SEAT eng12 - Borsa Italiana

Transcription

STRICTLY PRIVATE & CONFIDENTIAL
THIS IS NOT A PROSPECTUS, AN OFFERING CIRCULAR OR AN INFORMATION MEMORANDUM
27 March 2009
THIS DOCUMENT IS STRICTLY PRIVATE, CONFIDENTIAL AND PERSONAL TO ITS RECIPIENTS AND SHOULD NOT BE
COPIED, DISTRIBUTED, PUBLISHED OR REPRODUCED IN WHOLE OR IN PART, NOR PASSED TO ANY THIRD PARTY. THIS
IS NOT A PROSPECTUS, AN OFFERING CIRCULAR OR AN INFORMATION MEMORANDUM AND DOES NOT CONSTITUTE
AN OFFER TO SELL, OR THE SOLICITATION OF AN OFFER TO BUY, AND SHOULD NOT BE RELIED ON BY ANYONE IN
CONNECTION WITH AN OFFER OR INVITATION TO SELL, OR A SOLICITATION TO BUY, ANY OF THE SECURITIES
REFERRED TO HEREIN.
This document contains an unofficial translation into the English language (the “Translation”) of the official prospectus, the Prospetto Informativo,
dated 27 March 2009 and prepared in the Italian language (the “Prospectus”) for the purposes of the Offering (as defined below) by Seat Pagine
Gialle S.p.A. (the “Issuer”) of ordinary shares of the Issuer (the “Shares”). The Prospectus (a copy of which accompanies this document or, if a
copy does not accompany this document, which you are required to obtain from the Issuer) was registered with the Italian Securities Exchange
Commission (Commissione Nazionale per le Società e la Borsa) (“CONSOB”) on 27 March 2009, following notice of authorisation to publication
no. 9026092 of 25 March 2009.
The information contained herein relates to the offering of 1,885,982,430 Shares, with no nominal value, by way of option to the holders of ordinary
shares and saving shares of the Issuer (the “Offering”). The Shares, once issued, will be admitted to listing on the Mercato Telematico Azionario, the
electronic stock market organised and managed by Borsa Italiana S.p.A.
IN MAKING AN INVESTMENT DECISION, PROSPECTIVE INVESTORS SHOULD BASE THEIR DECISION AS TO WHETHER TO
INVEST IN THE SHARES ON AN EXAMINATION OF THE FULL CONTENTS OF THE PROSPECTUS IN THE ITALIAN
LANGUAGE ONLY. THE SECTION OF THE PROSPECTUS ENTITLED “FATTORI DI RISCHIO” (“RISK FACTORS”), AS WELL
AS THE ISSUER’S CONSOLIDATED FINANCIAL STATEMENTS, SHOULD BE CONSIDERED IN CONNECTION WITH ANY
INVESTMENT IN THE SHARES.
ANY INVESTOR SEEKING TO BRING ANY LEGAL ACTION IN RESPECT OF INFORMATION CONTAINED IN THE
PROSPECTUS MAY BE REQUIRED UNDER THE APPLICABLE NATIONAL LAW TO BEAR THE COST OF TRANSLATING THE
PROSPECTUS PRIOR TO THE COMMENCEMENT OF LEGAL PROCEEDINGS, BECAUSE THIS TRANSLATION MAY NOT BE
ADMISSIBLE IN SUCH PROCEEDINGS.
This Translation is provided for information purposes only and for ease of reference. In the event of any discrepancy between the
Prospectus and this Translation, the Prospectus shall prevail. By accepting delivery of this document each recipient shall be deemed to agree
to the foregoing.
This document and the Prospectus are only addressed to and directed at shareholders of the Issuer and may not be distributed, directly or indirectly,
into the United States of America, Canada, Japan and Australia or in any other countries in which such distribution requires the approval of or
registration with any competent authorities (jointly with the United States of America, Canada, Japan and Australia, the “Other Countries”).
Therefore, no acceptances of the Offering shall be taken, coming, directly or indirectly, from the Other Countries where such acceptances violate any
local rules.
In particular, no offer may be made, directly or indirectly, into or from any of the Other Countries through the services of any regulated market in the
Other Countries, nor by means of the postal services or through any other communication or trade instruments connected to any of the Other
Countries.
Neither this Translation, nor the Prospectus or any other documents relating to the Offering may be transmitted, distributed or sent into or from any
of the Other Countries. This limitation is applicable also to the Issuer’s shareholders with an address in any of the Other Countries and is applicable
to their fiduciary persons, delegates or depositaries who have Seat Pagine Gialle S.p.A. shares.
Recipients (including fiduciary persons, delegates or depositaries) of this Translation, or of the Prospectus, may not distribute, send or transmit any
part of the Translation or the Prospectus into the Other Countries, either by means of the postal services or by any other communication or trade
instruments connected to the Other Countries.
The Shares have not been and will not be registered under the United States Securities Act of 1933, as amended (the “Securities Act”) or the
securities laws of any State of the United States, and may not be offered or sold in the United States, except pursuant to an exemption from the
registration requirements of the Securities Act. Accordingly, the rights to subscribe for the Shares in the Offering, are being offered and sold outside
the United States in an offshore transaction (as defined in Regulation S under the Securities Act).
The Sole Global Coordinator and Sole Bookrunner assumes no responsibility for, and makes no representation or warranty, whether express or
implied, as to the fairness, accuracy, completeness or correctness of this Translation and neither the Sole Global Coordinator and Sole Bookrunner
nor its respective advisors, directors, members, officers, employees or affiliates accepts any liability whatsoever (in negligence or otherwise) for any
loss however arising from any use of this Translation or its contents.
No person has been authorised to give any information or to make any representation not contained in the Prospectus in connection with the
Offering. If given or made, any such information and/or representation must not be relied upon as having been authorised by the Issuer or the Sole
Global Coordinator and Sole Bookrunner. Neither the delivery of this Translation nor any sale of Shares made pursuant to the Offering shall, under
any circumstances, create an implication that there has not been any change in the information set out in the Prospectus or in the affairs of the Issuer
since the date of the Prospectus.
Any reproduction or distribution of this Translation in whole or in part, and any disclosure of its contents or use of any information herein for any
purpose other than in considering an investment in the Shares is prohibited. Each recipient of this Translation, by accepting delivery of this
Translation, agrees to the foregoing.
Issuer
SEAT Pagine Gialle S.p.A.
INFORMATION PROSPECTUS FOR THE OFFER IN OPTION TO
SHAREHOLDERS AND ADMISSION TO LISTING ON THE MERCATO
TELEMATICO AZIONARIO ORGANISED AND MANAGED BY BORSA
ITALIANA S.p.A. OF ORDINARY SHARES
SEAT PAGINE GIALLE S.p.A.
Information Prospectus deposited with Consob on 27 March 2009 following notification by Consob of their
decision authorising publication in Memorandum dated 25 March 2009, Register No. 9026092.
Publication of the Information Prospectus does not imply any judgment on the part of Consob on the
investment opportunity proposed or on the merits of the data and information given in connection therewith.
The Information Prospectus is available from Borsa Italiana S.p.A. (Milan, Piazza degli Affari 6), from the
registered offices of the Issuer: Milan, Via Grosio 10/4, and from the Issuer’s secondary offices at: Turin,
Corso Mortara 22, as well as on the Issuer’s website: www.seat.it.
[THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY]
Table of contents
TABLE OF CONTENTS
Definitions .........................................................................................................................................................7
Glossary ...........................................................................................................................................................13
Summary .........................................................................................................................................................15
Section One .....................................................................................................................................................33
1
RESPONSIBILITY..............................................................................................................................35
1.1 Responsibility for the Information contained in the Information Prospectus .....................35
1.2 Declaration of Responsibility ....................................................................................................35
2
INDEPENDENT AUDITORS.............................................................................................................36
2.1 Issuer’s Independent Auditors..................................................................................................36
2.2 Information on relationships with auditors.............................................................................36
3
SELECTED FINANCIAL INFORMATION ....................................................................................37
3.1 Consolidated economic, capital, and financial data for the financial years ended on
31 December 2008, 2007, 2006, and 2005 .................................................................................38
3.2 Consolidated economic, capital, and financial data for the 6-month periods ended on
30 June 2008 and 2007...............................................................................................................38
3.3 Consolidated economic, capital, and financial data for the 9-month periods ended on
30 September 2008 and 2007.....................................................................................................39
3.4 Selected Net Financial Debt Data .............................................................................................40
3.5 Selected data on equity, profits and dividends per share .......................................................40
4
RISK FACTORS ..................................................................................................................................41
4.1 RISK FACTORS RELATING TO THE ISSUER..................................................................41
4.2 RISK FACTORS ASSOCIATED WITH THE SECTOR IN WHICH THE ISSUER
OPERATES ................................................................................................................................56
4.3 RISK FACTORS LINKED TO THE SHARES OFFERED..................................................57
5
INFORMATION ON THE ISSUER ..................................................................................................61
5.1 History and development of the Issuer ....................................................................................61
5.1.1 Legal and commercial name of the Issuer ......................................................................61
5.1.2 Place of registration of the Issuer and its registration number ......................................61
5.1.3 Date of incorporation and length of life of the Issuer.....................................................61
5.1.4 Domicile and legal form of the Issuer, legislation under which the Issuer
operates, its country of incorporation and registered office...........................................61
5.1.5 Important events in the development of the Issuer’s business.........................................61
5.1.6 The Issuer’s rating ..........................................................................................................66
5.2 Investments.................................................................................................................................67
5.2.1 Investments made in the last three-year period ..............................................................67
5.2.2 Investments under way ....................................................................................................68
5.2.3 Issuer’s main future investments.....................................................................................69
6
OVERVIEW OF THE ISSUER’S ACTIVITIES..............................................................................70
6.1 Main activities ............................................................................................................................70
6.1.1 Description of the nature of the Issuer’s business and main activities ...........................70
6.1.2 Indications of new products and/or services...................................................................86
6.1.3 Sales channels .................................................................................................................87
6.2 Main markets .............................................................................................................................89
6.2.1 Description of the main markets in which the Issuer operates .......................................89
6.2.2 Future plans and strategies.............................................................................................91
1
SEAT Pagine Gialle S.p.A. Information Prospectus
6.3
Exceptional factors that have influenced the information provided at Paragraphs
6.1, “Main Activities,” and 6.2, “Main Markets”....................................................................92
6.4 Information on potential dependence on patents or licences, industrial, commercial
or financial agreements, or new manufacturing procedures .................................................92
7
INFORMATION ON THE ISSUER’S PARENT GROUP ..............................................................94
7.1 Brief description of the Group..................................................................................................94
7.2 Subsidiary companies ................................................................................................................94
8
PROPERTY, PLANT, AND MACHINERY ...................................................................................101
8.1 Tangible fixed assets ................................................................................................................101
8.1.1 Real estate owned..........................................................................................................101
8.1.2 Rented / financial lease property ..................................................................................101
8.2 Environmental problems that might affect the use of the properties..................................103
9
DESCRIPTION OF THE OPERATING AND FINANCIAL POSITION ...................................104
9.1 Financial Position.....................................................................................................................104
9.2 Activities ...................................................................................................................................105
9.2.1 Reclassified consolidated income statement for the financial years ended on 31
December 2007, 2006 and 2005 ...................................................................................105
9.2.2 Data by business area ...................................................................................................107
9.2.3 Economic position in the first half of 2008 and 2007 ...................................................119
9.2.4 Data by business area for the first half of 2008 and 2007 ............................................120
9.2.5 Economic position for the first nine months of 2008 and 2007 and the third
quarter of 2008 and 2007..............................................................................................127
9.2.6 Economic position per business area for the first nine months of 2008 and 2007
and the third quarter of 2008 and 2007 ........................................................................129
9.2.7 Financial data at 31 December 2007, 2006 and 2005, at 30 June 2008 and 2007
and at 30 September 2008 and 2007.............................................................................134
9.3 Information concerning policies or factors involving governance, the economy,
taxation, currency or government that have had or may have significant direct or
indirect repercussions on the business of the Issuer .............................................................138
9bis DESCRIPTION OF THE OPERATING AND FINANCIAL POSITION ...................................139
9.1bis Financial Position ..................................................................................................................139
9.2bis Activities .................................................................................................................................139
9.2.1bis Reclassified consolidated income statement for the financial years ended on 31
December 2008 and 2007 as redetermined ................................................................140
9.2.2bis Data by business area ................................................................................................142
9.2.3bis Equity data as at 31 December 2008 and 2007..........................................................151
10
FINANCIAL RESOURCES..............................................................................................................153
10.1 The Issuer’s financial resources..............................................................................................154
10.2 Description of cash flows .........................................................................................................156
10.3 Financial requirement and financing structure ....................................................................159
10.4 Trade receivables securitisation programme ........................................................................159
10.5 Limitations on the use of financial resources ........................................................................160
10.6 Management of financial risks................................................................................................161
10.7 Expected sources of funding necessary to fulfil the obligations as per Paragraphs
5.2.3, “Issuer’s main future investments” and 8.1, “Tangible fixed assets” .......................168
11
RESEARCH AND DEVELOPMENT, PATENTS, AND LICENSES ..........................................169
11.1 Research and development......................................................................................................169
11.2 Intellectual property ................................................................................................................169
2
Table of contents
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INFORMATION ON EXPECTED TRENDS .................................................................................170
12.1 Recent significant trends in the Issuer’s business .................................................................170
12.2 Information on trends in 2008 ................................................................................................170
PROFIT FORECASTS OR ESTIMATES ......................................................................................171
13.1 Main assumptions for forecasts or estimates of profits ........................................................171
13.2 Report of auditors on forecasts or estimates of profit ..........................................................181
13.3 Basis of preparation of the forecasts or estimates of profits ................................................181
13.4 Forecasts of profit published in another information prospectus .......................................181
BOARD OF DIRECTORS, EXECUTIVE COMMITTEES AND SUPERVISORY
BOARDS .............................................................................................................................................182
14.1 Information on the Board of Directors, Executive Committees and Supervisory
Board.........................................................................................................................................182
14.1.1 Board of Directors ........................................................................................................182
14.1.2 Board of Statutory Auditors ..........................................................................................187
14.1.3 General Management....................................................................................................192
14.2 Conflicts of interest of the members of the Board of Directors, the Board of
Statutory Auditors, and General Management.....................................................................193
REMUNERATION AND BENEFITS..............................................................................................194
15.1 Remuneration and benefits of members of the Issuer’s Board of Directors and
Board of Statutory Auditors, and of the General Manager for Italy ..................................194
15.2 Amounts set aside or accumulated by the Issuer or other Group companies for the
payment of pensions, severance pay, and similar benefits ...................................................195
BOARD OF DIRECTORS’ GENERAL RULES............................................................................197
16.1 Expiration of terms of office ...................................................................................................197
16.1.1 Board of Directors ........................................................................................................197
16.1.2 Board of Statutory Auditors ..........................................................................................198
16.2 Information on employment contracts signed by the members of the Board of
Directors, the Board of Statutory Auditors, and by General Management with the
Issuer that call for severance pay ...........................................................................................198
16.3 The Internal Audit Committee and the Remuneration Committee ....................................198
16.4 Compliance with corporate governance regulations ............................................................200
EMPLOYEES.....................................................................................................................................202
17.1 Number of employees ..............................................................................................................202
17.2 Holdings of share capital and stock options ..........................................................................203
17.2.1 Holdings of share capital ..............................................................................................203
17.2.2 Stock option plans .........................................................................................................203
17.3 Description of any agreements for employee participation in the Issuer’s capital ............205
MAIN SHAREHOLDERS ................................................................................................................206
18.1 Parties owning financial instruments representative of the voting capital to an extent
greater than or equal to 2% of the Issuer’s share capital ....................................................206
18.2 Voting rights provisions contrary to those concerning participation in the capital ..........208
18.3 Indication of any controlling party pursuant to Art. 93 of the Consolidated Law ............208
18.4 Indication of the existence of any agreements for changing the structure of control ........208
RELATED-PARTY TRANSACTIONS...........................................................................................210
19.1 Identification of related parties ..............................................................................................210
19.1.1 Intragroup related-party transactions ..........................................................................210
19.1.2 Group related-party transactions .................................................................................215
3
20
21
22
4
FINANCIAL INFORMATION CONCERNING THE ISSUER’S ASSETS AND
LIABILITIES, FINANCIAL POSITION, AND PROFITS AND LOSSES .................................218
20.1 Financial information relating to the financial years ended on 31 December 2008,
2007, 2006 and 2005 .................................................................................................................218
20.2 Interim financial information and other financial information ..........................................224
20.2.1 In-depth information on significant financial statement items......................................232
20.2.2 Accounting standards and criteria of reference............................................................233
20.3 Pro forma financial information.............................................................................................233
20.4 Auditing of the annual financial information for previous financial years ........................233
20.4.1 Declaration attesting to the auditing of the financial information for previous
financial years...............................................................................................................233
20.4.2 Mention of other information contained in the registration document checked by
the auditors ...................................................................................................................233
20.5 Date of the most recent financial information.......................................................................233
20.6 Dividends policy .......................................................................................................................233
20.7 Administrative, court and arbitration proceedings ..............................................................234
20.7.1 Administrative, court and arbitration proceedings in which SEAT is involved ............235
20.7.2 Administrative, court and arbitration proceedings involving other companies in
the SEAT Group ............................................................................................................238
20.8 Significant changes in the Issuer’s financial or commercial situation ................................239
ADDITIONAL INFORMATION .....................................................................................................240
21.1 Share capital .............................................................................................................................240
21.1.1 Share capital issued ......................................................................................................240
21.1.2 Shares not representative of capital..............................................................................241
21.1.3 Treasury shares.............................................................................................................241
21.1.4 Amount of convertible bonds, exchangeable bonds or bonds with warrants................241
21.1.5 Mention of any purchase rights and/or obligations on the Issuer’s capital .................241
21.1.6 Information concerning the capital of any companies in the Group offered as an
option or that it has been decided to offer as an option................................................241
21.1.7 Change in the share capital over the last three financial years....................................242
21.2 Memorandum of Association and Bylaws .............................................................................242
21.2.1 Corporate purpose and objectives of the Issuer............................................................242
21.2.2 Summary of the Issuer’s Bylaws provisions regarding members of the
administration, management and supervisory bodies...................................................242
21.2.3 Description of the rights associated with the shares.....................................................246
21.2.4 Terms for modification of the rights of owners of shares .............................................246
21.2.5 Shareholders’ meeting notices ......................................................................................247
21.2.6 Bylaws provisions that could have the effect of delaying, postponing or
preventing a change in the structure of control of the Issuer .......................................247
21.2.7 Bylaws provisions governing the ownership threshold for the obligation of
respective notice to the public.......................................................................................247
21.2.8 Bylaws provisions governing modification of the share capital ...................................247
IMPORTANT AGREEMENTS........................................................................................................248
22.1 Supply agreements with Ilte S.p.A. ........................................................................................248
22.2 Real estate project for SEAT’s new Turin headquarters.....................................................250
22.3 Loan agreements ......................................................................................................................253
22.3.1 RBS Loan Agreement ....................................................................................................253
22.3.2 Lighthouse Loan Agreement .........................................................................................267
Table of contents
23
THIRD-PARTY INFORMATION, EXPERT OPINIONS AND DISCLOSURES .....................269
23.1 Third-Party Information, Expert Opinions and Disclosures ...............................................269
23.2 Declaration on Third-party Information, Expert Opinions and Disclosures .....................269
24
DOCUMENTS AVAILABLE TO THE GENERAL PUBLIC ......................................................270
25
HOLDINGS ........................................................................................................................................271
Section Two ...................................................................................................................................................273
1
RESPONSIBILITY............................................................................................................................275
1.1 Responsibility for the Information Contained in the Information Prospectus ..................275
1.2 Declaration of Responsibility ..................................................................................................275
2
RISK FACTORS ................................................................................................................................276
3
KEY FINANCIAL INFORMATION...............................................................................................277
3.1 Declaration on Circulating Capital ........................................................................................277
3.2 Shareholders’ Equity and Debt of SEAT Group ..................................................................277
3.3 Interests of Individuals and Legal Persons Admitted to the Offering ................................278
3.4 Reasons for the Offering and Allocation of Proceeds ...........................................................278
4
DETAILS OF THE FINANCIAL INSTRUMENTS OFFERED ..................................................279
4.1 Description of the Offered Shares ..........................................................................................279
4.2 Applicable Law.........................................................................................................................279
4.3 Characteristics of the Shares ..................................................................................................279
4.4 Shares’ Reference Currency ...................................................................................................279
4.5 Rights Vested in the Shares and Exercise Procedure ...........................................................279
4.6 Resolutions, Authorisations and Approvals Required for the Creation and/or Issue
of the Shares .............................................................................................................................279
4.7 Expected Issue Date of the Shares ..........................................................................................280
4.8 Restrictions on the Free Transferability of Shares ...............................................................280
4.9 Laws and Regulations Applicable to the General Public Offering of the Shares ..............280
4.10 Takeover Bids by Third Parties on the Issuer’s Financial Instruments during the
Current Financial Year or in the Previous Financial Year..................................................281
4.11 Taxation ....................................................................................................................................281
5
TERMS OF OFFERING ...................................................................................................................290
5.1 Conditions and statistics concerning the Offering, envisioned timetable and methods
of subscription to the Offering................................................................................................290
5.1.1 Conditions to which the Offering is subject ..................................................................290
5.1.2 Total amount of the Offering.........................................................................................290
5.1.3 Validity period of the Offering and description of the subscription methods ...............291
5.1.4 Possibility of revocation and suspension of the Offering..............................................291
5.1.5 Reduction of acceptances and methods of reimbursement............................................292
5.1.6 Maximum and/or minimum amount of subscriptions....................................................292
5.1.7 Withdrawal of acceptances ...........................................................................................292
5.1.8 Manner and terms for the payment and delivery of the Shares.....................................292
5.1.9 Publication of the results of the Offering ......................................................................292
5.1.10 Preemptive right to the unsubscribed Shares................................................................292
5.2 Distribution and allotment plan..............................................................................................293
5.2.1 Recipients and markets for the Offering .......................................................................293
5.2.2 Commitments to subscribe the Shares of the Issuer......................................................293
5.2.3 Information to be provided prior to allotment ..............................................................293
5.2.4 Procedure for communication to the subscribers as to the allotments .........................294
5
5.2.5 “Over-Allotment” and “Greenshoe”............................................................................294
5.3 Establishing the price ..............................................................................................................294
5.3.1 The Offering Price for the Shares and the expenses to be charged to the
subscribers ....................................................................................................................294
5.3.2 Procedure for Announcing Offering Price....................................................................294
5.3.3 Restrictions on the Option Rights .................................................................................295
5.3.4 Difference between the Offering Price for the Shares and the price of the Shares
paid during the course of the previous financial year or to be paid by members of
the Board of Directors, by members of the Board of Statutory Auditors, by the
General Manager for Italy or related persons or entities.............................................295
5.4 Placement and subscription ....................................................................................................295
5.4.1 Indication of those responsible for the placement of the Offering, and the
placement agents...........................................................................................................295
5.4.2 Name and address of the bodies placed in charge of financial service and of the
custodians in each country............................................................................................295
5.4.3 Subscription commitments and underwriting................................................................295
5.4.4 Date of entering into the subscription and underwriting agreements...........................297
6
LISTING FOR TRADING AND METHODS OF TRADING ......................................................298
6.1 Request for listing for trading ................................................................................................298
6.2 Regulated markets on which financial instruments of the same class as those of the
Offering are listed ....................................................................................................................298
6.3 Other operations involving financial instruments for which listing on a regulated
market is requested..................................................................................................................298
6.4 Intermediaries on the secondary market ...............................................................................298
6.5 Stabilisation ..............................................................................................................................298
7
HOLDERS OF FINANCIAL INSTRUMENTS WHO SELL........................................................299
7.1 Name and address of the entity or individual offering the financial instruments for
sale, nature of any offices or roles held or other significant relations that those
selling have had in the last three financial years with the Issuer or with any other
predecessor or related company .............................................................................................299
7.2 Number and class of financial instruments offered by each of the holders of financial
instruments carrying out a sale...............................................................................................299
7.3 Lock-Up Agreements ...............................................................................................................299
8
EXPENSES CONNECTED WITH THE OFFERING ...................................................................301
8.1 Total net proceeds and estimated total expenses connected with the Offering ..................301
9
DILUTION..........................................................................................................................................302
9.1 Amount and percentage of immediate dilution deriving from the Offering ......................302
9.2 Amount and percentage of immediate dilution in the event that the present
shareholders do not subscribe the Offering...........................................................................302
10
ADDITIONAL INFORMATION .....................................................................................................303
10.1 Consultants mentioned in section two....................................................................................303
10.2 Indication of information contained in this Section subjected to auditing or limited
review by the statutory auditors .............................................................................................303
10.3 Expert reports or opinions ......................................................................................................303
10.4 Information deriving from third parties................................................................................303
Appendix .......................................................................................................................................................305
6
Definitions
DEFINITIONS
Amendment Agreement
Agreement amending the RBS Loan Agreement, known as
“Amendment Agreement”, executed on 14 January 2009 between SEAT
and RBS.
Authorised Intermediaries
The authorised intermediaries adhering to the Monte Titoli S.p.A.
centralised management system.
Board of Directors
The board of directors of the Company.
Board of Statutory Auditors
The board of statutory auditors of the Company.
Borsa Italiana
Borsa Italiana S.p.A., located in Milan, Piazza Affari 6.
Business Plan
The business plan for which the guidelines already approved on 23
December 2008 were confirmed by the Board of Directors of the
Company on 12 February 2009, for the 2009 – 2011 period.
Bylaws
The Company Bylaws in effect as of the Date of the Information
Prospectus.
Capital Increase
The share capital increase of a nominal maximum amount of
€ 200,000,000 approved by the Extraordinary Shareholders’ Meeting of
the Company held on 26 January 2009, to be made by the issue of
Shares to be offered as an option to ordinary shareholders and holders
of savings shares at the unit Offering Price equal to the theoretical ex
right price (TERP) for the ordinary SEAT share, calculated according to
current methods and based on the arithmetic mean of the official unit
prices posted during a period of at least 3 market trading sessions prior
to determination of the Offering Price and discounted to the extent
stipulated by the Board of Directors; in any case, the Offering Price for
the new Shares may not be greater than € 6.00.
CIPI
Cipi S.p.A., subsidiary of SEAT, with its registered office in Milan, Via
Lorenteggio 259, entered in the Register of Companies of Milan under
No. 01201420872.
Code of Self-Governance
The Code of Self-Governance for listed companies drafted by the
Committee for the Corporate Governance of Listed Companies – March
2006 revised version – under the aegis of Borsa Italiana.
Consob
The Italian Securities Commission (Commissione Nazionale per le
Società e la Borsa), with headquarters in Rome, Via G. B. Martini 3.
Consodata
Consodata S.p.A., a wholly-owned subsidiary of SEAT, with registered
office in Rome, Via Mosca 43-A/45, entered in the Register of
Companies of Rome under No. 07902440010.
Consolidated Law
Legislative Decree No. 58 of 24 February 1998 (Testo Unico della
Finanza or Consolidated Law on Financial Intermediation, pursuant to
Articles 8 and 21 of Law No. 52 of 6 February 1996), with subsequent
amendments and addenda.
Consolidation
Consolidation (reverse stock split) of existing ordinary and savings
shares of the Company, at the following ratios: (i) 1 new ordinary share
for 200 existing ordinary shares; (ii) 1 new savings share for 200
existing savings shares, with cancellation of 96 ordinary and 186
savings shares, and reduction of shareholders’ equity by € 8.46 overall,
decided by the Issuer’s Extraordinary Shareholders’ Meeting of 26
January 2009 and having effect from 9 February 2009.
7
Date of the Information
Prospectus
The date of publishing this Information Prospectus with Consob.
Directive 2003/71/EC
Directive 2003/71/EC of the European Parliament and Council dated 4
November 2003, concerning the prospectus to be published for a public
offering or the admission to trading of financial instruments.
Dogan
Dogan Yayin Holding A.S., with its registered office in Evren, Mah.,
Hurriyet Medya Towers, Günesli, 34212, Istanbul, Turkey.
EBITDA
EBITDA, or Operating income before amortisation, depreciation, nonrecurring and restructuring cost, net, is represented by EBIT (Operating
result) including net non-recurring and restructuring expenses, as well
as amortisation, depreciation and writedowns, both operating (referring
to all intangible assets with a defined useful life and to tangible assets)
and non-operating (goodwill and Customer Data Base).
Europages
Europages S.A., subsidiary of SEAT, with its registered office at
Avenue Charles de Gaulle 127, Neuilly sur Seine, France, entered in the
Register of Companies of Nanterre under No. B 338631930.
IFRS/IAS
The IFRS (International Financial Reporting Standards)/IAS
(International Accounting Standards) international accounting standards
– issued by the IASB (International Accounting Standards Board) and
approved by the European Commission pursuant to the procedure
stipulated in Regulation (EC) 1606/2002 – and the interpretations
contained in the IFRIC (International Financial Reporting Committee)
documents.
Indenture
Agreement executed on 22 April 2004 between, inter alia, SEAT and
Lighthouse in connection with the bond issue made by Lighthouse and
underwritten by SEAT.
Independent Auditors
Reconta Ernst & Young S.p.A., headquartered in Rome, Via
Giandomenico Romagnoli 18/A.
Information Prospectus
This information prospectus.
Intercreditor Agreement
Intercreditor agreement executed between SEAT, Lighthouse and RBS,
among others, on 25 May 2005 at the same time as the RBS Loan
Agreement.
Issuer or Company or SEAT
SEAT Pagine Gialle S.p.A., with its registered office in Milan, Via
Grosio 10/4 and secondary office in Turin, Corso Mortara 22, entered in
the Register of Companies of Milan under No. 03970540963.
Issuer Regulations
The regulations for implementation of the Consolidated Law,
concerning the rules for issuers, adopted by Consob in Resolution No.
11971 of 14 May 1999, with subsequent amendments and addenda.
Katalog
Katalog Yayin ve Tanitim Hizmetleri S.A., a partially-owned subsidiary
of SEAT in a joint venture with Dogan, with its registered office at Dr
Cemil Bengu Caddesi, HAK is Merkezi, 2 Kat: 3, CaglanyanSisli/Istanbul, Turkey, entered in the Register of Companies under No.
556998.
Lighthouse
Lighthouse International Company S.A., a company under Luxembourg
law, headquartered at 3 rue du Fort Rheinsheim, L-2419, Luxembourg,
entered in the Register of Companies of Luxembourg under No.
B94.548.
Lighthouse Loan Agreement
Subordinate loan agreement executed on 22 April 2004 between SEAT
and Lighthouse for the amount of € 1,300,000,000.
Lighthouse Securities
Securities issued by Lighthouse pursuant to the Indenture.
8
Definitions
Mediobanca
Mediobanca – Banca di Credito Finanziario S.p.A., with its registered
office in Milan, Piazzetta Enrico Cuccia 1, entered in the Register of
Companies of Milan under No. 00714490158.
Mercato Telematico Azionario
or MTA
The Mercato Telematico Azionario (Italian Electronic Stock Exchange)
organised and managed by Borsa Italiana.
Offering Period
The period for acceptance of the Offering in Option, running from 30
March 2009 until 17 April 2009, inclusive.
Offering Price
The price of € 0.106 at which each Share will be offered as an option to
SEAT shareholders, as determined by the Board of Directors on 26
March 2009, in compliance with the criteria identified and approved by
the Extraordinary Shareholders’ Meeting held on 26 January 2009.
Offering in Option or Offering
The offering in option on the Shares to ordinary shareholders or holders
of savings shares of SEAT.
Option Rights
Option rights that provide the right to subscribe Shares.
Ordinary and/or Extraordinary
Shareholders’ Meeting
The meeting of shareholders of the Company, either passing resolutions
with the quorum provided for in Art. 2368 Paragraph 1 (ordinary
meeting), and/or Paragraph 2 (extraordinary meeting), Italian Civil
Code.
Prontoseat
Prontoseat S.r.l., subsidiary of SEAT, with its registered office in Turin,
Via S. Ambrogio 21/E, entered in the Register of Companies of Turin
under No. 01900280023.
RBS
The Royal Bank of Scotland Plc, Milan Branch, located in Milan, Via
Turati 16-18.
RBS Loan
Senior Loan granted to SEAT by RBS in the original amount of
€ 2,620,100,000, pursuant to the RBS Loan Agreement.
RBS Loan Agreement
Loan agreement executed on 25 May 2005 and subsequently amended
on 14 January 2009 between SEAT and RBS for the granting of the
RBS Loan.
Reference Shareholders
Together, Alfieri Associated Investors Serviços de Consultoria S.A.
(“Alfieri”), CVC Silver Nominee Limited (“CVC Nominee”), CART
Lux S.à r.l. (“CART”), TARC Lux S.à r.l. (“TARC” and jointly with
CART, the “Permira Investors”) and BC European Capital VII-1, BC
European Capital VII-2, BC European Capital VII-3, BC European
Capital VII-4, BC European Capital VII-5, BC European Capital VII-6,
BC European Capital VII-7, BC European Capital VII-8, BC European
Capital VII-9, BC European Capital VII-10, BC European Capital VII11, BC European Capital VII-12, BC European Capital VII-14, BC
European Capital VII-15, BC European Capital VII-16, BC European
Capital VII-17, Blue Capital Equity GmbH & Co. KG, Mr. Edouard
Guillet, Mr. Lucien-Charles Nicolet, BC European Capital VII Top-Up1, BC European Capital VII Top-Up-2, BC European Capital VII TopUp-3, BC European Capital VII Top-Up-4, BC European Capital VII
Top-Up-5, BC European Capital VII Top-Up-6, Mr. Cedric
Dubourdieu, Mr. Michel Guillet (jointly, the “BC Investors”), which
indirectly hold approximately 50.4% of the ordinary share capital and
49.6% of the overall share capital of the Issuer as of the Date of the
Information Prospectus.
9
Regulation 809/2004/EC
Regulation 809/2004/EC of the European Commission dated 29 April
2004, containing the terms for enforcement of Directive 2003/71/EC
concerning the information contained in prospectuses, the model for
prospectuses, the inclusion of information by way of reference, the
publication of prospectuses, and the dissemination of advertising
messages.
SEAT Group or Group
Jointly, the Issuer and its subsidiary companies pursuant to Art. 93 of
the Consolidated Law.
Shares
The 1,885,982,430 ordinary SEAT shares, ISIN IT 0004458094, with
no nominal value, and having the same characteristics as those
outstanding on the Date of the Information Prospectus, deriving from
the Capital Increase and forming the Offering.
Split Luxcos
Collectively, the companies under Luxembourg law: PG Sub Silver A
S.A., entered in the Luxembourg Register of Companies under No.
B145157; PG Sub Silver B, entered in the Luxembourg Register of
Companies under No. B145158; Sterling Sub Holdings S.A., entered in
the Luxembourg Register of Companies under No. B104772, Subcart
S.A., entered in the Luxembourg Register of Companies under No.
B104770, Subtarc S.A., entered in the Luxembourg Register of
Companies under No. B104769 and AI Sub Silver S.A., entered in the
Luxembourg Register of Companies under No. B104771.
Split Parents
Collectively, the companies under Luxembourg law: PG Silver A S.A.,
entered in the Luxembourg Register of Companies under No. B145179;
PG Silver B S.A., entered in the Luxembourg Register of Companies
under No. B145180; Sterling Holdings S.A., entered in the Luxembourg
Register of Companies under No. B104775, Silcart S.A., entered in the
Luxembourg Register of Companies under No. B104777, SiltarcS.A.,
entered in the Luxembourg Register of Companies under No. B104778
and AI Silver S.A., entered in the Luxembourg Register of Companies
under No. B104776.
Stock Exchange Offering
The offering period on the regulated market of Option
Rights not exercised during the Offering Period, pursuant to Art. 2441,
Paragraph 3 Italian Civil Code.
TDL Group
The group of companies under Thomson – a subsidiary of SEAT
through TDL Infomedia Ltd., with its registered office at Thomson
House, 296 Farnborough Road, Farnborough, Hampshire, Great Britain
– as of the Date of the Information Prospectus, indicated in Section One
Chapter 7, Paragraph 7.2 of the Information Prospectus.
TDL Infomedia
TDL Infomedia Ltd., a subsidiary of SEAT, with its registered office at
Thomson House, 296 Farnborough Road, Farnborough, Hampshire,
Great Britain, entered in the Register of Companies under No. 3794451.
Telegate
Telegate AG, a subsidiary of SEAT, with its registered office at
Fraunhoferstraße 12a, Martinsried bei München, Germany, entered in
the Handelsregister AG Munich under No. HRB114518.
Telegate Group
The group of companies under Telegate AG, a subsidiary of SEAT on
the Date of the Information Prospectus, indicated in Section One,
Telegate Media
Telegate Media AG, a subsidiary of SEAT through Telegate, with its
registered office at Kruppstr. 74, 45145 Essen, Germany, entered in the
Handelsregister B Amtsgericht Essen under No. 20157.
10
Definitions
Thomson
Thomson Directories Ltd., a subsidiary of SEAT through TDL
Infomedia, with its registered office at Thomson House, 296
Farnborough Road, Farnborough, Hampshire, Great Britain, entered in
the Register of Companies under No. 902438.
Trustee
The Law Debenture Trust Corporation Plc., headquartered at Fifth
Floor, 100 Wood Street, London, EC2V 7EX, United Kingdom.
Waiver Request
Letter sent by SEAT to RBS on 1 December 2008 and accepted by the
latter on 22 December 2008, in which SEAT requested RBS to either
waive or amend, depending on the provision in question, certain
provisions in the RBS Loan Agreement.
WLW
Wer liefert was? GmbH, with its registered office at Normannenweg 1620, 20537 Hamburg, Germany, entered in the Handelsregister of
Hamburg under No. HRB102055.
11
12
Glossary
GLOSSARY
Brand
Name, symbol, design, or a combination of such elements, identifying the
products or services of a specific company (together with the definition of a series
of intangible but strong values that are essential in creating an immediate and
unequivocal relationship of trust between the company and the consumer) for
purposes of distinguishing it from others offered by the competition.
B2B
Acronym for Business to Business: operators whose target customers are
primarily other companies (e.g. industrial facility pump manufacturers,
wholesalers).
B2C
Acronym for Business to Consumer: operators whose target customers are
primarily individuals (e.g. apparel and household furnishings companies).
Call centre inbound
Call centre devoted to receiving telephone calls.
Call centre outbound
Call centre devoted to making telephone calls.
Co-branding
Marketing co-investment activity by two or more companies through the use of
the respective brands and intended for the exploitation of possible synergies. The
term is utilised with reference to agreements with other Internet operators aimed
at increasing traffic on SEAT sites.
Cross selling
Sales technique aimed at inducing the customer receiving a given product/service
to purchase other articles associated with the one desired through the combination
of two products (and, almost always, at a discounted price compared to the sum of
the two original prices).
Customer Data Base
All information and data on relationships with customers, consisting of organised
data and information, data preparation and classification models for the specific
sales and marketing know-how of SEAT, utilised in support of the Company’s
strategic decisions made in connection with increasing and maintaining its
customer base.
Directory
Information products/services containing directory advertising for the search for
consultants, based on lists organised by name/address information in alphabetical
order, by business category, etc. The directory content may be provided on print,
voice and online platforms.
Directory Assistance
Products/services based on organised lists of names/address information (in
alphabetical order, by business category, etc.) to which access is gained by
telephone with the assistance of an operator.
Directory company
Company that makes directories.
Directory Internet
Products/services based on organised lists of names/address information (in
alphabetical order, by business category, etc.) to which access is gained via the
Internet.
Excess Cashflow
Indicates, pursuant to the RBS Loan Agreement, the amount which, multiplied by
0.5 and reduced by the total of voluntary repayments of the RBS Loan Agreement
made by the Company, must be allocated for repayment of the RBS Loan
Agreement in the event that the conditions provided for in the RBS Loan
Agreement are established (for more details please see Section One, Chapter 22,
Paragraph 22.3)
Greenshoe
In the context of an IPO, an option granted by the selling shareholder to the
coordinators of the IPO, even on behalf of members of the placement consortium,
for the acquisition at the offering price of a specific number of shares (not
applicable to this Offering).
13
Impairment Test
A test to establish the reduction in value of assets used by the Company to
determine the recoverable value of the assets posted on its financial statements.
The recoverable value is whichever is greater between the fair value of an asset or
a CGU (cashflow generation unit), less costs of sale and its use value. If the book
value of an asset is greater than its recoverable value, this asset has suffered a loss
in value and is consequently depreciated in order to find the recoverable value.
When determining the use value, the SEAT Group subtracts the current value
from estimated future cashflows, using a discount rate before tax that reflects the
market valuation of the time value of the money in question and the specific risks
of the asset. Losses of value undergone by the asset as a result of the above are
shown on the income statement in the cost category that corresponds to the asset
that has undergone the loss in value.
Incumbent
Telephone operator with a particularly dominant position in the reference market
(for telecommunications in Italy, Telecom Italia).
Lock-Up
Agreement under which the shareholders of a company undertake not to sell their
own shares for a specific period of time. This type of agreement also includes the
undertaking made by a company not to carry out, for a specific period of time,
further issues of shares or other financial instruments convertible into shares or
which would give a right to acquire and/or subscribe the company’s shares.
Marketing Intelligence
Marketing
analyses
usually
intended
for
comparing
the
offerings/services/performance of competitors or, in general, of the different
operators present on the market.
One-to-one marketing
Direct marketing to a specific customer (current or potential) by sending
personalised communications.
Over Allotment
In the context of an IPO, an option granted by the selling shareholder to the
coordinators of the IPO, even on behalf of members of the placement consortium,
to receive in the form of a loan a specific number of additional shares (not
applicable to this Offering).
Print-centred offering
Offering of products traditionally based on print directories produced by the
Issuer, currently offered on three platforms (print-voice-online).
SMEs
Small and Medium-Sized Enterprises.
Universal Service
Overall system of services that is based on the recognition of a series of
requirements of collective interest (typically telecommunications, but also postal
services) which must be ensured to the entire population so that no one is
excluded from the benefits of the information society and, consequently, from the
economic and social life of a country.
Universal Service is comprised of a series of services, including access to the
public telephone network and the provision of lists of subscribers to the respective
urban network that one belongs to.
The need to oversee such collective requirements has led to the issue, at
Community level, of some directives (the latest ones, as of 2002, transposed in
Italy in the Code of Electronic Communications, Legislative Decree No. 259 of 1
August 2003, as well as in other resolutions by the Regulatory Authority for the
sector, the AGCom), which impose some obligations on Incumbent Operators.
The objective of the regulations is to ensure that all persons requesting access to it
obtain certain essential services connected with telephony, and the maintenance of
certain reasonable quality and price standards.
14
Summary
SUMMARY
CAUTIONS
This Summary, prepared pursuant to Regulation 809/2004/EC and Directive 2003/71/EC, is a summary
statement of the risks and essential characteristics of the Issuer, the SEAT Group and the Shares involved in
the Offering.
For purposes of making a correct assessment of the investment, investors are asked to evaluate the
information contained in the Summary, together with the other information contained in the Information
Prospectus.
Please note that the Summary will not be published or disclosed to the public separately from the other
Sections into which the Information Prospectus is divided.
In particular, it is expressly advised that:
(a)
the Summary must be read as an introduction to the Information Prospectus;
(b)
any decision to invest in the Shares must be based on an examination of the full Information
Prospectus by the investor;
(c)
if an action is filed before the court authorities on account of the information contained in the
Information Prospectus, the plaintiff investor may be required, in accordance with the national
law of the Member States, to bear the expenses for translation of the Information Prospectus
prior to the beginning of the proceedings; and
(d)
civil liability will fall to the persons who are responsible for the Summary and any translation
thereof only to the extent that the said Summary provides misleading, inaccurate or inconsistent
information if read together with the other parts of the Information Prospectus.
Capitalised terms are defined in the appropriate Definitions section of the Information Prospectus.
References to Sections, Chapters and Paragraphs refer to the Sections, Chapters and Paragraphs of the
***
A.
RISK FACTORS
The operation described in the Information Prospectus offers the risk elements typical of an investment in
listed equity shares. For a correct assessment of the investment, investors are asked to evaluate the specific
risk factors relating to the Issuer and to the business sector in which it operates, as well as those relating to
the financial instruments offered; the titles of these risk factors are listed below.
For further information on the risk factors associated with the Offering, please see Section One, Chapter 4 of
the Information Prospectus.
1. RISK FACTORS RELATING TO THE ISSUER
A) RISKS ASSOCIATED WITH THE ISSUER’S FINANCIAL STRUCTURE
1.1
Risks associated with high financial indebtedness, potential lack of liquidity and the
availability of financial resources
1.1.1 Risks relating to possible limitations on the activities of the companies in the SEAT
Group deriving from the provisions, financial covenants and pledges in connection with
the RBS Loan Agreement and the Indenture
1.1.2 Risks associated with restrictions on the distribution of dividends
1.1.3 Effects of a change in control on the existing loan agreements
15
1.1.4 Risks associated with the non-occurrence of the conditions precedent affecting certain
provisions of the Amendment Agreement
1.1.5 Risks associated with interest rate fluctuations
1.2
Risks associated with exchange rate fluctuations
B) RISKS ASSOCIATED WITH THE ISSUER’S BUSINESS
1.3
Risks associated with failure to implement the Business Plan 2009-2011, and with forecasts
and estimates of profits, as well as with the statements and provisional information on
changes in the reference market in question
1.4
Risks associated with the loss of significant intellectual property rights
1.5
Risks associated with the possible reduction in revenues deriving from print directories
1.6
Risks associated with the expansion of the Issuer’s business in the Internet market
1.7
Risks associated with the expansion of the Group’s business in the Directory Assistance
market
1.8
Non-Renewal of the Mandate of the Chief Executive Officer
1.9
Credit risk
1.10 Risks relating to dependence on the exclusive supplier of printing services
1.11 Risks relating to any system malfunctions, delays or breaching of the security systems
1.12 Risks associated with litigation
1.13 Risks associated with a possible unfavourable result of the Impairment Test on intangible
assets
1.14 Risks associated with possible changes to accounting items on the Issuer’s draft statutory
financial statements at 31 December 2008 during the Shareholders’ Meeting for approval
of the statements
2. RISK FACTORS ASSOCIATED WITH THE SECTOR IN WHICH THE ISSUER OPERATES
2.1
Risks associated with the advertising market’s exposure to economic cycles
2.2
Risks associated with amendments of applicable laws governing information technology,
the protection of personal data and other services offered by the Group
3. RISK FACTORS LINKED TO THE SHARES OFFERED
3.1
Risks associated with partial implementation of the Capital Increase
3.2
Risks relating to the liquidity and volatility of the Shares
3.3
Dilution effects
3.4
Markets in which the Offering is not allowed without authorisations from the competent
authorities
3.5
Potential conflicts of interest
***
16
Summary
B.
THE ISSUER AND THE GROUP, ACTIVITIES AND PRODUCTS
1.
Information on the Issuer and on the Group
The Issuer
SEAT is incorporated as a public limited company and operates pursuant to Italian law.
It has its registered office in Milan, Via Grosio 10/4 and its secondary office – which is the main
administrative office – in Turin, Corso Mortara 22. The Issuer is registered with the Chamber of Commerce,
Industry, Crafts and Agriculture of Milan – Register of Companies Office of Milan – under No.
03970540963, REA 1715428.
Share capital issued
On the Date of the Information Prospectus, the Issuer’s share capital, fully subscribed and paid in, is
€ 250,351,656, divided into 41,044,903 ordinary shares and 680,373 savings shares with no nominal value.
Corporate purpose and term
Pursuant to Art. 4 of the Bylaws, the Company’s purpose is to:
“engage in the publishing, printing and graphic arts industry and trade in general, carried out in any
manner and by any means, including online; the collection and implementation – including on behalf of third
parties – of advertising, in any form and intended for any communications medium, including in exchange
for goods or services; the management of activities – including promotional activities – in the field of
advertising communications and public relations initiatives; the operation, preparation and sale, by any
technological means or with any transmission medium, including online and via the Internet, of any type of
documentation services in any way relating to multiple forms of economic activity, such as, by way of
example, databases and services supporting trading in goods and services; the management of all activities
associated with the processing and use of information of any type and carried out in any manner, including
information relating to the use and marketing of communication services of any type, therefore also
including dial-up and electronic information, and with any instrument and method, including the
management of electronic communication networks, as well as, in general, any manufacturing or sales
activities related, accessory or instrumental to the activities described above.
The Company may also carry out any commercial, personal and real property, industrial and financial
transactions (the latter not with the public) functionally related to the achievement of the corporate purpose;
for that purpose, it may also directly or indirectly acquire – in a non-primary manner and within the legal
limits – equity interests or holdings in other companies or businesses, with the express exclusion of any
activity inherent to the collection of public savings and any other activity not allowed by law.”
The term of the Company, pursuant to the Bylaws, is set until 31 December 2100. This term may be
extended by resolution of the Extraordinary Shareholders’ Meeting.
History of the Issuer
For over 80 years, SEAT has been providing information services, as well as tracking and communication
tools.
The origins of SEAT date back to 1925, the year in which the “Società Elenchi Ufficiali degli Abbonati al
Telefono S.p.A.” was incorporated. This company handled the publication and distribution of telephone
directories to residential phone customers located in northern Italy and, subsequently, throughout the nation’s
territory.
In 1987 “Società Elenchi Ufficiali degli Abbonati al Telefono S.p.A.” was merged into STET S.p.A. and,
subsequently, following several extraordinary mergers and de-mergers that took place between 1997 and
2003 – which had initially tied the business of SEAT to the group under Telecom Italia S.p.A. – on 27 May
17
2003 the corporation Spyglass S.r.l. (the current Issuer) was incorporated, and subsequently transformed into
a public limited company by resolution of the Extraordinary Shareholders’ Meeting of 22 July 2003.
On 23 December 2003, following the implementation of a dual merger by absorption, Spyglass S.p.A. took
on the name of “SEAT Pagine Gialle S.p.A.”
Currently, SEAT, which is active in six European countries besides Italy (United Kingdom, Germany,
France, Spain, Turkey and Austria), is among the top Italian operators in the media sector and one of the
leaders in Europe and worldwide1 in the multimedia directory advertising business.
SEAT is a major multimedia platform which, through companies in its Group as well, offers tens of millions
of users detailed information and sophisticated search tools and, for its advertisers, a wide-ranging offering
of multi-platform advertising media (“print-voice-online”), in particular highly innovative Internet products,
print directories and Directory Assistance services, in addition to a broad range of accessory advertising
communication tools.
For further information on the Issuer’s history and evolution, please see Section One, Chapter 5, Paragraph
5.1 of the Information Prospectus.
Structure of the Group
The chart below shows the structure of the companies belonging to the SEAT Group on the Date of the
Information Prospectus and the subsidiaries operating in each business area.
ITALY DIRECTORIES
UK DIRECTORIES
100%
TDL Infomedia Ltd.
TDL
Infomedia
Ltd
TDL
Infomedia
Ltd
Thomson Directories Ltd
100%
100%
Thomson Directories
Pension Company Ltd
100%
Calls You Control Ltd
DIRECTORY ASSISTANCE
OTHER ACTIVITIES
100%
Telegate Holding GmbH
100%
Consodata S.p.A.
77.37% a)
Telegate AG
51%
Cipi S.p.A.
93.562%
Europages S.A.
Telegate Italia S.r.l.
100%
11811 Nueva
Informaciòn Telefònica
S.A.U. 100%
Telegate 118 000 Sarl
100%
Telegate Media AG
97.23%
11880 Telegate GmbH
100%
Europages GmbH c)
99%
Europages
Benelux SPRL
50% b)
Katalog Yayin
ve Tanitim
Hizmetleri AS
100% d)
Seat Corporate
University S.c. a r.l.
Telegate Auskunftdienste
GmbH
100%
UNO UNO OCHO CINCO
CERO GUIAS S.L.
100%
100%
Telegate AKADEMIE
GmbH
100%
LEGEND
Datagate GmbH
100%
a) Of which 16.24% directly and 61.13% throughTelegate Holding GmbH.
b) Consolidated by the net equity method.
c) Company in liquidation.
d) Of which 95% directly and 5% through Prontoseat S.r.l.
100%
100%
Vieras GmbH
100%
Mobilsafe AG c)
Prontoseat S.r.l.
In 2008, the SEAT Group generated € 1,376 million in revenues and € 605.3 million in EBITDA (€ 1,444.2
million and € 648.1 million respectively in the restated 2007 financial statements). During 2008 – on a
consolidated level – the Group employed a workforce consisting of an average of 5,163 persons (5,308 for
1
Source: SEAT Group data processing on the basis of the available financial statements published by major market operators.
18
Summary
2007, restated), of which 1,389 persons were employed at the SEAT Group parent company and 1,977.5 at
the SEAT Group’s several call centres.
The table below shows the main economic data of the SEAT Group for the financial years ended on 31
December 2008, 2007, 2006 and 2005, as well as for the nine-month periods ended on 30 September 2008
and 2007.
(€ million)
Revenues
EBITDA
Net profit
Average workforce
Year 2008
1,376.0
605.3
(179.6)
5,163
Year 2007 Year 2007
adjusted(*)
1,444.2
1,453.6
648.1
650.2
98.4
98.4
5,308
5,365.1
Year 2006 Year 2005
1,460.2
611.4
80.1
5,163.8
1,424.6
626.6
131.9
4,759.9
30 September
2008
986.7
411.4
11.0
5,441.5
30 September
2007
996.7
426.4
34.9
5,351
(*) The income statement figures for the financial year ended on 31 December 2007 have been adjusted so as to give a true comparison between
items thereon and the items shown on the income statement at 31 December 2008, in particular following the sale of WLW.
2.
Information on the activity of the SEAT Group
Overview of the Issuer’s activities
The activities of the SEAT Group are currently divided into the following business areas: (i) Italy
Directories; (ii) Directories UK; (iii) Directory Assistance; and (iv) Other Activities.
(i)
The Italy Directories area primarily concerns so-called “print-centred” products, that is directories that
derive historically from the print directories made by the Issuer and are currently offered through three
platforms (print-voice-online), as well as, to a residual extent, B2B products and other products.
The print-centred offerings include the following products: PAGINEGIALLE (Yellow Pages),
PAGINEBIANCHE (White Pages), Tuttocittà, Paginegialle.it, Paginebianche.it and Tuttocitta.it, as
well as the telephone services concerning the telephone numbers 89.24.24 Pronto PAGINEGIALLE
and 12.40 Pronto PAGINEBIANCHE.
The only B2B product currently offered by the Issuer is the Annuario Kompass, which provides
detailed information on the top 50,000 Italian companies operating in the B2B sector and is distributed
to a select list of businesses, associations, and entities, as well as to foreign companies requesting it,
either in print or the CD version.
The other products category includes the One to One Marketing services and products managed and
performed by the subsidiary Consodata.
The Italian Directories Business Area represents more than 70% of the Group’s activity.
(ii)
The Directories UK area concerns the activities carried out by the TDL Group (through the company
Thomson) in the telephone directories market, through the sale of advertising spaces in print and
online search tools, as well as on the Business Information market.
(iii)
The Directory Assistance Area includes the activities carried out by the Telegate Group, which is
present in Germany with the 11880 service (operated through seven call centres), in Spain, through the
11811 service (managed by two call centres, one in Spain and one in Argentina), in France with the
118000 service (managed by a single call centre located in Morocco) and in Italy through the Telegate
Italia S.r.l. call centre. The Telegate Group has recently strengthened its presence on the online
advertising market through the acquisition of a controlling stake in KlickTel AG, now known as
Telegate Media.
(iv)
The Other Activities area includes services carried out by the company Europages – which is the
publisher of “Europages”, the pan-European B2B directory produced for companies utilising import
and export channels – and by the Issuer’s Italian subsidiaries, Consodata and CIPI (the latter offers
promotional, merchandising and corporate gift products that can be personalised with client logos and
brands).
19
The following table shows the revenue split by Business Area.
(€ millions)
Italian Directories
UK Directories
Other activities
Total
Cancellations and other adjustments
Consolidated total
2008
1,058.7
118.1
190.4
70.3
1,437.5
(61.5)
1,376.0
2007 adjusted (*)
1,090.2
158.2
185.8
71.6
1,505.8
(61.6)
1,444.2
2006
1,077.5
173.5
188.7
77.0
1,516.7
(56.5)
1,460.2
2005
1,061.8
175.6
159.4
67.6
1,464.4
(39.8)
1,424.6
(*) The income statement figures for the year ended on 31 December 2007 were adjusted to allow for a fair comparison with those from the financial
statements as at 31 December 2008, notably following the sale of WLW.
For further information on the activities carried out by the SEAT Group, the products offered, the key
business factors, as well as on the main markets in which it operates, please see Section One, Chapter 6 of
Legal and regulatory framework of reference
The markets on which SEAT provides its services are regulated.
Specifically, the most relevant provisions are those concerning:
•
telecommunications network access, which govern the interconnection of Directory Assistance
operators with the fixed-line and mobile telephone operators’ networks and the utilisation of various
services at competitive prices;
•
Universal Service, in particular the law concerning the provision of a Single Database of consenting
fixed and mobile telephony subscribers, made up of information on the subscribers of each national
telephone operator and made available to downstream market operators (which includes the
Directory Assistance service) at “fair, non-discriminatory and competitive” prices;
•
the authorisations for telecommunications networks and services, which, among other things, have
simplified the terms for obtaining certificates for carrying out telephone service operator activities.
Future plans and strategies
On 12 February 2009, the Board of Directors of the Issuer confirmed the guidelines (already approved on 23
December 2008) of the new Business Plan, which defines the strategic objectives for the 2009-2011 period
and confirms the strategic directives defined in March 2008.
The guidelines provided for in the Business Plan can be summarised as follows:
•
confirmation of the strategic orientation, aimed at growing the business in Italy, particularly Internet
activities, and at focusing on activities in support of the core business by increasing investments in
product innovation, the promotion of services, and the strengthening of the sales network;
•
implementation of a cost-cutting plan supporting investments in business growth and generation of
cash flow to service debt repayment.
In this context, in view of the positive results obtained in 2008 in the Internet market in Italy, supported by
an investment strategy focused on product innovation and on strengthening the sales network, the objective
for the 2009-2011 three-year period will be to maintain the Company’s high cash flow, to continue the
transformation of the Italian business toward the Internet sector, and to reduce debt.
For further information on the SEAT Group’s future plans and strategies, please see Section One, Chapter 6,
Paragraph 6.2.2 and Section One, Chapter 13 of the Information Prospectus.
20
Summary
Related-party transactions
All the transactions carried out by the Issuer during the course of the past three financial years with related
parties (as defined by the IAS 24 international accounting standard) are of an ordinary, typical or usual
nature and have been entered into in compliance with the criteria of substantial and procedural correctness,
and at market conditions similar to those applied for transactions entered into with independent third parties.
On 23 December 2003, the Issuer approved a procedure for performance of the obligations referred to in Art.
150, Paragraph 1, of the Consolidated Law and in Art. 16 of the Bylaws, in accordance with the rules of
conduct for related-party transactions set forth in Art. 9 of the Code of Self-Governance and in Consob
notices on corporate controls. The procedure also contains a document that governs the rules of conduct for
extraordinary transactions with related parties.
In relation to the activity carried out by the Issuer, ordinary operations worth more than € 250,000 concluded
with intragroup related parties and ordinary operations worth more than € 50,000 concluded with nonintragroup related parties are particularly highlighted.
For further information on the related-party transactions entered into by the Issuer, please see Section One,
Chapter 19 of the Information Prospectus.
Employees
The average overall workforce employed by the SEAT Group as at 31 December 2008 was 5,163 (5,365.1
units as at 31 December 2007, which included the workforce of the WLW Group). As regards the allocation
of human resources among the different business areas, it should be noted that although SEAT generates
73.65% (72.4% as at 31 December 2007) of the revenues of the entire Group, it employs 27% (26% as at 31
December 2007) of the overall average workforce.
For further information, please see Section One, Chapter 17, Paragraph 17.1 of the Information Prospectus.
3.
Corporate and shareholder bodies
Board of Directors, Board of Statutory Auditors, General Manager and Independent Auditors
Board of Directors
On the Date of the Information Prospectus, the Board of Directors of the Issuer is composed of thirteen
members, including ten appointed by the Ordinary Shareholders’ Meeting of the Issuer held on 27 April
2006, two appointed by the Ordinary Shareholders’ Meeting of the Issuer held on 19 April 2007 – following
cooptation by the Board of Directors on 10 October 2006 – and one by the Ordinary Shareholders’ Meeting
of the Issuer held on 26 January 2009, following cooptation by the Board of Directors on 23 December 2008.
All of the directors will remain in office until the Ordinary Shareholders’ Meeting called for approval of the
financial statements for the financial year ended on 31 December 2008.
For further information, please see Section One, Chapter 14, Paragraph 14.1.1 of the Information Prospectus.
21
Particulars of members of the Board of Directors are given in the table below.
Office
Chairman
Chief Executive Officer (*)
Director
Director
Director
Director
Director
Director
Director
Director
Independent Director
First and last name
Enrico Giliberti
Luca Majocchi
Dario Cossutta
Michele Marini
Luigi Lanari
Pietro Masera
Antonio Belloni
Carmine Di Palo
Nicola Volpi
Marco Lucchini
Lino Benassi
Gian Maria Gros Pietro
Alberto Giussani
Place and date of birth
Naples, 29 June 1945
Monza, 24 May 1959
Monza, 27 July 1951
Cortina d’Ampezzo (BL), 15 Aug. 1963
Léopoldville (Zaire), 13 November 1958
Milan, 17 November 1968
Genoa, 24 March 1950
Florence, 21 February 1971
Milan, 3 October 1961
Mantua, 25 September 1968
Trento, 2 December 1943
Turin, 4 February 1942
Varese, 23 August 1946
(*) The Board of Directors’ meeting on 9 February 2009 took note of Chief Executive Officer Luca Majocchi’s intention not to serve for an
additional three-year term at the time the Board of Directors is replaced by the Ordinary Shareholders’ Meeting of the Company called to approve
the financial statements as at 31 December 2008. On 12 February 2009 an agreement was also formalised between Mr. Majocchi and the
Reference Shareholders, which provides firstly for a commitment by the Reference Shareholders to vote for the reconfirmation of Mr. Majocchi
as a member of the Board of Directors with the office of Chief Executive Officer with the same delegations and powers as those currently
attributed to him, and secondly the commitment of Mr. Majocchi to accept the office proposed until, and no later than, 30 June 2009 and in any
case to resign prior to 30 June 2009 if the Company identifies a new candidate for the office of Chief Executive Officer.
All members of the Board of Directors are domiciled for purposes of their office at the corporate
headquarters.
Board of Statutory Auditors
On the Date of the Information Prospectus, the Board of Statutory Auditors of the Issuers, appointed by the
Ordinary Shareholders’ Meeting of the Issuer held on 27 April 2006, is made up of three acting statutory
auditors and two alternate statutory auditors.
All members of the Board of Statutory Auditors will remain in office until the Ordinary Shareholders’
Meeting called to approve the financial statements for the financial year ended on 31 December 2008.
Particulars of the members of the Board of Statutory Auditors are given in the table below.
Office
Chairman of the Board of Statutory Auditors
Acting Statutory Auditor
Acting Statutory Auditor
Alternate Statutory Auditor
Alternate Statutory Auditor
First and last name
Enrico Cervellera
Andrea Vasapolli
Vincenzo Ciruzzi
Guido Costa
Guido Vasapolli
Place, date of birth
Milan, 27 February 1941
Turin, 13 June 1962
Turin, 12 June 1949
Milan, 7 May 1965
Turin, 22 May 1960
All members of the Board of Statutory Auditors are domiciled for purposes of their office at the corporate
headquarters.
General Manager
In June 2008 a new corporate organisational structure was launched, providing for the creation of a new
General Manager for Italy, to whom sales and operational management for the Italian business will report.
The position of General Manager for Italy was assigned to Massimo Castelli.
22
Summary
Independent Auditors
The Independent Auditors in charge of auditing the individual and consolidated financial statements of the
Issuer and the consolidated half-yearly reports – and of verifying that the company’s accounting books are
kept in due order and that operating facts are properly posted in the book entries – for the 2006-2011
financial years, are Reconta Ernst & Young S.p.A., headquartered in Rome, Via Giandomenico Romagnosi
18/A, registered in the roll of auditing firms referred to in Art. 161 of the Consolidated Law.
Reference Shareholders
On the Date of the Information Prospectus and in accordance with the register of shareholders and the other
information available to the Issuer, the shareholders directly or indirectly holding SEAT shares representing
more than 2% of the share capital with voting rights of the Issuer are those shown in the table below.
Declarant
CIE Management II Limited
CVC Nominee
Alfieri
CART
TARC
Shareholders
P.G. Subsilver S.A.
Sterling Sub Holdings S.A.
AI Subsilver S.A.
Subcart S.A.
Subtarc S.A.
Number of ordinary shares
7,916,897
6,089,855
1,217,970
3,580,014
1,900,941
% of ordinary share capital
19.288
14.837
2.967
8.722
4.631
On 23 December 2008, the Reference Shareholders agreed to proceed at the time of the Capital Increase with
a reorganisation of the shareholders of the Issuer, providing, among other things, for the partial withdrawal
of the BC Investors from the Company’s shareholders, with the assignment (indirectly, or through the
disposal of shares of PG Silver A S.A. and PG Silver B S.A. and of their respective subsidiaries PG Sub
Silver A S.A. and PG Sub Silver B S.A.) of the majority of the ordinary SEAT shares held by the BC
Investors to Alfieri and CVC Nominee. It was resolved that the percentage of ordinary SEAT shares held by
the BC Investors that will be assigned to Alfieri and CVC Nominee should vary in keeping with the Offering
Price.
***
C.
RELEVANT ACCOUNTING AND FINANCIAL INFORMATION
Shown below is a summary of the main consolidated financial information concerning the assets and
liabilities and the financial and economic standing of the SEAT Group for the financial years ended on 31
December 2008, 2007, 2006 and 2005, the six-month periods ended on 30 June 2008 and 2007, as well as the
nine-month periods ended on 30 September 2008 and 2007.
This information has been taken from:
•
the consolidated financial statements of the SEAT Group as at 31 December 2008, 2007, 2006 and 2005,
as audited by the Independent Auditors, which issued their reports on 13 March 2009, 7 April 2008, 2
April 2007, and 11 April 2006, respectively;
•
the half-yearly financial reports of the SEAT Group as at 30 June 2008 and 2007, as audited by the
Independent Auditors, which issued their reports on 28 August 2008 and on 10 September 2007,
respectively;
•
the interim management reports of the SEAT Group as at 30 September 2008 and 2007, which have not
undergone any auditing by the Independent Auditors.
The financial information shown below includes some measurements utilised by the Company’s
management to monitor and assess its own and the Group’s operational and financial progress. These
measurements are not identified as accounting measurements pursuant to the IFRS and therefore must not be
23
considered an alternate measurement for the assessment of the economic performance of the Group and its
relative equity and financial standing. The Issuer considers the financial information shown below to be an
important parameter for measuring the Group’s performance, insofar as it allows analysis of its economic,
equity and financial performance. Since determination of these measurements is not governed by the
accounting standards of reference, the methods of calculation applied by the Company may not be consistent
with those adopted by others and, therefore, these measurements may not be comparable.
The financial information shown below must be read together with the information shown in Section One,
Chapters 3, 9, 9bis, 10 and 20 of the Information Prospectus.
Consolidated economic data
(€ thousands)
Revenues from sales and services
Gross operating profit (GOP) (*)
Operating result before amortisation and net non-recurring and
restructuring expenses (EBITDA) (**)
Operating profit (EBIT)
Result for the period
Year
Year 2007 Year 2007 Year 2006 Year 2005
2008 adjusted(***)
1,375,989
1,444,213 1,453,592 1,460,183 1,424,611
658,415
701,157
703,044
659,501
690,733
605,289
648,124
650,172
611,424
626,560
228,317
(179,646)
427,704
98,399
429,074
98,399
(€ thousands)
H1 2008
H1 2007
Gross operating profit (GOP) (*)
Operating result before amortisation and net non-recurring and restructuring
expenses (EBITDA) (**)
Operating profit (EBIT)
576,469
223,362
197,698
68,513
(45,651)
(*)
402,118
80,136
420,194
131,905
582,263
235,953
207,573
9 months
2008
986,746
448,802
411,438
9 months
2007
996,708
469,015
426,423
95,658
(31,066)
223,602
11,026
263,027
34,876
GOP or Gross operating profits is represented by EBITDA including Miscellaneous Operating Income and Expenses and Net Provisions for
Adjustments and Provisions for Risks and Contingencies.
(**) EBITDA or Operating income before amortisation, depreciation, non-recurring and restructuring cost, net is represented by EBIT (Operating
result) including net non-recurring and restructuring expenses and operating amortisation and writedowns (referring to all intangible assets with
a defined useful life and tangible assets) and non-operating amortisation and writedowns (goodwill and Customer Data Base).
(***) The income statement figures for the year ended on 31 December 2007 were adjusted to allow for a fair comparison with those from the
financial statements as at 31 December 2008, notably following the sale of WLW.
24
Summary
Consolidated equity and financial data
(€ thousands)
Net capital invested (*)
of which Goodwill and Customer Data Base
of which Operating Net Working Capital (**)
Group net equity
Net financial debt (***)
of which non-current
of which current
(€ thousands)
Net capital invested (*)
of which Goodwill and Customer Data Base
of which Operating Net Working Capital (**)
Group net equity
Net financial debt (***)
of which current
(*)
31 December 2008 31 December 2007 31 December 2006 31 December 2005
3,920,304
4,310,082
4,377,887
4,535,019
3,517,486
3,943,671
3,997,672
4,154,998
320,633
300,306
298,690
285,598
876,595
1,100,006
1,057,184
980,117
3,082,016
3,274,306
3,405,782
3,634,581
3,105,646
3,271,168
3,485,091
3,648,003
(23,630)
3,138
(79,309)
(13,422)
30 June 2008
4,127,279
3,873,919
199,406
1,044,203
3,152,107
3,161,513
(9,406)
30 June 2007
4,215,408
3,915,817
212,436
989,188
3,316,160
3,352,876
(36,716)
30 September 2008
4,137,058
3,831,109
261,904
1,080,920
3,105,176
3,161,443
(56,267)
30 September 2007
4,206,230
3,867,637
273,043
1,046,374
3,233,263
3,352,953
(119,690)
Net Capital Invested is calculated as the sum of Operating Working Capital, Non-Operating Working Capital, Goodwill and Customer Data
Base, other non-current assets, and operating and non-operating current liabilities.
(**) Operating Working Capital is calculated as Operating Current Assets (i.e. associated with operating revenues), net of Operating Current
Liabilities (i.e. associated with operating expenses) and excluding current financial assets and liabilities.
(***) Net Financial Debt corresponds to net book financial debt, including net adjustments relating to cash flow hedge contracts and origination,
financing and securitisation fees to be amortised.
Consolidated cash flow report
(€ thousands)
Cash flow from operating activities
Cash flow from investment activities
Cash flow from loan activities
Cash flow from non-current discontinued operations / held for sale
Cash flow for year
Cash and cash equivalents at the start of the year
Cash and cash equivalents at the end of the year
(*)
Year Year 2007
Year
Year
Year
2008 adjusted(*)
2007
2006
2005
545,503
596,869 606,655 538,268 606,429
(87,987)
(69,741) (185,216) (61,242) (58,103)
(400,077)
(511,382) (525,085) (370,989) (484,045)
42,614
(119,392)
100,053
(103,646) (103,646) 106,037
64,281
204,549
308,195 308,195 202,158 137,877
304,602
204,549 204,549 308,195 202,158
The income statement figures for the financial year ended on 31 December 2007 have been adjusted so as to give a true comparison between
(€ thousands)
Cash flow for the period
Cash and cash equivalents at the beginning of the period
Cash and cash equivalents at the end of the period
H1 2008
H1 2007
291,581
(54,832)
(239,545)
(2,796)
204,549
201,753
284,986
(26,046)
(356,530)
(97,590)
308,195
210,605
9 months
2008
409,961
(66,917)
(306,040)
37,004
204,549
241,553
9 months
2007
432,275
(38,744)
(519,711)
(126,180)
308,195
182,015
25
Selected data on net financial debt
(€ million)
Non-current financial liabilities
Non-current financial assets (*)
Net non-current financial debt
Current financial liabilities
Current financial assets
Cash and cash equivalents
Current net financial liabilities
Net “Book” value financial debt (**)
Origination, refinancing and securitisation fees to be amortised
Net (income) expense adjustments for cash flow hedge contracts
Net financial debt
(*)
31 December
2008
3,031.5
(2.0)
3,029.5
293.8
(2.0)
(304.6)
(12.8)
3,016.7
76.2
(10.9)
3,082.0
31 December
2007
3,190.4
(2.0)
3,188.4
215.5
(13.1)
(204.5)
(2.1)
3,186.3
82.8
5.3
3,274.4
31 December
2006
3,384.2
(1.4)
3,382.8
229.2
(1.3)
(308.2)
(80.3)
3,302.5
102.3
1.0
3,405.8
31 December
2005
3,526.7
(1.2)
3,525.5
214.3
(2.4)
(202.2)
9.8
3,535.3
122.5
(23.2)
3,634.6
This item does not include “financial assets available for sale”.
(**) Net Book Value Financial Debt is calculated as the sum of cash and cash equivalents and current and non-current financial assets and
liabilities.
For further information on the economic, equity and financial standing of the SEAT Group for the financial
years ended on 31 December 2008, 2007, 2006 and 2005, the half-year ended on 30 June 2008 and 2007, as
well as the nine-month periods ended on 30 September 2008 and 2007, please see Section One, Chapters 3
and 20 of the Information Prospectus.
For further information on reporting on the operating and financial standing and the financial resources of
the SEAT Group during the same periods mentioned above, please see Section One, Chapters 9 and 10 of the
***
D.
INFORMATION RELATING TO THE OFFERING IN OPTION
1.
Characteristics of the Offering in Option
The Shares object of the Offering derive from the Capital Increase approved by the Extraordinary
Shareholders’ Meeting of the Issuer held on 26 January 2009. For further information, please see Section
One, Chapter 21.1.1, as well as Section Two, Chapter 5, Paragraph 5.1.2 of the Information Prospectus.
The Extraordinary Shareholders’ Meeting held on 26 January 2009 resolved to: (i) carry out a divisible
increase in share capital, by a maximum of € 200,000,000, through the issue of ordinary Shares with no
nominal value, to be offered in option to holders of ordinary and savings shares, at a share Offering Price
equal to the theoretical ex right price (TERP) of the ordinary SEAT share, calculated according to current
methodologies and based on of the arithmetic mean of the officially determined unit prices posted during a
period of at least 3 trading days prior to determination of the Offering Price, and discounted to the extent to
be established by the Board of Directors, with the understanding that, on any event, the Offering Price of the
new Shares may not be higher than € 6.00; (ii) confer upon the Board of Directors the broadest powers to: (a)
determine the Offering Price (and consequently any discount) on the basis of prevailing market conditions at
the time of the actual launching of the operation, of the market quotes for ordinary SEAT stock, as well as of
market practices for similar transactions, it being understood in any case that the Offering Price of the new
Shares may not be higher than € 6.00; (b) determine the maximum number of Shares for the new issue; (c)
determine the timing for implementation of the Capital Increase resolution, by the deadline of 10 July 2009;
(d) prepare and submit to the competent authorities all documents required for purposes of implementing the
Capital Increase resolution; (iii) stipulate that if the Capital Increase is not fully subscribed by the final
deadline of 10 July 2009 it shall be deemed complete, within the limits of the subscriptions collected by that
date; (iv) as a result thereof, to amend Art. 5 of the Company Bylaws; (v) attribute to the Board of Directors
and, on behalf of the same, to the Chief Executive Officer and the Chairman, severally among them, all of
26
Summary
the broadest powers to implement the abovementioned resolution and to make any changes, corrections or
addenda that may be required by the competent Authorities.
On 26 March 2009, the Board of Directors of SEAT consequently resolved to issue 1,885,982,430 newly
issued ordinary Shares, having the same characteristics as those outstanding, to offer them in option to
shareholders at the price of € 0.106 per Share, at a ratio of 226 newly issued Shares for every 5 ordinary
and/or savings shares held by each shareholder, for an overall amount of approximately € 199,914,000.
The Offer is unconditional.
2.
Intended subscribers and terms of subscription
The Shares object of the Offering in Option shall be offered in option to the ordinary shareholders and
holders of savings shares of the Issuer.
The Offering shall be carried out exclusively in Italy on the basis of the Information Prospectus.
The Offering is intended, without distinction and under equal conditions, for all ordinary shareholders and
holders of savings shares of SEAT without limitation or exclusion of the Option Right, but is not being made
directly or indirectly in the Other Countries.
No subscriptions coming directly or indirectly from the United States of America, Canada, Japan, Australia
or from Other Countries through the services of any regulated market of the United States of America,
Canada, Japan, Australia or of Other Countries, in which such subscription would be a violation of local law
shall be accepted.
The Shares and the respective Option Rights have not been and will not be registered pursuant to the United
States Securities Act of 1933, as amended, nor pursuant to the laws in force in the Other Countries and may
consequently not be offered or in any case delivered directly or indirectly in the United States or any other of
the Other Countries. For further information, please see Section Two, Chapter 5, Paragraph 5.2.1 of the
The Option Rights valid for subscribing the Shares shall be traded on the stock exchange from 30 March
2009 to 8 April 2009, inclusive.
The Option Rights shall have the following ISIN: IT 0004474992.
Subscription of the Offering shall take place by signing the appropriate forms especially prepared by the
Authorised Intermediaries belonging to the Monte Titoli centralised management system.
The Option Rights may be exercised by shareholders of the Issuer holding ordinary or savings shares of the
Company deposited at an Authorised Intermediary and introduced into the system in dematerialised form.
The Offering shall become irrevocable as from the date of the filing of the respective notice with the Register
of Companies of Milan pursuant to Art. 2441, Paragraph 2, Italian Civil Code.
In the event that the Offering is not implemented in accordance with the terms provided for in this
Information Prospectus, notice thereof shall be given to the public and to Consob by the trading day prior to
the date provided for commencement of the Offering Period, by means of a notice pursuant to Art. 114 TUF
and Art. 66 of the Issuer Regulations, as well as by means of a special advertisement published by the
calendar day prior to the start of the Offering Period in a national circulation newspaper and sent at the same
time to Consob.
Option Rights not exercised within the Offering Period shall be offered by the Company on the Stock
Exchange pursuant to Art. 2441, Paragraph 3, Italian Civil Code.
The Shares shall have the following ISIN: IT 0004458094.
For further information, please see Section Two, Chapter 5, Paragraphs 5.1.3 and 5.1.4 and Chapter 6 of the
27
3.
Payment and delivery of the Shares
Payment in full for the Shares shall be made at the time of subscription, at the Authorised Intermediary at
which the subscription request was submitted.
The Issuer does not require accessory any fee or expense from the subscriber.
Shares subscribed by the end of the Offering Period shall be made available to the subscribers through the
Authorised Intermediaries by the tenth trading day after the end of the Offering Period.
Shares subscribed by the end of the Stock Exchange Offering, pursuant to Art. 2441, Paragraph 3, Italian
Civil Code, shall be made available to the beneficiaries through the Authorised Intermediaries by the tenth
trading day after the end of the Stock Exchange Offering.
For further information, please see Section Two, Chapter 5, Paragraph 5.1.8 of the Information Prospectus.
4.
Timetable and important dates for the Offering
The following summarises the planned timetable for the Offering:
Events
Commencement of the Offering Period
Commencement of the trading period for the Option Rights
Last day of the Option Rights trading period
End of the Offering Period
Announcement of the results of the Offering at the end of the Offering Period
Date
30 March 2009
30 March 2009
8 April 2009
17 April 2009
Promptly after the end of the Offering Period
It should be noted that the timetable for the Offering is provisional and may undergo changes if events and
circumstances beyond the Issuer’s control occur, including particular conditions of financial market volatility
which could prejudice the proper outcome of the Offering. Any changes to the Offering Period shall be
notified to the public with a special notice to be published under the same conditions as for dissemination of
the Information Prospectus. It is understood, however, that the commencement of the Offering shall take
place by no later than one month from the date of issue of the resolution authorising publication of the
Information Prospectus by Consob.
For further information, please see Section Two, Chapter 5, Paragraph 5.1.3 of the Information Prospectus.
5.
Subscription commitments and underwriting of the proper outcome of the Offering
The Reference Shareholders who, by virtue of a shareholders’ agreement dated 30 July 2003 (and most
recently amended on 13 September 2007), in the aggregate hold, on the date of the Information Prospectus, a
percentage of 49.6% of the share capital of the Company, including both ordinary and savings shares, agreed
on 23 December 2008 to proceed, at the time of the Capital Increase, with a reorganisation of the shareholders
of the Issuer, providing, among other things, for the partial withdrawal of the BC Investors from the
shareholders of the Company, with the assignment (indirectly, or through the disposal of shares of PG Silver
A S.A. and PG Silver B S.A. and of their respective subsidiaries PG Sub Silver A S.A. and PG Sub Silver B
S.A.) of the majority of the SEAT ordinary shares currently held by the BC Investors to Alfieri and CVC
Nominee (the “Agreement” – for further details, please see Section One, Chapter 18, Paragraph 18.1).
Pursuant to the Agreement, the Reference Shareholders (other than BC Investors) mutually agreed, among
other things, to subscribe the Capital Increase in the proportion to which they are entitled (as well as, insofar
as Alfieri and CVC Nominee are concerned, also in relation to the proportion to which BC Investors was
previously entitled). The Reference Shareholders agreed to pay in, for the subscription of the Capital
Increase, an overall amount of approximately € 99.2 million.
The subscription commitment of the Reference Shareholders (other than BC Investors) was subject to the
following conditions precedent, which, to the Company’s knowledge, have been fully satisfied on the Date
of the Information Prospectus:
•
28
(a) the acceptance by RBS of the Waiver Request sent by the Company to RBS on 1 December
2008, pursuant to which the Company requested the necessary consent, among other things: (i) to
Summary
implement the Capital Increase, as well as (ii) to modify, also in light of the Capital Increase, the
current financial covenants provided for by the RBS Loan Agreement, and (b) the signing by RBS
and the Company of the Amendment Agreement and the satisfaction of all the conditions precedent
therein;
•
the obtainment of a formal written declaration from Consob (received on 16 March 2009, protocol
No. 9023135) attesting to the non-existence, as a result of the overall internal reorganisation within
the shareholders’ agreement and the Capital Increase, of circumstances that would imply a Public
Tender Offer (PTO) obligation on the Issuer’s capital;
•
the approval of the reorganisation by the antitrust authorities. In this regard, it should be noted that
the reorganisation was notified to the German and Austrian Antitrust Authorities (on 9 February
2009 and 10 February 2009, respectively) and approved respectively on 25 February 2009 and 28
February 2009 (approval issued by the Austrian Antitrust Authorities on 27 February 2009 with
effect from 28 February 2009).
•
the approval by SEAT of the Capital Increase at an Offering Price of no more than € 0.03 per share,
or of no more than € 6.00 following the Consolidation (for more information on the Consolidation,
see Section One, Chapter 21, Paragraph 21.1.1);
•
the non-occurrence, as of the end of the third day prior to Consob authorising the publication of the
Information Prospectus, of events that might substantially prejudice the economic and financial
conditions of SEAT, and make it apparent that SEAT is unable to meet predetermined solvency
ratios, for a 12-month period.
The Shareholders’ Agreement was also signed by the Issuer solely for purposes of Art. 1411, Italian Civil
Code.
Mediobanca, in its capacity as Sole Global Coordinator and Sole Bookrunner for the Offering, will enter into
an underwriting agreement (the “Underwriting Agreement”) with the Issuer by the day prior to the
commencement of the Offering, in line with the best market practices for similar transactions, which is
intended to guarantee the subscription of a number of newly issued Shares corresponding to any Option
Rights that remain unexercised after the Stock Exchange Offering pursuant to Art. 2441, Paragraph 3, Italian
Civil Code, for a maximum amount of € 100,800,000, equal to the residual portion of the Capital Increase
other than the portion forming the subscription commitment by the Reference Shareholders, notwithstanding
the fact that, in the event that the Shares to be subscribed under the guarantee (the assumption) represent, on
the basis of a hypothetical calculation (on a figurative basis), more than 30% of the ordinary share capital of
SEAT after the Capital Increase, the underwriting commitment of Mediobanca shall be reduced by an
amount, equal to a maximum equivalent of € 2,000,000, so that the percentage of the ordinary share capital
represented by the shares held by the Reference Shareholders (other than BC Investors) after the Capital
Increase exceeds 50.01% (please see Section One, Chapter 18, Paragraph 18.2 and 18.4 and Section Two,
Chapter 3, Paragraph 3.3). Therefore, in the event that the threshold of 30% of the ordinary share capital of
SEAT should be exceeded by Mediobanca as a result of the assumption, it will not entail a PTO obligation
pursuant to Art. 49, paragraph one, letter (a) of the Issuer Regulations, which provides that the exceeding of
that threshold shall not entail the tender obligation provided for in Art. 106 TUF if “the majority of the voting
rights exercisable at an ordinary shareholders’ meeting are held by another shareholder or by other
shareholders jointly”.
The Underwriting Agreement shall provide that Mediobanca will not be required to fulfil its underwriting
obligations or that the underwriting obligations will be revoked upon the occurrence, among other things, of
certain extraordinary circumstances, including (i) the publication of a supplement to the Information
Prospectus due to events that – in the reasonable opinion of Mediobanca – may have a material adverse
effect on the capital, economic and/or financial position or on the activities carried out by the Company
and/or the Group; (ii) the material non-fulfilment by the Company of its commitments pursuant to the
Underwriting Agreement (such as, for example, the commitment to comply with legal obligations, to ensure
that the Shares are issued free of any third-party lien or right, to not undertake any activity that could be
qualified as stabilisation activity or any solicitation activity in countries in which the approval of the
competent local authorities is required, to notify Mediobanca of any event likely to render the information
contained in the Information Prospectus no longer true or correct in a material aspect, and to give appropriate
advance notice to Mediobanca of any statement, disclosure or announcement that the Company intends to
make); (iii) the representations and warranties given by SEAT in the Underwriting Agreement are found to
29
be materially untrue, incomplete or incorrect; (iv) the non-fulfilment by the Reference Shareholders (other
than BC Investors) of the commitment to subscribe their part of the Capital Increase; and (v) events of an
extraordinary nature such as to have a negative impact on the Business Plan.
If the Reference Shareholders (except for the BC Investors) fail to subscribe their part of the Capital
Increase, some provisions of the Amendment Agreement to the RBS Loan Agreement (in particular, the socalled financial covenant reset) would not go into effect (for further details, please see Section One, Chapter
4, Paragraph 4.1.1.4 and Section One, Chapter 22, Paragraph 22.3.1) and Mediobanca may not fulfil or may
revoke its underwriting obligations.
For further information, please see Section Two, Chapter 5, Paragraphs 5.2.2 and 5.4.3 of the Information
Prospectus.
6.
Dilution effects of the Capital Increase
Because the Offering is a capital increase in option, the implementation of the Capital Increase will not have
any effects of dilution, in terms of the percentage of ownership of the share capital of the Company, for the
shareholders of the Issuer that decide to subscribe the Option Rights assigned to them.
However, given that the Offering in Option is reserved both to the holders of SEAT ordinary shares and to
holders of SEAT savings shares, in the event of full exercise of the option rights by all shareholders there
will be an effective dilution, equal to a maximum of 1.60%, of the percentage of the share capital represented
by the ordinary shares of the Issuer.
In a shareholder fails to exercise the Option Rights, following the issue of the Shares, such shareholder will
suffer a dilution of its shareholding.
The maximum percentage of such dilution, in the case of full subscription of the Capital Increase, is 97.84%
(please see Section Two, Chapter 9 of the Information Prospectus).
7.
Reasons for the Offering, estimate of the net revenues and their allocation
The net proceeds deriving from the Capital Increase (assuming it is subscribed in full), net of underwriting
expenses and fees, are estimated to be € 191.6 million.
The proceeds of the Capital Increase shall be allocated as follows: 50% to early repayment of Tranche A of
the RBS Loan Agreement (a commitment accepted by RBS, along with the other conditions of the Waiver
Request, by means of the acceptance thereof dated 22 December 2008), to be applied proportionately to the
instalments due as of the payment date immediately after the date on which the proceeds of the Capital
Increase are actually received by SEAT and until 28 December 2011, and 50%, for the fulfilment of the
objectives set out in the Business Plan (please see Section Two, Chapter 8, Paragraph 8.1 and Chapter 3,
Paragraph 3.4 of the Information Prospectus).
8.
Expenses
The overall amount of expenses, including the commissions provided for in the underwriting agreement with
Mediobanca, are estimated to be approximately € 8.4 million (please see Section Two, Chapter 8, Paragraph
8.1 of the Information Prospectus).
***
30
Summary
E.
DOCUMENTS AVAILABLE TO THE PUBLIC
A copy of the documentation available to the public, listed below, may be consulted throughout the period of
effectiveness of the Information Prospectus at the Issuer’s registered office in Milan, Via Grosio 10/4, at its
secondary office in Turin, Corso Mortara 22; as well as at Borsa Italiana in Milan, Piazza Affari 6, during
office hours and on business days, and on the Company’s website at the following address: www.seat.it:
(i)
Articles of Association and Bylaws;
(ii)
Information Prospectus;
(iii)
Individual and Consolidated Financial Statements of the Issuer as at 31 December 2008, 2007,
2006 and 2005, together with the respective reports by the Independent Auditors;
(iv)
Consolidated Half-Yearly Reports as at 30 June 2007 and 30 June 2008;
(v)
Interim Consolidated Management Reports as at 30 September 2007 and 30 September 2008.
***
31
32
Section One
Section One
33
34
Section One
1
PERSONS RESPONSIBLE
1.1
Persons responsible for the Information contained in the Information Prospectus
SEAT, with its registered head office in Milan, Via Grosio 10/4 and secondary office in Turin, Corso
Mortara 22, assumes responsibility for the completeness and truthfulness of the data and information
contained in the Information Prospectus.
Because it is an offering in option pursuant to Art. 2441, Paragraph 1, Italian Civil Code, there is no person
responsible for the placement, and therefore Mediobanca is not among the “persons responsible for the
information provided in the Information Prospectus,” pursuant to Regulation 809/2004/CE, Appendix I.1.
1.2
Declaration of Responsibility
The Information Prospectus follows the form deposited with Consob on 27 March 2009, after notification of
approval by Consob pursuant to Art. 94bis of the Consolidated Law.
SEAT, which is responsible for preparing the Information Prospectus, declares, having adopted all
reasonable diligence to this end, that to the best of its knowledge the information contained in the
Information Prospectus agrees with the facts and that there are no omissions that might change its meaning.
35
2
INDEPENDENT AUDITORS
2.1
Issuer’s Independent Auditors
The Issuer’s consolidated financial statements for the financial years ended on 31 December 2008, 2007,
2006, and 2005 were audited by Reconta Ernst & Young S.p.A., with domicile in Rome, Via Giandomenico
Romagnosi 18/A (the “Independent Auditors”), registered in the Roll of Auditors pursuant to Art. 161 of
the Consolidated Law. For each financial year the Independent Auditors have issued their independent
auditors’ reports without qualification.
The interim condensed consolidated financial statements included for the first half period ended on 30 June
2008 and 2007 have been reviewed by the Independent Auditors. For each period the Independent Auditors
have issued their independent auditors’ review reports without qualification.
The Independent Auditors have furthermore confirmed that the Company’s accounts have been kept in
accordance with proper accounting principles and that the disclosure of operating facts in the Issuer’s
accounts for the same financial years, pursuant to Art. 155, Paragraph 1 (a), of the Consolidated Law, is
correct.
Pursuant to Art. 159 of the Consolidated Law, the Ordinary Shareholders’ Meeting of the Issuer held on 27
April 2006 assigned to the Independent Auditors the audits of the Issuer’s consolidated financial statements
for the years 2006-2011, the reviews of the interim condensed consolidated financial statements for the first
half period ended on 30 June of the years 2006-2011, and verification of the proper accounting principles
used and the correct disclosure of operating facts during the course of the aforementioned financial years.
The Independent Auditors have audited the Company’s financial statements from the financial year ended on
31 December 2003.
The Independent Auditors have also issued a report, a translation of which is attached to this Prospectus, on
the prospective financial information of the Issuer, contained in Section One, Chapter 13, of the Prospectus.
2.2
Information on relationships with the Independent Auditors
The Independent Auditors have not resigned from their engagement, nor has the Issuer revoked their
mandate during the financial years to which the financial information included in the Information Prospectus
refers or up to the Date of the Information Prospectus.
36
Section One
3
SELECTED FINANCIAL INFORMATION
Below a summary is given of the Issuer’s main consolidated financial information extracted from the
consolidated annual financial statements at 31 December 2008, 2007, 2006, and 2005, from the consolidated
semi-annual reports at 30 June 2008 and 2007 and from the interim consolidated management reports at 30
September 2008 and 2007, which, where not reported in this Information Prospectus, shall be considered
incorporated herein by reference pursuant to Article 11, paragraph 2 of Directive 2003/71/EC and Article 28
of Regulation 809/2004/EC. These documents are available to the public at the company’s head office and
on the Issuer’s website, www.seat.it, in the section “Investor”. The trial balance sheets for all the periods
presented, extracted from the consolidated financial data available to the public, are also presented in Section
One, Chapter 20 of the Information Prospectus.
As described in detail in Section One, Chapters 9, 9bis and 10 of the Information Prospectus, the selected
financial information presented below was prepared in accordance with IFRS and are presented in
reclassified form, as in the management report on the annual consolidated financial statements and the
consolidated semi-annual reports and as presented in the interim consolidated management reports.
As described above in Chapter 2 of the Prospectus, the Issuer’s consolidated annual financial statements at
31 December 2008, 2007, 2006, and 2005, were audited by the Independent Auditors, whereas the interim
condensed consolidated financial statements included in the consolidated semi-annual reports at 30 June
2008 and 2007 were reviewed by the Independent Auditors. The intermediate consolidated management
reports at 30 September 2008 and 2007 were not, however, audited.
The financial data presented below show some measures used by the Company’s management to monitor
and evaluate its and the Group’s operational and financial progress. Such measures are not identified as
accounting measures within the scope of the IFRS and therefore should not be deemed alternative
measurements for evaluating the economic progress of the Group and relative capital and financial position.
The Issuer believes that the financial information reported below is an important parameter for evaluating the
performance of the Group, inasmuch as it allows for an analysis of its economic, capital, and financial
performance. Because the determination of these measures is not regulated by the accounting principles in
reference, the calculation methods applied by the Company might not be identical with those adopted by
others and therefore these measurements might not be comparable. The measures are:
• EBITDA or Operating income before amortisation, depreciation, non-recurring and restructuring
cost, net is represented by EBIT (Earnings Before Interest and Taxes), including non-recurring and
restructuring charges and operating amortisation and depreciation (referring to all intangible assets at
their defined useful life and to tangible assets) and non-operating amortisation (goodwill and
Customer Database).
• GOP or Gross operating profit is represented by EBITDA including other operating income and
charges and allowances for net adjustments and the reserve fund for risks and charges.
• Operating Working Capital and Non-operating Working Capital are calculated, respectively, as
current operating assets (that is, related to operating revenues), net of current operating liabilities (that
is, related to operating costs) and as non-operating assets net of current non-operating liabilities: both
items exclude current financial assets and liabilities.
• Net Invested Capital is calculated as the sum of Operating Working Capital, Non-Operating Working
Capital, goodwill and Customer Database, other non-current operating and non-operating assets and
liabilities.
• Net Book Value Financial Debt is calculated as the sum of cash and cash equivalents and current and
non-current financial assets and liabilities.
• Net Financial Debt corresponds to Net Book Value Financial Debt before net adjustments related to
cash flow hedge contracts and opening, refinancing, and securitisation charges amortisable.
37
3.1
Consolidated economic and financial data for the financial years ended on 31 December 2008,
2007, 2006, and 2005
(€ thousands)
2008
Economic data
Income from sales and services
Gross operating profit (GOP)
Earnings before interest, taxes, depreciation and amortisation (EBITDA)
Earnings before interest and taxes (EBIT)
Result of the Fiscal Year
1,375,989
658,415
605,289
228,317
(179,646)
2007
adjusted(*)
2007
2006
2005
1,444,213 1,453,592 1,460,183 1,424,611
701,157 703,044 659,501 690,733
648,124 650,172 611,424 626,560
427,704 429,074 402,118 420,194
98,399
98,399
80,136 131,905
(€ thousands)
Capital and financial data
Net invested capital
of which goodwill and Customer Database
of which current net operating capital
Group net equity
Net financial debt (*)
of which current
31 December 2008
31 December 2007
31 December 2006
31 December 2005
3,920,304
3,517,486
320,633
876,595
3,082,016
3,105,646
(23,630)
4,310,082
3,943,671
300,306
1,100,006
3,274,306
3,271,168
3,138
4,377,887
3,997,672
298,690
1,057,184
3,405,782
3,485,091
(79,309)
4,535,019
4,154,998
285,598
980,117
3,634,581
3,648,003
(13,422)
(*) Does not include multi-annual charges incurred for opening loans and “net” activities derived from marking the cash flow hedge contracts to
market.
(€ thousands)
Financial report
Cash flow from non-current discontinued operations / held
for sale
Cash flow for the year
Cash and cash equivalents at the start of the year
2008
(a)
(b)
(c)
(d)
(a+b+c+d)
545,503
(87,987)
(400,077)
42,614
100,053
204,549
304,602
2007
adjusted(*)
2007
2006
2005
596,869
606,655
538,268
606,429
(69,741) (185,216) (61,242) (58,103)
(511,382) (525,085) (370,989) (484,045)
(119,392)
(103,646) (103,646)
308,195
308,195
204,549
204,549
106,037
202,158
308,195
64,281
137,877
202,158
3.2
Consolidated economic and financial data for the 6-month periods ended on 30 June 2008 and
2007
(€ thousands)
Economic data
Operating income before amortisation, depreciation, non-recurring and restructuring cost, net (EBITDA)
38
H1 2008
H1 2007
576,469
223,362
197,698
68,513
(45,651)
582,263
235,953
207,573
95,658
(31,066)
Section One
(€ thousands)
Group net equity
of which current
30 June 2008
30 June 2007
4,127,279
3,873,919
199,406
1,044,203
3,152,107
3,161,513
(9,406)
4,215,408
3,915,817
212,436
989,188
3,316,160
3,352,876
(36,716)
(*) Does not include multiannual charges incurred for opening loans and “net” activities derived from marking the cash flow hedge contracts to
market.
(€ thousands)
Financial report
Operating cash flow for the financial year
Cash flow from financing activities
Net cash and cash equivalents at the beginning of the period
Net cash and cash equivalents at the end of the period
3.3
(a)
(b)
(c)
(a+b+c)
H1 2008
H1 2007
291,581
(54,832)
(239,545)
(2,796)
204,549
201,753
284,986
(26,046)
(356,530)
(97,590)
308,195
210,605
Consolidated economic and financial data for the 9-month periods ended on 30 September 2008
and 2007
(€ thousands)
Economic data
Operating income before amortisation, depreciation, non-recurring and
restructuring cost, net (EBITDA)
9 months 2008
9 months 2007
Q3 2008
Q3 2007
986,746
448,802
411,438
996,708
469,015
426,423
410,277
225,440
213,740
414,445
233,062
218,850
223,602
11,026
263,027
34,876
155,089
56,677
167,369
65,942
(€ thousands)
Group net equity
of which current
30 September 2008
30 September 2007
4,137,058
3,831,109
261,904
1,080,920
3,105,176
3,161,443
(56,267)
4,206,230
3,867,637
273,043
1,046,374
3,233,263
3,352,953
(119,690)
(*) Does not include multiannual charges incurred for opening loans and “net” activities derived from marking the cash flow hedge contracts to
market.
(€ thousands)
Financial report
Operating cash flow for the financial year
Cash flow from financing activities
Net cash and cash equivalents at the beginning of the period
Net cash and cash equivalents at the end of the period
(a)
(b)
(c)
(a+b+c)
9 months
2008
9 months
2007
Q3
2008
Q3
2007
409,961
(66,917)
(306,040)
37,004
204,549
241,553
432,275
(38,744)
(519,711)
(126,180)
308,195
182,015
118,380
(12,085)
(66,495)
39,800
201,753
241,553
147,289
(12,698)
(163,181)
(28,590)
210,605
182,015
39
3.4
Selected Net Financial Debt Data
(€ million)
31 December 31 December 31 December 31 December
2008
2007
2006
2005
3,031.5
3,190.4
3,384.2
3,526.7
(2.0)
(2.0)
(1.4)
(1.2)
Net non-current financial debt
(a)
3,029.5
3,188.4
3,382.8
3,525.5
293.8
215.5
229.2
214.3
(2.0)
(13.1)
(1.3)
(2.4)
(304.6)
(204.5)
(308.2)
(202.2)
Current net financial liabilities
(b)
(12.8)
(2.1)
(80.3)
9.8
Net “Book” value financial debt
(a+b)
3,016.7
3,186.3
3,302.5
3,535.3
76.2
82.8
102.3
122.5
Net (income) expense adjustments for cash flow hedge
(10.9)
5.3
1.0
(23.2)
contracts
Net financial debt
3,082.0
3,274.4
3,405.8
3,634.6
(*) This item does not include “financial assets available for sale”.
3.5
Selected data on equity, profits and dividends per share
The following table reports the main data per share related to the financial years ended on 31 December
2008, 2007, 2006, and 2005. This data is historic in nature and reflects the effects of the Consolidation
decided by the Issuer’s Extraordinary Shareholders’ Meeting on 26 January 2009 and effective, after
registration in the Companies Registry, on 9 February 2009. For further information see Section Two,
Chapter 4, Paragraph 4.6.
(€ thousands)
Capital stock
Number of savings shares
Net equity per share
Diluted net equity per share
Profit (loss) per share
Diluted profit (loss) per share
Dividends per ordinary share
Dividends per savings share
Euro
No.
No.
Euro
Euro
Euro
Euro
Euro
Euro
2008
250,351,664.46
8,208,980,696
136,074,786
21.0087
n.a.
(4.3054)
n.a.
-
2007
250,351,664.46
8,208,980,696
136,074,786
26.375
26.323
2.3544
2.3498
0.3000
2006
249,878,714.46
8,193,215,696
136,074,786
25.510
25.446
1.9287
1.9240
1.4000
1.5200
2005
248,011,964.46
8,130,990,696
136,074,786
23.751
23.739
3.2014
3.1998
1.0000
2.0200
Net equity and profit per share are calculated by dividing respectively the net equity and the financial result of the SEAT Group by the average
number of shares in circulation during the financial year in reference. For the purposes of calculating the diluted profit per share the weighted average
of shares in circulation during the financial year was used, modified assuming subscription of all the potential shares derived from exercising the
options with a dilutive effect pursuant to IAS 33, and taking into account the Consolidation.
Pursuant to IAS 33, there was no dilution of shareholders’ equity per share and earnings per share in 2008, as the market value of the Issuer’s ordinary
shares is significantly lower than the strike price of the options still exercisable as at 31 December 2008.
40
Section One
RISK FACTORS
4
RISK FACTORS
4.1
RISK FACTORS RELATING TO THE ISSUER
A) RISKS ASSOCIATED WITH THE ISSUER’S FINANCIAL STRUCTURE
4.1.1
Risks associated with high financial indebtedness, potential lack of liquidity and the availability of
financial resources
As at 31 December 2008, the SEAT Group had net financial debt of € 3,082 million, which included the
following main loans: (a) a senior loan issued to SEAT by The Royal Bank of Scotland Plc, through its
Milan branch (“RBS”), in the original amount of € 2,620,100,000, the outstanding amount of which at 31
December 2008 was € 1,717 million (the “RBS Loan”), under an agreement entered into on 25 May 2005, as
most recently amended on 14 January 2009 (the “RBS Loan Agreement”); (b) a subordinated loan issued to
SEAT by Lighthouse International Company S.A. (“Lighthouse”) for the amount of € 1,300,000,000, under
a loan agreement entered into on 22 April 2004 (the “Lighthouse Loan Agreement”), as part of a bond
issue undertaken by Lighthouse and guaranteed by SEAT under the Indenture Agreement also entered into
on 22 April 2004 (the “Indenture Agreement”); (c) limited-recourse asset-backed securities, in the total
amount of € 256,000,000, issued by the special-purpose vehicle Meliadi Finance S.r.l. as part of a
securitisation transaction started in June 2006 and having as its object a portfolio of trade receivables to be
transferred on a revolving basis each month for a period of five years through to June 2011; (d) six financial
lease agreements, in the total amount of € 53.9 million, entered into with Leasint S.p.A. to finance the
purchase and renovation of the real estate complex located on Corso Mortara in Turin, Italy, to which SEAT
has transferred its secondary office.
The SEAT Group has high financial indebtedness, with financial leverage of approximately five times
EBITDA as at 31 December 2008 (the leverage was also approximately five times EBITDA as at 31
December 2007).
The following table shows the change in the SEAT Group’s net financial debt from 2005 to 2008 (for more
information, see Section One, Chapter 10, Paragraph 10.1).
(€ millions)
Non-current financial debts
Net non-current financial debt (a)
Current financial debts
Net current financial debt (b)
Net financial debt – “book value” (a+b)
Transaction costs on loans and securitisation programme not yet
amortised
Net market value of cash flow hedge instruments
Net financial debt
31 December 31 December 31 December
2008
2007
2006
3,031.5
3,190.4
3,384.2
(2.0)
(2.0)
(1.4)
3,029.5
3,188.4
3,382.8
293.8
215.5
229.2
(2.0)
(13.1)
(1.3)
(304.6)
(204.5)
(308.2)
(12.8)
(2.1)
(80.3)
3,016.7
3,186.3
3,302.5
76.2
82.8
102.3
(10.9)
3,082.0
5.3
3,274.4
1.0
3,405.8
31 December
2005
3,526.7
(1.2)
3,525.5
214.3
(2.4)
(202.1)
9.8
3,535.3
122.5
(23.2)
3,634.6
The average life of its outstanding loans was 3.9 years as at 31 December 2008 and the amortisation schedule
for the main loans described above, without taking into account the commitments undertaken by SEAT in
connection with the use of 50% of the proceeds of the Capital Increase for partial repayment of the RBS
Loan, may be broken down as follows:
41
RISK FACTORS
Amortisation schedule without Capital Increase:
(€ million)
Creditor
RBS (*)
Lighthouse
Securitisation (**)
Leasing
Total
(*)
31/12/09
219.2
2.8
222.0
31/12/10
231.8
2.7
234.5
Maturity before
31/12/11
31/12/12
245.2
556.1
2.8
3
248.0
559.1
31/12/13
464.5
3.1
467.6
Beyond
1,300.0
256.0
42.4
1,598.4
On 28 January 2009 the Company paid back € 50 million of the € 219.2 million payment due by 31 December 2009; a further € 59.6 million
payment will be repaid on 28 June 2009 and another € 109.6 million on 28 December 2009.
Half of the € 231.8 million payment due by 31 December 2010 shall be repaid on 28 June 2010 and the remaining half on 28 December 2010.
The € 556.1 million payment due on 31 December 2012 shall be repaid in full on 8 June 2012.
The € 464.5 million payment due on 31 December 2013 shall be repaid in full in June 2013.
(**) SEAT will have the option of transferring new loan portfolios each month until June 2011; from this date, the asset-backed securities issued
with maturities in 2014 will be repaid using cashflows generated from trade receivables transferred up to that time.
In view of the current market scenario, of performance expectations for 2008 and of the first forecast
estimates for 2009-2011, starting from the second half of 2008 SEAT began to implement a series of
measures aimed at protecting its financial and economic balance and cash-flow generation profile, as well as
ensuring compliance with the financial covenants set out in the RBS Loan Agreement. The Business Plan
guidelines confirmed that the Company will continue to pursue the strategic development of its business in
Italy, especially in the Internet segment, while focusing on activities aimed at supporting its core business by
increasing its investments (in product innovation, service promotion and development of its sales channels)
and implementing the agreed cost-cutting programme, which will allow the Company to invest in business
development and generate more cashflow to service its debt. The need to increase investments in light of the
difficult economic scenario and of forecast limited revenue growth has led the Company to seek to improve
its financial flexibility, in order to face the changed market context with an improved financial and economic
balance.
On 1 December 2008 the Company sent to RBS a Waiver Request containing, inter alia, a request to revise
the existing financial covenants consistently with the results achievable by the Company according to the
estimates in its Business Plan or within a buffer range of at least 20%. The renegotiation of the terms of the
loan was meant to allow the Company to continue to implement the measures required to protect its business
model in view of the negative market environment, preventing any defaults on the RBS Loan Agreement
financial covenants by adjusting the covenants to reflect revenues forecast by SEAT Group’s new Business
Plan in view of the worsening economic and financial situation. The renegotiation process started with the
Waiver Request was completed upon receipt by SEAT of an acceptance letter from RBS on 22 December
2008, and was subsequently formally approved with the execution of the RBS Loan Amendment Agreement
on 14 January 2009.
As detailed in Section One, Chapter 22, Paragraph 22.3.1 of the Prospectus, the waiver and amendment of
some of the terms of the RBS Loan Agreement, including the clauses preventing SEAT from carrying out its
Capital Increase and implementing all related activities, became effective upon execution of the Amendment
Agreement. Changes made to the provisions concerning, inter alia, the amount of interest payable under the
Loan, the option to increase/decrease interest payments in line with the improvement/deterioration of SEAT
Group’s Net Debt/EBITDA ratio, the contractual definitions contained in the section relating to SEAT
Group’s financial commitments (financial covenants), as well as the changes in the threshold applicable to
such financial commitments (so called “financial covenants reset”) will come into force only if one of the
following conditions is met:
•
42
one or more Reference Shareholders pay the Company, directly or indirectly, by subscribing to the
Capital Increase, an amount in aggregate not lower than € 99,200,000 future capital increase reserves or
other reserves (subject, in each case, to the provisions of the Creditors’ Agreement) by 31 May 2009, or
alternatively, if the Capital Increase is delayed upon request or by order of any competent authorities
(including Consob and Borsa Italiana), by 28 June 2009 (the “Final Date”); or
Section One
RISK FACTORS
•
one or more Reference Shareholders notify RBS of their full, irrevocable and unconditional commitment
to pay, either directly or indirectly by subscribing to the Capital Increase, an amount in aggregate not
lower than € 99,200,000 as future capital increase reserves or other reserves. These amendments are
however subject to the condition that such payments are made by the Final Date.
The Waiver Request expressly sets out that the Company will set aside 50% of all payments made by the
Shareholders under the Capital Increase to the early repayment of the instalments due under Tranche A of
RBS Loan Agreement, starting from the first instalment due after the Capital Increase until the instalment
due on 28 December 2011 (a commitment accepted by RBS, along with the other conditions of the Waiver
Request, by means of the acceptance thereof dated 22 December 2008); accordingly, as set out in the
Amendment Agreement, if the Capital Increase were to be subscribed in full (for a total of € 200 million) and
SEAT were to set aside € 100 million to the early repayment of the RBS Loan, the repayment schedule
would be as follows:
(€ millions)
Lender
RBS (*)
Lighthouse
Securitisation (**)
Leasing
Total
(*)
31/12/09
300.5
2.8
303.3
31/12/10
192.3
2.7
195.0
falling due by
31/12/11
31/12/12
203.4
556.1
2.8
3
206.2
559.1
31/12/13
464.5
3.1
467.6
beyond
1,300.0
256.0
42.4
1,598.4
On 28 January 2009 the Company paid € 50 million of the € 300.5 million payment falling due by 31 December 2009; a further € 159.6 million
payment will be repaid on 28 June 2009 and another € 90.9 million on 28 December 2009.
The € 556.1 million payment due on 31 December 2012 shall be repaid in full on 8 June 2012.
The € 464.5 million payment due on 31 December 2013 shall be repaid in full in June 2013.
(**) SEAT will have the option of transferring new loan portfolios each month until June 2011; from this date, the asset-backed securities issued
The risk that the Capital Increase fails to be subscribed or is only partially subscribed, which the Company
believes is unlikely given the subscription commitment signed by the Reference Shareholders (other than BC
Investors) and the guarantee issued by Mediobanca, will occurr in the following two cases:
(i)
failure by the Reference Shareholders (other than BC Investors) to subscribe their part of the
Capital Increase (equal to 49.6% of the share capital), equal to approximately € 99.2 million,
with the resulting ineffectiveness of the above-mentioned financial covenant reset agreed with
RBS in the Amendment Agreement (please see Paragraph 4.1.1.4 below) and less cash for
allocation to the implementation of the Business Plan, also taking into account the possibility for
Mediobanca to revoke its underwriting obligation; or
(ii)
failure by the market and/or Mediobanca to subscribe the part of the Capital Increase not
subscribed by the Reference Shareholders, with the consequence that the Company would have
less cash available (for further details on the conditions applicable to Mediobanca’s guarantee
and the relevant termination clauses, please see Paragraph 4.3.1 of this Chapter), which lack of
subscription shall not have an effect on the financial covenant reset (which would become
effective as a result of the subscription of the Capital Increase by the Reference Shareholders).
In the event of a completely unsuccessful outcome to the Capital Increase, all of the consequences for the
Issuer as described under (i) and (ii) would take place. Therefore, as a result of what is described above, in
the Issuer’s opinion, if the Capital Increase should fail to have a successful outcome completely or partially,
the Group could be required to repay all of its debt to RBS early; however, there would no immediate effect
on business continuity, although it could create a situation of greater financial tension.
43
RISK FACTORS
The Company may – at this stage – only make conjectures as to which initiatives it will need to take in order
to obtain the funds required to service its debt obligations. The Company expects to implement one or more
of the following measures:
(i) Measures required to guarantee an adequate level of comfort on existing covenants
•
The Company may implement actions aimed at reducing some key cost items (advertising expenses,
bonuses to sales agents and performance-based staff bonuses; operating costs and integration synergies
between Group companies) so as to be able to comply with RBS Loan Agreement current financial
covenants;
•
the Company may speed up the implementation of measures already under consideration (in particular
concerning the management of its working capital and investment budget), aimed at generating a
positive impact on its ordinary cash generation capacity.
The above options refer to actions that the Company may undertake in order to achieve the EBITDA margin
required under the RBS Loan Agreement’s current financial covenants and do not take into account any
“extraordinary” items which will help to reduce its debt level, such as, for instance, the sale of non-strategic
assets.
(ii) Renegotiation of financial covenants with RBS
If, after and/or during the implementation of the measures outlined at paragraph (i) above, the Company
were to realise that there is a material risk that the financial covenants will not be met, it will immediately restart the negotiation process with RBS to amend the financial covenants not conditionally on the capital
increase.
(iii) Debt restructuring
The company could in any event assess whether it is advisable – based on the actual financial market
situation and related prospects, as recorded at the time – to proceed with a full renegotiation and/or
restructuring of its debt. (See Section One, Chapter 4, Paragraph 4.3.1).
As far as liquidity risk is concerned, which is the risk that the financial resources available may be
insufficient to cover short-term obligations of any nature coming due, the SEAT Group believes that,
because the volatility of its business is relatively low and its cash generation high, and in consideration of the
approximately € 120 million in available credit lines, it has sufficient financial resources to meet its
obligations. In line with the foregoing, at the end of January 2009 the Company made a voluntary early
repayment of € 50 million against the aforesaid obligations to RBS falling due in 2009. It is believed that the
Company will maintain the ability to meet its commitments even if the Capital Increase is not subscribed.
As described above, after 31 December 2009 SEAT will have to repay significant sums on outstanding loans;
in this respect, the Group may not have sufficient financial resources to do so, making it necessary to seek
new loans. In 2008, the financial crisis triggered by securities linked to subprime mortgages, and the heavy
impact that it had on all financial companies, caused a general and increasing aversion to risk among
investors, reflected in the widening of spreads on credit default swaps and in a sharp drop in high yield bond
prices in particular.
If, due to market conditions or other circumstances, the Issuer is not able to generate sufficient capital
resources to discharge its financial obligations at the established maturities and terms or if, in general,
defaults should occur on additional obligations provided for in the abovementioned loan agreements, as well
as in the event of insolvency proceedings or non-performance of obligations arising from any other debt or
guarantee instrument of SEAT or a SEAT Group company, the sums disbursed must be repaid early in full,
along with the interest accrued and additional sums owed under said agreements, with the ensuing negative
effects on the operating performance, capital structure and financial standing of the Company and the SEAT
Group. Furthermore, if SEAT, for any reason, is not able to raise sufficient financial resources to fulfil its
financial obligations and it is forced to renegotiate the terms and conditions on its financial obligations
before they come due or to seek the necessary resources for repayment on the bank and/or financial market,
it may not be able to find available resources or may find available resources at less favourable conditions
than the current ones, with negative effects of the Group’s operating performance, capital structure, and
financial standing.
44
Section One
RISK FACTORS
Such difficulty in obtaining financial resources could also occur if the rating given to SEAT by Standard &
Poor’s, which, at the Information Prospectus date, is “BB-”, were to worsen. This rating expresses the
Standard & Poor’s assessment of the Company’s likelihood of default and is the result of an analysis of (i)
the Group’s prospects in terms of profitability, cash generation and sustainability of the debt, and (ii)
foreseeable reference market scenarios. If the subjective assessment of the rating company’s analysts were to
show a deterioration of one of both analysis parameters compared to the current assessment, then this could
cause SEAT’s rating to be downgraded by Standard & Poor’s, even merely in relation to a negative trend in
the reference markets. Under the terms of the documents that regulate the asset securitisation transaction
started by SEAT in June 2006, the downgrading of SEAT could entail a reduction in the Company’s ability
to assign assets on a rotating basis to the securitisation vehicle. In this event, if it is not possible for SEAT to
negotiate a change to the contracts regulating the securitisation, so as to neutralise such risk, the assets not
freed up through securitisation would be financed using alternative methods which, however, in current
market conditions, could be more expensive than the current costs of securitisation. The SEAT Group could
in any event make up for any difficulties in activating alternative funding methods by using its own cash
resources and the aforesaid availability of credit lines, amounting to € 120 million.
For further details, please see Section One, Chapter 10, Paragraph 10.3 and 10.4 and Section One, Chapter
22, Paragraphs 22.2 and 22.3.
4.1.1.1 Risks relating to possible limitations on the activities of the companies in the SEAT Group
deriving from provisions, financial covenants and pledges in connection with the RBS Loan
Agreement and the Indenture
According to the RBS Loan Agreement, in addition to the repayment obligations triggered by SEAT’s
default, early repayment must be made by the Company in the following circumstances: (i) if it becomes
unlawful for RBS to fulfil its obligations under the RBS Loan Agreement, RBS becomes insolvent or is
subject to any insolvency proceeding; (ii) if the sale of certain assets by SEAT or its subsidiaries generates
net gains in excess of specified amounts; (iii) if the settlements paid to SEAT on insurance claims exceeds
certain specified amounts in a given year; (iv) if the Excess Cashflow within SEAT Group exceeds certain
specified thresholds (set out in Section One, Chapter 22, Paragraph 22.3.1).
In addition, under the RBS Loan Agreement, SEAT is subject to a series of disclosure obligations. The most
important of such obligations consist in submitting to RBS: (i) a copy of SEAT’s certified consolidated
annual accounts; (ii) SEAT Group’s uncertified quarterly consolidated report drafted by its management; (iii)
SEAT Group’s uncertified monthly report drafted by its management; and (iv) SEAT Group’s operating
costs estimates for each financial year. All certified annual accounts and quarterly reports must be submitted
together with a statement signed by the CFO or other SEAT Director stating that the financial indicators set
out in the following paragraph have been met by the Company and that no case of default is pending under
the terms of RBS Loan Agreement. All consolidated annual accounts submitted must be certified by SEAT’s
Auditors in a letter drafted as specified by RBS, stating that at the date of the financial statements SEAT has
not defaulted on any of the above mentioned financial indicators. In addition, SEAT will promptly notify
RBS of: (i) any legal, arbitration or administrative proceedings involving SEAT or each of its subsidiaries,
which may involve losses in excess of € 250,000; (ii) any material employment dispute; (iii) any document
or information sent by SEAT to its creditors; (iv) any information relating to the balance sheet and P&L
position of any company belonging to the Wider Group (as defined in Section One, Chapter 22, Paragraph
22.3.1) as requested by RBS at its discretion; (v) any breach of the RBS Loan Agreement or of any
documents relating or annexed to the RBS Loan Agreement of which SEAT is aware; (vi) any event which
triggers the early repayment of the RBS Loan; and (vii) any default under RBS Loan Agreement, as soon as
it becomes aware thereof.
The RBS Loan Agreement, SEAT is also required, inter alia, to comply with several financial indices
calculated at the consolidated level, and which limit its operational flexibility. These include: the ratio of
total net debt to EBITDA, the ratio of senior debt to EBITDA, the ratio of EBITDA to interest payments to
service the SEAT Group’s debt and the ratio of the SEAT Group’s cash flows to principal and interest
payments to service the SEAT Group’s debt. The threshold financial indicators with which SEAT will need
to comply with are set out in Section One, Chapter 22, Paragraph 22.3.1. SEAT’s capacity to comply with
45
RISK FACTORS
these financial indices and tests may be influenced by events beyond the Company’s control. Consequently,
compliance with the above by the Issuer may not be guaranteed.
Furthermore, both the RBS Loan Agreement and the Indenture Agreement require SEAT and, in the case of
RBS Loan Agreement, the latter requires all the Obligors pursuant to such agreement (as defined in Section
One, Chapter 22, Paragraph 22.3.1), to comply with non-financial covenants that impose specific restrictions
on the activities of SEAT and the Group, including restrictions in connection with the possibility of: (i)
contracting additional debt or granting guarantees, except as expressly provided for in the RBS Loan
Agreement and the Indenture Agreement; (ii) undertaking certain investments, acquisitions or equity
investments in joint ventures, except as expressly provided for in the RBS Loan Agreement and the
Indenture Agreement; (iii) undertaking transactions to dispose of its assets, except in certain situations
expressly provided for in the RBS Loan Agreement and the Indenture Agreement; (iv) redeeming or
discharging subordinated debt or share capital; (v) undertaking restructuring or participating in mergers; or
(vi) making substantial changes to the nature of SEAT’s business. These covenants could limit SEAT’s
capacity to finance future operations and capital requirements and limit the Company’s capacity to undertake
acquisitions, investments or other business activities.
Finally, the RBS Loan Agreement and the relevant Indenture set out a series of Events of Default, including (a)
failure to pay any sum due under RBS Loan Agreement or any other Financial Documents and the Indenture,
(b) failure to meet the financial indicators under RBS Loan Agreement, (c) default on the above payment
obligations and on the other obligations set out under RBS Loan Agreement or under the other Financial
Documents and the Indenture, (d) failure of a member of the Wider Group (as defined in Section One, Chapter
22, Paragraph 22.3.1) to meet any payment obligation by the stipulated deadline, (e) in application for Chapter
11 protection (i.e. insolvency or agreement with creditors) by SEAT or an Obligor (as defined in Section One,
Chapter 22, Paragraph 22.3.1) or by a Relevant Company (as defined in Section One, Chapter 22, Paragraph
22.3.1), (f) any order made against an Obligor or a Relevant Company to pay an amount in excess of € 5
million, (g) the involvement of any company of the Wider Group in a litigation case which it is likely to lose,
thus creating a Substantially Prejudicial Effect (as defined in Section One, Chapter 22, Paragraph 22.3.1), (h)
the event that the auditors certifying SEAT annual accounts may qualify, in any material aspect, their
statement, (i) the occurrence of certain events contractually stipulated which may produce a substantial
negative impact on the overall business, assets or financial position of SEAT and the other Obligors.
In case of non-compliance with information requirements, covenants and financial tests, and non-financial
covenants or the occurrence of one of the events of default set forth in: (i) the RBS Loan Agreement, RBS
may rescind the Agreement and request immediate repayment of all sums disbursed, along with interest
accrued and additional sums owed under the RBS Loan Agreement and (ii) the Indenture Agreement, the
Trustee, or parties holding the majority of the Lighthouse Securities in terms of the principal due thereunder,
may request the immediate redemption of all Lighthouse Securities, along with the interest accrued and
additional sums owed under the Indenture Agreement, with the consequence that SEAT will be required to
provide Lighthouse with the funds necessary to make said payments.
If SEAT is not able to discharge its guarantee obligations towards Lighthouse, the lending banks and the
holders of the Lighthouse Securities (acting through the Trustee) may enforce the assets pledged as collateral
by SEAT to secure said sums. SEAT cannot guarantee that the proceeds from execution of the guarantees
issued under the Indenture (which shall be allocated first to the service of SEAT’s senior debt under the RBS
Loan Agreement, since these guarantees are second lien pledges), will cover the above payment and the
amount owing to the bondholders in full, likewise, it cannot ensure that the proceeds from the execution of
the guarantees issued under RBS Loan Agreement will cover in full all payments due to RBS in the event of
early repayment of the RBS Loan.
In particular, in order to cover the financial obligations arising from the RBS Loan Agreement and the other
Financial Documents, the Company issued the following first ranking lien and, when also guaranteeing the
obligations arising from the Indenture, second ranking lien pledges: (i) a pledge on SEAT’s shares belonging
to the Reference Shareholders (first ranking and second ranking lien); (ii) a pledge on Split Luxcos’ shares
(first ranking and second ranking lien); (iii) a pledge on the shares/units of TDL Infomedia, Thomson,
Telegate and any other company which may from time to time become part of the Wider Group (as defined
in Section One, Chapter 22, Paragraph 22.3.1) whose EBITDA is at least equal or above 5% of the Wider
Group’s EBITDA; (iv) a pledge on the main brands belonging to the Wider Group; (v) a special charge on
SEAT’s assets and fixed assets pursuant to Article 46 of the Consolidated Banking Act; (vi) a fixed and
46
Section One
RISK FACTORS
floating charge on the assets of TDL Infomedia and Thomson; (vii) a secured transfer of proceeds arising
from the loan granted to SEAT by Lighthouse (first and second lien).
Between the date of payment of the RBS Loan and Prospectus Date SEAT did not default on any of its
financial and non-financial obligations under the RBS Loan Agreement. In particular, the latest checks on the
Company’s compliance with the financial covenants during the period from 1 January 2008 and 31
December 2008 positively highlighted that the net overall debt/EBITDA margin allows for a headroom of
9% between the threshold amount set out in RBS Loan Agreement and the amount actually obtained by
SEAT (SEAT Group’s total net debt/EBITDA margin was 4.77 against a threshold value of 5.25).
Both the occurrence of cases of default and also non-compliance by the Company with the financial indices
and tests specified above could trigger an obligation for SEAT to make early repayment of the sums due
under the RBS Loan Agreement and the Indenture Agreement. Moreover, the covenants and other
commitments undertaken under the agreements could limit the activities of the Issuer and the SEAT Group.
The occurrence of such circumstances could have negative effects on the business, earnings, and financial
position of the Issuer and the SEAT Group.
For further details, please see Section One, Chapter 22, Paragraph 22.3.
4.1.1.2 Risks associated with restrictions on the distribution of dividends
Both the RBS Loan Agreement and the Indenture Agreements establish limitations on SEAT’s ability to
distribute dividends or undertake any other distribution, whether in cash or another form, in connection with
its share capital.
Under the RBS Loan Agreement, SEAT may only pay dividends or undertake any distribution, whether in
cash or another form, in connection with its share capital if all of the following conditions have been satisfied:
i.
no Event of Default, as defined in the RBS Loan Agreement, has occurred;
ii.
SEAT has satisfied all of the conditions set forth in the Indenture Agreement applicable to the
distribution of dividends; and
iii.
the ratio of total net debt to EBITDA, at the moment the distribution is undertaken and for two
quarters thereafter, falls within the agreed range, as recalculated on a pro-forma basis subsequent
to said distribution, or the distribution is undertaken by drawing on the net proceeds arising from
the sale of companies, business units, assets or shares related to the TDL Group or Telegate not
allocated to mandatory early repayment of the RBS Loan.
Furthermore, under the provisions of the Amendment Agreement to the RBS Loan Agreement, SEAT has
undertaken: (a) not to decide to undertake and not to undertake any distributions of dividends or other sums
in connection with its ordinary shares; and (b) to limit the distribution of dividends associated with its
savings shares to the indispensable minimum level required to avoid breaching its current bylaws, in both
cases up to a ratio of total net debt to EBITDA of less than or equal to 4.00:1 (considering the total amount
of said distributions). These undertakings are contingent upon the occurrence of the same conditions as
provided for the efficacy of the reset of the financial covenants (please see Paragraph 4.1.1.1).
The repayment in full of the RBS Loan or the renegotiation thereof following the redemption of the
Lighthouse Securities by Lighthouse could also result in the Company being unable to distribute dividends in
the future.
It should be noted that in the periods covered by the Information Prospectus the Issuer distributed to its
shareholders the following dividend payments, calculated taking into account the Consolidation: (i) in 2007,
an amount of € 0.3000 per share allocated exclusively the Company’s saving shareholders for a total of €
204,112.18; (ii) in 2006, a total amount of € 58,457,448.24 of which € 1.4000 per each ordinary share and €
1.5200 per each saving share (iii) in 2005, a total amount of € 42,117,946.32, of which € 1.0000 per each
ordinary share and € 2.0200 per each saving share. In 2008 the Issuer shall not distribute any dividends to its
shareholders (for further details see Section One, Chapter 3, Paragraph 3.5 and Chapter 20, Paragraph 20.6).
47
RISK FACTORS
4.1.1.3 Effects of a change in control on the existing loan agreements
Both the RBS Loan Agreement and the Indenture Agreement provide for early repayment of the loans where
certain events occur. Such events, described in detail in each of the two documents, are commonly referred
to as events of “change of control”.
Under the RBS Loan Agreement, if there is a change of control over the Issuer, RBS’s obligation to disburse
additional sums in connection with the revolving tranches of the RBS Loan will be cancelled, effective
immediately, and SEAT will be required, effective immediately, to make early repayment of all loans
disbursed to it and to pay to RBS the interest accrued and not yet paid as of said date, in addition to all
further sums owed to RBS under the RBS Loan Agreement and the documents associated therewith.
Under the Indenture Agreement, if there occurs a change of control over the Issuer, each holder will be
entitled to obtain the repurchase of its securities by Lighthouse at a price equal to 101% of the face value of
the securities, plus interest accrued and not yet paid as on the date of repurchase. In this case, SEAT, under
the Lighthouse Loan Agreement, would be required to make early repayment of a portion of the Lighthouse
Loan sufficient to provide Lighthouse with the funds required to undertake any such repurchases. This
amount would be paid directly to securities holders by SEAT in case of default by Lighthouse, in accordance
with the Indenture Agreement, under which SEAT has expressly and irrevocably undertaken to secure all of
Lighthouse’s obligations to the securities holders. Any payment by SEAT under the Lighthouse Loan or
Indenture would nonetheless be undertaken in accordance with the provisions of the RBS Loan Agreement
and the intercreditor agreement entered into by SEAT, Lighthouse and RBS, among the other parties thereto,
on 25 May 2005 concurrently with the RBS Loan Agreement (the “Intercreditor Agreement”), which
governs, inter alia, relations between SEAT, RBS (in its capacity as senior creditor), Lighthouse and the
securities holders, (in their capacities as subordinated creditors).
For further details, please see Section One, Chapter 22, Paragraph 22.3, and, in particular, as regards the
identification of events of “change of control”, please refer to the contents of the Annual Corporate Governance
Report, whose information, if not reported in this Information Prospectus, shall be understood as being hereby
incorporated by reference, as per Article 11, Paragraph 2 of Directive 2003/71/EC and Article 28 of Regulation
809/2004/EC. This document is available to the public at the Company’s official website www.seat.it.
4.1.1.4 Risks associated with the non-occurrence of the conditions precedent affecting certain
provisions of the Amendment Agreement
As shown in more detail in Paragraph 4.1.1, in the light of the earnings and financial position results
projected for 2008 and in the first results of the new Business Plan 2009-2011, the definition of which was
begun in the third quarter of the 2008, SEAT has undertaken a series of actions aimed at protecting the
Company’s financial equilibrium and cash-generating capacity and ensuring compliance with the provisions
of the RBS Loan Agreement, specifically as regards clauses pertaining to the financial covenants with which
the Company must comply under said agreement.
In further detail, on 1 December 2008 SEAT submitted to RBS the Waiver Request of certain provisions of
the RBS Loan Agreement, which RBS signed by way of acceptance on 22 December 2008. The agreement
was formalised on 14 January 2009 by conclusion of an agreement amending the RBS Loan Agreement,
entitled “Amendment Agreement”, which has incorporated what was agreed following the Waiver Request.
From the date of issue of the RBS Loan (8 June 2005) to the date of the Amendment Agreement none of the
contractual commitments undertaken by the Issuer vis-à-vis RBS were violated. Pursuant to the Waiver
Request, the Company paid RBS a waiver fee equal to approximately € 9 million.
The Amendment Agreement provides for, inter alia:
i.
48
the reset of the financial covenants, that is to say, revised threshold levels for certain financial
ratios set forth in the RBS Loan Agreement as a function of the differing scenario assumed in the
Business Plan with respect to that presumed at the time the RBS Loan Agreement was entered
into, so as to allow for headroom of 20% for 2009 and 2010. The parties also agreed to extend
the application of the financial covenants through to 31 March 2013, calling, with reference to
the projections of the Business Plan and subsequent projections, for headroom of 25% in
connection with 2011 and 30% in connection with 2012 and 2013; and
Section One
RISK FACTORS
ii.
consent for the amendment of projections associated with the financial debt allowed under the
RBS Loan Agreement in order to provide the Company with greater flexibility in financing its
trade receivables by drawing on methods alternative to the ongoing securitisation transaction,
subject to the total amount of such types of debt not collectively exceeding the amount of €
300,000,000 currently provided for in the RBS Loan Agreement.
Under the Amendment Agreement, the provisions relating to the reset of the financial covenants and the
modification of projections pertaining to the financial debt allowed will enter into force solely and exclusively
if one or more of the Reference Shareholders make payment to SEAT, directly or indirectly, by subscribing a
Capital Increase, of sums allocated to a future capital increase or other sums, of a total amount of €
99,200,000, or provide to SEAT a full, irrevocable and unconditional commitment to undertake such payment
(provide that, regardless of the circumstances, said payment is made by 31 May 2009, or, if there is a delay
associated with a Capital Increase, 28 June 2009). On 23 December 2008, the Reference Shareholders (other
than BC Investors) undertook to subscribe the Capital Increase, for the full portion thereof to which they are
entitled, by means of an internal reorganisation of the ownership structure involving the release of the BC
Investors from the shareholders’ agreement of 30 July 2003 and the substantial reallocation of the majority of
said shareholders’ investments to two of the other three Reference Shareholders, contingent upon the
occurrence of certain conditions (for further details, please see Section One, Chapter 18, Paragraph 18.4 and
Section Two, Chapter 5, Paragraph 5.4.3).
Details on the new financial indicator thresholds that must be observed by SEAT are provided in Section
One, Chapter 22, Paragraph 22.3.1. If the conditions for said provisions of the Amendment Agreement are
not satisfied, and, consequently, the reset of the financial covenants does not enter into force, the Issuer may
not be able to comply with the financial covenants originally provided for in the RBS Loan Agreement. This
could trigger an obligation for SEAT to make early repayment of the sums borrowed, along with the interest
accrued and further sums owed under the RBS Loan Agreement, with possible negative effects on the
business, earnings and financial position of the Issuer and the Group.
4.1.1.5 Risks associated with interest rate fluctuations
The SEAT Group is exposed to the risk of fluctuation of interest rates inasmuch as its outstanding financial
debt, during the period between December 2008 and June 2012, is characterised by a significant portion
(albeit decreasing over time) of floating rate transactions. The loans outstanding as at 31 December 2008
came to € 3,329.7 million, of which € 2,029.7 million was floating rate. For some considerable time the
Company has implemented a strategy of hedging the risk associated with the fluctuation of interest rates, and
has thereby entered into a series of derivative instruments agreements. Hedges in place on the total debt
structure as at 31 December 2008 allow: (i) for the three-year period 2009-2011, overall protection of
approximately 69% of the total, equal to the average sum of the following items: fixed-rate subordinated debt
(43.66%), interest rate swap and forward rate agreement transactions (approximately 20%) and interest rate
collar transactions (5.5%); (ii) for the following two-year period 2012-2013, overall protection of
approximately 67% of the total, equal to average the sum of the following items: fixed-rate subordinated debt
(64%) and interest rate swap transactions (3%).
In January 2009, new derivatives-based hedging transactions were undertaken, further raising the level of
protection against the risk of fluctuation of interest rates during the three-year period 2009-2011 to 74% (of
which 43.66% consists of fixed-rate subordinated debt, approximately 23% of interest rate swap and
forward-rate agreement transactions, and 7.85% of interest rate collar transactions).
Interest rate conditions have shown significant volatility in recent months. It cannot be excluded that
fluctuations in market interest rates may have negative consequences for the business, earnings and financial
position of the Issuer and the Group.
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RISK FACTORS
4.1.2 Risks associated with exchange rate fluctuations
The currency of the SEAT Group’s consolidated financial statements is the euro. However, some Group
companies operate in currencies other than the euro, primarily the pound sterling, and the Group is therefore
exposed to the risk arising from fluctuations of exchange rates between the various currencies.
The Group’s turnover generated by activities in the United Kingdom, expressed in pounds sterling and
converted into euro, represented 8.22% of its total turnover as at 31 December 2008. Variations in the value
of the exchange rate between the euro and the pound sterling could result in a variation in the exchange
reserve carried among the Issuer’s consolidated equity.
Furthermore, the Company is exposed to exchange rate risk in connection with an infra-Group loan facility
in pounds sterling to the TDL Group (please see Section One, Chapter 19, Paragraph 19.1.1).
The Company has undertaken exchange rate risk hedging transactions, the effects of which are reflected in
the Company’s consolidated income statement.
For further details, please see Section One, Chapter 20.
B) RISKS ASSOCIATED WITH THE ISSUER’S BUSINESS
4.1.3 Risks associated with failure to implement the Business Plan 2009-2011, and with forecasts and
estimates of profits, as well as with the statements and provisional information on changes in the
reference market in question
On 12 February 2009, SEAT’s Board of Directors confirmed the guidelines of the business plan for the
period 2009-2011 (the “Business Plan”), as previously approved on 23 December 2008. The Business Plan
contains the Group’s strategic guidelines and earnings and financial position growth targets for the coming
three years. The Business Plan is founded on assumptions of a general nature regarding the external
economic situation and assumptions as to the effects of initiatives and actions taken by the Company,
including (i) the successful completion of the Capital Increase; (ii) an increase in the use of Internet media to
attract advertisers and generate growing revenues on this platform; (iii) a significant increase in the direct
sales force in Italy to enhance the capacity to attract new clients; (iv) the stabilisation of the single client base
in Italy; (v) a reduction in operating costs, particularly those of the Issuer; and (vi) the substantial stability of
the earnings results of other Group companies.
Given the subjective nature of the assumptions in the Business Plan, if one or more of such underlying
assumptions prove inaccurate or only partially accurate, in connection with events that may not currently be
foreseen or quantified in relation to the external scenario and the Group’s business, the Company might not
achieve the growth targets set and the Group’s results could differ (possibly to a significant extent) from the
projections set forth in the Business Plan, with ensuing negative effects on the business, earnings and
financial position of SEAT and the Group.
In particular, as described in Section One, Chapter 22, Paragraph 22.3.1, 50% of the proceeds from the
Capital Increase will be allocated to the early repayment of Tranche A of the RBS Loan, due as of the
payment date immediately after the date on which the proceeds of the Capital Increase are actually received
and until 28 December 2011. The other 50% of the proceeds will remain available to the Company, among
other things for fulfilment of the objectives contained in the guidelines to the Business Plan, unless, in terms
of the objectives under the Business Plan and the timing for their achievement, the Company’s Business Plan
specifically allocates financial resources from the Capital Increase. Most of the costs and investments
envisaged in the Business Plan (which focuses mainly on product development, recruiting new agents and
advertising) are in fact financed through the Issuer’s operating cashflows, backed also by the plan to reduce
and efficiently manage operating costs. The net proceeds deriving from the Capital Increase will mainly
serve to help the Issuer maintain an adequate level of liquidity throughout the duration of the Business Plan
so that it can manage any market risks. The partial or total failure of the Capital Increase would essentially
result in less liquidity being available for the Business Plan, with the consequent need to check the possible
impact on the assumptions of the Business Plan, in terms of timing and level of objectives.
It should be noted that the report by the Independent Auditors on the projections contained in the Business
Plan is annexed to this Information Prospectus.
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The Information Prospectus also contains several estimates by the Issuer of the SEAT Group’s revenues and
EBITDA for 2009-2011, drawn from the Business Plan. Furthermore, the Information Prospectus contains
forward-looking statements regarding the performance of the sector in which the SEAT Group operates.
These statements are founded on the Company’s knowledge and experience and the data available for this
market sector.
Finally, the Information Prospectus contains several statements of dominant position and indications of the
competitive positioning of the Issuer and the Group, expressed by SEAT on the basis of the available data
and its knowledge of the sector in which it operates. Such assessments have been prepared in consideration
of the absence of certain, homogeneous industry data drawn up on the basis of market research on companies
and firms comparable to Group companies.
The estimates and projections are generally subject to risks, uncertainty and assumptions. Consequently, the
SEAT Group’s results and the performance of the sector in which it operates may prove different from those
foreseen in such statements due to known and unknown risks, uncertainty, and other factors set forth, inter
alia, in these Risk Factors and other Sections of the Information Prospectus.
4.1.4 Risks associated with the loss of significant intellectual property rights
The SEAT Group’s trademarks (specifically PAGINEGIALLE, PAGINEBIANCHE, Tuttocittà and SEAT)
and other intellectual property rights are well known on the markets on which the Company operates and are
important for its business. The Company relies upon a set of laws governing databases, copyrights and
trademarks, in addition to contractual agreements, including licensing agreements and confidentiality
agreements, to protect its intellectual property rights. On occasion, SEAT must take legal action against third
parties in order to protect its intellectual property rights. Likewise, SEAT is sometimes a party to legal
proceedings initiated by third parties for alleged breach of the intellectual property rights of others.
Although SEAT is not aware of any substantial breach of its rights to trademarks of relevance to its business,
any proceedings initiated by or against SEAT, regardless of the outcome thereof, could entail significant
costs and outlays of resources with negative effects on the business, earnings and financial position of the
Issuer and the Group.
The trademarks PAGINEGIALLE and PAGINEBIANCHE, along with the corresponding trademarks held in
other European countries by houses that publish directories by category and alphabetical directories (Yellow
Pages, White Pages, Pages Jaunes, Pages Blanches, etc.), are often the object of claims by third parties who
wish to identify their own print and online products with the same or similar brand names, on the assumption
that such names are not sufficiently distinctive, and therefore cannot be validly registered as trademarks, or
have lost their distinctiveness over time through a process of popularisation. In the past, SEAT, along with
its European counterparts, has successfully defended itself against such claims, demonstrating the validity of
its trademarks. Nonetheless, European courts or authorities charged with supervising Community trademarks
could at a future date reach a different conclusion, resulting in the loss of the identity of the Group products
distinguished by said trademarks, with possible negative effects on the Group’s business, earnings and
financial position.
Furthermore, to secure the repayment of the RBS Loan and the payment of all sums due under the additional
Loan Documents (as defined in Section One, Chapter 22, Paragraph 22.3), SEAT has pledged the Group’s
most significant trademarks to RBS and the other lenders. If SEAT is unable to discharge its debts, the
lenders could enforce the collateral provided to them to secure said sums and therefore proceed with the
enforcement of the pledge on the Group’s trademarks, with possible negative effects on the Group’s
business, earnings and financial position.
4.1.5 Risks associated with the possible reduction in revenues deriving from print directories
Print products have performed poorly in Italy over the last few years. This trend may be ascribed to a number
of causes: (i) economic growth in Italy has been slower than projected in recent years and a recession phase
51
RISK FACTORS
is forecast for the near future; (ii) sales activities have recently become increasingly focused on the
management of existing clients and the renewal of agreements with the highest values, a factor which, when
coupled with the fall in the number of agents, has lead to a decrease in the inflow of new clients and a
contraction of the client base; (iii) advertisers (especially large advertisers and advertisers in the most
important urban centres) have increasingly seized the opportunity presented by the rising penetration of the
Internet to decrease advertising spaces in print directories and increase the share of their investments devoted
to Internet media, including the Issuer’s website, paginegialle.it
If the Company is unable to increase its revenues from new clients and secure the renewal of agreements
with existing clients, or if it is unable to offset the lesser revenues from print directories with greater
revenues from Internet directories, such circumstances could result in negative effects on the business,
earnings and financial position of SEAT and the Group.
For further details, please see Section One, Chapter 6, Paragraph 6.1.1.2.
4.1.6 Risks associated with the expansion of the Issuer’s activity in the Internet market
The Issuer’s strategy calls for the development of revenues on its Internet business, which consists of its
proprietary websites. Revenues from online products in Italy represented approximately 12.6% of total
revenues in 2007 and have been verified as 15.3% of total business revenues in 2008, an increase of 18.4%
over the previous financial year.
However, competitors, such as, for example, large search engines or large media and telephony companies,
which have recently been attracting a very high number of Internet users in Italy and providing some
comparable products to the same advertisers, could limit the Company’s ability to attract advertisers to its
own websites.
A greater presence of Internet search engines on the advertising market, a lack of development or slower
development of the Internet advertising market, a slowdown in the penetration of the Internet in the Italian
market, the Company’s inability to improve and develop its networks and systems so as to efficiently
manage traffic on the Company’s websites, or the non-acquisition or acquisition to a limited extent of new
clients by the Company’s sales force could result in non-development or reduced development of the
Company’s Internet activities, with negative effects on the business, earnings and financial position of SEAT
and the Group.
For further details, please see Section One, Chapter 6, Paragraph 6.1.1.2 and Section One, Chapter 13,
Paragraph 13.1.
4.1.7 Risks associated with the expansion of the Group’s business in the Directory Assistance market
The Issuer’s strategy also calls for the development of revenues on the Directory Assistance business, in
which the Company operates on various European markets (Italy, Germany, France, Spain).
Call volumes in the main European countries are gradually falling due to (i) a post-liberalisation structural
decline in all those EU markets in which Universal Service has been replaced by new number systems,
resulting from the perception that the new number systems apply higher rates than those of the old Universal
Service, and (ii) the increasing use of Internet as a search tool.
The change in the market, which is undergoing constant development, has led the Group to focus on
innovation in its value-added services in the Directory Assistance area (such as, for example, hotel bookings,
traffic information, weather forecasts and emergency services), the quality of its database, and the
development of its brands. The Group has implemented a strategy of extending its brands onto other search
platforms, in particular Internet-based ones, the growing use of which represents one of the primary causes
of the decline in call volumes on the market.
The launch of the new online commercial advertising model presents a certain number of risks, such as the
capacity to channel increasing traffic towards the Group’s websites, given the presence of constantly
increasing competition from local advertising portals and the main search engines.
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The Group’s failure to implement this new business model could have a negative effect on the business,
earnings and financial position of SEAT and the Group.
For further details, please see Section One, Chapter 6, Paragraph 6.1.1.2 and Section One, Chapter 13,
Paragraph 13.1.
4.1.8 Non-Renewal of the Mandate of the Chief Executive Officer
The Chief Executive Officer, Mr. Luca Majocchi, informed the Board of Directors’ meeting of 9 February
2009 that he was not willing to serve another three-year term, in relation to the Board of Directors’ renewal
pursuant to a resolution passed by the Ordinary Shareholders’ Meeting convened to approve the financial
statements at 31 December 2008, since he believes that, at the conclusion of two consecutive terms, he has
completed his mission and therefore wishes to move on other professional experiences. For the purpose of
ensuring maximum business continuity during the transition period between the Company’s old management
and new management, on 12 February 2009 Mr. Majocchi and the Reference Shareholders formalised an
agreement by which firstly the Reference Shareholders have committed themselves to vote to reconfirm Mr.
Majocchi as a member of the Board of Directors with the office of Chief Executive Officer and with the
same mandates and powers currently attributed to him, and secondly Mr. Majocchi has committed himself to
accept the office proposed until and not beyond 30 June 2009, and in any case to resign, including on a date
before 30 June 2009, if the company identifies a new candidate for the position of Chief Executive Officer.
While a new Chief Executive Officer is being identified, the Company deems that the recent reorganisation
(described in detail in Section One, Chapter 13, Paragraph 13.1.2 of the Information Prospectus), entailing
among other things the entry of experienced managers into the Issuer’s organisational structure, will
guarantee that during the transition phase the Italian core business will be efficiently managed and developed
and that the foreign subsidiaries will experience improved control.
4.1.9 Credit risk
The Group’s business is characterised by the presence of a large number of clients. Of the Group’s total trade
receivables, 87.2% at 31 December 2008 (87.7% at 31 December 2007) related to SEAT, which has
approximately 550,000 clients distributed throughout Italian territory, consisting primarily of SMEs. Each
year, the Company alone issues approximately 950,000 invoices, each of which, on average, calls for
payments in 2.5 instalments of approximately € 590 each, meaning that there are over 2.3 million collection
transactions.
Given these circumstances, the Group is not exposed to the concentration of credit risk.
However, the high volumes of transactions undertaken do generate a large number of non-performing
positions, with the ensuing need for an efficient receivables management organisation. Over time, the
Company has established a broad-based, constantly reinforced structure for efficient management of all
stages of the payment solicitation process. The internal organisational structure, telephone payment reminder
agencies, debt recovery agencies and network of legal counsel involve a total of approximately 1,400
persons.
The exposure to credit risk, which is represented on the financial statements by a provision for impaired
receivables, is measured by using a statistical model founded on the segmentation of clients according to
geographical location and length of relationship, the estimates of which reflect SEAT’s historical experience
in receivables collection by projecting it into the future.
At 31 December 2008, the provision for impaired trade receivables at the Group level came to € 111.4
million (€ 117.8 million at 31 December 2007), and the percentage of the Issuer’s past-due receivables
covered by the provision had risen to 51.3% from 50% at the end of 2007.
Current economic trends, specifically the stagnation of consumption and the difficulties associated with
access to credit, driven by an increased aversion of banks to assuming positions of risks, could result in the
53
RISK FACTORS
course of 2009 in an increase in the non-performance rate of clients in discharging their obligations to SEAT,
with the ensuing possible negative effects on the Company’s business, earnings and financial position.
4.1.10 Risks relating to dependence on the exclusive supplier of printing services
SEAT uses the printing house Industria Libraria Tipografica Editrice S.p.A. (“Ilte”) for nearly all of its
printing operations for the Italian market and binding and print publication services in Europe. Only a limited
number of other printing houses in Europe are capable of providing a service similar to that provided by Ilte.
Furthermore, SEAT could fail to secure from such new suppliers the same services under the same terms and
conditions as currently provided for in the agreement with Ilte, which is set to expire in 2014.
Consequently, any inability by Ilte to satisfy SEAT’s printing requirements for the Italian market or the
inability by SEAT to renew its agreement with Ilte under favourable conditions could have negative effects
on the business, earnings and financial position of the Issuer and the Group.
For further details, please see Section One, Chapter 6, Paragraph 6.4 and Section One, Chapter 22,
Paragraph 22.1.
4.1.11 Risks relating to any system malfunctions, delays or breaching of the security systems
Most of SEAT’s business relies to a significant extent on the efficient, uninterrupted operation of proprietary
and third-party information technology (“IT”) and communications systems. Any malfunction of current or
new future systems, including any malfunctions caused by third parties, could potentially compromise the
receipt, processing or storage of data and the proper ordinary management of business, with possible material
negative effects on the Group’s business, earnings and financial position.
The Group’s IT and communications systems may be subject to damage or discontinuity of service due to a
variety of causes, such as computer virus attacks on web portals specifically targeted at SEAT’s online
directories and search engines. Despite the precautionary measures taken by SEAT, illicit acts by third
parties, natural disasters or other unforeseen problems that entail the compromise or loss of data on the
Group’s IT systems could have negative effects on the business, earnings and financial position of the Issuer
and the Group.
4.1.12 Risks associated with litigation
On the date of the Information Prospectus, SEAT and the other Group companies are parties, as defendants,
to civil and administrative legal proceedings initiated: (i) by their clients for alleged breach of advertising
agreements; (ii) by subscribers of telephone services for alleged errors or omissions in the publication of
information related to users and taken from the Single Data Base of telephone services operators used by the
Issuer; and (iii) by agents and employees for matters relating to employment contracts. SEAT is also
currently undergoing a tax assessment by the Milan Tax Police.
It should be noted that SEAT and the other Group companies were parties, as defendants, to civil and
administrative legal proceedings. SEAT has made allocations to a provision for ongoing litigation risks in its
financial statements amounting at consolidated level to approximately € 21 million at 31 December 2008,
included in the current contingencies and charges item for approximately € 52 million overall.
When making allocations to the contingency provision for litigation in progress, the Company has
considered the potential risks attached to each dispute and the accounting standards applicable thereto, which
call for the recognition of liabilities for likely, quantifiable risks. Some of the proceedings to which SEAT
Group companies are parties, and for which a negative outcome is deemed unlikely or unquantifiable, have
not been included in the provision.
However, it may not be excluded that the proceedings not included when making allocations to the provision
may nonetheless result in extraordinary expenses, or that the allocations made to the provisions for risks and
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RISK FACTORS
contingencies may prove insufficient to cover the liabilities arising from a negative outcome of the
associated proceedings in excess of projections.
Consequently, the Group could at a future date be required to discharge liabilities associated with a negative
outcome to ongoing or threatened litigation not covered by provisions for risks, with the ensuing possible
negative effects on the business, earnings and financial position of the Issuer and the Group.
The main disputes currently in existence involving the Issuer or one of its subsidiaries as plaintiff or
defendant are:
•
dispute between SEAT and Telecom Italia due to billing terms and receivables management for nongeographical number (NGN) access services provided by Telecom Italia S.p.A. to its subscribers
under interconnection contracts in effect with Other Licensed Operators (“OLOs”). The dispute was
concluded following the issue of AGCOM Resolution No. 27/08/CIR and the renegotiation of a new
contractual text for “Billing on behalf of third parties,” signed on 31 October 2008, having as its
object the interconnection services for both the 892 numbers and the 12xy numbers;
•
dispute between AGCOM and Telecom Italia S.p.A. in which SEAT filed an intervention “ad
adiuvandum” regarding the costs for interconnection from the mobile network to NGNs as per the
emergency measure issued by AGCOM with Resolution 504/06/CONS. The case is currently
pending before the Council of State following AGCOM’s appeal against the ruling of the Lazio
Regional Administrative Court upholding Telecom Italia S.p.A.’s appeal at first instance;
•
dispute arising from the partial de-merger in August 2003 of Telecom Italia Media S.p.A. (formerly
“ex SEAT”) launched against the latter by Cecchi Gori Group Fin. Ma. Vi. S.p.A. (currently
Fallimento Cecchi Gori Group Fin. Ma. Vi.) and Cecchi Gori Group Media Holding S.p.A., now in
liquidation, in respect of which – and notwithstanding what is described below – the Issuer is jointly
and severally liable pursuant to Article 2506 quater, Paragraph 3, Italian Civil Code, for any
liabilities deriving therefrom and not met by Telecom Italia Media. The disputes in question regard,
respectively: (i) the establishment of the nullity or non-effectiveness of the security pledge on shares
of Cecchi Gori Communication S.p.A. and the claim for damages of not less than LIT 750 billion,
plus revaluation and interest; (ii) the request for damages for extra-contractual liability for € 500
million; and (iii) the challenge to the resolution passed by the Shareholders’ Meeting of Cecchi Gori
Communications S.p.A. on 11 August 2000. Rulings by the courts are currently pending;
•
dispute between Telegate and Deutsche Telekom regarding costs associated with the supply of
telephone subscriber data and for which Telegate sought the restitution from Deutsche Telekom of
the excess sums paid by the former during the periods: (i) 1997-2000; (ii) 2000-2004; and (iii)
January-September 1999. Recently a final decision was made with regard to this last period, with the
court ruling in favour of Telegate, while the others are still pending;
•
dispute between Telegate and Telekom Austria for the purpose of determining the cost for the
provision of telephone subscriber data, with Telekom Austria AG ordered to make restitution of the
greater sums paid equal to approximately € 900,000.00. The court’s decision is still pending;
•
SEAT is also currently undergoing a tax assessment by the Milan Tax Police; however, on the Date
of the Information Prospectus no formal challenges have been made against the Company.
The overall value of the main disputes to which the SEAT Group is a party – and listed here – amounts to
approximately € 913.8 million, of which € 887 million are ascribable to disputes against Telecom Italia
Media S.p.A., in relation to which Telecom Italia Media S.p.A. and the Former SEAT 2 (this latter
subsequently incorporated into Silver S.p.A., in turn incorporated into Spyglass S.p.A., the current Issuer)
signed an agreement (dated 10 June 2003) by which they confirmed that any liabilities attributable to and
relating to the business division remaining under Telecom Italia Media would remain entirely under the
responsibility of Telecom Italia Media. Thus, in relation to the aforementioned disputes, the Company has
not effectively set aside a litigation risk provision as it does not face any real liability risk.
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RISK FACTORS
4.1.13 Risks associated with a possible unfavourable result of the Impairment Test on intangible assets
The SEAT Group has recognised among its assets significant goodwill values arising from corporate merger
and/or acquisition transactions undertaken over time (€ 3,394 million at 31 December 2008, or 86.6% of net
invested capital). Such assets are subject to an Impairment Test on an annual basis or when there are
indicators that they have undergone impairment in value. In particular, in 2008, the impairments due to the
Impairment Test were equal to € 130.8 million (for further details, please see Section One, Chapter 9bis,
Paragraph 9.2bis).
The measurement of the goodwill carried is undertaken by comparing the book value of each CGU (cashgenerating unit) with its recoverable value, which is equal to the greater of the fair value of the asset, where
applicable, and its value in use (the current value of expected future cash flows projected to arise from the
permanent use and disposal of an asset at the end of its useful life). Consequently, the measurement process
is sharply conditioned by the underlying assumptions employed in estimating future cash flows and the
associated discounting rates. If such future cash flows and discounting rates subsequently diverge
significantly from the estimated values, resulting in a reduction of the recoverable value estimated at 31
December 2008, there could be a loss in the goodwill levels stated in the Group’s 2008 figures; this
circumstance could have significant negative effects on the Group’s income statement, and, consequently, its
level of equity.
4.1.14 Risks associated with possible changes made to items in the Issuer’s draft statutory financial
statements at 31 December 2008 during the Shareholders’ Meeting for approval of the statements
On 6 March 2009, the Board of Directors approved the consolidated financial statements of SEAT Group at
31 December 2008 and the Issuer’s draft individual financial statements at 31 December 2008, and requested
that the Chairman call an Ordinary Shareholders’ Meeting for 8 and 9 April 2009 – respectively in first and
second call – to approve the Issuer’s financial statements for the year ended on 31 December 2008.
In the event that during the Shareholders’ Meeting approving the Issuer’s financial statements at 31
December 2008 material changes or variations are made to the items with respect to those reported in the
Issuer’s draft financial statements and in the Group’s consolidated financial statements as approved by the
Board of Directors, it would be necessary to reconvene the Board of Directors to approve new consolidated
financial statements at 31 December 2008 so that SEAT Group can take into account the changes made to
the Company’s individual financial statements at 31 December 2008 during the Ordinary Shareholders’
Meeting.
4.2
RISK FACTORS ASSOCIATED WITH THE SECTOR IN WHICH THE ISSUER OPERATES
4.2.1 Risks associated with the advertising market’s exposure to economic cycles
The Group’s advertising revenues, like those of the publishing industry in general, are cyclical and could
decline due to the deterioration of general economic conditions and changes in economic and demographic
factors at the regional and local level, at which SMEs (SEAT’s primary clients) operate. The Company
cannot guarantee that the demand for the Group’s services will remain at the current levels. Advertising
revenues have historically decreased during general economic downturns and recessions at regional and local
level, similar to the conditions being experienced currently.
Macroeconomic projections for 2009 show a weakening economic position, with certain key indicators likely
to decline. Gross domestic product, trade volumes, unemployment levels and consumer confidence are
factors particularly relevant to the local and regional publication industry. Each of these indicators has
declined recently and is foreseen to continue to deteriorate, with a likely negative impact on the advertising
market.
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The Group’s revenues have been negatively conditioned by the volatility of markets at the macroeconomic
level. A lasting downturn in the economy would be likely to have negative effects on the business, earnings
and financial position of the Issuer and the Group.
Furthermore, the Group’s advertising revenues are dependent on factors specifically related to directory
users. Such factors include, inter alia, the size and the demographic characteristics of the local population
and local and general economic and market conditions. Many of these factors are beyond the Group’s
control, and the Group’s failure or inability to react to such economic and demographic changes in the local
communities of various markets could have negative effects on the business, earnings and financial position
of the Issuer and the Group.
For further details, please see Section One, Chapter 6, Paragraph 6.1.1.2 and Chapter 13, Paragraph
13.1.3.
4.2.2 Risks associated with amendments of applicable laws governing information technology, the
protection of personal data, and other services offered by the Group
The markets on which SEAT provides its services are regulated. Decisions by regulatory authorities,
including antitrust authorities, could have negative effects on the business, earnings and financial position of
the Issuer and the Group. The enactment of new laws, regulations, or policy guidelines that change the
current legislative framework could have substantial negative consequences for the services currently offered
by SEAT or limit the growth of SEAT’s business in Italy, the United Kingdom and other countries. The
European Union has enacted various directives pertaining to the telecommunications industry that have not
yet been transposed into law in all Member States of the European Union, such as, for example, Germany.
Moreover, the European Commission regulates the processing of personal data and the protection of the
confidentiality of such data in the electronic communications sector. The Personal Data Protection Authority
of the Republic of Italy has established new criteria for the publication of the personal data of subscribers,
dictating certain restrictions where such data are employed in direct marketing activities. The regulation of
the Internet and the associated services is still in the developmental stage.
If the legislative framework within which SEAT operates becomes more restrictive, including as a result of
more extensive regulation of Internet content, such a situation could have negative effects on the business,
earnings and financial position of the Issuer and the Group.
For further details, please see Section One, Chapter 6, Paragraph 6.1.1.4.
4.3
RISK FACTORS LINKED TO THE SHARES OFFERED
4.3.1.
Risks associated with partial implementation of the Capital Increase
On 23 December 2008, the Reference Shareholders (with the exception of the BC Investors) undertook to
subscribe the entirety of the portion of the Capital Increase to which they were entitled (equal to 49.6% of
the entire share capital), after agreeing on an internal reorganisation of the ownership structure involving the
release of the BC Investors from the shareholders’ agreement of 30 July 2003 and the reallocation of the
majority of the equity capital held by the BC Investors to two of the other three Reference Shareholders. The
Reference Shareholders (other than the BC Investors) agreed to pay a total of approximately € 99.2 million
for the subscription of the Capital Increase. The Reference Shareholders’ subscription commitment (other
than for the BC Investors) was conditional upon conditions precedent which, to the best of the Company’s
knowledge on the date of the Information Prospectus, have been fully satisfied (for further details, please see
Section One, Chapter 18, Paragraph 18.4). The conditions are as follows:
•
(a) RBS’s acceptance of the Waiver Request sent by the Company on 1 December 2008 to RBS and
pursuant to which the Company has requested the necessary consent in order, among other things: (i)
to proceed with the Capital Increase, and (ii) to modify, also in light of the Capital Increase, the
current levels of financial covenants provided for under the RBS Loan Agreement and (b) RBS’s and
the Company’s execution of the Amendment Agreement and fulfilment of all the conditions
precedent included therein;
57
RISK FACTORS
•
the receipt of a formal written declaration from CONSOB (received on 16 March 2009, protocol No.
9023135) stating the non-existence, due to the overall reorganisation operation internal to the
shareholders’ agreement and the Capital Increase, of circumstances resulting in obligations to submit
public purchase bids for the Issuer’s capital;
•
the approval of the reorganisation operation by the competent antitrust authorities. In this regard, it
should be observed that notice of the reorganisation was given to the German antitrust authority (on
9 February 2009) and the Austrian antitrust authority (on 10 February 2009) and approved
respectively on 25 February 2009 and 28 February 2009 (approval issued by the Austrian Antitrust
Authorities on 27 February 2009 with effect from 28 February 2009);
•
SEAT’s approval of the Capital Increase at an Offering Price per share of not more than € 0.03 per
share, or € 6, following the Consolidation. (For further details, please see Section One, Chapter 21,
Paragraph 21.1.1);
•
the non-occurrence, at the latest by the third day prior to CONSOB’s authorisation to publish the
Information Prospectus, of events such as would materially prejudice SEAT’s economic and
financial position, in other words such as would make it evident that SEAT is not able to satisfy, on
the basis of a projected period of 12 months, certain solvency indexes.
It should be also noted that the Offering is backed by a guarantee provided by Mediobanca having as its
object the underwriting of Shares corresponding to any Option Rights not exercised at the end of the Stock
Exchange Offering, for the maximum amount of € 100,800,000, equal to the residual portion of the Capital
Increase other than the portion forming the object of the subscription commitment by the Reference
Shareholders, notwithstanding the fact that, in the event that the Shares to be subscribed under the
guarantee (the assumption) represent, on the basis of a hypothetical calculation (on a figurative basis),
more than 30% of the ordinary share capital of SEAT after the Capital Increase, the underwriting
commitment of Mediobanca shall be reduced by an amount, equal to a maximum equivalent of
€ 2,000,000, so that the percentage of the ordinary share capital represented by the shares held by the
Reference Shareholders (other than the BC Investors) after the Capital Increase shall thereby exceed
50.01% (please see Section One, Chapter 8, Paragraphs 18.2 and 18.4 and Section Two, Chapter 3,
Paragraph 3.3). Therefore, in the event that the threshold of 30% of the ordinary share capital of SEAT is
exceeded by Mediobanca as a result of the assumption, it will not entail a PTO obligation pursuant to Art.
49, paragraph one, letter (a) of the Issuer Regulations, which provides that the exceeding of that threshold
shall not entail the tender obligation provided for in Art. 106 TUF if “the majority of the voting rights
exercisable at an ordinary shareholders’ meeting are held by another shareholder or by other shareholders
jointly”.
The Underwriting Agreement shall provide for the event that Mediobanca shall not be required to fulfil the
underwriting obligations or for such obligations to be revoked upon the occurrence, among other things, of
Prospectus due to events that – in the reasonable opinion of Mediobanca – may have material adverse
and/or the Group; (ii) material non-fulfilment by the Company of its commitments pursuant to the
contained in the Information Prospectus no longer true or correct in a significant aspect, and to give
appropriate advance notice to Mediobanca of any statement, disclosure or announcement that the Company
intends to make); (iii) the fact that the representations and warranties given by SEAT in the Underwriting
Agreement should prove untrue, incomplete or incorrect in a material aspect; (iv) the non-fulfilment by the
Reference Shareholders (except for the BC Investors) of the commitment to subscribe their part of the
Capital Increase; and (v) events of an extraordinary nature such as to have a negative impact on the
Business Plan.
Should the Reference Shareholders (with the exception of the BC Investors) fail to subscribe a portion of the
Capital Increase (i) certain provisions of the Amendment Agreement to the RBS Loan Agreement (in
particular the reset of the financial covenant) would not enter into force (for further details, please see
58
Section One
RISK FACTORS
Paragraph 4.1.1.4 of this Chapter); and (ii) Mediobanca might not fulfil or might revoke its guarantee
obligations.
Should Mediobanca exercise its withdrawal right or should any of the conditions precedent relating to the
guarantee not be fulfilled, the Company would have fewer resources with which to fulfil the objectives
contained in the Business Plan, as specified in more detail in Paragraph 4.1.3 of this Chapter.
For further details, please see Section Two, Chapter 5, Paragraph 5.4.3.
4.3.2.
Risks relating to the liquidity and volatility of the Shares
The Shares present the risk factors typical of an investment in listed shares. Holders of the Shares may
liquidate their investments on the Mercato Telematico Azionario. Option Rights to Shares arising from the
Capital Increase and forming the object of the Offering may only be traded on the MTA during the period
from 30 March 2009 to 8 April 2009 (both dates inclusive).
However, sales offers during this period might not meet with adequate, timely purchase offers due to the
trend in trading of Option Rights and the existence of insufficient liquidity. The trading price of the Option
Rights will depend on, inter alia, the trend in the price of outstanding SEAT shares, and could be subject to
greater volatility than the market price of said shares.
Furthermore, factors such as changes in the business, earnings, financial or income position of the Company
or its competitors, changes in the general conditions of the sector in which the Company operates, changes in
the general economy and capital markets, changes in the legislative and regulatory framework, measures by
the Italian Communications Authority (“Agcom”), and the dissemination by media outlets of information
from journalistic sources regarding the Company could lead to substantial fluctuations in the price of the
Shares and, as the case may be, of the Option Rights.
Moreover, equity markets have shown considerable fluctuations in prices and volumes in recent years. Such
fluctuations could in the future have a negative impact on the market price of SEAT shares and the Option
Rights, regardless of the Company’s operating profits or financial condition.
In addition, some of the Company’s shareholders could decide not to exercise their Option Rights under the
Offering and to sell them on the market. This could have a negative effect on the market prices of the Option
Rights and the Shares.
For further details, please see Section Two, Chapter 5.
4.3.3.
Dilution effects
Because the transaction in question is a capital increase offered in option, it will not result in dilution in
terms of the percentage of ownership of share capital for holders of the Company’s ordinary and savings
shares who decide to accept the Offering by subscribing in full all Option Rights to which they are entitled,
except as explained below.
However, given that the Offering in Option is reserved both to the holders of SEAT ordinary shares and to
holders of SEAT savings shares, in the event of exercise of all the Option Rights by all shareholders there
will be an effective dilution equal to a maximum of 1.60% on the percentage of the share capital represented
by the ordinary shares of the Issuer.
Conversely, the Company’s shareholders who decide not to exercise their Option Rights will see their
holdings diluted as a result of the issue of the Shares. The maximum percentage of such dilution is 97.84%.
Please see Section Two, Chapter 9, Paragraph 9.2.
4.3.4.
Markets in which the Offering is not allowed without authorisations from the competent authorities
The Information Prospectus does not constitute an offer of securities in the United States of America or any
other country in which the Offering is not permitted without the specific authorisation of the competent
authorities (“Other Countries”). No security may be offered or traded in the United States of America or the
59
RISK FACTORS
Other Countries without specific authorisation or registration, or exemption from such authorisation or
registration, issued in accordance with provisions of law applicable in each of these countries.
The Shares shall not be registered under the United States Securities Act of 1993, as amended, or under
equivalent legislation in force in the Other Countries. Consequently, the Shares may not be offered or
otherwise delivered, directly or indirectly, in the United States of America or the Other Countries.
SEAT’s shareholders not residing in Italy may be excluded from the sale of the Option Rights associated
with the Shares and/or the exercise of such rights under any legislation in a foreign jurisdiction applicable to
them. Shareholders are therefore advised to seek specific legal advice on this issue before taking any action.
If the Issuer determines that the exercise of the Option Rights associated with the Shares by shareholders
may violate laws and/or regulations in the United States of America or the Other Countries, it reserves the
right not to permit such exercise.
Please see Section Two, Chapter 5, Paragraph 5.2.1.
4.3.5.
Potential conflicts of interest
Mediobanca, acting as the Sole Global Coordinator and Sole Bookrunner for the Offering, is in a position of
potential conflict of interest inasmuch as it and the Issuer, by the day before the commencement of the
Offering, are to enter into an underwriting agreement, the purpose of which is to ensure the success of the
Capital Increase, for the portion of the Capital Increase exceeding that forming the object of the subscription
commitment by the Reference Shareholders (except BC Investors).
Please see Section Two, Chapter 5, and Paragraph 5.4.3.
****
60
Section One
5
INFORMATION ON THE ISSUER
5.1
History and development of the Issuer
5.1.1
Legal and trade name of the Issuer
The legal name of the Issuer is SEAT Pagine Gialle S.p.A.
The Issuer may also validly identify itself for all intents and purposes under the law and in all documents
pertaining to it by the abbreviated names SEAT S.p.A. or SEAT PG, without restrictions in terms of
graphical representation.
5.1.2
Place of registration of the Issuer and its registration number
SEAT is registered with the Chamber of Commerce, Industry, Handicrafts and Agriculture of Milan – Office
of the Register of Companies of Milan under No. 03970540963, Economic and Administrative Index
(“REA”) No. 1715428.
5.1.3
Date of incorporation and length of life of the Issuer
SEAT was incorporated on 27 May 2003 by deed notarised by Notary Fausta Piazza of Milan, repertory No.
324694 and index No. 6407, under the initial company name of Spyglass S.r.l., and was then transformed
into an Italian-law company limited by shares (“società per azioni”) by resolution of the Extraordinary
Shareholders’ Meeting of 22 July 2003.
On 23 December 2003 the following mergers by absorption became effective:
i) the Former SEAT 2 (as defined hereunder) into Silver S.p.A., by deed notarised by Prof. Piergaetano
Marchetti of Milan, repertory No. 17783 and index No. 5449, of 19 December 2003. Silver S.p.A. had
been incorporated on 30 May 2003 by deed notarised by Notary Fausta Piazza of Milan, repertory No.
324759 and index No. 6442, with its share capital being fully owned by Spyglass S.p.A.;
ii) Silver S.p.A. into Spyglass S.p.A., the current Issuer, which, when the merger was completed,
changed its name to SEAT Pagine Gialle S.p.A.
The Company’s life under the Bylaws is set to expire on 31 December 2100. This term may be extended by
resolution of the Extraordinary Shareholders’ Meeting.
5.1.4
Domicile and legal form of the Issuer, legislation under which the Issuer operates, its country of
incorporation and registered office
SEAT was incorporated in the form of an Italian-law company limited by shares (“società per azioni”) and
operates under the laws of Italy.
Its registered office is in Milan, at Via Grosio 10/4 (telephone number: +39 02 33443095), and its secondary
offices, forming its primary administrative office, are located in Turin, Corso Mortara 22 (telephone number:
+39 011 4351).
5.1.5
Important events in the development of the Issuer’s business
5.1.5.1 Origins
SEAT’s origins may be traced back to 1925, the year of incorporation of Società Elenchi Ufficiali degli
Abbonati al Telefono S.p.A., which engaged in the publication and distribution of telephone directories for
residential users in northern Italy and, subsequently, throughout the entire country.
In 1966, the first business directory was introduced to Italy through the PAGINEGIALLE service.
In 1987, Società Elenchi Ufficiali degli Abbonati al Telefono S.p.A. merged with STET S.p.A., which had
been controlled by Italy’s Ministry of the Treasury since 1933.
61
5.1.5.2 Subsequent years
Until 1997, STET S.p.A. held a controlling interest in Telecom Italia S.p.A., Italy’s primary provider of
public telecommunications services. On 31 December 1996, following the partial de-merger of STET S.p.A.,
business directory activities were transferred to a newly incorporated company, SEAT S.p.A. (the “Former
SEAT”).
The Former SEAT’s shares were allocated to the same shareholders of STET S.p.A. in proportion to the
stake held by each in the share capital of STET S.p.A. Consequently, following the de-merger, 38.73% of
share capital with voting rights in the company forming the beneficiary of the transaction (i.e. the Former
SEAT) was held by the public (which was also a shareholder in STET S.p.A.), while the remaining 61.27%
was held by Italy’s Ministry of the Treasury. On 2 January 1997, the Former SEAT’s ordinary and savings
shares were listed on the Mercato Telematico Azionario through a public subscription and sale offering.
Then, in November 1997, Italy’s Ministry of the Treasury transferred its entire equity investment in the
Former SEAT to a group of private investors.
In 1999, the Former SEAT’s business was positively influenced by the Internet boom and underwent rapid
economic expansion, due in part to ownership of the website www.virgilio.it, one of Italy’s main web
portals. SEAT then gradually expanded the scope of its business from telephone directories to information
services, employing other distribution platforms in addition to print media: telephone and Internet.
Following the growth and development of information technology platforms and the technology linked to
use of the Internet, in 2000 the controlling shareholders transferred their equity capital in the Former SEAT
to Telecom Italia S.p.A., which then transferred the business unit responsible for Internet interconnectivity to
the Former SEAT.
From 1999 to 2001, the Former SEAT made a considerable number of strategic investments, expanding the
scope of its business. In this context, the company acquired various enterprises, primarily operating in the
Internet industry, a segment with high earnings potential.
At the end of 2001 the Former SEAT began to rationalise the group’s structure and investment portfolio by
disposing of non-strategic assets. The number of subsidiaries and associates of the Former SEAT group fell
from 190 in early 2002 to 100 at the end of the same year.
5.1.5.3 Subsequent developments and creation of the new SEAT Pagine Gialle S.p.A.
A series of extraordinary operations occurred throughout 2003.
On 10 June 2003, upon the conclusion of a competitive auction procedure, Telecom Italia S.p.A. and Silver
S.p.A. entered into a share purchase and sale agreement (the “Purchase and Sale Agreement”) under which
Telecom Italia S.p.A., which held (directly or indirectly, through its subsidiaries Telecom Italia Finance S.A.
and TI.IT – Telecom Italia Information Technology S.p.A.) approximately 62.50% of the Former SEAT’s
ordinary share capital (approximately 61.47% of its total share capital), undertook to sell the entirety of its
stake in the Former SEAT’s equity capital to Silver S.p.A., a special-purpose vehicle fully owned by the
Reference Shareholders.
On 1 August 2003, Telecom Italia S.p.A. completed a partial de-merger of the Former SEAT, involving the
transfer to a newly incorporated company, which concurrently took the name SEAT S.p.A. (the “Former
SEAT 2”), of the business unit primarily comprising: (i) the Directories business area (consisting of
telephone directory activities involving the sale of advertising space and the publication of print and online
products as well as the publication of other communications products for SMEs); (ii) the Directory
Assistance business area (pertaining to the provision of information services by telephone and call centre
activities); (iii) the Business Information business area (consisting of the provision of one-to-one marketing,
marketing intelligence and database management services to companies); and (iv) equity capital holdings in
companies operating in the above business areas. The remaining business areas, including Internet
connectivity, telecommunications, office products and publishing activities, remained within the de-merged
company, which subsequently took the name Telecom Italia Media S.p.A. On 8 August 2003, in
performance of the Sale Agreement, Silver S.p.A. purchased the stake in the Former SEAT 2’s equity capital
held by Telecom Italia S.p.A. (approximately 62.50% of ordinary capital and 61.47% of total share capital).
62
Section One
Due to the partial de-merger and the purchase of the Former SEAT 2’s equity capital, Silver S.p.A. was
required by Article 106, Paragraph 1, of the Consolidated Law to make a public purchase bid (the “Bid”) for
the entirety of the Former SEAT 2’s outstanding ordinary shares, corresponding to 37.50% of the latter’s
ordinary capital and 36.88% of its total share capital. Upon the completion of the Bid, the stake held by
Silver S.p.A. in the Former SEAT 2’s equity capital had risen to 62.52% of ordinary capital and 61.49% of
total share capital.
On 23 December 2003, the mergers by absorption of the following entities were executed:
(i) of the Former SEAT 2 into Silver S.p.A., incorporated on 30 May 2003, and the holder of 61.49% of
the Former SEAT 2’s total share capital at the conclusion of the Bid;
(ii) of Silver S.p.A. into Spyglass S.p.A., the current Issuer, which at the time of the merger held 100%
of the capital of Silver S.p.A. (the only holding in its portfolio);
(collectively, the “Operation”).
The Operation was subject, among other conditions, to admission of the Company’s ordinary and savings
shares to trading on the Mercato Telematico Azionario.
The twofold merger had retroactive effect for accounting purposes on the date of registration of the two
absorbing companies in the Register of Companies, therefore on:
- 3 June 2003 for Silver S.p.A.;
- 1 August 2003 for SEAT (formerly Spyglass S.p.A.).
Beginning on the effective date of the Operation, Spyglass S.p.A. took the name SEAT Pagine Gialle S.p.A.
and its ordinary and savings shares were admitted to trading on the MTA without interruption with respect to
the listing of the Former SEAT 2’s ordinary and savings shares.
5.1.5.4 Phase subsequent to the Operation
In the following period SEAT continued to pursue its plan of organisational rationalisation and management
focus on its core business (Directories, Directory Assistance, and Business Information). These strategic
objectives were aimed at maintaining and reinforcing leadership of the directories and business information
markets by developing the product portfolio and expanding its operating presence on all distribution
channels, especially new IT systems, both in Italy and abroad.
The period from 2003 to 2005 was consequently characterised by reinforcement of the online directories
business and traditional brands (PAGINEGIALLE and PAGINEBIANCHE) by developing them on
multimedia channels such as CD-ROMs, the Internet, and WAP, as well as expanding investments in other
European countries in addition to Italy and Germany.
The same period also witnessed several investment/disinvestment operations in pursuit of the Group’s
strategic goals in Italy and abroad.
The following extraordinary operations were undertaken in Italy:
•
on 30 March 2004, by virtue of a purchase and sale agreement entered into on 16 March 2004 and
subsequently amended on the date of performance, SEAT, effective prior to the completion of the
sales operation described above, and as part of an operation whereby it transferred to a U.S.
company (Acxicom Corporation) 98.6% of the share capital of Consodata S.A. and 100% of the
share capital of Consodata Germany Verwaltung GmbH and Consodata Germany GmbH & Co. KG,
acquired from Consodata S.A. 100% of the share capital of the latter’s subsidiary, Consodata;
•
on 13 September 2005, SEAT purchased from Promoinvestments S.r.l. 51% of the share capital of
CIPI, a company engaged in the sale of promotional and informational material and the manufacture
and sale of office products.
The following primary equity capital investment and disinvestment operations were undertaken in Europe:
•
on 30 September 2004, Telegate entered into a purchase and sale agreement having as its object the
transfer of 100% of the share capital of its English subsidiary, 118866 Ltd., to Croftacre Holdings
Ltd., with the aim of focusing its business and investment resources on the European Directory
63
Assistance market, which was liberalised the following year. The acquisition took effect on 1
October 2004;
•
on 14 October 2004 SEAT transferred to Pages Jaunes S.A. (previously a shareholder with a 50%
interest) its equity capital holding (representing 50% of share capital) in Eurodirectory S.A., a
company owning 49% of the share capital of Editus Luxembourg, the publisher of Luxembourg
directories, the activities of which allowed for limited synergies with the rest of the Group;
•
on 21 July 2005 the Telegate Group purchased the entire share capital of Scoot France SARL, which
operates in the directory assistance market in France, positioning itself as an alternative provider of
such services, in part with the aim of taking advantage of opportunities presented by the initial phase
of the liberalisation of the French market implemented in November 2005;
•
on 5 October 2005 Telegate acquired 1818 Auskunft AG, which was the owner of the “golden
number” 1818 and operated in the directory assistance market in Switzerland. On 10 October 2006
this equity capital holding was sold to the U.S. company InfoNXX-Group, in order to exploit the
opportunity to capitalise the investment at an advantageous price;
•
on 7 June 2006 Telegate also purchased from SNT Deutschland AG the entire share capital of
Telegate Auskunftdienste GmbH, and consequently the services associated with the numbers 11881,
11882 and 11889, as well as the agreements with the clients for such services.
5.1.5.5 Recent developments (2007 and 2008)
Investments and disinvestments in equity capital
(A) Katalog
In November 2007 the SEAT Group, in performance of a 50/50 joint venture agreement with Doğan Yayin
Holding A.S. (“Doğan”), a leading Turkish media, publishing and telecommunications service group aimed
at developing the directories business in Turkey, subscribed a specific reserved capital increase of
approximately USD 7.6 million by Katalog Yayin ve Tanitim Hizmetleri A.S. (“Katalog”), a company
operating on the Turkish directories market and owner of the Golden Pages brand, theretofore controlled by
Doğan. At the conclusion of this capital increase, the SEAT Group held 50% of Katalog. This operation was
undertaken in order to combine the SEAT Group’s expertise in product development, sales force
organisation, and IT applications with Doğan’s in-depth knowledge of Turkey and the Turkish media market.
The joint venture’s business plan provided for: (i) an initial phase devoted to the fine-tuning of the print and
Internet product line, the formation of a competent local sales force, and the launch of an experimental
version of the new directories; and (ii) a second phase devoted to increasing the awareness and dissemination
of the product through advertising investments and the development of sales. On the basis of the goals set out
under (i) above, the first directories sales campaign in the Turkish capital, Istanbul, was implemented in the
second half of 2008, leading to the distribution in November of approximately 1.25 million copies of print
directories and the establishment of the website www.bravoo.com.
(B) Telegate Media (formerly KlickTel AG)
In the first quarter of 2008, Telegate purchased 14.1% of the share capital of the German firm KlickTel AG
on the market, paying approximately € 4.4 million. KlickTel AG, which subsequently changed its name to
Telegate Media AG, had been founded in 1999 and operated on the German online directories market, and its
shares are traded on the Entry Standard segment of Deutsche Börse. During the same period, in February
2008, Telegate entered into a series of preliminary agreements for the purchase of additional holdings
totalling 78.7% of Telegate Media’s share capital for consideration of approximately € 25 million. This
operation, after being approved by the German Federal Cartel Office, became effective in April 2008,
bringing the investment in the German company to 92.8%. Then, in May 2008, Telegate made a public
purchase bid to purchase the entirety of Telegate Media’s outstanding share capital for consideration of € 7.8
per share and also undertook additional share purchases on the market, which resulted in an overall stake of
97.23% of Telegate Media’s equity capital at 31 December 2008.
The acquisition of Telegate Media allowed the SEAT Group to strengthen its position in the directory and
directory assistance service market in Germany in terms of hits (approximately two million individual users
64
Section One
per month in Germany), client base (approximately 25,000 B2B advertisers) and sales capacity
(approximately 400 sellers)2.
It should be noted that Telegate, after exceeding the threshold of 95% ownership of Telegate Media’s share
capital, submitted a squeeze-out request to its subsidiary in order to proceed with the purchase of the entirety
of the latter’s share capital. Under the provisions of the German Stock Corporation Act, the squeeze-out
procedure requires the authorisation of the general shareholders’ meeting of the company whose shares are to
be purchased (the target company). This procedure only becomes effective following the registration of the
associated resolution in the Register of Companies in which the target company is registered, in the absence
of opposition from any minority-interest shareholders, and results in the automatic transfer of the shares to
the majority shareholder that initiated the procedure.
In the case at hand, on 3 December 2008, Telegate Media’s general shareholders’ meeting passed a
resolution approving Telegate’s squeeze-out request. However, this resolution has been challenged by
several of the company’s minority-interest shareholders. Notice of the petition has yet to be served on
Telegate Media.
(C) WLW
On 1 October 2007, SEAT, acting through its fully-owned subsidiary Provista GmbH, which subsequently
changed its name to Wer liefert Was? Holding GmbH, purchased from Eniro AB for € 118 million (in terms
of enterprise value) 100% of the share capital of the German firm Wer liefert Was? GmbH – a provider of
online telephone directory search services to export companies in the manufacturing industry – in order to
strengthen the Group’s position on the online B2B market in Europe, and particularly in Germany, as well as
to develop business synergies with another SEAT subsidiary already operating on the B2B market,
Europages.
On 11 March 2008 the merger by absorption of Wer liefert Was? GmbH into Wer liefert Was? Holding
GmbH took effect, and the latter subsequently changed its name to Wer liefert Was? GmbH (“WLW”).
During 2008, following the redefinition of the Group’s strategic goals by SEAT’s management, aimed at
expanding the scope of its activities in its core Italian business and gradually disposing of non-essential
equity capital holdings, in particular those on markets with poor prospective returns, the Company decided to
sell the entirety of its investment in its subsidiary WLW. Consequently, on 23 December 2008, SEAT, in
performance of the purchase and sale agreement entered into in November 2008, sold, for consideration of €
40 million (in terms of enterprise value), 100% of the shares of WLW and the companies in the latter’s
group, with the exception of WLW Vermögen (a non-operating company in the process of liquidation) to the
Swedish concern Bisnode AB, which purchased the equity capital holding in question through its fully
owned special-purpose vehicle, Provista Siebenhundertsechsunddreißigste Verwaltungsgesellschaft mbH.
The payment amount agreed upon was determined according to the ‘locked box’ mechanism3, on the basis of
the company’s accounting and financial situation at 30 September 2008, and was paid in full on the date of
the transfer of the equity investment, after receiving authorisation from the German Competition and Market
Authority, which was a condition precedent of the preliminary sale agreement for said investment. The
disposal took place at the conclusion of a competitive auction and resulted in a net capital loss of
approximately € 76 million at the consolidated level, net of WLW’s earnings through to 30 September 2008.
The agreement is governed by the laws of Germany.
As a consequence of this sale operation the consolidated income statement figures for the financial year
ended on 31 December 2008 include the WLW group’s data among discontinued activities.
(D) CIPI
On 15 October 2008, SEAT served notice of its intention of exercising the call option on the residual portion
of CIPI’s share capital not owned on that date by SEAT (49%) which it held by virtue of the option
agreement it had entered into on 26 July 2005 with Promoinvestments S.r.l., CI.FIN. S.r.l. and Messrs.
2
2007 figures; source: figures extrapolated by SEAT Group.
3
The ‘locked box’ mechanism is a method of determining price often employed in purchase and sale agreements for equity investments. It calls for
the parties to agree to determine the price to be paid by way of consideration for transfer of the shares (and, therefore, the value of the acquired
company) on the basis of a statement of financial position drafted and defined by agreement between the parties at a date prior to the date of the
execution of the agreement.
65
Rosario Circo, Valentina Circo, Marta Circo and Bianca Piccolo. Following this notice, SEAT and CIPI’s
current sole minority-interest shareholder, CI.FIN. S.r.l., are negotiating a possible extension of their
collaboration arrangements through CIPI (which could void SEAT’s notice of its intention to exercise the
call option).
Development of the business
In terms of pursuit of the Group’s strategic goals, Internet penetration in Italy rose sharply in 2007 (41.6%),
an improvement upon the good results achieved in the previous financial period, resulting in the expansion of
the Issuer’s market of operation and the number/quality of the services offered, particularly those offered
over the Internet.
After completing the investment phase that characterised the period beginning in 2003, the SEAT Group has
placed its strategic focus on managing its portfolio of equity investments, while respecting each investee
company’s specific situation, by concentrating on implementing their respective business plans, including
with reference to the degree of development of the various products in various countries.
In June 2007, SEAT finished implementing its Customer Database system (please see Section One, Chapter
6, Paragraph 6.1.1.3), involving the introduction of identification details for Italian companies (current and
potential customers) and the restyling of the PAGINEGIALLE product and other related services. The
Customer Database system was then updated and consolidated in the course of 2008.
With regard to the publishing industry, in the last quarter of 2007 the Group completed a series of projects
aimed at developing and optimising the Multimedia Publishing System, which manages the entire production
process for print and multimedia publishing products.
Beginning in March 2008 the Company’s management prepared a new development strategy for the Group
aimed at focusing on the core business in Italy, where the acceleration of the growth of the Internet in 2007
has presented increased new development prospects for both traditional and multimedia activities.
In April 2008, SEAT, acting through its subsidiary Consodata, expanded its value-added commercial
information services (direct marketing, marketing intelligence, information services and protection against
commercial risks) on the B2B and B2C markets by launching the operation and expansion of the portal
www.lineaffari.com. The concentration of information provision services with Consodata was accompanied
by the expansion and development of the sales network through the introduction of a network of agents
tasked with encouraging SMEs that are already clients of the Lineaffari business information service to also
use direct marketing and communications services.
For further information of the business of the Issuer and the Group, please see Section One, Chapter 6 of the
5.1.6
The Issuer’s rating
The ratings assigned to SEAT as of the Date of the Information Prospectus were as follows4:
Rating Agency(*)
S&P’s
Moody’s
Corporate
BBB1
(*) The rating agreement with Fitch Ratings expired on 24 February 2009.
4
The data have been updated through to 2 March 2009.
66
Outlook
Negative
Stable
Credit Watch
YES
NO
Section One
5.2
Investments
5.2.1
Investments made in the last three-year period
The table below illustrates the investments made by the SEAT Group during the course of the financial years
ended on 31 December 2008, 2007, 2006 and 2005, and in the first six and nine months of 2008, indicating
the area of the business in which such investments were made.
(€ million)
Directories Italy (*)
Directories UK (**)
Directory Assistance (***)
Other assets
Aggregate total
Write-offs and other adjustments
Consolidated total
(*)
2008
103.0
1.9
5.9
4.2
115.0
(0.3)
114.7
30 September 2008
26.0
1.5
2.6
3.8
33.9
(0.2)
33.7
30 June 2008
18.0
1.0
1.9
3.1
24.0
(0.3)
23.7
2007
51.4
1.8
5.8
7.4
66.4
(0.3)
66.1
2006
35.1
2.8
6.0
4.4
48.3
48.3
2005
27.6
2.8
13.1
2.7
46.2
(0.2)
46.0
The data are related to investments made by the SEAT Group in the Italian market.
(**) The data are related to investments made by the SEAT Group in the United Kingdom market.
(***) The data are related to total investments made by the SEAT Group in the following markets: Germany, Spain, France, and Italy.
In terms of investment policy, the focus of the Group during 2008, 2007 and 2006 was principally:
• product innovation (among others, Paginegialle.it and Tuttocitta.it – see Section One, Chapter 6,
Paragraph 6.1.1.2 A.(a) (iii) and (iv)) and the consequent improvement in productive capacity in
order to offer products that increasingly meet the needs of users, searching for greater flexibility and
speed of response;
• effectiveness and efficiency in the sales force support systems (among others, CRM/SFE – for
further details see Section One, Chapter 5, Paragraph 5.2.2 as well as Section One, Chapter 6,
Paragraph 6.1.3);
• attention to systems to manage customer care activities, to manage credit and collections from
customers, and the integration of sales and administrative back office processes.
The following table provides an analysis of the different investments by type:
(€ million)
Investments in intangible assets
Software
Patent rights, concessions, trademarks and licenses
Other intangible assets
Total investments in intangible assets
Investments in tangible assets
Fixed assets
Plant and machinery
Other tangible assets
Total investments in tangible assets
Leasing
Total investments
2008
30 September 2008
30 June 2008
2007
2006
2005
20.1
1.6
17.3
39.0
11.6
1.2
13.2
26.0
8.8
0.9
8.7
18.4
22.6
2.7
25.8
51.1
20.1
3.2
11.5
34.8
11.2
0.6
14.1
25.9
0.2
3.3
9.5
13.0
62.7
114.7
1.2
6.5
7.7
33.7
0.5
4.9
5.4
23.8
0.2
2.9
11.9
15.0
66.1
0.5
4.0
9.0
13.5
48.3
0.7
9.6
9.9
20.2
46.1
In 2008, 2007, 2006 and 2005 the SEAT Group, because of the plan launched at the end of 2004, to be
completed in 2009, made strategic investments in the information technology area because of the need to
create greater flexibility in adjusting to changes in the reference economic situation and the context in which
the Issuer operates, as well as reducing the time to market for offering new products.
In particular, the main investments made from 2005 until now have as a common denominator the
achievement of “Real Time Enterprise”, which is a “real time” business concept in which data and
information are disseminated across the board to all business applications at the same moment they are
entered or updated.
67
The objective was to implement agile, latest-generation information technology architecture through: (i)
integration across different systems; (ii) steps aimed at providing 24-hour service 7 days a week; (iii) full
support for “mobile computing”, understood as the ability to use technology without restrictions thanks to
mobile computing devices; (iv) an integrated telecommunications system, in particular to support the sales
network; and (v) having advanced Disaster Recovery.
Within this framework, the investment projects related to the sectors in which SEAT’s abilities are a
distinctive factor of its business are aimed at ad hoc solutions, such as investments related to the Customer
Database (where the added value is represented by the wealth of information on Italian economic operators),
or the Multimedia Publishing System – which manages the entire production chain of paper and multimedia
publishing products – where SEAT’s ability to create products represents a competitive advantage.
On the other hand, the investment projects relating to more standard environments have been aimed at
market solutions. Noteworthy in this category is the implementation of the CACS (“Computer Assisted
Collection System”), a computerised system for credit recovery and management, and the ERP (“Enterprise
Resource Planning”) SAP (from the name of the supplier, SAP A.G.), which is software for the integrated
management (product planning, implementation, sales, supplies, purchasing, warehouse logistics, marketing)
of customer orders.
From 31 December 2008 and up to the Date of the Information Prospectus approximately € 10 million has
been spent on the Group’s investment activities and, more particularly, on the launch of the CRM
Programme for the SAP and SFE systems, described in Paragraph 5.2.2 below.
5.2.2
Ongoing investments
Among the investments in information technology in the process of being implemented by the Issuer is the
“CRM Programme” – or, simply, “CRM” – (“Customer Relationship Management”), a combination of
software systems and strategic elements aimed at improving integration between publishing processing,
management of business data and sales activities as well as assisting the speedy and economic development
of new products. The CRM Programme represents a basic element completing the evolutionary process with
regard to business support information systems and allowing the SEAT sales force to operate with efficient
mobile, real-time work tools, principally aimed at reducing: (i) the time spent on administrative activities and
accessing the business databases, which will now take place in real time, thus benefiting the customer
negotiation phase; and (ii) processing times, limiting defectiveness and increasing the quality and
transparency of customer services.
To achieve these objectives, in February 2009 two new systems were launched, completely integrated with
each other:
•
SAP, software to manage sales and accounting administrative processes (for further details, see this
Chapter, Paragraph 5.2.1);
•
SFE (acronym for “Front-End System”), software for preparing visits and the acquisition of
customer contracts.
The programme has been developed over the last few years, in four major phases:
1.
the phase during which the functional requirements of the new system were established, in order to
define the characteristics of the CRM to better adapt it to SEAT’s business;
2.
the system requirements analysis and development phase, in which the CRM was developed
directly based on the technical specifications devised;
3.
the phase, currently under way, of performing functionality tests;
4.
the phase of releasing the CRM to the entire SEAT business and sales force.
During the course of 2008, works related to the construction of the new secondary company headquarters in
Turin were also undertaken and to a large extent completed, with an investment of approximately € 65.8
million, realising € 62.6 million using a financial lease transaction (for further information, see Section One,
Chapter 22, Paragraph 22.2).
Investments currently ongoing are financed exclusively from operating cash flow except for the financial
lease transaction related to completion of the work on the new secondary headquarters for the company.
68
Section One
5.2.3
Issuer’s main future investments
The Business Plan, whose guidelines, approved on 23 December 2008, were confirmed by SEAT’s Board of
Directors on 12 February 2009, stipulate for 2009 the following main investments:
•
the release of the CRM Programme described in Paragraph 5.2.2 above, and the performance of
subsequent fine-tuning initiatives – software development activities performed after the launch of
an application to stabilise it – for the consolidation of the two new SAP systems; and
•
the development of the information technology to support: (i) product innovation; (ii) SEAT sales
force support systems; and (iii) customer care activities, for customer credit and collections
management and also the integration of sales and administrative back office processes.
With respect to infrastructure technology, the main areas of involvement are: (i) the “Data Centre,” either to
replace obsolete machines with new, more efficient machines, or to provide for the ever increasing
requirements of SEAT’s business in terms of processing capacity and storage space to safeguard business
data; (ii) the acquisition of hardware for the scheduled replacement of obsolete workstations (both laptops
and desktops) or the development of agent networks; and (ii) investments in security and networking.
For further details, see Section One, Chapter 13.
With the exception of SAP, for which the Board of Directors of the Company has already assumed specific
contractual and costs obligations, amounting to approximately € 24 million, in accordance with the plan
approved on 20 June 2006, the Issuer has not assumed definitive obligations to proceed with the
abovementioned investments.
The Issuer’s future investments will be financed through operating cash flow and by accessing net proceeds
derived from the Capital Increase.
69
6
OVERVIEW OF THE ISSUER’S ACTIVITIES
6.1
Main activities
6.1.1
Description of the nature of the Issuer’s business and main activities
6.1.1.1 Introduction
The SEAT Group is among the top Italian operators in the media sector and one of the leaders in Europe and
worldwide in the multimedia directory advertising business.
For over 80 years SEAT has offered information services and tracking and communication tools. It is a
success story built on the renown of the PAGINEGIALLE brand, a sales network of over 2,000 people,
continually evolving technology, a database of 15 million households and 3.8 million business operators
(2007 data; Source: SEAT Group information), and on a wide range of products that ensure the availability
of an integrated communication system for approximately 520,000 customers in Italy.
Active in six European countries besides Italy, SEAT is today a major multimedia platform that offers tens
of millions of users detailed information and sophisticated search tools and, for its own advertisers, a broad
range of multi-platform advertising media (“print-voice-online”), in particular highly innovative online
products, print directories and telephone assistance products, in addition to a wide range of accessory
advertising communication tools.
In 2008, this translated into 63 million volumes distributed (Source: SEAT Group data), 33 million Directory
Assistance calls (Source: SEAT Group data), and over 329 million visits to online directories (Source:
Nielsen Net Ratings).
In 2008, the SEAT Group generated € 1,376 million in revenues and € 605.3 million in EBITDA (€ 1,444.2
million and € 648.1 million, respectively, in the adjusted 2007 financial statements). During the same
financial year 2008 – on a consolidated level – the Group also employed a workforce on average of 5,163
persons (5,308 in 2007, restated), of which 1,389 were employed at the SEAT parent company and 1,977.5 at
the Group’s various call centres.
The Company is listed on the Milan Stock Exchange, with a market capitalisation of € 487.38 million as of
31 December 2008.
The table below shows the main economic data of the SEAT Group for the financial years ended on 31
December 2008, 2007, 2006 and 2005, as well as for the nine-month periods ended on 30 September 2008
and 2007.
(€ million)
Revenues
EBITDA
Net profit
Average workforce
2008
1,376.0
605.3
(179.6)
5,163
2007 adjusted (*)
1,444.2
648.1
98.4
5,308
2007
1,453.6
650.2
98.4
5,365.1
2006
1,460.2
611.4
80.1
5,163.8
2005
1,424.6
626.6
131.9
4,759.9
30 September 2008
986.7
411.4
11.0
5,441.5
30 September 2007
996.7
426.4
34.9
5,351
items thereon and the items shown on the income statement at 31 December 2008, following, in particular, the sale of WLW.
70
Section One
On the Date of the Information Prospectus, the Issuer operates in the areas of activity shown in the chart
below, with the main brands indicated.
Italy
In Italy, the reference country for the Group’s activities, the SEAT Group is active in the directories
business, where it operates through three platforms, print-voice-online, with the brands shown in the above
table. In 2007, the activities of the “Italy Directories” Business Area accounted for approximately 72% of
revenues and approximately 85% of the EBITDA of the Group.
For details on the different products, please see Paragraph 6.1.1.2 (A) below.
In Italy, the Group also operates through the subsidiary Telegate, which manages part of the telephone
assistance service calls for SEAT and operates as call centre services outsourcer for other partners.
The Group is also present in Italy with complete and innovative direct marketing services for thousands of
businesses in all sectors through the subsidiary Consodata, and operates in the promotional items and
corporate gifts sector, covering the entire chain of value from importing items through to personalising them
with the client’s logo and selling directly or through SEAT or through the subsidiary CIPI.
The Group in Europe
In the rest of Europe, the Group operates in the United Kingdom, Germany, France, Spain, Austria and
Turkey.
In the United Kingdom, where the Group operates through its subsidiary Thomson, the offering, alongside
Thomson Local traditional print directories (yellow pages), also includes the ThomsonLocal.com online
activities. In 2007, the activities of the TDL Group met the communication needs of approximately 95,000
customers, mainly SMEs, generating approximately 10.4% of Group revenues and approximately 5.7% in
Group EBITDA. In 2007, 23.8 million copies of print directories were distributed.
The SEAT Group also provides voice information services in Germany, France and Spain (as well as in
Italy) through the Telegate Group with a business model based on telephone traffic and advertising revenues.
In Germany, Telegate is active with a multi-channel strategy, through a commercial offering available both
on voice and through the 11880.com portal, geared toward generating advertising revenues. In addition, in a
market context that is showing a year-on-year contraction in call volumes, Telegate made the acquisition in
2008 of the controlling stake in the company KlickTel AG, now known as Telegate Media, a company that is
competitive on the local research market and active in the primarily B2C online directories market, in order
to accelerate the process of migration toward a new, more online-centred business model (please see Section
One, Chapter 5, Paragraph 5.1.5.5).
In France, after the start-up phase in 2006, which required significant advertising investments, the Telegate
Group reached substantial break-even in the first half of 2008 in a market undergoing strong contraction, one
that is unable to provide satisfactory overall profitability.
In Spain, Telegate has consolidated its position in order to achieve an adequate level of business profitability
over time, albeit in a difficult market context characterised by a contraction in the number of calls.
71
The Group also provides B2B services in Europe through the subsidiary Europages, which is the publisher of
the eponymous Pan-European directory for companies utilising import and export channels.
During the second half of 2008, the SEAT Group consolidated its international presence thanks to the entry
into operations of Katalog, a vehicle whereby SEAT entered the Turkish directories market in a joint venture
with local media group Doğan (please see Section One, Chapter 5, Paragraph 5.1.5.5).
In the United Kingdom, the TDL Group is the third directories operator after Yell and British Telecom (2008
data, Source: TLD Group information). In Germany, the Telegate Group is the number two telephone
assistance services operator after former monopoly operator Deutsche Telekom (2008 data, Source: Telegate
Group information). This positioning, together with SEAT’s leadership position in Italy in the multimedia
direct advertising sector (Source: Kelsi Nielsen), ranks the SEAT Group as one of the top directories
operators in Europe both in terms of revenues, as well as EBITDA.
72
Section One
6.1.1.2 Description of the products
A. ITALY DIRECTORIES BUSINESS AREA
Shown below is a summary description of the characteristics and the main products offered by the Issuer,
broken down into 3 macro-areas:
a) so-called print-centred products, or products (directories) that derive historically from print directories
and are currently offered in voice and online modes as well;
b) business to business (“B2B”) products;
c) other products.
(€ million)
Year
2006
Year 9 mths. 9 mths.
2007
2007
2008
371.4
357.8
246.7
232.1
385.8
390.3
296.3
296.9
4.0
123.5
3.1
137.1
2.0
78.2
1.3
87.1
36.8
42.8
26.7
26.4
3.3
6.1
3.3
4.8
4.3
929.1
6.1
941.3
3.3
656.1
4.8
650.0
B2B directory for SMEs
15.3
12.1
B2B directory for businessmen
and SME procurement managers
14.8
13.5
4.1
7.3
Relative to all information
(headquarters, activity, products,
etc.) on over 100,000 Italian
companies
PAGINEBIANCHE Cd-Rom distributed together
Office
with PAGINEGIALLE
Lavoro containing data on over 3
million Italian companies
10.4
10.3
7.4
6.5
3.2
2.5
1.9
0.9
43.7
63.0
38.4
74.8
13.4
56.4
14.7
55.0
11.9
10.1
6.9
7.1
17.0
15.4
8.0
5.9
12.8
10.2
7.6
6.6
104.7 110.5
1,077.5 1,090.2
78.9
748.4
74.6
739.3
Advertising revenues: print-centred products
PAGINEGIALLE
Print
Online
Voice
Directory of Italian economic
activities by category
PAGINEBIANCHE Directory of telephone
subscribers
TuttoCittà
Map book of Italy
PAGINEGIALLE.it Search engine specialising in
commercial searches
89.24.24.Pronto
Provides added-value directory
PAGINEGIALLE assistance services
12.40 Pronto
Provides subscriber information
PAGINEBIANCHE database services
Other products
Total advertising revenues: print-centred products
Advertising revenues: B2B products
Annuario SEAT
PAGINEGIALLE
Professional
Prodotti Kompass
Total revenues: B2B products
Other
Telephone traffic
Direct Marketing
Merchandising
Minor other
products
Total other
Total revenues
Telephone traffic revenue
generated by calls to 1240 and
89.24.24 services
Postal and Internet mailing list
services
Line of personalised promotional
products
73
(a)
“PRINT-CENTRED PRODUCTS” BUSINESS AREA
(i)
PAGINEGIALLE
PAGINEGIALLE is a print version directory containing basic information relating to the particulars on
businesses present within Italy (approximately 3.5 million business operators). It is organised in alphabetical
order by business category and by locality. In 2008 it was published with a print run of approximately 23
million copies, in two versions:
•
PAGINEGIALLE Casa, or Residential Yellow Pages, intended for Italian households, with
approximately 1,000 business categories and 105 editions;
•
PAGINEGIALLE Lavoro, or Business Yellow Pages, distributed to all business operators, with
approximately 2,400 business categories and 87 editions.
The users of PAGINEGIALLE are primarily individuals (“Casa” edition) and businesses – or individuals
using it for personal reasons at the workplace – (“Lavoro” edition). The consultations posted in 2008 reached
421 million (Source: Kkienn 2008).
The advertisers are predominantly B2C companies targeting individuals (“Casa” edition) and B2C and B2B
companies targeting all business operators equipped with fixed-line telephone connections and individuals
(“Lavoro” edition).
(ii)
•
PAGINEBIANCHE AND PAGINEBIANCHE.IT
PAGINEBIANCHE is the print version alphabetical directory of the subscribers of telephony services
with all operators, created in accordance with the provisions and regulations on Universal Service. It is a
precise and well-known system for finding or supplementing contact information and gaining
informative details on companies, individuals and the Public Administration.
The advertisers are business operators and the Public Administration. Through PAGINEBIANCHE,
information can be provided such as a company’s contact information (including e-mail and URL), its
activity (helpful information: hours, days closed, etc.), its products/services, and its image (logo and
graphics).
An advertiser’s presence in the PAGINEBIANCHE volume automatically allows it to appear also on
www.paginebianche.it, thus responding to continually changing and growing needs for online
consultation.
PAGINEBIANCHE is utilised to find or supplement contact information and/or detailed information on
a private individual or a company that is already known. Each year, PAGINEBIANCHE posts
approximately 2 billion total consultations (1.96 billion in 2008; Source: Kkienn 2008), including over
40% of a business nature.
PAGINEBIANCHE has a print run of approximately 27 million volumes and is distributed free of
charge in 103 editions to all homes and offices in Italy.
•
Paginebianche.it is the Italian website for Web searches for addresses and telephone numbers for
individuals, companies and the Public Administration. On PagineBianche.it, the data are continually
updated, in accordance with the rules and regulations on Universal Service.
On Paginebianche.it searches can be made alphabetically, by name and by geographical area, as well as
reverse telephone number and address searches (where the holder of the service has given their consent).
The information includes: addresses, telephone numbers, toll free numbers, fax numbers, e-mail
addresses, and links to websites. The user is aided in searching by filters, search suggestions, and
translations into four languages. In addition, the site includes two sections devoted to statistics and
curious facts regarding Italian surnames: “Contacognomi” and “Facciamo nomi e cognomi”. In 2008, on
average, PagineBianche.it, posted 3.9 million individual users per month and over 193 million visits
(Source: Nielsen NetRatings).
74
Section One
(iii)
•
TUTTOCITTÀ AND TUTTOCITTA.IT
Tuttocittà is a map book containing maps and information on means of transportation, parking, cinemas,
theatres, and museums.
Tuttocittà is an information tool capable not only of suggesting to residents how to get around the city,
but also of matching demand with supply thanks to the possibility of immediately locating a point of
sale.
It contains a display of the main addresses and telephone numbers for emergencies and a cultural events
calendar. Tuttocittà is available in all PAGINEGIALLE editions in the “Lavoro” and “Casa” versions.
For 35 editions, Tuttocittà is kept as a stand-alone publication and is distributed together with
PAGINEGIALLE Casa. Tuttocittà can also be consulted online (www.tuttocitta.it) with the option of
outlining routes and locating business operators of interest on the map.
The advertisers are companies with a predominantly local B2C market as well as institutions, both of
which invest to improve visibility among customers who are searching in the area where their business
is located.
•
Tuttocitta.it is the website that allows the viewing of maps online and calculation of routes with maps
intended for car and pedestrian use. It includes detailed routing (a system for identifying routes on a
map) with driving instructions, information relating to access in Limited Traffic areas, ecopasses, and
toll road signage. Tuttocitta.it includes the SEAT commercial database, which enables useful businesses
and services to be located, such as, for example, postal offices or pharmacies.
Tuttocitta.it enables discovery and interaction with the area through a local search based on commercial
activity maps, public service information, and events scheduled in one’s city/locality.
In 2008, Tuttocitta.it posted 35 million visits and an average of 1 million individual users monthly
(Source: Nielsen NetRatings).
(iv)
PAGINEGIALLE.IT
Paginegialle.it is a search engine specialising in commercial inquiries, which allows the user to access a
database of over 3.5 million Italian business operators through the website www.paginegialle.it.
Paginegialle.it allows advertisers to introduce their business, describe the products and services offered –
through a semantic search engine and a detailed classified database – update the information at any time,
have a personal Web address, and receive messages and contacts from potential customers in real time.
Paginegialle.it also offers the possibility of displaying information on a company, in Italian or in English,
French, German and Spanish.
Paginegialle.it is also present in a network of websites which includes: Tuttocitta.it, Yahoo!Italia, Gazzetta.it,
Corriere.it, Repubblica.it, Kataweb, SuperEva, MSN Italia, Leonardo.it, La stampa.it, and IlSole24Ore.it.
The typical functions of PagineGialle.it are based on proprietary technology, which dispenses with the need
for recourse to external technologies (e.g. API Google). In addition, through a partnership with Telespazio,
PagineGialle.it offers the user new forms of surfing: high-definition aerial photographs for the main Italian
municipalities, street-level photographs (i.e. a photographic system for viewing maps on the web at street
level, which allows for a view like one would have by going to the area viewed), and 3D reconstructions of
the area.
The images are accurately geo-referenced to the geographic coordinates and can therefore be superimposed
on street maps. With an advanced representation system, the visual search manages to identify every
individual street number accurately, whether squares or major buildings, or businesses or corporate
headquarters.
Searches on the www.paginegialle.it site are posting strong growth rates: in 2008, www.paginegialle.it
posted 102 million annual visits (35,181,205 visits in the last quarter of 2008, 21,624,635 visits in the same
period of 2007, with an increase of 62.7%), with an average of 3 million individual users per month and 230
million searches per year (Source: Nielsen Net Ratings).
75
(v)
VOICE
The voice offering gives the advertiser the possibility of being present in two different voice services:
•
12.40 Pronto PAGINEBIANCHE is the SEAT voice service launched following the opening up of the
subscriber information services market, previously offered by the traditional Telecom Italia 12 service.
It allows information of interest to be obtained quickly over the telephone: fixed-line and cellular
network telephone numbers for subscribers, public entities and the Public Administration, companies
and professionals. In addition, it is possible to receive the data required by SMS, and also via fax and email, as well as to request the route for reaching the user sought or to ask to be put into contact directly
without having to hang up and redial the number. Lastly, with a fixed-line telephone number, it is
possible to go to the person in whose name it is, provided that he or she have given their consent to this.
•
89.24.24 Pronto PAGINEGIALLE, a next-generation voice service, capable of satisfying broader and
different needs compared to the basic subscriber information service.
Created in 2000, 89.24.24 Pronto PAGINEGIALLE has established itself as the top next-generation
voice service in Europe. Accessible 24 hours a day, 365 days a year, throughout Italy, it is based on a
continually updated database. Using genuine personal assistants the customer is followed up until their
needs are completely met, at any time of day wherever they are.
With a view toward building loyalty among its users, two clubs were created intended for customers of
89.24.24 Pronto PAGINEGIALLE:
o
“89.24.24 per te”, the club that enables personalisation and speeding up of the service and means
members are always being brought up to date on new developments and contests;
o “Prontissimo”, the top club reserved for premier customers with exclusive benefits and services.
It should be noted that both of the abovementioned voice services also generate revenues from telephone
traffic (please see (c) “Other Products” in this Paragraph).
***
The business of print directories has a seasonal nature.
SEAT publishes its print directories for the 100 or more directory areas into which Italy is divided, which
have different levels of profitability. The advertising revenues from this business derive from yearly
campaigns taking place in each individual directory area, which close at the time of the publication of the
respective print directories. For purposes of optimising printing and distribution costs, publications in the
different directory areas are spread out over the year. The directories revenues are posted on the income
statement at the time of publication, as are the respective costs directly attributable to them; therefore, in
keeping with the timing of the distribution of the publications (which tends to favour the second half of the
calendar year in terms of number and profitability for the directory area), we have historically seen cyclical
revenue and profitability performance, with weaker performance in the early part of the year and a recovery
in the second half of the calendar year.
(b)
BUSINESS TO BUSINESS (“B2B”) PRODUCTS
It should be noted that as of 2009 the Issuer has decided to discontinue the publication of the B2B products
described briefly below (with the exception of the Kompass products), insofar as SEAT has chosen to focus
its strategy on strengthening the Europages B2B directory (for further details, please see Paragraph D
below).
(i)
KOMPASS PRODUCTS
The Kompass system offers informational and analytical tools that allow a company operating in the B2B
market to expand its business volume through added-value data and information making it easy to match
76
Section One
supply up with demand. It provides detailed information on the top 50,000 Italian companies in the B2B
sector, leaders in terms of size and manufacturing speciality.
The Annuario Kompass directory is devoted to those whose job it is to search for products and services for
their company.
The CD-Rom is distributed each year in over 50,000 copies, intended for the procurement managers at major
Italian manufacturing companies.
The print volume, in combination with the CD-Rom, is distributed to a select list of companies, associations,
entities and foreign companies requesting it through the Kompass international network, which includes over
70 countries. In addition, it is available at certain places frequented by corporate managers and key people:
VIP lounges at airports and stations, Chambers of Commerce, and business centres.
In addition, 95% of the profiles include information on company size (net sales and number of employees).
The information in Kompass also includes quality certifications and other information for choosing the most
suitable supplier.
(ii)
PAGINEGIALLE PROFESSIONAL
PAGINEGIALLE Professional is the specialised product intended for procurement managers and
professional buyers in Lombardy, Piedmont, Valle d’Aosta, Emilia Romagna, the Triveneto area, Lazio and
Umbria.
For the most part, users are professionals and procurement managers at SMEs purchasing primary and
secondary services and supplies, who use it primarily to expand the range of potential suppliers to be
contacted beyond a strictly local environment. The advertisers, on the other hand, are general mid-sized and
medium-to-small companies with a regional or multi-regional B2B market that wish to make themselves
known and promote their companies in the entire region/area among a specific target audience (corporate
procurement managers).
(iii)
ANNUARIO SEAT
ANNUARIOSEAT is a line of specialised directories intended for the manufacturing sector of the Italian
economy. Divided into 12 volumes, it represents the entire national production line, from the production
cycle down to supporting segments, with additional descriptive information in the advertising spaces as well
as in the free listings. It contains product information and includes sector profiles/statistics prepared by
Databank.
For the most part, users are professionals and procurement managers at SMEs purchasing primary and
secondary services and products, who utilise it primarily to expand the range of potential suppliers to contact
nationally.
The advertisers, on the other hand, are generally mid-sized and medium-to-large companies with a
predominantly national B2B market and a significant share of the business in a specific manufacturing
sector, which want to promote their company among a specific target audience (corporate procurement
managers).
(iv)
PAGINEBIANCHE OFFICE
PagineBianche Office is the CD-Rom containing the business subscribers of all the telephone operators, in
accordance with the rules and regulations on Universal Service.
PagineBianche Office is utilised by companies and users from PC sites not connected to the Internet or which
prefer offline tools to satisfy their need for contact information (addresses, telephone numbers, e-mail
addresses) and information or details on all the companies and on Public Administration in Italy.
The PagineBianche Office advertisers are business operators and the Public Administration, which provide
information on their own business and services.
77
(c) OTHER PRODUCTS
The portfolio of products offered by SEAT also includes One to One Marketing services and items managed
and made by the subsidiary Consodata, which offer over 13,000 SEAT customers solutions that are also
highly personalised to satisfy direct communication needs, whether by ordinary or electronic mail.
The One to One Marketing solutions offered by SEAT allow companies to analyse, research, select and
contact their own target audience of reference both in the consumer market and in the business market
through the availability of very extensive B2C and B2B information resources on the Italian market.
The One to One Marketing services include the databases Linea Kompass Direct, Business Disc Italia
Kompass and Imprese e Imprenditori di Italia, offered on CD-Rom, as well as the direct marketing services
of Giallo Dat@.
The offering of promotional items and corporate gifts marketed by SEAT under the Giallo Promo brand,
which makes available to companies a catalogue of over 200 promotional items that can be personalised, even
in small lots, with the advertiser’s logo or brand, should also be noted. This offering also enables a company
to communicate with and build loyalty among its customers through so-called “item-based advertising”.
(i)
IDEEINVACANZA
Please note that as of late 2008 SEAT has discontinued the publication of this product.
Ideeinvacanza was a local shopping and entertainment guide, full of suggestions, specific information and
curious facts, ideas and useful addresses, organised by major reference topics.
The guide was in a pocketbook format and was published in 18 editions which referred to the 18 primary
Italian tourist districts. It was distributed free of charge in localities with high tourist traffic and had a print
run of approximately 2 million copies in 2008.
B.
“DIRECTORIES UK” BUSINESS AREA
The TDL Group operates, through its operating company Thomson, in the telephone directories market
through the sale of advertising space in print and in online search tools, and it also operates on the Business
Information market.
The TDL Group is the third-ranking operator in the telephone directories sector in the United Kingdom (after
the Yell Group and British Telecom), with approximately 75,000 customers in 2008 (Source: TDL Group
information).
Thomson operates in three contiguous businesses, the main products of which are the following:
• print directories under the Thomson Local brand, a sector-based directory of business operators with
a local focus, published in 173 editions, which covers 85% of the population and 45% of the territory
of the United Kingdom. Thomson Local is distributed free of charge at over 22 million private or
business addresses and includes not only the sector-based section on business operators but also
sections with public service information, local entertainment events and street maps;
• online directories through the proprietary site www.Thomsonlocal.com. This site is an online version
of the print product and provides search services using key words on an online platform. The Internet
site offers anyone consulting it search services both in the Thomson proprietary database (Business
Finder), as well as on the entire Web (Web Finder). In support of the Web Finder search engine a
print directory was recently launched, known as “Web Finder directory”, which groups together the
Web addresses that can be consulted online;
• business information, through the sale of licences for consultation of its proprietary database and the
new product Business Search Pro. This product is a CD-Rom containing parts of the Thomson
database and is sold to customers who pay on the basis of data consulted.
Thomson has a portfolio of approximately 75,000 customers, of which 45% are in the online area (2008
Data; Source: TDL Group information).
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Section One
C. “DIRECTORY ASSISTANCE” BUSINESS AREA
The Telegate Group is one of the main providers of Directory Assistance services on the European market.
The Telegate parent company, incorporated in 1996, has been listed on the Frankfurt Stock Exchange since
1999. Today, the company is number two in directory consultation services, behind Deutsche Telekom, with
a market share of 33% in terms of branded call volume, i.e. calls managed directly through the 11880 service
(2008 Data; Source: Telegate Group information). The Telegate Group is present not only in Germany with
the 11880 service, but also in Spain through the 11811 service (managed by two call centres, one in Spain
and one in Argentina), in France with the 118000 service (managed by a single call centre, located in
Morocco), and in Italy through the Telegate Italia S.r.l. call centre.
In Germany, the Telegate Group has reacted to contraction of the telephone assistance services market, in
particular for calls from fixed lines, with continual development of added-value services (such as weather
forecasts, traffic information, and hotel reservations), which has made it possible to increase the duration and
average value per call. The Telegate Group has also continued – at strategic level – on the path of evolution
of its business aimed at generating advertising revenues on its voice and online platforms through creation of
the portal 11880.com. In 2008, Telegate further strengthened its presence on the online advertising market
through the acquisition of the controlling stake in KlickTel AG, now known as Telegate Media, one of the
largest companies in the online advertising market, characterised by: (i) a renowned brand; (ii) an Internet
site that enjoys high usage, with 1.34 million individual users monthly (2008 Data; Source: Nielsen
NetView); and (iii) a significant customer base at the time of the acquisition (approximately 20,000
customers). In addition, in order to grow its online offering in connection with SEO (Search Engine
Optimisation) and SEM (Search Engine Marketing) activities through optimising the visibility of advertising
customers on the main search engines, Telegate has started a partnership with Google and with other portals
active on the local search market, becoming the top official retailer of Google Adwords in Germany.
In Spain, to manage the contraction of the market, which resulted in a drop in the number of calls, Telegate
has launched a multi-channel voice and online offering. In this connection it has launched a project for
cooperation with QDQ Media SAU, the number two directories operator in Spain, with the objective of
integrating the new technologies and developing a joint Web platform.
A similar strategy has also been followed in France, where in 2006 Telegate launched a portal for searches
on its own database (www.118000.fr), with the intention of generating advertising revenues through the sale
of advertising to French corporate customers. In this connection it launched a project for cooperation with
Comareg S.A., a company active in the local publishing market in France which distributes the 118000
product through its own network of sales representatives.
D. “OTHER ACTIVITIES” BUSINESS AREA
(a)
EUROPAGES
Europages is the publisher of “Europages”, the pan-European B2B directory produced for companies
utilising import and export channels.
This multilingual search tool was created in 1982 as a print guide, accompanied over time by the version on
CD-Rom (1993) and the Internet (1995). Today it is available online only on the site www.europages.com.
The company, whose objective is to develop exchanges between companies, enables purchasers and sellers
to get in touch through:
•
a specialised database of 1,500,000 companies active in exports to identify the best
suppliers/partners, classified according to 26 business sectors, 4,000 headings and 35,000 key words
(Source: Europages information);
•
a multilingual search engine;
•
a commercial network of partners spread throughout the world.
Referencing the main search engines, Europages is an important reference point for all business operators
that operate in the import-export market at international level.
The site can be consulted in 26 language versions, and it attracts approximately 2 million individual users per
month, who generate approximately 65 million searches a year coming from 200 countries (Source: Nedstat).
79
The Europages online search engine is acquiring a position as world leader thanks to the quality and
relevance of the services offered to companies utilising it, which translates into great value for the advertiser.
(b) CONSODATA
Consodata, a wholly-owned subsidiary of SEAT, is one of the largest operators in Italy in the market of One
to One Marketing, Marketing Intelligence and Geomarketing of products and services.
By managing and exploiting its vast B2C and B2B information resources, Consodata offers over 400
customers direct services and personalised direct communication solutions, analyses of their market of
reference and their chosen target audience, as well as computerised support for the management and
standardisation of databases and for territorial management and planning of sales networks.
Through the Giallo Dat@ brand, Consodata also provides more standardised One to One Marketing solutions
for over 13,000 SEAT customers (please see Paragraph A (c) in this Chapter).
During the course of 2008 Consodata also started management of the commercial information portal
Lineaffari.com, which offers information services from chamber of commerce, land register and mortgage
register sources. These services, offered under a yearly subscription format with limit on usage, are marketed
by a dedicated network of agents that reach over 1,800 predominantly B2B SMEs.
(c) CIPI
CIPI, a 51%-owned subsidiary of SEAT, offers promotional, merchandising and corporate gift products that
can be personalised with customer logos and brands.
The products and services provided by CIPI can be divided into three main types:
•
design and execution of communication campaigns, through the distribution of promotional items,
on behalf of major customers;
•
execution and management, including logistics, of gift or merchandising catalogues on behalf of
companies with well-known brands and point-of-sale networks within Italy;
•
sale, either directly or through the network of SEAT agents, of promotional products by catalogue
with personalisation with customer brands, including in small lots, at its own site in Catania.
6.1.1.3 Key factors of the Group’s activities
A. Customer Data Base
A key element in the Issuer’s activities is the Customer Data Base, comprising data and information, as well
as data preparation, classification and interpretation models; it involves specific commercial and marketing
know-how, which is used in support of planning and control, strategic and operational marketing, and sales
and after-sale activities.
The support of reliable information, the “raw material” for the setting up of activities, procedures and
decisions geared both to the short, as well as to the medium-to-long term, is fundamental for the Issuer when
it comes to decisions inherent in “relationship” marketing.
The Customer Data Base, containing all information relating to customers and their needs, ensures SEAT has
a competitive edge deriving from information it gathers and manages in order to:
• know the market and grasp changes in it;
• know the customers and their needs and define appropriate market segmentation to offer targeted
products and services;
• develop the capability to gather information, facilitate the exchange of information on different
search platforms, and reduce the time elapsing between the development process for new products
and services and their marketing;
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Section One
• capitalise in a systematic and fruitful manner on the know-how developed over years of activity not
only in terms of the specific content of data, but also in terms of the way its organisation is designed.
B. Other Key Factors
Other important factors critical to the success of SEAT include:
•
a widespread sales force: the sales network is one of the Issuer’s main strong points; distributed
throughout the nation’s territory (almost 200 offices), it works to match the communication needs of
over 3 million operators with SEAT media. The agents’ sales activity has evolved in recent years from
simply collecting orders into performing advisory services for all the communication needs of customers.
In particular, in 2008, many of the local sales offices evolved naturally into genuine Web points so as to
be able to fully seize the sales opportunities offered by the sudden growth of local online advertising.
The SEAT sales network, devoted to the marketing of SEAT products and services on the Italian market,
can count on a network of over 2,000 sales representatives structured and organised in a differentiated
manner depending on the type of customer in question, with a view to understanding and satisfying
customers’ specific communication needs. For further details on the make-up of the sales network within
the different channels, please see Paragraph 6.1.3 in this Chapter;
•
a continually evolving multimedia offering capable of satisfying the needs of potential advertisers:
the objective of the continual evolution of SEAT’s multimedia offering is to increasingly satisfy its
customers’ communication needs more fully, increasing and bolstering the value generated for the
advertiser. SEAT has continued over the years with a strategy aimed at upgrading the existing product
range and launching new products geared toward different market segments. In particular, during the
course of 2007 and 2008, following the growth in the number of Internet users and its availability, the
Company has increased the resources invested in the online sector, strengthened the sales network and
launched new products aimed at exploiting the increasing volume of traffic generated on its websites.
For further details on the range of SEAT products, please see Paragraph 6.1.1.2 in this Chapter;
•
the Brand’s renown: SEAT can count on a strong position within the advertising market in Italy thanks
to the renown of its brands and services, in particular of the traditional print products (PAGINEGIALLE
and PAGINEBIANCHE), as well as the online products (www.paginegialle.it and
www.paginebianche.it) and voice services 89.24.24 Pronto PAGINEGIALLE and 12.40 Pronto
PAGINEBIANCHE, which have enabled it to obtain a significant share of the local advertising segment;
•
the long tradition of serving the reference target: for eighty years SEAT has been offering Italian
companies, in particular SMEs, tools for making themselves visible and able to be located by existing
and potential customers. The history of SEAT is characterised by continual investments and innovations
both in the products that represent the Company’s core business, such as print directories, as well as in
more technologically advanced products and solutions, such as next-generation online and voice
services. Thanks to such investments, SEAT has a multimedia platform which, using an integrated
system of communication between people and companies, needs and solutions, offers approximately
520,000 advertisers (2008 Data; Source: SEAT Group information) a wide offering of communications
media and opportunities.
6.1.1.4 Legal and regulatory framework of reference for the SEAT Group’s business
The legal framework of reference for the activities carried out by the SEAT Group comes from a package of
EC directives on telecommunications systems which have been subsequently implemented by the national
laws of member states, although not always in an identical manner. In particular, these directives include:
Directive 2002/19/EC, concerning the access to electronic communications networks, the resources
associated with them and their interconnection;
Directive 2002/20/EC, concerning the authorisations for electronic communications networks and services;
Directive 2002/21/EC, which institutes a common legal framework for electronic communication networks
and services;
81
Directive 2002/22/EC, concerning the Universal Service and users’ rights in the area of electronic
communications networks and services;
Directive 2002/58/EC, concerning the processing of personal information and the safeguarding of privacy in
the electronic communications sector.
In Italy, with the exception of Directive 2002/58/EC, implemented by Legislative Decree No. 196 of 30 June
2003 (the ‘Privacy Code’), these Directives were implemented by Legislative Decree No. 259 of 1 August
2003 (the ‘Electronic Communications Code’) and into other decisions of a regulatory nature issued both by
AgCom and by the Privacy Protection Authority.
Specifically, insofar as the SEAT Group’s business is concerned, the most important laws are those
concerning:
•
access to the telecommunications networks, insofar as it allows Directory Assistance operators to
obtain interconnection with the networks of fixed-line and mobile telephone operators and to enjoy a
series of services at competitive prices;
•
Universal Service, in particular the law regarding the provision of a Single Data Base of fixed-line
and mobile subscribers that have stated their consent to the inclusion of their information. This
database is comprised of the data on the subscribers of each national telephone operator and is made
available to operators in the downstream market (which includes the Directory Assistance service) at
fair, non-discriminatory and competitive prices;
•
authorisations for telecommunications networks and services, which, among other things, have
simplified the terms and conditions for obtaining certificates for engaging in the telephone service
operator business.
Italy
•
Telephone directories and Single Data Base (SDB)
The EU Commission initiated a review procedure on the Directives on Universal Service, which was
completed on 27 October 2006 and was aimed at limiting the scope of the obligations currently in force for
fixed-line telephone operators. As an interested party, SEAT had participated in the public consultation,
arguing, on the one hand, for the need to keep in force the rules that require telephone operators to offer a
Single Data Base of telephone subscribers to all companies operating in the directories market and, on the
other hand, that the offering should be made according to the principle of fair, non-discriminatory and
competitive pricing. SEAT had also requested the tightening of universal access obligations for Directory
Assistance services on the part of all telecommunications networks and argued that it was unnecessary to
maintain an obligation to supply a “universal” telephone directory in consideration of the fact that by now
the market had numerous alternative information sources available (telephone, online and mobile directories
services), which meant a stringent obligation to supply directories in print versions was no longer
indispensable. The debate on the new package of directives and their respective approval are expected in
early 2009, and their implementation in the laws of member states in 2010.
•
Subscriber information services – Costs for interconnection from a mobile network to nongeographic numbers
The procedure of analysis of the market of receiving calls on mobile networks made to non-geographic
numbers “NGN” (the so-called “15bis market”) conducted by the European Commission and the Italian
Communications Authority (AgCom), in which SEAT participated, including through companies in its
Group, as a provider of Directory Assistance services, was complete in March 2007.
This analysis originated with a public consultation procedure during which AgCom issued an emergency
measure (Resolution 504/06/CONS), subsequently notified to the principal mobile telephone operators in
Italy, which set limits on the costs for interconnection from mobile networks to NGNs, which include the
Directory Assistance services offered by companies in the SEAT Group through the numbers 89.24.24,
89.24.00, 12.40, 12.56 and 12.89.
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Section One
The AgCom emergency measure was based on the assumption that the 15bis market should be subject to ex
ante regulation, setting obligations and/or price caps for mobile operators, insofar as deemed insufficiently
competitive.
This measure became ineffective on 28 February 2007; however, the operators Vodafone, H3G, Wind and
Telecom Italia – the latter with the sole exception of telephone interconnection services to the number
89.24.24 Pronto PAGINEGIALLE, which it never considered a Directory Assistance service – continued to
apply the costs required by the AgCom measure.
Despite the fact that AgCom Resolution 504/06/CONS had already expired at the end of February 2007, in
the following month, March 2007, AgCom itself decided to withdraw the resolution following a negative
pronouncement by the European Commission, which considered that the issue of interconnection costs in the
15bis market could be resolved according to antitrust law, rather than as a matter for ex ante regulation.
Following that pronouncement, and in order also to deliberate on the possible reopening of a procedure for
analysis of the 15bis market, AgCom (Resolution 168/07/CONS) began an analysis of the mobile public
telephone network access and call termination market (the so-called “15 market,” as a market downstream
from the former). This procedure was completed recently with an AgCom resolution which, when
transmitting the resolution in question to the European Commission, stated that it did not see elements that
would render this market subject to ex ante regulation. This pronouncement was shared without comment by
the European Commission in a resolution dated 19 January 2009.
For further information on the dispute with Telecom Italia regarding the AgCom measure set forth in
Resolution 504/06/CONS, please see Section One, Chapter 20, Paragraph 20.8.
•
New National Numbers Plan
On 24 July 2008, the new National Numbers Plan (NNP) was published in the Official Gazette upon
completion of the review process begun by AgCom in late 2006.
Among the various new developments, the part of greatest interest to the SEAT Group concerns the
introduction of more stringent and clearer rules (i.e. safeguarding both the public calling such services and
also the companies offering them in accordance with the regulations) on the utilisation of 892 numbers,
which are dedicated to services of a social information nature and which may continue – as already provided
for in the NNP – to offer subscriber information services as well. In addition, greater regulatory consistency
is established between the 12xy and 892 codes. Unchanged with respect to the previous regulations are the
maximum price ceilings for services to the public, as well as the obligation to inform the caller of the prices
for the service (so-called “price announcement”).
The new NNP assigns the obligation for payment of the administrative fees to the recipient operator in the
case of number portability; for the number 89.24.24 Pronto PAGINEGIALLE, these obligations therefore
fall to Telegate. However, it should be noted that negotiation is in progress with Telecom Italia to transfer
that number under number portability to SEAT, instead of Telegate.
•
Telephone bill transparency
In August 2007, in order to protect telephone users, AgCom issued Resolution 418/07/CONS on “Telephone
Bill Transparency”. Fixed-line and mobile telephone operators, Directory Assistance service providers
(including SEAT) and consumer associations contributed to the wording of the resolution. The main new
developments contained in the resolution include: (i) the possibility of obtaining “upon subscriber request”
two separate bills in the same envelope (one for basic traffic, monthly fee and additional services, and
another for calls to numbers at a surcharge); and (ii) the express exclusion of all 892 numbers from
permanent call blockage when they provide subscriber information services (as in the case of the SEAT
Group numbers).
Upon postponement of the effective dates originally provided for as a result of the appeal against the
measure before the Lazio Regional Price Commission by Telecom Italia, the Authority issued Resolution
97/08/CONS in February 2008, whereby an opt-in regime was adopted to enable enjoyment of any service at
a surcharge (or the need for an express request for access to specific numbers by subscribers, contrary to
what has happened until now).
83
In late March 2008, SEAT requested formal clarification from AgCom regarding the list of numbers that are
excluded from permanent call blockage, in order to rule out possible disputes with Telecom Italia and ensure
free access by subscribers to the SEAT Group’s 892 services.
On 14 May 2008, AgCom accordingly published the list of NGNs excluded from permanent call blockage
(Resolution 201/08/CONS), confirming free access to 892 services that offer subscribers information. These
services are therefore not included in the new permanent call blockage arrangements, which were
automatically extended starting 30 June 2008 to all subscribers who in the preceding three months had not
expressed a wish to the contrary to their respective telephone service operator.
•
Personal data protection (Legislative Decree No. 196 of 30 June 2003)
On 26 June 2008 the Personal Data Protection Authority, after an investigation covering a number of
companies specialised in the creation and sale of databases of telephone service subscribers, issued Order
No. 1544326 against Consodata, notified to it on 4 September 2008, by which it prohibited Consodata (as
well as some operators of telephone services) from continuing the further processing of personal data
originating from telephone directories published prior to 1 August 2005, on the assumption that this personal
data had been acquired without appropriate background information and without specific consent being
given, where required by law.
In particular, according to the Protection Authority, the use of information on subscribers contained in
telephone directories and on databases created prior to 1 August 2005 for marketing, advertising and
commercial purposes, and the transfer of this data to third parties (including ones not operating within the
telecommunications sector) had occurred in breach of legislative provisions in force. Such provisions laid
down, among other things, that certain guarantees should be applied for the benefit of subscribers, which
were listed and described in an order issued by the Protection Authority, order No. 1032397 of 23 May 2002,
pursuant to which: (i) specific consent must be sought – beyond the mere fact that such data appeared in the
telephone directory – in order to use the data for commercial information purposes and for sending
promotional material or for conducting market research and interactive business communications; and (ii) a
uniform procedure was established which all operators were obliged to follow in order to identify subscribers
explicitly who had consented to the use of their data for commercial or advertising purposes, consisting of
certain graphic symbols placed beside the names of such persons.
Following notification of this order Consodata, which considered it had acquired the data in its database
lawfully, appealed to the Rome Court for Order No. 1544326 to be annulled: the case is due to be heard and
debated in April 2009. In the meantime, pending the hearing, activity has begun with a view to reaching an
out-of-court settlement of the proceedings and with the aim of achieving definition of new regulatory
arrangements that would allow Consodata to continue to use the file archive in question for printed
mailshots. As regards telemarketing initiatives, the company intends to organise a campaign, with the help of
operators in the sector, for requesting consent for processing directly from the owners of the personal data.
The Protection Authority has, however, by means of an independent order, reserved the right to check
whether the prior conditions exist for bringing a charge of administrative violations in relation to inadequate
background information.
The Group in Europe
United Kingdom
The English Office of Communications (Ofcom) began a consultation process in March 2008, proposing to:
• repeal the Universal Service clause (USC7), which requires British Telecommunications Plc (BT) to
maintain and provide the database of telephone subscribers;
• eliminate the general clause (USC7), which requires telecommunications operators to provide a print
telephone directory to all of their subscribers;
• establish ex ante regulations, if necessary, to ensure compliance with future regulations on a Single Data
Base comprised of data each operator is required to provide to other operators for the formation of
directories and Directory Assistance services;
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Section One
• amend Art. 19 of the general conditions of the Communications Act of 2003, with reference to the
advisability of expanding the scope of Directory Assistance services;
• establish the best regulatory approach for allowing Directory Assistance services operators to access the
information necessary to provide services under appropriate conditions.
The Ofcom consultation originated with the lawsuits filed by The Number (UK) and Conduit against BT in
relation to certain obligations incumbent on BT since 2003, pursuant to the directive on Universal Service (in
particular the Universal Service clause “USC7” on supplying the subscriber database). Ofcom had completed
its analysis with the opinion that this clause was unlawful, and it accordingly began a public consultation to
define how to regulate the new situation for supplying user databases. Thomson participated in that
consultation, arguing that regulation is necessary to ensure that providers of telephone directories and
Directory Assistance services have telephone subscriber information available and that access to the
respective database took place in accordance with the principle of fair, non-discriminatory and competitive
pricing.
This past November 2008 the Competition Appeal Tribunal (CAT) admitted an appeal filed by The Number
UK and by Conduit against the Ofcom decision that had revoked clause USC 7 – as being unlawful – that
imposed certain obligations on BT, starting back in 2003, relating to supplying the subscriber data base
(pursuant to the directives on Universal Service). The CAT judgment instead held clause USC7 to be lawful
and ordered Ofcom to review its previous assessments. Meanwhile, BT has appealed the CAT judgment, and
therefore Ofcom is now awaiting a final decision before taking any initiative either in the direction of
redefining the dispute or continuing with the public consultation process the Authority began in March 2008.
Spain
The Spanish Ministry of Communications has published a resolution once again confirming the obligation of
the incumbent company Telefónica to offer all services relative to Universal Service (which include
provision of the print telephone directory and the offering of subscriber information services). For years
Telefónica has been offering a Directory Assistance service under “Universal Service” through the number
118118.
Telegate is convinced that a Universal Service obligation is altogether superfluous (and totally contrary to
the EU directives) in a context of – by now fully liberalised – subscriber information services. The company
has nevertheless participated in the evaluation procedure initiated by the Ministry, proposing that it manage
only the voice information service, in Telefónica’s stead, a proposal that has not been taken into
consideration, however, by the Ministry. Currently, the European Commission is analysing the case to verify
that the procedure followed by the Spanish government is in compliance with European regulations.
Even if the resolution of the Spanish Ministry of Communications is upheld, changes are not foreseen in the
Spanish Directory Assistance market in relation to competition.
The Spanish regulatory authority (CMT) has finally created a Universal Service subsidy fund, with the
objective of balancing the costs that Telefónica must bear for this service (provided at a loss from 2003 to
2005), without indicating at this time which parties are required to contribute.
During 2008 the Ministry of Industry began a public tender among telecommunications operators for the
awarding of one component of Universal Service, the part associated with Directory Assistance, provided
until now by incumbent Telefónica through the number 118118. This is a unique case in Europe, considering
that usually tenders for the awarding of Universal Service obligations have always involved all components
of the respective service and not just the subscriber information service.
At the end of the tender, in December 2008, the Ministry awarded the tender to Telefónica.
France
As of 1 June 2008 a new amendment to the law on consumer protection (Law 2004-669 Article L121)
imposed the obligation on all Directory Assistance service providers to inform callers of the cost of the call,
with a voice message (so-called “price announcement”) before transferring the call to the requested number
(so-called “call completion”). This is to safeguard consumers, because the price for the call often remains the
85
same as that for the “premium price” service called (higher than regular geographically based
conversations).
Austria
The national Regulatory Authority intends to make the regulations regarding the use of Directory Assistance
numbers more flexible. In November 2008 a consultation process was begun on proposals to make it possible
to offer, through numbers devoted to Directory Assistance, other services such as added-value “locationbased” services, cinema and theatre scheduling information and similar. According to the draft resolution,
these services may be advertised and offered additionally only if the service offered through 118 numbers
continues to be centred primarily on Directory Assistance content.
On 7 March 2005, the Austrian Telecommunications Authority (Telekom Control Kommission) issued a
decision limiting the costs for the provision of telephone subscriber data to payment by the companies
requesting such data (in this case Telegate GmbH) of a fixed sum, to be paid once only, totalling
approximately € 14,000, plus a monthly amount of approximately € 750. The decision by the Austrian
Telecommunications Authority is based on the assumption that there is no direct connection between the cost
of supplying subscriber data and the number of accesses to them. On 19 December 2005, the Austrian
Federal Administrative Court upheld the decision by the Telekom Control Kommission and rejected all the
claims filed against this measure (including the one filed by Telekom Austria).
Germany
Germany has implemented the Directive on Universal Service in its own law, laying down that telephone
subscriber data must be obtained by publishers of directories and providers of Directory Assistance service,
which include the company in the Telegate Group, in observance of the principle of “fair, non-discriminatory
and competitive pricing”.
In addition, in July 2008 the Federal Administrative Court issued a ruling under which it is possible that in
the future Deutsche Telekom AG – from which Telegate obtains telephone subscriber data – may adopt a
new method for determining prices for providing this data.
This judgment partially contradicted a previous decision by the Administrative Court of Cologne, which had
already issued a ruling regarding the decision by the Federal Network Agency (the German
Telecommunications Authority) dated 17 August 2005, according to which – on the basis of the
Telecommunication Act of 2004 – it was provided that the total amount of € 49 million, imposed by
Deutsche Telekom AG as the cost for supplying subscriber data, had to be reduced to a maximum of
€ 770,000.
6.1.2
Indications of new products and/or services
Continual upgrading of existing products and launching of new services
During 2008, in view of the high rate of growth in the online advertising market, the online growth strategy
implemented by the Company was geared simultaneously toward expansion of the current customer base,
and toward penetration of new markets, with the objective of capturing a large part of the growth in the
online spending of SMEs in Italy. The areas where action was taken include: (i) maximisation of traffic
(increase of the visibility of PagineGialle.it, increase of visibility of the search engines through automatic
SEO (Search Engine Optimisation), and improvement of content with a view to building loyalty among users
of PagineGialle.it); (ii) the development of an improved offering for SMEs (development of specific
offerings by type of target customer and cost competitiveness); and (ii) the demonstration of performance to
customers (detailed reports on the traffic generated).
The new business offering is therefore structured to cover three areas:
(a) Content – development/control of products that more closely follow the typical business model of an
online directory. This area allows advertisers to obtain diversified and personalised visibility on the SEAT
corporate sites and represents the point of entry to PagineGialle.it (for example, the “company profile”, with
structured information, text and photos).
86
Section One
The synergies with the other two areas, together with the possibility for the customer of structuring the
information in relation to their reference target, strengthen the effectiveness of upselling strategies, i.e.
strategies aimed at offering customers products/services with greater value compared to those acquired
previously, with a resulting increase in the average amount of spending by the individual customer and
therefore greater online advertising investment by SEAT customers;
(b) Services – development of products with higher added value that are distinguished by their ability to offer
the advertiser tools to obtain visibility on the Web and by competitive cost, thanks to the ability of SEAT to
industrialise business models;
(c) Distribution/Reselling – development of products that allow the advertiser to obtain visibility on the Web
through partnerships with the main market operators and intermediation activity in the online advertising
market for the management and optimisation of campaigns using several platforms. This area also deals with
distribution of PagineGialle.it content both online and via other platforms.
Thanks to the integration of these three areas and the functions forming part of PagineGialle.it, it has been
possible to raise the level of the offering, ensuring it complements and is non-competitive with general
portals and search engines.
The new strategic vision has implied a change in the approach of PagineGialle.it to the Web. PagineGialle.it
is in fact able to exploit the potential provided by the top search engine on the market (Google), enabling:
•
increased traffic coming from Google thanks to automatic SEO (Search Engine Optimisation);
•
visibility to its advertisers within the organic listing of Google through the professional SEO (Search
Engine Optimisation) service;
•
creation of a new commercial offering by providing visibility within the paid organic listing through
advertising by key words.
The new strategy has led to the following results in all of the three abovementioned areas:
•
Increased traffic: +26% in consultations compared to 2007, ending 2008 with 102.3 million visits,
also due to the restyling of the PagineGialle.it site, which now allows for specific organisation of
content and improved utilisation by users. Out of the total 2008 traffic, 21% came from automatic
SEO (Search Engine Optimisation) (Source: Nielsen NetRatings).
Following the revision of the Paginegialle.it site, the Paginebianche.it and Tuttocitta.it sites were
also revised with a view to content optimisation.
•
New commercial offerings: new commercial offerings were released (SEO Professionale, PGClick,
and Priority), which permitted the industrialisation of the typical web agency model aimed at
offering SEAT online advertisers a genuine advisory service and optimisation of development and
promotion of their online presence.
•
Performance reports to advertisers: a detailed report certified by a certified online audience
measurement leader Audiweb (Shinystat) is provided.
6.1.3
Sales channels
Sales force training and segmentation
At the end of 2008 the SEAT sales network was comprised of approximately 1,700 agents (1,618 in 2007)
and 96 employees (104 in 2007), as well as 400 telephone sales operators (also employees). As a result of its
reorganisation in November 2007 the sales network is structured and organised into two overall sectors:
“Major Customers and Top Customers” and “SME and Local Sales” – identified on the basis of type of
customer for a better understanding and satisfaction of their specific communication needs. In particular:
•
the “Major Customer and Top Customer” division, geared toward complex nationwide companies with
sophisticated communication needs, services customers through teams of highly qualified specialists. In
2007, the “Major Customer and Top Customer” division created internally two new sales structures
dedicated, respectively, to the management and development of offerings for central and local
government bodies, and to the design and development of innovative multi-platform projects, executed
in cooperation with the marketing department, with a view to satisfying the needs of nationwide
87
customers by giving them the highest possible level of personalisation. During 2008 a special
organisational unit was incorporated into the department for the management of top-tier customers (Top
customers, represented by mid-sized companies often operating in local markets; companies which, due
to the size of their advertising investment, require more specialised service), which were managed
previously by the “Business and Local Sales” division. These markets are served by a sales force of 30
employees broken down into “Key Accounts” and “Sales Managers”, in addition to which there are 34
agents and 6 Area Managers for Top customers;
•
the “SME and Local Sales” division, created in November 2007, is intended to service the SME segment
and small business operators (local network) segment, with the objective of ensuring greater
homogeneity throughout Italy and increasing the level of coordination of the sales network and the
offering, which varies according to customer segment. In particular, the new sales organisation for “SME
Sales” provides for dividing the Italian territory into 4 macro-areas (according to the classification
proposed by the Nielsen research institute) and 37 markets (identified according to criteria of territorial
identity, sales potential and management optimisation). In terms of management responsibility, the new
organisation provides for “Area Managers”, who will handle management and development of the sales
network in the assigned area, as well as its business results, and “Market Managers”, who will perform a
similar function in the assigned market, in a different manner according to customer segment, for the
purpose of understanding and satisfying communication needs. During 2008, the staff of “SME Sales”
was strengthened through the addition of new online specialists. In late December 2008 this sales
network was joined by 200 new agents, defined as “hunters”, who focus on the acquisition of new
customers for which the online offering will prevail over other products.
The “SME Sales” operates through a network of 1,395 agents, coordinated by 37 “Market Managers”,
who oversee mid-tier or medium-to-small SMEs and manage approximately 400,000 customers overall.
The “Local Sales,” on the other hand, manages the mass market, or small-sized business activities with
communication needs of a local and basic nature, through telephone sales operators and agents within the
territory (Field agents). The territorial network of Field agents is comprised of 228 persons who manage
approximately 220,000 customers and a high number of potential customers. These mass marketoriented commercial offerings are also managed by over 400 telephone sales operators (employees).
The segmentation of the offerings and of the sales organisation, together with the sales agent’s everincreasing advisory role, is an important element for exploiting the returns the SEAT media are capable of
offering advertisers, and in improving the latter’s perception of these media.
Continuous control of customer care activities and procedures
Customer service, as the focal point towards which sales initiatives are directed, is also achieved by
increasing customer care procedures in all after-sale editorial and administrative phases, with the aim of
improving customer service and reducing errors in the execution of orders. In this connection, good results
have been achieved by the customer portal www.seatconvoi.it, launched in 2005 as the fourth customer
service channel, after the Freephone number, the post office box and the e-mail address. There are already
over 32,000 customers registered who, for some types of requests, use this communication channel
exclusively. This portal is intended to become the preferred relationship channel between SEAT and its
customers for the provision of added-value information services (statistics and data on the consultation of
SEAT media, advance news on new offerings, and social solidarity initiatives), conducting surveys (helpful
for developing offerings) and developing loyalty-building programmes.
For Top customers, in addition to the call centres for dedicated assistance, a new service has been developed,
known as Courtesy Back Office, which manages the execution of draft printed material. This activity will
allow for adequate prevention of printing errors for the most important customer segment.
Top customers receive 60,000 copies free of charge of the bi-monthly corporate communications magazine
Con Voi, which is aimed at supporting Italian SMEs and making their communications strategies more
effective. The online version can be consulted by all customers on the portal www.seatconvoi.it.
The initiatives on prevention implemented have reduced the number of complaints by 2%, with a reduction
of 5% in the overall cost of refunds compared to 2007.
88
Section One
6.2
Main markets
6.2.1
Description of the main markets in which the Issuer operates
The SEAT Group is one of the top operators in Europe in the multimedia “directive advertising” business.
The main markets in which the Issuer operates can be divided into four major categories:
•
Italy Directories, relating to Directory activity, or the provision in Italy of information products and
services containing “directive advertising” for the searches for users based on organised lists of
names and address information to which access is gained through print, voice and online platforms,
carried out in Italy by the Issuer. Business directories Italia accounts for over 70% of the Group’s
activities;
•
Directories UK, relating to Directory activity (as described above) in the United Kingdom, where the
Issuer operates through the TDL Group;
•
Directory Assistance, relating to Directory Assistance activities, or the provision of products/services
based on organised lists of names and address information, to which access is gained over the phone
with the assistance of an operator, carried out in various European countries (the most important of
these for the Issuer is Germany) where the Group operates through the subsidiary Telegate;
•
Other Activities related: (i) to the provision of direct marketing, promotional items and corporate gift
services in Italy, through the subsidiaries Consodata and CIPI; and (ii) the provision of online B2B
services through the French subsidiary Europages, which is active especially in Italy and France.
The following is a revenue breakdown by business area.
(€ millions)
Directories Italia
Directories UK
Other activities
Total
Eliminations and other adjustments
Consolidated total
2008
1,058.7
118.1
190.4
70.3
1,437.5
(61.5)
1,376.0
2007 restated(*)
1,090.2
158.2
185.8
71.6
1,505.8
(61.6)
1,444.2
2006
1,077.5
173.5
188.7
77.0
1,516.7
(56.5)
1,460.2
2005
1,061.8
175.6
159.4
67.6
1,464.4
(39.8)
1,424.6
(*) The income statement for the year ended on 31 December 2007 was restated for consistency with the income statement for the year ended 31
December 2008, following, in particular, WLW’s sale.
The business areas shown above represent the primary segment breakdown of the SEAT Group’s operating
results, financial conditions and cash flows, considering that the Group’s risk and profitability are affected
first of all by the differences among products and services provided in the various markets. Within the
individual business areas, data are further broken down, as the case may be, by product and/or type of
customer (Directories Italia and Directories UK) or by geographic area (Directory Assistance, Other
Activities). Generally, the target geographical areas are the same as the companies that operate in the related
business areas.
For further details on the business of the Group in the various markets, please see Paragraph 6.1.1 of this
Chapter 6.
Directories Italy
SEAT is the first operator in Italy in the local advertising sector (Source: SEAT Group information) and one
of the largest Italian operators in advertising nationwide, with a significant user and advertising revenue base
of approximately € 1 billion. SEAT holds a share of approximately 10% of the national traditional
advertising market (TV and newspapers, with the exclusion of the Internet), where overall sales are € 10
billion (2007 Data, Source: ZenithOptimedia), second only to the major national television companies
(Mediaset and RAI) in terms of advertising revenue (Sources: 2008 broker estimates), and a share of
approximately 47% in the traditional local media advertising market, which, according to Issuer estimates, is
worth € 2.09 billion nationally (Sources: SEAT information for the Local Radio sector, UPA data for TV and
Newspapers).
89
In recent years, the SEAT Group has expanded its market of reference by including not only the directories
sector but also the sector including all communications media of a promotional or advertising nature
available to SMEs both as traditional media (local print and TV, billboards, flyers, fairs, catalogues, etc.), as
well as in the form of new opportunities offered by the online media (general portals, vertical portals, and
search engines).
The general and specialised products and services offered by the SEAT Group on three platforms (print,
voice, online) are capable of satisfying the multiple communications needs of SMEs because they represent a
lower cost/contact compared to competing media thanks to their wide dissemination and high rate of usage.
The ever-increasing presence of the Internet will also allow the Group to continue developing new
commercial offerings to satisfy SME communication needs effectively.
As far as the online advertising market is concerned, the IAB (Internet Advertising Bureau) states that the
value of the Italian market in 2008 was € 846 million. SEAT therefore holds a market share of approximately
19%-20%.
The current difficult macroeconomic environment is negatively affecting the traditional advertising market,
while the online advertising market is expected to continue to undergo strong expansion, with growth
forecasts of approximately 20% for 2009 (Source: IAB).
Prior to the start-up and consolidation of the Internet as the mass media of reference, the directories business,
at that time almost exclusively in print form, presented high barriers to entry (such as, for example, the
employment of a qualified sales force, the commercial power of a brand, the customer base and the database)
which traditionally limited the entry of new participants. Significant examples are the unsuccessful attempts
by Pagine Utili (in 1997) and Cairo Communications (in 2005) to replicate the business model of SEAT
through the creation of their own sales force.
In recent years, on the other hand, the development of the Internet as a mass communication media is
changing the advertising market and the structure of the media sector, favouring the birth of a new
competitive environment of reference comprised of companies (largely web agencies focused on the
development of search engines), which compete for the same advertising expenditure base from advertisers.
In addition, Telecom Italia has recently announced that it plans to enter the directories business after the
expiration of the five-year non-competition agreement entered into with SEAT in August 2003.
Directories UK
The TDL Group – present on the English directories market since 1980 – became part of the SEAT group in
late 2000. On 31 December 2008, the TDL Group had approximately 1,000 employees and produced 173
editions of the Thomson Local directories, distributed in 24 million copies throughout the United Kingdom,
and, together with British Telecom, is an important operator behind market leader Yell.
In 2007, the English economy saw GDP grow by 3.1%, an improvement over the 2.9% posted in 2006. In
2008, the English economy also entered into recession (-1.8% as estimated by the European Commission).
The Directories UK market, in particular, is highly competitive and is at a rather advanced stage of
evolution. Important industrial groups such as Yell, British Telecom and Trinity Mirror operate in it, and
many competing operators are characterised by a predominantly online business model. With reference
merely to the traditional directories market, the market leader is Yell, which in 2007 posted revenues of GBP
720 million in the United Kingdom and had an estimate market share in excess of 65% (Source: TDL Group
information), while the TDL Group (with revenues of GBP 108.8 million) and British Telecom both have an
estimated market share of 10% each (Source: TDL Group information). In this context, beginning in 2006,
the TDL Group has implemented a process of upgrading its commercial offerings with important product
innovations, accompanied by a new organisation of the sales area and a requalification as an online media
agency capable of providing SMEs with 360-degree services for their Internet presence.
The Telegate Group operates in different European directory assistance markets, characterised by different
degrees of maturity. In Germany, where the market is showing an ongoing and repeated contraction in call
volumes, Telegate – active with 11880 portal services and the second operator after the former monopolist
90
Section One
Deutsche Telekom – has followed a strategy of upgrading offerings with added-value services that have
allowed the Company to increase its market share, which grew at the end of 2007 to 38% from 37% in 2006
(Source: Telegate Group information). In addition, also to deal with the structural slump in the market,
Telegate launched an online information search portal, based on a well-known brand name and on the quality
of the database, and equipped itself with sales staff geared specifically to collecting advertising. In 2008,
with the aim of accelerating the growth of its multi-channel offering, a controlling stake was acquired in
KlickTel AG (now Telegate Media), a company active in the online directories market. In France, after the
extremely competitive start-up phase in 2006, which required huge investments for advertising, the Telegate
Group achieved substantial breakeven point in the second half of 2007.
In Italy, the Telegate Group manages part of SEAT’s telephone assistance service calls and operates as a call
centre services contractor for other operators. Prontoseat, on the other hand, carries out call centre activities,
managing the 89.24.24 Pronto PAGINEGIALLE service and other SEAT Group back office services as
contractor and together with the Telegate Group’s Italian subsidiary.
Other activities
Europages is one of the top online B2B directory companies in Europe (Source: Europages information). The
portal includes references for 1,500,000 export companies and suppliers originating in 35 European
countries. In January 2009 the Europages website posted 3.3 million visits from over 200 countries (Source:
Nedstat).
The company operates in competition with all the typical marketing or online advertising operators: general
search engines (Google, Yahoo, MSN, etc.), international and national specialised B2B search engines
(Kompass, Thomas Net, KellySearch, WLW, MasterSeek, Business.com, etc.), intermediation websites for
the purchase and sale of goods and services (Alibaba, GlobalSources, Ec21, etc.), online B2B components of
traditional directories (PAGINEGIALLE) and online initiatives of media groups active in B2B (Reed
Business Information, Bonnier, etc.).
For over 20 years, Consodata has been the leader in Italy in One-to-One Marketing and geomarketing
(source: Consodata information), and offers complete and innovative direct marketing services to thousands
of companies in all sectors. Within the reference market, the communications activities that do not employ
classic media (such as sponsorships, promotional activities, public relations and direct marketing) account
for 49.5% of all advertising investments (€ 18.8 billion, Source; UPA 207), of which 4.9% is Direct Mail
(Source: Consodata information regarding sector data). The main competitors are Poste Italiane, with its
subsidiary Postel, the Mondadori group, with its subsidiary Cemit, and RCS Direct, which belongs to the
RCS group.
CIPI operates in the promotional items and corporate gifts sector, covering the entire chain of value, which
ranges from importing the items up to personalisation with the customer’s brand and sale directly or through
SEAT to the end customer. The market is made up of numerous operators, including ones of limited size, a
factor that makes it difficult to estimate its real dimensions.
For further details, please see Paragraph 6.1.1.2, D in this Chapter.
6.2.2
Future plans and strategies
Consistent with the strategy outlined in March 2008, the guidelines of the Business Plan provide for: (i)
continuing to focus strategically on the Italian market, where SEAT has its main products and where the
acceleration in the growth of the Internet since 2007 has caused new business development opportunities to
arise; and (ii) managing foreign subsidiaries as “non-core”.
In this context, in view of the positive results achieved in 2008 on the online market in Italy, sustained by an
investment strategy focused on product innovation and on strengthening the sales network, the objective for
the 2009-2011 three-year period will be to maintain the high cash flow generated by the Company, to
continue with the transformation of the Italian business toward the online sector, and to reduce debt.
In particular, in Italy, SEAT will continue with initiatives geared toward developing the online sector and
stabilising revenues from core products, faced with the difficult economic situation expected for 2009 and
2010. Alongside these initiatives on the revenue front, the Company has begun a programme to cut operating
91
costs, based on a review of current expenses and on the redesigning of its main operating procedures. This
redesign will rely on the availability of the SAP platform, which is more flexible compared to previous
applications and is planned to be released in early 2009, and on the opportunity to simplify working methods
made possible by the increasing weight of online customers and contracts, which will allow for some of the
costs traditionally required by management of print directories to be superseded. The resources freed up
through cost-cutting initiatives will be allocated to strengthening the business – in particular to product
innovation, promotion and expansion of new offerings, training and incentives for the sales force – and will
allow for maintaining the current high operating margin. The Company will also pay special attention to
credit risk, working capital risk, capital expenditures and interest rate risk, with the objective of maintaining
the high ability of the SEAT business to generate cash flow.
As regards foreign activities, notwithstanding the “non-core” nature of these companies – which recently led
to the disposal of WLW in Germany – the Issuer has already implemented some organisational changes
aimed at ensuring even stricter and more systematic control of the individual companies, as well as greater
support for their activity, with the objective of preserving their value.
For further details on the guidelines for the 2009 – 2011 three-year period, please see Section One, Chapter
13.
6.3
Exceptional factors that have influenced the information provided at Paragraphs 6.1, “Main
Activities,” and 6.2, “Main Markets”
On the date of the Information Prospectus there were no exceptional events that have influenced the
activities of the Issuer or the Group.
6.4
Information on potential dependence on patents or licences, industrial, commercial or financial
agreements, or new manufacturing procedures
Patents and licences
On the date of the Information Prospectus the activities of SEAT and the Group do not depend on third-party
patents or licences (the advertising licences and administrative authorisations related to the Directory
Assistance business such as the 12.40 and 89.24.24 numbering), industrial contracts, commercial contracts,
or new manufacturing procedures.
In particular, with respect to the aforementioned administrative authorisations for Directory Assistance
activities, SEAT was authorised by the Ministry of Communications (pursuant to Art. 25 Legislative Decree
1 August 2003, No. 259 – Electronic Communications Code) both to perform the service of issuing
telephone information and the subsequent “call completion” service, i.e. the ability to connect the caller
directly to the telephone number of the requested user.
The authorisations were issued both for 89.24.24 Pronto PAGINEGIALLE and for 1240 Pronto
PAGINEBIANCHE: for both, SEAT, holder of both trademarks, entered into a specific agreement with its
subsidiary Telegate Italia S.r.l. – where both numbers services are provided – for the material supply of the
services of centering and transferring calls addressed to the aforementioned numbers (see Section One,
Chapter 19, Paragraph 19.1.1).
In turn, Telegate Italia S.r.l., as an operator interconnected with the Telecom Italia S.p.A. telephone network,
has a similar contractual relationship with the latter to gather and transfer calls, including with respect to
Telecom Italia subscribers and other fixed and mobile telephone operators in turn interconnected with
Telecom Italia.
Suppliers
It is believed that for the Issuer no special state of dependence on paper suppliers exists, although paper is
the main raw material used by the SEAT Group, with a 25.31% impact on total industrial costs at 30 June
2008. The largest suppliers of paper to the SEAT Group are the Finnish companies Upm-Kymmene and
StoraEnso, the Swedish company Holmen and the Canadian company Catalyst. The agreements that regulate
these supply relationships last on average 3 years, and prices are fixed at the beginning of the relationship for
the entire period of the agreement, with the exception of a possible renegotiation to reflect conditions on the
92
Section One
market. Furthermore, the products from the different suppliers are completely interchangeable, which allows
for full operational flexibility.
With respect to printing, because Ilte S.p.A. (“Ilte”) is the exclusive supplier, the Issuer believes that it has a
dependent relationship with that supplier. Ilte is SEAT’s printer of reference to which all services for
printing, binding, and shrink-wrapping for PAGINEGIALLE, PAGINEBIANCHE, and other minor products
published by SEAT are granted exclusively until 2014.
The agreements that govern the supply result from renegotiation of the overall relationship in 1998 at the
same time as the sale of the majority interest held by STET S.p.A. (of which SEAT was at the time an
internal division) in Ilte, and were renewed in 2005. The individual services are governed by technical terms
and conditions and include a system of guarantees for SEAT, such as the application of progressive penalties
in case of failure to comply with due dates and quality parameters, as well as Ilte’s loss of exclusivity right in
the event of serious breaches of contract or a decline in service.
The aforementioned agreements stipulate fixed prices valid for the first 2005-2008 four-year period, subject
to future revisions in the subsequent two three-year periods (2009-2011 and 2012-2014) based on market
analyses to be carried out using an international benchmark for the main European printers with a standing
comparable to Ilte’s.
For the 2009-2011 three-year period the analyses undertaken did not reveal any divergence from market
prices, and therefore the original rates charged were not adjusted.
Under the agreements in question SEAT provides Ilte with paper based on the agreed technical terms and
conditions; Ilte directly procures the other raw materials used for printing, such as inks.
Although SEAT is required to use Ilte for its typographic requirements throughout the entire contractual
period, SEAT has the right to terminate the agreement for up to 30% of the value of orders if Ilte misses due
dates or defaults on the quality standards set out in the supply specifications (for further detail see Section
One, Chapter 22, Paragraph 22.1).
Financing
For a full description of existing financing, see Section One, Chapter 22, Paragraph 22.3.
93
7
INFORMATION ON THE ISSUER’S PARENT GROUP
7.1
Brief description of the Group
SEAT is the parent company of the group.
7.2
Subsidiary companies
The following chart shows the structure of the companies forming part of the SEAT Group on the date of the
ITALY DIRECTORIES
UK DIRECTORIES
100%
TDL Infomedia Ltd.
TDL
Infomedia
Ltd
TDL
Infomedia
Ltd
100%
100%
Thomson Directories
Pension Company Ltd
100%
Calls You Control Ltd
DIRECTORY ASSISTANCE
OTHER ACTIVITIES
100%
Telegate Holding GmbH
100%
Consodata S.p.A.
77.37% a)
Telegate AG
51%
Cipi S.p.A.
93.562%
Europages S.A.
100%
11811 Nueva
Informaciòn Telefònica
S.A.U. 100%
Telegate 118 000 Sarl
100%
Telegate Media AG
97.23%
11880 Telegate GmbH
100%
Europages GmbH c)
99%
Europages
Benelux SPRL
50% b)
Katalog Yayin
ve Tanitim
Hizmetleri AS
100% d)
Seat Corporate
University S.c. a r.l.
Telegate Auskunftdienste
GmbH
100%
UNO UNO OCHO CINCO
CERO GUIAS S.L.
100%
100%
Telegate AKADEMIE
GmbH
100%
LEGEND
Datagate GmbH
100%
a) Of which 16.24% directly and 61.13% throughTelegate Holding GmbH.
b) Consolidated by the net equity method.
c) Company in liquidation.
d) Of which 95% directly and 5% through Prontoseat S.r.l.
100%
100%
Vieras GmbH
100%
Mobilsafe AG c)
Prontoseat S.r.l.
The Italian subsidiaries Consodata, CIPI, Prontoseat and Seat Corporate University S.c.a r.l. have indicated,
pursuant to Article 2497bis, Italian Civil Code, that the Issuer is the entity that performs management and
coordination activities. Such activities entail the setting out of group strategic and operational guidelines, as
well as the definition and adaptation of the governance and internal control model and the design of human
resources, financial, procurement, training and communication management policies.
94
Section One
The table below indicates the main subsidiary companies of the Issuer on the date of the Information
Prospectus, with the name, domicile, share capital and interest held in each case.
•
Company: TDL Infomedia Ltd.
Date established: 23 June 1999
Registered Office: Thomson House, 296 Farnborough Road, Farnborough - GU14 7NU Hampshire (Great
Britain)
Share capital: £ 139,524.78
Shareholders: SEAT: 100%
Corporate purpose: the company operates in the telephone book market and in collecting advertising for the
directories and offering business information services, and holds 100% of the share capital of Thomson
Directories Limited.
•
Company: Thomson Directories Ltd.
Date established: 31 March 1967
Britain)
Share capital: £ 1,340,000
Shareholders: TDL Infomedia Ltd.: 100%
Corporate purpose: the objective of the company is advertising services and the publication and sale of
directories.
•
Company: Thomson Directories Pension Company Ltd.
Date established: 2 December 1976
Britain)
Share capital: £ 2
Shareholders: Thomson Directories Ltd.: 100%
Corporate purpose: the objective of the company is managing the pension fund of Thomson Directories.
•
Company: Calls You Control Ltd.
Date established: 11 July 2006
Britain)
Share capital: £ 1
Shareholders: Thomson Directories Ltd.: 100%
Corporate purpose: the objective of the company is call centre services and activities related to
management and advertising consulting.
95
•
Company: Telegate Holding GmbH
Registered Office: Fraunhoferstraße 12a - 82152 Martinsried bei München (Germany)
Share capital: € 26,100
Corporate purpose: holding company.
•
Company: Telegate AG
Date established: 7 August 1996
Share capital: € 21,234,545
Shareholders: Telegate Holding GmbH: 61.13%
SEAT: 16.24%
Managers and Market: 22.63%
Corporate purpose: the Company offers information services on lists of national and international
subscribers to fixed and mobile telephones and other telephone information services.
•
Company: Telegate Italia S.r.l.
Registered Office: Via Nizza 262, Int. 58, 10126 Turin (Italy)
Shareholders: Telegate AG: 100%
Corporate purpose: the objective of the company is call centre services.
•
Company: 11811 Nueva Información Telefónica S.A.U.
Registered Office: Calle Playa de Leincres, No. 2 Edif. Londres 2nd Floor Suite 8, Centro Europa
Empresarial, 28290 Las Matas – Madrid (Spain)
•
Company: Telegate 118000 S.à r.l.
Date established: 10 May 2004
Registered Office: 10, avenue de la Grande Armée, 75017 Paris (France)
96
Section One
•
Company: Telegate Media AG
Registered Office: Kruppstr. 74, 45145 Essen (Germany)
Shareholders: Telegate AG: 97.23%; Market: 2.77%
Corporate purpose: the objective of the company is information services.
•
Company: 11880 Telegate GmbH
Date established: 16 February 2001
Registered Office: Ha. Register Kornfeld, Siebensterngasse 21, 1070 Wien (Austria)
•
Company: Telegate Auskunftdienste GmbH
Date established: 26 November 1999
•
Company: UNO UNO OCHO CINCO CERO GUIAS S.L.
Date established: 7 April 2005
Registered Office: Calle Rozabella, No 4 Edif. Bruselas Ground Floor, Centro Europa Empresarial, 28290
Las Matas - Madrid (Spain)
•
Company: Telegate AKADEMIE GmbH
Registered Office: Warnowallee 31c - 18107 Rostock (Germany)
Corporate purpose: the objective of the company is training personnel assigned to the call centre.
97
•
Company: Datagate GmbH
Date established: 26 November 1999
Corporate purpose: the objective of the company is data management services.
•
Company: Vieras GmbH
Shareholders: Datagate GmbH: 100%
Corporate purpose: the objective of the company is numerous services related to the Internet sector.
•
Company: Mobilsafe AG
Date established: 11 January 2000
Shareholders: Datagate GmbH: 100%
Corporate purpose: the objective of the company is services related to the Internet sector.
•
Company: Prontoseat S.r.l.
Date established: 15 September 1997
Registered Office: Via S. Ambrogio 21/E – Turin (Italy)
Corporate purpose: the objective of the company is performance of call centre activities and the
distribution of information services by telephone.
•
Company: Consodata S.p.A.
Date established: 11 January 2000
Registered Office: Via Mosca 43-A/45 – Rome (Italy)
Share capital: € 2,446, 330
Corporate purpose: the Company offers complete marketing services aimed at companies in all sectors as
well as the creation, organisation, management and sale of databases, studies, services, software, products,
and media for marketing, advertising, and sales.
98
Section One
•
Company: Cipi S.p.A.
Registered Office: Via Lorenteggio, 259, Milan (Italy)
Share capital: € 1, 200,000
CI.FIN. S.r.l.: 49%
Corporate purpose: the objective of the company is the preparation, printing, and sale of goods and
merchandise used for promotional giveaways wholesale, by mail order, and through retail outlets.
•
Company: Europages S.A.
Registered Office: 127, Avenue Charles de Gaulle – Neuilly sur Seine (France)
Shareholders: SEAT: 93.562%
Yell Publicidad S.A.: 5%
Detemedien GmbH: 1.429%
Directors / Natural persons: 0.009%
Corporate purpose: the objective of the company is the production, promotion, and sale of the panEuropean B2B merchandising yearbook Europages.
•
Company: Europages GmbH
Registered Office: Fraunhoferstraße 12°, 82152 Martinsried bei München (Germany)
Shareholders: Europages S.A.: 100%
Corporate purpose: the objective of the company is services related to B2B online directories.
•
Company: Europages Benelux SPRL
Registered Office: Rue de l’Hospice Communal 6, B-1170 Watermael-Boitsfort (Belgium)
Shareholders: Europages S.A.: 99%
Edouard Prisse: 1%
Corporate purpose: the objective of the company is activities related to online advertising, the publication
of websites, and B2B search engines.
99
•
Company: Katalog Yayin ve Tanitim Hizmetleri A.S.
Registered Office: Dr Cemil Bengu Caddesi, HAK is Merkezi, No: 2 Kat:3, 34403 Caglayan-Sisli/Istanbul
(Turkey)
Share capital: YTL 26,500,000
Doğan Yayın Holding A.Ş.: 50%
Corporate purpose: the Company operates in the market of collecting advertising for all types of
publications.
•
Company: Seat Corporate University S.c.a r.l.
Registered Office: Corso Mortara 22, 10149 Turin (Italy)
Shareholders: SEAT: 95%;
Prontoseat S.r.l.: 5%
Corporate purpose: the objective of the company is the promotion and carrying out of management and
professional training programmes and study activity, consulting, and the provision of services for managerial
and professional training both to its own group members and to non-member third parties.
Data on Meliadi Finance S.r.l., a special-purpose vehicle established to operate the securitisation of
commercial credits pursuant to the Law of 30 April 1999, No. 130, not belonging to the SEAT Group, fully
consolidated pursuant to the document interpreting the IAS, SIC 12, is given below:
Company: Meliadi Finance S.r.l.
Registered Office: Via V. Alfieri 1, 31015 Conegliano (TV)
Shareholders: SVM Securitisation Vehicles Management S.p.A.: 100%
Corporate purpose: the objective of the company is to perform one or more credit securitisation operations
pursuant to the Law No. 130 of 30 April 1999.
100
Section One
8
PROPERTY, PLANT, AND MACHINERY
8.1
Tangible fixed assets
8.1.1
Real estate owned
The table lists the real estate owned by the SEAT Group on the date of the Information Prospectus.
SEAT
Location
Turin, via Mocchie 8
Use
Residential
CIPI
Location
Milan, via Lorenteggio 259
Catania, Zona industriale “Blocco Palma II” 72B and C Strada XIII
Catania, Zona industriale “Blocco Palma II” 72B and C Strada XIII
Use
Offices and showroom
Factory premises and warehouse
Football field and connected installations
According to the Plan governing the Industrial Development
Consortium Area, part of this area is destined for expropriation.
Thomson
Location
Thomson House - 296 Farnborough Road, Farnborough, Hants
GU14 7NU, UK
8.1.2
Use
Offices
The property has a mortgage (fixed and floating charge)
recorded in favour of RBS to guarantee what is owed by SEAT
and the other entities with obligations under the RBS Finance
Agreement. For further details see Section One, Chapter 22,
Paragraph 22.3.1.
Rented / financial lease property
SEAT
Location
Turin, corso Mortara 22
Milan, via Grosio 10/4
Ancona, via Caduti del Lavoro 40
Bari, via Amendola 172/C
Bologna, via dè Fornaciai 9/4
Bolzano, via Druso 281
Brescia, via Orzinuovi 20
Cagliari, via Tuveri 52
Cagliari, via Tuveri 54/B
Florence, via A. da Noli 4/6
Naples, via Giovanni Porzio, building E/3
Palermo, viale Regione Siciliana 7275/b
Treviso, viale Appiani 21
Use
Offices
Offices
Offices
Offices
Offices
Offices
Offices
Offices
Warehouses
Offices
Offices
Warehouses
Offices
CIPI
Location
Milan, via Pozzi 7
Use
Residential
101
Consodata
Location
Rome, via Mosca 45
Milan, via Alserio 10
Use
Offices
Offices and Warehouses
Prontoseat
Location
Turin, via S. Ambrogio 21
Use
Offices
Thomson
Location
10 Pilgrims Close, Valley Park, Chandlers Ford, Hants, SO53 4ST, United Kingdom
Thomson House, Faraday Street, Birchwood Park, Warrington, WA3 6GA, United Kingdom
Northgate House, Northgate, Darlington, DL1 1XA, United Kingdom
100 Queen Street, Glasgow, G1 3DN, United Kingdom
Town Centre House, Merrion Centre, Leeds, LS2 8LY, United Kingdom
The Beater House, Turkey Mill, Ashford Road, Maidstone, Kent, ME14 5PP, United Kingdom
Ash House, Language Office Campus, Plympton, Plymouth, PL7 5JX, United Kingdom
Venture House, 15-17 High Street, Purley, Surrey, CR8 2YW, United Kingdom
Durkan House, 214-224 High Street, Waltham Cross, EN8 7DR, United Kingdom
Unit 3 Hawley Lane Ind. Est., Hawley Lane, Farnborough, Hants, GU14 8EH, United Kingdom
8 Britannia Court, The Green, West Drayton, Middlesex, UB7 7PN, United Kingdom
Unit 4 Ancells Court, Rye Close, Fleet, Hants, GU51 2UY, United Kingdom
Use
Offices
Offices
Offices
Offices
Offices
Offices
Offices
Offices
Offices
Warehouses
Offices
Offices - vacant
Europages
Location
Neuilly sur Seine, 127, Avenue Charles de Gaulle, France
Use
Offices
Telegate
Location
Fraunhoferstraße 12a – 82152 Martinsried, Germany
Use
Headquarters (the property is also the headquarters of Datagate
GmbH, Vieras GmbH, Telegate Auskunftsdienste GmbH and
Mobilsafe AG)
Platz der Freundschaft 14b – 18273 Güstrow, Germany
Call centre
Friedrich-Engels-Ring 52 – 17033 Neubrandenburg, Germany Call centre
Warnowallee 31b – 18107 Rostock, Germany
Call centre (the property is also the headquarters of Telegate
AKADEMIE GmbH)
Platz der Befreiung 1 – 16303 Schwedt, Germany
Call centre
Tribseer Damm 76 – 18437 Stralsund, Germany
Call centre
Altwismarstraße 7-11 – 23966 Wismar, Germany
Call centre
102
Section One
Telegate Media
Location
Kruppstraße 74 – 45145 Essen, Germany
Kruppstraße 41 – 45128 Essen, Germany
Calenberger Esplanade 6 – 30169 Hannover, Germany
Glockengasse 1 – 50667 Cologne, Germany
Leonrodstraße 61 – 80636 Munich, Germany
Haubachstraße 72 – 22765 Hamburg, Germany
Kleppingstraße 20 – 44135 Dortmund, Germany
Sossenheimer Weg 5/7 – 65929 Frankfurt, Germany
Tempelhofer Ufer 37 – 10963 Berlin, Germany
Use
Headquarters
Call centre
Development office
Sales office
Sales office
Sales office
Sales office
Sales office
Sales office
Location
Via Nizza 262 int. 48 – 10126 Turin
Via Spagna 10/22 – 57017 Livorno
Use
Headquarters and call centre
Call centre
Telegate 118000 S.à.r.l.
Location
10, Avenue de la Grande Armée – 75017, Paris, France
Use
Headquarters
11811 Nueva Información Telefónica S.a.u.
Location
Use
Centro Europa Empresarial c/ Playa de Liencres 2, Edif., Londres, 2nd floor, suite 8, 28290 Las Matas, Madrid, Spain Headquarters
Centro Europa Empresarial c/ Playa Baja y Planta Primera, Edif., Roma, 28290 Las Matas, Madrid, Spain
Call centre
On the date of the Information Prospectus the SEAT Group does not own any other materially significant
fixed assets, nor does it intend purchasing any in the foreseeable future.
On the date of the Information Prospectus approximately 72% of the Group’s fixed assets consists of
buildings (equivalent to approximately € 77 million, of which approximately € 63 million in financial
leases). The remainder (€ 44 million) consists of plant and machinery (including the call centre equipment
and servers), individual IT stations for the use of agents and employees, and office furniture and furnishings.
8.2
Environmental problems that might affect the use of the properties
On the date of the Information Prospectus, SEAT is not aware of problems of an environmental nature that
could materially affect the use of the fixed assets.
103
9
DESCRIPTION OF THE OPERATING AND FINANCIAL POSITION
This chapter contains comments on the performance of the income and capital items of the SEAT Group for
the financial years ended on 31 December 2007, 2006 and 2005, as well as the half-yearly periods ended on
30 June 2008 and 2007 and for the nine months ended on 30 September 2008 and 2007.
The consolidated financial data and the relative comments presented in this Chapter shall be read in
conjunction with the information contained within the annual consolidated financial statements at 31
December 2007, 2006 and 2005, with the consolidated half-yearly reports at 30 June 2008 and 2007 and with
the interim consolidated operating statements at 30 September 2008 and 2007, whose information, if not
reported in this Information Prospectus, shall be understood as being hereby incorporated by reference, as
per Article 11, Paragraph 2 of Directive 2003/71/EC and Article 28 of Regulation 809/2004/EC. These
documents are available to the public at the company registered office as well as on the web site of the
Issuer, www.seat.it, in the “investor” section. The financial tables for all of the periods presented, extracted
from the consolidated financial data available to the public, are also presented in Chapter 20, below.
As described above in Chapter 2, the annual consolidated financial statements of the Issuer at 31 December
2007, 2006 and 2005 have been audited by the Independent Auditors, while the abbreviated interim
consolidated financial statements included in the consolidated half-yearly reports at 30 June 2008 and 2007
have been subjected to a limited audit by the Independent Auditors. The interim consolidated operating
statements at 30 September 2008 and 2007, on the other hand, have not been subjected to any audit.
The consolidated balance sheet and income statement of the Issuer contained in this Information Prospectus
have been prepared pursuant to the IFRS and are presented below in this chapter in a restated form, as in the
management report of the annual consolidated financial statements and of the consolidated half-yearly
reports and as presented in the interim consolidated management reports.
In particular, the reclassified consolidated income statement derives from the consolidated income statement
table of the consolidated balance sheets and of the abbreviated interim consolidated financial statements, as
well as showing the gross operating profit (GOP), Operating income before amortisation, depreciation, nonrecurring and restructuring cost, net (EBITDA) and the subdividing of some expenses between operating and
non-operating. The reclassified consolidated balance sheet also shows the operating assets and liabilities
separately from non-operating assets and liabilities, the net operating and non-operating working capital, the
net invested capital and the net financial debt.
Such measurements are not identified as accounting measurements within the scope of the IFRS and
therefore they should not be considered alternative measurements for evaluating the economic performance
of the Group and the relative financial and capital position. The Issuer believes that the financial information
reported in the following is an important parameter for measuring the performance of the Group as it enables
analysis of the economic, capital and financial performance of the Group. As the determination of such
measurements is not governed by the accounting standards in reference, the methods of calculation applied
by the Company may not be consistent with those adopted by others and therefore such measurements may
not be comparable.
For definitions of such measurements (EBITDA, GOP, operating working capital, non-operating working
capital, net invested capital, net book financial debt and net financial debt), see Section One, Chapter 3 of the
With reference to each period presented, the financial information and tables shown in this Chapter and the
relative comments are meant to provide a summary view of the economic and capital position of the Group,
of the changes occurring from one reference period to another, and the significant events that have
influenced the respective results.
9.1
Financial Position
The financial position of the SEAT Group is analysed in Section One, Chapter 10, Paragraph 10.1 of this
Information Prospectus, to which reference should be made.
104
Section One
9.2
Activities
The following are descriptions of the main factors that have influenced SEAT Group activities for the
financial years ended on 31 December 2007, 2006 and 2005, as well as the first half-yearly periods of 2008
and 2007 and for the first nine months (and third quarter) of 2008 and 2007.
9.2.1
Reclassified consolidated income statement for the financial years ended on 31 December 2007,
2006 and 2005
(€ thousands)
Materials and external services (*)
Salaries, wages, and employee benefits (*)
Gross Operating Profit (GOP)
% on revenues
Other valuation adjustments and provisions to reserves for
risks and charges, net
Other operating income (expense), net
Operating income before amortisation, depreciation,
non-recurring and restructuring costs, net (EBITDA)
% on revenues
Operating amortisation, depreciation and writedown
Non-operating amortisation and writedown
Non-recurring and restructuring costs, net
Operating result (EBIT)
% on revenues
Interest expense, net
Gains (losses) on disposal/valuation of investments
Income (loss) before income taxes and Minority
interests
Income taxes for the financial year
Net result of discontinued activities
Income (loss) before Minority interests
Minority interests
Income (loss) for the financial year
2007 (a)
2006 (b)
1,453,592 1,460,183
(504,158) (568,838)
(246,390) (231,844)
703,044 659,501
48.4%
45.2%
(50,077) (47,180)
(2,795)
650,172
(897)
611,424
2005 (c) Absolute
changes
(a-b)
1,424,611
(6,591)
(514,954)
64,680
(218,924) (14,546)
690,733
43,543
48.5%
(60,659)
(2,897)
(3,514)
626,560
44.7%
41.9%
44.0%
(42,151) (33,269) (32,391)
(162,067) (162,067) (162,067)
(16,880) (13,970) (11,908)
429,074 402,118 420,194
29.5%
27.5%
29.5%
(239,313) (246,209) (260,568)
(3,314)
(5)
4,243
186,447 155,904 163,869
(80,209)
106,238
(7,839)
98,399
(74,116)
81,788
(1,652)
80,136
(25,383)
175
138,661
(6,756)
131,905
% Absolute
changes
(b-c)
(0.5)
35,572
11.4 (53,884)
(6.3) (12,920)
6.6 (31,232)
%
2.5
(10.5)
(5.9)
(4.5)
(6.1)
13,479
22.2
n.s.
6.3
2,617
(15,136)
74.5
(2.4)
(8,882) (26.7)
(878)
(2.7)
(2,910) (20.8)
26,956
6.7
(2,062)
(18,076)
(17.3)
(4.3)
14,359
4,248
(7,965)
5.5
n.s.
(4.9)
(1,898)
38,748
6,896
(3,309)
30,543
2.8
n.s.
19.6
(6,093)
24,450
(6,187)
18,263
(8.2)
n.s.
29.9
n.s.
22.8
(48,733)
n.s.
(175) (100.0)
(56,873) (41.0)
5,104
75.5
(51,769) (39.2)
(*) Less shares of cost charged to minority interests and included in the IFRS financial statements as “Other Revenues and Income.”
2007 - 2006
The results obtained in 2007 reflect a development of the Italian economic situation that differs from what
was expected. Furthermore, they are the consequences of measures implemented in 2006 and 2007 by the
Issuer for the internal reorganisation and strengthening of its supply and sales capacity as well as for
recovery of the Telegate Group’s profitability after the high expenses suffered in 2006 due to the entry of
Directory Assistance into the French market.
Revenues from sales and services, in particular, reached € 1,453.6 million, substantially stable in relation to
€ 1,460.2 million in 2006, while the costs of materials and external services benefited from a reduction of
€ 42.7 million in advertising and promotion expenses in relation to the preceding financial year, registering
€ 504.2 million; 2006 was in fact influenced by the launch of new Directory Assistance services in Italy and
in France and by the related advertising expenses.
The costs of salaries, wages and employee benefits showed an increase of € 14.5 million due to the entry of
the German group WLW into the scope of consolidation starting on 1 October 2007 (then disposed of in
December 2008 and thus to be shown as a discontinued operation in the consolidated financial statements at
31 December 2008; for more information see Section One, Chapter 12 of this Information Prospectus) as
105
well as due to the policies for strengthening the sales structure of SEAT and of the subsidiary Europages, and
the different contractual framework for telephone operators in Italy.
The net effect of the change in expenses, which displayed a reduction greater than the reduction in revenues,
due to the positive measures of containing them, caused an increase in the EBITDA of 6.3% in relation to
2006, going from € 611.4 million to € 650.2 million, with an operating margin rising to 44.7% (41.9% in
2006).
For further information on operating expenses and revenues, see the analysis per business area appearing
below at Paragraph 9.2.2.
Operating amortisation, depreciation and writedowns (€ 42.1 million) went up € 8.9 million in relation to
the previous financial year due to the effect of the high level of industrial investments in recent years (for
further information see Section One, Chapter 5, Paragraph 5.2.1 of this Information Prospectus).
Non-operating amortisation and writedowns, at € 162 million (a level unchanged since the previous year)
represents the amortisation share of the SEAT Customer Data Base pertaining to the year (for further
information see Section One, Chapter 6, Paragraph 6.1.1.3 of this Information Prospectus).
The performance registered at the EBITDA level has also been confirmed at the EBIT level, despite the net
non-recurring and restructuring costs of € 16.9 million in 2007 (€ 14.0 million in 2006). They included, in
particular, € 7.5 million for company restructuring costs borne by the Issuer starting in the first half-year of
2007, which it was envisioned would be incurred in the following months in view of the activation of a
corporate restructuring plan approved by the top management and agreed to at labour union level. This plan
involves 130 redundancies in the 2007-2009 period, through measures of extraordinary unemployment
compensation (Cassa Integrazione Guadagni Straordinaria) and early retirement, as well as measures
involving the middle management level and professional retraining. It will be carried out in the publishing
and commercial back-office departments, which have been strongly influenced by the introduction of new
and highly innovative information technology systems. The plan has been updated during the course of 2008,
as described in Paragraph 9.2.3 below.
The performance of the net interest expense has reflected, in particular, interest expense (€ 258.2 million),
which remained essentially in line with that of the previous financial year despite the increase in the Euribor
rate. In 2007 SEAT in fact benefited from a lower average indebtedness, resulting from the repayments
made, as well as from the reduction in interest rates, resulting from the application, starting in February and
August 2007, of progressive reductions in the spread component of the cost for the senior debt following the
achievement at the end of December 2006 and of June 2007 of target ratios between the debt and the
EBITDA of the Group, which were contractually provided for. During 2007 the total average cost of the
financial debt of SEAT was 6.4% (6% in 2006).
The income taxes of the financial year (€ 80.2 million) were comprised of € 40.4 million in current taxes
on income, of € 101.8 million from the reversal of anticipated tax assets (essentially connected with the use
of tax losses of previous financial years) and of € 62.8 million from the reversal of deferred tax liabilities,
mainly attributable to the Customer Data Base, which is amortised for tax purposes over a different period of
time compared to the one used in the financial statements.
The net result for 2007 was € 18.3 million above the result for 2006, by virtue of the cost efficiencies
mentioned above at the operating and financial levels, although partially mitigated by the increase in
operating amortisation and depreciation (up € 8.9 million as a result of the industrial investments made in the
last few years).
2006 - 2005
The results of 2006 started to benefit from the investments made both during 2006 as well as in the preceding
months by strengthening the commercial structures for sales and by the launch of new products onto the
market in the area of print directories, Directory Assistance services and online services. The “one-off” costs,
needed for reaching the business development targets had a significant impact on results in the first half of
2006, still enabling significant growth to be recorded in the second half of the year both in terms of revenues
as well as operating profit.
106
Section One
The revenues from sales and services reached € 1,460.2 million in 2006, up 2.5% in relation to the
€ 1,424.6 million in 2005. 2006 was characterised in Italy by market confirmation of the 12.40 Pronto
PAGINEBIANCHE subscriber information service, by distribution of the PAGINEBIANCHE in full colour
and by sale of advertising insertions on the new internet platform (PAGINEGIALLE Visual). Abroad there
was development in the Directory Assistance services with the entry of the Telegate Group into the French
market and strengthening of the internet and print supply of the TDL Group, where the sales structure was
strengthened and the commercial approach modified.
The costs of materials and external services (€ 568.8 million in 2006) rose € 53.9 million over the previous
year due to the introduction of full colour into the printing process for PAGINEBIANCHE (+3.8% in
production costs), to advertising and promotion expenses (+ € 20.2 million) in support of the launch of
Directory Assistance service in France, and to call centre services (+ € 15.6 million) resulting from greater
use of call centre services in outsourcing as a result of the start-up of this business.
The expenses of salaries, wages and employee benefits also rose (up € 12.9 million compared to 2005),
which was also a result of the growing number of employees assigned to the call centres in support of the
12.40 Pronto PAGINEBIANCHE service.
EBITDA was € 611.4 million, down 2.4% in relation to 2005 due to advertising and operating costs incurred
particularly in the first half of the year for the launching of new telephone assistance services in Italy and
France. EBITDA grew, in particular, in the second half of the year (up +10.5% compared to the same period
in 2005, to reach € 456.4 million) by virtue of the positive effects of the measures undertaken since 2005 for
strengthening the product range, reorganising the sales structures per customer segment and improving the
competitiveness and the abilities of sales agents as consultants. The operating margin in 2006 was 41.9%
(44% in 2005).
Operating amortisation, depreciation and writedowns (€ 33.3 million) were substantially in line with the
previous financial year.
Non-operating amortisation and writedowns, at € 162 million (a level unaltered since the previous
financial year) represent the amortisation share of the Section Customer Data Base pertaining to the year (for
further information see Section One, Chapter 6, Paragraph 6.1.1.3 of this Information Prospectus).
The performance registered at the EBITDA level was also confirmed at the EBIT level, despite the net nonrecurring and restructuring costs of € 14.0 million in 2006 (€ 11.9 million in 2005). They include, in
particular, € 5.4 million for company reorganisation expenses incurred by the Issuer in the adoption of a new
commercial structure organised per customer segment (Large Customers, Business Sales and Local Sales).
They also included € 4.8 million for stock options, considered non-recurring and restructuring costs. For
further detail on the stock options plans issued by the Issuer see Section One, Chapter 17, Paragraph 17.2.2.
The performance of the net interest expense reflected, in particular, an interest expense (€ 257.6 million) in
decline in relation to the previous financial year (- € 27.2 million), mainly due to a lower level of average
debt. On the other hand, the cost of debt remained essentially stable, even given an increasing Euribor
reference rate, resulting from the positive effects deriving from the refinancing operation that burdened the
income statement for only 7 months and the lower expense in relation to 2005 resulting from hedging.
The income tax for the financial year (€ 74.1 million) was comprised of € 29.2 million in current income
taxes, of € 43.1 million from provisions for deferred tax liabilities and of € 2.6 million from reversal of
deferred tax assets.
The net result for the financial year was lower than that of the previous financial year by € 51.8 million.
This change is attributable to the effect on the 2005 result of the realignment carried out between the
statutory and tax values of the Customer Data Base pursuant to Article 14 of Law No. 342/2000.
9.2.2
Data per business area
The following is a description and analysis of the economic data of the SEAT Group by business area, as
shown in the management report on the annual consolidated financial statements.
107
For further details on the companies that comprise the various business areas, see Section One, Chapter 7,
Paragraph 7.2 of this Information Prospectus.
Economic data per business area of the SEAT Group: financial years 2007 - 2006 - 2005
(€ million)
Revenues from sales and
services
Directories Directories Directory
Other Aggregate Eliminations Consolidated
Italy
UK Assistance activities
total
and other
total
adjustments
2007
1,090.2
158.9
185.8
80.2
1,515.1
(61.5)
1,453.6
2006
2005
2007
1,077.5
1,061.8
(399.9)
173.5
175.6
(52.6)
188.7
159.4
(64.1)
77.0
67.6
(43.4)
1,516.7
1,464.4
(560.0)
(56.5)
(39.8)
55.8
1,460.2
1,424.6
(504.2)
2006
2005
Salaries, wages, and employee 2007
benefits
2006
2005
Gross operating profit (GOP) 2007
2006
2005
2007
Operating income before
2006
amortisation, depreciation,
2005
non-recurring and
restructuring costs, net
(EBITDA)
2007
2006
2005
(410.5)
(389.2)
(86.9)
(61.1)
(62.5)
(64.3)
(109.8)
(63.6)
(68.2)
(43.9)
(39.6)
(27.1)
(625.3)
(554.9)
(246.5)
56.5
39.9
0.1
(568.8)
(515.0)
(246.4)
(81.2)
(85.1)
603.4
585.8
587.5
553.5
542.4
535.2
(67.4)
(65.1)
42.0
44.9
48.0
36.8
39.3
42.0
(62.2)
(53.1)
53.5
16.7
42.7
50.0
17.7
37.7
(20.9)
(15.5)
9.8
12.1
12.5
9.9
12.0
11.7
(231.7)
(218.8)
708.7
659.5
690.7
650.2
611.4
626.6
(0.1)
(0.1)
(5.7)
-
(231.8)
(218.9)
703.0
659.5
690.7
650.2
611.4
626.6
351.6
348.0
343.8
33.3
35.1
35.9
40.7
10.6
31.1
3.5
8.4
9.4
429.1
402.1
420.2
-
429.1
402.1
420.2
Materials and external
services (*)
(*) Less the shares of cost charged back to minority interests and included in other operating income as referred to in the IFRS/IAS financial
statement tables in the item “Other Revenues and Income”.
“DIRECTORIES ITALY” BUSINESS AREA
The following table shows the main results for 2007 in comparison with those for 2006 and 2005:
(€ million)
2007
(a)
2006
(b)
1,090.2 1,077.5
(399.9) (410.5)
(86.9) (81.2)
603.4 585.8
553.5 542.4
restructuring costs, net (EBITDA)
351.6 348.0
2005 Absolute
% Absolute
%
(c) changes
changes
(a-b)
(b-c)
1,061.8
12.7 1.2
15.7 1.5
(389.2)
10.6 2.6
(21.3) (5.5)
(85.1)
(5.7) (7.0)
3.9 4.6
587.5
17.6 3.0
(1.7) (0.3)
535.2
11.1 2.0
7.2 1.3
343.8
3.6
1.0
4.2
1.2
(*) Less the shares of cost charged back to third parties and included in the IFRS financial statement as “Other Revenues and Income”.
2007 - 2006
In 2007, SEAT revenues (the activities of the “Directories Italy” business area essentially represent those of
the Issuer) were € 1,090.2 million, up 1.2% compared to the previous financial year (€ 1,077.5 million). This
growth was substantially in line with the 2006 growth (+1.5%) and occurred in an Italian economic context
characterised by a GDP that, while up 1.5% in 2007, started to show signs of weakness in the last part of the
year, particularly as a result of the critical situation of the world economy.
108
Section One
Revenues from sales and services in 2007 were supported by the recovery, in relation to 2006, of paper
products and by the results of the voice and online activities, which benefited from the commercial success
of the multimedia offers, the effects of the strategies of reorganisation and of revitalisation initiatives in the
sales area and the strengthening of the range of products and services carried out in preceding years.
In particular:
•
Print (PAGINEGIALLE, PAGINEBIANCHE and local directories): These recorded revenues of
€ 755.3 million in 2007, down 1.3%, but with an overall trend of improvement in relation to the decline
of 3.7% recorded in 2006. Of particular note is the difference between the results obtained by
PAGINEGIALLE (-3.7%), where the trend was nevertheless improving in relation to 2006 (-7.4%), and
by PAGINEBIANCHE, up 1.2% (+0.4% in the previous financial year). Of note is the progress made
by the Large Customers sales channel, which – making use of a team of qualified specialists – has been
able to reverse the negative dynamics that had characterised this customer segment in recent years;
•
Voice: Revenues were recorded in the amount of € 123.8 million, up 20% compared to 2006 thanks to
the continued development of the value-added services 89.24.24 Pronto PAGINEGIALLE and the
success of the subscriber information service 12.40 Pronto PAGINEBIANCHE. The 89.24.24 Pronto
PAGINEGIALLE service recorded growth of 7.0% in revenues compared to 2006, at € 80.3 million.
The revenues of the subscriber information service 12.40 Pronto PAGINEBIANCHE grew 50.7% in
relation to 2006;
•
Online: Paginegialle.it recorded revenues of € 137.1 million in 2007, up 11.0% compared to 2006
thanks to the new PAGINEGIALLE Visual service. The online offer showed positive performance
along all customer segments as well as in usage of the online platform, with the number of searches
increasing 11.7% in relation to 2006 taking both the Paginegialle.it and the Paginebianche.it brands into
account;
•
B2B: Revenues recorded were € 38.4 million, down 12.1% from the previous financial year. These
products were adversely affected in 2007 by the sales force’s focus on turning around print directories,
and a revision of the product range is planned in the upcoming years in order to reflect the increasing
importance of the online component in line with the trends displayed by the major B2B markets;
•
Other products: Revenues decreased € 3.4 million compared to 2006 due to the effect of the
performance of merchandising activities, amounting to € 15.4 million, and of direct marketing products
(€ 10.1 million).
The costs of materials and external services, net of the relative cost recoveries, amounting to € 399.9
million in 2007, declined overall by € 10.5 million in relation to 2006, by 2.6%. In particular:
•
Industrial costs amounted to € 176.1 million in 2007 (€ 172.8 million in 2006), with an increase of € 3.3
million (+1.9%) mainly due to the increased use of inbound call centre services (€ 30.0 million,
+26.2%), principally as a result of the growth in the handling time for the Directory Assistance and
subscriber information services. Data transmission costs were affected by the increased costs incurred in
the production of PAGINEGIALLE VISUAL videos. Paper consumption costs (€ 40.2 million)
decreased by € 2.1 million as a result of the lower number of printed signatures;
•
Sales costs amounted to € 152.6 million in 2007, down 9.2% compared to the previous financial year
(€ 168.0 million), mainly due to the lower incidence of advertising expenses, which decreased by € 14.6
million compared to the previous financial year (-42.1%), when they had been impacted by the launch of
the subscriber information service 12.40 Pronto PAGINEBIANCHE. Commissions and other sales costs
were down 4.0% to € 124.7 million; in particular, commissions declined 5.8% due, as well, to a different
mix of revenues, with a sharp increase in 2007 in the component deriving from telesales not remunerated
by commission. Costs for outbound call centre services increased noticeably (+ € 4.3 million), resulting
from the telesales channel becoming fully operational. Remuneration by royalties increased (up € 1.2
million to reach € 8.3 million) due to the expansion of the network of co-branded web sites and royalties
paid to Telespazio as part of the PAGINEGIALLE VISUAL business;
•
General costs, at € 71.2 million in 2007, increased by € 1.6 million in relation to the previous financial
year, also due to the increase in expenses for bad debt collection following the intense activity carried
out and the entry into operation of the new scoring system, comprised of a system for evaluating certain
109
possible customer behaviours/characteristics and the related cataloguing intended to serve as a guideline
for specific business policies.
The cost of salaries, wages and employee benefits amounted to € 86.9 million, up 7.0% compared to 2006
(€ 81.2 million), mainly due to the increase in average salaried workforce from 1,345 units in 2006 to 1,379
units in 2007. This item also includes the capitalisation of labour costs related to investments made during
the financial year (€ 4.2 million, compared to € 3.7 million in 2006).
The workforce – including directors, project workers and trainees – numbered 1,449 persons at December
31, 2007 (1,393 persons at December 31, 2006).
Gross operating profit increased by € 17.6 million in relation to the previous financial year, due, in
particular, to higher revenues. The savings achieved on the operating expenses front (down € 10.6 million)
were, in fact, partially absorbed by the higher cost of labour (up € 5.7 million).
EBITDA reached € 553.5 million in 2007, up 2.0% compared to the previous financial year, with a
profitability of 50.8% (50.3% in 2006).
2006 - 2005
In a macroeconomic context characterised in Italy between the second half of 2005 and 2006 by a downward
phase in consumption and in household confidence and by prudence on the part of SMEs in their advertising
investments, SEAT has continued with its investment policy aimed at product innovation and strengthening
of the sales network.
In particular, in 2006 the revenues from sales and services amounted to € 1,077.5 million, up 1.5%
compared to 2005 and with an accelerating trend in relation to the previous two-year period, mostly thanks to
the new products launched on the market in the second part of the year (full colour for the
PAGINEBIANCHE and PAGINEGIALLE Visual). In particular:
•
Print: Revenues in 2006 were € 765.5 million, down 3.7% compared to the previous financial year, with
negative performance, above all, in the first half of the year and progressive improvement in the second
part. This result was the effect of the performance of PAGINEBIANCHE, which increased in the second
half of the year (+2.5%) thanks to full colour, and the decline (-7.4%) for PAGINEGIALLE, which – in
the second half of 2006 – nevertheless started to show an improvement trend, even though not yet
benefiting from the restyling of the “Casa” and “Lavoro” editions (in production starting from April
2007). The local products (In Zona and Idee in Vacanza) were essentially stable;
•
Voice: Advertising revenues experienced growth of 12.1% to reach € 40.1 million due to the effects of
the results of the 89.24.24 Pronto PAGINEGIALLE service (+12.9%) and of the launching onto the
market of the new service 12.40 Pronto PAGINEBIANCHE;
•
Online: The online component recorded growth of 11.3% in revenues to reach € 123.5 million thanks to
the positive performance of Paginegialle.it. The new PAGINEGIALLE Visual offer had positive effects
on the usage of the online platform as well, where an increase of 14% in searches was registered;
•
B2B: The B2B area products produced revenues of € 43.6 million, down by € 2.4 million compared to
2005;
•
Other products: Revenues from other products increased 41.8% to reach € 103.7 million, driven by the
positive performance of telephone traffic generated by the 89.24.24 Pronto PAGINEGIALLE and
12.40 Pronto PAGINEBIANCHE services.
The costs of materials and external services amounted to € 410.5 million, up by € 21.3 million compared
to 2005, with the second half of the year experiencing a reduction of 5.3%, clearly against the trend of the
growth (+21.7%) recorded in the first half of 2006, and was to a great extent attributable to the costs incurred
to launch the new 12.40 Pronto PAGINEBIANCHE service and to support the strengthening of the sales
network. In particular:
•
110
industrial costs, at € 172.8 million in 2006 (€ 161.3 million in 2005), registered an increase of € 11.6
million (+7.2%). They referred to: (i) € 42.3 million for paper consumption (€ 43.2 million in 2005). In
2006, 62.7 tons of paper (64.1 tons in 2005) and 16.2 million sheets (12.1 million in 2005) were used;
(ii) € 90.6 million for industrial processing and other costs related to production and distribution
Section One
(€ 84.9 million in 2005), reflecting the launch of full colour, which led to an increase of around € 2.1
million in printing costs. It should be noted that, starting with the “Elenco Torino 2006” edition, an
initiative aimed at expanding PAGINEGIALLE distribution in the main cities was launched (+700,000
copies, 3% of the total) in order to increase the product user base and to counteract the decline in
recipients due to directory privacy requests and the transition to mobile phones by users of fixed-line
phones; and (iii) € 23.7 million for inbound call centre costs, increased by € 7.6 million compared to
2005, mostly due to the 12.40 Pronto PAGINEBIANCHE service, which had an impact on business
costs for the whole year (the service was launched in October 2005);
•
among the sales costs, the following are to be noted: (i) commissions and other agent costs, which
amounted to € 121.0 million in 2006, up 4.2% in relation to the previous financial year (€ 116.2
million). This increase reflects, in particular, the costs incurred for a) the sales force incentives, higher
than in 2005 because of the different mix of products sold, and b) higher training costs, with a 20%
increase compared to the previous financial year in the number of overall training hours provided in
order to support the new organisational structure, effective starting in January, as well as the start-up of
sales of the new products. Of particular note is the national convention (€ 2.3 million) organised in the
first half of 2006 and not held in 2005; (ii) advertising and promotion costs, amounting to € 34.6
million, substantially in line with the previous financial year (€ 34.5 million), with the second half of
2006 experiencing a strong downturn (- € 12.3 million) in advertising costs incurred to support the new
subscriber information service 12.40 Pronto PAGINEBIANCHE and the telephone assistance service
89.24.24 Pronto PAGINEGIALLE, by virtue of a gradual and natural development of the market toward
greater stability enabling a gradual reduction in the impact of advertising and promotion costs;
•
within the category of general costs, attention is drawn to the costs of professional services,
consultancies and cooperation, which amounted to € 31.4 million in 2006, an increase of € 1.8 million
compared to the previous financial year (€ 29.6 million), mainly due to legal and bad debt collection
costs, reflecting the Company’s increasing attention to the process of managing debt recovery. These
costs enabled an increase in the collection of doubtful receivables by 9.0%, reducing their overall value
by 3.0% compared to December 2005.
The cost of salaries, wages and employee benefits amounted to € 81.2 million, down by 4.6% compared to
2005 (€ 85.1 million) due to: (i) the capitalisation of personnel costs connected with investment projects
carried out during the financial year (€ 3.7 million), particularly in the online area and in relation to
administrative and commercial systems; in previous years, on the other hand, the activities of developing
new projects were less significant and were mainly outsourced, so the related costs were directly capitalised;
and (ii) savings obtained from the variable portions of remuneration measured by sales targets that were not
achieved (€ 4.1 million).
Gross operating profit (GOP) amounted to € 585.8 million and was substantially stable compared to the
previous financial year (-0.3%), with a 54.4% ratio to revenues (55.3% in 2005) and an upward trend in the
second half of the year (+8.3%), sharply against the trend from the first half of the year (-14.8%).
EBITDA amounted to € 542.4 million, up by € 7.2 million compared to the previous financial year (+1.3%),
with a 50.3% profitability, substantially in line with 2005. The improvement compared to the gross operating
profit (GOP) is to be attributed to developments in provisions to the reserves for risks and charges and to the
provision for impaired receivables. In particular, the provision to the reserve for commercial risks decreased
by € 3.6 million compared to 2005, thanks to the continuous focus on customer care processes. The
establishment of a call centre dedicated to the most high-end customers, in particular, has enabled a
reduction in the number of claims relating to errors in contractual compliance of almost 20% compared to
2005. A decline of € 3.0 million compared to 2005 was recorded in the provision for impaired receivables
thanks to intense activity in the management and collection of trade receivables implemented in the last two
years.
111
The table below shows the main results for 2007 compared to those for 2006 and 2005:
(€ million)
2007
(a)
2006
(b)
158.9 173.5
(52.6) (61.1)
(64.3) (67.4)
42.0 44.9
36.8 39.3
33.3
35.1
2005 Absolute
(c) changes
(a-b)
175.6
(14.6)
(62.5)
8.5
(65.1)
3.1
48.0
(2.9)
42.0
(2.5)
35.9
% Absolute
changes
(b-c)
(8.4)
(2.1)
13.9
1.4
4.6
(2.3)
(6.5)
(3.1)
(6.4)
(2.7)
(1.8) (5.1)
%
(1.2)
2.2
(3.5)
(6.5)
(6.4)
(0.8) (2.2)
(*) Less the shares of cost charged back to minority interests and included in other operating income as referred to in the IFRS/IAS financial
statement tables in the item “Other Revenues and Income”.
2007 - 2006
Revenues from sales and services amounted to € 158.9 million (GBP 108.8 million) in 2007, a decline of
14.6% in relation to the previous financial year, which included the effect of the weakening of the British
pound in relation to the euro. In fact, in local currency, the reduction in revenues was 8.0%. The dynamics of
the revenues were influenced both by the reorganisation of the sales area, necessary in order to be able to
effectively propose the new multi-product offering on the UK market, as well as by an increasingly
competitive market context. This situation also had an impact on the number of customers, which declined in
relation to 2006, while growth was displayed in the average value per customer. All of the product lines were
involved: print, online and business information.
In more detail, the revenues from print directories showed a clear decline, despite the positive effects of the
restyling of the Thomson directories and the good performance of sale of new advertising spaces as a result
of the agreement with Nectar, which amounted to GBP 16.2 million in the year overall. The decline in
revenues was more evident in the customer segment demanding national coverage, particularly the financial
institutions category, which was seriously affected by the credit market crisis. The customer segment
covered by the telesales channel was also hit, resulting from turnover in telesales agents deriving from the
activities of reorganising the commercial network. The segment of revenues generated by the network of
sales agents spread throughout the country was essentially stable (equal to about 75% of the total), on the
other hand.
Revenues from online activities also displayed a decline in relation to 2006, despite the good positioning of
the group on the market as an online media agency. The decline in online revenues during the course of 2007
can be attributed to the greater focus of the commercial area, especially in the first half of 2007, on the new
Nectar offer, confirming the sales force’s difficulties in proposing and effectively managing an increasingly
complex multi-product offering. The last few months of the year experienced a renewed commercial focus
on the online offering, also driven by the new agreement with Google, reflected in an increase in online
revenues.
Revenues from the business information channel also fell sharply compared to 2006, due in part to the expiry
of a considerable number of database user licenses.
The revenue slow-down was reflected in a GBP 1.6 million drop in EBITDA (equivalent to € 36.8 million),
despite an increase in operating margin, which rose from 22.7% of revenues in 2006 to reach 23.2% in 2007
thanks to lower advertising costs, to further efficiency gains in technical production costs and to lower
structural and sales costs. In more detail, the increased focus on discount and promotion policies enabled
containment of industrial costs, driven in particular by the decrease in paper consumption (as a consequence
of a lower number of printed signatures) resulting in an increase in the page yields.
Distribution costs remained in line with 2006 due to the plan to internalise the distribution process, which
involved 30% of activities, substantially offsetting the increase, in line with inflation, of the residual
distribution costs.
112
Section One
The cost of salaries, wages and employee benefits decreased by 4.3% to reach £ 44.0 million due to the
impact of the reduction in the variable component of structural and commercial area costs, which enabled
offsetting of the increase in the cost of technical personnel, in relation with the development of the new
online offering.
2006 - 2005
2006 was characterised by the start-up of a plan for strengthening the commercial offering and for
innovations in organisation and the sales methods in a way similar to what the Issuer had already been doing
since 2005. Within the context of a highly competitive market that had, however, according to the
management, significant prospects for development, above all in the online area, this plan was meant to
strengthen the ability of the business to meet a demand that remained high, both for print as well as for
online products.
Revenues from sales and services of the TDL Group amounted to € 173.5 million in 2006, slightly down
from the previous financial year (-1.2%). The performance of revenues was positively influenced by the
performance in the online area (+43%), which offset the decline in print directories (-6.5% in local currency).
The latter, in fact, were not yet benefiting from the restyling of the Thomson Local directories, from the
partnership with Nectar (the leading retention programme in the United Kingdom) and from the retraining
measures for the sales network. The average value per advertiser grew in relation to 2005 thanks to crossselling between the various platforms.
The 2006 EBITDA, at € 39.3 million, displayed a decline of 6.4% essentially due to the lower revenues and
a less favourable revenue mix, owing to the growth in search traffic and resales revenues, which have a
lower margin. In any event, costs benefited from the efficiencies achieved in production costs, particularly in
printing. The cost of salaries, wages and employee benefits increased in the year by 3.5% to € 67.4 million
(+3.2% in local currency), in line with the inflation rate.
“DIRECTORY ASSISTANCE” BUSINESS AREA
Telegate Group
(€ million)
2007
(a)
2006
(b)
173.3 178.9
(62.3) (107.8)
(59.1) (54.7)
51.9
16.4
48.9
16.7
40.4
10.3
2005 Absolute
% Absolute
%
(c) changes
changes
(a-b)
(b-c)
150.2
(5.6) (3.1)
28.7 19.1
(61.6)
45.5 42.2
(46.2) (75.0)
(47.2)
(4.4) (8.0)
(7.5) (15.9)
41.4
35.5 n.s.
(25.0) (60.4)
37.0
32.2 n.s.
(20.3) (54.9)
31.1
30.1
n.s.
(20.8) (66.9)
(*) Less shares of cost charged back to minority interests and included in other operating income as referred to in the IFRS/IAS financial tables in the
item “Other Revenues and Income”.
2007 - 2006
Revenues from sales and services decreased by 3.1% to € 173.3 million in 2007. The decrease was mainly
linked to business performance in the French market. It should be noted that revenues for 2006 included
€ 9.6 million in France for services rendered in outsourcing for the mobile providers Bouygues Telecom and
SFR, non-productive activities in terms of operating margins and no longer carried out following market
deregulation in April 2006. Excluding these revenues, the increase compared to 2006 was 2.4%.
Analysing the various countries, the following may be noted:
•
In Germany, revenues dropped by 2.3% compared to 2006, to reach € 112.8 million. The decline of the
telephone assistance service market then continued on into 2007, especially for fixed-line calls, whereas
113
calls from mobile phones remained stable. Telegate’s positioning, which is more oriented towards
mobile phone users than its competitors, allowed the company to further strengthen its market share from
37% to 38%. The decrease in the number of calls to the 11880 branded service was offset by the increase
in the average value per call arising from price adjustments and longer call handling time, resulting from
the introduction of ANA (Automatic Number Announcement) and especially from the strategy of
ongoing development of value-added services; in 2007 Telegate also pursued its multi-channel strategy
by means of an offering available by voice as well as on the 11880.com portal, with a view to generating
advertising revenues;
•
In Spain, revenues decreased compared to the previous financial year, due in particular to the fall in
revenues deriving from the operation of telephone assistance services outsourced by the provider MGA
and the less than brilliant performance of other calls managed in outsourcing (for the providers Antena 3,
Jazztel and Comunitel). This decrease was partly offset by the increase in branded revenues, driven by
the increased call handling time and the change in call pricing, which allowed the decrease in the volume
of such calls to be counteracted. Also in Spain a multi-channel offer (voice and online) was launched;
•
In Italy, the significant increase in revenues was driven by the positive performance of calls to the
services 89.24.24 Pronto PAGINEGIALLE and 12.40 Pronto PAGINEBIANCHE, which were up
approximately 30% compared to the previous financial year;
•
In France, the Company – with its own 118000 number – earned € 20.6 million in revenues, up 8.4%
compared to 2006, if the comparison is made net of the aforementioned services managed in outsourcing
for the mobile phone providers SFR and Bouygues Telecom, which were discontinued in April 2006 (date
of the deregulation of the market), as these services were provided at no margin. This result was achieved
in a market characterised by greater stability than in the past, although the market is still not stable enough
to permit satisfactory overall profitability. In the last quarter of 2007, a project to create an online platform
in France was launched: its sales test, outsourced to a specialised company, is currently being performed.
In 2007, the operating profit (EBITDA) of the Telegate Group rose by more than € 32 million compared to
the previous financial year, due in particular to the decrease (-52.3%) in advertising investments, which were
particularly high in France due to the launch of the number 118000.
In Germany, despite the fall in revenues, EBITDA increased by approximately € 4.8 million compared to
the previous financial year due to: (i) the lower advertising costs (-40.3%) incurred in 2006 to handle the
entry of a new operator onto the market; (ii) lower industrial costs thanks to the effect of lower expenses for
the updating of the database (down € 7.5 million) following the favourable judgments obtained from the
courts of Düsseldorf and Cologne in the lawsuits with Deutsche Telekom (for further details on these legal
proceedings, reference should be made to Section One, Chapter 20, Paragraph 20.7.2.). The containment of
cost thus achieved enabled an offsetting of the increase in the cost of salaries, wages and employee benefits
arising from the strengthening of the key accounts and the telesales channel. General costs increased
compared to the previous financial year, due as well to the effects of the cost of consultancy for the lawsuits
against Deutsche Telekom.
Good profitability was recorded in Spain, in line with 2006. The drop in revenues was offset by greater
efficiencies in the expenses of operating the call centres arising from the optimisation of overall capacity and
lower structural costs.
In Italy, the positive performance of the services 89.24.24 Pronto PAGINEGIALLE and 12.40 Pronto
PAGINEBIANCHE and the efficiencies in call centre activities led to an improvement in EBITDA
compared to 2006, despite the increase in the cost of salaries, wages and employee benefits due to the change
in contractual agreements with the voice operators.
In France, EBITDA increased by about € 26.6 million compared to 2006 thanks to the decrease in
advertising costs and lower costs deriving from the rationalisation of overall capacity, following the
discontinuation of the Company’s outsourcing agreements with SFR and Bouygues Telecom. Increased
revenues, on the one hand, and the aforementioned savings, on the other, allowed the company to reach
break-even point in the second half of 2007.
114
Section One
2006 - 2005
In 2006, revenues from sales and services of the Telegate Group increased by 19.1% to reach € 178.9
million. This growth was mainly linked to business development in France. In particular, in this period:
• In Germany, revenues increased slightly (+1.7%) compared to the previous financial year, to reach
€ 115.6 million. The decrease of about 10% in the number of calls to the 11880 service was lower than
the overall reduction of the market and was partially offset by an increase in the average value per call, as
a result not only of the price review but also of the strong development of value-added services, causing
an increase in the calls handling time. Revenues also grew by virtue of the development of other business
lines, such as the management of interconnection services for business and consumers and of the
directory assistance services provided in outsourcing for leading operators under existing agreements
signed with Vodafone GmbH, Mobilcom and Colt Telecom, which enabled an increase in the traffic
handled and provided the benefit of further economies of scale;
• In Italy and Spain, revenues increased in 2006 by 25.5% and 37.4% respectively compared to the
previous financial year, driven by the number of calls;
• In Italy, the Telegate Group, in particular, benefited from the good performance of the calls to the
89.24.24 Pronto PAGINEGIALLE service and from the growth in the 12.40 Pronto PAGINEBIANCHE
service, which at the end of 2005 had just been launched;
• In France, Telegate recorded revenues of € 28.7 million (€ 9.9 million in 2005) and positioned itself as
the third player with a market share still lower than the target in a highly variable and competitive market
situation.
In 2006, EBITDA of the Telegate Group decreased by € 20.3 million compared to 2005, mainly due to the
high advertising costs incurred to launch the 118000 number in France, where the Telegate Group’s
performance was impacted by the high level of competition on the market, which required greater
advertising investment than expected, and where the market displayed an inherent decline that was greater
than forecast, and despite the gain of € 3.1 million realised in October from the disposal of the Directory
Assistance business in Switzerland, a market which the Telegate Group decided it should exit. These
elements, therefore, led to a negative EBITDA of € 29.5 million in 2006 in France, a result that largely arose
in the first nine months of the year and was subsequently mitigated by the performance – nearly reaching the
operating break-even point – of the last quarter, thanks to the development of the market toward a more
mature stage.
The business performance in Germany in 2006 displayed a reduction in EBITDA compared to 2005 (-4.3%)
mainly due to the effect of the timing of the costs for the advertising campaign incurred to handle the entry of a
new operator (Arvato) onto the market and to support the development of the business. The temporarily higher
advertising investments enabled Telegate to increase its market share, despite the greater competitive pressure.
The international businesses of the Telegate Group (Italy and Spain) recorded positive performance thanks to
the efficiencies in the operating costs for call centres deriving from optimisation of the overall capacity.
Prontoseat
(€ million)
2007 2006 2005 Absolute
% Absolute
%
(a) (b)
(c) changes
changes
(a-b)
(b-c)
12.6 9.8 9.3
2.8 28.6
0.5
5.4
(2.0) (2.1) (2.1)
0.1
4.8
0.0
0.0
(9.0) (7.4) (5.9)
(1.6) (21.6)
(1.5) (25.4)
1.6 0.3 1.3
1.3
n.s.
(1.0) (76.9)
1.2 1.1 0.7
0.1
9.1
0.4 57.1
0.3
0.3
0.0
(0.0)
(0.0)
0.3
n.s.
115
2007 - 2006
In 2007, revenues from sales and services amounted to € 12.6 million and increased by 28.6% compared to
the previous financial year, thanks to the growth in the traffic volumes generated by the value-added service
89.24.24 Pronto PAGINEGIALLE and the development of outbound activities.
EBITDA amounted to € 1.2 million in 2007, a 9.1% increase, despite higher salaries, wages and employee
benefits, due to the change in the contractual structure of the relations with call centre operators and their
increased number.
2006 - 2005
In 2006, revenues from sales and services amounted to € 9.8 million (+5.4% compared to the previous
financial year) thanks to the increase in traffic volumes generated by the 89.24.24 Pronto PAGINEGIALLE
service, whose call centre services are managed jointly by Prontoseat and Telegate Italia S.r.l., the Italian
subsidiary of the Telegate Group. As from August 2006, Prontoseat is also providing the video call service
for H3G customers.
EBITDA, amounting to € 1.1 million in 2006, increased by about € 0.4 million compared to 2005. This
positive result was achieved, despite the higher costs for call centre personnel, in part due to the opening of
the new site in Bologna and the launch of new services, among which is included the 12.40 Pronto
PAGINEBIANCHE outbound service, and the launch of new activities for the SEAT Group, such as the
courtesy back office, for managing SEAT after sales service and insourcing Customer Service.
“OTHER ACTIVITIES” BUSINESS AREA
The “Other Activities” business area includes the results of the subsidiaries Europages, Consodata, CIPI and
WLW, the latter consolidated as of 1 October 2007. In 2007, Europages and Consodata together amounted to
more than 60% of the total revenues of this business area.
Europages
(€ million)
2007
(a)
2006
(b)
25.7 29.0
(16.6) (18.2)
(8.0) (5.1)
1.1
5.7
1.3
5.7
(1.9)
5.0
2005 Absolute
(c) changes
(a-b)
27.5
(3.3)
(17.3)
1.6
(4.5)
(2.9)
5.7
(4.6)
5.0
(4.4)
4.5
(6.9)
% Absolute
%
changes
(b-c)
(11.4)
1.5
5.5
8.8
(0.9) (5.2)
(56.9)
(0.6) (13.3)
(80.7)
(77.2)
0.7 14.0
n.s.
0.5
11.1
2007 - 2006
In 2007, the revenues from sales and services of Europages amounted to € 25.7 million, decreasing by
€ 3.3 million compared to the previous financial year. This reduction is due to the different sales strategy
pursued starting from the early months of 2007, involving a migration of sales activities toward an almost
entirely online offering from the multimedia offering of earlier years, as well as the creation of a sales
network of its own in France and in Germany. Consistently with the worldwide Business to Business trend,
and given that the majority of searches are performed online, the September 2007 print edition (the 25th) was
the final one and, starting in 2008, the product is now available only online.
116
Section One
EBITDA went down to € 1.3 million, compared to € 5.7 million in 2006, although remaining positive, due to
the effect of increased costs incurred to create the new sales network and to establish and strengthen certain
central departments with monitoring and marketing roles.
2006 - 2005
Revenues from sales and services increased overall by 5.5% in 2006 compared to 2005 due to the positive
sales performance in Italy (which represents about 70% of the total revenues). Here, the online component of
the multi-platform offering is now assuming the lead role in view of the development of the services
provided through the portal.
EBITDA increased by € 0.7 million compared to the previous financial year due to the effect of the business
growth and the reversal of the reserves for legal dispute risks, which became excessive during 2006 (€ 0.4
million).
Following the constant growth in the number of searches, amounting to 27 million in 2006 (+14%), with
over 100 million searches on the portal from 218 countries, in particular from those with strong economic
growth (China, Russia and the countries of Eastern Europe), Europages launched a commercial
reorganisation plan in Europe, with the aim of strengthening its commercial presence on the markets of the
major countries, particularly in Germany. The first step has been the activating, in France, of a cooperative
relationship with a business specialised in telesales and the organisation of a direct sales force in the major
areas of industrial interest, which consisted of 23 sales staff at the end of 2006.
CIPI
(€ million)
2007
(a)
2006
(b)
23.5 22.5
(13.5) (12.3)
(7.7) (8.0)
2.3
2.2
2.2
2.1
1.6
1.3
2005 Absolute
% Absolute
%
(c) changes
changes
(a-b)
(b-c)
21.8
1.0 4.4
0.7 3.2
(12.1)
(1.2) (9.8)
(0.2) (1.7)
(7.8)
0.3 3.8
(0.2) (2.6)
1.9
0.1 4.5
0.3 15.8
1.9
0.1 4.8
0.2 10.5
1.2
0.3 23.1
0.1
8.3
2007 - 2006
Revenues from sales and services amounted to € 23.5 million in 2007, an increase of € 1 million over 2006,
due to the effect of a decline in the performance of the SME sales channel as well as to the company’s
decision to focus on the sales of high-profit products (less focus on the “print” area and more focus on “data
content” and “geomarketing”). In 2007 there was, in fact, a continuation of the reconditioning of the business
model by the development of new technologies so as to improve adaptation to customer demand and to the
requirements for ever greater personalisation of products.
Despite the slow-down in revenues, EBITDA increased 4.8% compared to 2006, thanks to a different sales
mix (the company is orienting itself increasingly toward the sales of high-profit products, such as data
content products).
2006 - 2005
In 2006, revenues from sales and services amounted to € 22.5 million, up by 3.2% compared to 2005.
EBITDA was positive at € 2.1 million (+10.5% compared to 2005) despite the increase in the costs of the
117
commercial structure resulting from a profound restructuring of the offering and of the operational
procedures of its sales channels (including the SEAT channel).
Consodata
(€ million)
2007
(a)
2006
(b)
23.4 25.1
(11.3) (13.3)
(7.6) (7.6)
4.5
4.2
4.5
4.3
2.6
2.2
2005 Absolute
% Absolute
%
(c) changes
changes
(a-b)
(b-c)
29.5
(1.7) (6.8)
(4.4) (14.9)
(16.9)
2.0 15.0
3.6 21.3
(8.0)
0.0 0.0
0.4
5.0
4.6
0.3 7.1
(0.4) (8.7)
4.4
0.2 4.7
(0.1) (2.3)
2.8
0.4 18.2
(0.6) (21.4)
2007 - 2006
In 2007, revenues from sales and services amounted to € 23.4 million, down € 1.7 million compared to
2006 due to both the decline in the performance of the SME sales channel and the decision by Consodata to
focus on the sale of high-margin products (such as “data content” and “geo-marketing”).
Despite the fall in revenues, EBITDA increased by 4.7% compared to 2006 due to a different sales mix and
a decrease in distribution and printing costs. The cost of salaries, wages and employee benefits related to
sales and corporate staff also declined, due to the decrease in the average workforce compared to 2006, in
part as a consequence of the transfer of staff to SEAT’s sales and information technology departments.
2006 - 2005
In 2006, revenues from sales and services decreased by 14.9% compared to 2005 to reach € 25.1 million.
On a like-for-like basis in terms of the scope of consolidation (the 2005 results included the figures of the
subsidiary Pubblibaby, deconsolidated as from July 2005), the decrease in revenues was 3.5%, particularly
attributable to a decline in the performance of the SME sales channel and due to the decision of the company
to focus on sales of high-margin products. Marketing Intelligence products achieved extremely good results
(+20%), driven by geomarketing, an area considered to be strategic by management and where it
consequently intends to invest.
Despite the slow-down in revenues, EBITDA (net of the effect of the change in the scope of consolidation)
was 7.5% higher than in 2005 due to the effect of significant cost efficiencies realised during the year and
despite the development of new products, such as “In Fiera,” a local magazine distributed at a select number
of trade fairs in major Italian cities.
118
Section One
WLW Group
This table shows the main results for the group in the last quarter of 2007, given that the WLW Group
entered the scope of consolidation starting on 1 October 2007. As described in Section One, Chapter 12 of
this Information Prospectus, the WLW Group was disposed of in December 2008 and therefore will be
presented as a discontinued operation in the consolidated financial statements at 31 December 2008 pursuant
to IFRS 5.
(€ million)
Operating income before amortisation, depreciation, non-recurring and restructuring costs, net (EBITDA)
9.2.3
Q4 2007
8.6
1.8
1.9
1.3
Economic position in the first half of 2008 and 2007
The following is a description of the main factors that have influenced the activities of the SEAT Group
referring to the half-yearly periods ended on 30 June 2008 and 2007.
(€ thousands)
% on revenues
Other valuation adjustments and provisions to reserves for risks and
charges, net
Other operating income (expense)
Operating income before amortisation, depreciation, non-recurring
and restructuring costs, net (EBITDA)
% on revenues
Non-operating amortisation and writedown
% on revenues
Gains (losses) on disposal/valuation of investments
Income (loss) before income taxes and minority interests
Income (loss) before minority interests
Minority interests
H1 of 2008
576,469
(226,097)
(127,010)
223,362
38.7%
(30,157)
H1 of 2007
582,263
(224,616)
(121,694)
235,953
40.5%
(26,254)
Absolute change
(5,794)
(1,481)
(5,316)
(12,591)
%
(1.0)
(0.7)
(4.4)
(5.3)
(3,903)
(14.9)
4,493
197,698
(2,126)
207,573
6,619
(9,875)
n.s.
(4.8)
34.3%
(23,347)
(94,816)
(11,022)
68,513
11.9%
(119,793)
(891)
(52,171)
9,461
(42,710)
(2,941)
(45,651)
35.6%
(20,415)
(81,033)
(10,467)
95,658
16.4%
(119,977)
(3,327)
(27,646)
(624)
(28,270)
(2,796)
(31,066)
(2,932)
(13,783)
(555)
(27,145)
(14.4)
(17.0)
(5.3)
(28.4)
184
2,436
(24,525)
10,085
(14,440)
(145)
(14,585)
0.2
73.2
(88.7)
n.s.
(51.1)
(5.2)
(46.9)
Revenues from sales and services in the first six months of 2008 amounted to € 576.5 million, in line with
the expectations of the management of the Company and essentially stable in relation to the same period in
the previous financial year. With respect to the first half of 2007, one notes the inclusion within the scope of
consolidation of the German group WLW – which, as described in Section One, Chapter 12 of this
Information Prospectus, was disposed of in December 2008 and will therefore be presented as a discontinued
operation under IFRS 5 in the consolidated financial statements at 31 December 2008 – and, starting from 1
April 2008, of the German subsidiary Telegate Media (previously named KlickTel AG), the positive effect of
which was partially absorbed by the loss in value of the British pound in relation to the euro, with the result
that the revenues of the TDL Group decreased by approximately 12% in relation to the first half of 2007.
The costs of materials and external services, at € 226.1 million in the first half of 2008 (essentially stable
in relation to the first half of 2007), declined € 5.4 million at constant currency exchange rates and scope of
consolidation.
119
The cost of salaries, wages and employee benefits, net of cost recoveries, was € 127 million in the first half
of 2008, up € 5.3 million in relation to the first half of 2007. At constant currency exchange rates and scope
of consolidation, the performance of labour cost has been essentially stable (-0.8%).
EBITDA, at € 197.7 million in the first half of 2008, reduced 4.8%, also due to the effect of resources
dedicated to product innovation as well as to growth of the sales force in Italy, but in line with management
expectations.
Operating amortisation, depreciation and writedowns (€ 23.3 million) went up € 2.9 million in relation to
the first half of the previous financial year due to the effect of the high level of industrial investments in
recent years (for further information see Section One, Chapter 5, Paragraph 5.2.1 of this Information
Prospectus).
Non-operating amortisation and writedowns, at € 94.8 million, include € 81 million representing the
amortisation share of the SEAT Customer Data Base pertaining to the year (for further information see
Section One, Chapter 6, Paragraph 6.1.1.3 of this Information Prospectus) and € 13.0 million in impairment
losses on goodwill on the subsidiaries Europages and CIPI, following the results obtained from the
Impairment Test done on 30 June 2008.
Non-recurring and restructuring costs (€ 11.0 million in the first half of 2008, € 10.5 million in the first
half of 2007) include an additional provision of € 5.0 million to the restructuring reserve already recognised
in 2007 to cover the expected restructuring costs arising in SEAT for activation of the reorganisation
programme launched in 2007 and expected to be completed in the first quarter of 2009, for the overall
management of about 150 redundancies through the Cassa Integrazione Guadagni Straordinaria (Special
Wage Guarantee Fund) and early retirements, as well as selected dismissals and professional retraining
involving the publishing and back-office sales areas, both of which are strongly affected by the introduction
of innovative information technology systems.
The performance of the net interest expense has reflected, in particular, interest expense (€ 134.3 million),
which remained essentially in line with that of the first half of 2007 despite the strong increase in the Euribor
rate. SEAT in fact benefited from a lower average indebtedness, and from the reduction in the interest rates,
following application, starting in February and August 2007, of progressive reductions in the spread
component of the cost for the Senior debt following the achievement at the end of December 2006 and at the
end of June 2007 of contractually provided-for target ratios between the debt and the EBITDA of the Group.
The hedging of risks deriving from the variable nature of interest rates in conjunction with the strategies
adopted, with the transition to interest periods on a monthly Euribor basis, enabled the cost of debt to be kept
under control, at 6.56% in the first half of 2008 (6.4% in the first half of 2007).
The income tax of the period displays a positive balance of € 9.5 million (negative by € 0.6 million in the
first half of 2007). Pursuant to the provisions contained in IAS 34, the income tax of the period was
calculated by applying the actual average rates projected for the entire 2008 financial year to the gross
income of the half year.
The result for the period, negative by € 45.6 million and down by € 14.6 million compared to the first half
of 2007, reflect the phenomena described at the operative level. It should be noted that the second half of the
year is normally characterised by greater profitability due to the effect of the seasonal nature of the business
(for further information see Section One, Chapter 6, Paragraph 6.1.1.2).
9.2.4
Data by business area for the first half of 2008 and 2007
shown in the management report contained in the half-yearly consolidated financial statements at 30 June
2008 and 2007.
120
Section One
For further details on the companies that comprise the various business areas, please see Section One,
Chapter 7, Paragraph 7.2 of this Information Prospectus.
(€ million)
Italy
total
and other
total
adjustments
419.5
47.1
92.1
45.6
604.3
(27.8)
576.5
Revenues from sales and H1 of 2008
services
H1 of 2007
428.4
58.5
92.9
30.9
610.7
(28.4)
582.3
H1 of 2008
197.8
0.9
23.2
1.3
223.2
0.2
223.4
Gross Operating Profit
(GOP)
H1 of 2007
205.8
4.4
24.6
2.5
237.3
(1.3)
236.0
H1 of 2008
169.8
(0.6)
27.3
1.3
197.8
(0.1)
197.7
Operating income
before amortisation,
depreciation, nonrecurring and
restructuring costs, net
(EBITDA)
H1 of 2007
179.9
2.5
22.9
2.3
207.6
207.6
64.7
(2.1)
20.8
(14.9)
68.5
68.5
Operating result (EBIT) H1 of 2008
H1 of 2007
76.6
1.0
18.4
(0.3)
95.7
95.7
The table below shows the main results for the first half of 2008 compared to those for the first half of 2007:
(€ million)
Operating income before amortisation, depreciation, non-recurring and restructuring
costs, net (EBITDA)
H1 of 2008 H1 of 2007 Absolute
change
419.5
428.4
(8.9)
197.8
205.8
(8.0)
169.8
179.9
(10.1)
64.7
76.6
%
(2.1)
(3.9)
(5.6)
(11.9) (15.5)
Revenues from sales and services in the first six months of 2008 amounted to € 419.5 million, down 2.1%
in relation to the same period in the previous financial year. This result reflects the decline in print products
(-3.2%), only partially offset by the good performance (in particular in the second quarter of 2008) displayed
by online and voice services.
Despite the worsening of the Italian economic situation, the dynamics of purchase orders for the printcentred offering were essentially positive in all geographic areas, with development of the print and online
components matching the local dynamics of dissemination and penetration of the various media. In further
detail:
Revenues from the print-centred offering amounted to € 363.2 million in the first half of 2008, down 1.7%,
composed of the following:
•
Print: Revenues were € 288.3 million, compared to € 297.7 million in the first half of 2007. Print
products in fact reflected the conservatism of a number of businesses which, despite the continued slowdown of the economy, decided to put off renewing their advertising contracts beyond their normal
expiries or to cut their advertising and promotion budgets.
•
Voice: Advertising revenue amounted to € 21.6 million, up 8.0% compared to the first half of 2007. This
performance benefited from a second quarter that had strong growth at 35.2% in advertising revenues for
89.24.24 Pronto PAGINEGIALLE and 12.40 Pronto PAGINEBIANCHE.
•
Online: Revenue from Paginegialle.it was € 53.3 million in the first six months of 2008, up 3.2%
compared to the same period in the previous financial year. In particular, the second quarter of 2008 had
growth of 11.1% over the same period in 2007 (which had growth of 33.3% in relation to the same
period in 2006).
121
•
Business to Business: Revenues amounted to € 5.9 million, down € 1.0 million from the first half of
2007. In particular, in 2008 B2B products suffered both from the sales force’s focus on new online
products as well as from the current overhaul of the product range to reflect the ever increasing
importance of the online products component.
•
Other products: Revenues experienced a slight decline from the first half of 2007 (€ 51.9 million),
reaching € 49.0 million.
The costs of materials and external services amounted to € 177.3 million in the first half of 2008, down
€ 2.1 million compared to the same period in the previous financial year. Industrial costs fell € 1.9 million,
on the back of lower revenues. Sales costs rose 4.8% to reach € 70.6 million due to the greater weight of
outbound call centre services as a response to new revenues from the voice channel and due to an increase in
advertising costs supporting print-centred products. Agent costs were substantially in line since the
containment of commission costs was offset by higher sales bonuses produced by the change in the schedule
for sales targets from the first half of 2007.
Rising sales costs were generally offset by performance in general costs, down € 3.5 million to reach € 35.7
million, primarily thanks to a reduction in the bad debt collection costs, obtained by changing the timing of
such recovery actions.
The cost of salaries, wages and employee benefits, net of the recovery of costs for personnel seconded to
other Group companies, amounted to € 44.4 million, an increase of 2.9% in relation to the first half of 2007
(€ 43.1 million), caused in particular by the addition of 20 new employees to an otherwise stable average
workforce (including project workers, trainees and administrators). The half-yearly figures, however, do not
yet reflect the impact on the workforce of the Company’s reorganisation programme; the redundancies to be
covered by the Cassa Integrazioni Guadagni e Prepensionamento (Wage and Early Retirement Guarantee
Fund), as per the request made to the Ministry of Labour in January 2008, are reflected in the accounts from
July 2008.
Gross operating profit (GOP) reached € 197.8 million in the first six months of 2008, down 3.9%
compared to the first half of 2007 as a result of the drop in revenues. In particular, industrial costs went down
in line with revenues, while sales costs increased to support the growth of the sales force as did the
advertising costs in support of the print-centred offering.
EBITDA was € 169.8 million, down 5.6% compared to the same period in the previous financial year. This
dip in the performance of the GOP is attributable to increased provision for impaired receivables and
provisions to reserves for risks and charges (+ € 2.5 million) necessary for the prudent coverage of prior
residual positions. On the other hand, with reference to overdue positions of recent origin, better
performance was registered in the period by collections, while invoiced amounts remained relatively
unchanged when compared to the first half of 2007, as did DSO (days of sales outstanding).
(€ million)
costs, net (EBITDA)
%
change
47.1
58.5
(11.4) (19.5)
0.9
4.4
(3.5) (79.5)
(0.6)
2.5
(3.1)
n.s.
(2.1)
1.0
(3.1)
n.s.
Revenues from sales and services amounted to € 47.1 million (£ 36.5 million) in the first half of 2008. The
sharp fall from the first half of 2007 (-19.5%) was mainly due to the performance of the British pound in
relation to the euro and the decline amounted to only 7.3% if the data are analysed in the local currency.
The decline in revenues was more evident in the segment of customers demanding national coverage,
particularly the financial institutions category, which was severely affected by the credit market crisis. On
122
Section One
the other hand, there was a noticeably more contained decline in the segment of revenues generated by the
network of sales agents spread throughout the territory (equal to about 80% of the total).
With reference to the various product types, the revenues from print directories showed a clear decline in the
half-yearly period despite the positive effects of the restyling of the Thomson directories and the good
performance of the sales of advertising spaces within the scope of the Nectar retention programme. The
revenues from online activities grew 4.7% in local currency thanks to the new positioning of the Group on
the market as an online media agency for SMEs. Finally, the revenue of the business information channel
displayed significant growth over the past year (+3.4%) thanks, in particular, to the good performance of the
e-mail marketing business, mainly directed at customers requiring national coverage.
The GOP of the TDL Group in the first six months of 2008 went down € 3.5 million (£ 2.3 million) mainly
due to the effect of greater advertising costs in support of the online offering. Higher operating costs were
only partially offset by the containment of labour costs (- £ 1.8 million) as a result of the decline in the
average workforce number (-96 persons from the same period in the previous financial year), particularly
involving the sales area.
EBITDA, negative by € 0.6 million, displayed performance in line with the GOP.
Telegate Group
(€ million)
costs, net (EBITDA)
%
change
86.4
86.7
(0.3) (0.3)
22.5
24.1
(1.6) (6.6)
26.7
22.5
4.2 18.7
20.4
18.4
2.0 10.9
Revenues from sales and services of the Telegate Group amounted to € 86.4 million in the first six months
of 2008, generally in line with the same period in the previous financial year thanks to the inclusion within
the scope of consolidation – starting on 1 April 2008 – of Telegate Media (previously named KlickTel AG),
whose contribution was in line with the acquisition plan (€ 5.3 million in revenues).
In Germany revenues amounted to € 58.8 million in the first half of 2008 (€ 56.6 million in the first half of
2007), increasing thanks to the good performance of the online business and to the entry of Telegate Media
into the Group, both enabling the decline in the traditional market of telephone assistance services to be
offset.
In France Telegate essentially reached the break-even point at the operating level thanks to the new cost
containment strategy, while in Italy a positive development of the business is shown, by virtue of the good
performance of 12.40 Pronto PAGINEBIANCHE.
In Spain, in the first half of 2008, revenues dropped slightly due to the development of branded activities,
supported by a growth in call handling time and by a change in pricing, thus counteracting the reduction in
the number of calls.
In Italy, revenues rose significantly in the first half of 2008 thanks to longer call durations, more than
offsetting the slight reduction in their number.
GOP amounted to € 22.5 million for the Telegate Group in the first half of 2008, declining € 1.6 million
compared to the same period in the previous financial year, mainly as a result of the € 2.3 million rise in
labour costs due in part to the inclusion of Telegate Media into the scope of consolidation.
The entry of Telegate Media into the scope of consolidation had no effect on the GOP as the company closed
the second quarter of 2008 with an essentially level gross operating profit.
123
At a constant consolidation scope, costs for services fell 10.4% compared to the first half of 2007, mainly as
a result of lower advertising costs in France and Germany. Labour costs were essentially unchanged.
EBITDA amounted to € 26.7 million in the first half of 2008, up € 4.2 million compared to the same period
in the previous financial year. This result was also achieved by the inclusion of compensation of € 5.5
million that Deutsche Telekom paid to Telegate as a result of the conclusion – at the end of June 2008 – of
one of the lawsuits pending between the two companies for the restitution of excess sums paid by Telegate to
Deutsche Telekom for the supply of telephone subscriber data for the period between January and September
1999 (for further information on the disputes with Deutsche Telekom see Section One, Chapter 20,
Paragraph 20.7.2 of this Information Prospectus).
Prontoseat
(€ million)
costs, net (EBITDA)
%
change
5.7
6.3
(0.6) (9.5)
0.7
0.5
0.2 40.0
0.6
0.4
0.2 50.0
0.3
0.0
0.3
n.s.
Revenues from sales and services amounted to € 5.7 million in the first half of 2008, slightly down in
relation to the same period in the previous financial year (- € 0.6 million), attributable to a fall in the number
of calls for Directory Assistance services due to the overall shrinkage of the market. This was to some extent
offset by the operation of other services, i.e. customer service (+6.7%).
Gross operating profit (GOP) amounted to € 0.7 million, an improvement over the first half of 2007 thanks
to a change in the revenue mix (an increase in higher-margin calls), despite increased labour costs resulting
from the change in the contractual structure of relations with call centre operators.
This impact is also reflected in the EBITDA (€ 0.6 million at 30 June 2008), up € 0.2 million compared to
the same period in the previous financial year.
Europages
(€ million)
costs, net (EBITDA)
%
change
7.6
12.5
(4.9) (39.2)
(2.7)
1.3
(4.0)
n.s.
(2.8)
1.0
(3.8)
n.s.
(13.8)
(0.3)
(13.5)
n.s.
In the first six months of 2008, revenues from sales and services totalled € 7.6 million, down sharply from
the € 12.5 million of the previous financial year. It is to be noted that the change in sales planning compared
to 2007, resulting from completion of the migration to an exclusively online offering, makes comparison of
the performance of the business hardly representative.
Gross operating profit (GOP), negative by € 2.7 million, was down from the first half of 2007 following
the change in performance of revenues, reflected in a strong reduction in sales costs.
EBIT, negative by € 13.8 million, included a € 10.0 million writedown of goodwill on the company resulting
from the Impairment Test done based on the data available at 30 June 2008.
124
Section One
WLW Group
This table shows the main results in the first half of 2008 without comparison to the corresponding period of
the previous financial year, given that the WLW Group entered the scope of consolidation starting on 1
October 2007. As described in Section One, Chapter 12 of this Information Prospectus, the WLW Group was
disposed of in December 2008 and therefore will be presented as a discontinued operation in the
consolidated financial statements at 31 December 2008 pursuant to IFRS 5.
(€ million)
Operating income before amortisation, depreciation, non-recurring and restructuring costs, net (EBITDA)
H1 of 2008
17.1
2.1
2.4
1.6
Consodata
(€ million)
costs, net (EBITDA)
change
13.0
9.9
3.1
2.5
1.5
1.0
2.4
1.5
0.9
1.3
0.6
%
31.3
66.7
60.0
0.7 116.7
In the first half of 2008 the revenues from sales and services amounted to € 13.0 million, with an increase
of 31.3% compared to the first half of 2007, thanks to the performance of SEAT’s SME channel as well as
within the scope of the direct sales channel aimed at Large Customers.
The rise in SME revenue should be viewed within the context of the simplification of the direct marketing
product range, which enabled the sales force to focus on typical single-customer mailing products and on
local magazine segments.
The rise in Large Customer revenue, on the other hand, was obtained thanks to more effective sales,
benefiting in particular from the development of the B2B product range through full integration into the
SEAT database and a strengthening of the range of data processing software products for postal address
verification. The revenue rise was also attributable to the 1 April 2008 launch of the operation of the
Lineaffari.com portal, previously managed by SEAT, providing sales and marketing data to SMEs and
benefiting from its own dedicated sales network.
The changes in revenues and in their mix were reflected in the GOP, which rose € 1.0 million compared to
the first half of 2007 (€ 2.5 million at 30 June 2008), with a strong increase in operating profitability from
15.2% in the first half of 2007 to 19.2% in the first half of 2008. The operating profitability also benefited
from a reduction in structural costs due to the rationalisation of some staffing areas, such as information
technology.
EBITDA for the first half of 2008 (€ 2.4 million) displayed performance in line with the GOP.
125
CIPI
(€ million)
costs, net (EBITDA)
%
change
8.0
8.5
(0.5) (5.9)
(0.6)
(0.2)
(0.4) n.s.
(0.7)
(0.3)
(0.4) n.s.
(4.1)
(0.6)
(3.5)
n.s.
Revenues from sales and services amounted to € 8.0 million in the first half of 2008, declining € 0.5
million from the first half of 2007. The strategy implemented by the company for improving the quality and
number of its direct sales force focused on Large Customers substantially lifted revenues in the first halfyearly period, although this only partially offset the effects of a tough market resulting from the slow-down
in consumption.
The fall in revenues was reflected in a decline in the GOP, down € 0.6 million at 30 June 2008 (negative by
€ 0.2 million in the first half of 2007), to a certain extent because of the increased cost of raw materials, a
cost partially offset by the rise of the euro against the dollar.
EBITDA, down € 0.7 million, displayed performance similar to the GOP, when compared to the first half of
2007 (- € 0.3 million).
EBIT suffered from the € 3.0 million impairment of the Company’s goodwill as a result of the Impairment
Tests done with reference to the data available at 30 June 2008.
126
Section One
9.2.5
Economic position for the first nine months of 2008 and 2007 and the third quarter of 2008 and 2007
(€ thousands)
Salaries, wages, and employee
benefits (*)
% on revenues
Other valuation adjustments and
provisions to reserves for risks and
charges, net
Other operating income (expense)
Operating income before
amortisation, depreciation, nonrecurring and restructuring costs, net
(EBITDA)
% on revenues
Operating amortisation, depreciation
and writedown
Non-operating amortisation and
writedown
Non-recurring and restructuring costs,
net
% on revenues
Gains (losses) on disposal/valuation of
investments
Income (loss) before income taxes and
minority interests
Income (loss) before minority
interests
Minority interests
30 September 30 September Absolute
2008
2007 change
986,746
996,708
(9,962)
(347,830)
(348,466)
636
(190,114)
(179,227) (10,887)
Q3 2007 Absolute
change
(1.0) 410,277 414,445
(4,168)
0.2 (121,733) (123,850)
2,117
(6.1) (63,104) (57,533)
(5,571)
(1.0)
1.7
(9.7)
%
448,802
45.5%
(41,515)
469,015
47.1%
(40,246)
(20,213)
(4.3)
(1,269)
4,151
411,438
(2,346)
426,423
6,497
(14,985)
41.7%
(37,063)
Q3 2008
%
233,062
56.2%
(13,992)
(7,622)
(3.3)
(3.2)
225,440
54.9%
(11,358)
2,634
18.8
n.s.
(3.5)
(342)
213,740
(220)
218,850
(122) (55.5)
(5,110) (2.3)
42.8%
(30,619)
(6,444) (21.0)
52.1%
(13,716)
52.8%
(10,204)
(3,512) (34.4)
(136,115)
(121,550)
(14,565) (12.0)
(41,299)
(40,517)
(782)
(1.9)
(14,658)
(11,227)
(3,431) (30.6)
(3,636)
(760)
(2,876)
n.s.
263,027 (39,425) (15.0)
26.4%
(179,703)
(4,016) (2.2)
(3,327)
2,433 73.1
155,089
37.8%
(63,926)
(3)
167,369
40.4%
(59,726)
(12,280)
(7.3)
(4,200)
(3)
(7.0)
n.s.
107,643
(16,483) (15.3)
223,602
22.7%
(183,719)
(894)
38,989
79,997
(41,008) (51.3)
91,160
(24,346)
14,643
(40,248)
39,749
15,902 39.5
(25,106) (63.2)
(33,807)
57,353
(3,617)
11,026
(4,873)
34,876
1,256 25.8
(23,850) (68.4)
(676)
56,677
(39,624)
5,817 14.7
68,019 (10,666) (15.7)
(2,077)
65,942
1,401 67.5
(9,265) (14.1)
(*) Less shares of cost recharged to minority interests and included in other operating income as referred to in the IFRS/IAS financial tables in the
The revenues from sales and services in the first nine months of 2008 were € 986.7 million, in line with
management expectations and essentially stable (-1%) in relation to the same period in 2007. One should
note the inclusion within the scope of consolidation of the German group WLW – which, as described in
Section One, Chapter 12 of this Information Prospectus, was disposed of in December 2008 and will
therefore be presented as a discontinued operation under IFRS 5 in the consolidated financial statements at
31 December 2008 – and, starting from 1 April 2008, of the German subsidiary Telegate Media (previously
named KlickTel AG), the positive effect of which was partially absorbed by the loss in value of the British
pound in relation to the euro, with the result that the revenues of the TDL Group were down 13% in relation
to the first nine months of 2007.
The costs of materials and external services (€ 347.8 million) were essentially stable in relation to the
same period in the previous financial year (€ 348.5 million), down 3.5% at constant currency exchange rates,
editions published and scope of consolidation.
The cost of salaries, wages and employee benefits, net of the relative recovered costs, amounted to € 190.1
million in the first nine months of 2008, up € 10.9 million in relation to the same period in 2007. The
increase is attributable to the inclusion of WLW (€ 11.8 million in the first nine months of 2008) within the
scope of consolidation, which occurred in October 2007. This figure does not include € 3.4 million in
127
capitalised costs (€ 3.2 million in the first nine months of 2007), which represents the resources used in
investment activities.
Gross operating profit (GOP) amounted to € 448.8 million in the first nine months of 2008, down 4.3%
compared to the same period of 2007, but in line with management expectations. This result in fact derives
from current investments in Italy to strengthen the business as well as difficulties encountered by some of the
subsidiaries due to the slow-down in the economy.
Operating amortisation, depreciation and writedowns (equal to € 37.1 million in the first nine months of
2008) increased by € 6.4 million in relation to the same period in the previous financial year due to the high
level of industrial investments in the last few years (for further information see Section One, Chapter 5,
Paragraph 5.2.1 of this Information Prospectus).
Non-operating amortisation and writedowns amounted to € 136.1 million, including € 123.1 million as the
share of amortisation pertaining to the year for the Customer Data Base, which are recognised in Group
assets at the time of acquisition operations as partial allocation of the difference between the purchase price
and the share of equity acquired, as per IFRS 3 and as valued internally and/or independently. This item also
includes € 13 million in goodwill writedowns for the subsidiaries Europages and CIPI, following the results
of the Impairment Test done during the year.
Non-recurring and restructuring costs amounted to € 14.7 million in the first nine months of 2008 (€ 11.2
million in the same period of 2007). They include an additional provision of € 5.0 million to the restructuring
reserve already recognised in 2007 to cover the expected restructuring costs arising in the Issuer for
activation of a reorganisation programme launched during the last year and expected to be completed by the
first quarter of 2009, for the management of more than 150 redundancies through Cassa Integrazione
Guadagni Straordinaria (Special Wage Guarantee Fund) actions and early retirements as well as select
dismissals and professional retraining involving, in particular, the publishing and back-office sales areas,
both of which are strongly affected by the introduction of innovative information technology systems.
The item also includes € 8.9 million in non-recurring costs, among them: (i) € 1.9 million in costs relating to
reorganisations implemented in various Group companies; (ii) € 2.3 million in costs connected with the
process of integrating Telegate Media into the Telegate Group; and (iii) € 1.7 million in costs for activities in
support of SEAT management in redefining the product development strategies, with particular reference to
the online area.
EBIT proved to be € 223.6 million in the first nine months of 2008 (€ 263.0 million in the first nine months
of 2007), down 15.0% in relation to the same period in the previous financial year, influenced not only by
the dynamics demonstrated at the EBITDA level but also by the higher operating amortisation and
depreciation (due to the effect of the rising level of investments in recent years) and by the writedowns of
goodwill as a result of the Impairment Tests done during the year.
Net interest expense included € 5.3 million in writedowns applied to creditor positions and deriving from
existing hedging with Lehman Brothers (USA) at the time of its default and its entry into a Chapter 11
proceeding. Net of this devaluation component, the net interest expense at 30 September 2008 proved to be
€ 1.3 million lower than in the corresponding period of 2007, in line with the performance already shown
during the first half of the year.
The income tax of the period displays a negative balance of € 24.3 million (negative by € 40.2 million in
the first nine months of 2007). This decline in relation to the same period in the previous financial year is
connected with the strong reduction in pre-tax income.
Pursuant to the provisions contained in IAS 34, the income tax of the period was calculated by applying the
actual average rates projected for the entire 2008 financial year to the gross income at 30 September 2008.
The result of the period, positive by € 11.0 million in the first nine months of 2008 (positive by € 34.9
million in the first nine months of 2007), is down € 23.9 million in relation to the corresponding period of the
previous financial year, reflecting the same dynamics as those described at the EBIT level, partially
mitigated by the effect of the income taxes.
128
Section One
9.2.6
Economic position per business area for the first nine months of 2008 and 2007 and the third
quarter of 2008 and 2007
shown in the consolidated interim management report at 30 September 2008 and 2007.
For further details on the companies that comprise the various Business Areas, please see Section One,
Chapter 7, Paragraph 7.2 of this Information Prospectus.
(€ million)
Revenues from 9 months of 2008
sales and
services
9 months of 2007
Q3 2008
Q3 2007
9 months of 2008
Gross
Operating
Profit (GOP)
9 months of 2007
Q3 2008
Q3 2007
9 months of 2008
Operating
income before 9 months of 2007
Q3 2008
amortisation,
Q3 2007
depreciation,
non-recurring
and
restructuring
costs, net
(EBITDA)
9 months of 2008
Operating
result (EBIT)
9 months of 2007
Q3 2008
Q3 2007
Italy
total
and other
total
adjustments
739.3
77.6
141.7
70.5
1,029.1
(42.4)
986.7
748.4
319.8
320.0
398.1
102.2
30.5
43.7
9.7
140.0
49.6
47.1
36.4
49.3
24.9
18.4
4.5
1,039.9
424.8
429.2
448.7
(43.2)
(14.6)
(14.8)
0.1
996.7
410.2
414.4
448.8
410.3
200.3
204.5
360.9
372.5
191.1
192.6
17.4
8.8
13.0
7.1
14.1
7.7
11.6
39.3
13.2
14.7
39.1
36.9
11.8
14.0
3.3
3.2
0.8
4.4
2.9
3.1
0.6
470.3
225.5
233.0
411.5
426.4
213.7
218.8
(1.3)
(0.1)
(0.1)
-
469.0
225.4
233.0
411.4
426.4
213.7
218.8
203.9
5.1
28.6
(14.0)
223.6
-
223.6
222.0
139.2
145.4
12.1
7.2
11.1
29.9
7.8
11.5
(1.0)
0.9
(0.7)
263.0
155.1
167.3
-
263.0
155.1
167.3
The table below shows the main results for the first nine months of 2008 and the third quarter of 2008
compared to those for the corresponding periods of 2007:
(€ million)
9 months of
2008
739.3
398.1
360.9
203.9
9 months Absolute
Q3
Q3 Absolute
%
%
of 2007 change
2008 2007 change
748.4
(9.1) (1.2) 319.8 320.0
(0.2) (0.1)
410.3
(12.2) (3.0) 200.3 204.5
(4.2) (2.1)
372.5
(11.6) (3.1) 191.1 192.6
(1.5) (0.8)
222.0
(18.1) (8.2) 139.2 145.4
(6.2) (4.3)
Revenues from sales and services in the first nine months of 2008 amounted to € 739.3 million, down 2.0%
in relation to the same period in the previous financial year, with the same editions published, above all due
to the minor products, which felt most the impact from the slow-down in the economy.
In particular, the revenues from the print-voice-online core business (€ 650.0 million in the first nine months
of 2008) displayed performance substantially stable in relation to the first nine months of 2007 due firstly to
129
a decline – although contained – in print products, and secondly to a strong rise in the online area in the third
quarter of 2008 caused by product innovation. In detail:
•
Print: Revenues reached € 531.7 million, down 3.0% in relation to the first nine months of 2007 with a
slight improvement in the third quarter of 2008 (-2.7%) compared to the first six months of the year (3.2%) due to the beneficial seasonal nature (better volume in local directory areas) that offset the
deterioration of the economy and of the market;
•
Voice: Advertising revenue went up to € 31.2 million (+ 4.1% compared to the first nine months of
2007). With respect to the 89.24.24 Pronto PAGINEGIALLE service, the commercial success of the new
multimedia offering is noted, enabling an increase in the average value per advertiser over the base
offering;
•
Online: Revenues rose 11.4% compared to the same period in the previous financial year with strong
acceleration in the third quarter of 2008 (+27.3% above the third quarter of 2007), thanks to the launch
of new services. Revenues also rose due to the increase in traffic, registering 11.4 million visits by
October 2008;
•
Business to Business: Revenue declined to € 14.7 million, down € 4.9 million from the first nine months
of 2007, with the same published editions. This result was influenced by the focus of the sales force on
core products and by the migration in progress from the print offering to online, which will not be
completed until the end of next year;
•
Other products: Revenues were € 73.8 million, down € 4.7 million compared to the first nine months of
2007.
Costs of materials and external services, net of related recovery of costs, in the first nine months of 2008
totalled € 274.5 million, down € 1.1 million from the same period of 2007 (- € 2.7 million at constant
editions published) thanks to the containing of industrial costs (- € 3.2 million to reach € 112.9 million),
especially for the purchasing of paper and printing of directories, a direct result of the performance of print
revenue. Overheads also fell (- € 2.1 million to reach € 52.4 million), above all involving debt collection
expenses by virtue of the different timing of collection actions. Sales costs rose, however (+ € 2.7 million to
reach € 109.2 million).
The costs of salaries, wages and employee benefits, net of the recovery of costs for personnel seconded to
other Group companies, amounted to € 66.6 million in the first nine months of 2008, up 6.7% compared to
the same period of 2007, partly owing to an increase in average workforce numbers and also to CCNL
(employment contract) renewal.
At 30 September 2008 the workforce, including administrators, project workers and trainees, totalled 1,501
persons (1,449 at 31 December 2007). The average workforce over the period was 1,391 units (1,381 units in
the first nine months of 2007).
Gross operating profit (GOP) was € 398.1 million in the first nine months of 2008, down € 12.2 million (3%) compared to the same period of 2007. This result reflects the dip in revenues and the greater resources
invested in innovation of the product range and in strengthening the sales network in Italy, only partially
offset by containing operating costs.
EBITDA reached € 360.9 million in the first nine months of 2008, down 3.1% compared to the same period
in the previous financial year.
130
Section One
(€ million)
9 months of 9 months Absolute
% Q3 Q3 Absolute
%
2008
of 2007 change
2008 2007 change
77.6
102.2
(24.6) (24.1) 30.5 43.7
(13.2) (30.2)
9.7
17.4
(7.7) (44.3) 8.8 13.0
(4.2) (32.3)
7.1
14.1
(7.0) (49.6) 7.7 11.6
(3.9) (33.6)
5.1
12.1
(7.0) (57.9)
7.2 11.1
(3.9) (35.1)
Revenues from sales and services reached € 77.6 million in the first nine months of 2008, equivalent to
£ 61.6 million (£ 69.1 million in the first nine months of 2007), a decline of 10.9% resulting, in particular,
from difficulties encountered in sales with the customer segment demanding national coverage, especially
financial institutions, which have been hardest hit by the credit crunch. Expressed in euro, revenues showed
an even greater reduction (24.1%) caused by the acute decline in value of the British pound in relation to the
euro.
EBITDA, at € 7.1 million, displayed a more contained downward change (-7%) than the decline in revenues
thanks to the containing of operating costs, with the exception of greater advertising expenses to support the
business.
Telegate Group
(€ million)
Operating income before amortisation, depreciation, nonrecurring and restructuring costs, net (EBITDA)
9 months 9 months Absolute
% Q3
of 2008
of 2007 change
2008
133.3
130.7
2.6 2.0 46.9
35.2
38.2
(3.0) (7.9) 12.7
38.0
35.9
2.1 5.8 11.3
28.0
29.6
(1.6) (5.4)
Q3 Absolute
%
2007 change
44.0
2.9
6.6
14.1
(1.4) (9.9)
13.4
(2.1) (15.7)
7.6 11.2
(3.6) (32.1)
Revenues from sales and services of the Telegate Group went up 2.0% to reach € 133.3 million in the first
nine months of 2008, generally in line with the same period in the previous financial year thanks to the
consolidation – starting on 1 April 2008 – of Telegate Media (previously named KlickTel AG), whose
contribution in the first nine months of 2008 was revenues of € 10.4 million. In the third quarter of 2008 the
company also continued developing the business in Germany, aimed at generating advertising revenues on
the two voice-online platforms.
EBITDA reached € 38.0 million in the first nine months of 2008, up € 2.1 million over the same period in
the previous financial year, with a trend in line with that displayed at the end of the first half of the year.
131
Prontoseat
(€ million)
9 months
of 2008
8.5
1.2
1.1
0.6
9 months Absolute
% Q3 Q3 Absolute
%
of 2007 change
2008 2007 change
9.4
(0.9) (9.6) 2.8 3.1
(0.3) (9.7)
1.1
0.1
9.1 0.5 0.6
(0.1) (16.7)
1.0
0.1 10.0 0.5 0.6
(0.1) (16.7)
0.3
0.3 100.0
0.3
0.3
0.0
0.0
Revenues from sales and services amounted to € 8.5 million in the first nine months of 2008, down in
relation to the same period in the previous financial year (€ 9.4 million). The fall in the traffic volume
generated by the value-added service 89.24.24 Pronto PAGINEGIALLE in a general context of market
contraction and the slow-down in outbound activities relating to telesales was only partially offset by the
operation of other services, such as customer service (+5.2%).
Gross operating profit (GOP) amounted to € 1.2 million and showed a trend of improvement in relation to
the first nine months of 2007 (€ 1.1 million) thanks to a different revenue mix (an increase in higher-margin
calls) and lower labour costs due to a smaller number of telephone operators employed as a result of the
decline in the volume of calls handled.
This impact is also reflected in the EBITDA (€ 1.1 million at 30 September 2008), an increase in relation to
the same period in the previous financial year.
Europages
(€ million)
9 months
of 2008
14.8
(1.6)
(1.7)
(13.8)
9 months Absolute
% Q3 Q3 Absolute
%
of 2007 change
2008 2007 change
21.6
(6.8) (31.5) 7.2 9.1
(1.9) (20.9)
1.9
(3.5)
n.s. 1.1 0.6
0.5 83.3
1.6
(3.3)
n.s. 1.1 0.6
0.5
n.s.
(0.4)
(13.4)
n.s.
- (0.1)
(0.1)
n.s.
In the first nine months of 2008, the revenues from sales and services amounted to € 14.8 million,
decreasing by € 6.8 million compared to the previous financial year. This decline is attributable to lower
revenues in Italy and Spain that were only partially compensated by the good performance of revenues in
France.
The change in sales planning compared to 2007, resulting from completion of the migration process to an
exclusively online offering, makes comparison of the performance of the activities hardly representative.
At the end of September 2008 the EBITDA displayed a negative value of € 1.7 million due to greater costs
incurred to support sales activities in France and in Germany. However, the company has initiated significant
cost-cutting measures that will only have an impact starting in 2009.
WLW Group
This table shows the main results in the first nine months of 2008 and the third quarter of 2008 without
comparison to the corresponding periods of the previous financial year, bearing in mind that the WLW
Group entered the scope of consolidation starting on 1 October 2007. As described in Chapter 12 of this
132
Section One
Information Prospectus, the WLW Group was disposed of in December 2008 and therefore will be presented
as a discontinued operation in the consolidated financial statements at 31 December 2008 pursuant to IFRS
5.
(€ million)
Operating income before amortisation, depreciation, non-recurring and restructuring costs, net
(EBITDA)
9 months of 2008
26.0
4.2
4.5
Q3 2008
8.9
2.1
2.1
3.3
1.7
Consodata
(€ million)
9 months
of 2008
18.0
2.7
2.7
1.1
9 months Absolute
% Q3 Q3 Absolute
%
of 2007 change
2008 2007 change
15.1
2.9 19.2 5.0 5.2
(0.2) (3.8)
1.9
0.8 42.1 0.2 0.4
(0.2) (50.0)
2.0
0.7 35.0 0.3 0.5
(0.2) (40.0)
0.6
0.5 83.3 (0.2)
-
(0.2)
n.s.
In the first nine months of 2008 the revenues from sales and services amounted to € 18.0 million, an
increase of 19.2% compared to the first nine months of 2007, thanks to the good performance of sales posted
for the direct channel aimed at Large Customers.
The development of revenues and their better mix have had an impact on the GOP, up € 0.8 million in
relation to the first nine months of 2008 (€ 1.9 million at 30 September 2007).
CIPI
(€ million)
9 months of
2008
11.8
(1.0)
(1.1)
(4.5)
9 months Absolute
% Q3 Q3 Absolute
%
of 2007 change
2008 2007 change
13.3
(1.5) (11.3) 3.8 4.8
(1.0) (20.8)
(0.6)
(0.4) (66.7) (0.4) (0.4)
n.s.
(0.7)
(0.4) (57.1) (0.4) (0.4)
n.s.
(1.2)
(3.3)
n.s. (0.4) (0.6)
0.2
33.3
In the first nine months of 2008, the revenues from sales and services amounted to € 11.8 million,
decreasing by € 1.5 million compared to the first nine months of 2007. This revenue fall is mainly
attributable to the Giallo Promo line. Concretely, the effects of a tough sales campaign began to be felt at the
end of the first half of the year, which by the end of September had pulled revenue down 24.5% in relation to
the same period of the previous financial year.
The slow-down in revenues was reflected in a decline in the GOP, down € 1.0 million at 30 September 2008
(-€ 0.6 million in the first nine months of 2007), to a certain extent because of the increased cost of raw
materials purchased abroad in dollars, a cost partially offset by the performance of the euro/dollar exchange
rate.
EBITDA, down € 1.1 million, displayed a performance similar to the GOP when compared to the first nine
months of 2007 (- € 0.7 million).
133
EBIT suffered from the € 3.0 million writedown of goodwill on the company resulting from the Impairment
Test done based on the data available at 30 June 2008.
9.2.7
Financial data at 31 December 2007, 2006 and 2005, at 30 June 2008 and 2007 and at 30
September 2008 and 2007
The following table shows in reclassified form the capital and financial data for the SEAT Group at 31
December 2007, 2006 and 2005.
(€ thousands)
Goodwill and Customer Data Base
Other non-current assets (*)
Operating non-current liabilities
Non-operating non-current liabilities
Operating working capital
Operating current assets
Operating current liabilities
Non-operating working capital
Non-operating current assets
Non-operating current liabilities
Equity Shareholders of the Group
Minority interests
Total equity
Net financial debt
Transaction costs on loans and securitisation
programme not yet amortised
Net book value financial debt
of which:
Non-current financial assets
Current financial assets, cash and cash equivalents
Total
(A)
31 December 31 December 31 December Changes
2007 (a)
2006 (b)
2005 (c)
(a-b)
3,943,671
3,997,672
4,154,998 (54,001)
167,973
166,820
197,000
1,153
(68,555)
(78,148)
(73,996)
9,593
(6,404)
(434)
(3,632)
(5,970)
300,306
298,690
285,598
1,616
756,034
748,544
755,600
7,490
(455,728)
(449,854)
(470,002)
(5,874)
(26,909)
(6,713)
(24,949) (20,196)
18,356
3,510
3,742
14,846
(45,265)
(10,223)
(28,691) (35,042)
4,310,082
4,377,887
4,535,019 (67,805)
1,100,006
1,057,184
980,117
42,822
23,824
18,246
19,617
5,578
1,123,830
1,075,430
999,734
48,400
3,274,306
3,405,782
3,634,581 (131,476)
(82,792)
(102,326)
(122,474)
19,534
Changes
(b-c)
(157,326)
(30,180)
(4,152)
3,198
13,092
(7,056)
20,148
18,236
(232)
18,468
(157,132)
77,067
(1,371)
75,696
(228,799)
20,148
(B)
(5,262)
3,186,252
(999)
3,302,457
23,178
(4,263) (24,177)
3,535,285 (116,205) (232,828)
(A+B)
3,190,372
215,508
(1,996)
(217,632)
4,310,082
3,384,189
229,210
(1,424)
(309,518)
4,377,887
3,526,689 (193,817) (142,500)
214,301 (13,702)
14,909
(1,160)
(572)
(264)
(204,545)
91,886 (104,973)
4,535,019 (67,805) (157,132)
(*) Including financial assets available for sale.
Financial performance at 31 December 2007 and 31 December 2006
The net invested capital, at € 4,310.1 million at 31 December 2007, declined € 67.8 million from 31
December 2006 in relation to the share of amortisation of the Customer Data Base, while operating working
capital remained substantially stable.
In particular, net invested capital includes, at the end of 2007, € 3,687.1 million in goodwill (up during the
year by € 127.6 million as a result of the acquisition of the German group WLW, which, as described in
Chapter 12 of this Information Prospectus, was disposed of in December 2008 and therefore will be
presented as a discontinued operation under IFRS 5 in the consolidated financial statements at 31 December
2008) and € 256.6 million for the Customer Data Base (for further information see Section One, Chapter 6,
Paragraph 6.1.1.3 of this Information Prospectus).
Other non-current assets include € 147.5 million for operating intangible and tangible assets, up during
2007 by € 30.3 million as a result of industrial investments of € 66.1 million, partially offset by operating
amortisation, depreciation and writedowns of € 42.2 million. They also include € 5.4 million for the 50%
equity stake in Katalog resulting from the subscription by SEAT, in November 2007, of a reserved share
capital increase.
Non-current liabilities include € 20.9 million for the TDL Group pension fund (€ 26.5 million at 31
December 2006), € 24.5 million for employee severance indemnities (€ 29.8 million at 31 December 2006)
134
Section One
and € 21.3 million for the reserve for sales agents’ termination indemnities (€ 21.2 million at 31 December
2006).
Operating working capital, positive by € 300.3 million at 31 December 2007 (positive by € 298.7 million
at 31 December 2006), proved to be substantially stable during the year.
The non-operating working capital, negative at 31 December 2007 by € 26.9 million (negative by € 6.7
million at 31 December 2006) went down € 20.2 million in relation to 31 December 2006, particularly as a
result of higher tax debts (up € 28.5 million) in view of the higher taxes in the year.
Equity amounted to € 1,123.8 million at 31 December 2007 (€ 1,075.4 million at 31 December 2006), of
which € 1,100.0 million pertains to the Issuer (€ 1,057.2 million at 31 December 2006) and € 23.8 million
pertains to the minority shareholders (€ 18.2 million at 31 December 2006). The equity increased by € 48.4
million over 31 December 2006 due to the combined effect of the posting of earnings of € 98.4 million
pertaining to the Group for the year and of the distribution of dividends amounting to € 62.2 million.
Net financial debt amounted to € 3,274.3 million at 31 December 2007 (€ 3,405.8 million at 31 December
2006) and decreased during the course of 2007 by € 131.5 million, after including net expenditure of € 118.1
million for the acquisition of the subsidiary WLW and despite the distribution of € 62.2 million in dividends.
For further information on net financial debt, see Section One, Chapter 10 of this Information Prospectus.
Financial performance at 31 December 2006 and 31 December 2005
The net invested capital, at € 4,377.9 million at 31 December 2006, declined € 157.1 million from 31
December 2005 in relation to the share of amortisation of the Customer Data Base, while operating working
capital remained substantially stable, despite the strong industrial investments made for product innovation
and development and improvement in the efficiency and effectiveness of support systems for the sales force
and administrative and commercial back-office systems.
In particular, net invested capital included € 3,579.0 million at the end of the year for goodwill and € 418.7
million for the Customer Data Base (for further information see Section One, Chapter 6, Paragraph 6.1.1.3 of
this Information Prospectus).
Other non-current assets include € 117.2 million for operating intangible and tangible assets, up during
2006 by € 23.6 million as a result of industrial investments of € 48.3 million and the entry of the German
company Telegate Auskunftdienste into the scope of consolidation (€ 8.5 million), effects partially offset by
operating amortisation, depreciation and writedowns of € 33.3 million.
Non-current liabilities include € 26.5 million for the TDL Group pension fund (€ 19.3 million at 31
December 2005), € 29.8 million for employee severance indemnities (€ 32.9 million at 31 December 2005)
and € 21.2 million for the reserve for sales agents’ termination indemnities (€ 19.5 million at 31 December
2005).
at 31 December 2005), increased by € 13.1 million over the previous financial year, especially as a
consequence of a reduction in the trade payables.
The non-operating working capital, negative at 31 December 2006 by € 6.7 million (negative by € 24.9
million at 31 December 2005), went up € 18.2 million in relation to 31 December 2005, particularly as a
result of lower tax debts (down € 17.7 million) deriving from the payment during the course of the year of
the substitute tax debt relating to the realignment between the statutory value and the tax value of the
Customer Data Base carried out in 2005.
Equity amounted to € 1,075.4 million at 31 December 2006 (€ 999.7 million at 31 December 2005), of
which € 1,057.2 million pertained to SEAT (€ 980.1 million at 31 December 2005) and € 18.2 million
pertained to the minority shareholders (€ 19.6 million at 31 December 2005). The equity increased by € 77.1
million over 31 December 2005 due to the combined effect of the posting of earnings of € 80.1 million
pertaining to the Group for the year, the exercise of the stock option for € 20.4 million and the change in the
market value of the derivative contracts hedging interest rate risks, effects partially offset by a distribution of
dividends for € 45.3 million and by net actuarial losses on pension funds amounting to € 4.3 million.
135
Net financial debt amounted to € 3,405.8 million at 31 December 2006 (€ 3,634.6 million at 31 December
2005) and decreased during the course of 2006 by € 228.8 million, despite the distribution of € 45.3 million
in dividends and the payment of the substitute tax on the Customer Data Base (€ 19.4 million). For further
information on the net financial debt, see Section One, Chapter 10 of this Information Prospectus.
Financial performance at 30 June 2008 and 30 June 2007
(€ thousands)
30 June 31 December Changes 30 June
2008
2007
2007
3,873,919
3,943,671 (69,752) 3,915,817
193,849
167,973
25,876 175,210
(85,564)
(68,555) (17,009) (68,622)
(17,114)
(6,404) (10,710)
(2,411)
199,406
300,306 (100,900) 212,436
715,567
756,034 (40,467) 721,025
(516,161)
(455,728) (60,433) (508,589)
(37,217)
(26,909) (10,308) (17,022)
2,427
18,356 (15,929)
3,044
(39,644)
(45,265)
5,621 (20,066)
4,127,279
4,310,082 (182,803) 4,215,408
1,044,203
1,100,006 (55,803) 989,188
24,230
23,824
406
17,372
1,068,433
1,123,830 (55,397) 1,006,560
3,152,107
3,274,306 (122,199) 3,316,160
(73,468)
(82,792)
9,324 (92,213)
(19,793)
(5,262) (14,531) (15,099)
3,058,846
3,186,252 (127,406) 3,208,848
Minority interests
Total equity
(a)
Net financial debt
Transaction costs on loans and securitisation programme not yet amortised
(b)
of which:
3,090,005
190,664
(1,960)
(219,863)
Total
(a+b) 4,127,279
3,190,372 (100,367) 3,262,638
215,508 (24,844) 209,699
(1,996)
36
(1,975)
(217,632)
(2,231) (261,514)
4,310,082 (182,803) 4,215,408
Net invested capital, equal to € 4,127.3 million at 30 June 2008, reduced by € 182.8 million compared to 31
December 2007.
In particular, net invested capital included € 3,667.8 million at the end of June 2008 for goodwill (up in the
period by € 8.9 million as a result of the acquisition of Telegate Media) and € 206.1 million for the Customer
Data Base (for further information see Section One, Chapter 6, Paragraph 6.1.1.3 of this Information
Prospectus).
Other non-current assets amounted to € 193.8 million at 30 June 2008, up € 25.9 million in relation to 31
December 2007. Industrial investments in the first half of 2008 were equal to € 23.7 million (€ 26.2 million
in the first half of 2007), while operating amortisation represented a charge against the income account of
€ 23.3 million (€ 20.4 million in the first half of 2007).
Non-current liabilities at 30 June 2008 included € 39.2 million for the TDL Group pension fund (€ 20.9
million at 31 December 2007), € 22.5 million for employee severance indemnities (€ 24.5 million at 31
December 2007) and € 21.7 million for the reserve for sales agents’ termination indemnities (€ 21.3 million
at 31 December 2007).
The operating working capital, positive by € 199.4 million at 30 June 2008 (positive by € 300.3 million at
31 December 2007), declined € 100.9 million compared to 31 December 2007. The contraction of operating
working capital in the first half of the year is generally significant, as this is a business characterised by high
levels of revenues concentrated in the final months of the year and then collected in the subsequent periods.
136
Section One
In the first half of 2008, in fact, the performance of operating working capital benefited from a reduction in
trade receivables of € 56.1 million.
The non-operating working capital, negative at 30 June 2008 by € 37.2 million (negative by € 26.9 million
at 31 December 2007) went down € 10.3 million compared to 31 December 2007, particularly as a result of
lower tax debts (down € 7.5 million) consequent to the payments made in the period and the set-offs
executed with the tax credits in existence at the end of the previous financial year.
Total equity amounted to € 1,068.4 million at 30 June 2008 (€ 1,123.8 million at 31 December 2007), of
which € 1,044.2 million pertains to the Issuer (€ 1,100.0 million at 31 December 2007) and € 24.2 million
pertains to the minority shareholders (€ 23.8 million at 31 December 2007). The total equity decreased by
€ 55.8 million compared to 31 December 2007 due to the combined effect of the posting of the loss of the
period of € 45.7 million pertaining to the Group, actuarial losses on pension funds amounting to € 14.4
million and net exchange differences from foreign currency balance conversion amounting to € 10.4 million.
Net financial debt amounted to € 3,152.1 million at 30 June 2008 (€ 3,274.3 million at 31 December 2007)
and went down € 122.2 million during the course of the half-yearly period. For further information on the net
financial debt, see Section One, Chapter 10 of this Information Prospectus.
Financial performance at 30 September 2008 and 30 September 2007
(€ thousands)
Minority interests
Total equity
(a)
Net financial debt
Transaction costs on loans and securitisation programme not yet
amortised
Net “book value” financial debt
(b)
of which:
Total
(a+b)
30 September 31 December Changes 30 September
2008
2007
2007
3,831,109
3,943,671 (112,562)
3,867,637
171,903
167,973
3,930
154,613
(83,414)
(68,555) (14,859)
(67,814)
(16,946)
(6,404) (10,542)
(2,371)
261,904
300,306 (38,402)
273,043
697,869
756,034 (58,165)
722,288
(435,965)
(455,728)
19,763
(449,245)
(27,498)
(26,909)
(589)
(18,878)
13,077
18,356
(5,279)
10,488
(40,575)
(45,265)
4,690
(29,366)
4,137,058
4,310,082 (173,024)
4,206,230
1,080,920
1,100,006 (19,086)
1,046,374
24,862
23,824
1,038
20,684
1,105,782
1,123,830 (18,048)
1,067,058
3,105,176
3,274,306 (169,130)
3,233,263
(69,027)
(82,792)
13,765
(87,431)
(4,873)
3,031,276
(5,262)
389
3,186,252 (154,976)
(6,660)
3,139,172
3,094,394
187,618
(1,978)
(248,758)
4,137,058
3,190,372 (95,978)
215,508 (27,890)
(1,996)
18
(217,632) (31,126)
4,310,082 (173,024)
3,267,495
218,306
(1,973)
(344,656)
4,206,230
Net invested capital, amounting to € 4,137.1 million at 30 September 2008, reduced by € 173.0 million
compared to 31 December 2007.
Industrial investments in the first nine months of 2008 were € 33.7 million (€ 39.8 million in the first nine
months of 2007).
Non-current liabilities at 30 September 2008 include € 37.2 million for the TDL Group pension fund
(€ 20.9 million at 31 December 2007), € 21.7 million for employee severance indemnities (€ 24.5 million at
137
31 December 2007) and € 21.9 million for the reserve for sales agents’ termination indemnities (€ 21.3
million at 31 December 2007).
Operating working capital, positive by € 261.9 million at 30 September 2008 (positive by € 300.3 million
at 31 December 2007), decreased by € 38.4 million compared to 31 December 2007.
Non-operating working capital, negative by € 27.5 million at 30 September 2008 (negative by € 26.9
million at 31 December 2007), was essentially unchanged compared to 31 December 2007.
Total equity amounted to € 1,105.8 million at 30 September 2008 (€ 1,123.8 million at 31 December 2007),
of which € 1,080.9 million pertains to SEAT (€ 1,100.0 million at 31 December 2007) and € 24.9 million
pertains to the minority shareholders (€ 23.8 million at 31 December 2007).
Net financial debt amounted to € 3,105.2 million at 30 September 2008 (€ 3,274.3 million at 31 December
2007) and decreased by € 169.1 million during the period. For further information on the net financial debt,
see Section One, Chapter 10 of this Information Prospectus.
9.3
Information concerning policies or factors of a governmental, economic, tax, monetary or
political nature that have had or may have significant direct or indirect repercussions on the
business of the Issuer
Besides the description given with respect to risk factors, as shown in Chapter 4 in this Information
Prospectus, to which reference should be made for further information, the Issuer is not aware of any
information regarding external factors that has had or may have significant direct or indirect repercussions on
the business of the Group.
138
Section One
9bis DESCRIPTION OF THE OPERATING AND FINANCIAL POSITION
This chapter contains comments on the performance of the income and capital items of the SEAT Group for
the financial year ended on 31 December 2008.
The consolidated financial data and the relative comments presented in this Chapter must be read in
conjunction with the information contained in the annual consolidated financial statements at 31 December
2008, whose information, if not reported in this Information Prospectus, shall be understood as being hereby
incorporated by reference, as per Article 11, Paragraph 2 of Directive 2003/71/EC and Article 28 of
Regulation 809/2004/EC. This document is available to the public at the company registered office as well as
on the website of the Issuer, www.seat.it, in the Investor section.
As described above in Chapter 2, the annual consolidated financial statements of the Issuer at 31 December
2008 have been audited by the Independent Auditors.
The consolidated balance sheet and income statement of the Issuer contained in this Information Prospectus
have been prepared pursuant to the IFRS and are presented below in this chapter in a restated form, as in the
management report of the annual consolidated financial statements.
In particular, the reclassified consolidated income statement derives from the consolidated income statement
table of the consolidated balance sheets, as well as showing the gross operating profit (GOP), operating
income before amortisation, depreciation, non-recurring and restructuring cost, net (EBITDA), and the
subdividing of some expenses between operating and non-operating. The reclassified consolidated balance
sheet also shows the operating assets and liabilities separately from non-operating assets and liabilities, the
net operating and non-operating working capital, the net invested capital and the net financial debt.
Such measures are not identified as accounting measures within the scope of the IFRS and therefore they
should not be considered alternative measures for evaluating the economic performance of the Group and the
relative financial and capital position. The Issuer believes that the financial information reported in the
following is an important parameter for measuring the performance of the Group as it enables analysis of the
economic, capital and financial performance of the Group. As the determination of such measures is not
governed by the accounting standards in reference, the methods of calculation applied by the Company may
not be consistent with those adopted by others and therefore such measures may not be comparable.
For definitions of such measures (EBITDA, GOP, operating working capital, non-operating working capital,
net invested capital, net book financial debt and net financial debt), see Section One, Chapter 3 of the
With reference to each period presented, the financial information and tables shown in this Chapter and the
relative comments are meant to provide a summary view of the economic and capital position of the Group,
of the changes occurring from one reference period to another, and the significant events that have
influenced the respective results.
9.1bis Financial Position
The financial position of the SEAT Group is analysed in Section One, Chapter 10, Paragraph 10.1 of this
Information Prospectus, to which reference should be made.
9.2bis Activities
The following are descriptions of the main factors that have influenced SEAT Group activities for the
financial year ended on 31 December 2008. In particular, it should be noted that during the course of the last
quarter of 2008, following the decision to dispose of the WLW group, the asset, liability and income
statement amounts relating to it have been entered under “Non-current assets held for sale” in line with the
provisions contained in IFRS 5. Consequently the economic results of the WLW group for the 2008 financial
year have been stated in the line “Net income (loss) from discontinued operations/non-current assets held for
sale”. The amounts for the 2007 income statement (and for the respective business area) have been
redetermined in the same manner for purposes of making consistent the comparison of the respective items.
139
9.2.1bis Reclassified consolidated income statement for the financial years ended on 31 December 2008
and 2007 as redetermined
(€ thousands)
Costs of materials and external services (*)
Labour cost (*)
% of revenues
Valuation adjustments and provisions for risks and charges, net
Other operating income and expenses
Operating income before amortisation, depreciation and non-recurring and
restructuring expenses, net (EBITDA)
% of revenues
Operating amortisation, depreciation and writedowns
Non-operating amortisation, depreciation and writedowns
Non-recurring and restructuring expenses, net
% of revenues
Financial expenses, net
Income (loss) from equity investments valued by the net equity method
Income before taxes and minority interests
Income tax for the year
Income (loss) from continuing operations
Income (loss) from discontinued operations/non-current assets held for sale, net
Result for the year
Income (loss) for the year due to minority interests
Result for the year – Group share
(*)
2008
1,375,989
(479,189)
(238,385)
658,415
47.9%
(58,395)
5,269
605,289
44.0%
(50,114)
(295,207)
(31,651)
228,317
16.6%
(248,205)
(7,234)
(27,122)
(69,478)
(96,600)
(77,080)
(173,680)
(5,966)
(179,646)
2007 Absolute
%
Redetermined (**)
change
1,444,213 (68,224) (4.7)
(500,441)
21,252
4.2
(242,615)
4,230
1.7
701,157 (42,742) (6.1)
48.5%
(49,952)
(8,443) (16.9)
(3,081)
8,350
n.s.
648,124 (42,835) (6.6)
44.9%
(41,817)
(162,067)
(16,536)
427,704
29.6%
(239,778)
(3,314)
184,612
(79,482)
105,130
1,108
106,238
(7,839)
98,399
(8,297)
(133,140)
(15,115)
(199,387)
(19.8)
(82.2)
(91.4)
(46.6)
(8,427)
(3,920)
(211,734)
10,004
(201,730)
(78,188)
(279,918)
1,873
(278,045)
(3.5)
n.s.
n.s.
12.6
n.s.
n.s.
n.s.
23.9
n.s.
Minus the portion of costs allocated to minority interests and included under the IFRS financial statement format in the item “Other revenues
and income”.
(**) The income statement amounts for the financial year ended on 31 December 2007 were redetermined for purposes of making the comparison of
the items consistent with those on the financial statements at 31 December 2008 following, in particular, the sale of WLW.
Financial years 2008 and 2007 as redetermined
Revenues from sales and services reached € 1,376 million during 2008, a decrease of 4.7% compared to the
previous year 2007 as redetermined (€ 1,444.2 million). This decrease was reflected in costs for materials
and external services (€ 479.2 million during 2008), with a drop of € 21.3 million compared to 2007 as
redetermined, of which € 7.3 million was due to the effect of the weakening of the pound sterling with
respect to the euro. Industrial costs were down in particular (- € 16,846,000 compared to 2007 as
redetermined) as a result especially of lower paper consumption and lower printing costs as print runs at
SEAT and at Thomson fell. Sales costs also decreased, as a result of the containment of advertising
expenditures (- € 5.0 million).
Labour costs during the 2008 financial year amounted to € 238.4 million, a decrease of € 4.2 million
compared to 2007 as redetermined. At a constant euro/sterling exchange rate and scope of consolidation,
labour costs decreased by € 2.6 million. It dropped in particular in the TDL Group (€ 5.2 million net of the
foreign exchange effect) as a result of implementation of the corporate restructuring plan relating to the sales
and information technology areas, which allowed the average staff of the SEAT Group to be reduced by 160
units. The inclusion of Telegate Media in the scope of consolidation on 1 April 2008 entailed an increase in
labour costs of € 7.4 million, corresponding to an average workforce of 194 units.
The Group workforce – including administrators, project-based workers and interns – was 6,532 units at 31
December 2008 (6,421 units at 31 December 2007 as redetermined). In 2008, compensated average
attendance (FTE for foreign companies) was 5,163 units (5,308 units in 2007 as redetermined).
For more information on operating revenues and costs, please see the analysis by business area in Paragraph
9.2.2bis below.
140
Section One
Other operating income and expenses showed a net positive balance in 2008 of € 5.3 million (negative by
€ 3.1 million in 2007 as redetermined). Of the increase, € 5.5 million is attributable to the sums that Deutsche
Telekom returned to Telegate following completion in late June 2008 of one of the lawsuits pending between
the two companies aimed at the restitution of the sums paid in excess by Telegate to Deutsche Telekom for
the provision of telephone subscriber data in past years. More specifically, the judgment, now unappealable,
referred to the costs incurred for provision of data for the period from January-September 1999. See Section
One, Chapter 20, Paragraph 20.7 of the Information Prospectus.
Operating income before amortisation, depreciation and non-recurring and restructuring expenses,
net (EBITDA), amounting to € 605.3 million in 2008, was down 6.6% compared to 2007 as redetermined
(€ 648.1 million). The results obtained, although negative, were in line with management expectations, both
in Italy and abroad. In Italy, in particular, the decrease in net sales due to the economic crisis was limited by
the acceleration of Internet revenues, while the cost containment initiative begun in May 2008, just when the
true dimensions of the worsening economic crisis began to become manifest, allowed operating profits to be
protected.
Operating amortisation, depreciation and writedowns, amounting to € 50.1 million in 2008, increased by
€ 8.3 million compared to 2007 as redetermined; the increase with respect to the previous financial year
reflects the operational start-up of information systems and of product innovation and sales force support
projects in which the company has invested in recent years (for further information, please see Section One,
Chapter 5, Paragraph 5.1.2 of the Information Prospectus).
The non-operating amortisation, depreciation and writedowns, of € 295.2 million in 2008, refer to
€ 164.4 million in Customer Data Base amortisation and to € 130.8 million in goodwill writedowns posted
following the Impairment Tests carried out during the course of the year. These losses refer to the TDL
Group (€ 100.5 million), Europages (€ 25.3 million) and CIPI (€ 5 million) (for further information, please
see Section One, Chapter 6, Paragraph 6.1.1.3 of the Information Prospectus).
The non-recurring and restructuring expenses, net, of € 31.7 million during the 2008 financial year,
include an allocation of € 12 million to the corporate restructuring provisions for covering of expenses that
SEAT will bear upon completion of the 2007-2009 corporate restructuring plan and for the start-up of the
new 2009-2011 corporate restructuring plan. The latter has been agreed at the union level and was approved
in late December 2008 by the Board of Directors, and provides for the management during the 2009-2011
period of 210 redundant units through departure incentives, early retirement and the Cassa Integrazione
Guadagni Straordinaria.
The item also includes € 17.4 million in non-recurring expenses, among which can be mentioned the € 4.9
million paid to Chief Executive Officer Luca Majocchi at the end of his relationship with the Company as
compensation for his commitment not to engage in any activity on behalf of companies competing with
SEAT. For further details, please see Section One, Chapter 16, Paragraph 16.1.1 of the Information
Prospectus.
As a result of the circumstances outlined above, the operating result (EBIT) reached € 228.3 million in
2008, down € 199.4 million compared to 2007 as redetermined, with an impact on revenues of 16.6% (29.6%
in 2007 as redetermined).
Financial expenses, net, amounting to € 248.2 million, an increase of € 8.4 million compared to 2007 as
redetermined, are comprised of the balance between financial expenses of € 281.8 million (€ 258.5 million in
2007 as redetermined) and financial income of € 33.6 million (€ 18.7 million in 2007 as redetermined), .
Specifically, they include € 23 million in foreign exchange losses (partially offset by € 17.9 million in
foreign exchange gains) on intercompany loans in pounds sterling, as a result of the strong devaluation of
this currency against the euro during the course of 2008. They also include the following non-recurring
items: (i) € 6.1 million in writedowns made on credit positions and hedging derivatives outstanding with
Lehman Brothers (USA) at the time of its default and its entry into “Chapter 11” insolvency proceedings; (ii)
€ 2.9 million in pre-financing expenses for real estate leasing operations becoming effective on 23 December
2008 (please see Section One, Chapter 22, Paragraph 22.2 of the Information Prospectus). Net of the
abovementioned components, the financial expenses posted an improvement of € 6.8 million,
notwithstanding the increase in the Euribor reference rate, which was more than offset by the lower average
debt exposure compared to the 2007 financial year as redetermined. The average overall cost of the financial
debt of SEAT was 6.7% (approximately 6.4% in 2007).
141
Investments recognised with the equity method showed a net loss of € 7,234,000 (compared with a loss
of Euro € 3,314,000 in 2007 restated). This loss resulted mainly from the adjustment of the value of the
investment in Katalog (a company consolidated with the equity method) to reflect the 2008 loss attributable
to the SEAT Group. Moreover, considering the deterioration of the situation in the Turkish market in which
the company operates, and the negative effects that are likely to undermine business growth opportunities,
goodwill arising from this acquisition (€ 2,646,000) was impaired. In the previous year, this item reflected
mainly foreign exchange losses recognised in the income statement due to the deconsolidation of Consodata
Group Ltd., as of 1 January 2007, following liquidation and cancellation of the company from the companies
register.
Income taxes for the year (€ 69.5 million in 2008 and € 79.5 million in 2007 as redetermined) were
comprised of € 68.9 million in current income tax, with the increase compared to the previous year (+ € 29.3
million) being attributable essentially to the fact that SEAT’s previous losses for tax purposes were fully
absorbed in 2007 and that 2008 taxable income was subject to corporate income tax in full as a result. This
phenomenon is also shown in the performance of deferred tax assets, which were carried forward in 2007 in
order to utilise the corresponding previous losses. The current taxes were also affected by the deduction of
the portion representing Customer Data Base amortisation as a result of the tax realignment operation
pursuant to Law No. 342/2000, carried out in 2005, the effects of which came about in 2008 for purposes of
current taxes, and due to the partial non-deductibility of interest expenses introduced by the 2008 Budget Act
(Legge Finanziaria 2008).
Income (loss) from discontinued operations/non-current assets held for sale, net for 2008 amounted to a
net loss of € 77.1 million (income of € 1.1 million in 2007 as redetermined). The amounts refer primarily to
the German subsidiary WLW, the sale of which closed on 23 December 2008 (for further details on the
operation, please see Section One, Chapter 5, Paragraph 5.1.5.5 of the Information Prospectus). Specifically,
the item includes € 2.7 million in income produced by the WLW group from 1 January to 30 September
2008, the effective date for accounting purposes of the sale transaction, and € 79.5 million in capital losses
deriving from the disposal of the subsidiary, including accessory sale costs.
The result for the year due to the SEAT Group, which is negative by € 179.6 million, shows a reduction of
€ 278 million compared to 2007 (income of € 98.4 million). The 2008 financial year was characterised both
by a difficult economic situation, which adversely affected the management of ordinary activities, and also
by the posting of € 138 million in writedowns of goodwill and equity investments and of € 79.5 million in
capital losses deriving from the disposal of the German subsidiary WLW.
9.2.2bis Data by business area
The economic data of the SEAT Group by business group are shown and itemised below, as reported in the
management report in the annual consolidated financial statements.
For further details on the companies that comprise the different business areas, please see Section One,
142
Section One
SEAT Group economic data by business area for the 2008 and 2007 financial years as redetermined
(€ millions)
Revenues from sales 2008
and services
2007 as
redetermined (*)
2008
Cost of materials
and external
services (**)
2007 as
redetermined (*)
2008
Labour costs
2007 as
redetermined (*)
2008
Gross operating
profit (GOP)
2007 as
redetermined (*)
2008
Operating income
before amortisation,
depreciation and
2007 as
non-recurring and redetermined (*)
restructuring
expenses, net
(EBITDA)
2008
Operating income
(EBIT)
2007 as
redetermined (*)
Other Aggregate
Italy
Total
1,058.7
118.1
190.4
70.3
Removals Consolidated
and other
total
adjustments
1,437.5
(61.5)
1,376.0
1,090.2
158.2
185.8
71.6
1,505.8
(61.6)
1,444.2
(393.0)
(40.0)
(68.1)
(39.9)
(541.0)
61.8
(479.2)
(399.9)
(52.0)
(64.1)
(40.3)
(556.3)
55.9
(500.4)
(89.9)
(86.9)
(50.1)
(64.3)
(75.7)
(68.2)
(22.8)
(23.3)
(238.5)
(242.7)
0.1
0.1
(238.4)
(242.6)
575.8
28.1
46.7
7.6
658.2
0.2
658.4
603.4
41.9
53.5
8.0
706.8
(5.6)
701.2
526.9
24.2
47.1
7.1
605.3
553.5
36.7
50.0
8.0
648.2
(0.1)
648.1
304.0
(79.0)
33.2
(29.7)
228.4
(0.1)
228.3
351.6
33.2
40.7
2.2
427.7
605.3
427.7
(*)
The amounts on the income statement for the financial year ended on 31 December 2007 were redetermined for purposes of making the
comparison of the items consistent with the ones on the financial statements at 31 December 2008, following, in particular, the sale of WLW.
(**)
Minus the share of the cost allocated to minority interests and included in the other operating income referred to in the IFRS/IAS financial
statement format under the item “Other income and revenues”.
The following table shows the main results for 2008 compared to those for 2007:
(€ millions)
Cost of materials and external services (*)
Labour cost (*)
Operating income before amortisation, depreciation, and non-recurring and restructuring
expenses, net (EBITDA)
Operating income (EBIT)
2008
1,058.7
(393.0)
(89.9)
575.8
526.9
304.0
2007 Absolute
change
1,090.2
(31.5)
(399.9)
6.9
(86.9)
(3.0)
603.4
(27.6)
553.5
(26.6)
351.6
%
(2.9)
1.7
(3.5)
(4.6)
(4.8)
(47.6) (13.5)
(*) Minus the share of the cost allocated to minority interests and included in the other operating income referred to in the IFRS/IAS financial
Financial Year 2008 and 2007
Revenues from sales and services reached € 1,058.7 million in 2008, down 2.9% compared to the previous
year (€ 1,090.2 million). This result reflects a solid performance by the print-centred offering (print-voice-
143
online), albeit with a slight contraction (- 1.1%) compared to 2007, thanks to the growth of the online
business sustained by product innovation. More specifically:
a) print-centred revenues amounting to € 931.3 million in 2008, a decrease of € 9.9 million compared to
the previous year, were comprised as follows:
•
Print (PAGINEGIALLE, PAGINEBIANCHE and local directories): revenues reached € 720.5
million in 2008, down 4.6% from the previous year (€ 755.3 million). PAGINEGIALLE in
particular showed a further decrease in revenues (- 8.0%) and a downward trend compared to
2007, because it felt the effects of the economic recession that has prompted some economic
operators, especially in large metropolitan areas, to postpone the renewal of their advertising
contracts with respect to their natural expiry dates and/or to reduce their promotion and advertising
budget. PAGINEBIANCHE, on the other hand, posted revenues substantially in line with 2007,
thanks also to the positive effect deriving from the offering of combined visibility in print and
online editions (Paginebianche.it).
•
Voice: its advertising revenues of € 48.6 million were down 0.7% compared to 2007 (€ 48.9
million). This performance reflects a decrease in revenues in the fourth quarter of 2008 (-8.3%) in
contrast to the growth trend in the first nine months of the year (+4.1%), also as a result of sales
strategies focusing on the sale of new online offerings. Advertising revenues for the
12.40 Pronto PAGINEBIANCHE service grew (+26.1%) thanks to high levels of use.
•
Online: Buoyed by the new business strategy that saw sales concentrated in the second half of the
year, online products posted revenues of € 162.3 million in 2008, up 18.4% from 2007 (€ 137.1
million in the year 2007). The increase was achieved thanks to the launching of new online
offerings and the cross-selling initiatives with print products.
Online platform utilisation data were positive, with visits to Paginegialle.it increasing 25.5% from
2007, buoyed by the surge in direct consultation of the proprietary brand (40.7% growth). On the
other hand visits coming from partner sites were down, following the unravelling of the agreement
with the Telecom Italia group’s portal. This drop was more than offset by the SEO (Search Engine
Optimisation) activity, which generated approximately 24% of the consultations since July 2008,
allowing for an overall increase in visits to the Paginegialle.it proprietary brand of 41%
(comparison of the first and second half of 2008) (Source: SiteCensus).
b) B2B: the B2B specialised products posted revenues of € 26.2 million, down 31.7% from the previous
year (€ 38.4 million in the year 2007). This result was affected by the sales force’s focus on core
products and by the migration under way of the print offering to online, in particular for high-end clients,
in line with the trends shown on the main B2B markets. The strategic review of the sales offering
provides for a simplification of the different brands, with closedown of the Annuario SEAT and
PAGINEGIALLE Professional in 2009.
c) Other products: revenues were € 100.6 million, a decrease of € 8.5 million compared to 2007. The item
includes € 71.6 million in telephone traffic revenues generated by the 89.24.24 Pronto PAGINEGIALLE
and 12.40 Pronto PAGINEBIANCHE services (€ 74.8 million in 2007). The fact that the telephone
assistance service market has entered a consolidation phase led to an inevitable contraction in the
number of calls. However the quality of the services offered by the Company and the ongoing
development of new products allowed for a slight increase in market share. Performance was
substantially unchanged for Direct Marketing products, which stood at € 9.3 million, while
merchandising business posted a decline of € 3.5 million, reaching € 11.9 million, suffering partly due to
the focus on core products by the sales force.
Costs of materials and external services, minus the share of costs allocated to minority interests and
included in the IFRS financial statement format in the item “Other revenues and income”, amounted to
€ 393.0 million in 2008, a decrease of € 6.9 million or 1.7% compared to 2007. Specifically:
•
144
Industrial costs, amounting to € 169.3 million in 2008, decreased by € 6.8 million compared to the
previous year (€ 176.1 million). On the costs front, the reduction in revenues from print products
meant a 5.6% drop in print runs, which was reflected in lower paper consumption (-6.5%) and
lower industrial processing costs (-5.8%);
Section One
•
Sales costs, amounting to € 151.2 million in 2008, remained substantially unchanged from the
previous year (€ 152.6 million). The reduction in commissions and other sales costs, which
reached € 119.8 million (€ 124.7 million in 2007), can in particular be attributed to a differing
revenue composition, which saw an increase in 2008 in the component deriving from noncommission-based telephone sales. Call centre outbound expenses, on the other hand, increased
appreciably (+ € 3.1 million);
•
General costs amounted to € 72.5 million in 2008, increasing € 1.3 million compared to the
previous year primarily as a result of increased software licence fees (+ € 1.6 million) and
increased expenditures for rent and condominium fees; expenses were already incurred in 2008 in
this area for the Turin office at Corso Mortara 22, even though the transfer of employees to the
new office did not take place until the end of the year.
In 2008 labour costs increased to € 89.9 million, up 3.5% from 2007 (€ 86.9 million). The increase was due
to a greater average paid workforce, which went from 1,379 units in 2007 to 1,389 units in 2008. The change
in staff was due on the one hand to the effects of staff resizing following implementation of the 2007-2009
Corporate Restructuring Plan, and on the other hand to the addition of qualified resources with specific
technical and managerial skills in support of development of the business. The overall amount of this item
was affected by the capitalisation of personnel expenses associated with investment projects carried out
during the course of the year (€ 5.2 million in 2008 versus € 4.2 million in 2007).
As of 31 December 2008, the workforce, including administrators, project-based workers and interns,
totalled 1,444 units (1,449 units at 31 December 2007).
The gross operating profit (GOP), which was € 575.8 million in 2008, showed a reduction of 4.6% (€ 27.6
million) compared to the previous year. The drop is attributable substantially to a lower level of revenues
(decreasing by € 31.5 million, or -2.9%), offset only partially by lower operating expenses (decreasing by
€ 6.9 million, or -1.7%).
EBITDA stood at € 526.9 million in 2008, showing a contraction of € 26.6 million from 2007, with a 1%
drop in profitability to 49.8%. The trend in EBITDA is similar to the one posted in terms of GOP. The
valuation adjustments and provisions for risks and charges (€ 49.2 million) increased by € 1.3 million
compared to the previous year. Specifically, the allocation to the receivables writedown provision allowed
the delinquent receivables hedging percentage to be raised from 50% in 2007 to 51.3% in 2008.
Out of operating amortisation, depreciation and writedowns of € 34.3 million in 2008 (€ 26.8 million in
2007), € 26.3 million refers to intangible assets with a finite useful life and € 8 million to plant, property and
equipment. The latter increased by 28% from 2007 as a result of the operational start-up of information
systems and product innovation and sales force support projects in which the Company has invested heavily
in recent years.
Non-operating amortisation, depreciation and writedowns amounted to € 162.1 million in 2008,
substantially unchanged from the previous year, and refers to the amortisation portions of the Customer Data
Base.
Non-recurring and restructuring expenses, net, of € 26.6 million in 2008 (€ 13.1 million in 2007),
included € 12 million in additional allocations to the provisions for corporate restructuring to cover the
expenses for completion of the 2007-2009 corporate restructuring plan (expected to end in the early months
of 2009) and for the start-up of the new corporate restructuring plan for 2009-2011. This latter plan has been
agreed at the union level and was approved in late December 2008 by the Board of Directors of the
Company. It provides for the management in 2009-2011 of 210 redundancies through recourse to departure
incentives, early retirement and the Cassa Integrazione Guadagni Straordinaria. At the end of 2008, a
provision was made for the respective costs of management of the redundant resources already identified on
the dates of preparation of the financial statements, pursuant to IAS 37.
The non-recurring costs of € 14.3 million include: (i) € 4.9 million in compensation to be paid to Chief
Executive Officer Luca Majocchi at the end of his relationship with the Company, in exchange for his
commitment not to carry out activity on behalf of companies competing with SEAT (for further details,
please see Section One, Chapter 16, Paragraph 16.1.1 of the Information Prospectus); (ii) € 3.6 million in
management support activities for redefining product development strategies, the preparation of the new
Business Plan and for operations associated with management of the equity investments portfolio; (iii) € 2.8
145
million in corporate reorganisation expenses; and (iv) € 2.4 million in expenses borne by the Issuer for
transferring personnel to the new office in Turin.
In 2008, the operating result (EBIT) stood at € 304.0 million (€ 351.6 million in 2007), reflecting the
progress recorded in respect of GOP and EBITDA, as well as the increases in operating amortisation,
depreciation and non-recurring and restructuring expenses.
“UK DIRECTORIES” BUSINESS AREA
Starting in the second half of 2008, as a result of the decision by the board of directors of Thomson, the
operating activity of the Calls You Control Ltd. subsidiary was discontinued. Consequently the economic,
equity and financial figures for that company have been stated under “Non-current assets held for sale”.
The table below shows the main results for 2008 compared to those for 2007 as redetermined, pursuant to
IFRS 5, to allow for consistent comparison of the respective items.
(€ millions)
Labour costs (*)
Operating income before amortisation, depreciation, and non-recurring and
restructuring expenses, net (EBITDA)
(*)
2008 2007 redetermined Absolute
%
(**) change
118.1
158.2
(40.1) (25.3)
(40.0)
(52.0)
12.0 23.1
(50.1)
(64.3)
14.2 22.1
28.1
41.9
(13.8) (32.9)
24.2
36.7
(12.5) (34.1)
(79.0)
33.2
(112.2)
n.a.
Minus the share of the cost allocated to minority interests and included in the other operating income referred to in the IFRS/IAS financial
(**) The income statement amounts for the year ended on 31 December 2007 were redetermined for purposes of making consistent the comparison
of the items with those in the financial statements at 31 December 2008, following discontinuance of the operating activity of the subsidiary
Calls You Control Ltd.
Financial Year 2008 and 2007 as redetermined
Revenues from sales and services reached € 118.1 million in 2008 (£ 94.1 million), a decrease of 25.3%
compared to 2007 as redetermined. This reduction, affected by the performance of the pound sterling against
the euro, is considerably more contained if the data is analysed in local currency (-£ 14.2 million, or 13.1%).
The revenues position was influenced by a decidedly negative market context, which had heavy
repercussions on all operators present, requiring TDL Infomedia to review its sales offerings by making
significant product innovations and consequently reorganising its sales area to be able to offer the new sales
offerings on the market effectively.
The contraction in revenues was more evident in the bracket of customers with national coverage needs, in
particular in the financial institutions category, which was more affected by the crisis in the credit markets.
The drop was lower, on the other hand, in the revenues generated by the network of sales representatives
spread out throughout the country (approximately 80% of the total).
With reference to the different types of products, print directories ended on 2008 with decreased revenues,
despite the positive effects deriving from the restyling of the Thomson Directories and the good performance
in sales of advertising space under the Nectar programme for building customer loyalty. Online business
revenues, on the other hand, grew at 5.2% at constant exchange rates, thanks to the new positioning of the
TDL Group on the market as an online media agency for SMEs and despite the negative impact of the crisis
in the credit markets on the categories of customers already mentioned. Even direct marketing revenues
suffered from the structural difficulties in the Directories UK market, showing a reduction compared to the
previous year of -4.2%, despite the positive effects deriving from the good performance of the e-mail
marketing business, which is aimed primarily at customers needing national coverage.
In 2008, the Thomsonlocal.com site was visited by over 15.5 million individual users (as opposed to
approximately 6 million in 2007) who made over 14 million Internet searches (an increase of 20.3%
compared to 2007). Revenues in the Internet line grew by approximately £ 1 million from 2007, while the
146
Section One
Business Information line remained substantially unchanged (£ 7 million). The print products line was down,
decreasing to £ 71 million (£ 15 million less than 2007 as redetermined).
The decrease in print revenues was reflected in a reduction of GOP by € 13.8 million (-32.9%). In pounds
sterling, the reduction was £ 6.3 million (-22.0% compared to the 2007 GOP as redetermined). The TDL
Group responded to the difficult situation on the English market with cost-cutting measures. In particular,
costs for services reached € 33.6 million in 2008 (€ 42.7 million in 2007 as redetermined), as a result of a
reduction in industrial and production costs (- € 3.1 million) due to lower print runs, and in distribution costs
(- € 1.6 million), with part of the printing process being brought in-house as of late 2007.
Labour costs, at € 50.1 million in 2008 (€ 64.3 million in 2007), fell by 9.3% in local currency following the
decrease in the workforce as a result of implementation of personnel reduction and/or internal staff
reorganisation plans, which involved all areas.
EBITDA, amounting to € 24.2 million in 2008, decreased by € 12.5 million compared to 2007 as
redetermined, with performance in line with GOP.
EBIT was negative by € 79.0 million in 2008 (positive by € 33.2 million in 2007 as redetermined). The 2008
result suffered from the posting of a writedown of € 100.5 million on goodwill for Thomson directories, as a
result of the Impairment Tests carried out during the year.
Telegate Group
The table below shows the main results for 2008 compared to those for 2007.
(€ millions)
Labour costs (*)
Operating income before amortisation, depreciation, and non-recurring and restructuring expenses,
net (EBITDA)
2008
178.8
(66.6)
(67.1)
45.1
46.1
32.7
2007 Absolute
%
change
173.3
5.5
3.2
(62.2)
(4.4) (7.1)
(59.1)
(8.0) (13.5)
51.9
(6.8) (13.1)
48.9
(2.8) (5.7)
40.4
(7.7) (19.1)
Financial Years 2008 and 2007
In 2008, revenues from sales and services posted an increase of 3.2%, reaching € 178.8 million (€ 173.3
million in 2007), thanks also to the inclusion of the German company Telegate Media in the scope of
consolidation as of 1 April 2008 (€ 15.4 million in revenues). Specifically:
•
in Germany revenues reached € 124.3 million in 2008 (€ 112.8 million in 2007). At a constant
scope of consolidation, revenues in Germany dropped 3.5% compared to 2007 due to a contraction
in the telephone assistance services market, which also continued in 2008, in particular for fixed
line calls and to a lesser extent for mobile telephony. The positioning of Telegate, more oriented
towards mobile telephone users than its competitors, allowed it to achieve a lower contraction in
telephone services revenues than the market contraction in terms of the number of calls estimated
by management. The decrease in the number of calls to the 11880 branded service was in fact
offset to a great extent by the ongoing development of value-added services, which enabled the
duration and the average value per call to be increased. The Telegate Group also continued on its
path of developing business in Germany, aimed at generating advertising revenues on voice and
online platforms;
•
in Spain revenues were in line with those of the previous year, despite the reduction in revenues
deriving from outsourcing of the management of telephone assistance services by the operators
JazzTel, Antena3 and Communitel. Branded revenues grew slightly, despite the contraction in call
147
volume, buoyed by the growth in conversation minutes and by a different tariff plan. In Spain as
well a multi-channel voice and online offering was launched;
•
in Italy there was a slight increase in revenues in 2008, thanks to the greater duration of calls,
which more than offset the slight decrease in their number;
•
in France with its 118000 number Telegate made revenues of € 14.7 million, an appreciable drop
compared to the same period of the previous year, due to the strong contraction in telephone traffic
as a result of the company’s decision to curtail advertising investments. In terms of operating
profit, the drop in revenues was more than offset by efficient cost management, with business in
2008 essentially achieving breakeven point at the level of GOP. As regards the 118000 Web
platform the sales test, handled by outsourcing to a specialised company, was successfully
completed; the performance data were also positive for visits, which were in excess of
expectations.
At GOP level, the Telegate group achieved € 45.1 million in 2008, € 6.8 million down on the same period of
the previous year, as a result in particular of an increase of € 8.0 million in labour costs associated with the
employment of a greater number of staff. The inclusion of Telegate Media in the scope of consolidation did
not have particular effects on GOP, since the company ended on 2008 with an operating profit which
essentially broke even. At a constant scope of consolidation, the costs for services were down from 2007, as
a result of lower spending on advertising in France and in Germany.
In 2008, EBITDA stood at € 46.1 million, a drop of € 2.8 million compared to the same period for the
previous year. This result includes the amount of € 5.5 million that Deutsche Telekom paid to Telegate
following the completion in late June 2008 of one of the lawsuits pending between the two companies aimed
at the restitution of sums paid in excess by Telegate to Deutsche Telekom for the provision of telephone
subscriber data. In particular, the judgment, by now unappealable, refers to the costs borne for the provision
of data for the period from January-September 1999, and orders Deutsche Telekom to reimburse Telegate
€ 4.25 million, plus interest at the legal rate. Please see Section One, Chapter 20, Paragraph 20.7 of the
EBIT for 2008 (€ 32.7 million, a drop of € 7.7 million compared to 2007) reflects non-operating
amortisation and depreciation of € 2.3 million relating to the Customer Data Base in particular, to which part
of the price paid for the acquisition of Telegate Media was allocated, as well as non-recurring expenses
associated with that acquisition amounting to € 2.5 million.
Prontoseat
The table below shows the main results for 2008 compared to those for 2007:
(€ millions)
Labour cost (*)
net (EBITDA)
2008 2007 Absolute
%
change
11.7 12.6
(0.9) (7.1)
(1.6) (2.0)
0.4 20.0
(8.5) (9.0)
0.5
5.6
1.6 1.6
1.0 1.2
(0.2) (16.7)
0.5
0.3
0.2
66.7
Financial Year 2008 and 2007
At Prontoseat, revenues from sales and services reached € 11.7 million in 2008, down € 0.9 million from
the previous year. The drop in traffic volumes generated by the 89.24.24 Pronto PAGINEGIALLE addedvalue service in a context of general market contraction and the slowdown in outbound activities was only
partially offset by the operation of other services, such as “Prontissimo” (+20.7%).
148
Section One
EBITDA, amounting to € 1 million in 2008, decreased by € 0.2 million compared to 2007, as a result of the
contraction in revenues (calls to the 89.24.24 Pronto PAGINEGIALLE service decreased), offset almost
entirely by a corresponding reduction in operating costs.
The “Other Activities” business area includes the results of the subsidiaries Europages, Consodata and CIPI.
Europages
(€ millions)
Labour cost (*)
net (EBITDA)
2008
19.9
(13.2)
(8.0)
(1.3)
(1.4)
(30.4)
2007 Absolute
%
change
25.7
(5.8) (22.6)
(16.6)
3.4 20.5
(8.0)
1.1
(2.4)
n.s.
1.3
(2.7)
n.s.
(1.9)
(28.5)
n.s.
statement formats under the item “Other income and revenues”.
In 2008, revenues from sales and services stood at € 19.9 million, a decrease of € 5.8 million compared to
the previous year, a drop attributable entirely to lower revenues in Italy and in Spain. Revenues in France, on
the other hand, grew slightly. The different sales strategy pursued compared to 2007 (which provides for: (i)
completion of the process of migrating toward an almost entirely online offering compared to the multimedia
offering of previous years; and (ii) the creation of its own sales network in the countries of greatest interest,
in particular in France after the end of the distribution agreement with Pages Jaunes) makes a comparison of
performance of activities scarcely representative. This strategy, although it affected growth in net sales
during the course of the year (especially in Italy and in Spain), is nevertheless consistent, according to
management, with the trend that is already occurring worldwide in the B2B sector, where the majority of
inquiries take place online. The decrease posted in Spain was also affected by postponement of the closing of
the sales campaign to the first quarter of 2009.
In 2008, visits reached 19.2 million, with the number of searches amounting to 51.9 million, confirming the
portal’s good positioning in the B2B segment in Europe.
The time-lag in revenues was reflected in lower operating profit: GOP came in negative by € 1.3 million, a
drop of € 2.4 million compared to 2007, despite the consistent reduction in sales costs associated with
revenues performance.
EBITDA, negative by over € 1.4 million, showed performance similar to GOP, if compared with 2007.
EBIT was negative by € 30.4 million in 2008 (negative by € 1.9 million in 2007). The 2008 result suffered
from the posting of a writedown of € 25.3 million on goodwill for Europages as a result of the Impairment
Tests carried out.
149
CIPI
(€ millions)
Labour cost (*)
net (EBITDA)
2008
23.3
(12.5)
(7.3)
3.5
3.3
(2.4)
2007 Absolute
%
change
23.5
(0.2) (0.9)
(13.5)
1.0 7.4
(7.7)
0.4 5.2
2.3
1.2 52.2
2.2
1.1 50.0
1.6
(4.0)
n.a.
Revenues from sales and services were substantially unchanged in 2008 compared to 2007 and amounted
to € 23.3 million; the GialloPromo revenues were in line with 2007 as a result of the guaranteed minimum
clause governing the business relationship between CIPI and SEAT. The strategy implemented by the
company of qualitative and quantitative bolstering of its direct sales network focused on major customers
allowed for revenue growth, according to management, in the “special” and “professional” lines, which
offset the drop in revenues in the “service in” channel.
At the end of 2008, GOP was positive by € 3.5 million as a result of reduction in the cost of sales due to the
favourable performance of the dollar compared to the euro, as well as the positive effect deriving from the
abovementioned guaranteed minimum clause.
EBITDA, amounting to € 3.3 million, showed performance similar to GOP.
EBIT was negative by € 2.4 million in 2008 (positive by € 1.6 million in 2007). The 2008 result suffered
from the posting of a writedown of € 5 million on goodwill as a result of the Impairment Tests carried out.
Consodata
(€ millions)
Labour cost (*)
net (EBITDA)
2008
27.1
(14.2)
(7.5)
5.4
5.2
3.0
2007 Absolute
%
change
23.4
3.7 15.8
(11.3)
(2.9) (25.7)
(7.6)
0.1
1.3
4.5
0.9 20.0
4.5
0.7 15.6
2.6
0.4
15.4
In 2008, revenues from sales and services amounted to € 27.1 million, increasing 15.8% compared to 2007,
thanks in particular to the good sales performance posted in the direct channel geared toward Major
Customers. Sales performance benefited in particular from the development of the B2B data offering through
full integration with the SEAT database, the strengthening of data processing software products for the
standardisation of addresses for postal purposes, as well as the development of data mining and marketing
intelligence products and services. Lastly, the growth in revenues reflects the start-up as of 1 April 2008 of
operation of the Lineaffari.com portal, previously operated by SEAT, which provides sales and marketing
services to SMEs using its own dedicated sales network.
150
Section One
As regards the SME sales channel, which uses the SEAT sales force within the country with a dedicated
offering of direct marketing products, the strategic choice was made in 2008 to simplify the offering,
enabling the sales force to focus on standard single-client mailing and segmented local magazine products.
New low-cost products were also launched to meet the needs of the sales force, which requires simpler
products with a lower customer affordability threshold.
The growth in revenues and their diverse mix were reflected in GOP, which was up by € 0.9 million
compared to 2007.
9.2.3bis Equity data as at 31 December 2008 and 2007
The table below shows the reclassified equity and financial data of the SEAT Group at 31 December 2008
and 2007.
(€ thousands)
Non-current assets held for sale, net
Group shareholders’ equity
Minority interests
Total shareholders’ equity
Net financial debt
Transaction costs on loans and securitisation programme yet to be
amortised
Net market value of cash flow hedge contracts
“Book” financial debt, net
of which:
Total
(a)
31 December 2008 31 December 2007
3,517,486
3,943,671
216,138
167,973
(57,931)
(68,555)
(17,174)
(6,404)
320,633
300,306
756,666
756,034
(436,033)
(455,728)
(59,724)
(26,909)
4,989
18,356
(64,713)
(45,265)
876
3,920,304
4,310,082
876,595
1,100,006
26,946
23,824
903,541
1,123,830
3,082,016
3,274,306
(76,184)
(82,792)
Change
(426,185)
48,165
10,624
(10,770)
20,327
632
19,695
(32,815)
(13,367)
(19,448)
876
(389,778)
(223,411)
3,122
(220,289)
(192,290)
6,608
(b)
10,931
3,016,763
(5,262)
16,193
3,186,252 (169,489)
(a+b)
3,031,488
293,835
(2,026)
(306,534)
3,920,304
3,190,372 (158,884)
215,508
78,327
(1,996)
(30)
(217,632) (88,902)
4,310,082 (389,778)
(*) including financial assets available for sale.
Equity and financial position at 31 December 2008 and 31 December 2007
Net invested capital, amounting to € 3,920.3 million at 31 December 2008, decreased by € 389.8 million
compared to 31 December 2007, due to Customer Data Base amortisation instalments, several goodwill
writedowns and the sale of the German subsidiary WLW. Operating working capital, on the other hand,
remained substantially unchanged.
Specifically, net invested capital at the end of 2008 included € 3,394.0 million in goodwill, decreasing in
2008 by € 293.1 million in particular following writedowns after Impairment Tests (€ 130.8 million) and the
sale taking place in December 2008 of the German group WLW. The item also includes € 123.5 million of
Customer Data Base amortisation (for further information, please see Section One, Chapter 6, Paragraph
6.1.1.3 of the Information Prospectus).
Other non-current assets refer to € 216.1 million in operating fixed capital, both tangible and intangible,
which increased over the course of 2008 by € 48.2 million, as a result of the investment in the real estate
complex in Turin at Corso Mortara 22 (€ 65.8 million, of which € 62.6 million were financed through a
151
financial leasing operation becoming effective on 23 December 2008) and € 48.7 million in industrial
investments, partially offset by operating amortisation and depreciation of € 50.1 million.
Non-current liabilities refer to € 57.9 million for the TDL Group pension fund (€ 20.9 million at 31
December 2007), € 21.8 million for severance pay (€ 24.5 million at 31 December 2007) and € 22.2 million
for the agents’ indemnity fund (€ 21.4 million at 31 December 2007).
at 31 December 2007), increased in 2008 by € 20.3 million, of which € 14.8 million was due to removal of
the WLW group from the scope of consolidation.
Non-operating working capital, negative at 31 December 2008 by € 59.7 million (negative by € 26.9
million at 31 December 2007), decreased by € 32.8 million compared to 31 December 2007, as a result in
particular of greater tax liabilities (+€ 11.5 million) due to greater taxes for the year and the increase in the
provision for non-operating risks and charges (+€ 4.4 million) due to the allocations posted by SEAT in view
of the new 2009-2011 corporate restructuring plan.
Non-current assets held for sale, amounting to € 0.9 million at 31 December 2008, refer to the English
subsidiary Calls You Control Ltd., whose operating activity was discontinued in July 2008. The company is
to be placed in liquidation.
Shareholders’ equity amounted to € 903.5 million at 31 December 2008 (€ 1,123.8 million at 31 December
2007), of which € 876.6 million is due to the Issuer (€ 1,000 million at 31 December 2007) and € 26.9
million is due to minority interests (€ 23.8 million at 31 December 2007). Shareholders’ equity was reduced
by € 220.3 million compared to 31 December 2007 due to the combined effect from posting of the Group
share of the loss for the year of € 179.6 million, the losses deriving from the conversion of financial
statements in currencies other than the Euro (€ 30 million), and net liabilities of € 10.9 million from
valuation of the cash flow hedge contracts in existence at the end of the year or extinguished with
effectiveness deferred to future years (a net asset of € 5.3 million at 31 December 2008).
Net financial debt amounted at 31 December 2008 to € 3,082.0 million (€ 3,274.3 million at 31 December
2007) and decreased over 2008 by € 192.3 million, despite investments of € 65.8 million for the new real
estate complex in Turin at Corso Mortara 22 and of € 36.1 million for the acquisition of Telegate Media and
the subscription of capital increases at Katalog. For further information on net financial debt, please see
Section One, Chapter 10, Paragraph 10.2 of the Information Prospectus.
152
Section One
10
FINANCIAL RESOURCES
In this Chapter the SEAT Group’s financial position is analysed at 31 December 2008, 2007, 2006 and 2005,
at 30 June 2008 and 2007, and at 30 September 2008 and 2007.
The consolidated financial data and corresponding comments given in this Chapter must be read in
conjunction with the information contained in the annual consolidated financial statements at 31 December
2008, 2007, 2006 and 2005, in the consolidated half-yearly reports at 30 June 2008 and 2007, and in the
consolidated quarterly reports at 30 September 2008 and 2007, whose information, if not reported in this
Information Prospectus, shall be understood as being hereby incorporated by reference, as per Article 11,
Paragraph 2 of Directive 2003/71/EC and Article 28 of Regulation 809/2004/EC. These documents are
available to the public at the Company’s registered office and on the Issuer’s internet site www.seat.it, in the
Investor section. The financial statements for all the periods here given, extracted from the consolidated
financial data available to the public, are also presented in Chapter 20 below.
As described in Chapter 2 above, the Issuer’s annual consolidated financial statements at 31 December 2008,
2007, 2006 and 2005 have been subject to audit by the Independent Auditors, while the interim condensed
consolidated financial statements included in the consolidated half-yearly reports at 30 June 2008 and 2007
were subject to a limited audit by the Independent Auditors. The consolidated quarterly reports at 30
September 2008 and 2007 were not subject to audit.
As described in Chapters 9 and 9bis above, the financial statement information presented below has been
prepared according to IFRS and is presented in reclassified form, as in the report on activities to the annual
consolidated financial statements and the consolidated half-yearly reports, and as presented in the
consolidated quarterly management reports.
The financial data reported below highlights several measures that Company management has implemented
to monitor and evaluate the Company’s and the Group’s operating and financial performance. Such measures
are not identified as accounting measures in the IFRS framework; consequently they must not be considered
as an alternative measure for evaluating the Group’s operating performance and its capital structure and
financial position. The Issuer believes that the financial information reported below is an important
parameter for measuring the Group’s performance because it allows for an analysis of the Group’s operating
performance, capital structure and financial position. Since determination of these measurements is not
regulated by the applicable accounting standards, the calculation methods that the Company applies may not
be uniform with those adopted by others, hence may not be comparable. For the definition of such
measurements (EBITDA, GOP, operating working capital, non-operating working capital, net invested
capital, net book value financial debt and net financial debt) see Section One, Chapter 3 of this Information
Prospectus.
The select financial information in this Chapter is supplemented by the information on consolidated net
financial debt at 31 December 2008. Consequently the breakdown of net financial debt is not presented and
analysed at the intermediate dates of 30 June 2008 and 30 September 2008.
153
10.1 Issuer’s financial resources
In the table below the breakdown of SEAT Group’s net financial debt at 31 December 2008, 2007, 2006 and
2005 is given.
(€ million)
Non-current financial assets(*)
Non-current Net financial debt
Current Net financial debt
Origination fees, refinancing fees, and securitisation to be
amortised
(Positive) negative net adjustments to cash flow hedge
contracts
Net financial debt
31 December 31 December 31 December 31 December
2008
2007
2006
2005
3,031.5
3,190.4
3,384.2
3,526.7
(2.0)
(2.0)
(1.4)
(1.2)
(a)
3,029.5
3,188.4
3,382.8
3,525.5
293.8
215.5
229.2
214.3
(2.0)
(13.1)
(1.3)
(2.4)
(304.6)
(204.5)
(308.2)
(202.2)
(b)
(12.8)
(2.1)
(80.3)
9.8
(a+b)
3,016.7
3,186.3
3,302.5
3,535.3
76.2
82.8
102.3
122.5
(10.9)
5.3
1.0
(23.2)
3,082.0
3,274.3
3,405.8
3,634.6
Net financial debt, amounting to € 3,082.0 million at 31 December 2008 (€ 3,274.3 million at 31 December
2007) differs from net book value financial debt, described below, since it is shown before charges incurred
for the origination and refinancing of senior debt with RBS, for the subordinated loan owed to Lighthouse,
and for the start-up of the securitisation programme for the Issuer’s trade receivables. These charges, net of
the portions already amortised, amount to € 76.2 million at 31 December 2008 (for more information on
these contracts, see Section One, Chapter 22 of this Information Prospectus).
Moreover, net financial debt does not include the net value deriving from the fair value of cash flow hedge
contracts, amounting to a net liability of € 10.9 million at 31 December 2008 (net assets of € 5.3 million at
31 December 2007).
Net book value financial debt amounted to € 3,016.7 million at 31 December 2008 (€ 3,186.3 million at 31
December 2007) consisting of the following items:
Non-current financial liabilities, amounting to € 3,031.5 million at 31 December 2008 (€ 3,190.4 million at
31 December 2007), broken down as follows:
(€ million)
31 December
2008
1,452.7
1,269.5
255.3
53.9
0.1
3,031.5
Non-current financial debt owed to RBS
Non-current financial debt owed to Lighthouse
Limited recourse asset-backed securities
Non-current financial debt owed to Leasint S.p.A.
Non-current financial debt owed to other lenders
Total non-current financial liabilities
o
31 December
2006
1,870.9
1,258.5
254.7
0.1
3,384.2
31 December
2005
2,273.7
1,252.9
0.1
3,526.7
At December 31, 2008, non-current debt owed to RBS amounted to € 1,452.7 million (net of
origination and refinancing fees not yet amortised for an amount of € 44.9 million at 31 December
2008). The debt is attributable to the RBS Loan Agreement, originally for € 2,530.1 million, plus an
additional € 40 million used as part of a revolving credit line, paid back a few months later. The loan
was paid back during the financial years in the following amounts:
financial year
portion repaid
154
31 December
2007
1,670.9
1,264.2
255.0
0.3
3,190.4
2008
163.5
2007
208.3
2006
431.4
2005
10.0
Total
813.2
Section One
At year-end 2008 the total amount due to RBS, including the short-term portion amounting to € 219.2
million, was € 1,717 million, structured as follows:
a. Tranche A, € 1,252.4 million, with repayment according to an amortisation schedule with nonstraight line semi-annual instalments until June 2012 at a variable interest rate of Euribor plus a
1.435% spread. This spread is constant until the first half of February 2009 and thereafter, depending
on the change in the net debt/EBITDA ratio (based on the results achieved at 31 December 2008), a
spread of 1.685% will be applied;
b. Tranche B, € 464.5 million, with a lump-sum repayment in June 2013 at a variable interest rate of
Euribor plus a 2.06% spread. This spread is constant until the first half of February 2009 and
thereafter, depending on the change in the net debt/EBITDA ratio (based on the results achieved at
31 December 2008), a spread of 2.26% will be applied;
c. Tranche C, € 90 million, currently unused, allocated to cover the possible working capital
requirements of SEAT or its subsidiaries, in the form of a revolving credit line, available until May
2012, at a variable interest rate, if used, equal to the applicable interest rate at the time on Tranche A.
On the amounts in the revolving credit line pro tempore unused, a 0.56% per year fee for lack of use
is charged.
In addition, at year-end 2008, SEAT rolled over a short-term € 30 million committed credit line (expiring
on 30 June 2009), currently unused, at a spread of 1.65% on the reference Euribor, if used, and requiring
the payment of a 0.30% per year lack of use fee.
o The financial debt owed to Lighthouse amounts to € 1,269.5 million at 31 December 2008, net of
€ 30.5 million in fees for the origination of the subordinate debt and not yet amortised at the financial
year end. The subordinate loan has a 10-year duration at a fixed interest rate of 8% per year,
maturing in 2014.
Upon issue of the loan SEAT gave a € 350 million guarantee to cover any accessory charges on the
bond.
o Limited recourse asset-backed securities, for a gross amount of € 256 million at 31 December 2008,
were issued by the vehicle company Meliadi Finance S.r.l. to finance its acquisition of the initial loan
portfolio from SEAT as part of the securitisation programme for its trade receivables, starting up in
June 2006, relating to the commercial loan portfolios to be sold each month on a rotating basis over
five years, until June 2011.
These securities, backed by the loan portfolios subject to securitisation, were underwritten through a
private placement by an institutional investor; they mature in 2014 and will be repaid through the
collection of the transferred receivables. They have a variable interest rate equal to the sum of: (i) 3m
Euribor; (ii) 0.30% annually; and (iii) the positive or negative difference between 3m Euribor and the
quarterly commercial paper rate with a cap at that difference of 5 basis points. Pursuant to IAS 32
and 39, they are reported in the financial statements net of charges incurred for their issue and not yet
amortised at 31 December 2008 (€ 0.7 million). In support of the securitisation operation, two credit
lines with an annual duration (renewable) are planned.
o The debt owed to Leasint S.p.A., amounting to a total of € 53.9 million at 31 December 2008, refers
to six real estate lease agreements (start date 23 December 2008) regarding the real estate complex
located in Corso Mortara, 22 (Turin) where SEAT transferred its secondary office. A seventh lease
agreement, for around € 1 million, will be added to the previous ones in the first half of 2009. These
agreements have a 15-year duration and call for repayment in 60 deferred quarterly instalments, the
first falling due on 23 March 2009 at a variable interest rate of 3m Euribor plus approximately 65
b.p. per year spread. The redemption amount has been set at around 1% of the amount financed by
the leasing company (for further details, see Section One, Chapter 22, Paragraph 22.2).
•
current financial liabilities amount to € 293.8 million at 31 December 2008 (€ 215.5 million at 31
December 2007), including:
o € 219.2 million for the short-term portion of the RBS Loan Agreement, maturing in June and
December 2008 (€ 163.5 million at 31 December 2007). In case of a fully underwritten Capital
Increase, this portion would increase to € 300.5 million. For further details see Paragraph 10.6 below
in this Information Prospectus;
155
o € 17.8 million due for interest accrued but not yet paid at 31 December 2008 on outstanding loans
(€ 18.4 million at the end of 2007);
o € 30.9 million due to shareholders for dividends paid out but not yet collected at 31 December 2008
(€ 30.6 million at 31 December 2007). The company has agreed that, as from 1 November 2008, it
will pay a 6% per year rate of interest on a € 30.2 million portion of these dividends due to some
Reference Shareholders in exchange for their abstaining from exercising their right to payment, until
15 January 2009 of a € 14.4 million portion (subsequently regularly settled on 16 January 2009), and
until 15 June 2009 for the remaining € 15.8 million;
o € 3.1 million due for interest accrued but not yet paid on limited recourse asset-backed securities
issued by the vehicle company Meliadi Finance S.r.l. (€ 2.8 million at 31 December 2007);
o € 17 million in net liability consequent to the fair value estimate of cash flow hedge contracts
outstanding at 31 December 2008 (net assets of € 5.3 million at 31 December 2007). For a detailed
description of this item see Paragraph 10.5 below of this Information Prospectus.
•
non-current financial assets amounting to € 2.0 million at 31 December 2008 (unchanged from 31
December 2007), mainly consisting of loans to employees;
•
current financial assets and cash and cash equivalents amount to € 306.5 million at 31 December
2008 (€ 217.6 million at 31 December 2007), including:
o € 304.6 million in cash and cash equivalents (€ 204.5 million at 31 December 2007), of which € 87.9
million held by the vehicle company Meliadi Finance S.r.l. (€ 87.3 million at 31 December 2007)
generated by the collection of receivables transferred by SEAT as part of the securitisation
programme (for further details, see Paragraph 10.3 below of this Information Prospectus).
At 31 December 2007, the item included € 9 million in advances paid to SNOS – Spazi per Nuove
Opportunità di Sviluppo S.p.A. – as part of outstanding commitments in connection with the acquisition
and subsequent restructuring of the “ex Officine Savigliano” real estate complex in Turin, which is
intended to become SEAT’s new secondary office (for further details, see Section One, Chapter 22,
Paragraph 22.2 of this Information Prospectus).
10.2 Description of cash flows
The tables below show a summary of SEAT Group’s cash flow statements for the financial years ended on
31 December 2007, 2006 and 2005, for the first half 2008 and 2007, and for the first nine months (and third
quarter) of 2008 and 2007.
For further details see also Section One, Chapter 20, Paragraph 20.1.4 of this Information Prospectus.
(€ thousands)
Cash flow from ordinary activities
Cash flow from investment
Cash flow from financial activities
(a)
(b)
(c)
(a+b+c)
2007
(a)
606,655
(185,216)
(525,085)
(103,646)
308,195
204,549
2006
(b)
538,268
(61,242)
(370,989)
106,037
202,158
308,195
2005
(c)
606,429
(58,103)
(484,045)
64,281
137,877
202,158
Change
(a-b)
68,387
(123,974)
(154,096)
(209,683)
106,037
(103,646)
Change
(b-c)
(68,161)
(3,139)
113,056
41,756
64,281
106,037
Financial Year 2007-2006
In 2007, SEAT Group generated in the course of its business a high operating cash flow level (€ 606.7
million), a € 68.4 million increase over the previous financial year, of which € 185.2 million was allocated to
support investment activities and € 525.1 million to servicing the debt. This positive result was driven by the
€ 38.7 million increase in EBITDA over the previous financial year and a total € 18.6 million decrease in
working capital compared to 31 December 2006 (during 2006 the working capital increased by € 31.3
million). Moreover, working capital flow in 2007 was, among other things, influenced by a € 25.9 million
increase in taxes payable compared with 31 December 2006, due to higher taxes for the year reported by
SEAT.
156
Section One
Net outgoing cash flow for investment activities amounted to € 185.2 million, including expenses in
connection with industrial investments (€ 66.1 million in outlays for industrial investment) and equity
investments (€ 118 million for the acquisition of the German group of companies WLW).
Net cash flow from financial activities amounted to € 525.1 million in 2007, including € 222.1 million in net
interest charges, € 208.3 million for the repayment of principal portions of senior debt, and € 62.2 million in
dividend pay-outs.
Financial Year 2006-2005
In 2006, SEAT Group generated in the course of its business a high operating cash flow level (€ 538.3
million), down from € 606.4 million in 2005. The decrease was attributable in particular to:
•
the € 15.1 million decrease in EBITDA in 2006 compared to 2005, due to higher operating costs incurred
to strengthen the sales structures, in order to introduce on the market new products and services in the
print and online directories areas and in the directory assistance services;
•
the € 31.3 million increase in working capital compared to the € 40.5 million decrease in 2005,
attributable to, among other things: (i) the € 33.2 million decrease in trade receivables due by third
parties to SEAT in 2005 and mostly unchanged in 2006, and to Telegate because of delays in payment
for “traffic reconveyance” by several telephone operators, most of which were collected in the first days
of 2007; and (ii) a € 17.7 million decrease in taxes payable in 2006, attributable to the payment of the
“substitute tax” during the year relating to the adjustment made in 2005 to the value of the customer data
base as a realignment of its value for civil purposes and its value for tax purposes.
Net outgoing cash flow for investment amounted to € 61.2 million, including € 48.32 million in outlays for
industrial investment and € 8.4 million for the acquisition of consolidated equity investments.
Net cash flow from financial activities amounted to € 371.0 million in 2006, including € 223.3 million in net
interest charges payments, € 431.4 million for the repayment of principal portions of senior debt, and € 45.3
million in dividend pay-outs.
First half 2008 and 2007
(€ thousands)
(a)
(b)
(c)
(a+b+c)
First half 2008
291,581
(54,832)
(239,545)
(2,796)
204,549
201,753
First half 2007
284,986
(26,046)
(356,530)
(97,590)
308,195
210,605
In the first half of 2008, SEAT Group generated in the course of its business a high operating cash flow level
(€ 291.6 million), a slight increase (€ 6.6 million) over the same period of the previous financial year, of
which € 54.8 million allocated to investment and € 239.5 million to servicing the debt. This positive result
was achieved, despite the € 9.9 million decrease in EBITDA compared to the first half of 2007, through a
€ 111.2 million overall decrease in working capital compared to the first half of 2007, after decreasing by
€ 96.6 million in the first half of 2007. The contraction in operating working capital in the first half of the
year is normally significant since the business features a high level of invoicing in the final months of the
year and collection in the following periods. In the first half of 2008, operating working capital was boosted
by the decrease in trade receivables.
Net outgoing cash flow for investment amounted to € 54.8 million, including € 23.7 million in outlays for
industrial investment and € 31.1 million for the acquisition of the German company Telegate Media.
Net cash flow from financial activities amounted to € 239.5 million in the first half of 2008, including
€ 110.5 million in net interest charges payments, € 133.5 million for the repayment of principal portions of
senior debt, and € 3.9 million in dividend pay-outs, principally to minority shareholders of Telegate.
157
Nine months (and third quarter) 2008 and 2007
(€ thousands)
Cash and cash equivalents at the beginning of the
period
(a)
(b)
(c)
(a+b+c)
30 September 30 September Third quarter Third quarter
2008
2007
2008
2007
409,961
432,275
118,380
147,289
(66,917)
(38,744)
(12,085)
(12,698)
(306,040)
(519,711)
(66,495)
(163,181)
37,004
(126,180)
39,800
(28,590)
204,549
308,195
201,753
210,605
241,553
182,015
241,553
182,015
In the first nine months of 2008, SEAT Group generated in the course of its business a high operating cash
flow level (€ 410.0 million), which was a € 22.3 million decrease compared to the same period in the
previous financial year. Of this amount, € 66.9 million was allocated to investment and € 306.0 million to
servicing the debt.
Net outgoing cash flow for investment amounted to € 66.9 million in the first nine months of 2008, including
expenses for industrial investments (€ 33.7 million in outlays for industrial investment) and equity
investments (€ 31.4 million for the acquisition of the German company Telegate Media).
Net cash flow from financial activities amounted to € 306.0 million in the first nine months of 2008,
including € 164.1 million in net interest charges, € 163.5 million for the repayment of principal portions of
senior debt, and € 3.9 million in dividend pay-outs.
Financial Year 2008 and 2007 as redetermined
The table below shows a summary of the cash flow statement of the SEAT Group for the year ended on 31
December 2008.
During the last quarter of 2008, following the decision to sell the German group WLW, the asset, liability
and income statement amounts for that group were included among “Non-current assets held for sale”, in line
with the provisions contained in IFRS 5. Consequently, the 2008 cash flows of the WLW group were stated
separately. At the same time the 2007 income statement amounts were redetermined to make comparison of
the items consistent.
(€ thousand)
Cash flow from investment(1)
Cash flow from discontinued operations/non-current assets held for sale
Cash flow for the year
2008
(a) 545,503
(b) (87,987)
(c) (400,077)
(d)
42,614
(a+b+c+d) 100,053
204,549(2)
304,602
2007 Change
redetermined(*)
596,869 (51,366)
(69,741) (18,246)
(511,382) (111,305)
(119,392) 162,006
(103,646) (203,699)
308,195 103,646
204,549(2) (100,053)
(1) The item does not include € 62.6 million in 2008 in investments for the real estate complex in Turin at Corso Mortara, financed by a financial
leasing operation.
(2) Includes € 7.1 million in cash and cash equivalents of the WLW group.
(*) The income statement amounts for the year ended on 31 December 2007 have been redetermined for purposes of making consistent a comparison
of the items with the ones on the financial statements at 31 December 2008 following, in particular, the sale of WLW.
During 2008, the SEAT Group generated a high level of cash flow within its ordinary activities (€ 545.5
million), a decrease of € 51.4 million compared to the previous financial year, specifically reflecting the
reduction of € 42.8 million posted as operating income (EBITDA). The cash generated through ordinary
activities nevertheless remained at high levels and was employed in support of investment activities and debt
servicing.
158
Section One
In particular, the net cash outflow due to investment activity (€ 88.0 million in 2008) includes the outlays for
industrial investments (€ 48.7 million) and for the acquisition of Telegate Media and the subscription of
capital increases at Katalog (€ 36.1 million).
The net cash flow from financial activities (€ 400.1 million in 2008) specifically includes the payment of net
financial expenses of € 241.4 million and the repayment of instalments of capital under the RBS Loan of
€ 169.6 million.
The sale of the WLW group realised a net cash inflow of € 38.2 million, added to which there was € 4.4
million in net positive cash flow generated by the WLW group and by Calls You Control Ltd. in 2008 (until
the date of sale, where the WLW group is concerned). In 2007, the item included € 118.1 million in outgoing
cash flow for acquisition of the WLW group.
10.3 Financial requirement and financing structure
At 31 December 2008, SEAT Group had € 3,082 million in net financial debt, including the following major
loans:
•
The RBS Loan, originally for € 2,530.1 million, plus an additional € 40 million used as part of a
revolving credit line, paid back a few months later. The remaining amount at 31 December 2008 is
€ 1,717 million, regulated by the agreement executed on 25 May 2005, as amended on 14 January 2009
(the “RBS Loan Agreement”);
•
a subordinate loan issued to SEAT by Lighthouse for € 1,300 million, as per a loan agreement executed
on 22 April 2004 (the “Lighthouse Loan Agreement”), as part of a bond issued by Lighthouse and
guaranteed by SEAT pursuant to an indenture agreement also executed on 22 April 2004 (the
“Indenture”);
•
limited recourse asset-backed securities for a total of € 256 million, issued by the vehicle company
Meliadi Finance S.r.l. as part of the securitisation operation for SEAT’s trade receivables started in June
2006 and carried out by transfers made each month on a rotating basis over 5 years, until June 2011;
•
six leasing agreements for a total of € 56.4 million at 31 December 2008 signed with Leasint S.p.A., to
finance the purchase and restructuring of the real estate complex located in Corso Mortara, 22, Turin
where SEAT transferred its secondary office.
Below we describe the securitisation programme for trade receivables mentioned above which the Company
implemented in 2006.
10.4 Trade receivables securitisation programme
In June 2006, SEAT began the securitisation of trade receivables, as per the Italian Law of 30 April 1999,
No. 130, to be implemented through the periodic transfer of receivables to a vehicle company formed for the
purpose named Meliadi Finance S.r.l. for a period of five years until June 2011. In June 2006, SEAT
transferred an initial portfolio of trade receivables outstanding at 31 May 2006 for payment of
€ 344,545,657.
Meliadi Finance S.r.l. financed the purchase of this initial portfolio of receivables through the issuance of
limited recourse asset-backed securities for € 256 million, underwritten through a private placement by an
institutional investor and secured by the initial portfolio of receivables and by portfolios of receivables
transferred from time to time. These securities mature in 2014 and pay a variable interest rate equal to the
sum of (i) 3m Euribor, (ii) 0.30% per year, and (iii) the positive or negative difference between 3m Euribor
and the 3m commercial paper rate with a cap of 5 b.p. on that difference.
Upon occurrence of certain conditions, the securitisation includes the option of transferring to Meliadi
Finance S.r.l. on a monthly basis further ensuing portfolios of trade receivables generated by SEAT. The
vehicle company purchases such receivables using the cash from the collections of the previously purchased
receivables, without issuing further securities.
The vehicle company pays SEAT almost the entire amount for the transfer of each portfolio of receivables,
while the remaining amount is recognised as a deferred payment every month when the receivables are
159
actually collected and after deducting the corresponding receivables management expenses, corresponding
transaction costs, and the amounts due on the asset-backed securities.
The receivables transferred from time to time continue to be recognised in the SEAT financial statements
pursuant to IAS 39 since materially all the risks and benefits pertaining to such receivables are attributable to
SEAT. In parallel, at the consolidated level, the vehicle company Meliadi Finance S.r.l. is consolidated lineby-line, in accordance with Standing Interpretations Committee (SIC) 12, though the Group does not own
any of its share capital.
The credit risk is transferred to SEAT through the deferred payment mechanism, which is determined
dynamically from transfer to transfer depending on the performance of the previously transferred
receivables, and payment is effectively made to SEAT only once all transaction costs are covered. As a result
of this mechanism, SEAT will obtain the deferred payment only when the periodic collections of the
transferred receivables are sufficient.
Therefore SEAT’s risk depends on the quality of the overall receivables portfolio and it is only minimally
influenced by the securitisation operation. In particular, the Issuer continues to manage the receivables
(receipt of payments and collection of past-due receivables) through parties that it mandates, and to pay the
amounts due on the asset-backed securities to the party that owns them.
Transaction costs, consisting of the interest that Meliadi Finance S.r.l. pays on the securities, plus the
accessory charges on the securitisation operation, are recognised on an accrual basis under interest and other
financial charges.
With the cash generated by the transfer of the first loan portfolio as part of the securitisation programme
implemented in June 2006, after € 1.6 million in set-up expenses, SEAT paid back proportionally in advance
€ 254.4 million of the two tranches of the RBS Loan Agreement (Tranche A for € 193.9 million and Tranche
B for € 60.5 million). The cash generated by all the ensuing monthly receivables transfers generated from
time to time is used to finance current activities.
10.5 Limitations on the use of financial resources
The RBS Loan Agreement requires SEAT to observe specific economic and financial ratios (financial
covenants), which are checked on a quarterly basis. These covenants refer to the observance of specific ratios
between: (i) net debt and EBITDA; (ii) EBITDA and interest on debt; (iii) cash flow and debt servicing
(including interest and portions of principal payable in each relevant period).
At 31 December 2008 the company fulfilled these covenants and complied with all the limits required under
the RBS Loan Agreement.
In addition, as is customary for these types of operations, the RBS Loan Agreement regulates other points,
imposing limits and operating conditions on the Issuer and the Group, including investment, the possibility
of contracting further debt, to make acquisitions, to pay out dividends, and to execute operations on capital.
SEAT constantly monitors compliance, including forward-looking, with all the conditions present in the
abovementioned agreements.
As a result, consistent with the foregoing and in light of the market context, the expected financial and
economic results for 2008, and the 2009-2011 Business Plan (whose guidelines the Issuer’s Board of
Directors approved on 23 December 2008), a series of actions were undertaken to preserve SEAT’s
economic and financial equilibrium and SEAT’s cash generation capacity, as well as compliance with the
provisions contained in the RBS Loan Agreement.
In this context, on 23 December 2008, the SEAT Board of Directors passed a resolution to call an
Extraordinary Shareholders’ Meeting for 26 January 2009 to approve the Capital Increase. At the same time,
also in light of the possible Capital Increase, SEAT agreed with RBS several amendments to the terms and
conditions of the RBS Loan Agreement to allow, among other things, the Capital Increase and to adjust the
provisions of the RBS Loan Agreement to SEAT Group’s operating performance and financial profile as
envisioned in the new 2009-2011 Business Plan.
The aforementioned amendments to the RBS Loan Agreement were formalised on 14 January 2009 when
SEAT and RBS executed the Amendment Agreement. However, some of the amendments prescribed therein
160
Section One
(including the provisions concerning the so-called reset of the financial covenants, the restrictions on
dividend pay-outs, and the increase in margins applicable to the RBS Loan) will become effective only and
exclusively starting from the date on which one or more of the Reference Shareholders pay to SEAT, directly
or indirectly, through the underwriting of the Capital Increase, a total amount of not less than € 99,200,000
(subject to, in each case, the provisions of the Creditors Agreement) into a future capital increase or other
reserve, or they consign to RBS a full irrevocable and unconditional pledge to make such payment (in any
case provided that the payment is made within 31 May 2009 or, if the Capital Increase is delayed, within 28
June 2009). For further details see also Section One, Chapter 4, Paragraph 4.1.1 and Section One, Chapter
22, Paragraph 22.3.
SEAT Group’s cash and cash equivalents at 31 December 2008 included € 87.9 million in bank deposits
(€ 87.3 million at 31 December 2007) in the name of the vehicle company Meliadi Finance S.r.l., originated
from the cash-in of receivables transferred by SEAT as part of the securitisation programme. In case of use,
this cash is subordinate to payment of the vehicle’s payables.
10.6 Management of financial risks
In the normal course of business, SEAT Group is subject to risks of fluctuations in interest and exchange
rates. These market risks regard in particular the outstanding loan with RBS, the limited recourse assetbacked securities issued by the vehicle company Meliadi Finance S.r.l. serving the securitisation programme,
as well as foreign currency receivables and payables, especially in GBP.
SEAT Group constantly monitors the financial risks that it is exposed to; so as to evaluate in advance the
potential negative effects and take appropriate action to mitigate them. The management of these risks is
done through the use of derivative financial instruments, in accordance with Group risk management
policies. In the framework of these policies, the use of derivative financial instruments is reserved for the
management of exposure to exchange rate and interest rate fluctuations associated with cash flows and the
asset and liability items on the balance sheet, and no speculative operations are allowed.
SEAT Group policy on financial market risks
This policy calls for:
•
constant monitoring of the level of exposure to the risk of changes in interest rates and exchange rates
and the measurement of the maximum levels of risk exposure;
•
the use of derivative financial instruments for hedging purposes to manage the aforementioned risks and
not for speculation;
•
constant assessment of the level of reliability of financial counterparties to minimise the risk of nonperformance. All hedge derivative contracts are entered into with top financial companies and banks. If
the counterparty is a subsidiary, the operation is executed at market conditions.
Interest rate hedging financial instruments
SEAT Group is exposed to the risk of fluctuations in interest rates since the profile of its outstanding
financial debt in the period between December 2008 and June 2012 features a significant share, though
decreasing over time, of variable rate transactions.
Loans outstanding at 31 December 2008 amounted to € 3,329.7 million, of which € 2,029.7 million at
variable rates. From some time the Issuer has had a strategy to hedge the risk of fluctuations in interest rates,
and, in compliance with such strategy, has signed a series of derivative financial contracts.
Outstanding hedges at 31 December 2008 on the total debt structure allow for: (i) in the 2009-2011 threeyear period, total average protection of around 69% of the total, amounting to the sum of the following
items: fixed rate “subordinate” debt (43.5%), interest rate swap and forward rate agreement transactions
(around 20%), and interest rate collar transactions (5.5%); (ii) for the 2012-2013 two-year period, total
average protection of around 67% of the total, equal to the sum of the following items: fixed rate
“subordinate” debt (64%) and interest rate swap transactions (3%).
161
In January 2009, further derivative hedging transactions were executed. Such transactions further
strengthened its level of protection against the risk of fluctuations in interest rates in the 2009-2011 threeyear period, raising it to 74% (43.66% of fixed rate “subordinate” debt, around 23% interest rate swap and
forward rate agreement transactions, and 7.85% interest rate collar transactions).
In recent months, interest rate conditions have been highly volatile. Market interest rate fluctuations may
have negative consequences on the Issuer’s and the Group’s operating performance, capital structure, and
financial standing.
To measure the fair value of derivative financial instruments, SEAT made reference to pricing provided by
third parties (banks and financial companies).
The fair value of interest rate swaps (IRS) and forward rate agreements (FRA) is the current value of the
difference between fixed rate interest to be paid and/or received and interest valued on the basis of the
market interest rate curve referred to on the maturity dates of the derivative contracts.
The IRS and FRA trigger or may trigger the exchange of interest flows calculated on the notional amount of
the derivative at a fixed or variable rate at the maturity dates agreed between the parties. The notional
amount does not represent the amount exchanged between the parties and so it does not count towards the
measure of the exposure to credit risk, which is limited to the amount of the interest differentials that must be
exchanged on the settlement dates.
The market value of the collars is the difference between the price that would be paid to buy back the floor
options previously sold and the price that would be received to resell the cap options purchased. The price of
these options is calculated on the basis of expected levels of interest rates on the respective maturity dates,
the strike prices at each maturity date, and interest rate volatility.
The following derivative hedging contracts were in place at 31 December 2008:
•
Interest Rate Collar (negative fair value € 93,000) on the period from February 2009 to June 2009, by
which the variable 1m Euribor has been set at an average cap of 3.03% and an average floor of 1.66% on
a notional amount of € 300 million;
•
Interest Rate Swap (negative fair value of € 2 million) on the period from July 2009 to December 2011,
by which the variable 6m Euribor rate has been replaced with a fixed rate of 4.5525% on a notional
amount of € 50 million;
•
Interest Rate Collar (negative fair value € 525,000) on the period from July 2009 to December 2009, by
which the variable 6m Euribor has been set at a cap of 4.40% and a floor of 3.20% on a notional amount
of € 100 million;
•
Forward Rate Agreement (negative fair value of € 4.7 million) on the period from July 2009 to
December 2009, by which the variable 6m Euribor rate has been replaced with a fixed rate of around
3.643% on a notional amount of € 650 million;
•
Forward Rate Agreement (negative fair value of € 1.3 million) on the period from January 2010 to June
2010, by which the variable 6m Euribor rate has been replaced with an average fixed rate of around
•
Interest Rate Collar (negative fair value € 2.5 million) on the period from January 2010 to December
2011, by which the variable 6m Euribor has been set at a constant cap of 4.70% and a constant floor of
•
Interest Rate Swap (positive fair value of € 5,000) on the period from January 2010 to December 2011,
by which the variable 6m Euribor rate has been replaced with a fixed rate of 3.035% on a notional
amount of € 50 million;
•
Interest Rate Swap (negative fair value of € 5 million) on the period from January 2010 to June 2012, by
which the variable 6m Euribor rate has been replaced with an average fixed rate of around 3.75% on a
notional amount of € 325 million;
•
Forward Rate Agreement (negative fair value of € 157,000) on the period from July 2010 to December
2010, by which the variable 6m Euribor rate has been replaced with a fixed rate of around 3.58% on a
notional amount of € 50 million;
162
Section One
•
Interest Rate Swap (negative fair value of € 741,000) on the period from December 2008 to December
2011, for specific hedging of a portion of the interest flows from the leasing agreement, by which the
variable 3m Euribor rate has been replaced with a fixed rate of 3.60% on a notional amount of € 30
million;
Risks associated with fluctuations in exchange rates
The unit of account for the SEAT Group consolidated financial statements is the euro. However, some Group
companies do business in currencies other than the euro, mainly the British pound, so the Group is exposed
to risks associated with fluctuations in exchange rates among the different currencies.
At 31 December 2008, Group turnover expressed in GBP and converted into euro generated by assets in the
United Kingdom was 8.22% of total turnover. Changes in the EUR/GBP exchange rate could trigger a
change in the conversion reserve in the Issuer’s consolidated net equity.
In addition, the Company is exposed to exchange rate risk associated with an infra-group loan issued in GBP
to TDL.
The Company has entered into exchange rate risk hedging transactions, whose effects are reflected in the
Company’s consolidated profit and loss account.
Risks related to high financial debt, any event of insufficient liquidity and ability to raise financial
resources
As of 31 December 2008, the SEAT Group had net financial debt of € 3,082 million, which consisted mainly of
the following: (a) a senior loan to SEAT by the Milan branch of The Royal Bank of Scotland Plc (“RBS”) for a
total original amount of € 2,620,100,000; at 31 December 2008, the balance outstanding of this loan was
€ 1,717 million (“RBS Loan”), pursuant to an agreement entered into on 25 May 2005, as subsequently
amended until 14 January 2009 (“RBS Loan Agreement”); (b) a subordinated loan provided to SEAT by
Lighthouse International Company S.A. (“Lighthouse”) for a total amount of € 1,300,000,000, pursuant to a
loan agreement entered into on 22 April 2004 (“Lighthouse Loan Agreement”), in connection with the
Lighthouse bond issue guaranteed by SEAT under an Indenture signed on 22 April 2004 (“Indenture”); (c)
limited-recourse asset-backed securities for a total of € 256,000,000 issued by the vehicle Meliadi Finance S.r.l.
in connection with a securitisation transaction started in June 2006 and involving a revolving trade receivable
portfolio with monthly distributions for a period of five years, until June 2011; (d) six lease agreements, for a
total of € 53.9 million, entered into with Leasint S.p.A. to finance the purchase and restructuring of the complex
located in Corso Mortara where SEAT transferred its secondary place of business.
SEAT Group has a high level of debt, with a financial leverage at 31 December 2008 of around five times
EBITDA (also on 31 December 2007 the debt level was equal to 5 times EBITDA).
The table below shows changes in the SEAT Group’s net financial debt in the years from 2005 to 2008 (for
more information see Section One, Chapter 10, Paragraph 10.1).
(€ millions)
Non-current financial debt, net (a)
Cash and cash equivalents, net
Current financial debt, net (b)
Current “book” financial debt (a+b)
Lending, refinancing and securitisation fees to be amortised
Net value increase (decrease) of cash flow hedge contracts
Net financial debt
31 December
2008
3,031.5
(2.0)
3,029.5
293.8
(2.0)
(304.6)
(12.8)
3,016.7
76.2
(10.9)
3,082.0
31 December
2007
3,190.4
(2.0)
3,188.4
215.5
(13.1)
(204.5)
(2.1)
3,186.3
82.8
5.3
3,274.4
31 December
2006
3,384.2
(1.4)
3,382.8
229.2
(1.3)
(308.2)
(80.3)
3,302.5
102.3
1.0
3,405.8
31 December
2005
3,526.7
(1.2)
3,525.5
214.3
(2.4)
(202.1)
9.8
3,535.3
122.5
(23.2)
3,634.6
(*) This item does not include “Financial assets available for sale”.
163
The average maturity on outstanding loans at 31 December 2008 is 3.9 years. Without taking into account
the commitment that SEAT has assumed in connection with the use of 50% of the proceeds from the Capital
Increase for the partial repayment of the RBS Loan, the major debts repayment plan described above is set
out below.
Repayment plan in the absence of the Capital Increase:
(€ million)
Creditor
RBS (*)
Lighthouse
Securitisation (**)
Leasing
Total
(*)
31/12/09
219.2
2.8
222.0
31/12/10
231.8
2.7
234.5
maturity by
31/12/11
31/12/12
245.2
556.1
2.8
3
248.0
559.1
31/12/13
464.5
3.1
467.6
beyond
1,300.0
256.0
42.4
1,598.4
Of the € 219.2 million maturing in the year to 31 December 2009, € 50 million were repaid on 28 January 2009; € 59.6 million will be repaid
by 28 June 2009 and € 109.6 million will be repaid by 28 December 2009.
Of the € 231.8 million maturing in the year to 31 December 2010, half will be repaid on 28 June 2010 and the balance on 28 December 2010.
Of the € 245.2 million maturing in the year to 31 December 2011, half will be repaid on 28 June 2011 and the balance on 28 December 2011.
The € 556.1 million loan maturing in the year to 31 December 2012 will be repaid in full on 8 June 2012.
The € 464.5 million loan maturing in the year to 31 December 2012 will be repaid in full in June 2013.
(**)
SEAT will have the option of transferring new loan portfolios each month until June 2011; from this date the asset-backed securities issued
In view of the market scenario, the economic and financial results forecast for 2008 and the first indications
of the prospects for 2009-2011, a number of steps have been taken as from the second half of 2008 designed
to preserve SEAT’s economic and financial equilibrium and cash generation profile, as well as to enable it to
meet the financial covenants contained in the RBS Loan Agreement. In fact, the guidelines specified in the
Business Plan provided a strategic direction aimed at developing the business in Italy, particularly internet
activities, and a focus on activities supporting the core business. This involved an increase in investments
(for product innovation, service promotion and strengthening of the sales network), and implementation of a
programme (already defined) to reduce costs supporting investments for growing the business and generating
cash to service repayment of the debt. Hence the need to increase investments within difficult economic
circumstances and during a phase of limited earnings growth has required the company to seek greater
financial flexibility so that it can face the changed market situation with improved economic and financial
equilibrium.
As a result, on 1 December 2008, RBS was sent the Waiver Request containing, among other things, a
request to revise the existing financial covenants to a consistent degree, namely with a tolerance margin of at
least 20%, with regard to the results achievable within the context of the Business Plan results. The desired
objective of this renegotiation was to allow the Company, in an unfavourable market context, to pursue the
actions required to preserve its business model, and thereby to overcome the difficulties imposed by the
market situation. By managing these adequately in advance, it would avoid any critical repercussions arising
from a failure to meet the financial covenants provided for in the RBS Loan Agreement, adapting them to the
results achievable by the SEAT Group within the context of the new Business Plan prepared taking account
of the changed financial scenario. The renegotiation, started with the Waiver Request, concluded with the
RBS acceptance, received on 22 December 2008, and with the subsequent formalisation of the agreement
reached, completed with the Amendment Agreement to the RBS Loan Agreement dated 14 January 2009.
As described in more detail in Section One, Chapter 22, Paragraph 22.3.1 of the Information Prospectus, the
waiver and amendment of certain provisions of the RBS Loan Agreement, including those that did not allow
SEAT to carry out the Capital Increase and to start up all the related activities, became effective when the
Amendment Agreement was signed. The change to the provisions regarding, among other things, the amount
of interest applicable to the Loan, any increase/decrease in such interest relating to the
improvement/worsening of the SEAT Group’s net borrowing/EBITDA ratio, the contractual definitions
contained in the provisions relating to the SEAT Group’s financial commitments (financial covenants), as
well as the reset values specified in relation to such financial commitments will, on the other hand, become
effective when one of the following conditions occurs:
•
164
one or several Reference Shareholders pay into the Company directly or indirectly, by subscribing to the
Capital Increase, contributions on account to a future capital increase or other, a total amount not less
than € 99,200,000 (subject, in each case, to the provisions of the Intercreditor Agreement) by 31 May
Section One
2009, or if the Capital Increase process is delayed due to a request or order of any competent authority
(including Consob and Borsa Italiana), by 28 June 2009 (the “Last Date”); or
•
one or more of the Reference Shareholders provides RBS with a full irrevocable and unconditional
commitment to pay directly or indirectly, by subscribing to the Capital Increase, contributions on
account to a future capital increase or other, a total amount not less than € 99,200,000, such changes
remaining subject to the condition subsequent that such payment is actually made by the Last Date.
The Waiver Request expressly states the Company’s commitment to allocate 50% of the proceeds of any
payment made by its shareholders in relation to the Capital Increase to the early repayment of the instalments
of Tranche A of the RBS Loan falling due as from the instalment following the Capital Increase finalisation
date and up to that scheduled for 28 December 2011 (a commitment accepted by RBS, along with the other
terms of the Waiver Request, by means of the acceptance thereof dated 22 December 2008); hence, as a
result of the terms agreed with the Amendment Agreement, if the Capital Increase were fully subscribed (for
€ 200 million) and SEAT consequently allocated the amount of € 100 million to repay the RBS Loan early,
the repayment plan for the principal loans described at the beginning of this paragraph, would be organised
as follows:
(€ millions)
Creditor
RBS (*)
Lighthouse
Securitisation (**)
Leasing
Total
(*)
Due by
31/12/09
300.5
2.8
303.3
31/12/10
192.3
2.7
195.0
31/12/11
203.4
2.8
206.2
31/12/12
556.1
3
559.1
31/12/13
464.5
3.1
467.6
Later
1,300.0
256.0
42.4
1,598.4
Of the amount of € 300.5 million to be repaid by 31 December 2009, € 50 million has already been repaid on 28 January 2009; € 159.6 is
repayable on 28 June 2009 and € 90.9 million on 28 December 2009.
Half of the amount of € 192.3 million, to be repaid by 31 December 2010, is repayable on the due date of 28 June 2010 and the other half on 28
December 2010.
Half of the amount of € 203.4 million, to be repaid by 31 December 2011, is repayable on the due date of 28 June 2011 and the other half on 28
December 2011.
The amount of € 556.1 million, to be repaid by 31 December 2012, is repayable in full on the due date of 8 June 2012.
The amount of € 464.5 million, to be repaid by 31 December 2013, is repayable in a single instalment in June 2013.
(**)
SEAT will have the right to assign new portfolios of assets at monthly intervals, up to June 2011, as from that date the asset-backed securities
issued, with 2014 maturity, will be repaid with the cash flows generated by the trade receivables assigned up to that point.
The partial unsuccessful completion of the Capital Increase, although considered by the Company to be
unlikely, given the subscription commitment made by the Reference Shareholders (apart from the BC
Investors) and the guarantee commitment assumed by Mediobanca, could arise in the following two cases:
(i)
failure by the Reference Shareholders (except the BC Investors) to subscribe their part of the
Capital Increase (equal to 49.6% of the entire share capital), equal to approximately € 99.1
million, with the resulting ineffectiveness of the abovementioned financial covenant reset agreed
with RBS in the Amendment Agreement (please see Paragraph 4.1.1.4 below) and the possibility
for Mediobanca to revoke its underwriting obligation; or
(ii)
failure by the market and/or Mediobanca to subscribe the part of the Capital Increase not
subscribed by the Reference Shareholders, with the result that less cash would be available to the
Company (for further information on the conditions to which the Mediobanca guarantee and the
respective termination clauses are subject, please see Paragraph 4.3.1 of this Chapter), which
lack of subscription would not have an effect on the financial covenant reset (which would
become effective as a result of the subscription of the Capital Increase by the Reference
Shareholders).
In the event of a completely unsuccessful outcome to the Capital Increase, all of the consequences for the
Issuer as described under (i) and (ii) would take place. Therefore, as a result of what is described above, in
the Issuer’s opinion, if the Capital Increase should fail to have a successful outcome completely or partially,
the Group could be required to repay all of its debt to RBS early; however, there would no immediate effect
on business continuity, although it could create a situation of greater financial tension.
165
In those cases, the Company can, at the moment, merely make conjectures as to the steps that would be taken
in this case in order to obtain the financial resources to discharge its financial obligations. Such steps can be
proposed in abstract terms on the basis of three scenarios, which could also be activated in combination with
one another, described in brief below:
(i) Performance of the measures required to ensure an adequate level of comfort as regards existing
covenants
•
The Company could take measures to reduce certain major cost categories (advertising costs; agents
sales bonuses and staff bonuses linked to results; operating costs and synergies of integration between
Group companies) to such an extent as to allow the covenants currently provided for in the RBS Loan
Agreement to be met;
•
The Company could speed up the steps, including those already being studied (particularly as regards
management of working capital and investments), that are able to generate a positive impact on
“ordinary” cash generation.
The prospects described refer to the measures to be taken to reach the EBITDA level required to meet the
covenants currently specified in the RBS Loan Agreement and do not take account of “extraordinary” debtreducing contributions, such as, in particular, possible disposals of non-strategic assets.
(ii) New negotiation with RBS regarding the financial covenants
Should it be found, despite completion of the measures under (i) and/or also in combination with the
aforesaid actions, that there is an actual risk of not meeting the financial covenants, the Company would
immediately reopen negotiations for a change to the provisions regarding the financial covenants with RBS,
which do not involve a capital increase operation.
(iii) Debt restructuring
The company could in any event assess whether it is advisable – based on the actual financial market
situation and related prospects, as recorded at the time – to proceed with a full renegotiation and/or
restructuring of its debt. (See Section One, Chapter 4, Paragraph 4.3.1).
Therefore, as a result of what is described above, in the opinion of the Issuer, if the Capital Increase should
not have a favourable outcome, there would be no immediate effect on business continuity, although it could
create a situation of financial tension.
As far as liquidity risk is concerned, which is the risk that the financial resources available may be
insufficient to cover short-term obligations of any nature coming due, the SEAT Group believes that,
because the volatility of its business is relatively low and its cash generation high, and in consideration of the
approximately € 120 million in available credit lines, it has sufficient financial resources to meet its
obligations. In line with the foregoing, at the end of January 2009 the Company made a voluntary early
repayment of € 50 million against the aforesaid obligations to RBS falling due in 2009. It is believed that
such ability to meet its commitments will therefore be maintained even in the event of lack of subscription of
the Capital Increase.
As described above, after 31 December 2009 SEAT will have to repay significant sums on outstanding loans;
in this respect, the Group may not have sufficient financial resources to do so, making it necessary to seek
new loans. In 2008, the financial crisis triggered by securities linked to subprime mortgages, and the heavy
impact that it had on all financial companies, caused a general and increasing aversion to risk among
investors, reflected in the widening of spreads on credit default swaps and in a sharp drop in high yield bond
prices in particular.
If, due to market conditions or other circumstances, the Issuer is not able to generate sufficient capital
resources to discharge its financial obligations at the established maturities and terms or if, in general,
defaults should occur on additional obligations provided for in the abovementioned loan agreements, as well
as in the event of insolvency proceedings or non-performance of obligations arising from any other debt or
guarantee instrument of SEAT or a SEAT Group company, the sums disbursed must be repaid early in full,
along with the interest accrued and additional sums owed under said agreements, with the ensuing negative
effects on the operating performance, capital structure and financial standing of the Company and the SEAT
Group. Furthermore, if SEAT, for any reason, is not able to raise sufficient financial resources to fulfil its
financial obligations and it is forced to renegotiate the terms and conditions on its financial obligations
166
Section One
before they come due or to seek the necessary resources for repayment on the bank and/or financial market,
it may not be able to raise them or only raise them under terms and conditions that could be more costly that
the current ones, with negative effects of the Group’s operating performance, capital structure, and financial
standing.
Such difficulty in obtaining financial resources could also occur if the rating given to SEAT by Standard &
Poor’s, which, at the Information Prospectus date, is “BB-”, were to worsen. This rating expresses the
Standard & Poor’s assessment of the Company’s likelihood of default and is the result of an analysis of (i)
the Group’s prospects in terms of profitability, cash generation and sustainability of the debt, and (ii)
foreseeable reference market scenarios. If the subjective assessment of the rating company’s analysts were to
show a deterioration of one of both analysis parameters compared to the current assessment, then this could
cause SEAT’s rating to be downgraded by Standard & Poor’s, even merely in relation to a negative trend in
the reference markets. Under the terms of the documents that regulate the asset securitisation transaction
started by SEAT in June 2006, the downgrading of SEAT could entail a reduction in the Company’s ability
to assign assets on a rotating basis to the securitisation vehicle. In this event, if it is not possible for SEAT to
negotiate a change to the contracts regulating the securitisation, so as to neutralise such risk, the assets not
freed up through securitisation would be financed using alternative methods which, however, in current
market conditions, could be more expensive than the current costs of securitisation. The SEAT Group could
in any event make up for any difficulties in activating alternative funding methods by using its own cash
resources and the aforesaid availability of credit lines, amounting to € 120 million.
Effects of “change of control” on outstanding loan agreements
Both the RBS Loan Agreement and the Indenture have early loan repayment provisions in the occurrence of
certain events, identified in detail in each of the two agreements, commonly referred to as “change of
control”.
Pursuant to the RBS Loan Agreement, if the Issuer undergoes a change of control, RBS’s commitment to
issuing new sums as part of the revolving tranche of the RBS Loan is cancelled immediately, and SEAT will
have to immediately repay early all the loans issued in its favour and pay RBS the interest accrued and not
paid up to that date, as well as further amounts due to RBS pursuant to the RBS Loan Agreement and the
documents annexed to it.
Pursuant to the Indenture, if a change of control occurs at the Issuer, each owner of the securities would have
the right to require Lighthouse to repurchase the securities at a price of 101% of the nominal amount of the
securities, plus interest accrued and not paid up to the repurchase date. In such case, pursuant to the
Lighthouse Loan Agreement, SEAT would have to repay early a sufficient enough portion of the Lighthouse
Loan to provide Lighthouse with the necessary funding to execute these potential repurchases. SEAT would
have to pay the same amount directly to the owners of the securities if Lighthouse fails to perform, pursuant
to the provisions of the Indenture, according to which SEAT is expressly and irrevocably committed to
guaranteeing all of Lighthouse’s obligations towards the owners of the securities. Any SEAT payment
pursuant to the Lighthouse Loan or the Indenture should in any case be made in compliance with the
provisions of the RBS Loan Agreement and the Creditors Agreement which regulates, among other things,
relations among SEAT, RBS as senior creditor, and Lighthouse and the holders of the securities as
subordinate creditors.
For further details, see Section One, Chapter 22, Paragraph 22.3 and, in particular, for the identification of
“change of control” assumptions, reference is also made to the “Annual Corporate Governance Report”,
whose information, if not reported in this Information Prospectus, shall be understood as being hereby
incorporated by reference, as per Article 11, Paragraph 2 of Directive 2003/71/EC and Article 28 of
Regulation 809/2004/EC. This document is available to the public on the Company’s web site www.seat.it
Credit risk
SEAT Group’s business features a high number of customers. SEAT accounted for 87.2% of the Group’s
trade receivables at 31 December 2008 (87.7% at 31 December 2007). SEAT has around 550,000 customers
throughout Italy, mostly small/medium-sized businesses. Each year, the Issuer alone issues around 950,000
167
invoices, each of which, on average, calls for payments in 2.5 instalments of the amount, which is around
€ 590 each, so there are more than 2.3 million payment transactions.
In this context, then, there is no obvious concentration of credit risk.
However, the high volume of transactions executed generates a high number of arrears positions, with the
resulting need to set up a sufficient credit management organisation. Over time, the Company has set up a
structure that has a very wide reach and is being constantly strengthened to effectively manage all phases of
the solicitation process. The internal organisational structure, the phone-based solicitation agencies, the
credit collection agencies and the legal network involve a total of around 1,400 staff.
The exposure to credit risk – represented in the financial statements by the provision for impaired receivables
– is measured using a statistical model, based on customer segmentation according to geographical and
seniority criteria, and reflects in its estimates SEAT’s historical experience in credit collections, projecting it
into the future.
At 31 December 2008 the provision for impaired trade receivables at the Group level amounted to € 111.4
million (€ 117.8 million at 31 December 2007), with the Issuer increasing its coverage of past-due accounts
from 50% at year-end 2007 to 51.3%.
The economy’s current performance, with reference to both stagnant consumption and difficult access to
credit due to higher risk aversion among banks, could trigger in 2009 an increase in the rate of customer
arrears in respect of their obligations to SEAT, with possible negative effects on the Company’s operating
performance, capital structure, and financial standing.
10.7 Expected sources of funding necessary to fulfil the obligations as per Paragraphs 5.2.3. “Issuer’s
main future investments” and 8.1 “Tangible fixed assets”
Investment in progress is financed by operating cash flows, except for the property complex in Turin, Corso
Mortara, for € 62.6 million, financed through a leasing agreement starting on 23 December 2008, triggering
the recognition on the balance sheet of a € 56.4 million debt.
The Issuer’s future investments will be financed by operating cash flows and the net proceeds from the
Capital Increase.
168
Section One
11
RESEARCH AND DEVELOPMENT, PATENTS, AND LICENSES
11.1 Research and development
The Issuer carries out research and development to develop its products, although there are no specific costs
capitalised on the balance sheet in this area. The resources allocated so far to research and development are
focused on the development and maintenance of the Company’s highly sophisticated information system
assets and structure, which support its entire business cycle. As a consequence the underlying costs have
been incorporated internally into the value of the software products which are designed to enable operation
of the company’s product systems. Such software is recorded among company assets (including in the form
of capitalisation of internal costs) and amortised based on their estimated useful life, which is usually 36
months. If however activities have not enabled software to be deployed with a useful life of several years, the
costs in question are recorded on the income statement based on their nature (information technology
services, marketing services, labour costs) without distinguishing between the ‘research’ component and
other cost components such as services providing feasibility studies and technical and training support,
which in any case are non-capitalisable cost components according to IFRS accounting standards.
For product and services development policies and strategies, see Section One, Chapter 6, Paragraph 6.1.
11.2 Intellectual property
The Issuer believes that the copyrights, brands, databases, domain names, knowhow, and other similar
intellectual property rights that it owns are fundamental to its business development. The Issuer protects the
intellectual property rights that it owns through: (i) registration, where applicable, of patent rights in the
countries where it does business, as well as the other main world markets, pursuant to applicable law; (ii)
confidentiality agreements and/or licenses with its suppliers and business partners; and (iii) warnings to third
parties that unlawfully use similar distinctive signs.
The Issuer owns the trademarks SEAT, PAGINEGIALLE, PAGINEBIANCHE, and TUTTOCITTÁ, as well
as other trademarks with national and international extension.
The company’s “trademark portfolio” also includes defensive trademarks that, under the terms of law, if not
used could be subject to expiration for non-use.
The Issuer owns the name and domain “seat.it” which identifies its internet site, as well as other various
domains with national and international extensions that are instrumental to its business, of which the main
ones are:
•
“Paginegialle.it” (as well as the extensions “.com”, “.biz”, “.ca”, “.eu”, “.info”, “.mobi”, “.org”,
“.ru”, “.tv”);
•
“Paginebianche.it” (as well as the extensions “.biz”, “.eu”, “.info”, “.mobi”, “.ws”);
•
“tuttocitta.it” (as well as the extensions “.biz”, “.cn”, “.com”, “.de”, “.eu”, “info”, “.mobi”, “.net”,
“.ws”);
•
“892424.it” (as well as the extensions “.com”, “.eu”, “.mobi”);
•
“1240.it” (as well as the extension “.eu”).
169
12
INFORMATION ON EXPECTED TRENDS
12.1 Recent significant trends in the Issuer’s business
The Group’s strategic focus continues to be Italy, where its main products are centred and where the
acceleration in the growth of the internet in 2007 gave rise to new business development opportunities. In
2008 the company focused its resources on online areas, though it did not neglect the development of print
products. The benefits of the new range of online services and the sales efforts of the online sales staff
should begin to have a positive impact on the profit and loss account in the first quarter of 2009.
As of the Date of the Information Prospectus there have not been any especially notable trends in production,
sales and inventories performance, or in costs or sales prices compared with the position at 31 December
2008, such as would have an impact on the SEAT Group’s operations.
12.2 Information on trends in the current financial year
On 25 March 2009, an agreement with Google Ireland Ltd. was executed, pursuant to which SEAT shall act
as Authorised Retailer of Google AdWordsTM, the advertising program that allows companies to advertise
their products or services on the Google search engine.
SEAT will offer Italian SMEs the possibility of planning online advertising campaigns through the Google
platform in a simple, fast and effective manner. As Authorised Retailer of Google AdWordsTM, SEAT will
ensure advertisers a full range of consulting services, from campaign planning on up to integration with other
forms of communication on the Internet, the activation of the service, and the monitoring and optimisation of
results.
The foregoing agreement with Google is part of the strategy set out in the Business Plan which by 2008
already saw the start of further services on SEAT’s Internet sites and significant growth of online revenues.
In this respect, it is to be noted that, in 2008, SEAT registered total revenues from online services of € 162.3
million, with growth of 18.4% compared to 2007, accelerating in the second half, when growth was 27.6%.
The agreement has a two-year duration effective as of 1 April 2009and provides for the payment of a fee to
SEAT based on the revenues of Google Ireland Ltd, in exchange for the Issuer’s activity as sales agent.
Although the Issuer is not able, at present, to evaluate the exact impact that such agreement may have on its
online activities, the Company nevertheless expects a positive effect in terms of income growth.
On the Date of the Information Prospectus, except as stated above and in Section One, Chapter 4 of the
Information Prospectus, the Issuer is not aware of any known trends, uncertainties, demands, commitments
or facts that could reasonably have significant repercussions on the current financial year.
The Issuer’s business performance allows for assuming a continuation of current business results for the first
quarter of 2009, in line with the objectives of the Business Plan (for further information, please see Section
One, Chapter 13 of the Information Prospectus).
The quarterly report will be approved and published in accordance with legal requirements by 15 May 2009.
170
Section One
13
PROFIT FORECASTS OR ESTIMATES
13.1 Main assumptions for forecasts or estimates of profits
13.1.1 New industrial strategy adopted in 2008
At the beginning of 2008 the Issuer’s management prepared a new strategy that placed the main strategic
focus on Italy, the Group’s business reference country in which SEAT has its main assets, where the
acceleration of growth of the Internet in 2007 caused new business development opportunities to arise
(according to data published by Nielsen, Internet penetration in Italy at the end of 2007 was equivalent to
41.6%, a significant increase with respect to the 30.6% in 2006).
In Italy, the increased presence of the Internet as a means of communication has over the past few years
come to represent for SEAT an element serving the structural transformation of its business, as had already
happened in the directory companies in the other European countries which saw an increase in the presence
of online media prior to Italy. Firstly, the Internet creates an alternative to paper directories
(PAGINEGIALLE and PAGINEBIANCHE) as means used by families and companies to find the suppliers
of goods and services. Moreover, the new technologies offer SEAT the opportunity to expand its own
reference market and to reinforce its own competitive position, adding to the paper media an ever broader
supply of online services. In order to take advantage of this opportunity, at the beginning of 2008 the Issuer
decided to give another stimulus to product innovation and to development of service and sales capacity in
the area of the Internet, activities which were the focal point of the Company’s initiatives during the justended financial year.
In this context, in March of last year the Issuer also decided to undertake a strategic review of its own foreign
holdings, which were considered non-core in the context of the new strategy. This was in order in the future
to be able to increase the value of such holdings while protecting their value in the meantime, during a phase
of transformation and recession in the markets (in particular, Germany and the United Kingdom) where these
businesses operate.
13.1.2 Organisational Evolution of SEAT
In order to support the implementation of the new strategy, during 2008 the Issuer adopted a new
organisational structure for more effective management of the Italian core business and a better defence of
foreign holdings, and it has strengthened management by adding some new directors of proven experience.
In June the Italian General Management Department was created, which reports directly to the Chief
Executive Officer and into which the commercial and operating management activities of the Italian business
merged. The role of General Manager for Italy was assumed by Massimo Castelli, coming from Telecom
Italia. Also in June 2008, Massimo Cristofori, coming from Tiscali, and with experience in the publishing
sector, was appointed Chief Financial Officer, also reporting directly to the Chief Executive Officer
(Massimo Cristofori has also assumed the position of Director in charge of preparing the corporate financial
statements). In October Giancarlo Grimaldi joined the company, assuming responsibility for the new
Customer Care Department, created as part of the General Management Italy Department to guarantee
better and more efficient care of the SEAT client base, comprised of hundreds of thousands of SMEs.
The reorganisation of SEAT was completed in November 2008, with the change to the internal organisation
of the General Management Italy Department, in order to adjust it to the requirements arising from the everincreasing role of the Internet in the company’s business. To that end, the marketing area, which was
previously divided by product (paper guides, telephone services, Internet services) was restructured into a
single Product Marketing Department, responsible for the Company’s entire product portfolio, and a
Customer Marketing Department¸ responsible for ensuring that the sales structure has a multimedia
offering in accordance with the needs of the different segments of customers served.
To complement the reorganisation of the Issuer, a new Group Strategy & Business Innovation Department
was created in order to manage dynamics that might have a long-term impact on SEAT’s business and to
reinforce support for the other companies in the Group in terms of innovation and business management.
Finally, the will to maintain effective control of costs and operating margins has led to implementation of the
Procurement function as part of the Administration, Finance, and Control Department.
171
13.1.3 Market Situation
During the course of 2008 the Issuer’s business evolved in accordance with the strategic guidelines approved
at the beginning of the year, within the context of an economic situation that rapidly and unexpectedly
worsened during the course of the financial year.
In ordinary activities, the Group obtained results in line with expectations in Italy and abroad. In Italy, in
particular, the fall in turnover resulting from the economic crisis has been contained thanks to the decisive
increase in Internet income, which has benefited from the product innovations launched in the market
starting in June. In the meantime, margins were protected thanks to a decisive cost containment initiative
launched in May, just as the real extent of the economic crisis began to make itself apparent in its actual
dimension.
Italian Market
Changes in the macroeconomic situation and the advertising market
In 2008 SEAT was not able to fully benefit from the effects deriving from the strengthening of business
undertaken in the 2005-2007 three-year period and from the new strategy of investing in online business,
which began at the beginning of 2008, because of an economic situation undergoing strong decline, and
which was worse than expected. SEAT’s business, in fact, evolved within the context of a progressive
downturn of the Italian economy which, ending 2007 with an increase in Gross Domestic Product (GDP)
equal to 1.7%, began from the first few months of 2008 to show signs of weakness, with a GDP growth
forecast for 2008 of 0.7%. During the course of the year, the world economy deteriorated further, with
progressive downward revisions of GDP estimates, which, from figures released in February 2009, ended
2008 for the third time from the end of the Second World War to today, with a negative change of -0.9%.
The level of consumption was also shown to have dropped, for the second time in the last fifteen years.
The deterioration of the economic environment has had a negative impact on the advertising market, which
as a whole showed a negative change in the first nine months of the year (source: UPA).
The online advertising market, although growing with respect to 2007, also declined in the second part of the
year. According to data published by IAB (Interactive Advertising Bureau), in 2008 Internet advertising
grew by approximately 23% with respect to 2007, which is a slowdown compared with 2007 (+41.4%) and
initial expectations. The fact however remains that, in the current period of economic crisis, Internet
advertising continues to grow faced with the desire of advertising investors to expand the use of this new
media even in a general context of advertising budget stability or reductions.
These trends confirm the correctness of SEAT’s strategy in developing a multimedia offer, with an ever
greater weighting given to the online component, supported by continuous innovation in the offering and
reinforcement of the consulting and sales capacity of its distribution networks within Italy.
Change in the situation with regard to competition
The Issuer operates in the traditional advertising market (understood as that related to TV, radio and
newspapers) in which it has a 10% share at national level (Source UPA, for further information see Section
One, Chapter 6, Paragraph 6.2) and a share of nearly 47% in traditional local advertising (Source: UPA for
local newspapers and television, SEAT Group data processing for radio). In this market it has competed for
years with the other local media (newspapers, radio, television) and with other forms of communication
inherent to SMEs (direct marketing, promotional material, gadgets, sponsorships). Thanks to this SEAT is
the third largest media company in Italy by advertising revenue, after the two large television franchises and
ahead of the national publishing groups (Source: Corporate financial statements of the Issuer and Broker
reports).
As in the world of traditional media, also the new advertising market on the Internet is competitive, with
specialised operators, such as portals and search engines, which compete with businesses from the traditional
advertising market. In this market, SEAT was one of the first companies to launch, as far back as 1996, a
website dedicated to searching for products and services, a factor which has enabled it to become one of
today’s business leaders, with a share of 19-20% of the entire online advertising market (local and national
advertising) (source: IAB) and 45-50% in the market of purely local advertising (source: SEAT Group data
172
Section One
processing using IAB data). At the same time, the significant growth in Internet advertising and the crisis in
traditional media such as newspapers and magazines has led new entities to enter the online advertising
segment. In this connection the ongoing growth of the activities of large search engines (Google, Yahoo,
MSN), the initiatives of the publishing groups L’Espresso and Rizzoli Corriere della Sera, which have
strengthened their activities in the Internet area, and Telecom Italia, which has launched “io Pubblicità”, a
new multi-platform advertising product (Internet and telephone) dedicated to SMEs at the local level, are
noteworthy. At the same time, however, at the end of December 2008, Pagine Utili, which had a share of
about 2% of the market for paper and online directories, announced the dissolution and placement into
liquidation of its company, faced with the recent deterioration in its operating performance owing to
increased competition and the worsening economic situation.
Development of the Issuer’s business
During 2008 and within the context of a progressively contracting advertising market, SEAT has accelerated
its investment in development of activities in the Internet business area. This initiative, which has led to the
launch of several new products and the strengthening of the sales network, has allowed it to contain the
shrinkage in turnover, and has been accompanied by decisive cost-containment initiatives, which have
however not diminished the resources dedicated to developing the business.
In terms of innovation, the following are particularly noteworthy:
•
Products. The Internet offering was recently strengthened by investing in content
development and the functionality of the SEAT website, and by launching various new
products:
º
on the Paginegialle.it website, new types of advertising presence have been launched
with reduced content and lower prices compared with existing ones, in order to
favour the adoption of the Internet medium by current and potential small
customers. For medium- and large-sized customers, new value-added services have
been launched instead, which guarantee higher appearance priority on the
Paginegialle.it site and greater visibility in general search engines (in particular
Google);
º
on the Paginebianche.it website a new form of paid content has been introduced
which allows everyone who is on the alphabetical list of PAGINEBIANCHE to
obtain a dedicated website on Paginebianche.it enriched with value-added
information linked to the availability and the possibility of being contacted by users.
•
Queries. Internet traffic on the SEAT sites has benefited from the investments made to
improve the functionality of the Paginegialle.it and Paginebianche.it websites, with a benefit
in terms of user satisfaction and direct traffic on the SEAT sites, and the adoption of a new
development strategy for indirect traffic coming from third-party sites. The latter, in
particular, has gone from an approach based on agreements with Italian portals to a new
approach intended to maximise the ability to generate traffic from general search engines
(most of all Google).
•
Sales force: the sales network was strengthened by recruiting new salespeople, with
particular attention focused on the new position of Internet specialists, dedicated to servicing
current and potential customers for which Internet products are of greater importance than
other products.
Foreign subsidiaries
As regards the principal foreign companies, the TDL Group – present in the English directory market since
1980 – faced a particularly difficult market situation in 2008, one that had evident repercussions on other
market operators as well. In particular, the English economy, after having shown an increase in GDP in 2007
(by 3.1%), in 2008 entered a period of near stagnation (+0.7% according to the estimate by the European
Commission). In this context, the TDL Group has undertaken, starting in 2006, a process of renewing its
products offered with significant product innovations accompanied by a new organisation of the sales
173
department and a reclassification as an online media agency, capable of supplying SMEs with 360-degree
service for their presence on the Internet.
With regard to the Telegate Group, the German market, which has recorded a slowdown in growth in GDP
from +2.5% in 2007 to an anticipated +1.3% (Source European Commission), is also evidencing a year-overyear contraction in call volumes. Telegate – operating with the 11880 portal services and the second largest
operator after the former monopoly holder Deutsche Telekom (Source: Telegate Group data processing) –
has therefore pursued a strategy of enriching products offered with value-added services that have allowed
the company to increase its market share, ending 2007 at 38% versus 37% in 2006 (Source: Telegate Group
data processing). Also with the aim of facing the structural decline in the market, Telegate has launched an
online information search portal, based on a recognised brand and on the quality of the database, and has
developed a sales structure specifically aimed at gaining advertising. In 2008, with the objective of
accelerating growth in multichannel products, a controlling interest was acquired in KlickTel AG (now
Telegate Media), a company operating in the online directory market.
13.1.4 New 2009-2011 Strategic Plan
On 12 February 2009, the Board of Directors of SEAT confirmed the guidelines (first approved on 23
December 2008) of the new Strategic Plan that defines the strategic objectives for the 2009-2011 period and
confirms the strategic directives defined in March 2008 aimed at safeguarding the Company’s high level of
cash generation in a phase of economic recession, and transformation of the business related to the advent of
the Internet as a means of mass communication.
The Strategic Plan is the result of a forecast process relating to the economic, capital, and financial size of
the SEAT Group, including the Capital Increase which has been resolved upon for the purposes of the
Offering. The primary objective in the short term is in fact recovery of the Company’s operating flexibility,
necessary to guarantee an adequate investment capacity, in particular in Italy, for the development of the
Internet business. This injection of liquidity will moreover enable managing with greater flexibility the
process of valuing the holdings in some foreign subsidiaries, which today is penalised because of the
unfavourable market situation.
The Strategic Plan was created with significant involvement by SEAT’s management, starting with the
closing data at 30 September 2008, and it has involved an estimate of the main economic, capital, and
financial figures at 31 December 2008, described above.
The prospective financial information, related to the period of the Strategic Plan, were prepared taking as a
reference the IAS/IFRS accounting principles used by the SEAT Group to prepare the consolidated financial
statements for the financial year ended on 31 December 2007 and the interim condensed consolidated
financial statements for the first half period ended on 30 June 2008.
The forecast financial information on the business and the activities and target results expected for the SEAT
Group are based on assumptions concerning future events, which are subject to uncertainties (such as those
used for the expected macroeconomic situation and changes to the financial markets).
In particular, the forecast financial information are based on a set of estimates and assumptions about certain
future events and actions that will have to be undertaken by the Company’s directors.
The forecasts expressed in the 2009-2011 Strategic Plan also include hypothetical assumptions about future
events and actions by the directors and management that may not necessarily occur and events and actions on
which the directors and management may not or may only partially have an influence, regarding the trend of
the main financial and economic indicators, or other factors that influence its changes.
In this respect note should be taken of the current economic context, one characterised by a recession and
significant uncertainties which have no analogies in recent history.
Within this economic context, the forecast financial information assumes the positive conclusion of the
Capital Increase, and an evolution and change in the activities of the SEAT Group, with a business focus on
the directories activities in Italy, increasingly moving from print to online, even in the presence of a change
in management.
174
Section One
In particular, 50% of the proceeds from the share capital increase will be allocated to early repayment of
Tranche A of the RBS Loan (a commitment accepted by RBS, along with the other conditions of the Waiver
Request, by means of the acceptance thereof dated 22 December 2008). The remaining amount will be used
by the Company to achieve, among other things, the goals outlined in the guidelines of the Industrial Plan.
However, attention is called to the fact that, in terms of such goals and timing of their achievement, in
preparing the Industrial Plan the company did not allocate any of the proceeds generated by the share capital
increase. Most costs and investments envisaged in the Industrial Plan (focused mainly on product
development, the recruitment of new agents and advertising) will be financed with the Issuer’s cash flows
from operating activities, with planned cost reduction and effective management of operating costs. Net
proceeds from the share capital increase will be used mainly by the Issuer to keep sufficient liquidity over
the period covered by the Industrial Plan to cover any risk associated with market trends. The main effect of
a negative or partially negative outcome of the share capital increase for the Industrial Plan would be a lower
level of available cash.
13.1.5 Main assumptions on which the strategic 2009-2011 objectives are based
The Strategic Plan is based on certain assumptions regarding changes to the economic environment,
formulated by elaborating forecasts prepared by qualified economic research centres, and on the growth
dynamics of the reference market. The directors and management have no influence on these assumptions on
changes in the reference market.
Italian Market
Macroeconomic Situation
The following changes in particular are forecast in the Italian economy:
•
on the date on which the Strategic Plan was prepared the forecasts were for a contraction of
2009 GDP by approximately 0.5-1%. The further worsening of the macroeconomic context
in the last few months, with a GDP contraction in 2008 of 0.9% (Source: ISTAT February
2009) leads to a more conservative estimate, with 2009 GDP now estimated to decline by
2.5%, with the acknowledgement, by all the main research institutes, of evident difficulties
encountered in preparing forecasts in the current market context;
•
the Strategic Plan includes the assumption of a slight improvement in the economy in 20102011, with 2010 GDP estimated to record a change of 0-0.5% (Source: EU Commission,
January 2009) and an increase of around 1% in 2011 (Source: Italian Government). The
profile of the upturn will also depend, however, on external factors, and in particular on the
performance of economies with which Italy has the greatest export flows, whereas the level
of domestic consumption is estimated to grow only to a limited extent, faced with an
available household income that is forecast to remain under pressure.
Reference Market
The following dynamics are forecast for the market in which SEAT operates in Italy:
•
it is forecast that the recessionary economic situation will have an impact on the traditional
advertising market growth, which already in the second part of 2008 saw a significant
slowdown, above all in the national advertising component, and with a decline in business,
in particular in magazines and periodicals. The online portion, however, is forecast to
increase significantly (+20% in 2009, according to the most recent estimates provided by the
IAB – Interactive Advertising Bureau), although at a rate below that recorded in 2007;
•
the advent of the Internet as a mass medium, as described in Section 13.1.2, and the strong
development of the online advertising market, has attracted, and it is forecast will continue
to attract, new operators, thus increasing the level of competition. First, SEAT will continue
to compete, as has already been occurring for some years, with new operators in the new
economy, first of all with the large international search engines (Google, Yahoo, MSN).
Secondly, new entities are entering the market such as for example Telecom Italia, which
175
last autumn further strengthened its own activities in the online advertising market with its
“io Pubblicità” initiative;
•
the dynamics of queries directed to SEAT media on the different platforms (print-voiceonline) will be influenced, as has happened in the past, both by elements related to the
business situation (which act in the short-term), and by the increase in Internet penetration
(which operates over the medium- and long-term). In the initial phase of the recession, the
queries total amount will be under pressure because of the fact that families will tend to
reduce their purchases and, as a result, there will be less need to do searches using SEAT
media. Thereafter, as has happened in the past, an increase in queries is forecast, when
families start purchasing again, and they will be, precisely because of the economic crisis,
even more selective in searching for suppliers of goods and services. To this dynamic,
related to the business situation, is added the effect of the increasing presence of the Internet,
with the progressive change in the mix of queries from print media, declining, to the
Internet, growing. This dynamic is nevertheless a medium- to long-term development, since
it is related to demographic factors and the spread of technology which, in Italy more than in
the countries of Northern Europe, tends to be progressive rather than discontinuous. For this
reason, beyond the changes coming from the economic context, it is believed that the total
volume of queries on SEAT media will retain a profile in future that will allow it to
guarantee an adequate return on investment for its advertising customers.
With regard to the principal foreign companies, the TDL Group and the Telegate Group, it is forecast, within
an increasingly uncertain macroeconomic context, that the principal market trends that have characterised
2008 will be maintained. The TDL Group will continue with its strategy aimed at a market position as an
online media agency so as to provide 360-degree services to SMEs in relation to their presence on the
Internet. The Telegate Group will face the forecast contraction in call volumes with a strategy of enriching
the offer of value-added services and of gaining more online and multi-channel advertising, which will also
be thanks to the synergies with the company KlickTel AG (now Telegate Media), a company active in the
online directories market.
13.1.6 Strategic guidelines for the 2009-2011 Strategic Plan
The forecast for the scenarios described above have been created taking account of the action that the
directors and management intend to take to reinforce the Company’s position in the market, based on
assumptions related to factors which the directors and management may, in part, be able to influence.
The following is a summary of the guidelines for the Strategic Plan:
•
confirming strategic direction with a view toward developing the business in Italy, in
particular the Internet business, and focusing on activities sustaining the core business
through an increase in investments in product innovation, promoting services and
strengthening the sales network;
•
implementation of a programme (already defined) to reduce costs to sustain investments for
growing the business and generating cash to service repayment of the debt.
Italian market
In Italy, the Company has set itself the following objectives:
•
176
maintaining the current share of advertising investment on the SEAT media on the part of
existing customers, through continuous improvement of the offering and the market position
of the Company as an online media agency for high-segment customers;
Section One
•
•
growth in Internet income through:
º
strengthening existing supply by developing new content and functionality on the
SEAT sites to satisfy the communications requirements of the current customer
base;
º
acquisition of new online customers, thus leveraging the enlargement of the Internet
market;
º
investment in advertising and SEO (Search Engine Optimisation), taking advantage
of the potential of the Internet, which revolves around search engines, to increase the
use of SEAT media; and
stabilisation of the customer base by rebalancing the churn between departing existing
customers and the acquisition of new ones, by recruiting new agents and improving the
performance of existing ones.
These objectives will be pursued through a detailed action plan whose basic elements are described below.
Over the years SEAT has successfully developed the business model of “directed” advertising based on
gathering advertising information from businesses which is then made available to anyone, families and
businesses, who needs to acquire goods or services. This model has been transformed over time from the
print medium to the new telephone and digital platforms and is based on a large amount of information that
SEAT collects from several sources, including its own sales network, and organises using skills developed
over the years. This has allowed the company to become the third largest business in Italy with regards to
advertising market revenues after the two large television concessionaries and to be a leading company
within the local advertising segment and the online advertising segment.
SEAT believes that its media will continue to be appreciated and used by families and businesses even in the
new multimedia world that has been establishing itself in recent years. In particular, on the Internet the
company has for some time been asserting the quality of its own content, which is able to respond in a timely
manner to the search requirements of its users, positioning the SEAT search engines as a complement to the
general ones and to portals. This has led to a significant increase in traffic, which grew in 2008 by more than
25% with respect to 2007 (Source: Nielsen/Netratings) and which during the period of the Strategic Plan will
be sustained by further investments in advertising.
In recent years SEAT has been able to effectively monetise the growing volumes of traffic on its Internet
sites, thanks above all to continuous innovation of the services offered, innovation which starting from 2007
has been maintained at intense levels. This has made the search engine Paginegialle.it the preferred
instrument of SEAT customers to promote themselves in the online world, thanks to the visibility offered to
its advertisers and the competitiveness of its prices. The Company’s plans are to continue with the business
of innovating its product offering to give even greater visibility to those who have already acquired positions
on SEAT’s sites and to attract new customers to those platforms, bearing in mind that as of today nearly
three-quarters of SEAT’s customer base have not yet acquired services online.
The increased turnover of the online component of business will be mostly realised, above all during the
present recession phase of the economy, by transferring advertising resources from print media to the
Internet. The speed at which this will happen, leading to a fall in income from print and an increase in online
income, depends on a wide range of factors and is more difficult to forecast than the evolution of total
turnover. This is forecast to decline slightly in 2009, with a stabilisation and a progressive recovery in 20102011, reflecting the progressive recovery in the economy expected in those years. This dynamic of turnover
will be supported by a stabilisation of the customer base, which over recent years has undergone a
contraction because of the lower influx of new customers, as a result of the process of retraining the sales
network (with a fall in the number of agents) and the increased time dedicated to servicing existing
customers, in a phase of expanding the range of products. These dynamics, which have already seen a
turnaround during 2008 (with a recovery in the number of agents and a simplification of the product line) are
forecast to continue in the coming years, allowing SEAT to stabilise the size of its customer base which, with
approximately half a million customers, is the broadest among media undertakings in Italy. At the same time,
it is not forecast that turnover in the print portion of the business will be substantially resized in the next
three years, because the usage profile of this medium will in any case remain high. Moreover, in order to
sustain it, the Company will continue with the business of improving product distribution and innovation,
with a view toward adjusting availability and content to the evolution of the profile and of the requirements
177
of users. In virtue of these dynamics, the relative weight of the Internet in total turnover will increase
significantly and it is forecast that it could move from around 15% in 2008 to over 25% in 2011.
In terms of changes to the turnover mix, it is forecast that SEAT will be in a position to maintain its high
operating margins. First, the high returns that its services offer to advertisers and the large operational scale
have in recent years allowed the Company to bring margins for the new online services up to levels
comparable to those of print products, and it is forecast that this situation will continue thanks to ongoing
product innovations and increased traffic. Secondly, SEAT has already planned a series of steps concerning
operational and organisational aspects aimed at reducing its cost structure, benefiting from new computerised
procedures (in particular, the SAP platform launched last January) and from the possibility of reviewing the
operational processes, which has been made possible precisely because of the ever-increasing weight of the
online component of the business. It is forecast that all of these factors combined will lead to the Company
maintaining in 2010-2011 a level of margins substantially in line with the historic one.
In the implementation of its operating plans SEAT is faced with a series of risks, whereby the external
component, related to market dynamics, is greater than the internal component related to its own operating
capacity.
With regard to foreign business, in the spring of 2008 SEAT started a strategic review process of its portfolio
of holdings, and entrusted to a top-ranking investment bank the analysis of possibilities for enhancing the
value of its foreign subsidiaries. With that in mind, and consistent with the strategic decision to focus its own
resources on the Italian business, on 23 December 2008 the Company reported finalisation of the disposal of
100% of the share capital of WLW (for further details see Section One, Chapter 5, Paragraph 5.1.5.5). As
regards other international assets, the current market situation does not allow, in a short period, for plans for
further divestitures because of the high degree of uncertainty regarding the future economic situation and, as
a result, the individual subsidiary companies are now focused on executing their respective operating plans,
with a view toward confronting the specific market position in which each operates. Specifically:
•
Telegate will continue its strategy of developing a business online model, which will be
added to the current one covering telephone assistance services, levering the acquisition of a
controlling interest in KlickTel AG (now Telegate Media) (completed in the first quarter of
2008), a company active in the online directory market, to accelerate the move into its new
multichannel strategy;
•
Thomson will aim to preserve its value during a phase characterised by a particularly
negative environment in the United Kingdom, managing in the meantime the progressive
evolution of the mix of income resulting from the development of the Internet and adjusting
at the same time its cost structure in order to increase efficiency and defend operating
margins;
•
Europages will be progressively focused on sustaining SEAT’s business in the Italian
market, with the objective of strengthening the range of services offered to most
sophisticated B2B companies. To this end Europages’ Internet platform, historically used for
export-dedicated services, will be used to implement a new platform for the domestic market
in Italy.
13.1.7 Main objectives of the 2009-2011 Strategic Plan
The primary objectives at the base of the Strategic Plan with respect to the Group, to the Business Directories
Italy area (SEAT), and the other companies are illustrated in summary form below.
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Section One
13.1.7.1 Group Data Forecast
(€ million)
EBITDA
Net Debt/EBITDA
2009E
~560
~4.9
(€ million)
Operating FCF
2011E
>580
~4.0÷4.1
2009E-2011E cumulative
>1,500
Group
•
In 2009 the SEAT Group’s EBITDA is estimated at around € 560 million, faced with greater
investment in Italy dedicated to developing the business and taking advantage of existing
market opportunities; starting in 2010, a recovery of EBITDA is expected based on the
recovery of Italian activities, with a forecast consolidated EBITDA figure in 2011 greater
than € 580 million. The contribution of the other companies (in particular foreign non-core
activities) is however expected to be greater than € 65 million in 2009, with a dynamic
forecast to improve slightly in 2010/2011;
•
in 2009/2011 cumulative operating cash flows are expected to be over € 1,500 million; this
will allow the Group to pursue the scheduled reduction of the debt, with a target for the end
of 2011 (and before any divestitures) of approximately 4÷4.1 of the Net Financial Debt /
EBITDA ratio, compared with approximately 5.1 in 2008. The Strategic Plan moreover
provides for industrial investments (Capex) to support the activities described above (in
particular the development of Internet products thanks to savings in the Information
Technology area which will be possible through use of the SAP platform) (for further details
see Section One, Chapter 5, Paragraph 5.2.3).
13.1.7.2 Provisional Data Directories Italy (SEAT)
(€ million)
Total Income
% online income
EBITDA
2009E
< (5%)
18÷20%
>490
2011E
Greater than 2009
>25%
Greater than 2009
Revenues
•
In 2009 the persistence in Italy of a phase of economic recession will have a negative impact
on the growth of revenues, which are forecast to decline by a maximum of 5% with respect
to € 1,059 million in 2008. In particular, with respect to the mix of income from print and
online products, the forecast speed of the migration process will depend on external factors
(such as the economic context) and internal ones (marketing policies). In any case, during
the 2009-2011 three-year period, significant growth is still planned (around 20% on average
per year) in Internet revenues, which are estimated to be more than 25% of total income in
2011;
•
the activities performed and the increased resources allocated to business development are
forecast in 2010/2011 to show a recovery in income. In 2011 income is forecast to be above
the value forecast for 2009 thanks to the partial recovery of the economy and the first effects
of the investment strategy launched in 2008 and planned for 2009.
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Business development costs and investments
The Strategic Plan forecasts using greater resources both in terms of costs and in terms of focused
investments in order to sustain the improvement of the range of products offered, the growth in queries on
SEAT media and the increase in market share. In more detail the costs / investments will be focused on:
•
product development: it is planned to strengthen the product development team, and an
increase in the resources used to improve the range of existing products, through an
investment strategy designed to further develop content and functionalities, in particular of
the SEAT sites, and to increase usage by taking advantage of the potential of the Internet
system, which revolves around search engines;
•
sales network: recruiting new agents to obtain new customers for whom Internet products
will predominate compared with other products;
•
advertising: maintenance of the current level of investment in the telephone platform, in
order to sustain traffic volumes, and increased investment dedicated to launching a new
advertising campaign, focused on the Internet business, to improve product awareness and
awareness of the SEAT brands and the perception of customers, in order to support queries.
Operating costs
In order to maintain high margins throughout the Strategic Plan, and to generate cash to service repayment of
the debt, apart from increased resources dedicated to developing the sales force and product awareness and
the SEAT brands, a plan to reduce and effectively manage operating costs is envisaged during the course of
the next three years, within a context of limited income growth. In particular, the following are expected:
•
detailed analysis, with the support of an external consulting company, of the operational costs
planned for the 2009 budget in order to identify potential cost efficiencies in the short term;
•
reengineering of internal processes to adjust the Company’s organisation structure to the increased
strategic focus on online activities and the progressive migration of the business’s income from print
products to Internet products. In particular, this strategic process of reviewing processes is planned
to lead to savings:
º
in industrial, overhead, administrative, and back office costs, also with the help of systems
introduced to manage customer care activities and to manage credit and collections, and the
integration of sales and administrative back office processes (CRM “Customer Relationship
Management” and SAP “from order to cash” Project);
º
in costs related to a business organisation based on print products, which are planned to be
reduced within the framework of the migration toward an online-based business; and
º
in capex, thanks to the redesign of the information systems started in 2005, which should be
completed in 2009.
Overall in the short term (2009) a cost efficiency target estimated at around € 10 million has been identified.
During the 2009-2011 Strategic Plan period a total target as at the end of 2011 of approximately € 35 million
is forecast.
Provisions for impaired receivables and risks
In 2008, to reflect a more prudent approach by the Company in an unfavourable economic environment, the
provision for impaired receivables and risks was increased from 2.7% to 3.5% of income. During the
Strategic Plan period it is presumed that this reserve will allow the negative effects of the worsening
economic environment to be offset, and therefore a further increase in the reserve is not planned. In terms,
however, of the allowance for commercial risks a decreasing trend is forecast, thanks to the constant
monitoring of the business and the customer care processes and the diverse mix of income between print and
online products, which will allow for a reduction in the number of claims related to errors in contract
performance.
180
Section One
EBITDA
The EBITDA from business in Italy as a result of the aforementioned actions provided for in the Strategic
Plan, both from the point of view of income and of costs and reserves, is forecast to perform as follows:
•
in 2009, EBITDA is forecast to reach an amount in excess of € 490 million, a decline
compared with the preceding financial year, due to the effect of the increased investments in
Italy to support awareness of the SEAT products and brands and the strengthening of the
sales network, in a year where a decrease in income is forecast;
•
in 2010/2011, the growth in income should allow the negative trend of 2008 and 2009 to be
reversed, and EBITDA should start to grow, in 2011 reaching an amount greater than the
2009 figure thanks to the benefits derived from the cost reduction strategy and the benefits
of increased resources dedicated to strengthening the sales network and the brand.
13.1.7.3 The Group’s operating performance in the first months of 2009
The Group’s revenues and EBITDA in the early months of 2009, until the Date of the Prospectus, do not
show significant deviations from the 2009 projections reported in the Prospectus, also due to the historically
low revenue levels generated in this period (below 6% of the total) and the losses in the early months of the
year due to the seasonality of the business.
13.2 Independent Auditors’ Report on prospective financial information
The Independent Auditors have issued a report related to the procedures performed on the prospective
financial information for 2009-2011 of the Issuer indicated in this Chapter. A translation of the
aforementioned report is attached to the Information Prospectus.
13.3 Basis of preparation of the forecasts or estimates of profits
The accounting principles adopted for preparing the forecast financial information are consistent with those
used for the consolidated financial statements at 31 December 2007, and the consolidated semi-annual
reports at 30 June 2008, prepared in accordance with IFRS as adopted by the European Union.
13.4 Forecasts of profit published in another information prospectus
As of the date of the Information Prospectus there are no other valid prospectuses which contain forecasts
regarding the Issuer’s profit.
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14
BOARD OF DIRECTORS, EXECUTIVE COMMITTEES AND SUPERVISORY BOARDS
14.1 Information on the Board of Directors, Executive Committees and Supervisory Board
14.1.1 Board of Directors
Pursuant to Art. 14 of its Bylaws, the Issuer is governed by a Board of Directors consisting of a minimum of
seven members and a maximum of twenty-one.
The Shareholders’ Meeting of 27 April 2006 appointed the Board of Directors for the 2006-2008 period,
setting the number of members at thirteen.
On the date of the Information Prospectus, the Board of Directors consisted of the following members.
Office
Chairman
Chief Executive Officer
Director
Director
Director
Director
Director
Director
Director
Director
(*)
Name and surname
Enrico Giliberti
Luca Majocchi
Dario Cossutta
Michele Marini
Luigi Lanari
Pietro Masera
Antonio Belloni (*)
Carmine Di Palo (*)
Nicola Volpi
Marco Lucchini
Lino Benassi
Alberto Giussani (**)
Naples, 29 June 1945
Monza, 24 May 1959
Monza, 27 July 1951
Cortina d’Ampezzo (BL), 15 August 1963
Léopoldville (Zaire), 13 November 1958
Milan, 17 November 1968
Genoa, 24 March 1950
Florence, 21 February 1971
Milan, 3 October 1961
Mantua, 25 September 1968
Trento, 2 December 1943
Turin, 4 February 1942
Varese, 23 August 1946
The Shareholders’ Meeting of 19 April 2007 appointed the directors Antonio Belloni and Carmine Di Palo, already coopted to the Board of
Directors on 10 October 2006.
(**) The Shareholders’ Meeting of 26 January 2009 appointed director Alberto Giussani, already coopted to the Board of Directors on 23 December
2008.
All the members of the Board of Directors are domiciled for purposes of their office at the company’s
registered office.
Below, a brief biography of each director is given, containing information on their business management
skills and experience.
Enrico Giliberti, born in 1945. After an internship in New York at the Cahill, Gordon & Ohl law firm, he
worked at the international law firm Ughi and Nunziante. He was a member of the Erede, Bianchi e Giliberti
law firm, founder of the Colesanti, Giliberti, Nobili law firm, and co-founder of the Biscozzi, Giliberti,
Nobili law firm. He is currently senior partner at the Giliberti, Pappalettera, Triscornia e Associati law firm.
He is specialised in corporate law, securities markets, and mergers and acquisitions. He is a member of
business arbitration panels in Italy and abroad. He is currently an independent director at Telco S.p.A. He
graduated in Law at the Università di Napoli and earned a Master of Comparative Jurisprudence in 1969 at
New York University.
Luca Majocchi, born in 1959. In 1996 he joined Unicredito Italiano where he was recently appointed the
chief executive officer of Unicredit Banca and became head of the Unicredito Italiano Retail Division. From
1987 to 1991, he worked at Pirelli, and from 1991 to 1996 he was an associate and later Senior Engagement
Manager at McKinsey & Company. He graduated in Physics at the Università di Milano, earned a Master in
Management Engineering at Politecnico di Milano, and a Mini-MBA in Finance and Economics (McKinsey
& Co.). He is also currently Chairman of Thomson Directories and TDL Infomedia, a member of the
Supervisory Board at Telegate AG, Chairman of Katalog, and director at Eniro AB.
Antonio Belloni, born 1950. In his career he has served as chief executive officer for various companies,
including most recently Camfin S.p.A. and De Agostini S.p.A. During his time at De Agostini S.p.A., he
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Section One
managed various group companies and the group’s diversification through numerous acquisitions, including
Lottomatica S.p.A. and Toro Assicurazioni S.p.A., of which he was chairman. He is currently the chief
executive officer and vice-chairman of BC Partners. He has served as director for various companies,
including Capitalia S.p.A. He graduated in Economics and Business at the Università di Genova.
Lino Benassi, born in 1943. From 1963 to 1994, he worked at Banca Commerciale Italiana in several
capacities as director and in 2000-2001 he served as chief executive officer. From 1995 to 2000 he was
general manager and chief executive officer at INA S.p.A. and also served as chief executive officer of
Banca IntesaBci from 2000 to 2002. In 2003 he was nominated Grande Ufficiale al Merito della Repubblica
Italiana. His main offices have been as chairman of Caboto SIM, chairman and general manager of Banque
Sudameris (Paris), vice-chairman of Banco di Napoli Holding, director of Banco di Napoli (member of the
executive committee), director of Banca Nazionale del Lavoro (member of the executive committee), vicechairman of ABI, vice-chairman of Compagnie Monegasque de Banque, and chairman of Toro Assicurazioni
S.p.A. He is currently chairman of Banca Italease S.p.A. and of Credit Suisse (Italy) S.p.A., director of De
Agostini S.p.A., DeA Capital S.p.A. and Zignago Vetro S.p.A.
Dario Cossutta, born in 1951. Currently one of the Issuer’s non-executive directors. From 1980 to 1999, he
worked at Banca Commerciale Italiana as head of industrial economics, M&A and the primary market, and
in the investment banking division. He became chief executive officer of Sviluppo Italia in 1999. Since 2001
he has served as chief executive officer of Investitori Associati. He graduated in Statistics at the Università di
Roma and earned a Doctorate in Economy at Cambridge University. Mr. Cossutta is likewise director of La
Rinascente S.r.l., Upim S.r.l., Labochim S.p.A., Infa Group S.p.A., Sifavitor S.r.l., Cisalfa Sport S.p.A.,
Alberto Aspesi S.p.A., and Mer Mec S.p.A.
Carmine Di Palo, born in 1971. From 1997 to 1999 he was a consultant at Bain & Co. Currently partner at
BC Partners, which he joined in 2000. He graduated in Chemical Engineering at the Politecnico di Milano
and he earned an MBA at MIT Sloan School of Management in Cambridge, Massachusetts.
Alberto Giussani, born in 1946. He was coopted by the Board of Directors on 23 December 2008. He
graduated in Economics and Business at the Università Cattolica di Milano, and is enrolled in the Register of
Chartered Accountants and the Register of Independent Auditors. Mr. Giussani teaches Professional
Techniques and International Accounting courses at Università Cattolica di Milano. He is on the board of
directors of Credito Artigiano S.p.A. and Fastweb S.p.A., and he serves on the board of statutory auditors at
Mediaset S.p.A. Since 2001 he has been a member of the Standard Advisory Council of the IASC foundation
for the setting of international accounting standards; since 1981 he has been a member of the Accounting
Standards Commission for Chartered Accountants and Bookkeepers, and he is currently vice-chairman of the
Scientific Technical Committee of the Italian Accounting Board. He was chairman of the Italian Auditors
Association (Assirevi) from 2004 to 2006 and director from 1980 to October 2006; chairman of the
Associazione Ludovico Necchi (association of graduates from the Università Cattolica). He is a member of
the Board of Auditors for Biblioteca Ambrosiana and Caritas Ambrosiana. He was also a member of the
working group for the revision of the Code of Self-Discipline for listed companies, member of the Board of
Auditors of Borsa Italiana before its privatisation, and partner until 30 June 2007 in the independent audit
firm PricewaterhouseCoopers. During his career as auditor, he has managed the audits of major Italian
companies, including some multinationals, listed in Italy and the United States.
Gian Maria Gros-Pietro, born in 1942. From 1965 to 2004 he taught Economy at the Università di Torino.
Since 2004, he has managed the Department of Economic Sciences and Business at the Università LuissGuido Carli di Roma. From June 1997 to November 1999 he was chairman of IRI. From December 1999 to
May 2002 he was chairman of ENI. He is currently chairman of Atlantia S.p.A., Autostrade per Italia S.p.A.
(Atlantia Group) and Perseo S.p.A., and director of Fiat S.p.A. and Edison S.p.A.
183
Luigi Lanari, born in 1958. From 1984 to 1986 he worked at Banca Nazionale del Lavoro, New York. In
1987 he worked at Citicorp Finanziaria (Citifin), Milan. From 1988 to 1993 he worked at Citibank London
and Milan. He is currently a partner at CVC Capital Partners where he has worked since 1993, as well as
chief executive officer of the Milan branch. Mr. Lanari graduated in Economics and Business at the
Università di Roma, earned a Commercial Lending Certificate at New York University, and a Master in
Science of Management at MIT Sloan School of Management in Cambridge, Massachusetts. He currently
serves as executive director at CVC Capital Partners S.r.l. and director at Cartiere De Garda S.p.A. Lecta SA,
Sub Lecta 1 SA, Sub Lecta 2 SA, Samsonite Corporation, Vespucci (Holdings) LLP, and T&PSs.
Marco Lucchini, born in 1968. He is investment manager at Permira where he has worked since 2003 at its
Milan office. Since 1994 he has worked for PricewaterhouseCoopers in the Transaction Services division in
Milan, Hamburg, and Detroit. From 2000 to 2003 he worked for the management consulting company AT
Kearney in Milan. He is currently director at Schroder Associati S.r.l. He graduated in Business Economics
at Università Bocconi di Milano.
Michele Marini, born in 1963. Since 2000 he has been a partner at Investitori Associati. From 1991 to 2000
he worked at Banca Commerciale Italiana in several departments: in particular, from 1996 to 2000 he was
deputy manager of the Investment Banking Division. He has been on the board of directors of several
companies. He is currently a director at Investitori Associati SGR S.p.A., Grandi Navi Veloci S.p.A., and
Industrie Ilpea S.p.A. He graduated in Economic and Social Sciences at the Università Bocconi di Milano.
Pietro Masera, born 1968. From 1994 to 1998 he worked at UBS in Zurich, Paris, and London. From 1998
to 2001 he worked at Deutsche Bank, London. He is currently director at CVC Capital Partners S.r.l. where
he has worked since 2001. Mr. Masera graduated in Economics and Business at the Università di Bergamo.
Nicola Volpi, born in 1961. In 1987 he began working at Sefimeta, Montedison Group, in Milan, in the new
financial products development division. From 1988 to 1995, at San Paolo Finance, the merchant bank of the
San Paolo Group, he served as vice-manager of corporate finance and equity investments. Currently chief
executive officer at Permira S.p.A., and director at Sisal S.p.A. and Sisa Holding Finanziaria S.p.A. He
graduated in Economics and Business at the Università Bocconi di Milano.
No member of the Issuer’s Board of Directors has family relations with the other members of the Board of
Directors, with the members of the Board of Statutory Auditors, or with the Company’s General Manager for
Italy.
Furthermore, as far as the company is aware, no member of the Board of Directors has in the past five years
reported any conviction for crimes of fraud, nor has anyone been involved, during and for the aim of his
office, in bankruptcy, receivership or liquidation procedures, nor, finally, subject to official indictment or
fined by government or regulatory authorities (including designated professional associations) or
interdictions by a court from the office of member of the Issuer’s board of directors, executive boards or
supervisory boards, or from serving as executive or manager of any issuer.
On 27 April 2006 the Board of Directors conferred executive powers to the company’s chief executive
officer (the “Chief Executive Officer”). Otherwise, the chairman of the Board of Directors (the
“Chairman”) does not have any delegated power, and has solely the power of setting guidelines and control
pursuant to law. The Chief Executive Officer’s ordinary and extraordinary powers of administration may be
exercised up to a maximum amount of € 10,000,000, though there are particular limits in place on certain
types of acts.
The only director with executive powers is the Chief Executive Officer Mr. Luca Majocchi.
The Chairman of the Board of Directors, within the scope of the tasks assigned to him, ensures that the
meetings of the Board of Directors: (i) provide, as a general practice, for the participation of the company’s
financial officer and the General Manager for Italy, in part to provide the necessary information support to
184
Section One
directors that need clarifications concerning company procedures; (ii) provide for the participation of
company members with direct involvement when the meetings examine specific issues of company interest
to ensure the timely execution of the matters that the directors are responsible for; (iii) take place in an
orderly way at the company’s offices, in part to allow for the setting up of follow-up meetings with the
company’s management to allow more in-depth exploration of company issues.
At least quarterly, the Chief Executive Officer informs the Board of Directors and the Board of Statutory
Auditors of actions taken, of the general operating performance, of expected developments, and of operations
that the company or its subsidiaries have executed with a significant impact on the Group’s capital structure,
profit and loss account, and financial standing.
The table below shows all the joint-stock companies and partnerships of which the members of the Board of
Directors have been members of their boards of directors, executive committees or supervisory boards, or
partners in the past five years, including their status on the date of the Information Prospectus.
Name and surname
Enrico Giliberti
Luca Majocchi
Antonio Belloni
Lino Benassi
Company
Telco S.p.A.
Olimpia S.p.A.
Sirti S.p.A.
Hdp S.p.A.
Eniro AB
SEAT Corporate University Scarl
TDL Infomedia
Telegate AG
Katalog A.S.
Immo Sud SCI
Sci Elena SCI
BC Partners
De Agostini S.p.A.
Toro Assicurazioni S.p.A.
De Agostini Editore S.p.A.
Finanziaria Web S.p.A.
Matrix S.p.A.
ABBA S.r.l.
Syntek Capital AG
Coeclerici S.p.A.
Banca Italease S.p.A.
De Agostini S.p.A.
Credit Suisse Italy S.p.A.
DeA Capital S.p.A.
Zignago Vetro S.p.A.
La Finanziaria Trentina S.p.A.
Inpartnes S.p.A.
FARE SGR S.p.A.
Toro Assicurazioni S.p.A.
Advanced Capital SGR S.p.A.
Office in the Company or equity investment held
Board Director
Board Director
Board Director
Chairman
Chairman
Chairman
Member of the Supervisory Board
Chairman
Partner
Partner
Chief Executive Officer and Vice-chairman
Chairman
Director
Director
Director
Sole Director
Director
Director
Chairman
Board Director
Chairman
Board Director
Board Director
Chairman
Chairman
Chairman
Chairman
Chairman
Status
Current
Terminated
Terminated
Terminated
Current
Current
Current
Current
Current
Current
Current
Current
Current
Terminated
Terminated
Terminated
Terminated
Terminated
Current
Terminated
Current
Current
Current
Current
Current
Current
Current
Current
Current
Terminated
Terminated
185
Name and surname
Dario Cossutta
Carmine Di Palo
Luigi Lanari
Marco Lucchini
Michele Marini
Pietro Masera
Alberto Giussani
186
Company
Investitori Associati SGR S.p.A.
Investitori Associati S.p.A.
La Rinascente S.r.l.
Upim S.r.l.
Labochim S.p.A.
Infa Group S.p.A.
Sifavitor S.r.l.
Cisalfa Sport S.p.A.
Alberto Aspesi S.p.A.
Mer Mec S.p.A.
Invex S.p.A.
Pharmalogistics S.p.A.
Lottomatica S.p.A.
Novamont S.p.A.
Egidio Galbani S.p.A.
Industrie Ilpea S.p.A.
biG S.r.l.
Atlantia S.p.A.
Autostrade per l’Italia S.p.A.
Fiat S.p.A.
Edison S.p.A.
Perseo S.p.A.
Stedi S.r.l.
Zingali Loudspeaker S.r.l.
Adige S.p.A.
Adige UK plc
Agitec S.p.A.
Quantica SGR S.p.A.
Cartiere del Garda S.p.A.
Lecta S.A.
Rhiag Holding Limited
Samsonite Corporation
Sub Lecta 1 S.A.
Sub Lecta 2 S.A.
T&P S.s.
Vespucci (Holdings) LLP
CVC Capital Partners S.r.l.
Schroder Associati S.r.l.
Marazzi Group S.p.A.
Investitori Associati SGR S.p.A.
Investitori Associati S.p.A.
Invex S.p.A.
Grandi Navi Veloci S.p.A.
Industrie Ilpea S.p.A.
Ilpea Parent Inc.
Ilpea Equity LLC
Holm Industries Inc.
Ifas Gruppo S.p.A.
Globalcap S.p.A.
Guala Closures S.p.A.
AGM Finance S.p.A.
Credito Artigiano S.p.A.
Fastweb S.p.A.
Mediaset S.p.A.
Carlo Tassara S.p.A.
Finanziaria Canova S.p.A.
Board Director
Board Director
Board Director
Board Director
Board Director
Board Director
Board Director
Board Director
Board Director
Board Director
Board Director
Board Director
Board Director
Board Director
Board Director
Chairman
Chairman
Board Director
Board Director
Chairman
Minority Partner
Minority Partner
Board Director
Board Director
Chairman
Board Director
Board Director
Board Director
Board Director
Board Director
Board Director
Board Director
Director/Partner
Board Director
Executive Director/Partner
Sole Director
Board Director
Board Director
Board Director
Board Director
Board Director
Board Director
Board Director
Board Director
Board Director
Board Director
Board Director
Board Director
Partner
Board Director
Board Director
Chairman Board of Statutory Auditors
Auditor
Board Director
Status
Current
Current
Current
Current
Current
Current
Current
Current
Current
Current
Terminated
Terminated
Terminated
Terminated
Terminated
Terminated
Terminated
Current
Current
Current
Current
Current
Current
Current
Current
Current
Terminated
Terminated
Current
Current
Terminated
Current
Current
Current
Current
Current
Current
Current
Terminated
Current
Current
Terminated
Current
Current
Current
Current
Current
Terminated
Terminated
Terminated
Current
Current
Current
Current
Current
Current
Section One
Name and surname
Nicola Volpi
Company
Permira S.p.A.
Sisal S.p.A.
Sisal Holding Finanziaria S.p.A.
Permira Associati S.p.A.
D&V Venture S.r.l.
Ferretti S.p.A.
Marazzi Gruppo Ceramiche S.p.A.
Lauro Otto S.p.A.
Area Giochi Holding S.p.A.
Board Director
Board Director
Chairman
Director
Director
Director
Director
Status
Current
Current
Current
Current
Current
Terminated
Terminated
Terminated
Terminated
For a complete description of the company’s corporate governance system see Section One, Chapter 16, of
the Information Prospectus and the company’s annual report on corporate governance (the “Annual Report
on Corporate Governance”) available on the internet site www.seat.it.
14.1.2 Board of Statutory Auditors
Pursuant to Article 22 of the Bylaws, the Board of Statutory Auditors consists of three acting members and
two alternate members appointed by the Shareholders’ Meeting, which sets their remuneration.
The Shareholders’ Meeting of 27 April 2006 appointed the Board of Statutory Auditors for a three-year
period until the approval of the financial statements for the financial year ended on 31 December 2008. The
members of the Board of Statutory Auditors are indicated below.
Office
Acting Auditor
Acting Auditor
Alternate Auditor
Alternate Auditor
Name and surname
Enrico Cervellera
Andrea Vasapolli
Vincenzo Ciruzzi
Guido Costa
Guido Vasapolli
Milan, 27 February 1941
Turin, 13 June 1962
Turin, 12 June 1949
Milan, 7 May 1965
Turin, 22 May 1960
For the purpose of their offices the auditors are domiciled at the registered office.
Below a brief biography of each member of the Board of Statutory Auditors is given, containing information
on their business management skills and experience.
Enrico Cervellera, born in 1941. From 1965 to 1983 he was a member of the Studio Fiscale (tax firm)
associated with Arthur Andersen; since 1983 he has managed his own professional firm in Milan. He is a
member of the board of directors of Ferrero S.p.A., chairman of the board of statutory auditors of Interpump
S.p.A., Gruppo Lactalis Italia S.p.A., biG S.r.l. and S.p.A. Egidio Galbani, and acting auditor at Luxottica
Group S.p.A. and Tamburi Investment Partners S.p.A. Graduated in Economics and Business and in Law, he
is enrolled in the Register of Chartered Accountants and Auditors.
Vincenzo Ciruzzi, born in 1949. After three years’ experience working for an English-speaking audit firm,
he began to work on his own in 1976. For six years he was a member of the Commission for the Certification
of Financial Statements of the Milan Chapter of Chartered Accountants. He is auditor at the companies
Dexia Crediop S.p.A., Twice Sim S.p.A., Gruppo Baglietto S.p.A., and Enipower Mantova S.p.A. He
graduated in Economics and Business at the Università Bocconi di Milano; he is enrolled in the Register of
Chartered Accountants and Auditors.
Andrea Vasapolli, born 1962. Graduate in Economics and Business at the Università di Torino in 1987.
Chartered accountant enrolled in the register of Turin since 1989, auditor. Since 2002, term professor of tax
law at Scuola Superiore dell’Economia e delle Finanze (SSEF) in Rome. Founding partner of the tax,
corporate and legal consulting firm Vasapolli & Associati (Turin and Milan). Author of numerous
187
publications on tax and corporate law. Member of the Rules of Conduct Commission of Common
Interpretation on Tax Matters for the Italian Association of Chartered Accountants. Auditor for top
companies in industry, trade, and services. Previous work experience: Arthur Andersen & Co., Milwaukee
office (WI, USA). Former professor at the following entities and institutions: Master of International Tax
Law at SSEF (Milan and Venice), Master of International Tax Law at Seconda Università di Napoli, Master
of Tax Law at IPSOA (Milan), different local associations of Chartered Accountants and Accounting
Experts.
Guido Costa, born in 1965. Mr. Costa graduated in Business Economics at Università L. Bocconi di Milano
(1989), he is enrolled in the register of Chartered Accountants of the district of the Court of Milan (1991), he
is enrolled in the register of Auditors (Ministry of Justice), and is a former member of the Legal Accounts
Control Commission (private entity) and the Milan association of Chartered Accountants.
Guido Vasapolli, born 1960. Graduate in Economics and Business at the Università di Torino in 1984.
Chartered accountant enrolled in the register of Turin since 1986, auditor. Founding partner of the tax,
corporate and legal consulting firm Vasapolli & Associati (Turin and Milan). Author of numerous
publications on tax and corporate law. Auditor for top companies in industry, trade, and services. Former
professor at the following entities and institutions: Scuola Superiore dell’Economia e delle Finanze (SSEF),
Master of Tax Law at IPSOA (Milan), different local association of Chartered Accountants and Accounting
Experts.
Except for the Acting Auditor Andrea Vasapolli and the Alternate Auditor Guido Vasapolli, who are
brothers, no member of the Board of Statutory Auditors has family relations with other members of the
Board of Statutory Auditors, nor with members of the Board of Directors or with the General Manager for
Italy.
Furthermore, as far as the company is aware, no member of the Board of Statutory Auditors has in the past
five years reported any conviction for crimes of fraud, nor has anyone been involved, during and for the aim
of his office, in bankruptcy, receivership or liquidation procedures, nor, finally, subject to official indictment
or fined by government or regulatory authorities (including designated professional associations) or
interdictions by a court from the office of member of the Issuer’s board of directors, executive boards or
supervisory boards, or from serving as executive or manager of any issuer.
The table below shows all the joint-stock companies and partnerships where members of the Board of
Statutory Auditors have been members of the boards of directors, executive committees or supervisory
boards, or partners, in the past five years, including their status on the date of the Information Prospectus.
Name and surname Company
Enrico Cervellera
Interpump Group S.p.A.
Luxottica S.p.A.
Tamburi Investment Partners S.p.A.
Ferrero S.p.A.
San Lorenzo S.p.A.
Gruppo Lactalis Italia S.p.A.
biG S.r.l.
Egidio Galbani S.p.A.
Kennametal Italia S.p.A.
Stefanel S.p.A.
Telecom Italia Media S.p.A.
Brembo S.p.A.
Tamburi & Associati S.p.A.
Donen S.a.s.
188
Acting Auditor
Acting Auditor
Board Member
Chairman
Board Member
Acting Auditor
Acting Auditor
Partner
Status
Current
Current
Current
Current
Current
Current
Current
Current
Terminated
Terminated
Terminated
Terminated
Terminated
Terminated
Section One
Vincenzo Ciruzzi
Dexia Crediop S.p.A.
Twice Sim S.p.A.
Raffineria di Gela S.p.A.
Enipower Mantova S.p.A.
S.T.S. Società Tipografica Siciliana S.p.A.
Unispray S.r.l.
Sidim S.p.A.
Eurovetrocap S.r.l.
Carat Italia S.p.A.
Aegis Media Italia S.p.A.
Cantiere Navali Baglietto S.p.A.
Vizeum S.p.A.
H&C S.p.A.
Gruppo Baglietto S.p.A.
Speziayachting S.r.l.
Cantieri di Pisa S.p.A.
Consodata S.p.A.
Messina Fuels S.p.A.
Legatoria Ferrari e C S.p.A
Clama Trade S.r.l.
Enipower Trasmissione S.p.A.
Camuzzi Immobiliare S.r.l.
Napoletana Gas S.p.A.
Sorgenti Monte Bianco S.p.A.
Arnold Worldwide Italy S.r.l.
Alidisco S.r.l.
Mazars Business Advisory Services S.p.A.
S.A.G.E. S.p.A.
S.I.E.S. S.p.A.
Seregni Grafiche S.p.A.
Mazars & Guerard S.p.A.
S.I.N. S.p.A.
Cipi S.p.A.
Nuova Same S.p.A.
Fingraf S.p.A.
Serom S.p.A.
Sepad S.p.A.
Seregni Industrie Grafiche S.p.A.
Stem Editoriale S.p.A.
Gesprint S.p.A.
Sebe S.p.A.
Colonia Limito S.p.A.
Sele Editore S.r.l.
RBC Dexia Investor Services Italia S.p.A.
Agorarte S.r.l.
Oltrepo Terme Resort S.r.l.
Stiem S.p.A.
Pragma Inform S.p.A.
CDR & Associati
Acting Auditor
Acting Auditor
Acting Auditor
Acting Auditor
Acting Auditor
Acting Auditor
Acting Auditor
Acting Auditor
Acting Auditor
Acting Auditor
Acting Auditor
Acting Auditor
Acting Auditor
Acting Auditor
Acting Auditor
Chairman
Status
Current
Current
Terminated
Current
Current
Current
Current
Current
Current
Current
Current
Current
Current
Current
Current
Current
Current
Current
Terminated
Terminated
Terminated
Terminated
Terminated
Terminated
Terminated
Terminated
Terminated
Terminated
Terminated
Terminated
Terminated
Terminated
Terminated
Terminated
Terminated
Terminated
Terminated
Terminated
Terminated
Terminated
Terminated
Terminated
Terminated
Terminated
Terminated
Terminated
Terminated
Current
Current
189
Andrea Vasapolli
Samsonite S.p.A.
A.G.B. S.r.l.
CAMO S.p.A.
Burckhardt Compression (Italia) S.r.l.
Aksia Group Sgr S.p.A.
Valvitalia Holding S.p.A.
Valvitalia S.p.A.
Varenne Itaco S.p.A.
Varenne Bidco S.p.A.
Finmeco S.p.A.
Foro Frumentario S.p.A.
Vega International Tools S.p.A.
Eurochimind S.p.A.
San Carlo dal 1973 S.p.A.
Cofim S.p.A.
Space 2000 S.p.A.
Bercap S.p.A.
In.Ge.Co. S.p.A.
Co.Ge.Pi. S.p.A.
Trend S.r.l.
Cibe S.s.
Klaus S.s.
Prontoseat S.r.l.
E-Motion S.p.A.
E-motion Labs S.p.A.
T2 S.r.l.
Piave S.p.A.
Polythema S.r.l.
San Carlo Immobiliare S.r.l.
Casa Antonica S.r.l.
M.S.B. S.r.l.
PKS Consulting S.r.l.
Trend S.r.l.
T2 S.r.l.
Valvitalia S.p.A.
Società Agricola Vicoli S.r.l.
Società Agricola Fiume S.r.l.
Dolomiti Finanziaria S.p.A.
Aprilway Italia S.p.A.
Tecnoforge S.p.A.
Marte Due S.p.A.
Marte Uno S.p.A.
Marte Tre S.r.l.
Montello S.p.A.
Mourant Italia S.r.l.
Industrial Partners S.r.l.
Immobiliare Rio Nuovo S.r.l.
Immobiliare Rio Grande S.r.l.
Starmetal S.r.l.
Edilizia Miraflores S.p.A.
Tecnopol S.p.A.
I.M.A.M. S.r.l.
Farmaceutici Procemsa S.p.A.
Gi.Ca. S.p.A.
Contigo S.p.A.
Candis S.r.l.
Laghi Baite Land S.r.l.
190
Acting Auditor
Acting Auditor
Acting Auditor
Acting Auditor
Acting Auditor
Acting Auditor
Acting Auditor
Acting Auditor
Acting Auditor
Acting Auditor
Acting Auditor
Acting Auditor
Acting Auditor
Acting Auditor
Executive Director
Partner Director
Partner Director
Acting Auditor
Acting Auditor
Acting Auditor
Executive Director
Acting Auditor
Acting Auditor
Executive Director
Acting Auditor
Partner
Partner
Partner
Acting Auditor
Director
Director
Director
Acting Auditor
Acting Auditor
Acting Auditor
Liquidator
Director
Director
Acting Auditor
Acting Auditor
Acting Auditor
Acting Auditor
Status
Current
Current
Current
Current
Current
Current
Current
Current
Current
Current
Current
Current
Current
Current
Current
Current
Current
Current
Current
Current
Current
Current
Current
Current
Current
Current
Current
Current
Current
Current
Current
Current
Current
Current
Terminated
Terminated
Terminated
Terminated
Terminated
Terminated
Terminated
Terminated
Terminated
Terminated
Terminated
Terminated
Terminated
Terminated
Terminated
Terminated
Terminated
Terminated
Terminated
Terminated
Terminated
Terminated
Terminated
Section One
Guido Costa
Sorgenti Monte Bianco S.p.A.
Clama Trade S.r.l.
Vizeum S.p.A.
Rbc Dexia Investor Service Italia S.p.A.
Carat Luxury S.r.l.
Giava Group S.p.A.
Rivolta Tip Top Industriale S.p.A.
Pogliani & Rivolta S.p.A.
S.A.G.E. S.p.A.
S.I.E.S. S.p.A.
Seregni Grafiche S.p.A.
Mazars & Guerard S.p.A.
S.I.N. S.p.A.
Nuova Same S.p.A.
Fingraf S.p.A.
Rivolta S.p.A.
Serom S.p.A.
Sepad S.p.A.
Seregni Industrie Grafiche S.p.A.
Stem Editoriale S.p.A.
Gesprint S.p.A.
Sebe S.p.A.
Morgagni 33 S.r.l.
Pimefin S.p.A
CTPS S.r.l.
Idrica S.r.l.
Idrica Sistemi S.r.l.
Acting Auditor
Acting Auditor
Director
Acting Auditor
Director
Acting Auditor
Acting Auditor
Acting Auditor
Acting Auditor
Acting Auditor
Acting Auditor
Acting Auditor
Acting Auditor
Acting Auditor
Acting Auditor
Acting Auditor
Acting Auditor
Acting Auditor
Acting Auditor
Acting Auditor
Acting Auditor
Director
Acting Auditor
Acting Auditor
Acting Auditor
Acting Auditor
Status
Current
Current
Current
Current
Current
Terminated
Terminated
Terminated
Terminated
Terminated
Terminated
Terminated
Terminated
Terminated
Terminated
Terminated
Terminated
Terminated
Terminated
Terminated
Terminated
Terminated
Terminated
Current
Current
Current
Current
191
Guido Vasapolli
Cartiere del Garda S.p.A.
AGPower S.p.A.
Samsonite S.p.A.
A.G.B. S.r.l.
CAMO S.p.A.
Gefin S.p.A.
Burckhardt Compression (Italia) S.r.l.
Varenne Itaco S.p.A.
Varenne Bidco S.p.A.
C.E.A.S.T. S.r.l.
Jet Viaggi 3000 S.p.A.
I.C.L. S.p.A.
San Carlo dal 1973 S.p.A.
Cofim S.p.A.
Space 2000 S.p.A.
Trend S.r.l.
T2 S.r.l.
Candis S.r.l.
Piave S.p.A.
General Investment S.r.l.
San Carlo Immobiliare S.r.l.
M.S.B. S.r.l.
Grifoni Gold S.p.A.
PKS Consulting S.r.l.
Trend S.r.l.
T2 S.r.l.
Aprilway Italia S.p.A.
Immobiliare Rio Nuovo S.r.l.
Immobiliare Rio Grande S.r.l.
Marte Due S.p.A.
Marte Uno S.p.A.
Marte Tre S.r.l.
Montello S.p.A.
Starmetal S.r.l.
Edilizia Miraflores S.p.A.
Tecnopol S.p.A.
Magistra S.p.A.
Maina Organi di Trasmissione S.p.A.
Farmaceutici Procemsa S.r.l.
Gi.Ca. S.p.A.
Contigo S.p.A.
Loft Invest S.r.l.
Acting Auditor
Acting Auditor
Acting Auditor
Acting Auditor
Acting Auditor
Acting Auditor
Acting Auditor
Executive Director
Executive Director
Acting Auditor
Sole Director
Acting Auditor
Partner
Partner
Partner
Acting Auditor
Director
Director
Acting Auditor
Acting Auditor
Acting Auditor
Acting Auditor
Acting Auditor
Acting Auditor
Status
Current
Current
Current
Current
Current
Current
Current
Current
Current
Current
Current
Current
Current
Current
Current
Current
Current
Current
Current
Current
Current
Current
Current
Current
Current
Current
Terminated
Terminated
Terminated
Terminated
Terminated
Terminated
Terminated
Terminated
Terminated
Terminated
Terminated
Terminated
Terminated
Terminated
Terminated
Terminated
For a complete description of the company’s corporate governance system, please see Section One, Chapter
16, of the Information Prospectus and to the company’s Annual Report on Corporate Governance available
on the internet site www.seat.it.
14.1.3 General Management
In June 2008, the company introduced a new organisational chart calling for the formation of a General
Management Italy department, to be responsible for sales and operations management of the Italian business.
The General Manager for Italy position has been assigned to Massimo Castelli (the “General Manager for
Italy”).
Below we give a brief biography of the General Manager for Italy, containing information on his business
management skills and experience.
192
Section One
Massimo Castelli, born in Rome, 17 May 1959. He graduated in Electronic Engineering. In 1985, he joined
Olivetti’s Sales Department Italy and later, in May 1993, he joined Olivetti Telemedia. In 1997, he became
Marketing Manager at Infostrada. In October 2001 he joined Telecom Italia as part of its Telecom Francia
business unit; later, when the Domestic Wireline business unit was reorganised, he was appointed Marketing
Manager. In December 2004, he transferred to Telecom Italia Mobile as head of the Marketing & Sales
Department; in April 2005 he was appointed Chief Operating Officer. In December 2005, after Telecom
Italia Group was reorganised, he reported to the Chief Executive Officer of Operations as Chief Marketing
Officer. In 2007 he was appointed General Manager of Telecom Italia’s Domestic Fixed Services.
The General Manager for Italy has no family relationships with the members of the Board of Directors and
the Board of Statutory Auditors.
Furthermore, as far as the company is aware, in the past five years he has not reported any conviction for
crimes of fraud, nor has he been involved, in pursuing his offices, in bankruptcy, receivership or liquidation
procedures, nor, finally, been subject to official indictment or fined by government or regulatory authorities
(including designated professional associations) or interdictions by a court from the office of member of the
Issuer’s board of directors, executive boards or supervisory boards, or from serving as executive or manager
of any issuer.
The table below shows all the joint-stock companies and partnerships of which the General Manager for Italy
has been a member of their boards of directors, executive committees or supervisory boards, or partners in
the past five years, including his status on the date of the Information Prospectus.
Name and surname
Massimo Castelli
Company
TIM Italia S.p.A.
Samaroli S.p.A.
Board Director
Partner
Status
Terminated
Current
14.2 Conflicts of interest of the members of the Board of Directors, the Board of Statutory Auditors,
and General Management
On the Date of the Information Prospectus, as far as the Issuer is aware, no member of the Issuer’s Board of
Directors, the Board of Statutory Auditors, nor the General Manager for Italy has private interests in conflict
with his obligations deriving from the office or contractual position in the company.
However, in reference to the Chairman Enrico Giliberti, in 2007 SEAT paid the law firm Giliberti
Pappalettera Triscornia e Associati, of which he is a partner, € 675,500 in remuneration for consulting
services performed for the Company.
Except for those coopted, the members of the Board of Directors and other company boards and committees
have been appointed based on the lists submitted, even jointly, by the shareholders as per law and the
Bylaws.
The Company is not aware of restrictions on the members of the Board of Directors, the members of the
Board of Statutory Auditors, and the General Manager for Italy with reference to the transfer of the Issuer’s
shares that they may own.
On 12 February 2009, the Issuer’s Reference Shareholders and the Chief Executive Officer, Luca Majocchi,
signed an agreement by which the Reference Shareholders have acknowledged that Mr. Majocchi is not willing
to serve a further three-year term when the Board of Directors is due for renewal at the coming Shareholders’
Meeting to approve the 2008 financial statements; however he is willing to serve as Chief Executive Officer
until 30 June 2009 to ensure the highest level of business continuity during the transition period.
Consequently, to ensure the necessary management continuity, prior to the new Chief Executive Officer
appointment: (i) the Reference Shareholders are committed to re-appointing Mr. Majocchi as Board Member
at the aforementioned Shareholders’ Meeting and, at the first appropriate Board of Directors’ Meeting after
the renewal of the company officers, to appointing him Chief Executive Officer, with the same powers as
those currently conferred on him and with the recognition of the same remuneration currently in force for
him; (ii) Mr. Majocchi is committed to accepting the office of Board Member and the functions of Chief
Executive Officer at SEAT, with the same powers as those currently attributed to him; and (iii) the parties
mutually recognise that Mr. Majocchi will continue to serve as SEAT’s Chief Executive Officer and Board
Member until 30 June 2009 or until the date, if earlier, on which the Issuer’s Board of Directors will vote to
appoint a new Chief Executive Officer.
193
15
REMUNERATION AND BENEFITS
15.1 Remuneration and benefits of members of the Issuer’s Board of Directors and Board of
Statutory Auditors, and of the General Manager for Italy
Remuneration, paid for any reason to the members of the Board of Directors, the members of the Board of
Statutory Auditors and the General Manager for Italy for the financial year ended on 31 December 2007 is
listed in the following table.
Description of office
Surname and name Office held
Giliberti Enrico
Majocchi Luca
Belloni Antonio
Benassi Lino
Cossutta Dario
Di Palo Carmine
Gros Pietro Gian
Maria
Lanari Luigi
Lucchini Marco
Marini Michele
Masera Pietro
Giovanni
Reboa Marco (11)
Volpi Nicola
Cervellera Enrico
Vasapolli Andrea
Ciruzzi Vincenzo
Costa Guido
Vasapolli Guido
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
(13)
(14)
194
Director
Chairman
Director
Director
Member of the
Remuneration Committee
Director
Chairman of the Internal
Audit Committee
Director
Member of the
Director
Director
Chairman of the
Director
Director
Member of the Internal
Audit Committee
Director
Director
Director
Member of the Internal
Audit Committee
Chairman of the
Supervisory Body
Director
Chairman of the Board of
Statutory Auditors
Acting Auditor
Acting Auditor
Alternate Auditor
Alternate Auditor
Remuneration (€ thousands)
Salary
NonBonus
Other
for monetary and other remuneration
office benefits incentives
01/01/2007 – 31/12/2007
10,000
01/01/2007 – 31/12/2007 (1)
90,000
675,500(2)
01/01/2007 – 31/12/2007 (3)
10,000
01/01/2007 – 31/12/2007 (1)
880,000
3,574 679,822(4)
514,741(5)
01/01/2007 – 31/12/2007
10,000
01/01/2007 – 31/12/2007 (6) (8) 30,000
Term of office
01/01/2007 – 31/12/2007
01/01/2007 – 31/12/2007
10,000
40,000
01/01/2007 – 31/12/2007
01/01/2007 – 31/12/2007 (7)
10,000
30,000
01/01/2007 – 31/12/2007 (8)
01/01/2007 – 31/12/2007
10,000
10,000
01/012007 – 31/12/2007
40,000
01/01/2007 – 31/12/2007 (9)
01/01/2007 – 31/12/2007
01/01/2007 – 31/12/2007 (10)
10,000
10,000
30,000
01/01/2007 – 31/12/2007
01/01/2007 – 31/12/2007 (9)
10,000
10,000
01/01/2007 – 31/12/2007
01/01/2007 – 31/12/2007
10,000
30,000
01/01/2007 – 31/12/2007
10,000
01/01/2007 – 31/12/2007 (12)
01/01/2007 – 31/12/2007
10,000
61,975
01/01/2007 – 31/12/2007
01/01/2007 – 31/12/2007
01/01/2007 – 31/12/2007
01/01/2007 – 31/12/2007
41,317
41,317
0
0
6,772(13)
9,296(14)
Remuneration for the financial year 2007 as per Article 2389, Paragraph 3, Italian Civil Code.
The “other remuneration” attributed to Attorney Enrico Giliberti refers to compensation paid to the law firm Giliberti Pappalettera Triscornia e
Associati for consulting services performed for SEAT in 2007.
Remuneration for the financial year 2007 as per Article 2389, Paragraph 1, Italian Civil Code – remuneration waived.
Of which 40% will be paid out only subject to remaining in office at 1 December 2008 (20%) and 1 December 2009 (20%).
The other remuneration attributed to Luca Majocchi refers to the portion of severance pay for the financial year.
Antonio Belloni waived € 25,000 of his remuneration for his mandate as member of the Remuneration Committee.
Dario Cossutta waived € 25,000 of his remuneration for his mandate as member of the Remuneration Committee.
Carmine Di Paolo and Antonio Belloni will repay their remuneration to the benefit of BC Partners.
Luigi Lanari and Giovanni Pietro Masera will repay their remuneration to the benefit of CVC Capital Partners S.r.l.
Antonio Belloni waived € 25,000 of his remuneration for his mandate as member of the Internal Audit Committee.
On 29 August 2008, Marco Reboa resigned from the office he held in the company. On 23 December 2008 the Board of Directors replaced him
by coopting Alberto Giussani, whose nomination was later approved by the Shareholders’ Meeting of 26 January 2009.
Nicola Volpi paid back his remuneration in favour of Permira Associati S.p.A.
Remuneration for the financial year 2007 for the mandate of Chairman of the Board of Statutory Auditors of Prontoseat.
Remuneration for the financial year 2007 for the office of Chairman of the Board of Statutory Auditors of Consodata for € 5,784 and for the
office of acting auditor of CIPI for € 3,512.
Section One
SEAT’s Management By Objectives (MBO) System
In the 2004-2007 period, the company underwent a deep transformation of its human resources management
policies, leading to a substantial rejuvenation of company staff accompanied by tight control of increases in
labour costs even in part through the reallocation of assets and the implementation of remuneration and
incentive systems better structured than in the past.
During the same period the MBO system (annual bonuses) was expanded and made more objective and
transparent. In detail, the variable component of the MBO was limited, in percentage terms, by ceilings
based on individual gross annual remuneration (GAR) for top and senior management positions and on the
GAR relating to the other managerial and specialised positions. In addition, the company introduced an
‘ability to pay’ mechanism linked to EBITDA to stimulate internal cooperation.
However, in view of the need to support the company during its new development stage in the online sector,
starting with the MBO for 2008, it became necessary to introduce changes to the MBO system adopted to
improve its capacity to guide individual behaviour and its perceived fairness.
To this end, the company introduced the “bonus pool”, directly linking the share of EBITDA to be allocated
to short-term incentives, thus improving the effectiveness of the system and the fairness of pay-outs among
the company departments. To improve the effectiveness of the system, it was also necessary to introduce a
greater differentiation in the ranges of access to bonuses based on the level of difficulty and the implicit risk
of the pre-set objectives.
The main features of the new MBO system are: (i) the granting of bonuses based on the achievement of an
EBITDA target; (ii) incentive determined by two components: base component and variable component
(based on growth variables); (iii) the objective parameter, for all managerial personnel, linked to EBITDA;
(iv) the determination of the incentives amount at the beginning of the period, with its allocation by both
company department and by resource.
More in detail, the system calls for:
(i) two levels of objectives: (a) bonus pool (shared); (b) individuals;
(ii) assignment of targets to the participants: EBITDA (non-sales roles) and revenues (sales roles);
(iii) ability to pay: (a) team (EBITDA); (b) individual (performance);
(iv) range of access to variable bonuses based on pay-out volatility and the minimum threshold achievable.
15.2 Amounts set aside or accumulated by the Issuer or other Group companies for the payment of
pensions, severance pay, and similar benefits
Luca Majocchi, as the company Chief Executive Officer, is the only beneficiary of a severance package,
approved by the Shareholders’ Meeting of 27 April 2006 and by the Board of Directors’ meeting of the same
date to set the amount, taking the three-year appointment into account.
The purpose of the severance package for members of the Board of Directors and the subsequent
shareholders’ proposal to recognise such remuneration, in particular to the Chief Executive Officer – who is
not covered by the INPS (national social security institute) employee pension fund, since he is not a
company employee – is to allow the Chief Executive Officer to have at the end of his career pension
coverage that allows for integration with the INPS pension system and any private coverage.
The severance pay provides for supplementary pension coverage whose objective is similar to that of
supplementary pension funds promoted by many top Italian companies, especially banks and insurance
companies. Provisions to the fund are subject to the normal criteria of rationality and consistency, and call
for provisions made in proportion to the Chief Executive Officer’s remuneration, part of which is linked to
the achievement of objectives. Hence the amount of the severance pay is necessary to ensure, once converted
into income, a level of coverage consistent with Italian and international pension standards.
The total amount of remuneration for the financial year ended on 31 December 2007 that the Issuer has set
aside or accumulated for the payment of the severance package to the Chief Executive Officer is € 515,000.
In reference to the agreement between the Issuer’s Reference Shareholders and Chief Executive Officer (see
Section 1, Chapter 14, Paragraph 14.2), the Issuer and the Chief Executive Officer Luca Majocchi have
195
signed a “non-competition and confidentiality agreement” to protect the Issuer from the risk that, on
termination of his mandate as Chief Executive Officer, Luca Majocchi may provide services to a company in
competition with the Issuer.
The agreement covers a period of 30 months, taking into account the provisions of the cited agreement, from
1 July 2009, and the Issuer is committed to paying Mr. Majocchi in fulfilment of its obligation an amount
corresponding to 30 months of gross annual remuneration approved for Mr. Majocchi for 2008, plus the
amount of the MBO bonus, calculated as its average final amount for the three financial years prior to
termination of his mandate as the Issuer’s Chief Executive Officer. With the signing of the agreement, Mr.
Majocchi has likewise assumed a formal commitment to keep confidential all the information to which the
Chief Executive Officer may have had access as a consequence of his relationship with the Issuer.
196
Section One
16
BOARD OF DIRECTORS’ GENERAL RULES
Pursuant to Article 14 of its Bylaws, the Issuer is governed by a Board of Directors consisting of a minimum
of seven members and a maximum of twenty-one.
Pursuant to Article 19 of the Bylaws, the Board of Directors has all powers of ordinary and extraordinary
administration. The Board of Directors also has the power to pass resolutions concerning: (i) mergers in
cases prescribed by Articles 2505 and 2505bis Italian Civil Code, and splits if the same provisions are
applicable; (ii) the opening and closing of secondary offices; (iii) the designation of who, among the
directors, may represent the company; (iv) a decrease in capital in case of the withdrawal of the shareholder;
(v) amendments to the Bylaws to reflect laws and regulations; (vi) the relocation of the company
headquarters within national territory.
16.1 Expiration of terms of office
16.1.1 Board of Directors
The Shareholders’ Meeting of 27 April 2006 appointed the Board of Directors for the 2006-2008 period,
setting the number of members at thirteen. Consequently, the directors’ term will expire with the
Shareholders’ Meeting called to approve the financial statements at 31 December 2008, which will be held
according to the schedule published by the Issuer on 8 April 2009 (date of first meeting).
The table below shows the first appointment date for each director as member of the Issuer’s Board of
Directors.
Office
Chairman
Director
Director
Director
Director
Director
Director
Director
Director
Name and surname
Enrico Giliberti
Luca Majocchi
Dario Cossutta
Michele Marini
Luigi Lanari
Pietro Masera
Antonio Belloni
Carmine Di Palo
Nicola Volpi
Marco Lucchini
Lino Benassi
Alberto Giussani
First appointment date
18 November 2003
18 November 2003
18 November 2003
18 November 2003
18 November 2003
28 April 2005
19 April 2007
19 April 2007
18 November 2003
27 April 2006
18 November 2003
27 September 2004
26 January 2009
At its meeting of 9 February 2009, the Board of Directors acknowledged that the Chief Executive Officer,
Luca Majocchi, is not willing to serve a further three-year term when the Board of Directors will be renewed
pursuant to a resolution passed by the Shareholders’ Meeting convened to approve the financial statements at
31 December 2008, since he believes that, at the conclusion of two consecutive terms, he has completed his
mission and therefore wishes to commit himself to other professional experiences. The Board of Directors
has likewise announced that Mr. Majocchi and the Reference Shareholders are currently formalising an
agreement by which – for the purpose of ensuring maximum business continuity during the transition period
between the company’s old management and new management – firstly the Reference Shareholders have
committed themselves to vote to reconfirm Mr. Majocchi as a member of the Board of Directors with the
office of Chief Executive Officer and with the same mandates and powers currently attributed to him, and
secondly Mr. Majocchi has committed himself to accept the office proposed until and not beyond 30 June
2009, and in any case to resign even on a date before 30 June 2009 if the company identifies a new candidate
for the office of Chief Executive Officer.
This agreement was formalised on 12 February 2009.
197
16.1.2 Board of Statutory Auditors
The Shareholders’ Meeting of 27 April 2006 appointed the Board of Statutory Auditors for a three-year
period. Consequently, the current Board of Statutory Auditors’ term will expire with the Shareholders’
Meeting to approve the financial statements at 31 December 2008, which will be held according to the
schedule published by the Issuer between 30 March 2009 and 8 April 2009 (date of first meeting).
The table below shows the first appointment date for each auditor as member of the Issuer’s Board of
Statutory Auditors.
Office
Acting Auditor
Acting Auditor
Alternate Auditor
Alternate Auditor
Name and surname
Enrico Cervellera
Andrea Vasapolli
Vincenzo Ciruzzi
Guido Costa
Guido Vasapolli
First appointment date
18 November 2003
18 November 2003
18 November 2003
18 November 2003
18 November 2003
16.2 Information on employment contracts signed by the members of the Board of Directors and of
the Board of Statutory Auditors, and by General Management with the Issuer that call for
severance pay
On the date of the Information Prospectus, the Chief Executive Officer Luca Majocchi is bound to the
company by a management contract that calls for severance pay.
Mr. Majocchi is likewise bound to a non-competition and confidentiality agreement with the company as per
an agreement for the purpose signed with SEAT on 9 February 2009. For more details, see Section One,
Chapter 15.
The General Manager for Italy, Massimo Castelli is bound to the company by an employment contract that
likewise calls for severance pay.
With the exception of the above, as on the Date of the Information Prospectus there are no employment
contracts between other companies of the Group and members of the Board of Directors, members of the
Board of Statutory Auditors and the General Management that call for severance pay.
16.3 The Internal Audit Committee and the Remuneration Committee
In accordance with corporate governance provisions issued by Borsa Italiana, the Issuer’s Board of Directors
on 23 December 2003 passed a resolution to, among other things, set up the “Remuneration Committee”
and the “Internal Audit Committee”, pursuant to Articles 7.P.3 and 8.P.4. of the Code of Self-Governance,
and on 20 December 2005 it approved the organisational regulations for the Internal Audit Committee
(“Internal Audit Committee Regulations”).
Internal Audit Committee
On the date of the Information Prospectus, the Internal Audit Committee is composed of the directors Lino
Benassi (Chairman) and Marco Lucchini, appointed on 27 April 2006, and Alberto Giussani, appointed by
cooptation on 23 December 2008 and later confirmed board director by the Shareholders’ Meeting of 26
January 2009 and member of the Internal Audit Committee by the Board of Directors’ Meeting of 9 February
2009. All the members of the Internal Audit Committee are non-executive directors (most of which are
independent) and they have appropriate experience in accounting and finance.
Pursuant to the Internal Audit Committee Regulations, the Internal Audit Committee has both consultative
and proposal-making functions. In detail, the Committee:
198
•
assists the Board of Directors in setting guidelines and periodic checking of the adequacy and
effective functioning of the “Internal Audit System”, with the aim of ensuring that the main
business risks are identified, adequately measured, managed, and monitored;
•
examines the work plan drafted by the “Internal Audit Supervisor” and the periodic reports that he
or she receives;
Section One
•
evaluates the observations in the review reports by the Internal Audit Supervisor and the reports of
the Board of Statutory Auditors, the reports from the Supervisory Body set up as per Legislative
Decree 8 June 2001, No. 231 (the “Supervisory Body”) and inspections carried out by third parties;
•
expresses its opinion on the appointment and dismissal of the Internal Audit Supervisor, and
evaluates its place in the organisational chart and ensures its effective independence also in light of
Legislative Decree 8 June 2001, No. 231, on the administrative responsibility of corporations;
•
together with the manager responsible for drafting company accounting documents and the auditors,
evaluates the correct application of accounting standards and their uniformity for the purposes of
drafting the consolidated financial statements;
•
monitors the effectiveness of the audit process and in particular, consulting with the Board of
Statutory Auditors, it examines: (i) the critical accounting standards, with a view to the accurate
representation of the Group’s operating performance, capital structure and financial position; (ii)
alternative accounting treatments prescribed in generally accepted accounting standards regarding
substantial issues discussed with management, with the evidence of the consequences of use of
these alternative treatments and the corresponding information, as well as the treatments that the
auditor considers preferable; (iii) the contents of any other written communication between the
independent auditors and company management and the Board of Statutory Auditors; and (iv)
issues concerning the financial statements and consolidated financial statements of the main Group
companies. To this end it may meet with the manager responsible for drafting the company’s
financial statements, as well as the senior department managers of the Group’s main companies,
together with the chairpersons or other members of their respective boards of statutory auditors and
other supervisory bodies (if existing), as well as the managers responsible for auditing their
financial statements;
•
evaluates the proposals made by the independent auditors for their mandates, as well as the work
plan drafted for their audit and the results illustrated in the report and any suggestion letter;
•
carries out further tasks that may be conferred to it by the Board of Directors, specifically:
o
in the context of relations with the independent auditors, it evaluates the conferment of
mandates on the company responsible for auditing the financial statements in relation to
admissible extra-audit services, in accordance with company procedures laid down for that
purpose;
o
in transactions with related parties, it expresses its opinion on the rules of transparency and
material and procedural fairness in transactions with related parties and transactions in which
a director has an interest, either personally or on behalf of a third party;
o
assists the Board of Directors in the process of making assessments of the adequacy of the
company’s organisational, administrative, and accounting structures set up for the internal
audit system;
o
reports to the Board of Directors, at least semi-annually, on activities, expressing its
evaluation of issues concerning mandated powers.
On the Date of the Information Prospectus, the Remuneration Committee is composed of directors Gian
Maria Gros Pietro (Chairman), Antonio Belloni, and Dario Cossutta. All the members of the Remuneration
Committee are non-executive directors and only the Chairman is also an independent director.
The Board of Directors has assigned the Remuneration Committee the following task:
• to make proposals to the Board of Directors concerning the remuneration of chief executive officers and
other executives who occupy particular offices, also in reference to the determination of stock option
plans, and monitoring application of the decisions adopted by the Board of Directors;
199
• to periodically evaluate the criteria adopted for the remuneration of managers with strategic
responsibilities, monitor their application based on the information provided by the chief executive
officers, and make general recommendations to the Board of Directors on remuneration.
Supervisory Body
The Supervisory Body (formed as per Legislative Decree 8 June 2001, No. 231) is composed of Marco
Reboa (Chairman; university professor of economics and management and former independent director for
the company), Marco Beatrice (head of the company’s Legal and Corporate Affairs Department), and
Francesco Nigri (head of the company Internal Audit Department). This structure is considered suitable for
ensuring the provisions contained in the report accompanying Legislative Decree 8 June 2001, No. 231,
giving the Supervisory Body the same requisites of autonomy, independence, professionalism, and continuity
of action necessary to efficiently carry out the tasks assigned to it.
The Supervisory Body has the following tasks:
•
implementing the organisational model based on the guidelines contained in “Principle and
Guidelines of Model 231” (the “Organisational Model”);
•
monitoring the effectiveness of the Organisational Model to ensure that the company’s conduct
corresponds to the organisational, management, and control model set up;
•
monitoring the effectiveness of the Organisational Model, checking its suitability for preventing the
occurrence of the crimes listed;
•
updating the Organisational Model to implement suitable adjustments as a result of changes in the
environment and/or the company’s organisation.
As regards the code of ethics approved by the company (the “Code of Ethics”), the Supervisory Body has
the following tasks:
•
monitoring application of the Code of Ethics by interested parties through the adoption of specific
compliance programmes and receiving any reports from internal and external stakeholders;
•
reporting periodically to the Board of Directors on the results of operations conducted, highlighting
any significant Code of Ethics violations;
•
expressing opinions on revisions to the most important policies and procedures with a view to
ensuring their consistency with the Code of Ethics;
•
where necessary, proposing periodic revisions to the Code of Ethics.
***
For additional information on the internal committees of the Board of Directors, reference is made to the
“Annual Corporate Governance Report”, whose information, if not reported in this Information Prospectus,
shall be understood as being hereby incorporated by reference, as per Article 11, Paragraph 2 of Directive
2003/71/EC and Article 28 of Regulation 809/2004/EC. This document is available to the public on the
Company’s web site www.seat.it
16.4 Compliance with corporate governance regulations
The Company has adopted a corporate governance structure featuring rules of conduct and procedures aimed
at ensuring an efficient and transparent system of corporate governance. The Company’s corporate
governance system is inspired by the principles and application criteria defined in the Code of SelfGovernance for listed companies. From the time of its formation, the Company has adhered to previous
versions of the Code. More recently, the Board of Directors passed a resolution to adhere to the Code of SelfGovernance in its March 2006 version as of 19 December 2006, approving the application of the
recommendations contained in it.
200
Section One
In detail:
•
the functions and powers exercised by the Board of Directors, including in its function of setting
strategic guidelines, monitoring and control of company activities, as laid down in the Bylaws and
implemented in the Company’s general rules, are consistent with the principles and application
criteria pursuant to Article 1 of the Code of Self-Governance;
•
the Board of Directors has set up, from its own members, the Internal Audit Committee and the
Remuneration Committee;
•
the Company has identified the internal audit supervisor as the person who has operating
responsibility for coordination of the activities of the internal audit department and possesses the
necessary professional skills to carry out the tasks that he or she is responsible for, consistent with
the recommendation of the Code of Self-Governance. On the date of the Information Prospectus, the
Internal Audit Supervisor is Francesco Nigri;
•
the Company has adopted a procedure for the treatment of inside information consistent with the
guidelines in the Code of Self-Governance;
•
the independent directors Lino Benassi, Gian Maria Gros Pietro, and Alberto Giussani, appointed by
the Shareholders’ Meeting of 27 April 2006 in the case of the former two and 26 January 2009 for
the latter (after Mr. Giussani was coopted by the Board of Directors on 23 December 2008), fulfil the
requisites of independence consistent with the principles and application criteria pursuant to Article
3 of the Code of Self-Governance;
•
the Company has adopted the organisational, management, and control model prescribed by
Legislative Decree 8 June 2001, No. 231, appointing the Supervisory Body;
•
the Company has formalised some control procedures for the management of confidential
information, adhering to the national and international best practice models and in accordance with
the principles contained in the Guide for Market Information;
•
the Company has appointed a manager to specifically manage all activities pertaining to relations
with institutional investors and with other shareholders (the Investor Relator). On the Date of the
Information Prospectus, the Investor Relator is Stefano Canu;
•
the Company has adopted the general rules based on which transactions with related parties are
executed so as to guarantee the criteria of material and procedural fairness, pursuant the principle
stated in Article 9 of the Code of Self-Governance;
•
in implementation of Article 115bis of the Consolidated Law, the Company has set up a register of
people who, by virtue of their employment or professional activities or by virtue of the functions
they carry out, have access to inside information;
•
the Company has appointed Massimo Cristofori as manager of bookkeeping.
For further information on the corporate governance system adopted by the Company and its level of
compliance, see the Company’s Annual Corporate Governance Report, available on the website www.seat.it,
as well as in the Borsa Italiana website www.borsaitaliana.it. The information contained therein is
incorporated into this Information Prospectus by reference, pursuant to Article 11 of Directive 2003/71/EC
and Article 28 of Regulation 2004/809/EC.
201
17
EMPLOYEES
17.1 Number of employees
The following table shows the change in the data relating to the average number of employees employed by
the SEAT Group overall during the financial years 2008, 2007, 2006 and 2005, and the first nine months of
2008, broken down according to the main job categories:
Executives
Managers
Office workers
Operatives
Journalists
Telephone operators
Average dependent staff
Directors
Interns
Contract workers
Total
2008
139.5
491.0
2,351.2
88.5
1
1,977.5
5,048.6
18.8
75.9
19.9
5,163.2
First 9 months 2008
154.3
534.8
2,573.5
84.3
1
1,974.4
5,322.4
17.4
80.3
21,4
5,441.5
2007 adjusted*
143.9
512.1
2,334.5
110.1
1
1,960.8
5,062.4
17
81.3
147.6
5,308.3
2007
146.3
520.6
2,378.1
111.6
1
1,961.5
5,119.2
17
81.3
147.6
5,365.1
2006
143.2
499.9
2,182.3
125.3
1
1,855.1
4,806.7
17
112.3
227.8
5,163.8
2005
149.2
481.3
2,156.7
136.4
1
1,620.5
4,545.1
12.8
62.5
139.4
4,759.9
* The income statement figures for the financial ended on 31 December 2007 have been adjusted so as to give a true comparison between items
thereon and the items shown on the income statement at 31 December 2008, following, in particular, the sale of WLW.
The Issuer’s average number of employees remained essentially unchanged, and the TDL Group’s workforce
decreased slightly (-50 units) as a result of the reorganisation implemented during the last 12 months.
As regards the breakdown of human resources among the different business areas, it should be noted that
although in 2008 SEAT generated 73.65% (72.4% in 2007) of the entire Group’s revenues, it employed 27%
(26% in 2007) of the overall average workforce.
This can be attributed to the following reasons:
•
in Italy the sales force is comprised primarily of agents (1,666 as at 31 December 2008), while
abroad it is comprised of employees;
•
the call centres – used to provide Directory Assistance services – employ a large number of persons
mostly on a part-time basis. A percentage of 58.99% of the overall workforce is employed in the
Directory Assistance business area, with revenues equal to 13.8% of the total Group’s revenues.
Labour cost per Business Area
Italy Directories (SEAT)
Directories UK
Other activities
2008
38%
21%
32%
9%
2007
35%
26%
28%
11%
2008
27%
16%
48%
8%
2007
26%
19%
49%
8%
Average workforce per Business Area
Italy Directories (SEAT)
Directories UK
Other activities
202
Section One
17.2 Holdings of share capital and stock options
17.2.1 Holdings of share capital
The table below shows holdings in the share capital of the Issuer and of the companies in the SEAT Group
held directly or indirectly by members of the Board of Directors, the Board of Statutory Auditors and by the
General Manager for Italy on the Date of the Information Prospectus:
Name and surname
Company
Benassi Lino
SEAT
Giliberti Enrico
SEAT
Gros Pietro Gian Maria
SEAT
Majocchi Luca
SEAT
Castelli Massimo
-
Number of shares owned Number of shares
at the end of the previous
bought
financial year
148,300
(ordinary shares)
6,144
(savings shares)
60,000
(ordinary shares)
7,033,000
4,420,000
(ordinary shares)
(ordinary shares)
-
Number of
shares sold
-
Number of shares
owned at the end of
2008
148,300
(ordinary shares)
6,144
(savings shares)
60,000
(ordinary shares)
11,453,000
(ordinary shares)
-
17.2.2 Stock option plans
The stock option plans in existence on the Date of the Information Prospectus have been approved over time
by the Issuer and by Telegate.
They are intended for specific categories of employees working at the Issuer and at the subsidiaries, who are
considered “key” due to their responsibilities and/or skills, and they are formed through the allocation to the
beneficiaries of personal and non-transferable inter vivos rights, valid for the paid subscription of the same
amount of newly issued ordinary shares of the Issuer and of Telegate (so-called options).
203
As at 31 December 2008, the following plans were in existence:
Beneficiaries
2004 Plans
SEAT Group
employees
SEAT Group
employees
TDL Group
Chief
Executive
Officer
2005 Plans
SEAT Group
employees
SEAT Group
employees
TDL Group
Chief
Executive
Officer
Key People
Date of Number of Number of
allocation
options extinguished
allocated
options
07 June 2004 59,265,000
30 June 2004
4,900,000
30 June 2004 10,000,000
25 November
2004
5,000,000
08 April 2005 67,400,000
04 November
2005
04 November
2005
08 April 2005
1,600,000
9,335,000
5,000,000
12 September 20,000,000
2006
182,500,000
SEAT plans
total
2005 Telegate
Group Plans
Directors and 12 May 2005
293,000
Employees
Directors and 01 June 2006
400,000
Employees
Directors and 01 June 2008
319,000
Employees
Telegate
1,012,000
Group plans
total
SEAT Group
183,512,000
plans total
End of Exercise Number of Number of Number of Fair value
Option
maturity price (€)
options options not exercisable
rights expiry
period
exercised
exercised options as
(€
date
at thousands)
31.12.2008
(450,000) 30 September
2005
2005
2005
- 30 September
2005
0.3341 (42,925,000) (2,200,000) 13,690,000
(1,950,000) 30 September
2006
- 30 September
2006
2006
- 30 September
2006
-
15 April
2008
0.3341 (1,900,000)
-
2,200,000
400 30 June 2009
0.3341 (7,195,000)
(950,000)
1,230,000
922 30 June 2009
-
5,000,000
400 30 June 2009
0.3221 (34,455,000) (2,485,000) 28,510,000
5,633 30 June 2010
0.3341
0.3915
-
- (1,600,000)
0.3221 (7,290,000)
-
200 30 June 2010
(900,000)
470,000
745 30 June 2010
0.3221
-
-
5,000,000
498 30 June 2010
0.3724
- (20,000,000)
-
1,595 31 December
2008
15,983
(4,500,000)
(93,765,000) (28,135,000) 56,100,000
(31,500) 12 May 2007
14.28
(40,625) 01 June 2008
16.09
359,375
01 June 2010
11.01
319,000
(72,125)
(4,572,125)
5,590 30 June 2009
(240,500)
(240,500)
21,000
699,375
(94,005,500) (28,135,000) 56,799,375
489 30 September
2010
819 30 September
2010
472 30 September
2010
1,780
17,763
For further information, please refer to the “Information Document – Compensation Plans based on Financial
Instruments” prepared by the Company, in accordance with Art. 114bis of the Consolidated Law and Art.
84bis of the Issuer Regulations and the content of Annex 3A, Section 7 of the aforesaid Issuer Regulations,
available on the site www.seat.it, in the “Governance” section, for the purpose of examining the stock option
plans decided by the competent bodies of SEAT on 1 September 2007. The information contained in the
aforesaid document is included in this Information Prospectus by way of reference, pursuant to Art. 11 of
Directive 2003/71/EC and Art. 28 of Reg. 2004/89/EC.
During the course of 2007 and 2008, no new stock option plans were approved.
The only member of the Board of Directors of the Company receiving a stock option plan is Luca Majocchi,
Chief Executive Officer of SEAT, who is a director of the Company.
204
Section One
Number of shares servicing the stock option plans
With reference to the number of shares to be issued to service the stock option plans, it should be noted that,
following the Consolidation, the number of shares to be issued to service the stock option plans has been
redetermined as follows:
•
the maximum number of shares to be issued to service the stock option plan decided by the
Extraordinary Shareholders’ Meeting held on 18 November 2003 was redetermined as 516,475 ordinary
shares with no nominal value, for the maximum amount of € 3,098,850;
•
the maximum number of shares to be issued for which the Extraordinary Shareholders’ Meeting of 18
November 2003 conferred powers, pursuant to Art. 2443, Italian Civil Code, on the Board of Directors,
was redetermined as 838,605 ordinary shares with no nominal value, for the maximum amount of
€ 5,031,630; among these, the maximum number of shares reserved for chief executive officers (no
subordinate employees) was redetermined as 84,000;
•
the maximum number of shares to be issued in the context of the capital increase to service the 2004
employee stock option plan, decided by the Board of Directors on 21 June 2004, was redetermined as
325,000 ordinary shares with no nominal value, for the maximum amount of € 1,950,000, at the unit
price of € 66.82;
•
stock option plan for TDL employees, decided by the Board of Directors on 22 July 2004, was
redetermined as 50,000 ordinary shares with no nominal value, for the maximum amount of € 300,000,
at the unit price of € 66.82;
•
the maximum number of shares to be issued in the context of the capital increase to service the stock
option plan reserved for the Chief Executive Officer of SEAT, decided by the Board of Directors on 25
November 2004, was redetermined as 25,000 ordinary shares with no nominal value, for the maximum
amount of € 150,000, at the unit price of € 66.82;
•
employee stock option plan, decided by the Board of Directors on 8 April 2005 and 11 October 2005,
was redetermined as 337,000 ordinary shares with no nominal value, for the maximum amount of
€ 2,022,000, at the unit price equal to the “normal value” of the share;
•
the maximum number of shares to be issued in the context of the capital increase to service the stock
option plan reserved for the Chief Executive Officer of SEAT, decided by the Board of Directors on 8
April 2005, was redetermined as 25,000 ordinary shares with no nominal value, for the maximum
nominal amount of € 150,000, at a unit price equal to the “normal value” for the share and in any case no
less than € 62.66;
•
stock option plan for TDL employees, decided by the Board of Directors on 8 November 2005, was
redetermined as 46,675 ordinary shares with no nominal value, for the maximum amount of € 280,050,
at the unit price of € 64.42;
•
stock option plan for employees of the SEAT Group, decided by the Board of Directors on 8 November
2005, was redetermined as a maximum number of 8,000 ordinary shares with no nominal value, for the
maximum amount of € 48,000, at the unit price of € 78.30.
17.3 Description of any agreements for employee participation in the Issuer’s capital
Except as described in Paragraph 17.2.2 above, no agreements exist, on the Date of the Information
Prospectus, for employee participation in the Issuer’s capital.
205
18
MAIN SHAREHOLDERS
18.1 Parties owning financial instruments representative of the voting capital to an extent greater
than or equal to 2% of the Issuer’s share capital
The following table indicates the shareholders directly or indirectly owning shares of the Issuer to an extent
equal to or greater than 2% of its share capital on the Date of the Information Prospectus, according to what
appears in the shareholders’ register, the official notices received and the other information available to the
Company.
Declarant
CVC Nominee
Alfieri
CART
TARC
A.
Shareholder
P.G. Sub Silver A S.A.
P.G. Sub Silver B S.A.
Sterling Sub Holdings S.A.
AI Sub Silver S.A.
Subcart S.A.
Subtarc S.A.
6,202,889
1,714,008
6,089,855
1,217,970
3,580,014
1,900,941
% of ordinary share capital
15.112
4.176
14.837
2.967
8.722
4.631
Corporate standing before the Capital Increase
Alfieri Associated Investors Serviços de Consultoria S.A. (“Alfieri”), CVC Silver Nominee Limited (“CVC
Nominee”), CART Lux S.à r.l. (“CART”), TARC Lux S.à r.l. (“TARC” and jointly with CART, the
“Permira Investors”) and BC European Capital VII-1, BC European Capital VII-2, BC European Capital
VII-3, BC European Capital VII-4, BC European Capital VII-5, BC European Capital VII-6, BC European
Capital VII-7, BC European Capital VII-8, BC European Capital VII-9, BC European Capital VII-10, BC
European Capital VII-11, BC European Capital VII-12, BC European Capital VII-14, BC European Capital
VII-15, BC European Capital VII-16, BC European Capital VII-17, Blue Capital Equity GmbH & Co. KG,
Mr. Edouard Guillet, Mr. Lucien-Charles Nicolet, BC European Capital VII Top-Up-1, BC European Capital
VII Top-Up-2, BC European Capital VII Top-Up-3, BC European Capital VII Top-Up-4, BC European
Capital VII Top-Up-5, BC European Capital VII Top-Up-6, Mr. Cedric Dubourdieu, Mr. Michel Guillet
(together the “BC Investors”) (hereinafter Alfieri, CVC Nominee, the Permira Investors and the BC
Investors, jointly the “Reference Shareholders”) entered into a shareholders’ agreement on 30 July 2003
(last amended on 13 September 2007) for the purpose, inter alia, of corporate governance, the exercise of
voting rights at shareholders’ meetings, and the ownership structure of the Issuer (the “Shareholders’
Agreement”).
Shown below is the chain of control whereby each of the Reference Shareholders, through Tier I and II
vehicle companies, holds its interest in the Issuer on the Date of the Information Prospectus.
Reference Shareholder
Tier I vehicles
Tier II vehicles
Interest in the Company
Alfieri
Alfieri Silver
(100%)
Alfieri Sub Silver
(100%)
2.967%
Shareholders’ Agreement
BC Investors
CVC Nominee
PG Silver A
(100%)
PG Sub Silver
(100%)
15.112%
PG Silver B
Sterling Holdings
(100%)
(100%)
PG Sub Silver Sterling Sub Holdings
(100%)
(100%)
4.176%
14.837%
Permira Investors
CART
TARC
Silcart
Siltarc
(99.83%) (100%)
Subcart
Subtarc
(100%)
(100%)
8.722%
4.631%
13.353%
Seat Pagine Gialle S.p.A.
(50.4% of the ordinary capital)
The percentages indicated for Tier I vehicles refer to the respective voting capital.
•
Alfieri, a company under Portuguese law, with its registered office in Funchal, Madeira, 22, 2 f, Rua
João Tavira, Portugal, holds 100% of the voting capital of Alfieri Silver S.A., a company under
Luxembourg law, with its registered office at 19-21, Boulevard du Prince Henri, L-1724
Luxembourg.
Alfieri Silver S.A. in turn holds the entire share capital of AI Subsilver S.A., a company under
Luxembourg law, with its registered office at 19-21, Boulevard du Prince Henri, L-1724
206
Section One
Luxembourg, which holds an interest in the Issuer, on the Date of the Information Prospectus, equal
to 2.967% of the ordinary share capital.
•
The BC Investors hold 100% of the voting capital of PG Silver A S.A., a company under
Luxembourg law, with its registered office at 29 Avenue de La Porte Neuve, L-2227 Luxembourg.
PG Silver A S.A. in turn holds the entire share capital of PG Subsilver A S.A., a company under
Luxembourg law, with its registered office at 29 Avenue de la Porte Neuve, L-2227 Luxembourg,
which holds an interest in the Issuer, on the Date of the Information Prospectus, equal to 15.112% of
the ordinary share capital.
•
The BC Investors hold 100% of the voting capital of PG Silver B S.A., a company under
Luxembourg law, with its registered office at 29 Avenue de La Porte Neuve, L-2227 Luxembourg.
PG Silver B S.A. in turn holds the entire share capital of di PG Subsilver B S.A., a company under
Luxembourg law, with its registered office at 29 Avenue de la Porte Neuve, L-2227 Luxembourg,
which holds an interest in the Issuer, on the Date of the Information Prospectus, equal to 4.176 of the
ordinary share capital.
•
CVC Nominee, a company under English law, with its registered office in London E14 5JJ at 10
Upper Bank Street, United Kingdom, holds 100% of the voting capital of Sterling Holdings S.A., a
company under Luxembourg law, with its registered office at 20 Avenue Monterey, L-2163
Luxembourg.
Sterling Holdings S.A. in turn holds the entire share capital of Sterling Sub Holdings S.A., a
company under Luxembourg law, with its registered office at 20 Avenue Monterey, L-2163
Luxembourg, which holds an interest in the Issuer, on the Date of the Information Prospectus, equal
to 14.837% of the ordinary share capital.
•
CART, a company under Luxembourg law, with its registered office at 282 Route de Longwy, L1940 Luxembourg, holds 99.83% of the voting capital of Silcart S.A., a company under Luxembourg
law, with its registered office at 282 Route de Longwy, L-1940, Luxembourg.
Silcart S.A. in turn holds the entire share capital minus one share of Subcart S.A., a company under
Luxembourg law, with its registered office at 282 Route de Longwy, L-1940 Luxembourg, which
holds an interest in the Issuer, on the Date of the Information Prospectus, equal to 8.722% of the
•
TARC, a company under Luxembourg law, with its registered office at 282 Route de Longwy, L1940 Luxembourg, holds 100% of the share capital of Siltarc S.A., a company under Luxembourg
law, with its registered office at 282 Route de Longwy, L-1940, Luxembourg.
Siltarc S.A. in turn holds the entire share capital except one share of Subtarc S.A., a company under
Luxembourg law, with its registered office at 282 Route de Longwy, L-1940 Luxembourg, which
holds an interest in the Issuer, on the Date of the Information Prospectus, equal to 4.631% of the
B.
Corporate standing after the Capital Increase
On 23 December 2008, the Reference Shareholders agreed to proceed, at the time of the Capital Increase,
with a reorganisation of the shareholder structure of the Issuer, providing, among other things, for the partial
withdrawal of the BC Investors from the shareholder structure of the Company, with the assignment
(indirectly or through the transfer of shares of PG Silver A S.A. and PG Silver B S.A. and their respective
subsidiaries PG Sub Silver A and PG Sub Silver B S.A.) of the majority of the ordinary SEAT shares
currently held by the BC Investors to Alfieri and CVC Nominee. It was provided that the percentage of
ordinary SEAT shares held by the BC Investors that will be assigned to Alfieri and CVC Nominee should
vary in keeping with the Offering Price.
Following the shareholder reorganisation, the BC Investors will no longer be a party to the Shareholders’
Agreement.
207
Therefore, as a result of the Capital Increase operations, assuming complete subscription thereof, and in
consideration of the Offering Price determined by the Board of Directors meeting held on 26 March 2009
equal to Euro 0.106:
a) the composition of the SEAT shareholder structure involved in the Shareholders’ Agreement shall be
the following:
Reference
Shareholder
Tier I vehicles
Tier II vehicles
Interest in the
Company
Alfieri
Alfieri Silver
(100%)
PG Silver B
(100%)
Shareholders’ Agreement
CVC Nominee
Sterling
PG Silver A
Holdings
(100%)
(100%)
Alfieri Sub
PG Sub Silver B
Sterling Sub
PG Sub Silver A
Silver (100%)
(100%)
Holdings
(100%)
(100%)
2.920%
4.091%
14.600%
14.807%
7.012%
29.407%
Seat Pagine Gialle S.p.A.
(49.559% of the ordinary capital)
Permira Investors
CART
TARC
Silcart
Siltarc
(99.83%)
(100%)
Subcart
(100%)
Subtarc
(100%)
8.583%
4.557%
13.140%
b) the BC Investors, through a newly incorporated vehicle, will hold a percentage of the ordinary share
capital of the Issuer equal to 0.082%.
18.2 Voting rights provisions contrary to those concerning participation in the capital
On the Date of the Information Prospectus, the Company has issued ordinary shares and savings shares; the
latter do not have voting rights. Pursuant to Art. 6 of the Bylaws, the Extraordinary Shareholders’ Meeting
may resolve the issue of shares equipped with different rights, in accordance with legal provisions.
18.3 Indication of any controlling party pursuant to Art. 93 of the Consolidated Law
On the Date of the Information Prospectus, there are no individuals or legal entities exercising control over
the Issuer pursuant to Art. 93 of the Consolidated Law.
18.4 Indication of the existence of any agreements for changing the structure of control
On the Date of the Information Prospectus, as far as the Issuer knows, no agreements exist that could entail a
change in the structure of control of the Issuer.
Mention is made, however, of the following two agreements entered into by the Reference Shareholders of
the Company, properly notified and disclosed in extract form pursuant to Art. 122 of the Consolidated Law
and Art. 127 et seq. of the Issuer Regulations.
•
Shareholders’ agreement entered into by and between the Reference Shareholders on 30 July 2003,
as subsequently amended with an addendum dated 24 March 2004, an amendment dated 21
December 2006, and another addendum dated 13 September 2007 (the “Shareholders’
Agreement”), which contains provisions relating, among others things, to: (i) the composition and
voting terms of the Board of Directors; (ii) the terms for voting of the Shareholders’ Meetings of the
Issuer and (iii) an obligation of non-transferability on the SEAT shares held by the Reference
Shareholders through their respective vehicles, as well as on the interests held by the Reference
Shareholders in the said vehicles.
On 20 March 2007, the Reference Shareholders renewed the Shareholders’ Agreement, which,
therefore, except for possible amendments to the provisions of the Shareholders’ Agreement
concerning the duration thereof, which would come into force following the implementation of the
Capital Increase on the basis of what is set forth in the Agreement (as defined below), shall end on
the earliest of the following dates: (i) the third anniversary of the date of 20 March 2007 (or the fifth,
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Section One
if upon the occurrence of the third anniversary the ordinary shares of the Company are no longer
listed); or (ii) the date on which the parties to the Shareholders’ Agreement have fully disposed of
their direct or indirect investment in the Company.
•
Agreement entered into by and between the Reference Shareholders on 23 December 2008 (the
“Agreement”) whereby they agreed, inter alia: (i) to proceed with an overall reorganisation of the
interests held by the Reference Shareholders in the Company for purposes of the assignment
(indirectly, or through the transfer of the shares of PG Silver A S.A. and PG Silver B S.A. and of
their respective subsidiaries PG Sub Silver A S.A. and PG Sub Silver B S.A.) of the majority of the
interest held by the BC Investors to Alfieri and CVC Nominee; (ii) to amend the Shareholders’
Agreement so as to reflect the withdrawal of the BC Investors from it and renew the Shareholders’
Agreement for a three-year period; (iii) to vote in favour of the Capital Increase, subscribing for it,
with the exclusion of the BC Investors, up to approximately € 99.2 million and assuming this
commitment also in favour of SEAT pursuant to Art. 1411, Italian Civil Code; and (iv) not to
transfer the SEAT shares held by the Reference Shareholders through their own respective vehicles
until the completion of the abovementioned transactions. The agreement also establishes the
obligation of the Reference Shareholders to perfect the abovementioned operations is subject to the
occurrence of a series of conditions precedent by no later than 31 May 2009 or, if the procedure
relative to the Capital Increase is delayed on account of requests from the competent authorities, no
later than 28 June 2009 and in particular to:
(i) (a) upon RBS’s acceptance of the Waiver Request, submitted by the Company to RBS on 1
December 2008 to obtain the necessary consent, among others things: (i) to proceed with the
share capital increase, as well as to (ii) to amend, also in light of the share capital increase, the
current levels of the financial covenants provided for by the RBS Loan Agreement and (b)
signing of the Amendment Agreement by RBS and the Company and the fulfilment of all the
conditions precedent laid down therein;
(ii) a formal written declaration by Consob (received on 16 March 2009, protocol No. 9023135)
which attests to the non-existence, as a result of the overall reorganisation within the
Shareholders’ Agreement and the Capital Increase, of circumstances that entail the obligation of
a public tender offer (PTO) on the Issuer’s capital;
(iii) the approval of the reorganisation by the competent antitrust authorities. For this purpose, it
should be noted that the reorganisation has been notified to the German and Austrian antitrust
authorities (on 9 February 2009 and 10 February 2009 respectively), and approved respectively
on 25 February 2009 and 28 February 2009 (approval issued by the Austrian Antitrust
Authorities on 27 February 2009 with effect from 28 February 2009);
(iv) SEAT’s approval of the Capital Increase for an Offering Price not greater than € 0.03 pr share,
or € 6, following the Consolidation (for additional details on the Consolidation, reference is
made to Section One, Chapter 21, Paragraph 21.1.1);
(v) if by the third day prior to Consob’s clearance of the publication of the Prospectus, such events
as might undermine substantially SEAT’s financial and operating conditions – that is, such that
it is clear that SEAT cannot meet for the following 12 months certain solvency ratios – fail to
materialise.
To the best of the Company’s knowledge, at the Date of the Prospectus, these conditions precedent have
been fully met.
For further information on the Shareholders’ Agreement and on the Agreement, please see the respective
extracts posted on the Consob website, www.consob.it, which are to be understood as included herein by
way of reference pursuant to Art. 11, Paragraph 2, of Directive 2003/71/EC and Art. 28 of Regulation
809/2004/EC.
209
19
RELATED-PARTY TRANSACTIONS
19.1 Identification of related parties
SEAT maintains some relations of a commercial and financial nature with related parties, these being
understood as parties defined as such by international accounting standard IAS 24 concerning financial
statement information on related-party transactions, adopted according to the procedure set forth in Art. 6 of
Regulation (EC) No. 1606/2002.
By resolution of the Board of Directors dated 23 December 2003, SEAT approved a procedure for the
performance of the obligations referred to in Art. 150, Paragraph 1, of the Consolidated Law and in Art. 16
of the Bylaws, in accordance with the rules of conduct for related-party transactions as set forth in Art. 9 of
the Code of Self-Governance and in the Consob notices on the subject of corporate controls, and it conferred
upon the Chief Executive Officer a mandate to make the necessary amendments and/or addenda that may
become necessary in keeping with changes in the overall regulatory framework of reference. The procedure
also contains a document that governs the rules of conduct for making extraordinary transactions with related
parties.
All of the transactions carried out by the Issuer during the course of the last three years with its related
parties have been of an ordinary, typical or usual nature, have been made in observance of criteria of
substantive and procedural correctness and under conditions similar to those applied for transactions
concluded with independent third parties.
In particular, for the purposes of this Information Prospectus, typical or usual transactions shall be those that,
due to their object or their nature, are (i) not extraneous to the normal course of business of the Issuer and (ii)
do not include particular critical elements as a result of their characteristics or the risks inherent to the nature
of the counterparty or the time of their completion.
With regard to the activity engaged in by the Issuer, specific evidence is attributed to ordinary operations
concluded with intragroup related parties for an amount greater than € 250,000 and to ordinary operations
concluded with non-intragroup related parties for an amount greater than € 50,000.
With regard to the type of related-party transactions carried out by SEAT and in terms of the conditions
under which they have been concluded, it has been deemed that none of them may have effects on the
safeguarding of the corporate assets or on the completeness and correctness of the information, including
accounting information, of the Issuer; therefore, the obligation to prepare the information document referred
to in Art. 71bis of the Issuer Regulations or the reporting obligation referred to in Art. 114, Paragraph 1, of
the Consolidated Law and the respective implementation provisions were not found to exist.
19.1.1 Intragroup related-party transactions
The commercial and financial transactions with intragroup related parties are attributable to the Issuer’s
ordinary activity and are governed by the same conditions that SEAT would apply on the markets and in the
geographical areas in question to third-party companies extraneous to the Group.
On the Date of the Information Prospectus, the main transactions of a commercial/industrial/financial nature
concluded by the Issuer with intragroup related parties were the following:
•
the letter of intent signed on 1 December 2005 by SEAT and its subsidiary Telegate, whereby the
parties agreed to stipulate agreements concerning the provision on an exclusive basis by Telegate Italia
S.r.l. of call centre and traffic direction services for the SEAT Directory Assistance activities 89.24.24
Pronto PAGINEGIALLE and 89.24.24 Pronto PAGINEBIANCHE. In exchange for such services,
SEAT agreed to pay Telegate Italia S.r.l. a tariff of € 0.535 per minute for services provided in relation
to 89.24.24 Pronto PAGINEGIALLE Directory Assistance and € 0.51 with reference to 12.40 Pronto
PAGINEBIANCHE Directory Assistance. It was further agreed that such tariffs would remain
unchanged until 2007, except in the event of their renegotiation in case of significant changes in the
relevant costs. The agreements to be concluded were to have a five-year term;
•
the three-year supply agreement starting on 1 January 2006 with the possibility of automatic renewal
for subsequent two-year periods unless terminated, concluded between SEAT and its subsidiary CIPI.
The purpose of the agreement is for CIPI to supply SEAT with promotional items present in the SEAT
Giallo Promo catalogue for the entire three-year term of the agreement. CIPI also agreed to carry out
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Section One
“personalisation” of the said promotional items, consisting of printing or applying the particular
markings requested by SEAT customers on the raw items. In exchange for the aforesaid supply and
personalisation, SEAT is required to pay CIPI a price equal to the price schedule applied to CIPI
customers with a 40% discount. The agreement provides that SEAT is required to guarantee CIPI
minimum annual supplies of € 9,600,000 to be calculated net of the discount. The agreement provides
for a prohibition on CIPI from transferring it. The agreement is currently in a renegotiation phase, with
guaranteed minimums of a smaller size, as part of a more general review of the shareholders’
agreements with the minority shareholder;
•
the contracting agreement, concluded by an exchange of correspondence in February 2009 for a term
of one year effective as of 1 January 2009, with Telegate Italia S.r.l., whereby SEAT entrusted to its
subsidiary, on a non-exclusive basis, the management of the classification of “business” telephone
accounts relating to new telephone service subscribers or those affected by changes through an
information-gathering system based on telephone interviews. Both parties have the right to terminate
the relationship unilaterally upon 60 days’ advance notice. The fee to be paid to Telegate Italia S.r.l.
for management of the service is to be quantified on the basis of the outcome of the telephone
interviews conducted in the month prior to billing according to the tariffs contained in a specific annex
to the agreement. With the signing of the agreement, Telegate Italia S.r.l. took on the role of subscriber
personal information processing manager pursuant to Legislative Decree No. 196 of 30 June 2003.
Telegate Italia S.r.l. is expressly prohibited from transferring the agreement, as well as from
subcontracting it, to third parties, except in the event of written authorisation from SEAT;
•
the contracting agreement between SEAT and Prontoseat, concluded by an exchange of
correspondence in July 2007 for a term of one year, effective as of 1 February 2007, subsequently
renewed until 31 January 2009 and currently in a renegotiation phase. With this agreement, SEAT
entrusted to its subsidiary, on a non-exclusive basis, the performance of the customer assistance
service consisting of the management of calls received by the freephone number 800.011.411 and
coming from SEAT customers and from users of its products and services, to be carried out through
the Prontoseat contact centre. SEAT has the right to terminate the existing relationship unilaterally
with 90 days’ advance notice upon the occurrence of the following events: (i) transfer of the business
or business unit of Prontoseat relative to the contact centre service; (ii) a change of control of
Prontoseat; (iii) transfer of a minority stake to competitors of SEAT; (iv) merger of Prontoseat with
another company. The fee to be paid to Prontoseat for the management of the service is € 0.55 plus
VAT for every minute of conversation, plus accessory costs for operator training services and for
after-call activities. The application of penalties or the payment of quality bonuses is provided for with
regard to the quality of the service provided. With the signing of the agreement, Prontoseat took on the
role of subscriber personal information processing manager pursuant to Legislative Decree No. 196 of
30 June 2003. Prontoseat is expressly prohibited from subcontracting, except in the event of written
authorisation from SEAT, and is subject to an obligation not to carry out competing activities for the
entire term of the agreement with the same organisational unit, using a SEAT competitor within Italy;
•
the contracting agreement, concluded by an exchange of correspondence between SEAT and Telegate
Italia S.r.l. dated 16/17 January 2006 and expiring on 30 September 2010, subsequently amended on
13 March 2007, 29 May/4 June 2008 and, most recently, on 7 January 2009/12 January 2009, whereby
SEAT entrusted its subsidiary with the management of telephone calls directed to the 12.40 Pronto
PAGINEBIANCHE Directory Assistance service. SEAT agreed to pay Telegate monthly
compensation of € 0.575 per minute, plus € 1 in the event of utilisation of the international database
and € 0.50 per minute for telephone calls managed by third-party subcontractors. With regard to the
quality of the service provided, the application of penalties or the payment of quality bonuses in
varying amounts is provided for. The agreement may be terminated at any time if the SEAT Group
transfers outside of the Group the controlling stake held through Telegate in Telegate Italia S.r.l. With
the signing of the agreement, Telegate Italia S.r.l. took on the role of subscriber personal information
processing manager pursuant to Legislative Decree No. 196 of 30 June 2003. Telegate Italia S.r.l. also
agreed with SEAT not to perform, throughout the term of the agreement, services similar to those that
are the object of the agreement with a party competing with SEAT as an information services provider
within the Italian market. In a departure from that agreement, the parties acknowledge that Telegate
Italia S.r.l. has concluded an agreement with Prontoseat for the purpose of full management of the
service of managing calls made to the 1289 number. Telegate Italia S.r.l. is also prohibited from
211
transferring the agreement to third parties or from subcontracting the service that is the object of the
agreement, except for the possibility of subcontracting a portion of traffic, counted for 2009 to an
extent equal to or less than 20% of the traffic handled over a 6-month period (for the financial year
2008, the parties had agreed that the portion of traffic subject to subcontracting would have to range
from 10% to 14.99%);
•
the contracting agreement, concluded by an exchange of correspondence dated 27 January 2006 with
Telegate Italia S.r.l., for a term of five years starting on 1 October 2005 and expiring on 30 September
2010 – or, if beforehand, expiring on the date of termination of the agreement between Telecom Italia
S.p.A. and Telegate Italia S.r.l., concluded between those parties on 23 September 2005 – renewed on
29 May 2008, whereby SEAT entrusted to its subsidiary, on a non-exclusive basis, the service of
receiving and relaying telephone calls made to the 12.40 Pronto PAGINEBIANCHE number. The fee
payable to Telegate Italia for the aforesaid service, to be paid monthly, is equal to 0.70% of Telegate’s
taxable monthly billing to Telecom (as provider of the interconnection service). The parties have the
right to terminate the agreement in the event that the shares owned by Telegate representative of
control of Telegate Italia S.r.l. should be transferred to a party outside of the SEAT Group. Currently,
although the agreement should be considered terminated following the signing of a new
interconnection agreement between Telegate Italia S.r.l. and Telecom Italia, it continues to be applied
tacitly to the 12.40 Pronto PAGINEBIANCHE Directory Assistance service while awaiting the
formalisation of a new agreement taking into account the new terms of “billing for third parties” (for
further information on the interconnection services performed by Telecom Italia to Telegate Italia
S.r.l., please see Section One, Chapter 20, Paragraph 20.7);
•
the agreement between SEAT and Telegate Italia S.r.l., concluded by an exchange of correspondence
dated 29 May 2008, for a term of one year starting on 1 January 2008 for the provision by Telegate
Italia S.r.l., on a non-exclusive basis, of receiving and relaying services on its own
telecommunications network interconnected with Telecom Italia’s network for calls made to the
89.24.24 Pronto PAGINEGIALLE Directory Assistance service. Both parties have the right to
terminate the agreement with 120 days’ advance notice in the following events: (i) change of control
over Telegate Italia S.r.l. by Telegate AG or (ii) change of control over Telegate AG by SEAT. The
fee payable to Telegate Italia for the call receiving and relaying services, to be paid on a monthly
basis, is equal to 0.70% of Telegate’s taxable monthly billing to Telecom (as interconnection service
provider). Currently, the agreement is expired and in a renegotiation phase between the parties, as well
as for the purposes of including content taken from the new interconnection agreement with “billing
for third parties” concluded between Telegate Italia S.r.l. and Telecom Italia on 31 October 2008 (for
further information on the interconnection services performed by Telecom Italia to Telegate Italia
S.r.l., please see Section One, Chapter 20, Paragraph 20.8);
•
the sub-contracting agreement between Telegate Italia S.r.l. and Prontoseat for the provision of part of
the telephone traffic related to SEAT’s Directory Assistance 89.24.24 Pronto PAGINEGIALLE
services for 2008, whereby Prontoseat will handle all the calls by users of the “Prontissimo” club and
handle 50% of the other calls linked to the above Directory Assistance service (inclusive of the
“Prontissimo” club). However, the level of services can be increased in the event that Telegate Italia
S.r.l. cannot handle its share due to any force majeure identified by the parties. The payment for the
outsourced services will be determined in accordance with actual data at the end of each month, as
determined by reports for the period of reference provided by Telegate Italia S.r.l., and verified by
Prontoseat. Concerning the quality of the service provided, provisions have been made for the
application of penalties or quality rewards as well as for Prontoseat’s obligation to hold Telegate Italia
S.r.l. harmless against any loss, expenses or disputes arising from Prontoseat’s breach of any of its
contractual obligations. By signing the agreement, Prontoseat took on the role as person in charge of
processing the subscribers’ personal data, pursuant to Legislative Decree No. 196 dated 30 June 2003.
Moreover, Prontoseat is expressly prohibited from assigning the agreement to any third party, without
prejudice for Telegate Italia S.r.l.’s possibility to raise all the exceptions laid down in the subcontracting agreement or by way of offset with the buyer, in the event of assignment of contract for
value. Moreover, Prontoseat cannot outsource the activities under the contract. In addition Prontoseat
undertook with Telegate Italia S.r.l. not to provide the same services covered by the sub-contracting
contract to a competitor of SEAT and Telegate Italia S.r.l., in relation to information services, in Italy
throughout the term of the contract, unless authorised by Telegate Italia S.r.l.;
212
Section One
•
the contracting agreement, concluded by an exchange of correspondence dated 7 January 2009/12
January 2009 for a term of one year effective as of 1 January 2009 with Telegate Italia S.r.l., whereby
SEAT entrusted its subsidiary with the management of the calls made to the 89.24.24 Pronto
PAGINEGIALLE Directory Assistance service through its own call centre. The fee for the services
rendered by Telegate Italia S.r.l. is an amount determined monthly on the basis of the number and
duration of the calls handled by Telegate Italia S.r.l. during the period in question. With regard to the
quality of the service provided, the application of penalties or the payment of quality bonuses is
provided for. With the signing of the agreement, Telegate Italia S.r.l. took on the role of subscriber
personal information processing manager pursuant to Legislative Decree No. 196 of 30 June 2003.
Telegate Italia S.r.l. is expressly prohibited from transferring, as well as from subcontracting, the
agreement to third parties, except for the possibility of subcontracting partial management of some
services to Prontoseat, with Telegate Italia S.r.l. remaining liable in any case to SEAT for all the
services subcontracted. Telegate also agreed with SEAT not to perform the same services that are the
object of the agreement with a party competing with SEAT as an information services provider
throughout the term of the agreement within Italy;
•
the “usage-based” agreement concluded between SEAT and Consodata by an exchange of
correspondence in December 2008, effective for one year as of 1 April 2008, and for the purpose of
Business Information services provided by Consodata obtainable through the Lineaffari portal (socalled “Lineaffari Services”) for SEAT’s information gathering needs regarding its customers. SEAT
has the right to terminate the existing relationship unilaterally upon the occurrence of the following
events: (i) transfer of the business or business unit of Consodata relating to the activity that is the
object of the agreement; (ii) change of control of Consodata; and (iii) with reference to the individual
types of Lineaffari Services, when its interest in the provision thereof by Consodata disappears. The
fee to be paid to Consodata for the services offered is determined on the basis of a price schedule in
force at the time that the respective invoice is issued, to be adjusted also on the basis of any increase in
the tariffs applied by the info provider. The application of specific penalties is provided for in the
event of delay or interruption of the service provided. Consodata is prohibited from transferring the
agreement or the respective credits to third parties;
•
the agreement concluded between SEAT and Prontoseat by an exchange of correspondence dated 3
July 2008/23 July 2008 for a term of one year starting on 1 January 2008, renewed for 2009 with an
agreement currently in the negotiation phase for the purpose of Prontoseat’s providing a teleselling
service for SEAT products on the basis of periodic lists of operators and users periodically provided
by SEAT. The latter has the right to terminate the existing relationship unilaterally in the event that,
during each calendar quarter, Prontoseat fails to observe the sales performance provided for in the
agreement. The fee provided for in favour of Prontoseat for the services rendered is calculated: (i) for
new customers, in part as a fixed amount for each contact made and in part as a fixed
amount/percentage of each order obtained; and (ii) for agreement renewals, as a percentage of the
amount of the individual renewals. Prontoseat is expressly prohibited from transferring, as well as
from subcontracting, the agreement to third parties, except in the event of written authorisation from
SEAT. With the signing of the agreement, Prontoseat took on the role of subscriber personal
information processing manager pursuant to Legislative Decree No. 196 of 30 June 2003;
•
the credit transfer agreement (the “Agreement”) concluded on 8 June 2006 between SEAT and
Meliadi Finance S.r.l., a company incorporated pursuant to Art. 3 of Law No. 130 of 30 April 1999
(“Meliadi”), whereby SEAT transferred to Meliadi a portfolio of credits without recourse (the
“Credits”), selected on the basis of specific objective criteria specified in the Agreement, as part of a
securitisation operation made by Meliadi pursuant to Law No. 130 of 30 April 1999 (the
“Securitisation”). The overall purchase price for the Credits is € 344,545,657, of which € 256,000,000
was paid by Meliadi to SEAT as the initial price on 16 June 2006, by means of the proceeds deriving
from the issue of the securitisation instruments by Meliadi, and € 88,545,657 is to be paid to SEAT as
the deferred price, to the extent that the necessary funds exist after payment of the Securitisation costs
and of the amounts owed from time to time to holders of the securities. The Agreement provides for
the possibility for SEAT to transfer additional portfolios of credits to Meliadi selected on the basis of
the same objective criteria as those utilised in relation to the Credits, as well as specific criteria
provided for in the Agreement in relation to such additional portfolios of credits. The right of SEAT to
transfer additional portfolios of credits to Meliadi is subject to the non-occurrence of some specific
213
circumstances, including: breach by SEAT of any provision contained in the agreements relating to the
Securitisation, SEAT’s being subject to any insolvency or liquidation procedure, the occurrence of
events that may invalidate the actual ownership of the credits by SEAT, non-performance by SEAT of
any payment obligation in relation to its financial debts in an amount greater than € 10 million, or if
the credit portfolio of previously transferred credits exceeds specific performance indices (fixed to
cover non-payment or late payment by transferred creditors) and, with regard to a particular credit
category, a non-impairment of SEAT’s credit merit. Pursuant to the Agreement, Meliadi also granted
SEAT an option to repurchase all the credits transferred, which may be exercised only upon the
occurrence of certain events provided for in the Agreement and subject to the purchase price paid by
SEAT being sufficient for redemption of all the securities issued by Meliadi as part of the
Securitisation and for paying any additional amounts that may be owed by Meliadi in connection with
the said Securitisation. The Agreement also provides for a series of representations and guarantees
given by SEAT in relation to: its status, the validity and effectiveness of the securitisation documents,
the ownership of the credits, the validity and effectiveness of the transfer of the credits and the
application of the privacy laws in force. In the event, among other things, of falsehood in such
representations and guarantees or breach by SEAT of its obligations pursuant to the Agreement, SEAT
shall be required to indemnify Meliadi in an amount equal to all damages, costs and expenses incurred
by Meliadi itself. The Agreement provides, lastly, that any payment owed by Meliadi to SEAT
pursuant to the said Agreement shall be made only to the extent that the necessary funds exist,
pursuant to the order of preference for payments applicable under the Securitisation, following
payment of the Securitisation costs and the amounts owed from time to time to the securities’ holders.
The Agreement is governed by Italian law;
•
the loan agreement concluded between SEAT and TDL Infomedia dated 6 October 2004, as per the
amendment and addendum dated 28 April 2006 and 3 February 2009 respectively, pursuant to which
SEAT granted TDL Infomedia a loan for a maximum amount of £ 75 million at an interest rate equal
to the LIBOR rate plus 2% per annum, intended to enable early repayment by the TDL Group of two
high-yield bond issues, respectively in GBP (at the rate of 12.125%) and in USD (at the rate of
15.50%). The residual amount of the loan, equal to £ 68.5 million, must be fully repaid by TDL
Infomedia by 31 December 2010. The loan agreement provides for the possibility of repaying the loan
in full or in part on a voluntary basis, as well as for mandatory early repayment of the entire loan in the
event that SEAT ceases to have control of TDL Infomedia or Thomson ceases to have control of one
or more companies that it currently controls. SEAT shall also have the right to request immediate
repayment of the loan, together with the interest accrued and all additional amounts owed, upon the
occurrence of certain events, including: lack of payment by TDL Infomedia of what is owed to SEAT
pursuant to the loan agreement, the insolvency of TDL Infomedia, its being subject to an insolvency
procedure or default by TDL Infomedia on a financial debt of its own in an amount greater than
£ 500,000. The loan agreement is governed by English law;
•
cash-pooling agreements concluded by SEAT with subsidiaries CIPI, Prontoseat and Consodata,
which provide for the crediting of amounts by such subsidiaries in SEAT current accounts opened at
the bank Intesa Sanpaolo. These agreements fall under the Group’s centralised cash flow management
activity;
•
short-term deposit agreements between SEAT and subsidiaries TDL Infomedia and Telegate for the
amount of £ 15 million and £ 50.5 million respectively. These transactions are governed on the basis
of market rates and also fall under the Group’s centralised cash flow management activity.
The following table summarises the relationships between the Issuer and its related parties for the period
2005-2008 and shows the percentage of such values by reference to the corresponding items of the Issuer’s
financial statements.
214
Section One
Income Statement
(€ million)
2008 % on 2008 2007
separate
financial
statements
77.0
7.3 80.5
6.0
52.2
2.0
59.5
14.9 57.8
7.6
8.3
2.8
0.4
1.0
1.7
6.0
5.5
38.8
19.6
45.0 41.2
126.8
45.7 122.6
1.7
3.3
1.9
Other revenues and income
Costs of materials and external services
Salaries, wages and employee benefits
Valuation adjustments
Provisions to reserves for risks and charges, net
Other operating charges
Non-recurring costs
Financial income
Financial charges
Income taxes
% on 2007 2006
separate
financial
statements
7.4 71.9
30.3
1.0
14.3 49.6
3.2
1.1
5.4
35.8
0.3
86.0 43.0
48.6 115.5
3.2
1.1
% on 2006 2005
separate
financial
statements
6.7 40.1
16.4
1.3
11.9 34.0
1.3
8.2
0.3
91.7 15.4
45.7 115.3
2.0
0.8
% on 2005
separate
financial
statements
3.8
21.1
8.6
7.7
45.6
40.9
7.5
Balance Sheet
(€ million)
Other non-current financial assets
Non-current reserves to employees
Other non-current liabilities
Trade account receivables
Other current assets
Trade account payables
Payables for services to be rendered and
other current liabilities
Reserve for current risks and charges
Investments
2008 % on 2008
separate
financial
statements
1,440.6
48.9
0.4
2.0
0.9
3.4
18.5
3.1
6.9
11.3
84.5
97.8
118.7
32.9
17.7
8.1
4.4
4.6
6.0
0.9
13.7
0.8
2007 % on 2007
separate
financial
statements
1,432.7
46.2
0.4
1.7
19.7
3.3
2.4
4.5
99.1
88.4
155.2
48.4
16.7
7.2
0.4
0.4
6.0
1.7
15.2
3.2
2006 % on 2006
separate
financial
statements
1,419.2
43.1
0.5
1.9
20.2
3.4
2.3
4.1
104.3
98.8
6.7
3.9
57.5
22.5
13.7
5.9
0.5
0.5
0.4
1.1
2005 % on 2005
separate
financial
statements
109.4
98.8
1,252.9
35.5
0.6
1.9
16.5
2.8
1.0
1.6
3.0
56.4
65.4
25.0
8.4
3.6
0.9
0.9
0.1
0.5
Cash Flow Statement
(€ million)
Cash inflow from operating activities
Cash inflow from investment activities
Cash inflow from financing activities
2008
14.3
(0.8)
(98.9)
% on 2008
separate
financial
statements
3.0
1.9
24.6
2007
17.0
(1.7)
19.5
% on 2007
separate
financial
statements
3.3
2.9
n.a.
2006
22.8
(0.4)
87.3
% on 2006
separate
financial
statements
4.6
1.1
n.a.
2005
7.5
(0.1)
35.3
% on 2005
separate
financial
statements
1.4
0.7
n.a.
In the tables shown above, the amount for related-party transactions has been reported with the total for the
financial statement item in question, for purposes of showing their impact. No similar report has been made
with respect to shareholders’ equity and earnings for the year, since they are insignificant.
19.1.2 Group related-party transactions
As far as relationships with SEAT Group related parties, the relationships for the supplying of goods and/or
services were also concluded at market conditions, and fall within the typical activity of the Group and the
215
parties involved; their object, consideration, terms and duration are not unlike those practised in relationships
with ordinary customers, and they are not of a significant or important nature.
The SEAT Group related-party transactions concern transactions carried out with:
•
directors, statutory auditors and the General Manager for Italy;
•
other related parties, including:
o
close family members of directors, statutory auditors and the General Manager for Italy;
o
subsidiaries or related companies, including jointly, or parties with notable influence by the
aforesaid directors, statutory auditors and the General Manager for Italy;
o
associated companies (Lighthouse);
o
joint ventures (Katalog);
o
companies which exercise significant influence over the Issuer.
The following table shows the data concerning transactions with the Group related parties for the period
2005-2008 and shows the percentage of such values by reference to the corresponding items of the Group
consolidated financial statements.
Income Statement
(€ million)
2008
Other revenues and income
Non-recurring costs, net
Financial charges
3.2
7.3
5.0
110.1
% on 2008
Consolidated
financial
statements
19.0
3.0
28.1
39.1
2007
2.4
109.9
% on 2007
Consolidated
financial
statements
1.0
42.5
2006
109.9
% on 2006
Consolidated
financial
statements
42.7
2005
113.8
% on 2005
Consolidated
financial
statements
39.9
Balance Sheet
(€ millions)
2008 % impact on
2007 % impact on
2006 % impact on
2005 % impact on
2008
2007
2006
2005
consolidated
consolidated
consolidated
consolidated
result
result
result
result
2.9
4.2
0.4
1.2
0.4
0.8
-0.5
0.9
-0.6
1.1
1,269.5
41.9 1,264.2
39.6 1,258.5
37.2 1,252.9
35.5
0.9
3.3
47.8
16.3
47.5
22.0
30.0
13.1
17.4
8,1
1.4
0.5
1.1
0.4
0
0
Debts for services to be performed and
4.1
3.4
0.2
0.1
other current liabilities
Cash Flow Statement
(€ million)
Cash inflow from investment activities
Cash inflow from financing activities
216
2008 % on 2006
separate
financial
statements
2008
(6.8)
n.a.
(104.6)
26.1
2007 % on 2006
separate
financial
statements
(1.7)
(0.6)
(86.7)
n.a.
0.8
16.9
2006 % on 2006
separate
financial
statements
(0.3)
(91.7)
n.a.
24.7
2005 % on 2006
separate
financial
statements
0.2
(110.2)
22.8
Section One
In the tables shown above, the amount for related-party transactions has been reported with the total for the
financial statement item in question, for purposes of showing their impact. No similar report has been made
with respect to shareholders’ equity and earnings for the year, since they are insignificant.
It should be noted that from 31 December 2008 to the Date of the Information Prospectus there have been no
further non-intragroup related-party transactions.
Among the SEAT Group related-party transactions, mention should be made, in particular, of the legal and
corporate advisory activity carried out for the Issuer by the law firm Giliberti Pappalettera Triscornia e
Associati. In particular, during 2007, the law firm Giliberti Pappalettera Triscornia e Associati, of which
attorney Enrico Giliberti is a partner, carried out ongoing assistance on corporate matters, as well as legal
advice on some ordinary and extraordinary transactions in which SEAT was involved, such as the one
relating to the creation of the joint venture in Turkey with Doğan Yayin Holding, the acquisition of 100% of
the share capital of the German company WLW, and the implementation of the agreement for the purchase
of the “former Savigliano office complex” real estate properties, paying the firm overall compensation of
€ 675,500.
For further details on SEAT Group related-party transactions, please refer to the information contained in the
consolidated financial statements for the financial years ended on 31 December 2005 (please see note 33 of
the securities to the consolidated financial statements), 31 December 2006 (please see note 31 of the notes to
the consolidated financial statements), 31 December 2007 (please see note 31 of the notes to the consolidated
financial statements), and 31 December 2008 (see note 34 of the notes to the consolidated financial
statements).
217
20
FINANCIAL INFORMATION CONCERNING THE ISSUER’S ASSETS AND LIABILITIES,
FINANCIAL POSITION, AND PROFITS AND LOSSES
This Chapter provides information relating to the assets and liabilities and to the financial and economic
position of the SEAT Group with reference to the data appearing in the annual consolidated financial
statements as at 31 December 2008, 2007, 2006 and 2005, the consolidated half-yearly reports as at 30 June
2008 and 2007, and the interim management reports as at 30 September 2008 and 2007, whose information,
if not reported in this Information Prospectus, shall be understood as being hereby incorporated by reference,
as per Article 11, Paragraph 2 of Directive 2003/71/EC and Article 28 of Regulation 809/2004/EC. These
documents are available to the public at the corporate headquarters, as well as on the Issuer’s website,
www.seat.it, in the “Investors” section.
The financial information presented is prepared in accordance with the IFRS, which have been adopted by
the SEAT Group as of 2005 and applied in a consistent manner for all the periods presented.
The scope of consolidation of the SEAT Group includes the Issuer and the companies controlled by it, as of
the date of their acquisition, or as of the date on which the Group acquired control of them. Subsidiaries
cease to be consolidated as of the date on which control is transferred outside of the Group.
In addition, pursuant to the Standing Interpretations Committee (SIC) 12, the “vehicle” companies (so-called
Special Purpose Entity or SPE) are consolidated in full if the risks and benefits are substantially attributable
to the Group, regardless of the share of equity owned by the Group in the SPE. Consequently, Meliadi
Finance S.r.l. (the SPE created ad hoc by the SEAT Group for the trade account receivables securitisation
transactions) is consolidated in full even though the Group does not hold any interest in the share capital of
that company.
The annual consolidated financial statements of the SEAT Group as at 31 December 2008, 2007, 2006 and
2005 have undergone auditing by the Independent Auditors, which issued their reports on 13 March 2009, 7
April 2008, 2 April 2007 and 11 April 2006, respectively.
The abbreviated interim consolidated financial statements included in the SEAT Group’s half-yearly reports
as at 30 June 2008 and 2007 have undergone limited auditing by the Independent Auditors, which issued
their reports on 28 August 2008 and 10 September 2007, respectively.
The consolidated interim management reports of the SEAT Group as at 30 September 2008 and 2007 have
not undergone any auditing by the Independent Auditors.
The data presented in this Section of the Information Prospectus, as well as those in other Sections, are those
shown in the consolidated financial statements insofar as the individual financial statements of the Issuer do
not provide any additional information compared to the consolidated ones.
It should be also noted that on 6 March 2009 the Board of Directors approved the SEAT Group consolidated
financial statements as at 31 December 2008, which may be consulted at the website www.seat.it and on the
website of the Borsa Italiana (www.borsaitaliana.it).
20.1 Financial information relating to the years ended 31 December 2008, 2007, 2006 and 2005
Shown below are the economic and financial data taken from the consolidated financial statements of the
SEAT Group as at 31 December 2008, 2007, 2006 and 2005 disclosed by the Issuer.
Attention is drawn to the fact that in the fourth quarter of 2008, in line with the provisions of IFRS 5, the
German group WLW (transferred on 23 December 2008) was included under “Non-current assets
transferred/to be transferred”. Consequently:
• the 2008 economic results of the WLW Group have been included under “Gains (losses), net, on noncurrent activities transferred/to be transferred”. At the same time, the 2007 income statement amounts
were restated so that items were comparable;
• in the cash flow statement for the 2008 financial year the cash flows generated in the year by the WLW
Group and its disposal have been shown separately. At the same time, the 2007 cash flow statement
amounts were restated so that items were comparable;
218
Section One
Consolidated balance sheets
Assets
(€ thousands)
Non-current assets
Intangible assets with indefinite useful life
Intangible assets with finite useful life
Property, plant and equipment
Assets in leasing
Investments accounted for at equity
Deferred tax assets, net
Other non-current assets
Total non-current assets
Current assets
Inventories
Current tax assets
Total current assets
Non current assets transferred/to be transferred
Total assets
31 December
2008
31 December
2007
31 December
2006
31 December
2005
(a)
3,393,998
219,752
43,716
62,886
2,372
2,140
10,442
344
3,735,650
3,687,067
347,873
56,198
5,707
2,126
14,343
326
4,113,640
3,579,001
485,871
50,013
288
1,592
48,346
805
4,165,916
3,574,260
624,703
49,648
254
1,330
101,837
1,126
4,353,158
(b)
(c)
(a+b+c)
15,211
671,014
7,016
68,414
1,932
304,602
1,068,189
914
4,804,753
15,703
671,101
21,054
66,532
13,083
204,549
992,022
5,105,662
11,891
668,681
5,239
66,243
1,323
308,195
1,061,572
5,227,488
12,444
669,740
6,267
70,891
2,387
202,158
963,887
5,317,045
219
Liabilities and equity
(€ thousands)
Equity shareholders of the Group
Share capital
Additional paid-in capital
Reserve for foreign exchange adjustments
Reserve for transition to IAS/IFRS
Reserve for stock options
Reserve for cash flow hedge instruments
Reserve for actuarial gains (losses)
Other reserves
Income for the financial year
Total equity shareholders of the Group
Minority interests
Share capital and reserves
Income for the financial year
Total minority interests
Total equity
Non-current liabilities
Non-current financial debts to third parties
Non-current financial debts to related parties
Deferred tax liabilities, net
Total non-current liabilities
Current liabilities
Current financial debts to third parties
Current financial debts to related parties
Current tax payables
Payables for services to be rendered and other
current liabilities
Total current liabilities
Current liabilities related to non current assets
transferred/to be transferred
Total liabilities
Total liabilities and equity
220
(a)
(b)
(a+b)
(c)
(d)
(e)
(c+d+e)
(a+b+c+d+e)
31 December
2008
31 December
2007
31 December 31 December
2006
2005
250,352
465,103
(45,243)
181,570
5,956
(10,931)
(1,555)
210,989
(179,646)
876,595
250,352
465,103
(15,212)
181,570
7,592
5,262
(3,956)
110,896
98,399
1,100,006
249,879
460,428
(5,312)
181,576
7,905
1,533
(4,256)
85,295
80,136
1,057,184
248,012
441,893
(8,258)
181,576
9,223
(14,262)
24
(9,996)
131,905
980,117
20,980
5,966
26,946
903,541
15,985
7,839
23,824
1,123,830
16,594
1,652
18,246
1,075,430
12,861
6,756
19,617
999,734
1,762,018
1,269,470
34,767
14,168
26,170
3,106,593
1,926,171
1,264,201
47,183
5,089
22,687
3,265,331
2,125,640
1,258,549
56,768
21,814
3,462,771
2,273,792
1,252,897
52,781
2,059
22,788
3,604,317
245,998
47,837
256,993
52,460
72,764
118,529
167,972
47,536
276,814
44,165
54,413
125,601
199,268
29,942
292,919
39,259
23,533
104,366
196,926
17,375
292,754
50,366
40,958
114,615
794,581
38
716,501
-
689,287
-
712,994
-
3,901,212
4,804,753
3,981,832
5,105,662
4,152,058
5,227,488
4,317,311
5,317,045
Section One
Consolidated income statements
(€ thousands)
Sales of goods
Rendering of services
Other income
Total revenues
Materials
External services
Other valuation adjustments
Other operating expense
and restructuring costs, net
Amortisation, depreciation and writedown
Restructuring costs, net
Operating income
Interest expense
Interest income
Gains (losses) on investments accounted for at equity
Gains (losses) on disposal and evaluation of investments
Income before income taxes, discontinued activities and minority
interests
Income taxes for the year
Gains (losses) on ongoing activities
Gains (losses) net on non current activities transferred/to be transferred
Gains (losses) for the year
Of which gains (losses) for the year (for Minority interests)
Of which gains (losses) for the year (for the Group)
Gains (losses) per share (in €)
Gains (losses) per share (in €)
2008
30,442
1,345,547
1,375,989
16,983
1,392,972
(56,308)
(427,550)
(239,785)
(44,423)
(13,972)
(5,645)
605,289
(345,321)
(17,910)
(13,741)
228,317
(281,819)
33,614
(7,234)
(27,122)
(69,478)
(96,600)
(77,080)
(173,680)
5,966
(179,646)
(4.30545)
n.a.
2007
Adjusted(*)
35,983
1,408,230
1,444,213
5,375
1,449,588
(61,417)
(442,724)
(242,615)
(38,741)
(11,211)
(4,756)
648,124
2007
2006
2005
35,983
1,417,609
1,453,592
5,757
1,459,349
(61,493)
(446,365)
(246,390)
(38,866)
(11,211)
(4,852)
650,172
38,790
1,421,393
1,460,183
8,596
1,468,779
(64,862)
(508,417)
(231,921)
(37,441)
(9,739)
(4,975)
611,424
33,232
1,391,379
1,424,611
5,969
1,430,580
(68,211)
(450,785)
(219,128)
(40,771)
(19,888)
(5,237)
626,560
(203,884) (204,218) (195,336) (194,458)
(9,017)
(9,361) (12,932) (11,144)
(7,519)
(7,519)
(1,038)
(764)
427,704 429,074 402,118 420,194
(258,505) (258,190) (257,583) (284,753)
18,727
18,877
11,374
24,185
(3,314)
13
34
45
(3,327)
(39)
4,198
184,612 186,447 155,904 163,869
(79,482)
105,130
1,108
106,238
7,839
98,399
2.3544
2.3498
(80,209)
106,238
106,238
7,839
98,399
2.3544
2.3498
(74,116)
81,788
81,788
1,652
80,136
1.9287
1.9240
(25,383)
138,661
175
138,661
6,756
131,905
3.2014
3.1998
Gains (losses) per share is calculated by dividing the income (loss) for the year of the SEAT Group by the average number of shares outstanding
during the year. Diluted earnings per share is calculated by using the weighted average number of the shares outstanding during the year, adjusted by
assuming the issue of all the potential shares deriving from the exercise of dilutive options pursuant to IAS 33, and taking into account the
Consolidation.
Pursuant to IAS 33, in the 2008 financial year no dilution effect is reported on the earnings per share, as the market value of the ordinary shares of the
Issuer is considerably lower than the strike price of the options that have not yet exercised at 31 December 2008.
(*) The amounts of the income statement for the year ended on 31 December 2007 have been restated so that the items were comparable with those
of the financial statements at 31 December 2008, following, in particular, the disposal of WLW.
221
Consolidated cash flow statements
(€ thousands)
Gain from ongoing activities
Interest expense, net(1)
Costs for stock options
Income taxes for the year
(Gains) losses on disposal of non-current assets
(Write-up) writedown of assets
Change in working capital
Change in non-current liabilities
Foreign exchange adjustments, change in the scope of
consolidation and other change
Cash outflow for investments
Purchase of intangible assets with indefinite useful life
Purchase of intangible assets with finite useful life
Purchase of property, plant and equipment(2)
Other investments
Proceeds from disposal of non-current assets
Cash outflow for financing
Proceeds of non-current loans
Repayment of non-current loans
Proceeds of current loans
Repayment of current loans
Payment of interest expense, net
Payment of transaction costs on loans
Change in financial assets and financial debts
Increase in share capital from exercised stock options
Distribution of dividends
Payment of costs related to dividends distribution
Cash flow from non current activities transferred/to be
transferred
Increase (decrease) in cash and cash equivalents in the
year
Cash and cash equivalents at the beginning of the year
(a)
(b)
2008
2007
Adjusted(*)
2007
2006
2005
(96,600)
345,321
247,997
572
69,478
124
7,231
(39,453)
(5,828)
16,661
105,130
203,884
240,638
1,497
79,482
2,843
(13)
(41,415)
(5,973)
10,796
106,238
204,218
240,173
1,497
80,209
2,842
(13)
(44,241)
(6,133)
21,865
81,788
195,336
245,272
4,768
74,116
(37)
(34)
(58,705)
(2,968)
(1,268)
138,661
194,458
259,781
7,907
25,383
(4,104)
(220)
(15,859)
(413)
835
545,503
596,869
606,655
538,268
606,429
(31,797)
(39,020)
(12,974)
(4,378)
182
-
- (127,620)
(50,966) (51,094)
(14,645) (15,019)
(5,339)
(5,339)
1,209
1,234
12,622
(416)
(34,785)
(13,538)
(157)
968
(13,314)
(7,587)
(25,838)
(20,199)
(40)
9,806
(14,245)
(87,987)
(69,741) (185,216)
(61,242)
(58,103)
(169,615)
(232,296)
(9,096)
14,792
(3,862)
-
- 256,000
(208,301) (208,301) (431,522) (234,064)
40,000
- (40,000)
(222,393) (222,122) (223,285) (236,150)
(1,525) (26,052)
(26,817) (26,627)
51,831
(1,006)
8,350
8,350
20,434
5,576
(62,221) (62,221) (45,276)
(158)
(565)
- (14,164)
2,919
7,809
(c) (400,077)
(d)
42,614
(511,382) (525,085) (370,989) (484,045)
(119,932)
-
(a+b+c+d)
100,053
204,549(3)
304,602
(103,646) (103,646)
308,195
204,549(3)
308,195
204,549
106,037
64,281
202,158
308,195
137,877
202,158
(1) Less gains (losses) from discounting of operating assets/liabilities.
(2) In 2008, the item does not include € 62,571 thousand invested in the real estate complex located in Turin, at Corso Mortara 22, through a finance
lease transaction.
(3) It includes € 7,124 thousand of cash in respect of the WLW Group.
(*) The amounts of the income statement for the year ended on 31 December 2007 have been restated so that the items were comparable with those
of the financial statements at 31 December 2008, following, in particular, the disposal of WLW.
222
Section One
Changes in consolidated shareholders’ equity
(€ thousands)
At 31.12.2004 (*)
Allocation of previous year result
Exercise of stock options
Income (loss) recognised directly to equity
Change in the reserve for interest rate risk hedge
instruments
Actuarial gains (losses)
Foreign exchange adjustments
Fair value of stock option plans
Other changes
Income for the year
At 31.12.2005 (*)
Equity shareholders of SEAT
Minority interests
Total
Share Reserves Income
Total
Share Income Total
capital
(loss)
capital
(loss)
for the
and for the
year
reserves
year
247,539 522,887 79,930 850,356
3,659
6,129 9,788 860,144
79,930 (79,930)
5,971 (6,129) (158)
(158)
473
5,103
5,576
5,576
(14,261)
(14,261)
(14,261)
(164)
1,533
7,726
(2,554)
131,905 131,905
600,200 131,905 980,117
(164)
1,533
7,726
(50) 3,181
627
6,806 6,806 138,711
6,756 19,617 999,734
(164)
1,533
7,726
(2,554)
248,012
3,231
12,861
(*) The amounts at 31 December 2005 and 2004 have been redetermined with respect to what was disclosed at the time to include the effects
deriving from the posting of actuarial gains (losses), net of respective deferred taxes, on net liabilities for defined-benefit funds, following the
retroactive application of the accounting standard IAS 19 Paragraph 93A, as described in Item 4 “Change in accounting standards with retroactive
application” in this explanatory note.
(€ thousands)
At 31.12.2005
Change in the reserve for cash flow hedge
instruments
Other changes
Transactions of the year affecting only the
income statement
At 31.12.2006
Total
capital
(loss) for
the year
248,012
1,867
600,200 131,905
89,784 (131,905)
18,567
Total
999,734
(45,276)
20,434
15,795
15,795
15,795
(4,280)
2,946
4,468
(311)
(4,280)
2,946
(4,280)
2,946
(4,468)
84,604
249,879
Minority interests
Share Income Total
capital
(loss)
and for the
reserves
year
980,117 12,861
6,756 19,617
(42,121)
3,601 (6,756) (3,155)
20,434
727,169
(311)
84,604
80,136 1,057,184
122
10
(122)
1,774
16,594
10
1,774
(301)
86,378
1,652 18,246 1,075,430
223
(€ thousands)
At 31.12.2006
instruments
Reversal of the reserve for foreign exchange
adjustments due to Consodata Group Ltd.
deconsolidation
Other changes
income statement
At 31.12.2007
(€ thousands)
At 31.12.2007
Allocation of prior year’s profit (loss)
Allocation of prior year’s profit (loss) to
reserves
Dividend distribution
Income (charges) directly through the income
statement
Change in the reserve for “cash flow hedge”
instruments
Net exchange gains (losses) arising on the
conversion of financial statements denominated
in foreign currencies
Other changes
income statement
At 31.12.2008
Minority interests
Total
Total
Share Income Total
(a+b)
capital
(loss)
(a) capital
(loss)
(b)
for the
and for the
year
reserves
year
249,879 727,169
80,136 1,057,184
16,594
1,652 18,246 1,075,430
21,658 (80,136) (58,478) (2,091) (1,652) (3,743) (62,221)
473
6,631
7,104
1,246
1,246
8,350
3,729
3,729
3,729
1,965
(13,181)
3,281
1,965
(13,181)
1,965
(13,181)
1,408
(1,405)
(3,281)
(1,408)
103,088
250,352
751,255
(1,405)
103,088
98,399 1,100,006
118
118
(118)
7,957
15,985
118
7,957
(1,287)
111,045
7,839 23,824 1,123,830
SEAT Pagine Gialle S.p.A.’s share
Total
capital
(loss) for
(a)
the year
250,352
751,255
98,195
98,399
(204)
(204)
(16,193)
(16,193)
(16,193)
2,404
(30,031)
2,404
(30,031)
2,404
(30,031)
508
(249)
250,352
Minority interest
Total
Share Income Total
(a+b)
capital
(loss)
(b)
and for the
reserves
year
98,399 1,100,006
15,985
7,839 23,824 1,123,830
(98,399)
(204)
4,181 (7,839) (3,658)
(3,862)
(98,399)
7,839 (7,839)
(508)
(249)
(179,138) (179,138)
805,889 (179,646)
876,595
(3,658)
64
750
(3,658)
(64)
6,030
20,980
(3,862)
750
501
6,030 (173,108)
5,966 26,946
903,541
20.2 Interim financial information and other financial information
Shown below are the economic and financial data taken from the consolidated half-yearly report as of 30
June 2008 and 2007, as well as from the consolidated interim management report as of 30 September 2008
and 2007, disclosed by the Issuer as of the date of the latest audited individual and consolidated financial
statements.
It is noted that the data as of 30 September 2008 were disclosed by SEAT in reclassified form only, as
indicated in Section One, Chapter 9 of this Information Prospectus.
224
Section One
Consolidated balance sheets as of 30 June 2008 and 2007
Assets
(€ thousands)
Non-current assets
Intangible assets with indefinite useful life
Intangible assets with finite useful life
Property, plant and equipment
Investments accounted for at equity
Deferred tax assets, net
Other non-current assets
Total non-current assets
Current assets
Inventories
Current tax assets
Total current assets
Total assets
30 June 2008
30 June 2007
(a)
3,667,833
301,061
54,248
4,529
2,090
39,647
320
4,069,728
3,578,179
412,021
48,540
288
2,142
50,529
1,303
4,093,002
(b)
(a+b)
16,443
615,039
4,650
81,862
18,110
201,753
937,857
5,007,585
17,062
626,468
8,114
72,425
50,909
210,605
985,583
5,078,585
225
Liabilities and equity
(€ thousands)
Share capital
Additional paid-in capital
Reserve for foreign exchange adjustments
Reserve for transition to IAS/IFRS
Reserve for stock options
Reserve for cash flow hedge instruments
Reserve for actuarial gains (losses)
Other reserves
Income for the period
Total equity shareholders of the Group
Minority interests
Share capital and reserves
Total minority interests
Total equity
Non-current liabilities
Non-current financial debts to third parties
Non-current financial debts to associates
Deferred tax liabilities, net
Total non-current liabilities
Current liabilities
Current financial debts to third parties
Current financial debts to associates
Current tax payables
Payables for services to be rendered and other current liabilities
Total current liabilities
Total liabilities
Total liabilities and equity
226
30 June 2008
30 June 2007
(a)
250,352
465,103
(25,605)
181,570
7,736
19,793
(18,311)
209,216
(45,651)
1,044,203
250,304
464,627
(2,543)
181,576
7,548
10,116
(551)
109,177
(31,066)
989,188
(b)
(a+b)
21,289
2,941
24,230
1,068,433
14,576
2,796
17,372
1,006,560
(c)
1,822,977
1,267,028
63,663
15,481
23,534
3,192,683
2,001,263
1,261,375
47,817
23,216
3,333,671
(d)
(c+d)
(a+b+c+d)
173,289
17,375
236,661
47,649
42,839
228,656
746,469
3,939,152
5,007,585
192,324
17,375
234,228
39,542
34,126
220,759
738,354
4,072,025
5,078,585
Section One
Consolidated income statements for the first half of 2008 and 2007
(€ thousands)
Sales of goods
Rendering of services
Other income
Total revenues
Materials
External services
Other valuation adjustments
Other operating expense
Operating income before amortisation, depreciation, non-recurring and restructuring costs, net
Restructuring costs, net
Operating income
Interest expense
Interest income
Gains (losses) on investments accounted for at equity
Gains (losses) on disposal of investments
Income before income taxes, discontinued activities and minority interests
Income taxes for the period
Income before minority interests
Minority interests
H1 2008
12,984
563,485
576,469
9,240
585,709
(21,860)
(206,161)
(127,330)
(22,661)
(7,496)
(2,503)
197,698
(118,163)
(5,864)
(5,158)
68,513
(134,315)
14,522
(891)
(52,171)
9,461
(42,710)
(2,941)
(45,651)
H1 2007
14,267
567,996
582,263
2,469
584,732
(22,869)
(203,297)
(121,694)
(18,765)
(7,489)
(3,045)
207,573
(101,448)
(3,133)
(7,334)
95,658
(129,178)
9,201
(3,327)
(27,646)
(624)
(28,270)
(2,796)
(31,066)
227
Consolidated cash flow statements for the first half of 2008 and 2007
(€ thousands) (*)
Income (loss) for the period before minority interests
Interest expense, net (**)
Foreign exchange adjustments and other change
Purchase of consolidated subsidiaries
Purchase of property, plant and equipment
Other investments
Increase (decrease) in cash and cash equivalents in the period
H1 2008
H1 2007
(a)
(42,710)
118,163
120,012
459
(9,461)
10
891
100,099
(2,687)
6,805
291,581
(28,270)
101,448
120,350
781
624
3,333
86,574
192
(46)
284,986
(b)
(31,114)
(18,381)
(5,365)
(18)
46
(54,832)
(20,573)
(5,640)
(577)
744
(26,046)
(133,491)
(110,473)
8,281
(3,862)
(239,545)
(2,796)
204,549
201,753
(179,150)
(111,708)
(7,883)
4,432
(62,221)
(356,530)
(97,590)
308,195
210,605
(c)
(a+b+c)
(*)
The amounts as of 30 June 2007 have been reclassified compared to what was disclosed at the time to show in a single item the cash flow
effects related to the purchase of consolidated subsidiaries.
(**)
Minus gains (losses) deriving from discounting operating and non-operating assets/liabilities.
Changes in consolidated shareholders’ equity for the first half of 2008
(€ thousands)
As of 31.12.2007
instruments
Other changes
Transactions of the period affecting only the
income statement
As of 30.06.2008
228
Total
capital
(loss)
for the
period
250,352 751,255 98,399 1,100,006
98,195 (98,399)
(204)
14,531
14,531
14,531
(14,355)
(10,393)
421
(152)
(14,355)
(10,393)
(14,355)
(10,393)
(421)
(45,230)
250,352
Minority interests
Total
Capital Income Total
and
(loss)
reserves for the
period
15,985
7,839 23,824 1,123,830
4,181 (7,839) (3,658)
(3,862)
(152)
(45,230)
839,502 (45,651) 1,044,203
38
1,085
(38)
2,979
21,289
1,085
2,979
933
(42,251)
2,941 24,230 1,068,433
Section One
Changes in consolidated shareholders’ equity for the first half of 2007
(€ thousands)
As of 31.12.2006
instruments
adjustments due to Consodata Group Ltd,
deconsolidation
Other changes
income statement
As of 30.06.2007
Total
capital
(loss)
for the
period
249,879 727,169 80,136 1,057,184
21,658 (80,136) (58,478)
425
4,007
4,432
8,583
8,583
8,583
5,371
(512)
3,281
5,371
(512)
5,371
(512)
720
(327)
250,304
Minority interests
Total
Share Income Total
capital
(loss)
and for the
reserves period
16,594
1,652 18,246 1,075,430
(2,091) (1,652) (3,743) (62,221)
4,432
(3,281)
(720)
(27,065)
(327)
(27,065)
769,950 (31,066)
989,188
61
12
(61)
2,857
14,576
12
2,857
(315)
(24,208)
2,796 17,372 1,006,560
Reclassified consolidated balance sheets as of 30 September 2008 and 2007
(€ thousands)
- Operating current assets
- Operating current liabilities
- Non-operating current assets
- Non-operating current liabilities
Invested capital, net
Minority interests
Total equity
Financial debt, net
Adjustment relating to cash flow hedge instruments, net
“Book value” financial debt, net
of which:
- Non-current financial debts
- Current financial debts
- Non-current financial assets
- Current financial assets and cash and cash equivalents
Total
(a)
(b)
(a+b)
At 30.09.2008
3,831,109
171,903
(83,414)
(16,946)
261,904
697,869
(435,965)
(27,498)
13,077
(40,575)
4,137,058
1,080,920
24,862
1,105,782
3,105,176
(69,027)
(4,873)
3,031,276
At 30.09.2007
3,867,637
154,613
(67,814)
(2,371)
273,043
722,288
(449,245)
(18,878)
10,488
(29,366)
4,206,230
1,046,374
20,684
1,067,058
3,233,263
(87,431)
(6,660)
3,139,172
3,094,394
187,618
(1,978)
(248,758)
4,137,058
3,267,495
218,306
(1,973)
(344,656)
4,206,230
(*) The item includes financial assets held for sale.
229
Reclassified consolidated income statements for the first nine months and the third quarter of 2008 and 2007
(€ thousands)
Salaries, wages and employee benefits (*)
Gross operating profit
% of revenues
Other valuation adjustments and provisions to reserves for risks and
charges, net
Other operating income and expense
and restructuring costs, net (EBITDA)
% of revenues
Non-operating amortisation, depreciation and writedown
% of revenues
Gains (losses) on disposal and writedown of investments
Income before income taxes and minority interests
Income before minority interests
Minority interests
(*) Minus the respective cost recovery.
230
9 months 2008
986,746
(347,830)
(190,114)
448,802
45.5%
(41,515)
9 months 2007
996,708
(348,466)
(179,227)
469,015
47.1%
(40,246)
Q3 2008
410,277
(121,733)
(63,104)
225,440
54.9%
(11,358)
Q3 2007
414,445
(123,850)
(57,533)
233,062
56.2%
13,992
4,151
411,438
(2,346)
426,423
(342)
213,740
(220)
218,850
41.7%
(37,063)
(136,115)
(14,658)
223,602
22.7%
(183,719)
(894)
38,989
(24,346)
14,643
(3,617)
11,026
42.8%
(30,619)
(121,550)
(11,227)
263,027
26.4%
(179,703)
(3,327)
79,997
(40,248)
39,749
(4,873)
34,876
52.1%
(13,716)
(41,299)
(3,636)
155,089
37.8%
(63,926)
(3)
91,160
(33,807)
57,353
(676)
56,677
52.8%
(10,204)
(40,517)
(760)
167,369
40.4%
(59,726)
107,643
(39,624)
68,019
(2,077)
65,942
Section One
Consolidated cash flow statements for the first nine months and the third quarter of 2008 and 2007
(€ thousands) (*)
Income (loss) for the period before minority interests
Interest expense, net (**)
Foreign exchange adjustments and other change
Cash inflow from operating activities (A)
Purchase of consolidated subsidiaries
Purchase of property, plant and equipment
Other investments
Cash outflow for investments (B)
Payment of costs related to dividends distribution
Cash outflow for financing (C)
Increase (decrease) in cash and cash equivalents in the period (A+B+C)
9 months 2008 9 months 2007 Q3 2008
Q3 2007
14,643
173,178
183,809
535
24,346
8
891
10,836
(4,341)
6,056
409,961
39,749 57,353
152,169 55,015
180,602 63,797
1,139
76
40,248 33,807
2,763
(2)
13,337 (89,263)
(673) (1,654)
2,941
(749)
432,275 118,380
68,019
50,721
60,252
358
39,624
(570)
(73,237)
(865)
2,987
147,289
(31,367)
(25,998)
(7,731)
(1,910)
89
(66,917)
(416)
(253)
(29,236) (7,617)
(10,526) (2,366)
(25) (1,892)
1,459
43
(38,744) (12,085)
(416)
(8,663)
(4,886)
552
715
(12,698)
(163,491)
(164,084)
25,405
(3,862)
(8)
(306,040)
37,004
204,549
241,553
(179,150)
(166,423)
(120,125)
8,208
(62,221)
(519,711)
(126,180)
308,195
182,015
(30,000)
(53,611) (54,715)
17,124 (112,242)
3,776
(8)
(66,495) (163,181)
39,800 (28,590)
201,753 210,605
241,553 182,015
(*)
The amounts for the first 9 months of 2007, the third quarter of 2007, and for the financial year 2007 have been partially reclassified compared
to what was disclosed at the time to show the cash flow effects relating to the purchase of consolidated subsidiaries.
(**)
Minus gains (losses) deriving from discounting operating and non-operating assets/liabilities.
231
Changes in consolidated shareholders’ equity for the first nine months of 2008
(€ thousands)
As of 31.12.2007
- Retained earnings
- Dividends distributed
instruments
Actuarial gains (losses) for the period
Obligations to associates and other changes
Transactions of the period affecting only
the income statement
As of 30.09.2008
Total
capital
(loss)
for the
period
250,352 751,255 98,399 1,100,006
98,195 (98,399)
(204)
98,399 (98,399)
(204)
(204)
(389)
(389)
(389)
(13,867)
(10,492)
480
(5,639)
(13,867)
(10,492)
(13,867)
(10,492)
(480)
11,506
250,352
Minority Interests
Total
Share Income Total
capital
(loss)
and for the
reserves period
15,985
7,839 23,824 1,123,830
4,181 (7,839) (3,658)
(3,862)
7,839 (7,839)
(3,658)
(3,658)
(3,862)
819,543
55
1,024
(5,639)
11,506
(55)
3,672
11,026 1,080,921
21,245
1,024
3,672
(4,615)
15,178
3,617 24,862 1,105,783
Changes in consolidated shareholders’ equity for the first nine months of 2007
(€ thousands)
As of 31.12.2006
instruments
Actuarial gains (losses) for the period
adjustments due to Consodata Group Ltd,
deconsolidation
Other changes
income statement
As of 30.09.2007
Equity shareholders of Group
Total
capital
(loss)
for the
period
249,879 727,169 80,136 1,057,184
21,658 (80,136) (58,478)
469
6,531
7,000
2,929
2,929
2,929
5,360
(5,539)
3,281
5,360
(5,539)
5,360
(5,539)
1,051
(1,290)
(3,281)
(1,051)
39,208
250,348
Minority Interests
Total
Share Income Total
capital
(loss)
and for the
reserves period
16,594
1,652 18,246 1,075,430
(2,091) (1,652) (3,743) (62,221)
1,208
1,208
8,208
761,150
(1,290)
39,208
34,876 1,046,374
87
13
(87)
4,960
15,811
13
4,960
(1,277)
44,168
4,873 20,684 1,067,058
20.2.1 In-depth information on significant financial statement items
For in-depth information regarding the significant items on the consolidated financial statements of the
SEAT Group as of 31 December 2008, 2007, 2006 and 2005, the abbreviated interim consolidated financial
statements included in the half-yearly reports of the SEAT Group as of 30 June 2008 and 2007, and the
consolidated interim management reports as of 30 September 2008 and 2007, the reader is referred to the
information posted on the Company website, www.seat.it, in the “Investors” section.
232
Section One
20.2.2 Accounting standards and criteria of reference
For in-depth information regarding the IFRS applied in the drafting of the consolidated financial statements
of the SEAT Group, the reader is referred to the information posted on the Company website, www.seat.it, in
the “Investors” section, whose information, if not reported in this Information Prospectus, shall be
understood as being hereby incorporated by reference, as per Article 11, Paragraph 2 of Directive
2003/71/EC and Article 28 of Regulation 809/2004/EC. This document is available to the public at the
Company’s official website www.seat.it.
20.3 Pro forma financial information
Since no extraordinary and non-recurring transactions of a significant amount took place during the course of
the financial years being compared, this Information Prospectus does not contain pro forma financial
information.
20.4 Auditing of the annual financial information for previous years
The consolidated financial statements from which the data included in this Information Prospectus for the
years ended on 31 December 2008, 2007, 2006 and 2005 are extracted were audited by the Independent
Auditors, after which the audit reports attached thereto and available on the Company’s website,
www.seat.it, in the “Investors” section were issued.
The reports by the Independent Auditors must be read together with the audited consolidated financial
statements and refer to the date on which such reports were issued.
These reports, which are attached to this Information Prospectus, do not contain reservations or liability
exclusion clauses.
20.4.1 Declaration attesting to the auditing of the financial information for previous financial years
The financial information included in this Information Prospectus comes from the data on the Issuer’s
consolidated financial statements for the financial years ended on 31 December 2008, 31 December 2007, 31
December 2006 and 31 December 2005, previously audited by the Independent Auditors.
The Independent Auditors also performed a limited audit of the abbreviated interim consolidated financial
statements included in the half-yearly reports of the SEAT Group as of 30 June 2008 and 2007 shown in
Section One, Chapter 20, Paragraph 20.6 of this Information Prospectus.
20.4.2 Mention of other information contained in the registration document checked by the auditors
The Independent Auditors issued a report on the procedures carried out on the reasonableness of the stated
profit forecasts or estimates adopted by the Issuer as contained in Section One, Chapter 13 of the Information
Prospectus.
20.5 Date of the most recent financial information
The most recent financial information contained in Chapter 20 relates to the SEAT Group consolidated
financial statements as at 31 December 2008, approved by the Board of Directors of the Issuer on 6 March
2009.
20.6 Dividends policy
Pursuant to the provisions of Art. 6 of the Issuer’s Bylaws, “the net profits appearing on the duly approved
financial statements, after deduction of the portion to be allocated to the legal reserve, must be distributed to
savings shares up to the amount of five per cent of € 6.00 per share.
233
The profits that remain after the allocation of the preferred dividend stipulated in the previous paragraph to
savings shares, whose distribution is decided by the shareholders’ meeting, shall be distributed among all
the shares so that the savings shares shall be due a greater overall dividend than ordinary shares, to an
extent equal to two per cent of € 6.00 per share.
If a dividend lower than the amount stipulated in Paragraph Six has been allocated to savings shares in a
financial year, the difference shall be computed by increasing the preferred dividend in the next two
financial years.
In the event of distribution of reserves, savings shares shall have the same rights as the other shares,
However, the shareholders’ meeting approving the individual financial statements shall have the authority,
in the event of the lack of or inadequacy of the net profits appearing on the said financial statements, to
utilise the reserves available to satisfy the equity rights referred to in Paragraph Six above as possibly
increased pursuant to Paragraph Eight above”.
With reference to financial year 2007, it should be noted that the Ordinary Shareholders’ Meeting of the
Issuer held on 23 April 2008 resolved the distribution of a unit dividend of € 0.0015 (pre-Consolidation
figure) to the savings shares for an overall amount of approximately € 204,000, available for payment as of
22 May 2008, with an ex-dividend date of 19 May 2008.
Under the current credit market situation, the Company has adopted a financial policy based on preferred
allocation of available financial resources to debt repayment and to the development of internet activity in
Italy. In accordance with the Amendment Agreement to the RBS Loan Agreement, the Company agreed not
to distribute dividends until the ratio between debt (calculated considering the increase in debt deriving from
the proposed distribution) and EBITDA is no less than a value of 4. For the dividend distribution
commitments deriving from existing loans, please see Section One, Chapter 22, Paragraph 22.3.
Below is a table summarising the dividends decided by the Company:
Shareholders’
Meeting
2007 dividend
2006 dividend
2005 dividend
2003 extraordinary dividend
23/04/08
19/04/07
27/04/06
15/04/04
Unit
Unit
Gross
Gross
dividend dividend dividend for dividend for
for
for
ordinary
savings
ordinary
savings
shares
shares
shares
shares
(€)
(€)
(€)
(€)
0.0015
204,112.18
0.0070
0.0076 57,423,279.87 1,034,168.37
0.0050
0.0101 40,743,590.98 1,374,355.34
0.433658 0.433658
-
Overall
dividends
(€)
Profit
per
share
(€)
204,112.18 0.01054
58,457,448.24 0.01001
42,117,946.32 0.01028
3,578,238,127.84
n.a.
Historical data shown before the Consolidation approved by resolution of the Extraordinary Shareholders’
Meeting of the Issuer on 26 January 2009,which became effective, following the registration with the
Companies’ Register, on 9 February 2009. For further information, please see Section One, Chapter 20,
Paragraph 20.1.
20.7 Administrative, court and arbitration proceedings
During the course of the normal conduct of its business, the SEAT Group has been involved in some court
proceedings brought: (i) by its customers for alleged default on advertising contracts, (ii) by telephone
service subscribers for alleged errors or omissions in the publication of user information taken from the
telephone service operators’ Integrated Data Base utilised by the Issuer, and (iii) by agents and employees in
relation to circumstances surrounding their employment contracts. In addition, SEAT is currently undergoing
a tax audit by the Milan Tax Police.
With regard to the lawsuits referred to in item (i), normally, in entering an appearance in court, besides
disputing the basis of the adversaries’ claims, the Company argues for the effectiveness and operation in its
favour of the limitation of liability clause set forth in Art. 4 of the general conditions attached to all
advertising contracts and signed expressly in acceptance thereof by its customers, according to which “SEAT
shall be liable solely for the omissions, including complete omissions, and for the errors relative to the
commissioned advertising, which void or seriously reduce the effectiveness thereof and that are notified to it
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Section One
by the purchaser by registered letter, with return receipt requested, within 90 days as of publication; in that
case, the purchaser shall only be entitled to repetition free of charge of the advertisement in question in the
next edition and, with regard to 89.24.24 Pronto PAGINEGIALLE and online services, to intervention on
errors and omissions, excluding any other form of compensation”. In general, SEAT sees the operation of
that clause and, therefore, of the limitation of liability in its favour recognised by judgments in court, except
in cases where its application is excluded due to the existence of fraud or gross negligence.
With regard to the court proceedings referred to in item (ii), as a rule, the Company allows for involvement
of telephone services operators in the respective lawsuit for the purposes of being held harmless against
obligations of a compensatory nature which could possibly be ordered against it. In general, these lawsuits
are often decided by the judge with a judgment denying the damages claim against SEAT and ordering the
telephone service operator that owns the information to compensate the damage caused to the plaintiff by
inaccurate information or omissions contained in the Single Data Base.
The Company is not aware of arbitration proceedings having the Issuer or other companies in the Group as
interested parties and pending as of the Date of the Information Prospectus and/or instituted in the twelve
months prior to its publication.
The nature and the value of the legal disputes pending and instituted over the space of the twelve months
prior to the publication of the Information Prospectus allow for ruling out the existence, even provisionally,
of factors that could have a significant repercussion on the financial situation or the profitability of the Issuer
or the Group.
The overall value of the main disputes to which the SEAT Group is a party – and which are listed here –
amounts to approximately € 913.8 million, of which € 887 million are ascribable to disputes against Telecom
Italia Media S.p.A., (as specified below), with regard to which the Company has not made allocations to the
litigation contingency provision insofar as there is no real risk of liability for the Issuer.
It is noted that the SEAT Group’s financial statements show a reserve for risks and charges to cover potential
liabilities that could derive from any court and arbitration proceedings. The Group does not make allocations
to the reserve for risks and charges in the absence of certain or objective elements or when a negative
outcome to the dispute is not deemed likely. On 31 December 2008, this reserve amounted, on a consolidated
level, to approximately € 21 million. This amount is included in the current contingencies and charges
provision under liabilities on the balance sheet, totalling approximately € 52 million overall as at 31
December 2008; besides the aforesaid contingency provisions for lawsuits and disputes, the item includes
allocations for contingencies and charges not related to lawsuits and disputes, including in particular
provisions for commercial contingencies of € 14 million (to meet charges for indemnities to customers for
services performed improperly, all outside of any lawsuit), personnel restructuring provisions of € 10 million
and other current contingencies and charges of € 6 million.
The details of some of the most important cases in which SEAT and other Group companies are involved are
given below.
20.7.1 Administrative, court and arbitration proceedings in which SEAT is involved
Dispute with Telecom Italia due to billing terms and receivables management for non-geographical
number (NGN) access services
In April 2007, Telecom Italia S.p.A. (“Telecom Italia”) cancelled all the interconnection contracts
previously in effect with Other Licensed Operators (“OLOs”) holding non-geographical numbers (“NGNs”),
which include the SEAT Group’s 892 and 12xy numbers. The interconnection contracts governed the
management terms and the economic conditions for services5 for access to the Telecom Italia fixed network,
which it is required to offer – as incumbent operator – pursuant to current regulations to OLOs holding
NGNs. Following such cancellations, Telecom Italia has sought to impose a contractual amendment on the
OLOs – immediately rejected by the SEAT Group – which, in leveraging Ministerial Decree 366/2000 and
the so-called “billing on behalf” provided for therein in relation to business within the telecommunications
5
The scope of such services includes: the invoicing of calls by Telecom Italia subscribers to NGNs, the management of the credit associated with
such services, including any recovery actions, and the risk of bad debts.
235
sector, transferred a series of activities and charges, borne until then by Telecom Italia, to the OLO holding
the NGN.
In particular, following the new proposed contract, Telecom Italia would have performed credit management
services “under a mandate” from the OLOs, refraining from a series of activities carried out until October
2007 for its own subscribers. In the event of unsuccessful action by Telecom Italia against its own
subscribers proving delinquent in the payment of NGN services, this solution would have made the OLOs
bear the obligation to bring recovery actions against them (even though such OLOs are completely
extraneous to the contractual relationships between such subscribers and Telecom Italia).
On 31 October 2007, Telecom Italia notified the OLOs that the new interconnection contracts would be in
effect as of 15 November 2007, further specifying that in the event that the latter did not accept them, the
entire credit management would be the direct responsibility of each OLO for the traffic under its
responsibility.
SEAT, in conjunction with other primary OLOs, therefore undertook a series of actions through AGCOM
(the Italian telecoms regulator) for the purposes of obtaining an intervention from that Authority clarifying
the obligations borne by Telecom Italia by virtue of the interconnection contracts. On 26 November 2007,
the Authority sent Telecom Italia and all the OLOs involved a letter in which it (i) upheld SEAT’s argument,
criticising Telecom Italia’s interpretation of the phrase “billing on behalf of third parties”; (ii) reiterated that
the ownership of the credit for the services invoiced on the telephone bill remained with Telecom Italia,
including the credit recovery and delinquency management service and (iii) asked Telecom Italia to conclude
interconnection contracts with the OLOs in compliance with regulatory provisions (AGCOM Resolutions
No. 417/06/CONS and No. 107/07/CIR).
However, despite the clarification letter of 26 November 2007, Telecom Italia would not amend the draft
contract previously sent to the OLOs and refused payment of the invoices issued by Telegate for the traffic
on NGNs made from November 2007 to February 2008, on the assumption that the billing regime introduced
by it did not change the current regulatory framework and that, therefore, it should be deemed in keeping
with the interpretations provided by AGCOM.
At the same time, having verified that Telecom Italia had cancelled only the access agreements for the 892
numbers and not those for the 12xy numbers, SEAT gave notice to Telecom Italia to urgently pay the
invoices associated with these latter numbers. Telecom Italia, therefore, saw to paying the entire balance
outstanding until 21 March 2008.
Subsequently, SEAT, together with the other principal OLOs (BT Italia, Fastweb, Tiscali, Vodafone and
Wind), asked AGCOM for a new pronouncement on the services to be attributed to Telecom Italia by virtue
of the interconnection contracts. To this effect, with the May 2008 notice, contained in Resolution No.
27/08/CIR, AGCOM on the one hand accepted Telecom Italia’s placing the ownership of the credit deriving
from the traffic to the NGNs with the OLO that offers the said service (and no longer with Telecom Italia
itself, as stipulated in the previous resolutions), and on the other hand it issued some guidelines for the
performance of the credit management service for the purposes of safeguarding the OLOs’ rights vis-à-vis
Telecom Italia.
Following that measure, Telecom Italia published a new interconnection schedule, which contains the
directives imposed by AGCOM Resolution No. 27/08/CIR, and negotiated with Telegate Italia, as a
company in the SEAT Group in possession of a general authorisation as a telephone operator and of the
respective exchange on which all of the Group’s NGNs are concentrated, a new contractual text for “Billing
on behalf of third parties,” signed on 31 October 2008, having as its object the interconnection services for
both the 892 numbers and the 12xy numbers.
The contractual conditions that were agreed accommodate the SEAT Group’s requests in full with some
benefits, including: (i) improved and more detailed visibility throughout the entire credit management
process carried out by Telecom Italia on behalf of SEAT; (ii) percentages paid in advance to Telegate prior
to the actual collection of the respective telephone bills by Telecom Italia and (iii) visibility on the minimum
delinquency threshold for Telecom Italia to entrust credit recovery to external companies. This contractual
text was also extended by agreement to the 12xy codes, which had previously remained unchanged.
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Section One
Dispute with Telecom Italia regarding the costs for interconnection from the mobile network to nongeographical numbers (NGN)
With reference to the contracts concluded with Telecom Italia for interconnection services with NGNs, it is
further noted that Telecom Italia appealed the emergency measure issued by AGCOM with Resolution
504/06/CONS (concerning costs for interconnection from mobile networks to NGNs) before the Lazio
Regional Administrative Court on the assumption that the reduction in origination costs provided for by that
measure must be subject to a restrictive interpretation and should therefore benefit only services that provide
subscriber information “exclusively” and not other information content of public interest as well (as is the
case of the 89.24.24 PAGINEGIALLE service).
In July 2007, the Lazio Regional Administrative Court upheld Telecom Italia’s appeal, voiding Resolution
504/06/CONS (the effectiveness of which had expired anyway at the end of February 2007) due to
procedural defects (alleged absence of requirements for urgency, such as extraordinary circumstances and
reasons for urgency). AGCOM filed an appeal against that judgment before the Council of State, which
was also joined, in defence of the measure (so-called intervention “ad adiuvandum”), by SEAT, together
with other Directory Assistance service providers. Currently, the hearing of the appeal has not yet been
set.
Disputes arising from the partial de-merger in August 2003 of Telecom Italia Media S.p.A. (formerly
“ex SEAT”)
The following disputes relating to Telecom Italia Media S.p.A. (“Telecom Italia Media”) – a divested
company benefiting from the business activities of SEAT S.p.A. (“ex SEAT”) not awarded, in the context of
the partial spin-off in 2003, to “ex SEAT 2” (for more details please see Section One, Chapter 5, Paragraph
5.1.5.3) – should be noted, in respect of which – and notwithstanding what is described below - the Issuer is
jointly and severally liable pursuant to Article 2506 quater, Para. 3 Italian Civil Code, for any liabilities
deriving therefrom and not met by Telecom Italia Media. The three disputes in question have been launched
by companies of the Cecchi Gori group, namely Cecchi Gori Group Fin. Ma. Vi. S.p.A. (now Bankruptcy
Cecchi Gori Group Fin. Ma. Vi. “Finmavi”) and Cecchi Gori Group Media Holding S.p.A., now in
liquidation (“Media”).
1) Security Pledge
Case brought by Finmavi and Media before the Milan Court, to establish the nullity or non-effectiveness of
the security pledge by which shares of Cecchi Gori Communication S.p.A. (subsequently Holding Media e
Comunicazione HMC S.p.A., then incorporated into Telecom Italia Media), held by Media, were given as
guarantee to Telecom Italia Media, and in any case for the sentencing of Telecom Italia to pay damages of
not less than LIT 750 billion, plus revaluation and interest.
Finmavi and Media, which lost the case at first and second instance, submitted an appeal before the Court of
Cassation.
At the hearing on 20 September 2007 the Court of Cassation accepted the appeal of Finmavi and Media and
incidental grounds for appeal brought by Telecom Italia, and referred the case to another section of the Milan
Court of Appeal, also to determine the procedural costs relating to the legitimacy proceedings. By writ of
summons served on 10 November 2008 Finmavi and Media recommenced proceedings before the Appeal
Court of Milan: the first hearing is fixed for 24 March 2009.
2) Extra-Contractual Liability
Proceedings commenced before the Milan Court by Finmavi, Media and by Mr. Vittorio Cecchi Gori against
Telecom Italia Media in order to establish the latter’s extra-contractual liability in relation to (i) the latter’s
conduct with regard to management of Holding Media e Comunicazione HMC S.p.A. (later incorporated into
Telecom Italia Media), and (ii) implementation of the agreement of 7 August 2000 concerning the
acquisition of the Cecchi Gori Group’s television companies, with sentence against Telecom Italia Media,
which was ordered to pay damages of approximately € 500 million.
237
The judge invited the parties to formulate their own conclusions and gave 29 March 2009 as the deadline for
each to lodge their concluding statements and 18 April 2009 for each to lodge their reply.
3) Challenge to the resolution passed by the Shareholders’ Meeting of Cecchi Gori Communications
S.p.A. on 11 August 2000
Proceedings commenced by Finmavi and Media against Holding Media e Comunicazione HMC S.p.A. (later
incorporated into Telecom Italia Media) relating to resolutions passed on 11 August 2000 by the
Extraordinary Shareholders’ Meeting of Cecchi Gori Communications S.p.A. which introduced amendments
into the company’s bylaws aimed at attributing special rights to Class B shares.
Finmavi and Media, which lost the case at first and second instance, submitted an appeal in the Court of
Cassation; Telecom Italia Media appeared before the court on 16 October 2007 and lodged its statement of
defence and a cross-appeal. As on the Date of the Information Prospectus the date of the hearing for debate
had not yet been fixed.
It should finally be noted that Telecom Italia Media and “ex SEAT 2”, as part of the abovementioned partial
de-merger in August 2003, signed (on 10 June 2003) an agreement by which it confirmed that any liabilities
attributable to and relating to the business division remaining under Telecom Italia Media would remain
entirely under the responsibility of Telecom Italia Media. Thus, in relation to the aforementioned disputes,
the Issuer has not effectively set aside a litigation risk provision as it does not face any real liability risk.
***
Tax audit
On 17 February 2009 a tax audit was launched by the Milan Tax Police at the Company’s secondary office
located in Turin. The subject of the investigation by the Tax Police are the tax years from 2006 to 2008. On
the Date of the Information Prospectus, the tax audit activity was still under way and, to date, the tax
authorities have not yet raised any formal objections against the Issuer.
20.7.2 Administrative, court and arbitration proceedings involving other companies in the SEAT Group
Dispute between Telegate and Deutsche Telekom regarding costs associated with the provision of
telephone subscriber data
On 16 May 2007 and 27 June 2007, respectively, the Regional Court of Düsseldorf upheld on appeal the
judgments of the Court of Cologne of 31 August 2005, which had ascertained the right of Telegate AG to
obtain restitution from Deutsche Telekom of the sums paid by the former for the provision of telephone
subscriber data during the periods 1997-2000 and 2000-2004, respectively, with Deutsche Telekom
consequently being ordered to pay Telegate AG the sums of € 52.04 million plus interest for the 1997-2000
period and € 30.52 million plus interest for the 2000-2004 period. However, Deutsche Telekom appealed the
judgment of 16 May 2007, while it has filed a motion against the judgment of 27 June 2007 to be granted the
right of an additional appeals phase.
In addition, during 2007, the Regional Court of Düsseldorf upheld the judgment of 22 June 2005,
recognising the right of Telegate AG to obtain restitution of the sum of € 4.25 million, plus interest, as partial
reimbursement for the prices applied by Deutsche Telekom for the provision of subscriber data for the period
January-September 1999. This decision became final following the judgment of the German Federal Court
dated June 2008, which denied Deutsche Telekom the possibility of access to an additional appeals phase.
Dispute between Telegate and Telekom Austria
In July 2006, Telegate undertook a lawsuit against Telekom Austria AG for the purpose of determining the
cost for the provision of telephone subscriber data, deemed excessive by Telegate in keeping with a measure
previously issued by the Austrian Telecommunications Authority, and ordering Telekom Austria AG to
make restitution of the greater sums paid, equal to approximately € 900,000.00.
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Section One
During the course of a hearing held in April 2008, the judge at the Court of Vienna announced that he would
issue a judgment by summer 2008. However, at present, no ruling has been issued by the deciding authority.
20.8 Significant changes in the Issuer’s financial or commercial situation
It should be noted that on the Date of the Information Prospectus no substantial change has taken place in the
economic and financial information concerning the assets and liabilities, the financial situation and the
economic results of the Issuer and the Group.
For further information on events subsequent to the latest financial information contained in this Chapter 20,
please see Section One, Chapters 12 and 13 of this Information Prospectus.
239
21
ADDITIONAL INFORMATION
21.1 Share capital
21.1.1 Share capital issued
At 30 September 2008, the share capital of the Issuer, fully subscribed and paid-up, was equal to
€ 250,351,664.46, divided into 8,208,980,696 ordinary shares and 136,074,786 savings shares, with a
nominal value of € 0.03 each.
The Extraordinary Shareholders’ Meeting of 18 November 2003, as supplemented by the shareholders’
meeting resolutions of 15 April 2004 and 19 April 2007, resolved upon: (i) the share capital could further be
increased, in one or more tranches, before 31 December 2008, by a maximum of € 3,098,853.24 by means of
the issue of a maximum of 103,295,108 ordinary shares with a nominal value of € 0.03 to be offered for
subscription to directors of the Company and employees thereof or to employees of any parent company,
pursuant to Art. 2359, Paragraph 1 (1), Italian Civil Code, or of the subsidiaries, as a result of the stock
option plans taken on by the Company; (ii) the Board of Directors would have the authority, pursuant to Art.
2443, Italian Civil Code, to increase the share capital by payment one or more times, before 23 December
2008, by an overall maximum amount of € 5,031,630.39, by means of the issue of a maximum of
167,721,013 ordinary shares with a nominal value of € 0.03, with the exclusion of the option right in the
terms described below, to service a stock option plan taken on by the Company and/or additional plans that
may come to be adopted by the Board of Directors, to be offered for subscription to: (a) employees of the
Company or of any parent company, pursuant to article 2359, Paragraph 1 (1), Italian Civil Code, or of
subsidiaries, to be identified by the Board of Directors, with the exclusion of the option right pursuant to the
combined provisions of Article 2441, final paragraph, Italian Civil Code, and Art. 134, Paragraph 2, of
Legislative Decree No. 58 of 24 February 1998, and/or (b) limited to a maximum of 16,800,000 ordinary
shares with a nominal value of € 0.03, to (non-employee) chief executive officers of the Company, or of the
subsidiaries, to be identified by the Board of Directors, in which case the exclusion of the option right would
have to be made pursuant to the combined provisions of Art. 2443, Paragraph 1 (2), Italian Civil Code, and
Art. 2441, Paragraph 5, Italian Civil Code and, therefore, to be done by the said Board of Directors at the
time of exercising the proxy, on the assumption of the actual existence of corporate interest and in
observance of the additional conditions provided for in Art. 2441, Paragraph 6, Italian Civil Code, insofar as
applicable.
The Extraordinary Shareholders’ Meeting on 26 January 2009 resolved to:
•
eliminate the nominal value of the SEAT ordinary and savings shares outstanding and, consequently,
to make the necessary bylaws amendments to keep the extent and characteristics of the privileges
attendant upon SEAT savings shares unchanged;
•
group the existing ordinary and savings shares together according to the following ratios:
o
1 new ordinary share for every 200 existing ordinary shares;
o
1 new savings shares for every 200 existing savings shares,
with the voiding of 96 ordinary shares and 186 savings shares and the reduction of the share capital by
€ 8.46 overall (the “Consolidation”);
• increase the share capital, in one or more tranches, by a maximum of € 200,000,000.00, by the issue of
ordinary shares with no nominal value, to be offered as an option to ordinary shareholders and holders
of savings shares, at the unit Offering Price equal to the theoretical ex right price (TERP) of the SEAT
ordinary share, calculated according to current methods and on the basis of the arithmetic mean of the
official unit prices posted in a period of at least 3 trading days prior to the determination of the
Offering Price and discounted to the extent that is to be stipulated by the Board of Directors, it being
understood, in any case, that the Offering Price for the new Shares may not be greater than € 6.00,
taking into account the adoption of the Consolidation resolution made on the same date;
On 26 January 2009, the Extraordinary Shareholders’ Meeting also granted every broadest power to the
Board of Directors in order to (i) define the Offering Price (and consequently any discount), on the basis of
the prevailing market conditions at the time of the actual launching of the operation, the market prices for the
SEAT ordinary share, as well as market practices for similar operations, it being understood, in any case, that
the Offering Price for the new Shares may not be greater than € 6.00, taking into account the Consolidation
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Section One
resolution adopted on the same date; (ii) determine the maximum number of newly issued Shares; (iii)
determine the timing for the execution of the Capital Increase resolution, in observance of the final deadline
of 10 July 2009; (iv) prepare and submit to the competent authorities any document required for the purposes
of executing the Capital Increase resolution.
On 26 March 2009, the Board of Directors of SEAT therefore resolved to issue 1,885,982,430 newly issued
ordinary Shares, having the same characteristics as those outstanding and to offer them under option to
shareholders at the price of € 0.106 per Share, at a ratio of 226 newly issued Shares for every 5 ordinary
and/or savings shares owned by each, for an overall amount of approximately € 199,914,000.
Following the elimination of the nominal value and the Consolidation:
• on the Date of the Information Prospectus, the fully subscribed and paid-up share capital of the Issuer
is equal to € 250,351,656 divided into 41,044,903 ordinary shares and 680,373 savings shares, with no
nominal value;
• the maximum number of shares to be issued to service the stock option plan decided by the
Extraordinary Shareholders’ Meeting on 18 November 2003 is redetermined as 3,098,850 ordinary
shares with no nominal value for a maximum amount of € 516,475;
• the maximum number of shares to be issued, for which the Extraordinary Shareholders’ Meeting on 18
November 2003 granted a delegation pursuant to Art. 2443, Italian Civil Code to the Board of
Directors, is redetermined as 838,605 ordinary shares with no nominal value for a maximum amount
of € 5,031,630; from these, the maximum number of shares reserved for (non-employee) chief
executive officers is redetermined as 84,000 shares.
21.1.2 Shares not representative of capital
On the Date of the Information Prospectus, the Issuer has issued no shares not representative of the share
capital.
21.1.3 Treasury shares
On the Date of the Information Prospectus, the Issuer does not hold treasury shares in its portfolio.
21.1.4 Amount of convertible bonds, exchangeable bonds or bonds with warrants
On the Date of the Information Prospectus, the Issuer has not issued convertible bonds, exchangeable bonds
or bonds with warrants.
21.1.5 Mention of any purchase rights and/or obligations on the Issuer’s capital
Except as provided for with reference to the subscription and underwriting obligations in Section Two,
Chapter 5, Paragraph 5.4.3 of the Information Prospectus and what is described previously with reference to
the stock option plans in existence on the Date of the Information Prospectus (please see Section One,
Chapter 17, Paragraph 17.2), there are no other purchase rights and/or obligations on the Issuer’s capital.
21.1.6 Information concerning the capital of any companies in the Group offered as an option or that it has
been decided to offer as an option
On the Date of the Information Prospectus, no portions of the share capital of companies in the SEAT Group
have been offered as an option or have been decided to be offered, conditionally or unconditionally, as an
option.
241
21.1.7 Change in the share capital over the last three years
The table provided below explains the change in the share capital of the Issuer in the last 3 years,
No. of ordinary shares
No. of savings shares
Nominal value (€)
Share capital (€)
30 September 2008
8,208,980,696
136,074,786
0.03
250,351,664.46
31 December 2007
8,208,980,696
136,074,786
0.03
250,351,664.46
31 December 2006
8,193,215,696
136,074,786
0.03
249,878,714.46
31 December 2005
8,130,990,696
136,074,786
0.03
248,011,964.46
21.2 Certificate of Incorporation and Bylaws
21.2.1 Corporate purpose and purpose of the Issuer
Pursuant to Art. 4 of the Bylaws, the Company’s purpose is to:
“engage in the publishing, printing and graphic arts industry and trade in general, carried out in any
manner and on any means, including online; the collection and execution – including on behalf of third
parties – of advertising, in any form and intended for any communications medium, including in exchange
for goods or services; the management of activities – including promotional activities – in the field of
advertising communications and public relations initiatives; the operation, preparation and sale, by any
technological means or with any transmission medium, including online and via the internet, of any manner
of documentation services in any way concerning multiple forms of economic activity, such as, by way of
example, data bases and supporting services to trade in goods and services; the management of all activities
associated with the processing and use of information of any type and carried out in any manner, including
information concerning the performance and marketing of communication services of any type, therefore
also including dial-up and electronic information, and with any instrument and method, including the
management of electronic communication networks, as well as, in general, any manufacturing or sales
activities related, accessory or instrumental to the operation described above.
The Company may also carry out any commercial, movable and immovable property, industrial and
financial transactions (the latter not with the public) functionally related to the achievement of the corporate
purpose; for that purpose, it may also directly or indirectly acquire – in a non-primary manner and within
the legal limits – equity interests or holdings in other companies or businesses, with the express exclusion of
any activity inherent to the collection of public savings and any other activity not allowed by law”.
21.2.2 Summary of the Issuer’s Bylaws provisions regarding members of the administration, management
and supervisory bodies
Below are the principal bylaws provisions regarding the members of the Board of Directors and the members
of the Board of Statutory Auditors of the Issuer, For further information, the reader is referred to the
corporate Bylaws available at the registered office, on the Company’s website and on the Borsa Italiana
website.
21.2.2.1. Board of Directors
Pursuant to Art. 14 of the Bylaws, the Company is administered by a Board of Directors comprised of a
minimum of 7 (seven) and a maximum of 21 (twenty-one) Directors.
The Shareholders’ Meeting determines the number of members of the Board of Directors, which remains
steady until resolved otherwise, and the term of the appointment, within the maximum limits by law.
Directors may be re-elected.
Pursuant to Art. 17 of the Bylaws, for Board of Directors’ resolutions to be valid, the attendance of the
majority of the directors in office and a vote in favour by the majority of the directors attending are required.
Pursuant to Art. 19 of the Bylaws, “the Board of Directors shall be vested with the broadest powers for
ordinary and extraordinary administration of the Company and, therefore, it shall have the power to carry
out all the acts that it deems advisable for the implementation and achievement of the corporate purposes in
Italy, as well as abroad, excluding only those that are reserved by law to the shareholders’ meeting.
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Section One
The Board of Directors shall also be competent to adopt resolutions concerning:
- merger in the cases provided for by Articles 2505 and 2505bis of the Italian Civil Code and de-merger in
the cases in which such rules apply;
- the institution or elimination of secondary offices;
- the indication of which of the directors shall hold the representation of the Company;
- capital decrease in the event of a shareholder’s withdrawal;
- bringing the Bylaws into compliance with regulatory provisions;
- transfer of the registered office within the national territory.
For the implementation of its resolutions and for the management of the Company, the Board may, in
observance of the legal limits:
- institute an Executive Committee, determining its powers and the number of members;
- delegate the appropriate powers, determining the limits of the delegation, to one or more directors possibly
with the title of Chief Executive Officers;
- appoint one or more General Managers and ad negotia attorneys, determining their powers and
authorities.
[edited]
The Board may also create Committees within itself with advisory and propositional functions, determining
their assignments and powers.
Upon a mandatory opinion by the Board of Statutory Auditors, the Board of Directors shall appoint and
remove the executive in charge of the preparation of the corporate accounting documents, determining his
term in office. Only those in possession of at least three years’ experience acquired in a position of adequate
responsibility in the administrative and/or financial area of the Company or of companies comparable to it
in size or organisational structure may be appointed as executives in charge of the preparation of the
corporate accounting documents” (On the Date of the Information Prospectus, this latter office is held by
Dr. Massimo Cristofori, Manager of the Issuer’s Administration, Finance and Control Department).
Pursuant to Art. 20 of the Bylaws, “the legal representation of the Company before third parties and in court
shall fall to the Chairman, as well as, if appointed, to the Vice Chairman and the chief executive officers
separately among themselves within the context of the respective delegations”.
Method of appointment of the Board of Directors
Pursuant to Art. 14 of the Bylaws, “The appointment of the Board of Directors shall take place on the basis
of lists, submitted by the shareholders or by the outgoing Board of Directors, in which the candidates are
listed by a progressive number. In any case, reservation is made of the application of contrary and
additional measures provided for by binding legal or regulatory provisions.
Each list must contain and expressly indicate at least two candidates in possession of the requirements of
independence provided for by Art. 147-ter, Paragraph 4, of Legislative Decree 58/1998.
Any list submitted by the outgoing Board of Directors must be filed at the Company’s registered office and
published in at least one daily newspaper with national circulation no later than the twentieth day prior to
the date set for the shareholders’ meeting on first notice.
The lists submitted by shareholders must be filed at the Company’s registered office and published in at least
one daily newspaper with national circulation at the expense of the shareholders making the nomination at
least fifteen days prior to the date set for the shareholders’ meeting on first notice.
Any shareholder may submit or contribute to the submission of a single list, and any candidate may run on a
single list, under penalty of becoming ineligible.
Only those shareholders who, alone or together with others, own voting shares representing at least 2% of
the voting share capital in the Ordinary Shareholders’ Meeting, or representing the lower percentage
determined by CONSOB pursuant to Art. 147-ter, Paragraph I, of Legislative Decree No. 58/1998, are
243
entitled to submit lists. For purposes of corroborating the possession of the aforesaid right, a copy of the
certifications issued by authorised intermediaries and attesting to the possession of the number of shares
necessary for the submission of the said lists must be filed at the Company’s registered office attached to the
lists submitted by shareholders.
To be filed together with each list, by the abovementioned deadline, are the professional curricula and the
declarations whereby the individual candidates accept the candidacy and attest, under their own
responsibility, that there is no reason for ineligibility or incompatibility and they are in compliance with law
and Bylaws requirements prescribed for the office, in case along with an indication of their suitability to be
qualified as independent directors pursuant to Art. 147-ter, Paragraph 4, of Legislative Decree 58/1998.
Lists for which the abovementioned requirements have not been observed shall be deemed as not filed.
Each party having the right to vote may vote for only one list.
The election of the Board of Directors shall be carried out – reservation made, however, as provided for in
the conditions listed below for observance of the minimum number of directors who, on the basis of the
applicable regulations, shall have the requirements of independence or be expressed, where possible, by the
minority shareholders – as follows:
1) directors equal to the members of the Board of Directors minus two shall be taken from the list obtaining
the greatest number of votes cast at a shareholders’ meeting, on the basis of the progressive order in which
they appear on the list;
2) the remaining directors shall be taken from other lists; for this purpose, the votes obtained by the lists
shall be divided successively by one and by two. The quotients thus obtained shall be allotted progressively
to the candidates of each of those lists, according to the order provided for in them. The quotients thus
allotted to the candidates on the various lists shall be arranged in a single decreasing ranking. Those having
obtained the highest quotients shall be elected. In the event of tied quotients, the candidate from the list that
has not yet elected any director shall be elected.
In the event of a tie in the votes on the lists and a tie in the quotients as well, a new vote by the entire
shareholders’ meeting shall be carried out, with the candidate obtaining a simple majority of the votes being
elected.
Either way:
(i) at least one director must be taken from a list, if present, that is not associated, not even indirectly, with
the shareholders who submitted or voted for the list ranked first in number of votes, and
(ii) at least one director taken from the list that obtained the greatest number of votes at the shareholders’
meeting and at least one of those taken from the second list in number of votes obtained must meet the
requirements of independence referred to in Art. 147-ter, Paragraph 4, of Legislative Decree 58/1998.
For the appointment of directors not appointed for any reason in accordance with the procedure described,
the shareholders’ meeting shall decide with the legal majorities, notwithstanding the obligation to observe
the minimum number of directors possessing the aforesaid requirements of independence.
If one or more directors should come to be lacking during the course of a financial year, measures shall be
taken in accordance with Art. 2386 of the Italian Civil Code”.
21.2.2.2. Board of Statutory Auditors
Pursuant to Art. 22 of the Bylaws, the Board of Statutory Auditors shall be comprised of 3 (three) acting
members and 2 (two) alternate members, appointed by the Shareholders’ Meeting, which also resolves upon
their remuneration. The Statutory Auditors shall have the powers and the duties referred to in current legal
provisions.
Method of appointment of the Board of Statutory Auditors
Pursuant to Art. 22, “For purposes of ensuring minority shareholders the election of one acting statutory
auditor and one alternate, the appointment of the board of statutory auditors shall take place on the basis of
lists submitted by the shareholders in accordance with the paragraphs below, reservation made, in any case,
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Section One
of the application of contrary and additional measures provided for by binding legal or regulatory
provisions. Candidates are to be listed by means of a progressive number on the lists. Lists are to be made
up of two sections: one for candidates to the office of acting statutory auditor, and another for candidates to
the office of alternate statutory auditor.
All the statutory auditors must be registered in the Register of Auditors instituted at the Ministry of Justice
and must have engaged in the activity of legal auditing for a period of no less than three years.
Only those shareholders who, alone or together with others, own voting shares representing at least 2% of
the voting share capital in the Ordinary Shareholders’ Meeting, or representing the lower percentage
determined by CONSOB pursuant to Art. 147-ter, Paragraph I, of Legislative Decree No. 58/1998, are
entitled to submit lists.
For the purposes of corroborating the possession of the aforesaid right, a copy of the certifications issued by
authorised intermediaries and attesting to the possession of the number of shares necessary for the
submission of the said lists must be filed at the Company’s registered office attached to the lists submitted by
shareholders.
No shareholder, including shareholders belonging to one same group, may submit more than one list, nor
may they vote for different lists, even through an interposed person or fiduciary company. Each candidate
may run on only one list, at the risk of ineligibility.
Candidates not in possession of the requirements of honourableness and professionalism stipulated by the
applicable regulations may not be included in the lists. The statutory auditors out going may be re-elected.
The lists submitted must be filed at the company’s registered office at least fifteen days prior to the date set
for the shareholders’ meeting on first notice, and mention thereof shall be made in the notice of meeting.
To be filed together with each list, by the abovementioned deadline, are the professional curricula and the
declarations whereby the individual candidates accept the nomination and attest, under their own
responsibility, that there is no reason for ineligibility or incompatibility and they are in compliance with law
and Bylaws requirements prescribed for the respective offices.
Lists for which the abovementioned requirements have not been observed shall be deemed as not submitted.
The election of the statutory auditors shall be carried out as follows:
1) two acting members and one alternate shall be taken from the list that has obtained the greatest number of
votes at the shareholders’ meeting, on the basis of the progressive order in which they appear in the sections
of the list;
2) the remaining acting member and the other alternate member shall be taken, on the basis of the
progressive order in which they appear in the sections of the list, from the list ranked second in number of
votes at the shareholders’ meeting and which is not associated even indirectly with the shareholders who
submitted or voted for the list ranked first in number of votes.
The chairmanship of the board of statutory auditors shall fall to the candidate taken from the second list, if
submitted, who has obtained the greatest number of votes.
In the event that the prerequisites required by law and by the bylaws should cease to be met, the statutory
auditor shall forfeit the office.
In the event of the replacement of a statutory auditor, the alternate belonging to the same list as the one
terminated shall succeed him.
The above provisions regarding the appointment of the board of statutory auditors shall not apply at
shareholders’ meetings that must see by law to the appointment of acting and/or alternate statutory auditors
and of the chairman as necessary to make up the board of statutory auditors following replacement or
forfeiture, as well as to appoint statutory auditors not appointed for any reason pursuant to the previous
paragraphs. In such cases, the shareholders’ meeting shall decide in accordance with the legal quorums.
For the purposes of what is provided for in Art. 1, Paragraph 3, of Decree of the Minister of Justice of 30
March 2000, No. 162, it is specified that the activities of publishing, advertising and communication services
in general, regardless of the means or medium utilised, are activities closely tied to the activity of the
company”.
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21.2.3 Description of the rights associated with the shares
Each ordinary share shall grant the right to vote at ordinary and extraordinary shareholders’ meetings of the
Issuer, as well as equity and administrative rights, in accordance with the applicable legal and bylaws
provisions.
Pursuant to Art. 6 of the Bylaws, “The shareholders’ meeting may resolve the issue of shares endowed with
different rights, in accordance with legal provisions.
The shares may be bearer shares, within the legal limits and conditions.
Bearer shares may be converted to registered shares and vice versa, at the interested party’s request and
expense.
Savings shares shall have the privileges and rights described in Art. 6 of the corporate Bylaws”.
In particular, “The net profits appearing on the duly approved financial statements, after deduction of the
portion to be allocated to the legal reserve, must be distributed to savings shares up to the amount of five per
cent of € 6.00 per share”.
The profits that remain after the allocation of the preferred dividend stipulated in the previous paragraph to
savings shares, whose distribution is decided by the shareholders’ meeting, shall be distributed among all
the shares so that the savings shares shall be due a greater overall dividend than that for ordinary shares, to
an extent equal to two per cent of € 6.00 per share.
If a dividend lower than the amount stipulated in paragraph six has been allocated to savings shares in a
financial year, the difference shall be computed by increasing the preferred dividend in the next two
financial years.
In the event of the distribution of reserves, the savings shares shall have the same rights as the other shares.
However, the shareholders’ meeting approving the financial statements shall have the power, in the event of
the lack of or inadequacy of the net profits appearing on the said financial statements, to utilise the reserves
available to satisfy the equity rights referred to in paragraph six above as possibly increased pursuant to
paragraph eight above.
Share capital decreases due to losses shall have no effect on savings shares except for the portion of the loss
that exceeds the fraction of the capital represented by the other shares.
Upon winding-up of the company, the savings shares shall have preference in the reimbursement of capital
up to the amount of € 6.00 per share. In the event of subsequent share Consolidations or splits (as well as in
the event of operations on the share capital, where it is necessary for the purposes of not altering the right of
holders of savings shares with respect to the situation in which the shares would have nominal value), this
fixed amount per share shall be modified in a consistent manner.
For the purposes of ensuring the common representative adequate information on the operations that may
influence the progress of savings share prices, notices shall be sent to him relative to the aforesaid matters
according to the terms and conditions governing reporting to the market.
If the company’s ordinary or savings shares should come to be excluded from trading, the savings shares
shall retain their rights and their characteristics, although holders of savings shares may request that the
Company convert their shares into ordinary shares or into preferred shares admitted to listing, having the
same characteristics as savings shares – consistent with the legal provisions in effect at the time – as well as
the right to vote only in respect of extraordinary shareholders’ meeting resolutions, according to the terms
and conditions to be defined in a special resolution by an extraordinary shareholders’ meeting called for
that purpose and notwithstanding – where pertinent – the approval of the meeting of holders of savings
shares”.
21.2.4 Terms for modification of the rights of owners of shares
The SEAT Bylaws do not provide for terms for modification of the rights of owners of shares of the Issuer
other than those provided for by law.
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Section One
21.2.5 Shareholders’ meeting notices
Pursuant to Art. 10 of the Bylaws, “Shareholders’ meetings shall be called by law at the registered office or
elsewhere, provided that it is in Italy, by means of a notice published in the legal manner and time periods in
the Official Gazette or in the daily newspaper “II Sole 24 Ore”.
The ordinary shareholders’ meeting for approval of the financial statements must be called within 120 days
of the end of the financial year, in observance of the applicable legal provisions.
A shareholders’ meeting must also be called any time that the board believes it advisable or when it is
required to be called by law.
In the event of lack of quorum on second notice, the extraordinary shareholders’ meeting may meet on third
notice.”
Pursuant to Art. 8 of the Bylaws, “Shareholders’ meetings may be attended by shareholders having the right
to vote for which the intermediary’s notice, as provided for by Article 2370, Paragraph Two of the Italian
Civil Code, has been received by the Company within two days prior to the date of the that shareholders’
meeting.
Any shareholder entitled to attend the meeting may cause himself to be represented by a written proxy by
law.
The proxy may be issued to an individual or to a legal entity”.
21.2.6 Bylaws provisions that could have the effect of delaying, postponing or preventing an amendment in
the structure of control of the Issuer
The Issuer’s Bylaws do not provide for provisions that could have the effect of delaying, postponing or
preventing an amendment in the structure of control of the said Issuer.
21.2.7 Bylaws provisions governing the ownership threshold for the obligation of respective notice to the
public
The Bylaws do not provide special provisions relating to notification obligations relative to interest in the
Issuer’s share capital. The interest above which the obligation of notification to the public of the interest held
is in effect is the one provided for by law.
21.2.8 Bylaws provisions governing modification of the share capital
The Issuer’s Bylaws do not provide for more restrictive conditions for the modification of the share capital
than the conditions stipulated by law.
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22
IMPORTANT AGREEMENTS
With the exception of the agreements mentioned below in 22.2 and 22.3, the Issuer has not in the last two
years entered into any agreement other than those arising from ordinary business.
In any event, the Issuer wishes to highlight some agreements that have a significant impact on the economic
and/or financial situation of the SEAT Group.
22.1 Supply agreements with Ilte S.p.A.
On 26 May 2005, SEAT and Ilte S.p.A. (“Ilte”) entered into four agreements pertaining to the supply by Ilte
of data processing, printing, binding, storage, packaging and delivery services for the following print
directories produced by the Issuer:
•
PAGINEGIALLE;
•
PAGINEBIANCHE;
•
Kompass products;
•
minor products (Tuttocittà, PAGINEGIALLE Professional and Annuario SEAT).
Except for the agreement related to Kompass products, the duration of which was 4 years, from 1 January
2005 to 31 December 2008, which has not been renewed on the Date of the Information Prospectus, each
agreement has a duration of 10 years, running from 1 January 2005 to 31 December 2014, and gives Ilte the
exclusive right to supply its services for the whole duration thereof.
The fee for services carried out is determined on the basis of a price list attached to each agreement which
provides for the application of a different price item for each phase of the directory production process, as
well as a different tariff dependent on the type of paper used and the number of pages printed.
There is also scope for a price adjustment mechanism whereby (i) SEAT is charged more if it is more than
12 days late in delivering the digital files needed for printing; (ii) SEAT is charged less if Ilte is late in
delivering the agreed number of directories. Moreover the tariffs are subject to revision in the two
subsequent three-year periods on the basis of market checks.
In the event that the quality control phase reveals flaws and/or defects in the finished products (whether these
are ready for client distribution or are already being distributed), each agreement entitles SEAT to a penalty
discount from Ilte (except when the defective products are replaced by the latter). This does not impact on
the Issuer’s right to seek further damages or terminate the agreement in question.
In the event that the flaws and/or defects are revealed after client distribution, Ilte shall apply a penalty
discount if the defective products number 50 or more and if it can be proved that these products are owned
by at least 25 different people.
A penalty shall also be applied if there are serious defects that prevent users from properly consulting the
directories, SEAT is entitled to an extra € 4 per each defective copy multiplied by a coefficient of 1,000
which indicates the assumed number of times that an equal error is repeated during the printing process. The
maximum amount of the penalty for serious consultation defects in any event is € 40,0006 per edition.
In addition, SEAT is entitled to obtain a price discount as a penalty from Ilte in the event that (i) the
directories are not delivered to recipients within the agreed timelines or (ii) the number of copies distributed
is below the standard number determined by the parties in the respective production charts. In these cases,
Ilte is also contractually obliged to pay SEAT a penalty sum equal to the price of the undelivered directories.
Ilte may, in the event of temporary and contingent requirements, sub-contract to third parties the supply of
some of the services in each agreement, on the condition that:
6
•
SEAT has approved the sub-contractor in writing;
•
data processing, engraving, cutting and printing services are not sub-contracted under any
circumstances.
In the contract for the Issuer’s minor products, the maximum penalty for serious consultation defects depends on the product in question. It is
€ 15,000, € 30,000 and € 40,000 respectively for Tuttocittà, Annuario SEAT and PAGINEGIALLE Professional.
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Section One
In any event, Ilte remains directly and wholly responsible to SEAT for the service of its sub-contractors.
The agreements also stipulate the cases in which SEAT can avail itself of the right to withdraw from each
contractual agreement. The Issuer is entitled to do so in the following cases:
•
publication of each of the products included in the supply agreement is stopped by law, pertinent
regulations, or by a decision or measure adopted by an appropriate authority, and other similar
circumstances7;
•
(i) the current shareholders of Ilte (Ilte Holding S.p.A.) transfer to a third party the ownership of
enough shares to give this party a controlling stake in Ilte, or (ii) any other right transferring said
control, as per Article 2359, Italian Civil Code, is sold, or (iii) Ilte Holding S.p.A. assumes certain
contractual obligations that enable a third party to appoint the majority of board members or
minority directors with right of veto or to appoint the CEO or chairman (where the chairman has
been given the powers of signature of the CEO), provided that, in any event, the shares are sold to a
competitor of SEAT or it is proven that there is just cause to withdraw;
•
the agreement is transferred as a direct consequence of:
o
the disposal, assignment or spin-off of the entire corporate assets of Ilte or a branch of the
business including the Moncalieri factory;
o
a merger by incorporation of Ilte into an existing company or through the incorporation of a
new company.
In any event, the disposal, assignment or spin-off of the entire corporate assets of Ilte or the transfer of the
business or branch of the business (provided that the transfer includes the Moncalieri factory) remain the
only circumstances formally agreed upon by the parties under which supply agreements might be transferred.
Each agreement also stipulates the cases in which failure by the parties to fulfil their obligations should be
considered relevant for the purposes of evaluating the interest in continuing the contractual agreement so that
the compliant party can enforce the automatic termination of the agreement pursuant to Article 1456, Italian
Civil Code.
For Ilte, such non-fulfilment is linked to (i) not delivering the agreed number of directories within the agreed
timelines and (ii) creating defective products.
In relation to SEAT agreed obligations, such non-fulfilment concerned:
•
not paying Ilte the agreed fee for services rendered;
•
not paying, within 30 days (commencing on the date the relevant communication is received), the
amount due from the Issuer following arbitration proceedings or in virtue of another executive
measures from judicial authorities.
Regarding the methods of execution for Ilte’s directory delivery and printing obligations, each agreement
contains an attachment which details SEAT’s timelines and methods for notifying its total printing service
requirements (to be sent periodically according to what has been previously agreed in each attachment) as
well as the timelines and methods for notifying any changes to the number of copies forming the printing and
delivery services provided by Ilte compared with what was indicated in each estimate sent by the Issuer.
The agreements also entitle SEAT to carry out a physical check of the production process entrusted to Ilte
through direct access to the latter’s production sites and visual comparisons between the ‘control copy’ sent
previously by Ilte and each copy viewed by the Issuer during visits to these sites.
In addition, the agreements provide for quality control on finished products before client distribution,
according to quality parameters laid down in a document attached to each agreement. In the event that these
quality controls produce a negative outcome, and depending on the proportion of flawed pages, Ilte will be
subject to the aforementioned penalties unless it can replace all the defective copies and remove them from
distribution.
7
In the contract relating to the printing and distribution of the PAGINEBIANCHE directories, it is also stipulated that SEAT may withdraw from the
contractual agreement should these products lose their “universal directory” quality, as stated in compliance with the AgCom 36/02/CONS and
180/02/CONS and in Art. 55 of the Electronic Communication Code.
249
However, should Ilte contest the existence of flaws and defects uncovered by SEAT, the dispute shall be
resolved by an expert appointed by both parties or, failing their agreement on a suitable candidate, by the
Chairman of the Turin Chamber of Commerce. The expert shall make a fair judgment and his or her decision
shall be binding for both parties.
In any event, Ilte shall indemnify and hold SEAT harmless against the full amount of any cost, charge or
damage that may arise from compensation claims by third parties as a result of flaws and defects in products
made by Ilte.
Finally, the agreements contain an arbitration clause under which, in the event of disputes over the validity,
effectiveness, conclusion and execution of each agreement, any dispute shall be put before a three-man
arbitration board, two members of which shall be appointed by each parties and the third chosen mutually by
these first two members or, in the event of disagreement, by the chairman of the Turin Court. Any dispute
that does not come under the jurisdiction of an Arbitration Board (i.e. inter alia, disputes relating to
protective measures) shall be resolved by the Turin Court.
Neither the Issuer nor the Group relies significantly on suppliers other than Ilte (see Section One, Chapter 6,
Paragraph 6.4).
22.2 Real estate project for SEAT’s new Turin headquarters
On 21 December 2006, SEAT signed a preliminary agreement (hereafter, as subsequently modified and
integrated, the “Preliminary Agreement”) with SNOS (Spazi per Nuove Opportunità di Sviluppo S.p.A.,
“SNOS”) for the acquisition by SEAT of seven buildings in Turin that are part of the business complex
situated in the “ex-Officine Savigliano” district, destined to be the new operating headquarters of the
Company (the “Buildings”).
The Preliminary Agreement entitled SEAT, among others rights, to designate a leasing company to buy the
Buildings, provided that this company lease the Buildings to SEAT.
SEAT designated Leasint S.p.A. (previously known as Intesa Leasing S.p.A., hereafter “Leasint”), which
bought the Buildings and thereby acquired all the rights and obligations of SEAT towards SNOS pursuant to
the Preliminary Agreement, and concluded with SNOS the definitive purchase agreements for all the
Buildings.
At the same time as drawing up the definitive purchase agreements for the Buildings, SEAT concluded with
Leasint the lease agreements for these Buildings (collectively, the “Lease Agreements”). In order to
maximise building management flexibility, a Lease Agreement was drawn up for each of the Buildings.
These Lease Agreements have the same terms and conditions and include some provisions that regulate the
exercise by Leasint of SEAT’s rights as per the Preliminary Agreement, in relation to the work to be carried
out by SNOS following stipulation of the definitive agreements for the Buildings.
Lease Agreements for the Buildings
The following is a summary of the main provisions of the Lease Agreements.
Preamble
The preamble of the Lease Agreements gives notice that SEAT identified the Buildings on its own initiative
and independently agreed with SNOS the terms and conditions for the acquisition of these buildings by
drawing up the Preliminary Agreement. It also summarises briefly the terms of the Preliminary Agreement
and of subsequent Preliminary Agreement amendment agreements concluded between SEAT and SNOS.
Finally, the preamble mentions SNOS’s undertaking to carry out some work on the Buildings, in accordance
with terms attached to the Preliminary Agreement, and the identification by SEAT of suppliers to carry out
additional work on the Buildings.
Designation and stipulation of the Lease Agreement
Firstly, the Lease Agreements contain the undertaking by SEAT to designate Leasint as the purchaser of the
Buildings and the corresponding undertaking by Leasint to accept this designation and draw up the definitive
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Section One
agreement for these Buildings. These undertakings were properly met by both parties and the relative
definitive agreements for all the Buildings were drawn up between SEAT, SNOS and Leasint.
SEAT mandate
Pursuant to the Lease Agreements, Leasint bestowed upon SEAT an irrevocable mandate to: (i) exercise all
of Leasint’s rights as per the Preliminary Agreement, ensuring the proper progress of works on the Buildings
carried out by SNOS; (ii) draw up additional works contracts for the Buildings; (iii) perform the obligations
set out in the construction permits; and (iv) propose, also before the court, claims and lawsuits relating to the
Buildings and the rights pertaining thereto.
Security Officer/Works Manager/Handover of the Buildings
In accordance with the Lease Agreements, Leasint, as agreed with SEAT, appointed the Security Officer as
per Legislative Decree No. 494 of 14 August 1996, and SEAT appointed a Works Manager approved by
Leasint. The Works Manager has the task of approving progress reports presented by SNOS in accordance
with the Preliminary Agreement and organising the works completion declaration and certification of correct
completion, which are prerequisites for the handover of the Buildings to SEAT. Six of the seven Buildings
have already been handed over, while the handover of the seventh Building will take place before the
deadline specified in the conditions attached to the relevant Lease Agreement. Failure to meet this deadline
would entitle Leasint to withdraw from the Lease Agreement and to be indemnified for any reasonable
documented cost or expenditure incurred by Leasint in carrying out its activities as per the Lease Agreement.
Lease amount
The lease amount is determined on the basis of the definitive cost of making each building available, as
calculated by Leasint on handover, and is equal to the sum of the advanced rent paid by SEAT plus the
deferred regular payments indicated in the conditions of the Lease Agreements, as resulting contingent upon
the indexation provided for therein.
The cost of making each building available is equal to the sum of: (i) the price paid for the Buildings, (ii) the
amounts owing for work carried out on the Buildings pursuant to the Preliminary Agreement or to
subsequent tender contracts drawn up for the Buildings, (iii) the professional fees due for the planning,
direction and control of the works and the carrying out of any tests, and (iv) any other costs incurred by
Leasint in compliance with law and/or regulations, including any urban planning expenses.
Pursuant to the Lease Agreements, SEAT must pay Leasint an organisation commission equal to 0.2% of the
sum of the amounts from the above points (i) to (iv).
Finally, as remuneration for the progressive exposure of the leasing company from the date of acquisition of
each Building to the date of handover to SEAT, in relation to the relevant finishing and restructuring works,
SEAT will pay the financial charges accrued on expenditure by Leasint calculated at the Euribor rate plus
0.80% (pre-lease charges).
During 2008, the Company paid Leasint advanced rent totalling € 6.1 million in relation to six of the seven
Lease Agreements concluded with Leasint.
The remainder, in relation to the Buildings object of these Lease Agreements, will be paid by SEAT in 60
quarterly rental payments indexed to the exact value of the Euribor rate according to the formula set out in
the conditions of the Lease Agreements.
The capital component of the recurring rental payments to be paid in relation to the Lease Agreements is
shown in the following table (figures in millions of euro).
Building 1
8.48
Building 2
8.50
Building 3
8.50
Building 4
8.49
Building 5
8.49
Building 6
19.02
The last of the seven Lease Agreements is currently expected to become effective in April 2009, when the
last of the Buildings included in the Preliminary Agreement is handed over by SNOS.
Additional undertakings by SEAT
The Lease Agreements also require SEAT to fulfil a series of positive and negative obligations, including: (i)
filing all claims and taking care of all requirements pertaining to the piling and proposed use of the
251
Buildings, as well as the issue and/or maintenance of all the necessary use and occupancy licences; (ii) not
changing the use of the Buildings for the entire duration of the Lease Agreements; (iii) not making changes
and/or innovations to the Buildings that require authorisations or licences from the relevant authorities
without prior approval from Leasint; (iv) ensuring the diligent conservation of the Buildings; (v) allowing
Leasint, given reasonable notice and making allowance for working hours, to inspect the Buildings. The
Lease Agreements also require Leasint to meet obligations regarding the ownership of the Buildings, such as
not transferring in any way ownership to third parties and not establishing any type of guarantee, option or
pre-emptive right on the Buildings.
Indemnity
Pursuant to the Lease Agreements, SEAT also undertakes to hold Leasint harmless against any risk and
liability relating to the Buildings, their purchase and use, including all damages, costs or expenses arising
from the violation of regulations and/or the law, damage to or partial loss of the Buildings, damage to people
or objects, expressly excluding costs, expenses and damages arising from actions, deeds or omissions
attributable to Leasint for malice or negligence.
Duration of Lease Agreement/Purchase option
The Lease Agreements have a duration of 15 years. Upon expiry of the Lease Agreements, SEAT will have
the right either to purchase the Buildings in fact and in law, excluding any guarantee from Leasint, at a price
equal to 1% of the definitive cost of the Buildings (plus VAT), or to return the Buildings to Leasint, within
30 working days of the expiry of the Lease Agreements, in a good state of preservation and maintenance.
The call price determined for each Building already handed over to SEAT is shown in the following table
(figures in millions of euro).
Building 1
0.086
Building 2
0.086
Building 3
0.086
Building 4
0.086
Building 5
0.086
Building 6
0.192
Termination/Acceleration clause
The Lease Agreements provide for some case termination and/or acceleration clause enforcement scenarios
arising mainly from SEAT failing to meet its obligations laid down in the Lease Agreements (failure to hand
over the Buildings, not paying rent), circumstances pertaining to SEAT (submission of protests, executive or
precautionary measures, failure to obtain authorisation), substantial changes to the legal, economic and
financial situation of SEAT compared to the originally indicated situation or false statements issued by
SEAT so as to prejudice the credit of Leasint pursuant to the Lease Agreements.
In the event of termination, the Lease Agreements state expressly that, within 120 days of the termination
date, SEAT shall make the Buildings fully available to Leasint and pay to the latter an amount equal to: (i)
any outstanding rental payments, plus (ii) future rental payments (without applying the indexation clause), as
well as (iii) an amount equal to costs reasonably incurred by Leasint relating to the dissolution of the
relations arising from the Lease Agreements and specifically mentioned in each of the Lease Agreements
(the largest amount provided for in the Lease Agreements is € 24,500).
SEAT will receive the amount generated by Leasint, net of taxes and charges, from the sale or reallocation of
the Buildings or from third-party insurance compensation or claims.
Transfer of Lease Agreements
The Lease Agreements state expressly that Leasint may transfer each agreement or the rights deriving
therefrom to companies belonging to the Intesa Sanpaolo Group. The transfer of Lease Agreements by
Leasint to entities not belonging to the Intesa Sanpaolo Group is subject to prior written consent from SEAT,
which may not be unreasonably refused.
Arbitration clause
Any dispute pertaining to or resulting from the Lease Agreements shall be put before a three-man arbitration
panel. The arbitration shall be formal and shall take place in Milan.
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Section One
22.3 Loan agreements
22.3.1 RBS Loan Agreement
On 25 May 2005, SEAT in its capacity as borrower (“Borrower”) entered into the RBS Loan Agreement
with, inter alias, RBS in its capacity as a lender (“Lender”), under the terms of which RBS undertook to
make available, and the case of Tranche A and Tranche B (as defined as follows) made available, on 8 June
2005, the RBS Loan Agreement in the following tranches:
•
“Tranche A” term loan facility of € 1,930,100,000, of which € 1,252.4 million was outstanding on 31
December 2008 (“Tranche A”);
•
“Tranche B” term loan facility of € 600,000,000, of which € 464.5 million were still outstanding on
31 December 2008 (“Tranche B”); and
•
“Revolving Credit Facility” of € 90,000,000, which is not currently in use (“Revolving Facility”).
The Revolving Facility is intended to cover any working capital requirements of SEAT or its subsidiaries in
the form of a revolving credit line, which is available until May 2012 (or until Tranche A and Tranche B
have been entirely repaid, whichever date is earlier) with a variable interest rate equal to that applied pro
tempore to Tranche A if drawn. A non-usage fee of 0.56% per annum is due on available pro tempore
amounts that are not used.
Interest on the Loan
The interest rate applied to the different tranches of the Loan is equal to the Euribor rate, plus mandatory
costs (Mandatory Costs), if present, plus a base margin equal to: (i) 1.91% per annum for Tranche A and the
Revolving Facility, and (ii) 2.41% per annum for Tranche B.
In the event that the Condition in the Amendment Agreement materialises, the aforementioned base margin
will be increased by 0.75% (75 basis points) as follows: (i) 2.66% per annum for Tranche A and the
Revolving Facility, and (ii) 3.16% per annum for Tranche B.
The base margin applied to the various tranches of the Loan may be subject to reductions or, as the case may
be, increases depending on the improvement or worsening of the SEAT Group’s net debt/EBITDA ratio
according to the predetermined figures.
Repayment of the Loan
The RBS Loan Agreement states that Tranche A will be repaid according to an amortisation schedule with
variable six-monthly instalments running from June 2006 to June 2012, for the outstanding payment, as
follows:
Date of repayment
28 June 2009
28 December 2009
28 June 2010
28 December 2010
28 June 2011
28 December 2011
8 June 2012
Total
Amount in €
109,620,185.15(*)
109,620,185.15
115,884,195.73
115,884,195.73
122,595,635.64
122,595,635.64
556,154,653.66
1,252,354,686.7
(*) Of which € 50 million were paid in advance on 28 January 2009.
253
In the event that the Capital Increase is fully subscribed and SEAT fulfils its commitment to use 50% of the
proceeds of such Capital Increase to make an early repayment of Tranche A of the RBS Loan Agreement,
contained in the Waiver Request accepted by RBS dated 22 December 2008 to be calculated as a
proportional reduction of the instalments expiring in the period running from the first six-month expiry after
the Capital Increase and 28 December 2011, the repayment plan of the RBS Loan Agreement, even if not
expressly provided for in the Amendment Agreement, will appear amended as follows:
Date of repayment
28 June 2009
28 December 2009
28 June 2010
28 December 2010
28 June 2011
28 December 2011
8 June 2012
Total
Amount in €
209,620,185.15(*)
90,932,160.74
96,128,284.21
96,128,284.21
101,695,559.36
101,695,559.36
556,154,653.66
1,252,354,686.7
(*) Of which € 50 million were paid in advance on 28 January 2009.
Tranche B shall be repaid in a single payment in 8 June 2013.
Finally, pursuant to the RBS Loan Agreement, each drawdown on the Revolving Facility shall be repaid at
the end of the interest period (Interest Period) and all drawdowns on the Revolving Facility must be fully
repaid within the seventh year following the date of the first drawdown on the Loan (8 June 2012) or when
Tranche A and Tranche B are fully repaid, whichever date is earlier.
The RBS Loan Agreement provides that SEAT shall make an early repayment of all or part of the RBS Loan
Agreement upon the occurrence of specifically identified circumstances, the most important being briefly
summarised here below together with SEAT’s related repayment obligations:
254
•
RBS unlawfulness and insolvency: if RBS, among other things, is unable to fulfil its obligations
pursuant to the RBS Loan Agreement, due to RBS’ unexpected unlawfulness, insolvency or
bankruptcy proceedings of any kind or to approval of a resolution the subject of which is the
liquidation of RBS, SEAT shall repay the RBS Loan in full or, in the case of unlawfulness, such a
portion of the RBS Loan as to ensure that the fulfilment of RBS’ remaining obligations pursuant to
the RBS Loan Agreement were again lawful;
•
disposal of assets by companies of the SEAT Group: SEAT must ensure that 80% of the net
proceeds from the sale of such assets (except for the disposal deeds described below in paragraphs (i)
to (ix) of the list of the disposal deeds allowed under the RBS Loan Agreement), is used for the
mandatory early repayment of the RBS Loan, in the event that the net proceeds of such disposal, plus
the net proceeds of all other disposals of assets made by companies of the SEAT Group in the same
financial year, exceeds € 2.5 million, without prejudice to SEAT’s right to abstain from making the
repayments if within 12 months of receiving such proceeds - subject to the non-occurrence of Events
of Default - it reinvests such proceeds in assets used for Group activities;
•
insurance damages: SEAT shall use any insurance damages exceeding € 250,000 (after tax and any
insurance claim costs) for the mandatory early repayment of the RBS Loan, without prejudice to
SEAT’s right to use such damages to repair or replace the damaged assets, in respect of which the
insurance claim was filed, within 12 months following the receipt of such damages;
•
Excess Cashflow: SEAT must ensure that the tenth working day following the delivery to RBS of
the audited consolidated financial statements of the SEAT Group, and as long as the ratio of total
indebtedness to the EBITDA of the SEAT Group is greater than 4.25, is allocated to the mandatory
early repayment of the RBS Loan the amount (if positive) resulting from the following calculation:
the so-called Cashflow of the SEAT Group, less, inter alia, the principal and interest paid in that
financial year by the companies of the SEAT Group in relation to their own financial indebtedness,
any additional mandatory repayments of the RBS Loan, the proceeds from the subscription of shares
or other equity or quasi-equity instruments in companies of the SEAT Group by third parties, the net
proceeds of any deed for the disposal of assets of the SEAT Group and the amount of € 30 million;
Section One
all of the above then multiplied by 0.5 and less the total amount of all voluntary repayments of the
RBS Loan made in the same financial year;
•
change of control occurs if: (a) the Reference Shareholders cease to hold, directly or indirectly, at
least 50% of the ordinary share capital of the Split Parents, (b) each Split Luxco ceases to be wholly
owned (except for a single share) by a Split Parent, (c) the Split Luxco become holders of a
cumulative stake of less than 30% of the ordinary share capital of SEAT, or (d) an event or
circumstance occurs that constitutes a change of ownership as per the Indenture (as defined below),
SEAT will be held liable to repay the whole RBS Loan.
In addition, SEAT may voluntarily repay all or part of the RBS Loan in advance (in amounts of no less than
€ 5 million).
The fact that SEAT has made repeated voluntary repayments of the RBS Loan pursuant to this latter
provision has made it so that as from 2005 and to date, SEAT has never had to make mandatory repayments
pursuant to the Excess Cashflow clause.
Guarantee for SEAT’s obligations
SEAT, each of the Split Parents and the Split Luxcos, TDL Infomedia and Thomson Directories Ltd (the
“Guarantors”) have irrevocably and unconditionally undertaken to: (i) guarantee the fulfilment by SEAT of
any obligation pursuant to the Financial Documents, (ii) pay RBS any unpaid amount owed by SEAT
pursuant to the Financial Documents, and (iii) indemnify RBS for any cost, loss or damage suffered in the
event that an obligation guaranteed under the present guarantee becomes illegitimate, invalid or ineffective.
Declarations and Guarantees pursuant to the RBS Loan Agreement
Pursuant to the RBS Loan Agreement, SEAT and each of the Guarantors (hereafter, collectively, the
“Obligors”) issued some declarations and guarantees, the most important of which are summarised below:
•
Status: each Obligor is a validly constituted and functioning company and has the powers necessary
to hold its own assets and carry out its business, underwrite the Financial Documents and fulfil the
obligations therein;
•
Non-conflict: the underwriting and execution of the Financial Documents does not conflict with any
law or regulation applicable to an Obligor, with any of the Obligors’ incorporation documents and
with any contract or agreement involving the Obligor;
•
No default: no Event of Default (as defined in the RBS Loan Agreement) presently exists and there
are no events or circumstances that constitute non-fulfilment under the terms of a separate agreement
involving each Obligor (or a subsidiary of the Obligors) that can reasonably be considered to have a
substantially prejudicial effect on (i) the business, assets or financial condition of the Group
considered as a whole, (ii) the ability of SEAT to meet its Financial Commitments, (iii) the ability of
each company of the Group to meet its own payment obligations pursuant to the Financial
Documents, or (iv) the validity of the Financial Documents (“Substantially Prejudicial Effect”);
•
Accounts: the annual and quarterly accounts of the SEAT Group are prepared in accordance with
generally applied accounting principles and the standards and practices required by regulations in
force;
•
Dispute: there exists no legal or arbitrational dispute, or administrative order before any authority,
that may result in a ruling against an Obligor and, in such an event, could have a Substantially
Prejudicial Effect on said Obligor;
•
Significant deterioration: there has been no significant deterioration relating to the activity or the
financial situation of the SEAT Group since the issue date of the accounts for the financial year
ended on 31 December 2004.
Some of the above declarations and guarantees (in particular, including but not limited to, the declarations
and guarantees relating to the judicial nature and capacity of the Obligors, compliance with business purpose
and accounts) are to be considered upheld by the Obligors (with reference to the facts and circumstances
existing at that time) on the date of each request to draw of the Loan and on the first day of each period of
interest of the Loan.
255
Information obligations pursuant to the RBS Loan Agreement
SEAT undertook to respect certain information obligations with RBS, the most important of which are
summarised below:
•
Accounting records and auditors: obligation to keep proper accounting records of the business and
appoint as audit company one of the following: Deloitte&Touche, Ernst&Young, KPMG or
PricewaterhouseCoopers;
•
Accounts: SEAT must send to RBS:
(i)
a certified copy of the SEAT Group’s consolidated financial statements as soon as possible and
within 120 days of the end of each financial year;
(ii)
the uncertified consolidated economic and financial statement of the SEAT Group, prepared by
management, as soon as possible and not more than 45 days after the end of each quarter;
(iii) the uncertified consolidated economic and financial statement of the SEAT Group, prepared by
management, as soon as possible and within 45 days of the end of each calendar month (or
within 75 days, in reference to January and July); and
(iv)
the operating budget of the SEAT Group for each financial year, within 30 days of the start of
that financial year.
•
Compliance certificates: each certified and consolidated annual financial statements and each
quarterly statement shall be accompanied by a declaration signed by the Finance Director or another
board member of SEAT attesting that SEAT is meeting its Financial Commitments and that there is
no instance of non-fulfilment pursuant to the RBS Loan Agreement;
•
Auditor’s statement: each consolidated annual financial statements shall be accompanied by a
statement from the audit company charged with certifying the accounts, in a form acceptable to RBS
and demonstrating that, on the date of the financial statements, SEAT was not in violation of any of
its Financial Commitments;
•
Accounting principles: each account or economic and financial statement of any company in the
group comprising the Split Parents, the Split Luxcos, SEAT and their direct or indirect subsidiaries
(hereafter, collectively, the “Wider Group”) shall be prepared in accordance with the accounting
principles used for the accounts for the financial year ended on 31 December 2004, and a specific
procedure shall be followed in the event of one or more accounting principles being changed;
•
Financial year: SEAT may adjust the end of its financial year only on June 30, ensuring that each of
its subsidiaries adjust the end of their own financial years accordingly;
•
Investigations: SEAT shall co-operate with RBS in accordance with the RBS Loan Agreement in
the event that RBS has reasonable beliefs that any figure provided is substantially incorrect or
incomplete or that SEAT may about to be in violation of one of its Financial Commitments;
•
Additional information: SEAT shall inform RBS promptly of:
(i)
any legal, arbitrational or administrative proceedings that involves SEAT or any of its
subsidiaries and that may cost SEAT more than € 250,000;
(ii)
any significant employment law dispute;
(iii)
any document or information sent to its creditors;
(iv)
any information that RBS might request pertaining to the economic, financial and operational
situation of any company in the Wider Group;
(v)
details of any known violation of the RBS Loan Agreement or of additional documents
pertaining to, or connected with, the RBS Loan Agreement (the “Financial Documents”);
(vi)
details of any event obliging advanced repayment pursuant to the RBS Loan Agreement; and
(vii) the manifestation of any instance of non-fulfilment pursuant to the RBS Loan Agreement, as
soon as this becomes known.
256
Section One
Financial Commitments pursuant to the RBS Loan Agreement
Pursuant to the RBS Loan Agreement, SEAT has undertaken to respect the following financial parameters
(financial covenants) to be calculated on 31 March, 30 June, 30 September and 31 December of each year
with reference to the 12-month period preceding each of these dates:
•
Consolidated net debt/EBITDA ratio: SEAT must ensure that, between the Loan disbursement
date and 30 March 2013, the consolidated net debt/EBITDA ratio does not exceed the figure laid
down in the table below at each Audit Date indicated therein (“Audit Date”);
•
Senior debt/EBITDA ratio: SEAT must ensure that, between the Loan disbursement date and 31
December 2010, the senior debt (the debt arising from the RBS Loan Agreement and the additional
Financial Documents)/EBITDA ratio does not exceed the figure laid down in the table below at each
Audit Date indicated therein;
•
Total Net Interest Cover: SEAT must ensure that, between the Loan disbursement date and 31
December 2010, the EBITDA/SEAT Group debt interest coverage ratio does not lower than the
figure laid down in the table below at each Audit Date indicated therein;
The table below indicates the above-mentioned financial indicator thresholds that the Company has agreed to
observe:
Audit Date
30 June 2005
30 September2005
31 December 2005
31 March 2006
30 June 2006
30 September 2006
31 December 2006
31 March 2007
30 June 2007
30 September 2007
31 December 2007
31 March 2008
30 June 2008
30 September 2008
31 December 2008
31 March 2009
30 June 2009
30 September 2009
31 December 2009
31 March 2010
30 June 2010
30 September 2010
31 December 2010
•
Tot. Net Debt/EBITDA
(no greater than)
7.75
7.50
7.35
7.35
7.10
6.80
6.50
6.50
6.25
6.00
5.75
5.75
5.60
5.45
5.25
5.25
4.90
4.55
4.25
4.25
4.25
4.25
4.25
Sen. Net Debt/EBITDA
(no greater than)
5.75
5.50
5.25
5.25
5.00
4.75
4.53
4.53
4.30
4.10
3.90
3.90
3.75
3.60
3.48
3.48
3.15
2.80
2.51
2.51
2.51
2.51
2.51
Tot. Net Int. Cover
(no greater than)
1.95
2.00
2.00
2.00
2.05
2.10
2.15
2.15
2.20
2.30
2.30
2.30
2.35
2.40
2.45
2.45
2.50
2.60
2.60
2.60
2.60
2.60
2.60
Fixed Charge Cover: SEAT must ensure that, between the Loan disbursement date and 31
December 2010, the ratio between SEAT Group cash flows and mandatory capital repayment as laid
out in the repayment plan (with the exclusion of early voluntary repayments) and interest payments
is not lower than the figure 1:1 at each Audit Date indicated therein;
257
•
Capital Expenditures: the Wider Group may execute capital expenditures for no more than the
amounts specifically indicated in the following table:
Column 1
Financial Year ending on
31 December 2005
31 December 2006
31 December 2007
31 December 2008
31 December 2009
31 December 2010
Column 2
€
56,400,000
49,060,000
122,510,000(*)
62,470,000
64,340,000
66,210,000
(*) the maximum capital expenditure amount for 2007 includes the amount of € 61.8 million, added following an amendment request made by SEAT
on 11 January 2007 and agreed to by RBS on 30 January 2007, for purposes of allowing SEAT to purchase the Real Estate Properties referred to
in paragraph 22.2 above. The portion of that amount not utilised as at 31 December 2007 may be used in the following year.
General Commitments pursuant to the RBS Loan Agreement
Pursuant to the RBS Loan Agreement, the Obligors have also undertaken to meet the following generic
commitments, which are standard for agreements of this type:
•
Maintenance of authorisations: the Obligors are committed to obtaining and maintaining all
authorisations, permits, licences and concessions needed to carry out their business and without
which a Substantially Prejudicial Effect could arise, or which may be required by regulations in
order to enable the Obligors to fulfil their obligations pursuant to the Financial Documents or to keep
them effective, valid and binding;
•
Compliance with law: the Obligors are committed to complying with all applicable laws in
reference to which a lack of compliance may determine a Substantially Prejudicial Effect for the
economic and financial conditions of the Wider Group, for SEAT’s ability to meet its Financial
Commitments pursuant to the RBS Loan Agreement, for each company belonging to the Wider
Group to respect the payment obligations as per the Financial Documents, or the validity of said
documents;
•
Maintenance of status: the Obligors are committed to maintaining their own existence, remaining
domiciled in their respective countries of incorporation for tax purposes, not merging with or in
other entities and not substantially modifying the business of the Wider Group;
•
Pari passu: the Obligors are committed to ensuring that the credit rights of RBS pursuant to the
Financial Documents are at least at the same level as those of all the other unsecured creditors of the
Wider Group, except for privileges arising from law;
•
Negative pledge: the Obligors are committed to not establishing, and not allowing to be established,
guarantees (pledges, mortgages, liens, secured debt transfers and other contractual mechanisms or
contractual instruments having a similar effect) on their own assets. The following, however, are
exceptions to the negative pledge:
(i)
offset operations concluded by companies in the SEAT Group in the context of banking relations
conducted during ordinary business;
(ii)
charges and liens arising from applicable laws and in the context of ordinary business;
(iii) guarantees set up pursuant to the Financial Documents;
258
(iv)
guarantees set up for conditional sales in accordance with standard provisions contained in
goods supply agreements, where said goods are purchased on credit and in the context of
ordinary business;
(v)
guarantees set up for goods or titles of goods in accordance with documentary credit activities in
the context of ordinary business;
(vi)
guarantees set up against debts not exceeding € 30 million or the equivalent in another currency.
It should be pointed out that this amount is net of the sum guaranteed for some of the activities
in points (i) to (v) above;
Section One
(vii) guarantees given in respect of credits of companies in the SEAT Group or in respect of fixed
deposit accounts in relation to loans as per paragraph (x) of the provision on debt assumption
limitations.
•
Limitations on disposal: the Obligors are committed to not disposing of (in a broad sense) their
own assets. There are, however, exceptions to this commitment, and the following are therefore
permitted:
(i)
disposals implemented in the course of ordinary business;
(ii)
selling assets in exchange for other assets that are comparable or superior in type, value and
quality;
(iii) disposals of obsolete or superfluous assets and that are no longer needed by their owner to carry
out business;
(iv)
disposals carried out between Obligors, on the condition that if the assets involved are subject to
a guarantee set up pursuant to the Financial Documents, said assets will be transferred without
prejudicing the validity and effectiveness of the guarantee in its original terms and conditions;
(v)
disposals of RBS shares by a Split Luxco, as long as this does not constitute a change in
ownership (see the following section for more details);
(vi)
assignment of receivables by a company in the Wider Group, as long as they are pro soluto
transfers and provided that the nominal value of the receivables to be assigned does not exceed
€ 300 million for the duration of the Loan;
(vii) sale of TDL Group assets (other than receivables) for financing purposes and without recourse to
the seller, as long as the value of the assets does not exceed € 40 million;
(viii) disposals of TDL Group or Telegate Group businesses, divisions of businesses, assets or shares
by SEAT, on the condition that RBS is satisfied that said disposals will not compromise the
predetermined financial ratios;
(ix)
disposals of assets that are not strategic or relevant to the business of the seller;
(x)
disposals carried out between non-Obligors;
•
Insurance coverage: SEAT is committed to ensuring that the companies in the Wider Group take
out and maintain suitable insurance coverage against risks that are usually covered in a particular
sector or with reference to specific assets, sending a copy of the policies and the respective premium
payment receipts to RBS, as well as communicating promptly to RBS any incidental significant
change in the insurance coverage of the Wider Group or compensation claims exceeding € 250,000;
•
Acquisition limitations: no Obligor may acquire assets or shares unless:
(i)
in the course of ordinary business;
(ii)
they are shares in SEAT;
(iii) acquisitions under market conditions by a member of the SEAT Group of a controlling stake in
any company, a division or business or any limited liability company, meet the following
conditions: (1) the combined sum paid for said acquisitions does not exceed € 100 million in the
course of each financial year; (2) in the event of an equity purchase, SEAT has limited liability;
(3) the business of the acquired entity is similar or substantially similar to that in which each
member of the SEAT group is active after the disbursement date, and EBITDA (in the case of a
company or division with no debt or a net cash balance at the time of purchase) or net profits (in
all other cases) in the previous financial year were positive, or would have been positive without
one-off costs and applying synergies and cost savings resulting from the acquisition; (4) the
acquisition does not result in the non-fulfilment of the provisions of the RBS Loan Agreement;
(5) the assets of the acquired company or division are free of any charge, except as laid down in
the negative pledge regulations or when the charges were not formed dependent on the
acquisition or were removed within three months of the date of said acquisition; (6) the
consolidation of the most recent quarterly accounts of the Group (on a pro-forma basis taking
into account the income received and the unsecured and subordinated debt assumed by a
259
company belonging to the Wider Group for the purposes of the acquisition) does not: (a) starting
from the most recent 12-month period, violate any of the Financial Commitments pursuant to the
RBS Loan Agreement on the basis of the fact that the consolidated net debt/EBITDA ratio
(“Leverage Ratio”) applicable at the time of the acquisition is equal to (A) the Leverage Ratio
on the disbursement date or (B) the Leverage Ratio on the most recent Audit Date, whichever is
lower; and (b) for the 12 months immediately following the most recent Verification Date,
violate any of the Financial Commitments pursuant to the RBS Loan Agreement, on a pro-forma
basis taking into account the income received and the unsecured and subordinated debt assumed
by a company belonging to the Wider Group for the purposes of the acquisition; and (7) the
Wider Group has sufficient resources to finance its own working capital for at least the next 12
months;
(iv)
investments carried out by each company of the Wider Group in minority shareholdings, joint
ventures and companies meet the following conditions: (a) the maximum total investment for
each financial year does not exceed € 30,000,000; (b) no such investment involves the transfer of
strategic assets outside the Wider Group, or is in any case prohibited by the RBS Loan
Agreement or the Creditors’ Agreement; (c) such an investment is related to, and completed for
the purposes of, the SEAT Group’s business; and (iv) such an investment does not entail the
assumption of unlimited liability by any member of the Wider Group;
(v)
it is the repurchase of securities issued by Lighthouse International Company S.A.
(“Lighthouse”) maturing in 2014 pursuant to the Indenture agreement drawn up on 22 April
2004 between, among others, Lighthouse and SEAT (the “Indenture”) for an aggregated
amount not exceeding € 100 million;
(vi)
they are capital expenditures permitted under the terms of the RBS Loan Agreement;
(vii) the assets are purchased from one non-Obligor (under the terms of the Loan) SEAT Group
company by another non-Obligor (under the terms of the Loan) SEAT Group company;
(viii) the assets are purchased at market conditions by an Obligor from a non-Obligor for the purposes
of its own business;
(ix)
the asset is bought by an Obligor on the condition that said asset is the object of the same type
and level of guarantee as before the acquisition;
(x)
it is the repurchase of receivables transferred to Meliadi Finance S.r.l. as part of the
Securitisation Operation (as defined in the RBS Loan Agreement); and
(xi)
it is the purchase of securities issued by Meliadi Finance S.r.l. as part of the Securitisation
Operation (as defined in the RBS Loan Agreement).
•
Joint venture: no Obligor may take part in a joint venture or a similar agreement unless it complies
with the limits set out in paragraph (iv) above relating to permitted acquisitions;
•
Financial debt assumption limitations: no Obligor may assume financial debt unless, inter alia:
(i)
the amounts are owed under the terms of the Financial Documents having reference to the RBS
Loan Agreement;
(ii)
the debt is with SEAT parent companies, on the condition that said debt is subordinated and that
income from it is guaranteed under the terms of a guarantee document concerning the RBS Loan
Agreement;
(iii) the financial debt is permitted under the terms of the RBS Loan Agreement provisions relating to
loans and guarantees described below;
260
(iv)
the financial debt comes from underwriting PIK securities issued by a company belonging to the
Wider Group;
(v)
the financial debt comes from: (a) repurchasing securities issued by Lighthouse pursuant to the
Indenture for an aggregated amount not exceeding € 100 million, (b) selling certain TDL Group
assets (other than receivables) for financing purposes and without recourse to the seller, as long
as the value of the assets does not exceed € 40 million, and (c) a company belonging to the
Wider Group transferring receivables, as long as they are pro soluto transfers and provided that
Section One
the nominal value of the receivables to be transferred does not exceed € 300 million for the
duration of the Loan;
(vi)
financial leases or similar agreements connected with the acquisition of assets fundamental to the
business of the companies in the Wider Group, where the aggregate annual amount payable
pursuant to said agreements does not exceed € 6 million in each financial year;
(vii) any derivative instrument existing on the disbursement date or permitted under the terms of the
RBS Loan Agreement;
(viii) the financial debt comes from the loan agreement for € 1,300,000,000 signed by Lighthouse and
SEAT on 22 April 2004 or from securities issued by Lighthouse pursuant to the Indenture; and
(ix)
it is any additional financial debt taken on by an Obligor that does not exceed an aggregate
capital amount of € 200 million; and
(x)
the debt relates to liquidity lines not exceeding, when added to the value of receivables financed
by a Permitted Receivables Financing (as defined in the RBS Loan Agreement), an aggregate
amount equal to € 300 million.
• Limitations on providing guarantees: no Obligor nor any of its subsidiaries may provide a
guarantee to an entity outside the Wider Group, unless such a guarantee:
(i)
is provided pursuant to the Financial Documents;
(ii)
is subordinated pursuant to the Creditors’ Agreement;
(iii) is provided in the course of ordinary company business;
(iv)
relates to financial debt permitted under the terms of the RBS Loan Agreement.
• Limitations on granting loans: no Obligor nor any of its subsidiaries may grant a loan or other form
of credit, unless:
(i)
it is normal business credit;
(ii)
lending to an Obligor;
(iii) they are infragroup loans that existed on the date of issue;
(iv)
lending to employees and other subjects in the course of ordinary company business, provided
that the residual amount of this cumulative lending never exceeds € 10 million;
(v)
it is any loan granted by a non-Obligor member of the Wider Group to another non-Obligor
member of the Wider Group;
(vi)
they are infragroup loans granted by an Obligor to a non-Obligor to satisfy working capital
requirements arising after the draw down date for an aggregate amount not exceeding € 30
million;
•
Limitations related to hedging agreements: no Obligor shall underwrite a derivative instrument
except for the interest rate swap contracts provided for by the RBS Loan Agreement or the contracts
executed in the course of ordinary company business not for speculative purposes;
•
Intellectual property: each Obligor undertakes to preserve and protect (where reasonably possible)
its own intellectual property rights, and maintain and request the appropriate registrations where
their absence might determine a Substantially Prejudicial Effect regarding the economic and
financial conditions of the Wider Group, SEAT’s ability to meet its Financial Commitments
pursuant to the RBS Loan Agreement, or for each company belonging to the Wider Group to respect
the payment obligations as per the Financial Documents or the validity of said documents;
•
Duties and taxes: each Obligor undertakes to pay all compulsory taxes relating to itself, its assets,
income or profits before any late payment penalty is imposed, except when there are fiscal disputes
for which appropriate provisions have been made in the accounts;
•
Social security: each company in the Wider Group is committed to respecting legal and contractual
social security provisions where non-fulfilment might determine a Substantially Prejudicial Effect
regarding the economic and financial conditions of the Wider Group, SEAT’s ability to meet its
261
Financial Commitments pursuant to the RBS Loan Agreement, or for each company in the Wider
Group to respect the payment obligations as per the Financial Documents or the validity of said
documents;
•
Activities under market conditions: no Obligor shall stipulate any contract or significant
agreement outside market conditions, unless within the limits set out by the RBS Loan Agreement or
the Financial Documents or between two Obligors;
•
Environment: each Obligor is committed to respecting all applicable environmental legislation, as
well as all authorisations demanded by this legislation, where non-fulfilment might determine a
Substantially Prejudicial Effect regarding the economic and financial conditions of the Wider Group,
SEAT’s ability to meet its Financial Commitments pursuant to the RBS Loan Agreement, or for each
company belonging to the Wider Group to respect the payment obligations as per the Financial
Documents or the validity of said documents;
•
Articles of Association: no Obligor may modify or renounce any provision in the relevant Articles
of Association without the prior consent of RBS;
•
Intellectual property agreements: no Obligor shall sign a substantially important agreement
pertaining to its intellectual property rights or agree to any alteration, renunciation or termination of
such an agreement except in the course of ordinary company business or when such action does not
prejudice the interests of RBS pursuant to the Financial Documents;
•
Issuing shares: no Obligor shall permit any company belonging to the Wider Group to allot or issue
shares except:
(i)
in the case of a company belonging to the Wider Group, in compliance with stock option plans
existing on the draw down date;
(ii) in the case of SEAT, to employees or managers in compliance with any stock option plan or
incentive scheme;
(iii) to the company belonging to the Wider Group that controls the Issuer;
(iv) to the subsidiary Telegate, in relation to the issue of fully paid-up shares to minority shareholders;
provided that: (a) the aggregate number of shares issued pursuant to paragraphs (i) and (ii) never
exceeds 5% of the Issuer’s diluted voting capital, and (b) in the case of paragraph (iii), such new shares
are subject to the same guarantee as the existing shares;
•
Share buybacks: SEAT shall not buy, pay up or cancel treasury shares or warrants, nor shall it
reduce its share capital in any way, unless in favour of another Obligor;
•
Dividends: SEAT shall have the right to pay dividends or distribute any other sum, cash or
otherwise, in relation to its share capital, only when all the following criteria are met:
(i)
there is no non-fulfilment pursuant to the RBS Loan Agreement;
(ii) SEAT has respected all the conditions set out in the Indenture;
(iii) the ratio of total net debt to EBITDA (at the time of distribution and in the two subsequent
quarters) is respected when recalculated on a pro forma basis following distribution, or said
distribution is carried out in accordance with net revenues generated by sales of businesses,
business divisions, assets or shares relating to the TDL Group or Telegate not intended for
compulsory early repayment of the Loan;
Moreover, pursuant to the Amendment Agreement described below and on verification of the
Condition, SEAT: (a) may not deliberate or distribute any dividend or any other sum relating to its
ordinary share capital, and (b) shall limit the distribution of the savings share dividends to the
minimum amount required not to violate its corporate By-Laws, in both cases as long as the
consolidated net debt/EBITDA ratio is equal to or less than 4.00:1, taking the amount of such
distributions into account. These are subject to the same conditions provided for the efficacy of the
reset of financial covenants described below.
•
262
Payments to parent companies: no Obligor shall make capital or interest payments, or any other
payment, in relation to the loan granted to SEAT by Lighthouse on 22 April 2004 or in respect of
Section One
PIK securities (i.e. non guaranteed securities which among other things are issued by a company
outside the SEAT Group, do not incorporate any interest payment rights up to the repayment date of
Tranche B, are subordinated on terms and conditions to the satisfaction of RBS and never exceed a
combined amount of € 500 million) to its parent company, unless complying with the provisions of
the Creditors’ Agreement;
•
Payments to shareholders: SEAT shall not make any payment to its shareholders for management
commissions, royalties or similar fees except for payments for services rendered under market
conditions or that are permitted pursuant to the Financial Documents;
•
Permitted payments: the provisions relating to the prohibition of acts of disposal, share issues,
share buybacks, dividends and payments to parent companies and shareholders do not apply to:
(i)
payments made in accordance with revenues from the sale of SEAT shares;
(ii) payments made in accordance with revenues from the sale of PIK securities;
(iii) payments of management and administration fees, out-of-pocket costs and administrative
expenses by SEAT to Split Parents or Split Luxcos up to an aggregate amount of € 3 million per
financial year;
(iv) payments relating to the Lighthouse Loan or to PIK securities, which are financed by
underwriting shares or shareholder loans made by third parties to members of the Wider Group,
in any case in accordance with the provisions of the Creditors’ Agreement;
• Subordinated loans: SEAT shall not make any capital or interest payment on any amount owed
pursuant to the Financial Documents in connection with the loan granted to SEAT by Lighthouse and
with securities issued by said company, unless in accordance with the provisions of the Creditors’
Agreement.
Guarantees pursuant to the RBS Loan Agreement
The following guarantees have been furnished pursuant to the obligations arising from the RBS Loan
Agreement and the rest of the Financial Documents:
• pledge on SEAT shares owned by the Reference Shareholders representing a percentage of the share
capital of SEAT equal to at least 50.14%, including all the shares that the Reference Shareholders
may become the holders of at any time (including the portion of Shares to be subscribed by them in
connection with the Capital Increase), notwithstanding the Reference Shareholders’ option to
transfer SEAT Shares to third parties within the limits provided for in the RBS Loan Agreement;
• a pledge on all quotas of the Split Luxcos on the ownership of the Split Parents;
• a pledge on all the shares/quotas of TDL Infomedia, Thomson, Telegate and other companies that
become at any time part of the Wider Group and whose EBITDA is at least 5 per cent of the
EBITDA of the Wider Group (hereafter, collectively with SEAT, the “Principal Companies”);
• pledge on the principal brands of the Wider Group and, in particular, among others, the brands
“PAGINEGIALLE”, “SEAT”, “PAGINEBIANCHE”, “Pronto PAGINEGIALLE”, “SEAT Pagine
Gialle S.p.A.”, “PGOL”, “PAGINEGIALLE Casa”, “PAGINEGIALLE Lavoro”, “Paginebianche.it”,
“89.24.24 Pronto PAGINEGIALLE soluzioni 24 ore su 24”, “Paginebianche.it”, and “Paginegialle.it”;
• chattel mortgage pursuant to Art. 46 of the TUB on the property and equipment of SEAT listed in
Appendix A to the document creating the chattel mortgage;
• fixed and floating charge on the property of TDL Infomedia and Thomson, pursuant to the contract
under English law known as Debenture, including the real estate property known as “Thomson
House”, located in Farnborough, owned by Thomson;
• a secured transfer of proceeds, according to English Law, from the loan granted to SEAT by
Lighthouse.
263
Events of Default
The RBS Loan Agreement expressly states that, in the event of predetermined “Events of Default”, RBS
may, by informing SEAT in writing:
• cancel the total commitment (Total Commitment) of RBS pursuant to the RBS Loan Agreement;
• declare immediately payable all or part of the Loan amounts owed pursuant to the Financial
Documents, as well as the related interest;
• declare that the Loan must be repaid in full or in part at the request of RBS;
• declare that a sum equal to any amount owed by RBS pursuant to any letter of credit issued in
accordance with the provisions of the RBS Loan Agreement must be paid immediately to RBS;
and/or
• order the Senior Security Agent (as defined in the RBS Loan Agreement) to enforce all the
guarantees given in relation to the Loan, in accordance with the provisions of the Creditors’
Agreement.
The main Events of Default provided for by the RBS Loan Agreement are:
• failed payment by any Obligor of any amount pursuant to the Financial Documents;
• non-fulfilment of the additional obligations provided for by the Financial Documents, where said
non-fulfilment cannot be remedied within 21 days of SEAT receiving written communication from
RBS or of SEAT becoming aware of such non-fulfilment;
• failure to respect the Financial Commitments;
• false statements made by an Obligor pursuant to the RBS Loan Agreement;
• non-fulfilment by a member of the Wider Group of any payment obligation within the agreed
timeframe;
• insolvency of an Obligor or a Principal Company;
• an Obligor or a Principal Company becomes subject to any insolvency procedure;
• an Obligor or a Principal Company becomes subject to a debt recovery procedure for more than € 5
million;
• a company belonging to the Wider Group is involved in a dispute where it can be reasonably
expected that the decision will be against such company, which, as such, might have a Substantially
Prejudicial Effect;
• certification of SEAT’s annual accounts is qualified by the auditors in relation to a significant aspect;
• the occurrence, at any time, of an event or circumstance that might reasonably have a significant
prejudicial effect on the Obligors’ (considered as a whole) ability to fulfil their obligations pursuant
to the Financial Documents.
Applicable law
The RBS Loan Agreement is regulated by, and must be interpreted pursuant to, English law.
Changes to the Loan Agreement
SEAT made some requests to RBS to change some provisions of the RBS Loan Agreement. Furthermore, the
RBS Loan Agreement has been modified and supplemented on three occasions, following requests by SEAT
and RBS. The first two modifications were necessitated, respectively, by SEAT adopting the new IAS
accounting principles, in accordance with EC Regulation 1606/2002, and in order to allow SEAT to make
capital expenditures and take on any loans needed to purchase the Buildings mentioned in Paragraph 22.2.
The final modification was carried out, following a Waiver Request on 1 December 2008 and accepted by
RBS on 22 December 2008 and then finalised on 14 January 2009, by means of the conclusion between the
two parties of the Amendment Agreement.
264
Section One
Pursuant to the Waiver Request and the Amendment Agreement, some provisions in the RBS Loan
Agreement have been rejected or modified in order to:
•
allowing SEAT to decide on and complete the Capital Increase and carry out all the activities relative
thereto, notwithstanding SEAT’s commitment (contained in the Waiver Request accepted by RBS
dated 22 December 2008) to allocate 50% of the proceeds deriving from the Capital Increase to early
repayment of the instalments of Tranche A of the RBS Loan with due dates as of the next payment
due date subsequent to the date of completion of the Capital Increase and until the one scheduled for
28 December 2011;
•
allow Split Parents and Split Luxcos to implement corporate reorganisation operations in light of the
different market scenario;
•
allow SEAT to implement operations unfreezing its business credit, as an alternative to the transfer
of revolving credit carried out under the securitisation programme begun in June 2006 in the event
that this latter operation is no longer useful for the Company;
•
reduce the minimum price at which SEAT may sell its shareholdings in the TDL Group and the
Telegate Group.
The Amendment Agreement also provides for the modification of some provisions in the RBS Loan
Agreement in the event of one of the following conditions (the “Condition”):
•
one or more of the Reference Shareholders make direct or indirect payments to the Company,
through participating in the Capital Increase, in respect of a future capital increase or otherwise, for a
total amount not less than € 99,200,000 (subordinate, in each case, to the amount stipulated in the
Creditors’ Agreement) before 31 March 2009 or, if the Capital Increase be delayed owing to a
request or measure from any relevant authority (including Consob and Borsa Italiana), before 28
June 2009 (the “Final Date”); or
•
one or more of the Reference Shareholders gives RBS a full, irrevocable and unconditional pledge to
make payments indirectly or directly, through participating in the Capital Increase, in respect of a
future capital increase or otherwise, for a total amount not less than € 99,200,000. These
modifications are on the condition that said payment is made before the Final Date.
The provisions subject to modification relate to the amount of interest applicable to the Loan, any
decrease/increase of said interest depending on the improvement/worsening of the SEAT Group’s net
debt/EBTDA ratio, the contractual definitions contained in the provisions relating to the financial covenants
of the SEAT Group set out in the RBS Loan Agreement (the “Financial Commitments”) as well as the
limits on said Financial Commitments (reset of financial covenant).
In particular, the financial covenant reset consists of revising the thresholds of the Financial Commitments
depending on the scenario assumed by the Business Plan, compared with the scenario forecast at the time of
drawing up the RBS Loan Agreement, in order to obtain a headroom of 20% for 2009 and 2010. If the
Condition is realised this would also involve, pursuant to the Amendment Agreement, extending the
application of the Financial Commitments until 31 March 2013, providing for, in respect of the Business
Plan projections and subsequent forecasts, a headroom of 25% for 2011 and 30% for 2012 and 2013.
265
The tables below specify the threshold amounts for the Financial Commitments on the Audit Dates
subsequent to the Amendment Agreement if the Condition should occur relative to (i) overall net debt –
EBITDA ratio, (ii) senior debt – EBITDA ratio, (iii) Total Net Interest Cover:
Audit Date
31 March 2009
30 June 2009
30 September 2009
31 December 2009
31 March 2010
30 June 2010
30 September 2010
31 December 2010
31 March 2011
30 June 2011
30 September 2011
31 December 2011
31 March 2012
30 June 2012
30 September 2012
31 December 2012
31 March 2013
Tot. Net Debt/EBITDA
(no greater than)
5.95
6.19
6.24
6.33
6.06
5.98
5.83
5.74
5.86
5.77
5.68
5.59
5.73
5.63
5.47
5.33
5.07
Sen. Net Debt/EBITDA
(no greater than)
3.24
3.41
3.38
3.47
3.22
3.12
2.97
2.96
2.91
2.79
2.69
2.68
2.62
2.49
2.30
2.26
2.00
Tot. Net Int. Cover
(no greater than)
2.25
2.18
2.24
2.26
2.28
2.27
2.30
2.41
2.37
2.40
2.44
2.56
2.52
2.59
2.67
2.86
2.96
Relative to Capital Expenditures:
Column 1
Financial Year ending on
31 December 2009
31 December 2010
31 December 2011
31 December 2012
Column 2
€
71,400,000
73,600,000
64,000,000
60,900,000
A complete or partially unfavourable outcome to the Capital Increase, though deemed an extraordinary case
by the Company given the subscription commitment assumed by the Reference Shareholders (except for the
BC Investors) and the underwriting commitment assumed by Mediobanca, could be relevant only to the
extent that the Reference Shareholders do not subscribe their portion of the Capital Increase (equal to 49.6%
of the entire share capital), equal to € 99.2 million, insofar as the above-mentioned reset of the financial
covenants agreed with RBS in the Amendment Agreement would not enter into effect.
Therefore, since a complete lack of favourable outcome to the Capital Increase, represented by lack of
subscription by the market and/or Mediobanca, would not have an effect on the reset of the financial
covenants – which would become effective as a result of the subscription of the Capital Increase by the
Reference Shareholders – it would only entail lower liquidity for the Company.
The amendment of the amortisation schedule for Tranche A of the RBS Loan, on the other hand, has not
been expressly provided for in the Waiver Request or in the Amendment Agreement, being a direct
consequence of early repayment of a portion of the RBS Loan, which will be made by SEAT effective on the
proceeds of the Capital Increase.
Merely for convenience in reading and analysis, the combined effect has thus been summarised in the tables
provided for purposes of the loan repayment obligations on the due dates deriving from the amortisation
schedule as comprised of the early repayment agreed as effective on the proceeds deriving from the Capital
Increase.
It should lastly be noted that pursuant to the Waiver Request, the Company has paid RBS a so-called waiver
fee of approximately € 9 million.
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Section One
22.3.2 Lighthouse Loan Agreement
On 22 April 2004, SEAT in its capacity as borrower (the “Borrower”) entered into a loan agreement
(hereafter the “Lighthouse Loan Agreement”) with Lighthouse International Company S.A.
(“Lighthouse”) in its capacity as lender (the “Lender”), pursuant to which Lighthouse undertook to grant
SEAT a loan for a maximum amount equal to the gross revenues obtained by Lighthouse from issuing
securities (the “Lighthouse Securities”) pursuant to the Indenture. On the stipulation date of the Lighthouse
Loan Agreement, Lighthouse issued Lighthouse Securities for a total amount of € 1,300,000,000 and granted
SEAT a loan for a total amount of € 1,300,000,000 (the “Lighthouse Loan”). The Indenture states that
Lighthouse, following the issue date of the Lighthouse Securities, may issue further securities for a total
amount of no more than € 1,000,000,000.
Repayment of the Lighthouse Loan
SEAT shall repay in full the Lighthouse Loan no later than the working day before the maturity date of the
Lighthouse Securities (30 April 2014).
In the event that full or partial early redemption of the Lighthouse Securities is requested for whatever
reason, pursuant to the relevant previsions of the Indenture (i.e. following a case of change of control or a
case of breach as briefly described below), SEAT shall repay Lighthouse a portion of the Lighthouse Loan at
least equal to the amount necessary for early redemption of the relevant Lighthouse Securities, no later than
the working day before the date on which Lighthouse must make such early redemption.
Interest on the Lighthouse Loan
The Lighthouse Loan will accrue interest at the same rate as the Lighthouse Securities (8% per annum) plus
an additional € 250,000 per annum. This interest will be due from SEAT on the working day before the
interest payment date on the Lighthouse Securities.
Payment restrictions pursuant to the Lighthouse Loan
Until SEAT has fully satisfied its obligations pursuant to the RBS Loan Agreement and to associated
agreements, no payment pursuant to the Lighthouse Loan Agreement can be made unless in accordance with
the provisions of the Creditors’ Agreement.
Subordination of the obligations pursuant to the Lighthouse Loan
All SEAT’s obligations pursuant to the Lighthouse Loan Agreement are to be considered subordinate (to
those pursuant to the RBS Loan Agreement) in accordance with the provisions of the Creditors’ Agreement.
Additional payments
Any additional payment that SEAT has to make pursuant to the Lighthouse Loan Agreement shall be made
no later than the second working day prior to the one on which Lighthouse must pay the corresponding
amount relating to the Lighthouse Securities.
Applicable law
The Lighthouse Loan Agreement is regulated by and must be interpreted pursuant to English law.
Indenture
The Indenture is the agreement that regulates the issue of Lighthouse Securities by Lighthouse as well as the
terms and conditions of said securities. It was signed on 22 April 2004 by Lighthouse, SEAT,
Societé de Participations Silver S.A., subsequently replaced by PG Silver S.A. (subsequently replaced
following a de-merger by PG Silver A S.A. and PG Silver B S.A.), Sterling Holdings S.A., Silcart S.A.,
Siltarc S.A., AI Silver S.A. (the “Split Parents”) following the de-merger, Sub Silver S.A., subsequently
replaced by PG Sub Silver S.A., (subsequently replaced, following a de-merger, by PG Sub Silver A S.A.
and PG Sub Silver B S.A.) Sterling Sub Holding S.A., Subcart S.A. Subtarc S.A. AI Subsilver S.A. (the
“Split Luxcos”) following the de-merger, The Law Debenture Trust Corporation Plc, as Trustee, and RBS, as
Subordinated Agent.
In particular, the provisions contained in the Indenture include the following:
(i)
Lighthouse Securities duration, repayment and interest: the Lighthouse Securities may not have a
nominal value of more than € 2,300,000,000 (of which € 1,300,000,000 were already issued on 22
April 2004), shall be fully redeemed before 30 April 2014 and shall accrue interest at the rate
267
specified in the securities (the interest rate indicated on the Lighthouse Securities is 8% per annum,
and interest accrued shall be paid on 30 April and 31 October of each year).
(ii)
Commitments of Lighthouse and SEAT: Lighthouse and SEAT may not, among other things,
assume financial debt, distribute dividends or make other payments (or allow their subsidiaries to do
distributions and payments) to their own shareholders, carry out operations with related parties, sell
assets or shares or assign real guarantees or other charges over their own assets, unless within the
limits expressly set out by the Indenture.
(iii)
Compulsory early redemption of the Lighthouse Securities in the event of a change of ownership:
where (a) any subject outside the Reference Shareholders becomes the direct or indirect holder of
more than 30% of SEAT’s voting share capital and, at the same time, such Reference Shareholders
have a smaller percentage of voting rights and are unable, through a shareholder meeting,
contractually or in another way, to appoint the majority of the members of the Company’s Board of
Directors; (b) for a period of two consecutive years, the members of the Company’s Board of
Directors as on the date the Lighthouse Securities are issued cease to represent the majority of said
Board; (c) SEAT is merged or consolidated with another company with the result that an entity other
than one or more of the Reference Shareholders becomes the direct or indirect holder of more than
30% of SEAT’s voting share capital and, at the same time, said Reference Shareholders have a
smaller percentage of voting rights and are unable, through a shareholder meeting, contractually or
in another way, to appoint the majority of the members of the Company’s Board of Directors; and
(d) all or nearly all of the Company’s assets are sold to a third party, each Lighthouse Securities
holder may request the repurchase of his own securities by Lighthouse at a price equal to 101% of
the nominal value of the securities plus interest accrued and unpaid up to the date of repurchase.
(iv)
Instances of non-fulfilment: the principal instances of non-fulfilment provided for by the Indenture
are among other things (a) failure to pay interest on Lighthouse Securities for more than 30 days, (b)
failure to pay any capital amount on these securities, (c) non-fulfilment by Lighthouse, SEAT or
another company belonging to the Wider Group of the other undertakings provided for in the
Indenture, (d) non-fulfilment by Lighthouse, SEAT or major subsidiaries in relation to their payment
of financial debt exceeding € 40 million, and (e) Lighthouse, SEAT or major subsidiaries become
subject to any insolvency or liquidation proceedings. In such instances, the Trustee may declare
immediately liquid and payable the capital amount of the Lighthouse Securities and the interest
matured on said securities and unpaid to such a date. “Most significant subsidiaries” are to be
understood as the companies mentioned in the Indenture as Significant Subsidiaries or companies
that have not been designated by the Board of Directors as Unrestricted Subsidiaries pursuant to the
provisions of the Indenture and which can be considered as “Significant Subsidiaries” pursuant to
the provisions of Rule 1-02 of Regulation S-X as approved by the US Securities and Exchange
Commission.
(v)
Guarantee of SEAT and the other Guarantors pursuant to the Indenture: SEAT, the Split Luxcos and
the Split Parents have irrevocably and unconditionally undertaken to guarantee the proper fulfilment
of all Lighthouse’s obligations to Lighthouse Securities holders, the Trustee and RBS, pursuant to
the Indenture and the Lighthouse Securities.
(vi)
Subordination of the obligations of SEAT and the additional Guarantors pursuant to the Indenture:
SEAT and each additional Guarantor have agreed that their own obligations pursuant to the
Indenture are subordinate to the previous satisfaction of the so-called senior obligations relating to
the RBS Loan Agreement, and
(vii)
Guarantees: in order to ensure the proper fulfilment of all obligations arising from the Indenture, the
Split Parents have pledged on a second priority basis their shares in the Split Luxcos, the Split
Luxcos have pledged on a second priority basis their shares in SEAT and Lighthouse has put forward
as collateral its own receivables arising from the Lighthouse Loan. The proceeds arising from the
enforcement of such guarantees shall be firstly used to satisfy the so-called senior obligations
relating to the RBS Loan Agreement.
Applicable law
The Indenture is regulated by, and must be interpreted pursuant to, New York State law.
268
Section One
23
THIRD PARTY INFORMATION, STATEMENTS BY EXPERTS AND DECLARATIONS OF
ANY INTEREST
23.1 Third party information, statements by experts and declarations of any interest
This Information Prospectus does not contain any expert opinions or reports.
23.2 Declaration on third party information, statements by experts and declarations of any interest
Where indicated, information contained in this Information Prospectus has been obtained from third parties.
The Company confirms that third-party information has been accurately reproduced and that, as far as the
Company is aware, including on the basis of data published by such third parties, no facts have been omitted
which may render such information inaccurate or misleading.
269
24
DOCUMENTS AVAILABLE TO THE GENERAL PUBLIC
This Information Prospectus is available to the public at SEAT’s registered office in Milan, Via Grosio 10/4,
at its secondary offices in Turin, Corso Mortara 22 and at the offices of the Italian Stock Exchange (Borsa
Italiana), Piazza Affari 6, Milan, together with the following documents:
•
Articles of Association and Bylaws;
•
individual and consolidated financial statements of the Issuer for the financial years ended on 31
December 2008, 2007, 2006 and 2005, together with the relevant Auditor Reports;
•
half-yearly reports at 30 June 2007 and 30 June 2008;
•
interim consolidated management reports at 30 September 2007 and 30 September 2008.
This Information Prospectus and the above documents are available also on the Company’s website:
www.seat.it
270
Section One
25
HOLDINGS
The Company is the parent company of the SEAT Group. For further details of the Issuer’s holdings please
see Section One, Chapter 7, Paragraph 7.2.
271
272
Section Two
Section Two
273
274
Section Two
1
1.1
PERSONS RESPONSIBLE
Responsibility for the information contained in the Information Prospectus
The responsibility for the Information Prospectus is of the persons mentioned in Section One, Chapter 1,
Paragraph 1.1 of this Information Prospectus.
1.2
Declaration of responsibility
The declaration of responsibility is contained in Section One, Chapter 1, Paragraph 1.2 of this Information
Prospectus.
275
2
RISK FACTORS
For a description of the risk factors relating to the Shares forming the Offering in Option, please see Section
One, Chapter 4 of this Information Prospectus.
276
Section Two
3
3.1
KEY INFORMATION
Working capital statement
Within the meaning of Regulation 809/2004/EC and guided by the definition of working capital – as a means
used by the SEAT Group to obtain the liquid funds it needs to meet its obligations as they fall due – found in
the Recommendations for Uniform Implementation of the European Commission Regulation on Information
Prospectuses from the CESR (Committee of European Securities Regulators), the Issuer believes that the
Group’s working capital is sufficient to cover its requirements for a period of 12 months from the Date of the
Information Prospectus. For information on the Issuer’s financial resources please see Section One, Chapters
9, 9bis and 10 of this Information Prospectus.
3.2
Capitalisation and indebtedness of SEAT Group
a) Capitalisation
(€ million) (*)
Equity
Share premium reserve
Reserve for adoption of IAS/IFRS
Other reserves
Retained earnings
Profit (loss) for year
Capital and reserves
Profit (loss) for the year
Minority shareholders of the Group
Total equity
31 December 2008
250.4
465.1
181.6
(1.6)
160.8
(179.6)
876.6
20.9
6.0
26.9
903.5
31 December 2007
250.4
465.1
181.6
43.7
60.8
98.4
1,100.0
16.0
7.8
23.8
1,123.8
(*) Figures at 31 December 2008 are taken from accounting records updated to 31 December 2008.
b) Net Financial Debt
(€ million) (*)
Non-current financial assets (**)
Amortisable initial, refinancing and securitisation costs
Net (positive) negative changes of cash flow hedge contracts
Net financial debt
31 December 2008
3,031.5
293.8
(2.0)
(2.0)
(304.6)
3,016.7
76.2
(10.9)
3,082.0
(*)
Figures at 31 December 2008 are taken from accounting records updated to 31 December 2008.
(**)
This item does not include “financial assets available for sale”.
31 December 2007
3,190.4
215.5
(2.0)
(13.1)
(204.5)
3,186.3
82.8
5.3
3,274.4
The Issuer’s net financial position at 31 December 2008 shows a negative balance of € 3,082 million,
representing a € 192.3 million improvement compared to its position at 31 December 2007.
No substantial changes were reported on the date of the Information Prospectus compared to the figures
shown in the above table, except for the advance repayment of € 50 million of the RBS Loan made on 28
January 2009.
The obligations under the RBS Loan are guaranteed, among other things, by pledges on SEAT shares and
shares of other SEAT Group companies, by a pledge on the main trademarks owned by the SEAT Group and
also by means of a floating charge on certain instruments held by SEAT, and by a fixed and floating charge
under English law on assets of TDL Infomedia and Thomson. The obligations deriving from the Indenture
are on the other hand guaranteed, among other things, by a second-ranking pledge on shares of SEAT. As
regards asset-backed securities issued by the vehicle Meliadi Finance S.r.l. as part of the SEAT commercial
277
loan securitisation launched in June 2006, the obligations connected with them are guaranteed by the
securitised loan portfolio owned by Meliadi Finance S.r.l. and also by two credit lines with a renewable term
of one year, set up to support the securitisation, while the obligations connected with the leases concluded by
SEAT with Leasint S.p.A. are not guaranteed, apart from the fact that the properties forming the subject of
the leases are owned by Leasint S.p.A., which, in the event of SEAT’s failure to perform, could be
compensated using the proceeds from the sale of these properties.
For further information on capitalisation and indebtedness of the Company and of the Group and the relevant
guarantees please see Section One, Chapters 10, 20 and 22 of the Information Prospectus.
3.3
Interests of natural and legal persons involved in the Offering
On or before the day before the start of the Offering, Mediobanca, as Sole Global Coordinator and Sole
Bookrunner of the Offering, shall enter into an underwriting agreement with the Issuer, in line with the best
market practices for similar transactions, which is intended to guarantee the subscription of a number of
newly issued Shares corresponding to any Option Rights that remain unexercised after the Stock Exchange
Offering pursuant to Art. 2441, Paragraph 3, Italian Civil Code, for a maximum amount of € 100,800,000,
equal to the residual portion of the Capital Increase other than the portion forming the subscription
commitment by the Reference Shareholders, subject to the fact that, in the event that the Shares to be
subscribed under the guarantee (the assumption) represent, on the basis of a hypothetical calculation (on a
figurative basis), more than 30% of the ordinary share capital of SEAT after the Capital Increase,
Mediobanca’s underwriting commitment will be reduced by maximum amout of € 2,000,000, so that the
percentage of ordinary share capital of the Company held by the Reference Shareholders (other than BC
Investors) after the Capital Increase exceeds 50.01% (please see Section One, Chapter 18, Paragraphs 18.2
and 18.4). Therefore, in the event that the threshold of 30% of the ordinary share capital of SEAT should be
exceeded by Mediobanca as a result of the assumption, it will not entail a PTO obligation pursuant to Art.
49, paragraph one, letter (a) of the Issuer Regulations, which provides that the exceeding of that threshold
shall not entail the tender obligation provided for in Art. 106 TUF if “the majority of the voting rights
exercisable at an ordinary shareholders’ meeting are held by another shareholder or by other shareholders
jointly”.
The Underwriting Agreement shall provide that Mediobanca will not be required to fulfil the underwriting
obligations or that such obligations will be revoked upon the occurrence, among other things, of certain
extraordinary circumstances, including (i) the publication of a supplement to the Information Prospectus due
to events that – in the reasonable opinion of Mediobanca – may have a material adverse effect on the capital,
economic and/or financial position or on the activities carried out by the Company and/or the Group; (ii) the
substantial non-fulfilment by the Company of its commitments pursuant to the Underwriting Agreement (such
as, for example, the commitment to comply with legal obligations, to ensure that the Shares are issued free of
any third-party lien or right, to not undertake any activity that could be qualified as stabilisation activity or any
solicitation activity in countries in which the approval of the competent local authorities is required, to notify
Mediobanca of any event likely to render the information contained in the Information Prospectus no longer
true or correct in a material aspect, and to give appropriate advance notice to Mediobanca of any statement,
disclosure or announcement that the Company intends to make); (iii) the fact that the representations and
warranties given by SEAT in the Underwriting Agreement should prove untrue, incomplete or incorrect in a
substantial aspect; (iv) the non-fulfilment by the Reference Shareholders (except for the BC Investors) of the
commitment to subscribe their part of the Capital Increase; and (v) events of an extraordinary nature such as to
have a negative impact on the Business Plan.
3.4
Reasons for the Offering and use of proceeds
Fifty per cent of the proceeds from the Capital Increase will be used for the early repayment of Tranche A of
the RBS Loan Agreement, as provided for in the Waiver Request accepted by RBS dated 22 December 2008,
in order to repay on a pro-rata basis the instalments falling due starting from the first reimbursement date
falling after the date in which the proceeds of the Capital Increase are actually received by SEAT and up to
28 December 2011, while the remaining proceeds will be allocated, among other things, to realising the
objectives set out in the Business Plan (please see Section One, Chapter 5, Paragraph 5.2.3 and Section One,
Chapter 13, Paragraph 13.1).
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Section Two
4
4.1
INFORMATION CONCERNING THE SECURITIES TO BE OFFERED
Description of the Shares forming the Offering
The Shares subject to the Offering in Option are newly issued ordinary shares of the Issuer, and will
represent 97.87% of the Issuer’s ordinary share capital after full subscription of the Capital Increase.
The ISIN assigned to the Option Rights on the subscription of the Shares is: IT 0004474992.
The Shares carry regular entitlement rights (godimento regolare) and shall be issued with coupons numbered
from No. 1 onward.
The new Shares shall therefore be fungible with the existing ordinary shares of the Issuer.
4.2
Legislation under which the Shares have been created
The Shares will be issued in accordance with Italian Law.
4.3
Characteristics of the Shares
The Shares shall be indivisible, freely transferable registered shares issued in dematerialised form pursuant to
Law No. 213 of 24 June 1998 and to the Regulations approved by Consob Resolution No. 11768 of 23
December 1998 as subsequently amended, and shall be recorded in the centralised securities deposit system
managed by Monte Titoli S.p.A., via Mantegna 6, 20154, Milan.
4.4
Currency of the Shares issue
The reference currency of the Shares shall be the Euro.
4.5
Rights attached to the Shares and exercise procedure
The Shares have the same characteristics and entail the same rights as those attached to SEAT’s ordinary
shares listed on the date of the Information Prospectus.
Each share gives entitlement to vote in the ordinary and extraordinary shareholders’ meetings of the Issuer
and carries all other applicable administrative and equity rights in law and according to the Bylaws.
Pursuant to Article 23 of the Bylaws, subject to a deduction of 5 per cent to be allocated to the legal reserve
(until such reserve is at least equal to one-fifth of the share capital), the net profits shown in the financial
statements will be allocated to dividends to shareholders as approved by the Ordinary Shareholders’ Meeting
and/or allocated to any other end as the Ordinary Shareholders’ Meeting shall deem appropriate or necessary.
4.6
Resolutions, authorisations and approvals by virtue of which the Shares have been or will be
created and/or issued
The Shares object of the Offering derive from the Capital Increase approved by the Issuer’s Extraordinary
Shareholders’ Meeting of 26 January 2009.
The Extraordinary Shareholders’ Meeting of the Issuer held on 26 January 2009 passed the following
resolutions:
1) approving a divisible increase of the share capital by a maximum of € 200,000,000, through the issue of
new ordinary Shares with no nominal value, to be offered in option to the holders of ordinary and saving
279
shares at an Offering Price per share equal to the theoretical ex right price (TERP)8 of SEAT ordinary shares,
calculated in accordance with current methods and on the basis of the arithmetic mean of the official market
price per share recorded in a period of at least 3 trading days prior to the calculation of the Offering Price and
discounted by the amount to be set by the Board of Directors. Notwithstanding the foregoing, in any case the
share price shall not exceed € 6.00, taking into account the approval of the resolution on Consolidation;
2) to grant the Board of Directors full powers: (i) to set the Offering Price of the Shares (and accordingly any
applicable discount) on the basis of the market conditions prevailing on the date of the start of the
transaction, of SEAT’s ordinary shares trading price and of best practices applicable to transactions of this
type, provided that in any case the Offering Price of the new Shares shall not exceed € 6.00, taking into
account the approval of the resolution on Consolidation; (ii) to calculate the maximum number of Shares to
be issued; (iii) to set the timeframe for implementation of the Capital Increase resolution in view of the final
deadline of 10 July 2009; (iv) to draft and submit to the competent authorities all documents required to
implement the Capital Increase resolution;
3) to establish that, if the abovementioned Capital Increase fails to be fully subscribed by the final deadline
of 10 July 2009, it shall be considered complete up to the subscriptions received up until such date;
4) to modify Article 5 of its Bylaws accordingly;
5) to grant to the Board of Directors, and therefore to the CEO and to the Chairman of the Company, as
representatives of the Board of Directors, full powers to implement the above resolution and make any
changes, amendments or integrations as may be required by the competent Authorities.
The resolution of the Extraordinary Shareholders’ Meeting was filed with the Company Register of Milan on
3 February 2009. For further details please see Section One, Chapter 3, Paragraph 3.5.
On 26 March 2009, SEAT Board of Directors resolved to issue 1,885,982,430 new ordinary Shares with the
same characteristics as the Company’s outstanding ordinary Shares, to be offered in option to the existing
shareholders at the price of € 0.106 each, pro-rata on the basis of 226 new Shares for each 5 ordinary and/or
saving shares held by each shareholder, up to a maximum value of approximately € 199,914,000.
The Offering Price of € 0.106 per Share was set by the Board of Directors of the Issuer on 26 March 2009.
4.7
Expected issue date of the Shares
The Shares shall be made available to qualifying shareholders, through the Authorised Intermediaries
operating on the centralised securities deposit system managed by Monte Titoli S.p.A. within the tenth
trading day of the stock exchange after the end of the Offering Period.
4.8
Restrictions on the free transferability of Shares
There are no restrictions on the free transferability of the Shares.
4.9
Laws and regulations on general public offering applicable in relation to the Shares
Upon subscription, the Shares shall be subject to the provisions of the Consolidated Law and relevant
implementing regulations on securities traded and listed on Italian regulated markets, and in particular to the
rules on takeover bids and public offerings.
8
For the avoidance of doubt it should be noted that the TERP is the theoretical price of a share subsequent to a capital increase. It can be expressed
algebraically as follows:
TERP = [(Actual Pcum X Old Sh) + (Issue P X New Sh)] / (Old Sh + New Sh)
Where (with reference to the definitions adopted above):
Pcum Actual = average share price prior to the ex-rights date
Old Sh = number of shares prior to the capital increase
Issue P = Offering Price of the new shares prior to the ex-rights date
New Sh = number of newly issued shares
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Section Two
4.10 Public takeover bids by third parties on the Issuer’s financial instruments during the current
financial year or in the previous financial year
No takeover bids or offers for exchange of shares were launched on the Issuer’s ordinary and saving shares
during the current financial year or in the previous financial year.
4.11 Taxation
The following paragraphs contain a brief description of the taxation regime applicable to the purchase,
holding and sale of shares in companies incorporated and resident in Italy (such as the Issuer), listed on a
regulated market and recorded in the centralised securities deposit system managed by Monte Titoli. The
following information is not exhaustive and does not purport to detail all the fiscal implications of the
purchase, holding and sale of the Shares.
It should be noted that the above provisions may be amended at any time, also with retroactive effect. In
particular new regulations could be issued which modify the rate of withholding tax applicable to capital
gains and other financial gains or the rate of substitute tax applicable to the above income.
Accordingly, any new laws modifying the currently applicable regulations may have an impact on the
taxation of the Company’s Shares as described in the following paragraphs.
If such changes occur, SEAT will not update this section to report on any intervening changes in the law,
even where such changes would invalidate the information provided in this section.
It is therefore recommended that investors seek professional advice on taxation issues concerning the
purchase, holding and sale of shares and verify the nature and origin of any income earned by them from
distributions (of dividends or reserves) on the Shares of the Company.
Definitions
For ease of reference, in reading this Paragraph 4.11 of the Information Prospectus it should be noted that the
applicable tax regime varies depending on whether the shares to which the income from dividend
distributions and/or capital gains/losses from sale thereof relates are classed as qualified or non-qualified
holdings.
For listed companies, “qualified” and “non-qualified” holdings are:
•
“Qualified Holdings”: holdings in companies listed on regulated markets consisting of shares other than
saving shares and any other holding in the company’s capital or equity, as well as any securities or rights
by means of which is possible to purchase the above holdings, representing overall more than 2% of the
voting rights in the Ordinary Shareholders’ Meeting, or a holding of more than 5% in the company’s
capital or equity; and
•
“Non-Qualified Holdings”: shares in companies listed on regulated markets consisting of ordinary
shares whose voting or capital or equity rights do not exceed the above mentioned thresholds, and saving
shares.
Dividends
Pursuant to Law No. 213 of 24 June 1998, from 1 January 1999 it is mandatory for shares of Italian
companies traded on regulated markets to be registered in dematerialised form in the centralised securities
deposit system managed by Monte Titoli.
In accordance with Article 27ter of the Decree of the President of the Republic of Italy No. 600 of 29
September 1973, profits on shares held in dematerialised form are subject, in place of the tax normally
applied, to a substitute income tax regime at the same applicable rates and conditions.
Substitute tax is collected by the intermediaries operating on the centralised securities deposit system with
which the securities are deposited, or by the non-resident custodians of the securities, operating directly or
indirectly (through foreign central custodians) on the above centralised system. If the securities are deposited
with the above non-resident custodians, substitute tax shall be collected by an Italian fiscal agent appointed
281
by the above institutions pursuant to Paragraph 8 of Article 27ter of the Decree of the President of the
Republic of Italy No. 600 of 29 September 1973, who shall be responsible of the fulfilment of its obligations
at the same terms and conditions applicable to resident institutions.
In principle, substitute tax rates are as follows:
•
12.5% on profits distributed to resident individuals from Non-Qualified Holdings, provided that, in
accordance with Article 65 of the Decree of the President of the Republic of Italy No. 917 of 22
December 1986 (Single Taxation Act - “TUIR”) such holdings do not relate to the company’s business;
•
27% on profits distributed to resident persons exempt from Italian Corporate Income Tax (“IRES”);
•
27% on profits distributed to non-resident persons without a permanent establishment in Italy, if not one
of the companies or entities covered by Paragraph 3ter of Article 27 of the Decree of the President of
the Republic of Italy No. 600 of 29 September 1973. Holders of saving shares shall pay substitute tax at
the lower rate of 12.50%. Non-resident persons holding shares other than saving shares are entitled to
reimbursement of up to four-ninths of the amount of tax paid where they provide a fiscal declaration
issued by the competent authorities of the foreign country showing foreign tax paid on such profits. Any
lower rates allowed by international treaties against double taxation shall apply, if appropriate. In order
to benefit from such lower tax rates the agent in charge of collecting substitute tax must obtain: (i) a
declaration from the non-resident person which is the ultimate beneficiary of the income stating that all
requirements for the application of the lower tax rate have been met and containing the identification
details of the beneficiary as well as any information required to calculate the rate applicable pursuant to
the treaty; and (ii) a declaration issued by the competent fiscal authorities of the country of residence of
the ultimate beneficiary (which shall be valid until 31 March of the following year), evidencing that the
applicant is a resident of that country for the purposes of the treaty. It should be noted that the benefits
envisaged by the treaty are applicable in replacement of the above mentioned four-ninths
reimbursement;
•
1.375% on profits distributed to companies or entities subject to corporate tax in one of the member
states of the European Union or of the European Economic Area (EEA) included in the list to be issued
by decree of the Ministry of Economy and Finance under Article 168bis of the TUIR, and resident
therein, provided that the shares are not linked to a permanent establishment in Italy. Until the date of
issue of the above ministerial decree, the EEA countries which relevant for the purpose of the
application of the substitute tax at the above rate of 1.375% are those included in the list issued by the
Ministry of Finance with its Decree dated 4 September 1996, as subsequently amended. This rate
applies to profits earned in years subsequent to the current financial year at 31/12/2007.
Resident individuals who, upon distribution of profits, declare that such profits relate to the company’s
business or to a qualified holding shall not be eligible to benefit from the substitute tax rate. In both cases,
49.72% of dividends paid from profits earned after the financial year following the current financial year at
31 December 2007 shall be taken into account in calculating the total taxable income of the recipient of this
income, pursuant to Paragraph 1, Article 1 of Ministerial Decree of 2 April 2008 published in the Official
Journal No. 90 of 16 April 2008. Dividends paid from profits until the financial year at 31 December 2007
shall be taken into account in calculating the recipient’s income for 40%. In order to ensure smooth transition
from the old regime to the new one, Paragraph 2 of Article 1 of the above decree sets out specific transitional
rules under which dividend distributions approved after the profit distribution for the current financial year at
31 December 2007 shall be considered for tax purposes as received by the recipient from profits earned by
the company up to this financial year (and therefore 40% of such payments shall be also taken into account
in determining the recipient’s taxable income).
Substitute tax shall not be applicable if the recipient of the payment is:
a. a joint-stock company resident in Italy or a permanent establishment in Italy of a non-resident company.
In this event 5% of the distributed profits shall be taken into account in determining the recipient
corporation’s income. All dividend income earned from shares held for trading by companies that
prepare accounts under IAS shall be taken into account in the calculation of their taxable income;
b. a non-commercial resident entity. In this event, 95% of profits shall not be taken into account in the
calculation of taxable income. The 5% taxable share of profits is subject to Italian corporation tax
(IRES);
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Section Two
c. a resident partnership, such as “società in nome collettivo”, “società in accomandita semplice” and
other equal types of partnership, excluding the type of partnership “società semplice”. Pursuant to
Paragraph 1 of Article 1 of Ministerial Decree of 2 April 2008 published in the Official Journal No. 90
of 16 April 2008, the total taxable income of the recipient shall be calculated taking into account 49.72%
of dividend income earned from profits generated after the financial year at 31 December 2007 or 40%
of dividend income earned from profits generated until the financial year at 31 December 2007. In order
to ensure smooth transition from the old regime to the new one, Paragraph 2 of Article 1 of the above
decree sets out specific transitional rules under which dividend distributions approved after the
distribution of profits for the current financial year at 31 December 2007 shall be considered for tax
purposes as received by the recipient from profits generated by the company up to such financial year
(therefore, 40% of such payments shall also be taken into account in the calculation of the recipient’s
taxable income);
d. a company resident for taxation purposes in a member-state of the EU which pursuant to a double
taxation treaty with a non-member country is not deemed resident outside the EU and is incorporated as
set out in the annex to Directive No. 435/90/EEC of the Council of 23 July 1990 and which is subject to
one of the taxes listed in the above Directive in its resident country in accordance with the rules set out
in the above Directive without optional regimes or exemptions (unless subject to geographical and/or
time limitations) and which has been uninterruptedly holding for at least 12 months a direct stake of at
least 10 per cent. To this extent a certificate issued by the competent foreign tax authorities must be
provided as evidence that the above requirements are met, together with a declaration from the
beneficiary evidencing the above minimum holding for the period required by the Directive.
If the recipient company is directly or indirectly controlled by persons resident outside the EU, the above
tax regime can be applied provided that the recipient company can show that it does not hold the interest
exclusively or mainly to benefit from the above tax exemption regime;
e. an entity which has opted for application of the “managed savings regime” in respect of the NonQualified Holding to which the dividend income relates. In this event dividend income earned shall be
taken into account in calculating investment returns and the applicable substitute tax rate shall be
12.50% (for further details see the tax regime on taxation of capital gains from sales of shares);
f.
an Undertaking for Collective Investment in Transferable Securities (UCITS) resident in Italy
(investment fund, SICAV). In this event, distributed profits are to be taken into account in calculating the
investment returns generated each financial year, which are subject to a substitute tax withholding of
12.50% applied directly by the asset management company, unless otherwise indicated by any special
tax regulations;
g. a pension fund under Legislative Decree No. 252 of 5 December 2005. In this event, distributed profits
shall be taken into account in the calculation of the investment income subject to substitute tax of 11%
accrued during each financial year;
h. a real estate fund under Law Decree No. 351 of 25 September 2001. In this event, distribution amounts
are not subject to income tax, to Italian Regional Tax on Productive Activities (IRAP) or to substitute tax
on the net book value of the fund. Income generated by investment in real estate funds is taxed at 20%
upon distribution of income to investors.
Distribution of reserves
The information provided in this paragraph summarises the taxation regime applicable to the distribution by
the Company – other than in the event of capital reduction, termination, exclusion, redemption or liquidation
– of its capital reserves under Paragraph 5 of Article 47 of the TUIR, namely, inter alia, of any reserves or
other funds comprising: share premiums, interest paid by subscribers, non-repayable loans or contributions
by shareholders and the positive balances of any tax-exempt monetary revaluations (hereinafter “Capital
Reserves”). In accordance with Paragraph 1 of Article 47 of the TUIR, irrespective of the decision of the
shareholders’ meeting, profits for the financial year and profit reserves shall be deemed to have been
distributed for fiscal purposes (except for the share of profits set aside against payment of deferred tax
charges). Any amounts received which, in accordance with the above assumption, are deemed profits for
fiscal purposes, are taxed under the regime applicable to distributed dividends depending on whether these
amounts relate to Non-Qualified Holdings and/or holdings which do not relate to the company’s business).
283
Distributions of dividends from Capital Reserves, net of any profits calculated on the basis of the above
assumption, shall not be deemed profits but shall reduce the reportable cost of the holding for tax purposes
by a corresponding amount. Accordingly, when the shares are subsequently sold, the taxable gain shall be
calculated as the difference between the sale price and the reportable cost of the holding for tax purposes,
reduced by an amount equal to the sum of all Capital Reserve distributions (net of profits, if applicable).
According to the interpretation adopted by the Italian Financial Administration, in respect of holdings not
relating to the company’s business, distributions from Capital Reserves exceeding the reportable cost of the
holding for tax purposes are deemed profits and accordingly are taxed as dividends. With regard to NonQualified Holdings and holdings not relating to the company’s business, if the recipients of such
distributions do not declare the taxable value of their holdings, the total amounts or assets received shall be
taxed at 12.50%.
Partnerships such as “Società in nome collettivo”, “Società in accomandita semplice” and other equal types
of partnership, joint-stock companies and other business entities fiscally resident in Italy
Capital Reserves distributions received by partnerships such as “società in nome collettivo, “società in
accomandita semplice” and other equal types of partnerships (excluding the type of partnership “società
semplice”) under Article 5 of the TUIR and by companies and entities under Paragraphs 1 (a) and 1 (b) of
Article 73 of the TUIR (i.e. joint-stock companies and commercial entities) fiscally resident in Italy,
qualified on the basis of the aforementioned assumption as profits for tax purposes, are taxed as dividends.
Amounts received as distributions from Capital Reserves, net of profits qualified as income, as the case may
be, are offset against the reportable cost of the holding for tax purposes. The balance is considered a gain and
accordingly is subject to capital gains tax on the sale of shares.
Italian pension funds and UCITS (investment funds, SICAVs)
Amounts received as distributions from Capital Reserves should be considered in aggregate in calculating
the fund’s assets at the end of the business period as well as the value, as of the same date, of the holdings to
which the distributions relate. The net investment returns accrued over the financial year shall be subject to
substitute tax at the rate of 12.5% (11% for pension funds).
Persons not fiscally resident in Italy without a permanent establishment within Italian territory
Distributions from Capital Reserves to persons to whom the holding may be linked, which are not fiscally
resident in Italy (either individuals or companies), or are without a permanent establishment in Italy, shall be
taxed as holdings not relating to the company’s business the same way as those belonging to individuals
fiscally resident in Italy. Amounts qualifying as profits are taxed as dividends. Recipients of distributions
from Capital Reserves in excess of the reportable cost of the holding for tax purposes are required to declare
the value of the holding for tax purposes in order to avoid the application of the withholding tax on the total
amount of distributions received.
Persons not fiscally resident in Italy with a permanent establishment in the Italian territory
Amounts received by non-resident persons who hold their shares through a permanent establishment in Italy
are taken into account in full when calculating the income of the permanent establishment according to the
tax regime applying to companies and entities fiscally resident in Italy under Paragraphs 1 (a) and 1 (b) of
Article 73 of the TUIR.
If the holding is deemed not to be linked to the permanent establishment in Italy of a non-resident person, the
tax regime applicable to distributions from Capital Reserves shall be the same as that applying to non-fiscal
residents in Italy without a permanent establishment in the Italian territory.
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Section Two
Capital gains on the sale of shares
Individuals fiscally resident in Italy not carrying on business activities
(a) Sale of Non-Qualified Holdings
Capital gains other than profits from business activities realised by resident individuals on the sale of shares
or securities and rights entitling to the acquisition of shares are taxed at the substitute tax rate of 12.50%,
provided that such gains relate to Non-Qualifying Holdings.
In order to ascertain whether the holding sold is a qualified holding or not, the holding percentage is
determined taking into account all sales transactions made over the course of 12 months, both prior to and
after the sale, even where the counterparties differ or fall under different tax years. The twelve-month term
shall apply starting from the date when the holdings, securities and rights held meet the percentage of voting
or attending rights for a Qualified Holding. Therefore, as long as a taxpayer does not hold a Qualified
Holding (even if only for one day), the sale made during the course of twelve months, even if greater overall
that the aforesaid percentages as a result of repeated purchase and sale transactions, cannot be considered
Sales of Qualified Holdings. On the other hand, as long as one of the aforesaid percentages is not exceeded
as possession, the sales made in the next twelve months are considered as Sales of Qualified Holdings (if
they, in turn, are greater than the aforesaid percentages) and this as long as twelve months have not passed
since the time when the taxpayer’s possession of the interest fell below the percentage provided for by the
rule.
If the sale relates to rights or securities entitling to the purchase of shares, the percentage of holding sold is
determined taking into account the voting and participation rights potentially linked to the shares that the
securities and rights sold allow to be purchased.
Substitute tax may be applied either under the standard regime, based on which taxpayers must declare any
realised gains in their tax returns, or under two alternative regimes applicable at the taxpayers’ choice,
namely the so-called “administered savings regime” and “managed savings regime”.
•
Standard regime
Taxpayers must indicate in their tax returns all realised gains made during the financial year. In order to
ascertain the eligibility for substitute tax rate of 12.50%, total losses realised over a financial year are offset
against realised gains for each asset class. If realised losses are higher than realised gains the difference may
be deducted, up to the same amount, from gains realised in subsequent financial years for each asset class up
to the fourth year from the date in which the losses are incurred, provided that such difference is shown in
the tax return for the financial year in which the losses were realised. Substitute tax must be paid within the
times and in accordance with the methods applicable to payment of income tax due based on the tax return.
•
Administered savings regime
Taxpayers may choose to pay substitute tax at the rate of 12.50% on each realised gain, provided that their
holdings are deposited with an authorised intermediary, who may be either a custodian or an asset manager
(for instance, banks and asset management companies or “SIMs”). In order to benefit from this regime,
taxpayers must notify their intermediaries in writing of their intention when they open the deposit or current
account. The owners of existing deposits and current accounts must notify the intermediaries of their
intention to benefit from this tax regime prior to the beginning of the financial year or at any subsequent time
during the year, however in such case the regime shall apply from the beginning of the next financial year.
The chosen regime shall apply for the entire financial year and all subsequent financial years, unless revoked
by the end of any calendar year with effect from the subsequent financial year. Any realised losses can be
offset, up to the same amount, against gains realised on subsequent transactions relating to the same account
during the same financial year and up to the fourth subsequent financial year. Substitute tax is paid directly
by the authorised intermediary, either by applying the relevant withholding on each realised gain or with
monies received from the taxpayers by the fifteenth day of the second month after which the tax was applied.
Taxpayers are not required to declare such gains/losses in their tax returns.
•
Managed savings regime
The above regime applies if the shares are part of an individual portfolio managed by a financial
intermediary authorised to carry out such activity.
285
Under this regime, a substitute tax withholding of 12.50% is applied directly by the asset manager on
investment returns, which are calculated as the difference between the value of the managed assets at the end
of each calendar year and their value at the beginning of the year. In particular, the value of the managed
assets at the end of each calendar year is calculated gross of substitute tax and includes any drawdowns and
is decremented by any contributions made during the year, plus all income accrued over the period subject to
withholding tax and any income taken into account to determine the taxpayers’ total income, as well as any
tax-exempt income accrued during the period, any income from mutual investment fund units or shares
subject to substitute tax, and units in real estate investment funds, net of management charges and
commissions. Any negative returns generated over the year are used to offset positive results generated in the
following four years, up to their full amount covered by each year. Taxpayers are not required to declare this
income in their annual tax return.
(b) Sale of Qualified Holdings
The share of realised gains or losses made by resident individuals from 1 January 2009 on Qualified
Holdings not relating to business activities, to be taken into account in determining their taxable income and
subject to personal income tax at standard progressive rates, shall be 49.72%. Where realised losses exceed
realised gains, the negative difference can be used to offset any taxable gains realised in the following four
financial years, provided that such difference is shown in the tax return relating to the tax period in which the
loss was realised.
Non-resident persons
Pursuant to Article 23 of the TUIR, any gains realised by non-resident persons without a permanent
establishment in Italy on the sale of holdings in Italian resident companies are in theory subject to Italian
taxation. Conversely, gains realised by the above persons on the sale of Non-Qualified Holdings relating to
shares or securities traded in regulated markets are not subject to Italian tax, irrespective of where they are
held, since they are not considered as realised in Italy.
Shareholders fiscally non-resident in Italy which have chosen to be taxed under the administered savings
regime or under the managed savings regime described in the paragraphs above can benefit from tax
exemption upon presentation of a declaration stating that they are not fiscally resident in Italy.
The share of realised gains or losses made by non-resident individuals without a permanent establishment in
Italy on Qualified Holdings to be taken into account in determining their taxable income and subject to
personal income tax at standard rates shall be 49.72%. Where realised losses exceed realised gains the
negative difference can be used to offset any taxable gains realised in the following four financial years,
provided that such difference is shown in the tax return relating to the fiscal period in which the loss was
realised. Notwithstanding the foregoing, a different tax regime may apply under international treaties against
double taxation, where appropriate.
Any holdings held by permanent establishments in Italy on behalf of non-resident persons shall be taken into
account in determining the taxable income of such permanent establishments and shall be taxed as capital
gains realised by companies and entities resident in Italy for fiscal purposes as defined in Paragraph 1 (a) and
(b) of Article 73 of the TUIR.
Resident joint-stock companies and commercial entities
Gains and losses realised by the companies and entities described in Paragraph 1 (a) and (b) of Article 73 of
the TUIR on the sale of shares shall be taken into account in full in determining the company’s or entity’s
business income.
However, 95% of gains realised by the companies and entities described in Paragraph 1 (a) and (b) of Article
73 of the TUIR shall be tax-exempt, provided that all the following requisites are met:
a) the holding sold must have been held continuously from the first day of the twelfth month prior to the
month in which the sale took place, and the first shares considered to be sold shall be those most recently
acquired;
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Section Two
b) the holding sold must be shown as a fixed financial asset in the financial statements for the first financial
year ended during the holding period. Companies which prepare their financial statements under IAS must
show all financial instruments other than securities held for trading as fixed financial assets;
c) the company to which the holding relates must be fiscally resident in Italy or in a country or territory other
than those listed in the ministerial decree issued under Paragraph 4 of Article 167 of the TUIR, which benefit
from the special tax regime, or alternatively the company must have duly shown, by applying to the
Financial Administration, that no incomes were located in the above countries or territories;
d) the business carried out by the company to which the holding relates must be of the type “impresa
commerciale” as described in Article 55 of the TUIR. This requirement is considered as automatically met if
the holding relates to a company whose shares are listed in regulated markets.
Upon realisation of the gains, the requirements under letters (c) and (d) above must be continuously met at
least from the beginning of the third financial year before the one in which the gains are realised.
If at the time of the sale one or more of the above requirements are not met, any gains made shall be taken
into account in full to determine the taxable income for the financial year in which the gains are realised or,
at the taxpayers’ choice, can be spread out in equal shares during the current financial year and the following
four years provided that in the financial statements for the last three years the relevant holding was shown
under fixed financial assets.
Sales of shares or units shown as fixed financial assets or circulating assets in the financial statements must
be considered separately with reference to each category.
Where the requirements under letters (a), (b), (c) and (d) above are met, any losses realised on the sale of
holdings continuously held from the first day of the twelfth month prior to the month in which the sale took
place shall not be deducted from the company’s income, and the first shares considered to be sold shall be
those most recently acquired.
Any losses and negative balances relating to shares which do not qualify for exemption shall not be taken
into account up to the amount of non-taxable dividends or of any prepayments received in the previous
thirty-six months from the date in which such losses or negative balances were realised/incurred. This
provision applies to shares acquired within thirty-six months prior to the date such losses or negative
balances were realised/incurred, provided that all the requirements under letters (c) and (d) above are met.
This provision does not apply to companies which prepare their accounts under IAS.
However, it should be noted that in accordance with Paragraph 3 of Article 5quinquies of Legislative Decree
No. 203 of 30 September 2005, subsequently amended and converted by Law No. 248 of 2 December 2005,
if the amount of the abovementioned losses exceeds the amount of € 50,000 (even if spread over a series of
transactions) taxpayers must notify the Italian Revenue Office of all transaction details. The details to be
provided to the tax authorities as well as the times and methods of disclosure are set out in the Italian
Revenue measure of 29 March 2007 (published in the Official Journal of the Republic of Italy No. 86 of 13
April 2007). Where taxpayers fail to make the above disclosure, or if such disclosure is incomplete or
inaccurate, any losses realised shall not be tax deductible.
For certain types of companies and under certain conditions, all gains realised by the above persons on the
sale of shares must be taken into account to determine the relevant net value of production subject to Italian
Regional Tax on Productive Activities (“IRAP”).
Resident partnerships and sole traders
Gains realised on the sale of shares by resident sole traders and partnerships such as “società in nome
collettivo”, “società in accomandita semplice” and other equal types of partnerships described in Article 5 of
the TUIR, excluding the type of partnership “società semplice”, shall be taken into account in full to
determine the company’s income subject to taxation in Italy under the standard regime.
However, if the requirements for tax exemption of gains realised by resident joint-stock companies and
commercial entities described under letters (a), (b), (c) and (d) above are met, only part of the gains made
shall be taken into account in determining the taxable company income, since 50.28% of such gains shall be
tax-exempt. Conversely, 50.28% of realised losses on the sale of shares which meet the same requirements
shall not be tax-deductible.
287
If one or more of the above requirements are not met, all gains shall be taken into account in determining the
taxable income of the financial year in which such gains were realised or alternatively, at the taxpayers’
choice, such gains can be spread out in equal shares over the current financial year and the following four
years if in the accounts for the last three financial years the relevant holdings were shown as fixed financial
assets.
Pension funds, real estate funds and UCITS (investment funds and SICAVs)
Gains realised by Italian undertakings for collective investment (investment funds and SICAVs), by pension
funds under Legislative Decree No. 252 of 5 December 2005 and by real estate funds under Legislative
Decree No. 351 of 25 September 2001 are taxed as dividends under the rules applicable to the taxation of
company profits.
Resident non-commercial entities
Gains realised by resident non-commercial entities which are not classed as business profits are taxed under
the same regime applicable to gains realised by individuals from holdings held not in relation to the business.
Taxation of stock exchange operations
Decree No. 248 of 31 December 2007 published in the Official Journal No. 302 of 31 December 2007
(Decree No. 248), abolished the tax on stock exchange operations set out in Royal Decree No. 3278 of 30
December 1923, subsequently amended by Article 1 of Legislative Decree No. 435 of 21 November 1997.
Tax on stock exchange operations previously used to apply to contracts of sale or purchase of shares, units or
holdings in any type of company.
Following the abolition of the abovementioned tax on 31 December 2007, the relevant contracts are subject
to a registration fee and a stamp duty as follows.
Pursuant to Article 11 of Section I of the Schedule attached to Decree No. 131 of the President of the Italian
Republic dated 26 April 1986 (Consolidated Registration Tax Law), securities operations effected by public
notarial deed or by certified private agreement between the parties are subject to a fixed registration fee of
€ 168.
Alternatively, in accordance with Article 2 of the Schedule, Part Two, Consolidated Registration Tax Law),
non-certified private agreements concerning securities trading need to be registered only depending on their
use or in case of voluntary registration. For instance, an agreement may need to be registered for use
purposes if it is to be filed at an office of the Public Administration or a court for administrative purposes.
Registration is mandatory also when the content of the agreement is reproduced in a deed which is subject to
registration and was entered at least by and between the same parties (“enunciazione”). In each of the
abovementioned cases a fixed registration fee of € 168 shall apply.
Decree No. 248 of 31 December 2007 modified Article 7 of Table A, Annex B of Decree No. 642 of the
President of the Italian Republic dated 26 October 1972 by exempting from payment of stamp duty all
documentation relating to securities trading.
Inheritance and Donation Tax
Paragraph 1 of Article 13 of Law No. 383 of 18 October 2001 abolished, inter alia, inheritance and donation
tax.
However, inheritance and donation tax was reintroduced by Article 2 of Decree No. 262 of 3 October 2006,
subsequently converted into Law No. 286 of 24 November 2006. Further changes were introduced by Law
No. 296 of 27 December 2006.
Following the abovementioned legislative changes, inheritance and gift transfers concerning the shares:
− in favour of a spouse or a first-degree relative, are taxed at 4% on the inheritance or donation value in
excess of € 1,000,000 for each beneficiary;
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Section Two
− in favour of siblings, are taxed at 6% on the inheritance or donation value in excess of € 100,000 for each
beneficiary;
− in favour of relatives up to the fourth degree, of direct relatives in law and of indirect relatives in law up to
the third degree, are taxed at 6%;
− in favour of any other persons, are taxed at 8%.
In any event, if the beneficiary of the inheritance or gift carries one of the serious disabilities listed in law
No. 104 of 5 February 1992, only the value of inheritance or gift in excess of € 1,500,000 shall be subject to
taxation.
Share prices in the last three financial years and other historical data:
Average price as at December (*)
Ordinary shares
Saving shares
Market capitalisation
(based on the average of official prices in December)
(€)
(€)
(€ million)
December 2008
0.0575
0.0581
480
December 2007
0.2938
0.2880
2,451
December 2006
0.4526
0.3743
3,759
(*) official prices. Source: Thomson Reuters.
289
5
TERMS OF THE OFFERING
5.1
5.1.1
Conditions and statistics concerning the Offering, estimated timetable and methods of
subscription to the Offering
Conditions to which the Offering is subject
The Offering is not subject to any conditions.
5.1.2
Total amount of the Offering
The Shares object of the Offering derive from the Capital Increase resolved by the Extraordinary
Shareholders’ Meeting of the Issuer on 26 January 2009.
On 26 January 2009 the Extraordinary Shareholders’ Meeting of the Issuer approved:
1) a divisible increase in share capital by a maximum of € 200,000,000, through the issue of ordinary Shares
with no nominal value to be offered in option to shareholders holding ordinary and savings shares at a share
Offering Price equal to the theoretical ex right price (TERP)9 of the ordinary SEAT share calculated
according to current methods and on the basis of the arithmetic average of the officially determined unit
prices over at least 3 trading days prior to determination of the Offering Price, and discounted to the extent to
be established by the Board of Directors, with the understanding that, in any event, the Offering Price for the
new Shares may not be higher than € 6.00, taking into account the approval of the resolution on
Consolidation;
2) to confer on the Board of Directors the broadest possible powers: (i) to define the Offering Price (and
consequently any possible discount) on the basis of the market conditions prevailing at the time of the actual
launch of the operation, of the course of exchange of SEAT ordinary shares, as well as on the basis of market
practices for similar operations, with the understanding that, in any event, the Offering Price for the new
Shares shall not be greater than € 6.00, taking into account the adoption of the resolution on share
consolidation; (ii) to determine the maximum number of Shares to be issued; (iii) to determine the timing for
implementation of the resolution on the Capital Increase, taking into account the final deadline of 10 July
2009; and (iv) to prepare and present to the competent authorities any document required for the purposes of
implementing the resolution on the Capital Increase;
3) To establish that, in the event that the abovementioned Capital Increase resolved is not entirely subscribed
by the deadline of 10 July 2009, it shall be deemed complete within the limits of the subscriptions collected
by that date;
4) For such purposes, to modify Article 5 of the Bylaws;
5) To attribute to the Board of Directors and, on behalf of it, to the Chief Executive Officer and the
Chairman, separately, all broadest powers in order to execute the preceding resolution as well as to make
such changes, corrections or additions as may be required by the competent authorities.
On 26 March 2009, the Board of Directors of SEAT therefore resolved to issue 1,885,982,430 newly issued
ordinary Shares having the same characteristics as those outstanding, to be offered in option to the
shareholders at the price of € 0.106 per Share at the ratio of 226 newly issued Shares for every 5 ordinary
and/or savings shares owned by each of them, for an overall amount of approximately € 199,914,000.
9
For the avoidance of doubt it should be noted that the TERP is the theoretical price of a share subsequent to a capital increase. It can be expressed
algebraically as follows:
TERP = [(Actual Pcum X Old Sh) + (Issue P X New Sh)] / (Old Sh + New Sh)
Actual Pcum = average share price prior to the ex-rights date
Old Sh = number of shares prior to the capital increase
Issue P = Offering Price of the new shares prior to the ex-rights date
New Sh = number of newly issued shares
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Section Two
5.1.3
Period of validity of the Offering and description of the subscription methods
The option rights that confer the right of subscription of the Shares (the “Option Rights”) must be exercised,
or they will expire, within the period from 30 March 2009 up to 17 April 2009, both dates inclusive (the
“Offering Period”), by submitting the appropriate application to the authorised intermediaries belonging to
the centralised management system operated by Monte Titoli S.p.A. (the “Authorised Intermediaries”
and/or individually, the “Authorised Intermediary”).
The Option Rights valid for subscription of the Shares are to be tradable on the Stock Exchange from 30
March 2009 up to 8 April 2009, inclusive.
The proposed timetable for the operation serves as a guide and may undergo modifications in the event of
occurrences and circumstances beyond the control of the Company, including particular volatile conditions
on the financial markets that may prejudice the success of the Offering. Any modifications of the Offering
Period shall be reported to the public by means of the appropriate notice to be published under the same
arrangements as for circulation of the Information Prospectus.
However it is understood that the launch of the Offering is to take place by and not beyond one month from
the date of issue of the order by Consob authorising publication of the Information Prospectus.
Acceptance of the Offering is to take place by signing the appropriate forms provided for such purpose by
the Authorised Intermediaries, which shall contain, in such manner as to allow easy reading, at least the
features that identify the Offering and the following information:
•
Notice that the subscriber may receive a copy of the Information Prospectus free of charge;
•
Reference to Section One, Chapter 4, entitled “Risk Factors” contained in the Information
Prospectus.
The Option Rights may be exercised by shareholders of the Issuer who hold ordinary and savings shares in
the Company deposited with an Authorised Intermediary and entered into the computerised securities
system.
The Company shall not be responsible for any delays attributable to the Authorised Intermediaries in
execution of the instructions given by the applicants in relation to acceptance of the Offering. It is the task of
the Authorised Intermediaries themselves to verify the regularity and accuracy of acceptances received by
them.
Within a month subsequent to the termination of the Offering Period, the Option Rights not exercised during
the Offering Period shall form the Stock Exchange Offering.
The following table summarises the timetable envisioned for the Offering:
Event
Commencement of the Offering Period
Commencement of the trading period for the Option Rights
Last trading day for the Option Rights
End of the Offering Period
Announcement of the results of the Offering at the end of the Offering Period
5.1.4
Date
30 March 2009
30 March 2009
8 April 2009
17 April 2009
Promptly after the end of the Offering Period
Possibility of revocation and suspension of the Offering
The Offering shall become irrevocable from the date of filing with the Companies’ Register of Milan of the
relevant notice in accordance with Paragraph 2 of Article 2441, Italian Civil Code.
In the event that the Offering is not implemented by the deadlines provided for in this Information
Prospectus, the public and Consob shall be so informed on or before the trading day preceding the day
provided for the launch of the Offering Period, by means of an announcement pursuant to Articles 114 of the
Consolidated Law and 66 of the Issuer Regulations, as well as the appropriate notice published, by the
calendar day preceding the launch of the Offering Period, in a daily periodical of national circulation and
simultaneously forwarded to Consob.
291
5.1.5
Reduction of acceptances and methods of reimbursement
No possibility is provided for subscribers to reduce their subscriptions, even partially.
5.1.6
Maximum and/or minimum amount of subscriptions
The Offering in Option is meant for the ordinary and savings shareholders of the Issuer, in the ratio of 226
Shares for every 5 ordinary and/or savings shares held.
No minimum or maximum quantities are provided for.
5.1.7
Withdrawal of subscription requests
Subscription requests are irrevocable, except as provided for by law, and they shall not be subjected to any
conditions.
5.1.8
Manner and terms for the payment and delivery of the Shares
Full payment for the Shares must be made at the time of subscription, to the Authorised Intermediary to
which the subscription application has been submitted.
The Issuer does not require any accessory expense or fee from the applicant.
The Shares subscribed by the end of the Offering Period shall be made available to subscribers through the
Authorised Intermediaries by the tenth trading day after the end of the Offering Period.
The Shares subscribed by the end of the Stock Exchange Offering, pursuant to Article 2441, Paragraph 3,
Italian Civil Code, shall be made available to the beneficiaries through the Authorised Intermediaries by the
tenth trading day subsequent to the end of the Stock Exchange Offering.
5.1.9
Publication of the results of the Offering
Because the Offering is a capital increase in option, the entity required to inform the public and Consob as to
the results of the Offering is the Issuer.
The results, at the end of the Offering Period, shall be promptly announced by means of a special notice.
Within a month following the expiration of the Offering Period, in accordance with Paragraph 3 of Article
2441, Italian Civil Code, the Company shall offer any Option Rights – which shall be valid for the
subscription of the Shares – not exercised by the end of the Offering Period on the Stock Exchange. By one
day prior to the launch of the Offering on the Stock Exchange, a notice shall be published in a daily
periodical of national circulation indicating the number of Option Rights not exercised to be offered on the
Stock Exchange in accordance with Paragraph 3 of Article 2441, Italian Civil Code and the dates for the
sessions in which the Stock Exchange Offering is to be made.
Communication of the final results of the Offering shall be effected within 5 days from the termination of the
Offering on the Stock Exchange by means of a special notice from the Company.
5.1.10 Preemptive right to the unsubscribed Shares
The Bylaws of the Issuer do not provide for preemptive rights to the Shares.
With respect to the trading of the Option Rights for subscription of the Shares and the treatment of Option
Rights that are not exercised, see Paragraphs 5.1.3 and 5.1.9 of Section Two, above.
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Section Two
5.2
5.2.1
Distribution and allotment plan
Recipients and markets for the Offering
The Shares covered by the Offering are to be offered in option to the ordinary and savings shareholders of
the Issuer.
The Offering is promoted exclusively in Italy on the basis of the Information Prospectus.
The Information Prospectus does not constitute an offering of financial instruments in the United States of
America, Canada, Japan and Australia or in any other foreign country where the Offering would not be
allowed in the absence of specific authorisation, or exemption from such authorisation, in compliance with
the applicable provisions of law (jointly with the United States of America, Canada, Japan and Australia, the
“Other Countries”).
The Offering is not directly or indirectly intended for, and cannot be directly or indirectly accepted in, any of
the Other Countries, through the services of any regulated market of the Other Countries, nor through the
postal services or by any other means of national or international trading or communications pertaining to the
Other Countries (including, without limitation, the postal network, fax, telex, electronic mail, telephone and
internet and/or any other electronic means or media).
Similarly, acceptances shall not be recognised if made by the use of such services, media or equipment.
Neither the Information Prospectus nor any other document pertaining to the Offering shall be sent to nor
may be sent or otherwise issued, made available, distributed or mailed to or from the Other Countries; this
restriction also applies to the holders of SEAT shares with addresses in any of the Other Countries, or to
persons or entities that SEAT or its representatives know to be fiduciaries, proxies or depositories in
possession of SEAT shares on behalf of such holders.
Anyone receiving such documents (including, without limitation, custodians, proxies and fiduciaries) is not
to distribute, mail or send any of them to or from the Other Countries, whether through the postal services or
by means of any other national or international trading or communications pertaining to the Other Countries
(including, without limitation, the postal network, fax, telex, electronic mail, telephone and internet and/or
any other electronic means or media).
The distribution, mailing or sending of such documents to or from the Other Countries, whether by means of
the services of any regulated market of the Other Countries, through the postal services or by any other
means of national or international trading or communications pertaining to the Other Countries (including,
without limitation, the postal network, fax, telex, electronic mail, telephone and internet and/or any other
electronic means or media) shall not mean acceptance of the Offering will be accepted by virtue of such
documents.
The Shares and the respective Option Rights have not been and will not be registered within the meaning of
the United States Securities Act of 1933, as amended, nor pursuant to the securities laws in force in the Other
Countries and therefore cannot be offered or, in any event, sent directly or indirectly to the Other Countries.
5.2.2
Commitments to subscribe the Shares of the Issuer
Except as described in Section Two, Paragraph 5.4.3 of the Information Prospectus below, as of the Date of
the Information Prospectus, to the extent of the knowledge of the Issuer, no shareholders or member of the
Board of Directors and of the Board of Statutory Auditors have expressed any decision with respect to
subscription of the Shares pertaining to them by option.
5.2.3
Information to be provided prior to allotment
In view of the nature of the Offering in Option, no communications to the subscribers prior to allotment of
the Shares are envisioned.
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5.2.4
Procedure for communication to the subscribers as to the allotments
The announcement that allotment of the Shares has taken place shall be made to the respective customers by
the Authorised Intermediaries.
5.2.5
“Over-Allotment” and “Greenshoe”
Not applicable.
5.3
Establishing the price
5.3.1
The Offering Price for the Shares and the expenses to be charged to the subscribers
The Extraordinary Shareholders’ Meeting of the Issuer held on 26 January 2009 resolved, among other
things, to:
1) increase the share capital, in several tranches, by a maximum of € 200,000,000, by means of the issue of
ordinary Shares devoid of nominal value, to be offered as an option to holders of ordinary and savings
shares, at a unit Offering Price equal to the theoretical ex right price (TERP)10 of the ordinary SEAT share,
calculated according to current methods and on the basis of the arithmetic average of the official unit prices
posted during a period of at least 3 market days prior to the determination of the Offering Price and
discounted to the extent that will be stipulated by the Board of Directors, it being understood in any case that
the Offering Price for the new Shares may not in any case exceed € 6.00, taking into account the adoption of
the Consolidation resolution;
2) grant the Board of Directors all the broadest powers to: (i) determine the Offering Price (and consequently
any discount), on the basis of prevailing market conditions at the time of the actual launching of the
transaction, the market quotes for the ordinary SEAT share, as well as market practices for similar
transactions, it being understood in any case that the Offering Price for the new Shares may not in any case
exceed € 6.00, taking into account the adoption of the Consolidation resolution; (ii) determine the maximum
number of newly issued Shares; (iii) determine the timing for the execution of the Capital Increase
resolution, observing the final deadline of 10 July 2009; and (iv) prepare and submit to the competent
authorities any document required for purposes of the execution of the Capital Increase resolution.
In execution of the resolution of the Extraordinary Shareholders’ Meeting held on 26 January 2009, the
Board of Directors resolved at a meeting held on 26 March 2009 to offer the Shares at the price of € 0.106
each, determined on the basis of prevailing market conditions and the arithmetic average of the official unit
prices posted during a period of 3 market days prior to the date of the above-mentioned Board of Directors’
meeting and discounted by 46%.
No accessory expense or fee to be charged to the subscriber is provided for by the Issuer.
5.3.2
Procedure for disclosure of the Offering Price
The Offering Price, equal to € 0.106 per Share, was disclosed to the market by means of a press release
disseminated at the end of the Board of Directors’ meeting held on 26 March 2009 and stated in the
10
The TERP is the theoretical price of a share after the capital increase. From an algebraic standpoint, it may be expressed as follows:
TERP = [(actual cumP X old Shares) + (issue P X new Shares)] / (old Shares + new Shares)
actual cumP = average share price prior to the detachment of option rights
old Shares = number of shares prior to the increase
issue P = Offering Price for the new shares prior to the detachment of option rights
new Shares = number of newly issued shares
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Section Two
5.3.3
Restrictions on the Option Rights
The Shares are offered in option to the shareholders in accordance with Paragraph 1 of Article 2441, Italian
Civil Code and therefore no restrictions on the Option Rights relating to those entitled are provided for.
5.3.4
Difference between the Offering Price for the Shares and the price of the Shares paid during the
course of the previous year or to be paid by members of the Board of Directors, by members of the
Board of Statutory Auditors, by the General Manager for Italy or related persons or entities
With the exception of acquisitions made and announced to the market in accordance with the applicable rules
(for which please see the Issuer’s web site www.seat.it), to the knowledge of the Issuer, the members of the
administrative, management and supervisory bodies, as well as the General Manager for Italy or persons or
entities closely connected with them have not acquired shares of the Company at a price different from the
Offering Price.
5.4
Placement and subscription
5.4.1
Indication of those responsible for the placement of the Offering and the placement agents
Because this is an offering in option in accordance with Paragraph 1 of Article 2441, Italian Civil Code,
there is no person or entity in charge of placement.
5.4.2
Name and address of the bodies placed in charge of the financial service and of the custodians in
each country
Receipt of the acceptances of the Offering shall take place at the Authorised Intermediaries.
5.4.3
Subscription and underwriting commitments
The Reference Shareholders who, by virtue of a shareholders’ agreement dated 30 July 2003 (and most
recently amended on 13 September 2007), in the aggregate hold, on the date of the Information Prospectus, a
percentage of 49.6% of the share capital of the Company, including both ordinary and savings shares, agreed
on 23 December 2008 to proceed, at the time of the Capital Increase, with a reorganisation of the shareholders
of the Issuer, providing, among other things, for the partial withdrawal of the BC Investors from the
shareholders of the Company, with the assignment (indirectly, or through the disposal of shares of PG Silver
A S.A. and PG Silver B S.A. and of their respective subsidiaries PG Sub Silver A S.A. and PG Sub Silver B
S.A.) of the majority of the SEAT ordinary shares currently held by the BC Investors to Alfieri and CVC
Nominee (the “Agreement” – for further details, please see Section One, Chapter 18, Paragraph 18.1).
Pursuant to the Agreement, the Reference Shareholders (other than BC Investors) mutually agreed, among
other things, to subscribe the Capital Increase in the proportion to which they are entitled (as well as, insofar
as Alfieri and CVC Nominee are concerned, also in relation to the proportion to which BC Investors was
previously entitled). The Reference Shareholders agreed to pay in, for the subscription of the Capital
Increase, an overall amount of approximately € 99.2 million.
The subscription commitment of the Reference Shareholders (other than BC Investors) was subject to the
following conditions precedent, which, to the Company’s knowledge, have been fully satisfied on the Date
of the Information Prospectus:
•
(a) the acceptance by RBS of the Waiver Request sent by the Company to RBS on 1 December
2008, pursuant to which the Company requested the necessary consent, among other things: (i) to
implement the Capital Increase, as well as (ii) to modify, also in light of the Capital Increase, the
current financial covenants provided for by the RBS Loan Agreement, and (b) the signing by RBS
and the Company of the Amendment Agreement and the satisfaction of all the conditions precedent
therein;
•
the obtainment of a formal written declaration from Consob (received on 16 March 2009, protocol
No. 9023135) attesting to the non-existence, as a result of the overall internal reorganisation within
295
the shareholders’ agreement and the Capital Increase, of circumstances that would imply a Public
Tender Offer (PTO) obligation on the Issuer’s capital;
•
the approval of the reorganisation by the antitrust authorities. In this regard, it should be noted that
the reorganisation was notified to the German and Austrian Antitrust Authorities (on 9 February
2009 and 10 February 2009, respectively) and approved respectively on 25 February 2009 and 28
February 2009 (approval issued by the Austrian Antitrust Authorities on 27 February 2009 with
effect from 28 February 2009);
•
the approval by SEAT of the Capital Increase at an Offering Price of no more than € 0.03 per share,
or of no more than € 6.00 following the Consolidation (for more information on the Consolidation,
see Section One, Chapter 21, Paragraph 21.1.1);
•
the non-occurrence, as of the end of the third day prior to Consob authorising the publication of the
Information Prospectus, of events that might substantially prejudice the economic and financial
conditions of SEAT, and make it apparent that SEAT is unable to meet predetermined solvency
ratios, for a 12-month period.
The Shareholders’ Agreement was also signed by the Issuer solely for purposes of Art. 1411, Italian Civil
Code.
Mediobanca, in its capacity as Sole Global Coordinator and Sole Bookrunner for the Offering, will enter into
an underwriting agreement (the “Underwriting Agreement”) with the Issuer by the day prior to the
commencement of the Offering, in line with the best market practices for similar transactions, which is
intended to guarantee the subscription of a number of newly issued Shares corresponding to any Option
Rights that remain unexercised after the Stock Exchange Offering pursuant to Art. 2441, Paragraph 3, Italian
Civil Code, for a maximum amount of € 100,800,000, equal to the residual portion of the Capital Increase
other than the portion forming the subscription commitment by the Reference Shareholders, notwithstanding
the fact that, in the event that the Shares to be subscribed as a result of the implementation of the guarantee
(the assumption) should represent, on the basis of a hypothetical calculation (on a figurative basis), a
percentage of the ordinary share capital of SEAT after the Capital Increase exceeding 30%, the underwriting
commitment of Mediobanca shall be reduced by an amount, equal to a maximum equivalent of € 2,000,000,
such that the percentage of the ordinary share capital represented by the shares held by the Reference
Shareholders (other than BC Investors) after the Capital Increase shall thereby exceed 50.01% (please see
Section One, Chapter 18, Paragraph 18.2 and 18.4 and Section Two, Chapter 3, Paragraph 3.3). Therefore, in
the event that the threshold of 30% of the ordinary share capital of SEAT should be exceeded by
Mediobanca as a result of the assumption, it will not entail a PTO obligation pursuant to Art. 49, paragraph
one, letter (a) of the Issuer Regulations, which provides that the exceeding of that threshold shall not entail
the tender obligation provided for in Art. 106 TUF if “the majority of the voting rights exercisable at an
ordinary shareholders’ meeting are held by another shareholder or by other shareholders jointly”.
The Underwriting Agreement shall provide that Mediobanca will not be required to fulfil its underwriting
obligations or that the underwriting obligations will be revoked upon the occurrence, among other things, of
Prospectus due to events that – in the reasonable opinion of Mediobanca – may have a material adverse
and/or the Group; (ii) the material non-fulfilment by the Company of its commitments pursuant to the
contained in the Information Prospectus no longer true or correct in a material aspect, and to give appropriate
advance notice to Mediobanca of any statement, disclosure or announcement that the Company intends to
make); (iii) the representations and warranties given by SEAT in the Underwriting Agreement are found to
be materially untrue, incomplete or incorrect; (iv) the non-fulfilment by the Reference Shareholders (other
than BC Investors) of the commitment to subscribe their part of the Capital Increase; and (v) events of an
extraordinary nature such as to have a negative impact on the Business Plan.
If the Reference Shareholders (except for the BC Investors) fail to subscribe their part of the Capital
Increase, some provisions of the Amendment Agreement to the RBS Loan Agreement (in particular, the socalled financial covenant reset) would not go into effect (for further details, please see Section One, Chapter
296
Section Two
4, Paragraph 4.1.1.4 and Section One, Chapter 22, Paragraph 22.3.1) and Mediobanca may not fulfil or may
revoke its underwriting obligations.
5.4.4
Date of entering into the subscription and underwriting agreements
The underwriting commitments referred in Paragraph 5.4.3, above, are to be undertaken by Mediobanca on
or before the day before the launch of the Offering.
297
6
6.1
LISTING FOR TRADING AND METHODS OF TRADING
Request for listing for trading
The ordinary shares of the Company are listed for official trading on the Mercato Telematico Azionario,
Blue Chip segment.
The Capital Increase provides for the issue of a maximum of 1,885,982,430 Shares, representing a
percentage greater than 10% of the number of shares of the Company of the same class already listed for
trading. Therefore, pursuant to Paragraph 1 of Article 57 of the Issuer Regulations, the Company is not
exempt from the obligation to publish a prospectus for listing, and therefore the Information Prospectus also
constitutes a listing prospectus.
The Shares are to be officially listed for trading on the Mercato Telematico Azionario, Blue Chip segment,
the same as the shares presently outstanding.
6.2
Regulated markets on which financial instruments of the same class as those of the Offering are
listed
On the Date of the Information Prospectus, the shares of the Issuer are exclusively traded on the Mercato
Telematico Azionario.
6.3
Other operations involving financial instruments for which listing on a regulated market is
requested
No other transactions for the private placement or subscription of financial instruments of the same class as
those covered by the Offering are expected to occur in the proximity of the Offering.
6.4
Intermediaries on the secondary market
Not applicable to this Offering.
6.5
Stabilisation
It is not provided that any stabilisation activities will be carried out by the Issuer or by entities instructed by it.
298
Section Two
7
HOLDERS OF FINANCIAL INSTRUMENTS WHICH ARE OFFERED FOR SALE
7.1
Name and address of the entity or individual offering the financial instruments for sale, nature
of any offices or roles held or other significant relations that those who decide to sell have had in
the last three years with the Issuer or with any other predecessor or related company
The Shares are offered directly by the Issuer and therefore, for any information relating to the Company and
the Group, please see the data and information already provided in the Summary Note and in Section One of
7.2
Number and class of financial instruments offered by each of the holders of financial
instruments carrying out a sale
Not applicable.
7.3
Lock-up agreements
On 19 January 2009, AI Sub Silver S.A., Sterling SubHoldings S.A., Subcart S.A., Subtarc S.A. and PG Sub
Silver S.A. (subsequently, following a de-merger, PG Sub Silver A S.A. and PG Sub Silver B S.A.), in their
capacities as shareholders of the Issuer and controlled by the Reference Shareholders (the “Shareholders”),
signed a lock-up agreement (the “Lock-Up Agreement”) with Mediobanca under which they undertook,
each with respect to its own shareholding:
•
not to enter into, whether directly or indirectly, nor to publicly announce the intention to enter into
sales transactions, preliminary sales agreements, letters of intent or other equivalent dealings or acts
in which they commit themselves to carry out sales or, in any event, acts of disposal or transactions
that have the purpose or effect of the attribution or transfer to third parties, by any means and in any
form, of the Company shares (or other financial instruments, including equity instruments, that
attribute rights inherent to or similar to such financial instruments or shares); as well
•
not to approve and/or carry out, whether directly or indirectly, transactions on derivative financial
instruments that have the same effects, even if only economic effects, as the transactions referred to
above, without Mediobanca’s prior written consent, which shall not be unreasonably refused.
This commitment has been undertaken by the Shareholders for the period from the date of signing the LockUp Agreement and 90 days subsequent to the date of payment (the latter understood to mean the day when
Mediobanca proceeds to make available to the Company the equivalent value of the shares that have been
subscribed in performance of the underwriting commitment).
The Lock-Up Agreement shall not apply to sales transactions or acts of disposal, including, without
limitation, mergers, consolidations, de-mergers, contributions, etc, whether or not for valuable consideration,
between the Shareholders or companies in any manner attributable to the Shareholders, including the
“newco” that is to be directly and/or indirectly held by one of the funds that are, as of the date of the signing
of the Lock-Up Agreement, the final shareholders of one of the Shareholders (the “Permitted
Transactions”), all of this being governed within the scope of the framework agreement signed by them on
23 December 2008. On the other hand, the Lock-Up Agreement is fully applicable to all of the newly issued
Shares to be subscribed by each of the Shareholders within the context of the Capital Increase.
The Shareholders also undertake to procure that anyone who obtains the status of shareholder of SEAT as a
result of the performance of the Permitted Transactions will assume the same commitments as those of the
Lock-Up Agreement.
Besides the other commitments assumed by the Shareholders, the Issuer undertakes, upon assumption of the
underwriting commitment by Mediobanca, not to carry out further issues of shares or of other financial
instruments convertible into shares or that confer the right to acquire and/or subscribe shares of the Company
without Mediobanca prior written consent, whic

SEAT eng12 - Borsa Italiana

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