan, assigning 600,000 options for the acquisition of an
equivalent number of shares at €4.80, exercisable on a daily basis from March 31, 2006
until March 31, 2009.
The strike price of all of the above plans are determined in accordance with article 9, comma
4 of the Testo Unico consolidated tax law, and are therefore calculated with reference to the
simple arithmetic average of official stock market prices of the shares of the company for the
month prior to the issue of the plan.
The company has committed itself to purchase an equivalent number of shares to service
stock option plans in favor of Marco Benedetto.
Based on the above, at the present date unexercised stock options giving the right to
purchase shares of the company amount to 9,847,475, representing 2.27% of the overall
share capital of the company. Attachment 4 a) and b) summarize information relating to each
stock option plan in force at June 30, 2005.
73
Stock option plans were valued according to the binomial tree method based on the original
Cox, Ross and Rubinstein approach. This entails the subdivision of the life of the stock
option contract into discrete intervals, ∆t (thus determining the so-called nodes), assuming
that the price of the share can rise by a certain percentage (u), or decline by a certain
percentage (d) in the space of the interval. The value of the option is thus calculated
according to its pay-off. Assumptions used in determining the fair value of stock option
plans are summarized in the table below.
No. of options assigned
Average price of the stock at time of assignment
Value of stock at time of assignment
Average strike price
Expected volatility
Term of the option (residual no. of years)
Expected dividend growth rate
Risk-free rate
Feb. 25, 2004
Plan
600,000
July 28, 2004
Plan
600,000
Feb. 23, 2005
Plan
750,000
5.03
4.54
4.77
3,018,000
2,724,000
3,577,500
4.95
4.80
4.75
24.19%
25.86%
20.84%
3.75
3.75
4.75
10.899%
10.899%
10.899%
4.312%
4.49%
3.788%
At June 30, 2005, the cost relating to stock option plans recorded in the financial statements
was equal to €1,280 thousand (€894 thousand at June 30, 2004).
Trade payables (19)
Jan. 1, 2005
June 30, 2005
Payables to suppliers of:
•
Paper
41,319
36,482
•
Printing services
32,229
20,566
•
Capital goods
31,089
22,161
•
Promotions
12,157
8,434
•
Products sold optionally with publications
17,461
22,385
•
Other suppliers
74,673
71,136
Advances received
169
95
Other payables
423
1,887
209,520
183,146
TOTAL TRADE PAYABLES
Terms of payment range normally between 60 and 90 days.
74
Tax payables (20)
Jan. 1, 2005
June 30, 2005
1,608
31,363
-
5,325
Personnel withholding and income taxes payable
9,305
6,310
VAT payable
5,335
7,466
233
271
16,481
50,735
Corporate (Ires) and local income taxes (Irap) payable
Corporate taxes payable to parent company
Other tax payables
TOTAL TAX PAYABLES
Other payables (21)
Jan. 1, 2005
June 30, 2005
Social Security payables
14,032
9,790
Payables to personnel
14,810
18,767
Payables for personnel for holidays
14,209
19,340
611
400
Payables on subscriptions
10,087
10,633
Payables for contributions ex Law 62/2001
20,267
17,571
4,781
3,895
78,797
80,396
Payables to Directors, Auditors and minority shareholders
Other payables
TOTAL OTHER PAYABLES
75
INCOME STATEMENT
Revenues (22)
Circulation
Change in inventories
Advertising
Sale of hardware and software
E-commerce
Sale of internet service and software development
Sale of other products
Other revenues
TOTAL REVENUES
1st Half 2004
1st Half 2005
249,640
258,648
(1,609)
59
276,328
294,710
2,905
89
326
59
1,843
1,177
444
800
16,180
12,071
546,057
567,613
Other operating revenues (23)
1st Half 2004
1st Half 2005
Grants
504
7,896
Capital gains on disposal of assets
118
78
Extraordinary gains
1,702
3,457
2,411
1,160
TOTAL OTHER OPERATING REVENUES
4,735
12,591
Purchases (24)
1st Half 2004
1st Half 2005
54,607
58,640
Printing materials
5,947
8,858
Other consumables
2,078
2,174
Publications sold optionally with newspapers and magazines
7,585
7,123
117
3
3,260
441
-
(192)
6,709
2,513
80,303
79,560
Paper
E-commerce goods
Other goods
Capitalized cost of internal construction
Change in raw material and merchandise inventories
TOTAL PURCHASES
76
Services received (25)
1st Half 2004
1st Half 2005
55,580
31,892
14,678
16,160
19,637
11,081
14,302
8,329
3,433
8,509
4,042
7,239
12,783
48,417
32,549
15,685
21,757
22,582
9,871
15,554
8,108
3,721
10,205
3,703
10,202
14,041
207,665
216,395
1st Half 2004
1st Half 2005
Wages and salaries
94,251
101,582
Social Security
28,874
32,581
7,240
7,703
Accruals for retirement benefits and similar
491
826
Underwriting of stock options
894
1,280
Early retirement incentives
533
184
2,293
2,973
134,576
147,129
1st Half 2004
1st Half 2005
2,340
3,284
Printing and other work carried out by third parties
Editing costs
Transports
Reproduction rights and other copyright costs
Promotions
Publisher fees
Commissions and agent fees
Advisory
Postage, telephone and data transmission
Maintenance and utilities
TV production and Internet sites’ technical services
Rent
Other services
TOTAL SERVICES RECEIVED
Personnel costs (26)
Accruals for employee severance indemnities
Other personnel costs
TOTAL PERSONNEL COSTS
Other operating costs (27)
Accruals to provisions for risks and charges
Taxes
518
951
Public relations and gifts
382
385
Membership fees
464
475
86
117
Extraordinary losses
1,576
1,650
1,339
1,207
TOTAL OTHER OPERATING COSTS
6,705
8,069
Settlements and reimbursements
77
Depreciation, amortization and write-downs (28)
Intangible asset amortization
Depreciation of tangible assets
Write-down of intangible assets
Write-down of tangible assets
Write-down of receivables
TOTAL DEPRECIATION, AMORTIZATION AND
WRITE-DOWNS
1st Half 2004
1,225
16,357
36
208
3,501
1st Half 2005
1,041
20,080
8
2,045
21,327
23,174
1st Half 2004
1,129
94
369
273
1,865
(96)
(234)
(508)
(6,482)
(104)
(117)
(773)
(8,314)
1st Half 2005
4,101
1,311
28
297
266
6,003
(57)
(243)
(408)
(13,792)
(215)
(94)
(629)
(15,438)
(6,449)
(9,435)
Financial income/(expense) (29)
Interest received on current accounts and short-term deposits
Financial income on derivatives
Foreign-exchange gains
Interest on securities
Other financial income
Net financial income
Interest paid on current account overdrafts
Accessory banking expenses
Interest on loans
Interest on bond issued
Foreign-exchange losses
Leasing payments
Other financial charges
Net financial charges
TOTAL FINANCIAL INCOME/(EXPENSE)
Income taxes (30)
CORPORATE INCOME TAX (IRES)
1st Half 2005
Pre-tax profit
Theoretical income tax expense
Increases (decreases):
temporary differences deductible in future years
permanent differences for the period
temporary differences from previous years
dividends
tax-exempt income
Taxable income
Adjustment to taxable income due to tax consolidation
CURRENT INCOME TAX LIABILITY ON PROFIT FOR THE
PERIOD
96,902
31,978
Tax rate
33%
12,268
7,673
(21,560)
(35)
(5,867)
89,381
(1,808)
29,606
30.55%
78
REGIONAL TAX ON PRODUCTIVE ACTIVITY (IRAP)
1st Half 2005
Difference between operating profit and operating costs
Income exempt from IRAP
Costs that may not be deducted for IRAP purposes (personnel,
freelance work, receivables, other)
Deductions for IRAP purposes
Total
Theoretical IRAP tax expense
Net tax effect on revenues
Net tax effect on costs
Net production value
CURRENT IRAP TAX LIABILITY ON PRODUCTION VALUE
Tax rate
106,337
(1,687)
160,556
(1,728)
263,528
11,200
4.25%
472
(1,391)
262,609
11,182
4.25%
Base income per share (31)
Base income per share is calculated by dividing the net profit for the period pertaining to the
Group by the weighted average number of ordinary shares in circulation in the period.
The diluted income per share is calculated by dividing the net profit for the year attributed to
ordinary shareholders by the weighted average number of ordinary shares in circulation in
the period, adjusted for the diluting effect of stock options.
The table that follows shows income per share and other information used in the calculation
of the diluted income per share.
Net profit
weighted average number of ordinary shares in circulation (‘000)
Base income per share (€ per thousand shares)
Net profit
weighted average number of ordinary shares in circulation (‘000)
No. of options (‘000)
Diluted income per share (€ per thousand shares)
1st Half 2004
1st Half 2005
52,365
54,810
428,533
429,423
0.122
0.128
1st Half 2004
1st Half 2005
52,365
54,810
428,533
429,423
11,205
12,819
0.119
0.124
Dividends paid (32)
At June 30, 2004, dividends recorded for the 2003 financial year, as resolved by the
Shareholders’ Meeting held on April 21, 2004 in a proportion of €0.11 for each of the
428,306,388 ordinary shares in circulation, amounted to €47,114 thousand.
The Shareholders’ Meeting held of April 20, 2005 resolved the distribution of an ordinary
dividend of €55,833 thousand, to be distributed to shareholders in a proportion of €0.13 for
each of the 429,486,288 ordinary shares in circulation. Dividends paid at June 30, 2005
amounted to €55,833 thousand.
79
OTHER INFORMATION
Related parties transactions
Transactions between Group companies and related parties, including intragroup
transactions, are carried out in the normal course of business and are settled at market rates.
In the period under consideration there were no atypical or unusual transactions falling
outside the scope of ordinary business to report.
The parent company, Gruppo Editoriale L'Espresso SpA, holds with its subsidiaries and
affiliated companies both trade relationships and relationships involving the provision of
services and of operating and financial advice. Among the most important trade relationships
are those held with subsidiary A.Manzoni&C. SpA, concessionaire for the advertising space
of L’espresso and la Repubblica, those with the subsidiary Kataweb SpA for the
management of sites, and those held with subsidiaries Rotosud SpA and CPS SpA, supplying
typeset and printing services. Gruppo Editoriale L'Espresso SpA also manages a current
account for transactions within the Group to which most subsidiaries and affiliated
companies participate according to individual debit and credit positions.
Gruppo Editoriale L'Espresso SpA receives in turn from its parent company CIR SpA,
services and advice on strategic, administrative, financial and tax matters. It is to be noted
that the provision of such services on the part of the parent company is deemed as preferable
to the provision of the same on the part of third parties thanks, among other things, to the
wide knowledge and experience CIR SpA has acquired over time on the company and the
sector in which Gruppo Editoriale L'Espresso SpA operates.
The new Income Tax Code (TUIR, Testo Unico delle Imposte sui Redditi ) introduced the
possibility for companies of a same Group to determine an overall profit corresponding in
principle to the algebraic sum of taxable profits of each company (parent company and
companies controlled directly and/or indirectly with a share over 50%) and, consequently, to
determine a single income tax liability for the whole Group. Starting with the 2004 financial
year, Gruppo Editoriale L'Espresso SpA participates in parent company’s CIR “tax
consolidation” procedure pursuant to a general agreement regulating the rights and
obligations of CIR and consolidated companies (thus including Gruppo Editoriale
L’Espresso SpA) with respect to the participation in the tax consolidation.
The table below shows operating and financial data of Gruppo Editoriale L'Espresso SpA
and its parent companies, subsidiaries and affiliated companies.
80
Transactions between Gruppo Editoriale L’Espresso SpA and other Group companies
(thousands of euro)
Costs
Revenues
Financial
charges
Financial
Receivables
income(*)
Payables
Guarantees
Financial
Trade
Financial
Trade
granted
1,722
-
2,995
17,190
SUBSIDIARIES
Finegil Editoriale SpA
8,792
Editoriale La Nuova Sardegna SpA
2,426
901
-
18
-
254
78
141
E A G SpA
Edizioni Nuova Europa SpA
Editoriale La Città SpA
S.E.T.A. SpA
Editoriale FVG SpA
1,360
-
23,030
12,096
179
(12)
15
3,207
301
1,868
966
79
117
(85)
-
-
259
9,154
300
1,728
(10)
-
-
28
1,096
-
-
(3)
-
-
139
541
-
-
(36)
550
-
277
4,857
50
1,192
2
258
(193)
4,853
-
568
19,829
1
-
40
859
(60)
15,009
2,188
1,793
7
239
-
EleTv SpA
-
19
(20)
-
-
20
2,321
-
-
Deejay Budapest kft
-
-
-
-
1
-
-
-
100
Elemedia SpA
Radio Bonton a.s.
-
-
-
-
-
-
-
-
200
Rete A SpA
2
21
-
24
9,101
25
-
3
-
All Music SpA
A. Manzoni & C. SpA
Rotosud SpA
-
-
(12)
-
-
-
6,012
-
-
1,916
147,073
(39)
40
12,220
88,227
33
1,300
-
15,311
133
(3)
3,128
7,030
149
3
5,724
5,766
C.P.S. SpA
1,683
38
(16)
520
-
213
1,808
680
-
Rotocolor SpA
9,369
137
-
55
682
257
-
2,745
-
Selpi SpA
64
3
(22)
246
-
12
2,540
7
-
Somedia SpA
2,462
202
(5)
1
1
715
771
1,917
-
Kataweb SpA
2,229
1,279
(176)
-
-
927
22,247
1,478
-
-
-
-
-
-
-
-
4
-
Ksolutions SpA
-
59
-
114
5,913
60
-
29
-
Esperya SpA
-
-
-
-
-
-
50
-
509
Studio Vit Srl
-
-
-
-
-
-
29
38
66
-
56
-
120
-
127
-
674
-
1,225
-
-
-
-
-
-
1,225
-
Kataweb News Srl
AFFILIATED COMPANIES
Le Scienze SpA
PARENT COMPANIES
CIR SpA
(*) including dividends received by subsidiaries
Commitments
At June 30, 2005, commitments of the Group amounted to €5,122 thousand and consisted of:
•
contracts for the purchase of plant and equipment (€3,484 thousand) relating primarily to
la Repubblica, Finegil Editoriale and Editoriale La Nuova Sardegna in the context of the
full color project;
•
risks connected to bills discounted (€1,157 thousand), relating primarily to advertising
concessionaire A.Manzoni&C.;
•
guarantees granted and other minor commitment (€481 thousand).
Guarantees granted amount to €4,492 thousand and relate to guarantees in favor of Kataweb,
Elemedia and A. Manzoni&C. on the lease of the respective head offices.
81
Attachments
Gruppo Editoriale L'Espresso – Interim Financial Statement at June 30,2005
GROUP COMPANIES
ATTACHMENT No. 1
Name
and activity
PARENT COMPANY
Gruppo Editoriale L’Espresso SpA
publishing
Registered
office
Share
capital
Rome
65,003
% owned
Shares owned by
SUBSIDIARIES CONSOLIDATED LINE-BY-LINE
- Finegil Editoriale SpA
publishing
- Editoriale La Nuova Sardegna SpA
publishing
- EAG SpA
publishing
- Edizioni Nuova Europa SpA
publishing
- Editoriale La Città SpA
publishing
- S.E.T.A. SpA
publishing
- Editoriale FVG SpA
publishing
- Edigraf Srl
printing
- A.Manzoni&C. SpA
advertising concessionaire
- Elemedia SpA
radio broadcasting
- EleTV SpA
digital television
- Radio Deejay Kft
radio broadcasting
- Radio Bonton a.s.
radio
- Rete A SpA
national TV network
- All Music SpA
national TV network
- Rotosud SpA
printing
- C.P.S. SpA
pre-printing
- Rotocolor SpA
printing
Rome
18,161
100
Sassari
776
100
Pavia
815
100
Ivrea
(TO)
Salerno
104
100
774
100
Bolzano
775
71
Udine
87,960
91.95
Trieste
312
66.67
Editoriale FVG SpA
Milan
15,000
100
Milan
3,000
100
Milan
2,120
Budapest
Hungary
Prague
Czech Rep.
Sesto San
Giovanni (MI)
Sesto San
Giovanni (MI)
Oricola
(AQ)
Rome
50,000
(HUF ‘000)
12,000
(CZK ‘000)
6,198
95
5
95
5
100
Elemedia SpA
Elemedia SpA
EleTV SpA
Elemedia SpA
100
6,500
100
Rete A SpA
2,860
100
520
100
Rome
23,000
100
NB: Figures are in thousands of euros unless otherwise specified.
85
Name
and activity
- Somedia SpA
services
- Selpi SpA
publishing and services
- Kataweb SpA
publishing and internet services
- Kataweb News Srl
internet publishing
- Ksolutions SpA
internet services
- Esperya SpA
e-commerce
- Studio Vit Srl
internet services
Registered
office
Milan
Share
capital
500
% owned
Shares owned by
100
Rome
3,202
Rome
25,000
70
30
100
Rome
10
100
Kataweb SpA
San Giuliano
Terme (PI)
Porto Recanati
(MC)
Rome
1,000
100
Kataweb SpA
500
100
Kataweb SpA
25
100
Kataweb SpA
Rome
103
50
Milan
47
50
Piacenza
1,000
19
Piacenza
517
35
AFFILIATED COMPANIES CONSOLIDATED ON EQUITY
- Le Scienze SpA
publishing
- Saire Srl
printing
- Editoriale Libertà SpA
publishing
- Altrimedia SpA
advertising concessionaire
UNCONSOLIDATED SUBSIDIARIES AND AFFILIATED COMPANIES
- Benedettine Srl in liquidation
real estate
- Alsoft Srl in liquidation
internet services
- Uhuru Multimedia Srl not operational
internet services
- SandalyaWeb Srl not operational
e-commerce
- Enotrya Srl in liquidation
e-commerce
- Zivago SpA in liquidation
e-commerce
- Cellularmania.com Srl in liquidation
internet services
Piacenza
255
35
San Giuliano
Terme (PI)
Rome
52
100
Ksolutions SpA
10
100
Ksolutions SpA
Sassari
75
Rome
78
51
49
70
Kataweb SpA
Kataweb SpA
Milan
3,096
50
Kataweb SpA
Rome
10
100
Kataweb SpA
86
Name
and activity
Registered
office
Share
capital
% owned
Shares owned by
MAIN INVESTMENTS IN OTHER COMPANIES
- A.G.F. Srl
photo agency
- Agenzia ANSA Soc. Coop. a r.l.
news agency
Rome
102
10
Rome
12,539
- Club DAB Italia-consortium
radio broadcasting services
- E-Ink Corporation
printing technologies
- Presto Technologies Inc. not operational
internet services
- Consorzio Energia Sassari
purchase of electricity
- Agenzia Informativa Adriatica d.o.o.
production and transmission of news
- Trento Press Service Srl
newspaper distribution
- Immobiliare Editori Giornali Srl
real estate
- Protagon Periodici SpA under bankruptcy
Milan
18
3.14
3.14
3.14
3.14
1.89
2.52
14.3
Editoriale FVG SpA
EAG SpA
S.E.T.A SpA
Elemedia SpA
Cambridge
(USA)
Cambridge
(USA)
Sassari
43,284
($ ‘000)
7,664
($ ‘000)
4
0.43
7.83
Kataweb SpA
12.5
Capodistria
2,120
Slovenia (Taller ‘000)
Gardolo di
260
Trento
Rome
830
19
publishing
- Audiradio Srl
market research
- Consuledit Srl
market research
Perugia
Editoriale FVG SpA
14.4
S.E.T.A SpA
0.17
0.12
10
S.E.T.A SpA
Milan
234
4
Milan
20
EAG SpA
S.E.T.A. SpA
Editoriale FVG SpA
Rete A SpA
Rete A SpA
- Consorzio Emittenti Radio
Bologna
179
6.62
3.99
0.62
0.39
0.49
0.47
6.67
- Consorzio Colle Maddalena
Torino
62
4.17
A.Manzoni&C. SpA
87
TOTAL INTANGIBLE ASSETS
Work in progress and advances
Concessions, licenses and trademarks
intellectual property rights
(4,015)
(72,268)
539,012
-
(27,654)
(6,847)
(31,040)
(2,639)
4,095
187
33,973
0,688
33,547
Goodwill
Industrial patents and
61,183
Frequencies
(73)
and impairment
write-downs
cost
399,146
Acc. amortization,
Original
January 1, 2004
466,744
80
187
6,319
34
2,507
58,544
399,073
balance
Opening
OPENING BALANCES
Publications
(in thousand of euro)
ATTACHMENT 2 (a)
764
-
50
656
-
-
58
-
development
Internal
-
-
-
-
-
-
-
companies
disposal of
-
-
-
-
(20)
-
-
(20)
Decreases
ORIGINAL COST
Aggregation/
CHANGES IN INTANGIBLE ASSETS FROM JANUARY 1, 2004 TO JUNE 30, 2004
-
-
(188)
188
-
-
-
-
-
-
-
(1,225)
(41)
-
(1,166)
(18)
internal
Reclassifications Amortization
-
-
-
-
-
-
-
-
companies
disposal of
Aggregation/
CHANGES IN THE PERIOD
-
-
-
20
-
-
11
9
Decreases
(36)
-
-
(36)
-
-
-
-
-
22
-
(22)
-
-
-
-
Write-downs Reclassifications
PROVISIONS
539,756
4,095
49
34,797
6,881
33,547
61,241
399,146
cost
Original
(73,509)
(4,034)
-
(28,867)
(6,856)
(31,040)
(2,639)
(73)
and impairment
write-downs
Acc. amortization,
June 30, 2004
466,247
61
49
5,930
25
2,507
58,602
399,073
balance
Closing
CLOSING BALANCES
(4,034)
(73,509)
539,756
-
(28,867)
(6,856)
(31,040)
(2,639)
4,095
49
34,797
6,881
33,547
Goodwill
61,241
Frequencies
(73)
and impairment
write-downs
cost
399,146
Acc. amortization,
Original
June 30, 2004
466,247
61
49
5,930
25
2,507
58,602
399,073
balance
Opening
OPENING BALANCES
Publications
ATTACHMENT No 2 (b)
1,356
12
50
854
7
-
433
-
development
Internal
-
-
-
-
-
-
-
-
companies
disposal of
-
(659)
(97)
-
(217)
(5)
-
(340)
Decreases
ORIGINAL COST
Aggregation/
CHANGES IN INTANGIBLE ASSETS FROM JUNE 30, 2004 TO JANUARY 1, 2005
-
-
(60)
60
-
-
-
-
Reclassifications
-
-
-
(1,318)
(64)
-
(1,055)
(199)
internal
Amortization
-
-
-
-
-
-
-
-
companies
disposal of
Aggregation/
-
-
-
139
88
-
36
15
Decreases
(31)
-
-
(31)
-
-
-
-
-
16
-
(195)
179
-
-
-
PROVISIONS
540,453
4,010
39
35,494
6,883
33,547
61,334
399,146
cost
Original
(74,719)
(3,994)
-
(30,112)
(6,861)
(31,040)
(2,639)
(73)
and impairment
write-downs
Acc. amortization,
January 1, 2005
465,7340
16
39
5,382
22
2,507
58,695
399,073
balance
Closing
CLOSING BALANCES
(3,994)
(74,719)
540,453
-
(30,112)
(6,861)
(31,040)
(2,639)
4,010
39
35,494
6,883
33,547
Goodwill
61,334
Frequencies
(73)
and impairment
write-downs
cost
399,146
Acc. amortization,
Original
January 1, 2005
465,7340
16
39
5,382
22
2,507
58,695
399,073
balance
Opening
OPENING BALANCES
Publications
ATTACHMENT No 2 (c)
4,656
-
48
969
7
-
3,632
-
development
Internal
149,844
-
-
317
59
34,879
114,589
-
companies
disposal of
(40)
-
-
(14)
-
-
(26)
-
Decreases
ORIGINAL COST
Aggregation/
CHANGES IN INTANGIBLE ASSETS FROM JANUARY 1, 2005 TO JUNE 30, 2005
-
-
-
-
-
-
-
-
-
-
-
(1,041)
(7)
-
(1,024)
(10)
internal
Reclassifications Amortization
(369)
-
-
(316)
(53)
-
-
-
companies
disposal of
Aggregation/
(17)
-
-
(17)
-
-
-
-
Decreases
-
-
-
-
-
-
-
-
Write-downs
PROVISIONS
-
-
-
-
-
-
-
-
Reclassifications
694,913
4,010
87
36,766
6,949
68,426
179,529
399,146
cost
Original
(76,146)
(4,001)
-
(31,469)
(6,924)
(31,040)
(2,639)
(73)
and impairment
write-downs
Acc. amortization,
June 30, 2005
618,767
9
87
5,297
25
37,386
176,890
399,073
balance
Closing
CLOSING BALANCES
(324,860)
524,119
TOTAL TANGIBLE ASSETS
(214)
495
Property
(214)
(5,894)
(128)
(5,694)
(72)
495
12,006
244
10,846
916
(318,752)
(16,109)
-
(40,855)
(2,136)
(218,370)
(20,538)
(3,124)
(17,620)
Non operating buildings
Fixed assets held under a lease
Other leased assets
Leased plant and equipment
Leased buildings
511,618
17,182
Other assets
Fixed assets owned
52,300
80,444
2,413
Furniture, fixtures and vehicles
274,547
Technical equipment
22,418
8,516
47,971
-
and write-downs
cost
5,827
Acc. depreciation
Original
January 1, 2004
199,259
281
281
6,112
116
5,152
844
192,866
1,073
80,444
11,445
277
56,177
1,880
5,392
30,351
5,827
balance
Opening
OPENING BALANCES
Plant and machinery
Leasehold improvements
Other buildings
Land
ATTACHMENT No 3 (a)
60,233
-
-
9
-
-
9
60,224
174
43,362
3,228
50
10,808
2,111
7
484
-
development
Internal
CHANGES IN TANGIBLE ASSETS FROM JANUARY 1, 2004 TO JUNE 30, 2004
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
companies
disposal of
(1,325)
-
-
-
-
-
-
(1,325)
(135)
-
(572)
(48)
(543)
(9)
-
(18)
-
Decreases
ORIGINAL COST
Aggregation/
-
-
-
-
-
-
-
-
-
(65,496)
48
10
59,459
87
-
5,892
-
Reclassifications
-
(16,357)
(7)
(7)
(558)
-
(543)
(15)
(15,792)
(373)
-
(2,284)
(73)
(11,906)
(367)
(129)
(660)
internal
Depreciation
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
companies
disposal of
Aggregation/
1,240
-
-
1
-
-
1
1,239
219
-
479
47
487
-
1
6
-
Decreases
(208)
-
-
-
-
-
-
(208)
(28)
-
(33)
(7)
(140)
-
-
-
-
-
-
-
(18)
(18)
-
-
18
44
-
2
-
(2)
(26)
-
-
-
PROVISIONS
583,027
495
495
12,015
244
10,846
925
570,517
17,221
58,310
55,004
2,425
344,271
24,607
8,523
54,329
5,827
cost
Original
(340,185)
(221)
(221)
(6,469)
(146)
(6,237)
(86)
(333,495)
(16,247)
-
(42,691)
(2,169)
(229,931)
(20,931)
(3,252)
(18,274)
-
and write-downs
Acc. depreciation
June 30, 2004
242,842
274
274
5,546
98
4,609
839
237,022
974
58,310
12,313
256
114,340
3,676
5,271
36,055
5,827
balance
Closing
CLOSING BALANCES
(340,185)
583,027
(221)
495
Property
(221)
(6,469)
(146)
(6,237)
(86)
495
12,015
244
10,846
925
(333,495)
(16,247)
-
(42,691)
(2,169)
(229,931)
(20,931)
(3,252)
(18,274)
Other leased assets
Leased buildings
570,517
17,221
Other assets
Fixed assets owned
55,004
58,310
2,425
344,271
Technical equipment
24,607
8,523
54,329
-
and write-downs
cost
5,827
Acc. depreciation
Original
June 30, 2004
242,842
274
274
5,546
98
4,609
839
237,022
974
58,310
12,313
256
114,340
3,676
5,271
36,055
5,827
balance
Opening
OPENING BALANCES
Plant and machinery
Other buildings
Land
ATTACHMENT No 3 (b)
41,499
-
-
-
-
-
-
41,499
525
10,813
4,934
481
12,590
7,101
-
4,545
510
development
Internal
CHANGES IN TANGIBLE ASSETS FROM JUNE 30, 2004 TO JANUARY 1, 2005
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
companies
disposal of
(12,031)
-
-
-
-
-
-
(12,031)
(710)
(214)
(813)
(20)
(7,435)
(2,692)
(1)
(146)
-
Decreases
ORIGINAL COST
Aggregation/
-
-
-
-
-
-
-
-
27
(47,024)
59
4
44,479
693
-
1,762
-
-
(20,148)
(6)
(6)
(555)
-
(542)
(13)
(19,587)
(481)
-
(2,577)
(134)
(14,634)
(784)
(126)
(851)
internal
Reclassifications Depreciation
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
companies
disposal of
Aggregation/
9,369
-
-
(1)
-
-
(1)
9,370
575
-
755
24
5,209
2,807
-
-
-
Decreases
(2,559)
-
-
-
-
-
-
(2,559)
(16)
-
(29)
-
(2,514)
-
-
-
-
-
-
-
(19)
(19)
-
-
19
54
-
1
(1)
(6)
(27)
(2)
-
-
PROVISIONS
612,495
495
495
12,015
244
10,846
925
599,985
17,063
21,885
59,184
2,890
393,905
29,709
8,522
60,490
6,337
cost
Original
(353,523)
(227)
(227)
(7,044)
(165)
(6,779)
(100)
(346,252)
(16,115)
-
(44,541)
(2,280)
(241,876)
(18,935)
(3,380)
(19,125)
-
and write-downs
Acc. depreciation
January 1, 2005
258,972
268
268
4,971
79
4,067
825
253,733
948
21,885
14,643
610
152,029
10,774
5,142
41,365
6,337
balance
Closing
CLOSING BALANCES
(353,523)
612,495
(227)
495
Property
(227)
(7,044)
(165)
(6,779)
(100)
495
12,015
244
10,846
925
(346,252)
(16,115)
-
(44,541)
(2,280)
(241,876)
(18,935)
(3,380)
(19,125)
Other leased assets
Leased buildings
599,985
17,063
Other assets
Fixed assets owned
59,184
21,885
2,890
393,905
Technical equipment
29,709
8,522
60,490
-
and write-downs
cost
6,337
Acc. depreciation
Original
January 1, 2005
258,972
268
268
4,971
79
4,067
825
253,733
948
21,885
14,643
610
152,029
10,774
5,142
41,365
6,337
balance
Openening
OPENING BALANCES
Plant and machinery
Other buildings
Land
ATTACHMENT No 3 (c)
14,133
-
-
1,255
520
735
-
12,878
333
1,328
2,511
33
5,185
2,882
-
571
35
development
Internal
CHANGES IN TANGIBLE ASSETS FROM JANUARY 1, 2005 TO JUNE 30, 2005
11,337
-
-
5,257
357
4,900
-
6,080
232
-
-
103
2,559
-
-
3,186
-
companies
disposal of
(1,125)
-
-
-
-
-
-
(1,125)
(162)
-
(339)
(1)
(618)
(5)
-
-
-
Decreases
ORIGINAL COST
Aggregation/
-
-
-
-
-
-
-
-
9
(20,913)
(9)
-
17,163
160
-
3,590
-
Reclassifications
-
(20,080)
(7)
(7)
(967)
(131)
(822)
(14)
(19,106)
(228)
-
(2,389)
(105)
(14,187)
(1,019)
(126)
(1,052)
internal
Depreciation
(5,129)
-
-
(2,608)
(133)
(2,475)
-
(2,521)
(190)
-
-
(100)
(1,718)
-
-
(513)
-
companies
disposal of
Aggregation/
975
-
-
-
-
-
-
975
154
-
161
1
655
4
-
-
-
Decreases
(8)
-
-
-
-
-
-
(8)
-
-
-
-
-
(8)
-
-
-
Write-downs
PROVISIONS
-
-
-
-
-
-
-
-
(9)
-
9
-
-
-
-
-
-
Reclassifications
636,840
495
495
18,527
1,121
16,481
925
617,818
17,475
2,300
61,347
3,025
418,194
32,746
8,522
67,837
6,372
cost
Original
(377,765)
(234)
(234)
(10,619)
(429)
(10,076)
(114)
(366,912)
(16,388)
-
(46,760)
(2,484)
(257,126)
(19,958)
(3,506)
(20,690)
-
and write-downs
Acc. depreciation
June 30, 2005
259,075
261
261
7,908
692
6,405
811
250,906
1,087
2,300
14,587
541
161,068
12,788
5,016
47,147
6,372
balance
Closing
CLOSING BALANCES
25.60
6.25
2.51
3.30
3.36
2.86
3.54
4.95
4.80
780,000
372,900
728,850
834,975
985,450
1,084,675
1,440,000
1,450,000
April 24, 2001 Stock Option Plan
October 24, 2001 Stock Option Plan
March 6, 2002 Stock Option Plan
July 24, 2002 Stock Option Plan
February 26, 2003 Stock Option Plan
4.75
1,485,000
7.87
Total
9,291,850
4.75
1,485,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2000 Stock Option Plan
Options assigned in the
period
Options expired in the
period
Options exercised in the period
213,500
30,000
30,000
30,000
21,750
19,500
12,750
10,500
4,000
25,000
30,000
7.40
4.75
4.80
4.95
3.54
2.86
3.36
3.30
2.51
6.25
25.60
715,875
-
-
-
152,925
167,325
169,725
133,725
92,175
-
-
3.16
-
-
-
3.54
2.86
3.36
3.30
2.51
-
-
4.71
-
-
-
4.72
4.71
4.71
4.70
4.67
-
-
9,847,475
1,455,000
1,420,000
1,410,000
910,000
798,625
652,500
584,625
276,725
755,000
1,585,000
7.75
4.75
4.80
4.95
3.54
2.86
3.36
3.30
2.51
6.25
25.60
8.10
10.25
9.50
9.25
8.50
8.25
7.50
7.25
6.75
6.25
5.25
Average
expiration
(years)
Options in circulation at end of the
period
Average market
Weighted
Weighted
Weighted
Weighted
Average price
No. of options average price No. of options average price No. of options average price No. of options average price price at exercise No. of options
for period
date
for period
for period
for period
for period
Options in circulation at
beginning of the period
1,615,000
ATTACHMENT No 4 (a)
EMPLOYEE STOCK OPTION PLANS AT JUNE 30, 2005
4,413,675
340,800
423,000
265,200
221,325
312,300
317,325
193,725
755,000
1,585,000
12.05
4.75
4.80
4.95
3.54
2.86
3.36
3.30
2.51
6.25
25.60
Weighted
No. of options average price for
period
Options that may be
exercised at end of the
period
3.54
4.95
4.80
-
600,000
600,000
600,000
-
Total
4.42
2.86
600,000
2,900,000
6.25
500,000
Options assigned in the
period
Options expired in the
period
Options exercised in the period
750,000
750,000
-
-
-
-
-
4.75
4.75
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
600,000
600,000
- 1,200,000
-
-
-
-
-
-
2.86
-
-
-
2.86
2.86
-
4.61
-
-
-
4.61
4.61
-
2,450,000
750,000
600,000
600,000
-
500,000
5.12
4.75
4.80
4.95
3.54
2.86
6.25
3.46
4.75
3.75
3.75
-
-
0.83
Average
expiration
(years)
Options in circulation at end of the
period
Average market
Weighted
Weighted
Weighted
Weighted
Average price
No. of options average price No. of options average price No. of options average price No. of options average price price at exercise No. of options
for period
date
for period
for period
for period
for period
Options in circulation at
beginning of the period
April 24, 2001 Stock Option Plan
ATTACHMENT No 4 (b)
MANAGING DIRECTOR STOCK OPTION PLANS AT JUNE 30, 2005
500,000
500,000
6.25
6.25
Weighted
No. of options average price
for period
Options that may be
exercised at end of the
period
Financial Statements of
at June 30, 2005
Gruppo Editoriale L'Espresso SpA
Balance Sheet
ASSETS
(€ thousand)
Intangible assets with an indefinite useful life
Jan. 1,
June 30,
2005
2005
220,661
220,661
2,947
2,949
223,608
223,610
Tangible assets
Other investments
Deferred tax assets
NON-CURRENT ASSETS
Inventories
77,998
77,324
256,020
376,521
6,882
1,454
19.988
19.011
584,496
697,920
25,791
22,340
103,248
98,834
20,142
10,016
31,976
55,859
Tax receivables
34,044
37,829
Other receivables
14,429
8,520
372,577
291,872
CURRENT ASSETS
602,207
525,270
1,186,703
1,223,190
Trade receivables
TOTAL ASSETS
(€ thousand)
Share capital
Jan. 1,
June 30,
2005
2005
64,896
65,003
124,538
121,685
Retained earnings
43,177
68,040
Net income
72,350
78,542
304,961
333,270
Financial debt
315,401
315,783
Reserves
7,325
7,857
Employee severance reserve and other retirement benefits
41,780
43,954
32,593
31,796
397,099
399,390
Financial debt
285,087
299,068
4,542
5,000
150,606
123,745
8,203
26,562
36,205
36,155
CURRENT LIABILITIES
484,643
490,530
TOTAL LIABILITIES
881,742
889,920
1,186,703
1,223,190
Trade payables
Tax payables
Other payables
98
Income Statement
st
st
1 Half
1 Half
(€ thousand)
2004
2005
Revenues
331.169
350,986
1,593
8,020
(59,031)
(59,122)
(147,102)
(166,861)
(54,433)
(59,074)
(3,286)
(4,637)
(6,885)
(6,940)
Operating income
62,025
62,372
(6,008)
(8,958)
Dividends
27,231
47,176
Pre-tax profit
83,248
100,590
(22,944)
(22,048)
60,304
78,542
Purchases
Services received
Personnel costs
Taxes
NET PROFIT
99
(€ thousand)
1 st Half
1 st Half
2004
2005
Net income
60,304
78,542
4,802
6,134
894
1,280
Adjustments:
6,885
6,940
(27,064)
(47,176)
45,821
45,720
8,075
3,451
7,145
9,878
(526)
(26,911)
7,160
14,574
21,854
992
(129)
180
(3,027)
(2,970)
64,519
43,922
(419)
(629)
- Other adjustments
(13,341)
(5,194)
(27,000)
(120,501)
27,231
47,176
(13,529)
(79,148)
Dividends received
Increases in capital and reserves and other changes in the Shareholders' Equity
1,113
4,320
(634)
(3,050)
(4,842)
10,126
1,886
(1,042)
Dividends paid
(47,114)
(55,833)
(49,591)
(45,479)
1,399
(80,705)
58,448
372,577
59,847
291,872
100
Share
-
Net profit (loss)
Other changes
-
Other changes
-
-
Net profit (loss)
Other changes
65,003
-
-
Stock options
107
Dividends
-
64,896
-
-
Elimination reserve for own shares under Italian GAAP
64,896
-
Net profit (loss)
-
74
Stock options
64,822
-
-
Stock options
53
-
Dividends
-
64,769
capital
(€ '000)
Statement of Changes in the Shareholders' Equity
Share
77,306
-
-
-
-
2,156
-
-
75,150
-
-
13,192
61,958
-
-
313
-
1,439
-
60,206
-
-
(3,785)
-
-
-
-
63,991
premium
Own
(11,575)
-
-
2,437
-
-
-
-
(14,012)
-
(14,012)
(13,192)
13,192
-
-
(313)
-
-
-
13,505
-
-
4,842
-
-
-
-
8,663
shares
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(2,323)
(83)
-
-
-
-
-
-
(2,240)
(2.240)
reserve
Fair value
IFRS
49,365
-
-
-
-
-
-
-
49,365
1,680
-
-
47,685
-
-
-
-
-
-
47,685
-
-
-
-
-
-
-
47,685
reserve
3,781
-
-
(795)
1,280
-
-
-
3,296
-
-
-
3,296
-
-
-
1,571
-
1,725
-
-
-
894
-
-
-
831
reserve
Stock option
Equity
13,001
22
-
-
-
-
-
-
12,979
-
-
-
12,979
15
-
-
-
-
-
12,964
10
-
-
-
-
-
-
12,954
reserves
60,170
(25)
-
501
-
-
(55,833)
72,350
43,177
59
820
-
42,298
(8)
-
-
-
-
-
42,306
(7)
-
-
-
-
(47,114)
57,725
31,702
earnings
Retained
Net
78,542
-
78,542
-
-
-
-
(72,350)
72,350
-
-
-
72,350
-
12,046
-
-
-
-
60,304
-
60,304
-
-
-
(57,725)
57,725
profit
Total
333,270
(86)
78,542
2,143
1,280
2,263
(55,833)
-
304,961
(501)
(13,192)
-
318,654
7
12,046
-
1,571
1,513
-
303,517
3
60,304
1,057
894
53
(47,114)
-
288,320
Sh. Equity
Reclassified key financial information of subsidiaries
RECLASSIFIED KEY FINANCIAL DATA OF SUBSIDIARIES
(€'000)
Shareholders' Net financial
Equity
position
Net
capital
employed
Revenues
Gross
operating
profit
Operating
profit
Net
profit
Finegil Editoriale
60,939
(16,627)
77,566
69,871
15,529
11,356
14,826
Editoriale La Nuova Sardegna
17,281
(751)
18,032
17,159
4,913
3,468
1,959
EAG
8,252
8,458
(206)
9,333
1,804
1,511
769
S.E.T.A.
4,617
4,510
107
9,346
607
311
10
927
1,287
(360)
1,096
181
160
82
Edizioni Nuova Europa
Editoriale La Città
Editoriale FVG
Edigraf
Elemedia
EleTv
Deejay Budapest kft
664
787
(123)
1,514
(219)
(238)
(271)
112,489
24,549
87,940
26,392
6,347
5,236
2,901
563
423
140
481
40
15
-
57,057
(2,066)
59,123
36,906
19,575
18,150
10,851
2,570
2,332
238
713
181
71
58
129
56
73
164
(485)
(505)
(503)
387
277
110
427
(10)
(35)
(13)
Rete A
6,282
(10,581)
16,863
5,252
2,020
1,600
916
All Music
6,470
6,138
332
492
(24)
(24)
(21)
A. Manzoni & C.
16,635
(28,360)
44,995
290,676
2,261
921
(401)
Rotosud
12,215
(13,276)
25,491
15,143
5,380
2,012
1,031
Radio Bonton a.s.
1,615
1,838
(223)
1,912
621
537
314
23,470
(601)
24,071
9,440
2,138
753
455
3,501
2,550
951
324
121
101
68
Somedia
391
1,155
(764)
3,033
73
(39)
(82)
Kataweb
24,390
22,709
1,681
6,208
(227)
(398)
(1,322)
C.P.S.
Rotocolor
Selpi
Kataweb News
Ksolutions
Esperya
Studio Vit
9
11
(2)
-
(3)
(3)
(3)
608
(5,073)
5,681
3,507
(690)
(1,390)
(1,582)
1,316
324
992
54
75
43
24
44
34
10
102
(61)
(65)
(66)
Auditors’ Report
Transition to IFRS
Gruppo Editoriale L'Espresso – Interim Financial Statement at June 30, 2005
TRANSITION TO IFRS
FOREWORD
The Consolidated Financial Statements of the Group at December 31, 2005 will be the first
financial statements prepared under IFRS.
The Espresso Group adopted IFRS from January 1, 2005 while the transition date is January
1, 2004. The Group has therefore prepared an opening balance sheet at the transition date
applying all mandatory exceptions and some of the exemptions to the retroactive application
of IFRS allowed under IFRS 1.
Until December 31, 2004, the Consolidated Financial Statements of the Espresso Group
were prepared in accordance with Italian Law, as interpreted and integrated by the Italian
Accounting Profession (referred to jointly as Italian GAAP). For certain aspects such
principles differ from IFRS. To conform to IFRS, the Group modified some accounting
methods and valuation principles used in the preparation of consolidated financial statements
for previous years.
The notes that follow describe the choices made by the Group with regard to exemptions to
the retroactive application of IFRS allowed under IFRS 1, in addition to the reconciliation
and description of effects of the transition from Italian GAAP to IFRS required by Consob.
The following reconciliation schedules and related notes were prepared with such end:
1) Shareholders’ Equity
Reconciliation of the Shareholders’ Equity at the following dates:
• date of transition to IFRS (January 1, 2004);
• closing date of the last financial statements prepared under Italian GAAP (December
31, 2004);
• closing date of the last interim financial statements prepared under Italian GAAP (June
30, 2004);
• date from which IAS 32 and IAS 39 have been adopted (January 1, 2005).
2) Profit
Reconciliation of profit for the following periods:
• last financial year for which the financial statements were prepared under Italian
GAAP (2004 financial year);
• last half-year for which the interim financial statements were prepared under Italian
GAAP (first half of 2004).
The Espresso Group appointed independent auditors PricewaterhouseCoopers SpA, which
also audited the financial statements at December 31, 2004, to carry out a full audit of the
preliminary IFRS reconciliation schedules at January 1, 2004, December 31, 2004 and
January 1, 2005.
113
Adjustments were made in accordance with IFRS in force at the date of approval of the
present interim report. Figures provided in the reconciliation schedules could therefore be
subject to changes to reflect further orientations of the European Commission with regard to
the approval of IFRS or possible new pronouncements of the IASB or the IFRIC that should
occur by December 31, 2005.
IFRS reconciliation schedules are prepared exclusively for the purposes of the transition in
the context of the preparation of the first full financial statements under IFRS approved by
the European Commission and lack therefore comparative data and the necessary notes that
would be required to present fairly the consolidated financial position and consolidated
results of operations of the Espresso Group under IFRS.
OPENING BALANCE SHEET
As required under IFRS 1, a Consolidated Balance Sheet was prepared at the date of
transition to IFRS (January 1, 2004) in which:
• all assets and liabilities whose recording is required under IFRS, including those not
required under Italian GAAP, were recorded;
• all assets and liabilities whose recording is not allowed under IFRS were excluded;
• assets and liabilities were recorded at the value that would have applied in case IFRS had
been applied retrospectively;
• items previously reported in the financial statements in a manner different from that
provided under IFRS were reclassified.
The effect of the adjustment to IFRS of beginning balances of assets and liabilities was
recorded in the Shareholders’ Equity in the “IFRS reserve”, net of the related tax effect.
In the preparation of the opening Consolidated Balance Sheet at January 1, 2004, the
Espresso Group decided to take advantage of the following exceptions to the retroactive
application of IFRS:
1. business combinations, acquisition of investments in affiliates and joint ventures: the
retroactive application of IFRS 3 (“Business Combination”) requires the review of the
recording of all aggregations of companies (mergers, acquisitions, contributions, spinoffs, etc.) carried out in the past from the initial incorporation of the company. IFRS 1
allows the choice not to apply IFRS 3 retroactively, or to apply the same from a date set
by the same. The exemption applies also to all acquisitions of shares in affiliated
companies and joint ventures.
The Espresso Group decided to take advantage of the exemption to the retroactive
application of IFRS 3 for the acquisition of shares in affiliated companies and joint
ventures occurred before January 1, 2004;
114
2. value at which tangible and intangible assets are recorded: the retroactive application of
IAS 16 (“Property, plant and equipment”), IAS 38 (“Intangible assets”) and IAS 40
(“Investment property”) requires – for those tangible and intangible assets are recorded at
cost – the restatement of the historical cost, accumulated depreciation and write-downs.
The Espresso Group decided to apply the “estimated cost” with reference to part of land
and buildings on the basis of expert valuations prepared by independent surveyors.
There lacking an active market for intangible assets, the Group could not benefit from
the application of the “estimated cost” in the valuation of the same.
3. employee benefits (Employee Severance Indemnity and other benefits): in the recording
of defined benefit plans (which include the Employee Severance Indemnity) IAS 19
allows the suspension of actuarial gains and losses that do not exceed a certain limit
(“corridor approach”). The retroactive application of IAS 19 requires the quantification
of actuarial gains and losses arising over time from the initial incorporation of the
company for all personnel employed at the date of the transaction with the aim of
determining the ones to be recorded and those to be suspended. IFRS 1 allows the use of
the corridor approach.
The Espresso Group opted for the prospective application of the corridor approach.
Actuarial gains and losses at the date of the transition are recorded in full, with a parallel
recording under Shareholders’ Equity;
4. designation of financial instruments: IAS 39 requires the designation of a financial
instrument to a specific category to be carried out at the time of its first recording. IFRS
1 allows the designation to be carried out at the transition date.
The Espresso Group decided to apply IAS 32 and 39 starting from January 1, 2005 and
opted for the exemption to the restating of the related comparative data. The designation
of financial instruments was therefore carried out at the date of adoption of IAS 32 and
IAS 39;
5. stock options: the exemptions to stock options allows to wave the application of IFRS 2
for stock options granted before November 7, 2002 (date of publication of the Standard)
and for stock options granted after November 7, 2002 and maturing before January 1,
2005. The early application of the principle is however allowed only when the company
has disclosed the fair value of stock options granted.
The Espresso Group opted for the exemption to the application of IFRS 2 for stock
option plans issued before November 7, 2002 and for stock options granted after such
date and expiring before January 1, 2005.
115
EFFECT OF THE ADOPTION OF IFRS ON THE BALANCE SHEET AT JANUARY 1, 2004
ASSETS
(€ million)
Intangible assets with an indefinite life
Tangible assets
Other investments
Long-term securities
Deferred tax assets
NON-CURRENT ASSETS
Inventories
Trade receivables
Tax receivables
Other receivables
CURRENT ASSETS
TOTAL ASSETS
Italian
GAAP
326.3
10.0
336.3
181.7
25.6
8.7
4.9
557.1
36.5
231.5
20.3
0.4
55.0
11.8
69.8
425.3
982.4
Italian
(€ million)
GAAP
Share capital
Reserves
Retained earnings
Net income
Minority interest in the Shareholders’ Equity
Financial debt
retirement benefits
Deferred tax payables
Financial debt
Trade payables
Tax payables
Other payables
CURRENT LIABILITIES
TOTAL LIABILITIES
TOTAL LIABILITIES AND SHAREHOLDERS’
EQUITY
Reclass.
(2.6)
(2.6)
2.6
21.6
(21.6)
(0.2)
19.5
19.3
(5.5)
15.3
0.2
(19.5)
(9.6)
9.8
Reclass.
IAS/IFRS
adjustments
IAS/IFRS
Jan. 1, 2004
133.8
(0.8)
133.0
15.0
1.9
0.6
150.5
(0.3)
(0.7)
(1.0)
149.5
460.1
6.6
466,7
199.3
23.5
4.0
8.7
4.6
20.1
726.9
31.0
246.8
20.3
0.6
35.2
11.1
69.8
414.7
1,141.6
IAS/IFRS
IAS/IFRS
adjustments
Jan. 1, 2004
64.8
199.4
67.8
332.0
9.9
341.9
227.1
-
(113.8)
113.8
18.4
111.7
(2.8)
108.9
0.8
109.7
4.3
(1.2)
64.8
197.3
111.0
67.8
441.0
10.6
451.6
231.4
17.2
98.5
(0.5)
(6.2)
91.7
5.4
331.0
18.2
25.9
181.1
16.2
68.2
309.5
640.5
17.8
9.8
(18.0)
0.1
0.1
(8.1)
9.8
42.1
39.0
1.0
(0.2)
0.8
39.8
47.5
387.8
28.9
7.7
181.2
16.2
68.3
302.3
690.1
982.4
9.8
149.5
1,141.6
116
Main reclassifications consist in the reclassification of leasehold improvements from
intangible assets to tangible assets, that of work in progress from inventories to trade
receivables, the breakdown of provisions for risks and charges between current and noncurrent, the reclassification of current trade receivables and current financial debt, limited to
the part relating to bills discounted with banks and receipts at December 31, 2003 but
recorded in 2004.
The reserve for capital grants, the reserve for merger differences and the revaluation reserve
were reclassified from “Reserves” to “Retained earnings (loss carry-forwards)”.
Two new captions were introduced: “Investments valued at equity”, whose amount is
reported separately from “Other investments”, and “Deferred tax assets”, whose amount is
indicated separately from “Tax receivables”.
The table that follows and the related notes summarize main impacts on the Consolidated
Shareholders’ Equity at January 1, 2004.
(€ million)
Consolidated Shareholders’ Equity under Italian GAAP
332.0
1. Intangible assets
133.0
2. Investments valued at equity
1.9
3. Tangible assets
0.8
4. Leased assets
7.7
5. Employee benefits
6.2
6. Provisions for risks and charges
1.4
7. Other adjustments
(0.6)
Tax effect
(41.5)
Total IFRS adjustments
108.9
Consolidated Shareholders’ Equity under IFRS
441.0
Notes:
1. Intangible assets (IAS 38)
Under IAS 38 intangible assets having an indefinite useful life are not amortized but are
subject annually, or any time there is an indication that the asset has experienced a loss in
value, to an impairment test to identify possible reductions in value. At the transition
date, Publications, Frequencies and Goodwill were classified as intangible assets having
an indefinite life. The retroactive application of IAS 38 required the re-recording of the
historical costs of these assets (totaling €460.1 million) with the subsequent elimination
of accrued amortization (amounting to €133.8 million). The impairment test carried out
on these assets did not detect losses in value.
Net adjustments to item “Other intangible assets” (equal to €0.8 million) includes
prevalently the elimination of the value of self-developed software not covered by
117
patents. Such adjustment determined a reduction in the Consolidated Shareholders’
Equity equal to €0.2 million net of the related tax effect.
Overall, the adjustments above resulted in an increase in the Consolidated Shareholders’
Equity equal to €97.7 million, net of the related €35.3 million tax effect. Such effect
includes taxes calculated by individual companies on the restoring of the historical cost
of publications and frequencies (equal to €36.8 million) and taxes resulting from
consolidation adjustments (positive €1.5 million).
2. Investments valued at equity (IAS 28)
Adjustments relating to investments valued at equity relate to the restoring at the date of
transition of accumulated amortization of the publication owned by Editoriale la Libertà.
The adjustment resulted in a €1.9 million increase of the Consolidated Shareholders’
Equity.
3. Tangible assets (IAS 16)
Under IAS 16, individual components of a complex fixed asset, characterized by a
different useful life, are recorded separately and depreciated over their respective useful
life. In particular, under IAS 16, it is necessary to identify and record separately the value
of land (no longer depreciated) from the value of buildings that insist on the same and,
consequently, to depreciate only the buildings. In the transition to IFRS, the Group has
therefore identified the two components, eliminating accumulated depreciation relating
to land amounting to €1.2 million.
Leasehold improvement costs were reclassified under “Tangible assets” and the
requisites for their capitalization were verified. Such verification resulted in the
elimination of certain capitalized costs amounting to €0.4 million.
The above said adjustments resulted in an increase in the Consolidated Shareholders’
Equity equal to €0.2 million net of the related €0.6 million tax effect of which €0.3
million relating to the elimination of the provision for reinvested capital gains accrued
pursuant to Article 54, Presidential Decree no. 597/73.
In addition to the above described gross effect (€0.8 million), adjustments to item
“Tangible assets” includes the effect of the application of IAS 17 (€14.2 million)
described in the note below.
4. Leases (IAS 17)
Under IAS 17, all assets held under a financial lease are accounted for by recording
interest payments and depreciation charges of leased assets in the income statement, and
the asset and the residual portion of debt in the balance sheet. In the transition to IFRS,
the Group recorded in the balance sheet leased assets amounting to €14.2 million (€8.1
million relating to leases redeemed, and €6.1 million to assets still held under a lease),
adjusted prepaid expenses by €1.2 million and recorded under liabilities €5.3 million of
financial debt, separating the current portion from the non-current portion.
118
These adjustments resulted in an increase in the Consolidated Shareholders’ Equity of
€4.8 million, net of €2.9 million of the related tax effect.
5. Employee benefits (IAS 19)
Under IAS 19, liabilities relating to the Employee Severance Indemnity and the Fixed
indemnity for managers of newspapers were restated under the actuarial method.
This adjustment resulted in an increase in the Consolidated Shareholders’ Equity of €4.4
million, net of €1.9 million of the related tax effect.
6. Provisions for risks and charges (IAS 37)
Under IAS 37, accruals to the provisions for risks and charges are represented by the
present value of expected payments to extinguish the obligation.
This adjustment resulted in an increase in the Consolidated Shareholders’ Equity of €1
million, net of €0.4 million of the related tax effect.
Other adjustments have a negative impact on the Consolidated Shareholders’ Equity
equal to €0.6 million and are represented by individually not significant adjustments.
119
2004 INCOME STATEMENT
Italian GAAP
Reclass.
IAS/IFRS
(€ million)
IAS/IFRS
adjustments
Revenues
2004
1,080.3
-
-
1,080.3
16.5
-
(0.7)
15.8
Purchases
(160.3)
-
-
(160.3)
Services received
(428.0)
-
1.0
(427.0)
Personnel costs
(258.8)
-
2.3
(256.5)
(15.8)
-
0.8
(15.0)
-
1.1
0.5
1.5
(61.9)
-
15.2
(46.6)
Operating profit
172.0
1.1
19.1
192.2
(12.0)
(1.1)
(4.6)
(17.7)
Pre-tax profit
160.0
-
14.6
174.5
Taxes
(71.6)
-
(3.3)
(74.9)
88.3
-
11.3
99.6
Valuation of investments at equity
NET PROFIT
Group’s share in net profit
0.6
-
0.1
0.7
87.7
-
11.1
98.9
The table that follows and the related notes show the main effects on the 2004 Consolidated
Net Profit.
(€ million)
Italian GAAP Consolidated Net Profit
87.7
15.9
0.5
3. Tangible assets
0.2
4. Leases
(0.2)
5. Stock options
(2.5)
0.7
(0.3)
0.2
Tax effect
(3.3)
11.1
IFRS Consolidated Net Profit
98.9
Notes
1. Intangible assets (IAS 38)
The application of IAS 38 resulted in a €0.2 million increase in costs for services
received due to those costs that may no longer capitalized, in addition to a €16.1 million
decline in the amortization expense of publications and radio frequencies.
The overall impact on the Consolidated Net Profit was positive by €11.2 million, net of
€4.7 million of deferred taxes. The tax effect includes taxes of individual companies on
120
restoring the historical cost of publications and frequencies (€4.6 million) and taxes on
consolidation adjustments (positive by €0.1 million).
2. Investments valued at equity (IAS 28)
The elimination of the amortization of the publication owned by Editoriale la Libertà had
a €0.5 million positive effect on the Consolidated Net Profit.
3. Tangible assets (IAS 16)
The elimination of leasehold improvement costs, no longer capitalized (€0.8 million
gross of the tax effect), the non- recording of depreciation on land (€0.2 million, gross of
the related tax effect) and other negative adjustments to depreciation and amortization
(€0.4 million, gross of the related tax effect), resulted in a net positive adjustment to
Consolidated Net Profit of €0.3 million, net of €0.2 million of deferred tax assets. The
last effect includes €0.4 million relating to the impact of the elimination of the provision
for reinvested capital gains accrued pursuant to Article 54, Presidential Decree no.
597/73, as previously mentioned.
4. Leases (IAS 17)
The adoption of a new accounting treatment of leasing contracts resulted in the
elimination of €1.2 million in leasing payments and a €1.5 million increase in
depreciation and amortization, having a combined negative effect on Consolidated Net
Profit of €0.1 million, net of the related €0.1 million positive tax effect.
5. Stock options (IFRS 2)
The fair value recording of stock options determined a €2.5 million increase in personnel
costs and a consequent €1.7 million reduction in the Consolidated Net Profit, net of the
related €0.8 million positive tax effect.
6. Employee benefits (IAS 19)
The restatement in accordance with the actuarial method of liabilities relating to the
Employee Severance Indemnity and the Fixed Indemnity due to managers of companies
publishing newspapers resulted in a €4.8 million reduction in the cost of personnel and a
€4.2 million increase in financial charges, with a positive impact on Consolidated Net
Profit of €0.6 million, net of the €0.1 million positive tax effect.
7. Provisions for risks and charges (IAS 37)
The net effect of the discounting of provisions for risks and charges determined a €0.3
million increase in financial charges. The overall impact on Consolidated Net Profit was
negative by €0.2 million, net of the €0.1 million positive tax effect.
Other adjustments have a positive impact on Consolidated Net Profit of €0.2 million and
are represented by adjustments individually not significant.
121
BALANCE SHEET AT DECEMBER 31, 2004
ASSETS
Italian GAAP
Reclass.
(€ million)
Intangible assets having an indefinite life
Tangible assets
Other investments
Deferred tax assets
NON-CURRENT ASSETS
Inventories
Trade receivables
Tax receivables
Other receivables
CURRENT ASSETS
TOTAL ASSETS
311.4
17.7
329.1
233.2
25.4
13.2
4.0
604.8
36.6
234.6
20.1
4.3
59.6
22.6
383.2
761.0
1,365.9
Italian GAAP
(11.3)
(11.3)
11.3
21.5
(21.5)
(0.1)
19.9
19.7
(6.4)
7.1
0.1
(18.1)
(17.3)
2.5
Reclass.
(€ million)
Share capital
Reserves
Retained earnings (loss carry-forwards)
Net income
Financial debt
retirement benefits
Financial debt
Trade payables
Tax payables
Other payables
CURRENT LIABILITIES
TOTAL LIABILITIES
EQUITY
IAS/IFRS
IAS/IFRS
adjustments
Dec. 31, 2004
148.9
(0.9)
148.0
14.4
2.4
4.1
168.9
(0.7)
(0.7)
168.1
460.3
5.5
465.7
259.0
23.9
3.9
13.2
3.8
23.9
793.4
30.2
241.7
20.1
4.4
41.5
21.9
383.2
743.1
1,536.5
IAS/IFRS
IAS/IFRS
adjustments
Dec. 31, 2004
64.9
222.6
87.7
375.2
10.1
385.3
322.2
-
(134.5)
134.5
13.8
114.2
(2.8)
11.1
122.5
0.9
123.4
3.2
(0.8)
64.9
202.3
131.7
98.9
497.8
11.0
508.8
325.4
13.0
103.2
(0.4)
(6.9)
95.9
4.0
429.5
222.4
23.8
209.5
16.5
78.9
551.1
980.5
13.4
2.5
(13.3)
(0.2)
(10.9)
2.5
48.3
43.9
1.0
(0.2)
0.1
0.9
44.7
52.4
486.7
225.9
10.3
209.5
16.5
78.8
541.0
1,027.7
1,365.9
2.5
168.1
1,536.5
122
The table that follows provides a summary of changes in the Consolidated Shareholders’
Equity at December 31, 2004. Such adjustments are not commented as they follow from
those recorded in the opening balance sheet above.
(€ million)
375.2
148.0
2.4
3. Tangible assets
1.0
4. Leases
7.5
6.9
1.1
(0.1)
Tax effect
(44.3)
122.5
497.8
BALANCE SHEET RECONCILIATION AT JUNE 30, 2004
ASSETS
Italian GAAP
Reclass.
(€ million)
Tangible assets
Other investments
Deferred tax assets
NON-CURRENT ASSETS
Inventories
Trade receivables
Tax receivables
Other receivables
CURRENT ASSETS
TOTAL ASSETS
318.8
12.3
331.1
222.7
24.9
13.5
4.2
596.5
30.2
220.5
20.3
0.6
81.3
14.7
74.6
442.2
1,038.7
(5.2)
(5.2)
5.2
20.9
(20.9)
(0.1)
19.7
19.6
(7.6)
23.6
0.1
(19.7)
(3.6)
16.0
IAS/IFRS
IAS/IFRS
adjustments
June 30, 2004
141.4
(1.0)
140.3
14.9
2.1
1.0
158.4
(0.3)
(0.6)
(0.9)
157.5
460.2
6.1
466.2
242.8
23.0
4.0
13.5
4.2
20.7
774.5
22.6
244.1
20.3
0.7
61.4
14.1
74.6
437.8
1,212.3
123
Italian GAAP
Reclass.
(€ million)
Share capital
Reserves
Retained earnings
Net income
Financial debt
retirement benefits
Financial debt
Trade payables
Tax payables
Other payables
CURRENT LIABILITIES
TOTAL LIABILITIES
EQUITY
IAS/IFRS
IAS/IFRS
adjustments
June 30, 2004
64.8
221.2
47.3
333.3
9.8
343.0
224.6
-
(134.5)
134.5
17.2
112.6
(2.8)
5.1
114.9
0.8
115.8
3.8
(1.0)
64.8
199.3
131.7
52.4
448.2
10.6
458.8
228.3
16.2
100.6
(0.3)
(6.2)
94.1
4.4
329.6
28.3
67.1
185.1
12.0
73.6
366.1
695.7
16.9
16.0
(57.9)
41.0
(0.1)
(0.9)
16.0
44.4
41.0
1.0
(0.2)
0.8
41.8
48.8
387.4
45.3
9.1
185.1
53.1
73.5
366.0
753.4
1,038.7
16.0
157.5
1,212.3
The table that follows provides a summary of changes in the Consolidated Shareholders’
Equity at June 30, 2004. Such adjustments are not commented as they follow from those
recorded in the opening balance sheet above.
(€ million)
333.3
. Intangible assets
140.3
2.1
3. Tangible assets
0.9
4. Leases
7.6
6.2
1.3
(0.2)
Tax effect
(43.4)
114.9
448.2
124
RECONCILIATION
MONTHS OF 2004
OF THE INCOME STATEMENT AND NET PROFIT FOR THE FIRST SIX
Italian GAAP
Reclass.
(€ million)
Revenues
Purchases
Services received
Personnel costs
Valuation of investments at equity
Operating profit
Pre-tax profit
Taxes
NET PROFIT
Group’s share in net profit
546.1
4.7
(80.3)
(208.2)
(133.7)
(6.8)
(28.6)
93.1
(5.7)
87.4
(39.9)
47.5
0.2
47.3
IAS/IFRS
IAS/IFRS
st
adjustments
1 Half 2004
0.5
(0.9)
0.1
0.2
7.3
7.3
(0.3)
7.1
(1.9)
5.2
0.1
5.1
546.1
4.7
(80.3)
(207.7)
(134.6)
(6.7)
0.7
(21.3)
100.9
(6.4)
94.5
(41.8)
52.7
0.3
52.4
0.4
0.4
(0.4)
-
The table that follows provides a summary of changes in the Consolidated Net Profit for the
first six months of 2004. Such adjustments are not commented as they follow from those
recorded in the opening balance sheet above.
(€ million)
Italian GAAP Consolidated Net Profit
47.3
7.9
0.2
3. Tangible assets
0.1
4. Leases
(0.1)
5. Stock options
(0.9)
(0.2)
(0.0)
Tax effect
(1.9)
IFRS Consolidated Net Profit
5.1
52.4
125
IAS 32 AND 39: RECONCILIATION OF THE BLANCE SEET AT JANUARY 1, 2005
As allowed under IFRS 1, the Espresso Group decided to apply IAS 32 and 39 from January
1, 2005. The table that follows shows the effect of the application of IAS 32 and 39 on
Consolidated Balance Sheet balances at January 1, 2005.
ASSETS
(€ million)
Tangible assets
Other investments
Deferred tax assets
NON-CURRENT ASSETS
Inventories
Trade receivables
Tax receivables
Other receivables
CURRENT ASSETS
TOTAL ASSETS
(€ million)
Share capital
Reserves
Retained earnings
Net income
Financial debt
retirement benefits
Financial debt
Trade payables
Tax payables
Other payables
CURRENT LIABILITIES
TOTAL LIABILITIES
EQUITY
IAS/IFRS
Dec. 31, 2004
IAS 32 - 39
Reclass.
IAS 32 - 39
adjustments
IAS/IFRS
Jan. 1, 2005
460.3
5.5
465.7
259.0
23.9
3.9
13.2
3.8
23.9
793.4
30.2
241.7
20.1
4.4
41.5
21.9
383.2
743.1
1,536.5
(13.2)
(13.2)
(2.7)
(2.7)
(15.9)
5.4
2.9
8.3
0.1
0.1
8.4
IAS/IFRS
Dec. 31, 2004
IAS 32 - 39
reclass.
IAS 32 - 39
adjustments
64.9
202.3
131.7
98.9
497.8
11.0
508.8
325.4
13.0
(14.0)
0.8
(13.2)
(13.2)
-
(0.6)
0.1
(0.5)
(0.5)
5.4
-
64.9
187.7
132.6
98.9
484.1
11.0
495.1
330.9
13.0
95.9
-
-
95.9
52.4
486.7
225.9
10.3
209.5
16.5
78.8
541.0
1,027.7
(2.7)
(2.7)
(2.7)
1.8
7.2
1.7
1.7
8.9
54.2
493.9
224.8
10.3
209.5
16.5
78.8
539.9
1,033.9
1,536.5
(15.9)
8.4
1,528.9
460.3
5.5
465.7
259.0
23.9
3.9
9.3
26.8
788.5
30.2
241.7
20.1
1.7
41.5
22.0
383.2
740.4
1,528.9
IAS/IFRS
Jan. 1, 2005
126
Reclassifications relate to own shares, subtracted from Shareholders’ Equity, and the writeoff of accrued income and liabilities recorded against interest rate swaps having a nominal
value of €300 million entered into to hedge the risk arising from the bond issue.
The table that follows and the related notes summarize the effect of the application of IAS 32
and 39, net of the related tax effect, on the Consolidated Shareholders’ Equity at January 1,
2005.
(€ million)
Consolidated Shareholders’ Equity at January 1, 2005
1. Own shares
2. Fair value reserve
3. Application of amortized costs on bond issues
Total adjustments due to the adoption of IAS 32 and 39
Restated Consolidated Shareholders’ Equity at January 1, 2005
497.8
(13.2)
(2.2)
1.7
(13.7)
484.1
Notes:
1. Own shares (IAS 32)
Under Italian GAAP, own shares were recorded under long-term assets and valued at
cost, reduced for permanent impairment. An equivalent amount was recorded in a
Shareholders’ Equity reserve. The effect of transactions involving own shares were
recorded in the income statement. As a result of the adoption of IAS 32, the book value
of own shares was reclassified in a specific Shareholders’ Equity reserve, while the
reserve for own shares was reclassified in the reserve used for its recording and the
original cost was restored. The adjustment resulted in a €13.2 million reduction in the
Consolidated Shareholders’ Equity, net of the €14 million effect of the reclassification of
the book value of own shares, and the elimination of write-downs carried out in the past,
amounting to €0.8 million.
2. Fair value reserve (IAS 39)
At January 1, 2005, a paper swap contract was in place through which the company fixed
the price of part of its paper needs for its magazines until September 2005. Under Italian
GAAP, price differentials on the paper swap were recorded in the income statement
under the accrual method.
As a result of the adoption of IAS 39, the fair value of the contract, amounting to €2.2
million, net of the related tax effect, was recorded also in a specific Shareholders’ Equity
reserve.
3. Application of amortized cost on bond issues (IAS 39)
In application of IAS 39, at January 1, 2005, the original value of bond issues was
restated keeping into account costs incurred and issue discounts, in addition to the
127
portion accrued in the period (based on the residual term of the bond) of the positive
difference between the original cost of the issue and its fair value recorded at the time of
the reversal of fixed/variable interest rate swap contracts originally entered into to hedge
the €300 million bond.
The adjustment resulted in a €1.7 million increase in the Consolidated Shareholders’
Equity.
MAIN CHANGES TO THE STATEMENT OF CASH FLOWS
At December 31, 2004, net consolidated debt amounted to €139.7 million. As a result of the
application of IAS 32 and 39, the net debt of the Group amounted to €141.4 million. Main
changes relate to the restatement of financial debt at the amortized cost.
128
Auditors’ Report on the IFRS reconciliation schedules

First Half 2005 PDF File

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