Statements and Notes to the Financial Statements
USE OF ESTIMATES
The preparation of financial statements and the related explanatory notes in accordance with IAS/IFRS requires Management to make estimates and assumptions that have an impact on the value of assets and liabilities and on disclosures on contingent assets and liabilities at the reporting date. The actual results may differ due to such estimates. The estimates and assumptions are revised periodically and the impact of each change occurred is reflected in the Income Statement of the year in which the estimate revisions occur if the effects are limited to that period, or also in the following years if the revision has implications both for the current and the future years. It is to be noted that in relation to the recent financial and economic crisis the Company has elaborated new assumptions with respect to its future economic and financial developments characterized by a high level of uncertainty; therefore, it is reasonable that, on the basis of the information currently available, next year’s financial results may differ from the Company’s estimates and also material adjustments may be carried out to the book values of the interested items.
The balance sheet items principally exposed to such a level of uncertainty are the following:
• bad debt provisions;
• Impairment of financial assets;
• Depreciation and amortization ;
• Asset write-downs;
• Employees’ benefits;
• Income taxes;
• Provisions for risks and charges;
189
48.
Income Statement Items
48.1. Revenue
Revenue increased to Euro 90,215 thousand in 2008, up approximately Euro 53,714 thousand compared to the previous year. The item can be broken down as follows:
(in Euro ‘000s) 2008 2007
Sales and service revenue:
Service revenue 17,515 15,001
Dividends 73,320 21,500
Total 90,835 36,501
Sales and service revenue included the dividend distributed by the subsidiary Tecnimont S.p.A. during the first half of 2008 amounting to Euro 73,320 thousand (Euro 21,500 thousand in 2007) and revenue for Group coordination activities amounting to Euro 17,515 thousand paid by the subsidiary Tecnimont S.p.A.
The contract for “Group coordination” foresees that the Parent Company in its role as provider of coordination and contro,l provides support and coordination services (legal, administration and finance) in favor of the companies belonging to the Group.
48.2. Other operating income
“Other operating Income” generated during the year 2008 amounted to Euro 3,658 thousand increasing by Euro 3,496 thousand compared to the previous year; this revenue is not directly linked to the Company’s operations, but relates to activities ancillary to the core business. In particular, the item was mainly composed of re-allocated costs (rents, licenses and insurance) incurred by Maire Tecnimont S.p.A. on behalf of the Group and from insurance reimbursements.
48.3. Raw materials and consumables used
The cost of raw materials and consumables in 2008 totaled Euro 165 thousand, an increase of Euro 66 thousand compared to the previous year.
This item can be broken down as follows:
(in Euro ‘000s) 2008 2007 Raw materials 0 (9) Consumables (74) (27) Fuel (91) (63) Total (165) (99)
The increases in consumables and fuel resulted from the increase in operations in the year and were essentially attributable to the procurement of consumables (stationery) and fuel for the aircraft.
Maire Tecnimont S.p.A.
190
48.4. Cost of services
Cost of services in 2008 amounted to Euro 8,611 thousand, an increase of Euro 1,142 thousand compared to the previous year.
This item can be broken down as follows:
(in Euro ‘000s) 2008 2007
Utilities (95) (144)
Transportation (405) (550)
Advertising, publicity and representation costs (837) (3,119)
Consulting and other services (2,744) (2,026)
Costs of guarantees and other banking services (40) (474)
Insurance (1,202) (160)
Directors and Statutory Auditors’ remuneration (1,624) (716)
Other (1,664) (280)
Total (8,611) (7,469)
The general increase of the cost of services was attributable to the expansion of operations. The item Advertising, publicity and representation costs in 2008 decreased substantially compared to the previous year, as one-off costs in 2007 had been incurred for the advertising campaign and the roadshow activities linked to the listing process.
The item Consulting and other services mainly included costs for professional fees, services and consultancies linked to a range of projects implemented during the year (compliance with Law No. 262, Industrial Plan update project, consultancy on IAS/IFRS).
The item Directors and Statutory Auditors’ emoluments was composed of the remunerations paid to the members of the Board of Directors and the Statutory Board of Auditors during the financial year; the Euro 907 thousand increase compared to the previous year was due to adjustments in the emoluments.
It is important to notice that the item “Other” mainly included the non-capitalized costs from information technology, software maintenance expenses and services in favor of personnel.
48.5. Personnel costs
Personnel costs totaled Euro 8,357 thousand in 2008, an Euro 4,079 thousand decrease compared to the previous year.
191
(in Euro ‘000s) 2008 2007
Wages and salaries (5,432) (10,210)
Social security costs (1,561) (1,037)
Severance indemnities (319) (229)
Other expense (1,045) (960)
Total (8,357) (12,436)
The decrease in wages and salaries was essentially attributable to the fact that bonuses for the listing had been distributed during the previous year.
The item Other expense included esclusively the costs and the M.B.O. contributions provisioned during the year 2008.
In detail, the number of personnel employed in the Company is provided below:
Category 2007 Hired Terminated Promotions 2008
Executives 12 4 (2) 0 14
Management 18 7 (4) 2 23
Office 10 5 (3) (2) 10
Workers 0 0 0 0 0
TOTALE 40 16 (9) 0 47
The average number of employees increased during the year from 35 to 45; a detail break- down of personnel by category is provided below:
Category Average
Executives 12
Management 23
Office 10
Total 45
48.6. Other operating costs
Other operating costs totaled Euro 3,833 thousand in 2008, a Euro 2,309 thousand increase compared to the previous year.
Maire Tecnimont S.p.A. 192 (in Euro ‘000s) 2008 2007 Leases (307) (191) Rentals (1,214) (802) Other expense (2,312) (531) Total (3,833) (1,524)
The item Other expense, amounting to Euro 2,312 thousand, mainly referred to the portion of non-deductable VAT of Euro 1,107 thousand, membership fees amounting to Euro 277 thousand, other non-deductable expense for Euro 268 thousand and travel costs for Euro 247 thousand.
48.7. Depreciation, amortization and impairment losses
Depreciation, amortization and impairment losses in 2008 totaled Euro 1,176 thousand. The item consists of the following:
(in Euro ‘000s) 2008 2007
Amortization of intangible assets , depreciation and impairment losses:
• Depreciation of tangible assets (427) (386)
• Amortization of intangible assets (749) (82)
Total (1,176) (468)
The amortization of intangible assets was mainly referred to the implementation of the new information system SIMT(SAP), the new accounting consolidation software CPM Tagetik and related licenses.
Depreciation was essentially composed of the annual amount of the aircraft’s depreciation, which decreased during the year from 15% to 8.38% following the revision of the asset’s useful life in compliance with the accounting principles in in light of the lower actual utilization with respect to the previous management’s estimate. The impact of the depreciation rate cut generated a lower depreciation for the year of Euro 308 thousand.
48.8. Bad debt provisions and provisions for risks and charges
The item in detail is as follows:
(in Euro ‘000s) 2008 2007
Bad debt provisions 0 0
Provisions for risks and charges 0 (481)
Total 0 (481)
The amount of provisions made during the previous year represented the best estimate of potential liabilities for litigation.
193
48.9. Financial income
(in Euro ‘000s) 2008 2007
Financial income from subsidiaries 4,107 4,278
Financial income from controlling companies 0 12
Interest income 1,386 569
Total 5,493 4,859
The amount of financial income from subsidiaries of Euro 4,107 thousand referred to the income accrued by Maire Tecnimont S.p.A. from the option granted to Tecnimont S.p.A. for the purchase of 32.4% of the investment in Maire Engineering S.p.A.
Euro 1,386 thousand of interest income was earned on savings accounts.
48.10.Financial charges
(in Euro ‘000s) 2008 2007
Financial charges to subsidiaries (1,274) (3,550)
Financial charges (2) (192)
Other charges (15) 0
Foreign currencies losses (1) (1)
Total (1,292) (3,743)
Financial charges payable to subsidiaries amounted to Euro 1,274 thousand and referred to financial charges on the original loan of Euro 74,400 thousand issued by Tecnimont S.p.A. in favor of Maire Tecnimont S.p.A. and paid off during the first half of 2008.
Financial charges totaled Euro 2 thousand and referred to financial charges on bank overdrafts while the other financial charges amounting to Euro 15 thousand relate to the interest cost on Severance indemnity liabilities.
48.11.Taxes
(in Euro ‘000s) 2008 2007
Current income taxes (2,565) (294)
Previous’ years taxes 290 0
Net deferred taxes (546) 439
Total (2,821) 145
The item Income tax was composed of Ires and Irap (corporation income taxes) determined for the year (Euro 2,565 thousand), the lower amount of taxes arising from the previous’ years (Euro 290 thousand) and net tax assets (Euro 546 thousand).
The break down of differences between the theoretical and actual tax charges for the period under examination is the following:
Maire Tecnimont S.p.A.
194
(in Euro ‘000s) 2008
Italy
Theoretical income tax rate (*) 27.5%
Net Income (loss) before tax 76,552
Theoretical income tax charge 21,052
Temporary differences deductable in future years 1,227
Temporary differences taxable in future years 2,558
Reversal of prior years’ temporary differences (3,002) Differences that will not reverse in future years (69,654)
Taxable income 7,681
Current income taxes 2,112
Actual tax rate 2.8%
(*) for the purpose of a better understanding of the reconciliation between the tax charge recognized in the financial statements and the theoretical tax charge, Irap is not considered as this Income Tax has a different taxable income from the income before taxes and it would generate discrepancies from one fiscal year to the other. Therefore, theoretical income taxes have been determined by applying the tax rate existing in Italy (Ires amounting to 27.% in 2008) to the income before taxes.
48.12.Earnings per share
The basic earnings per share hase been calculated by dividing the net profit attributable to Maire Tecnimont for the year 2008 by the weighted average number of shares outstanding of Maire Tecnimont S.p.A. in the financial year in question.
At the date of this financial report, subsequent to the purchase of 4,836,500 own shares, 317,663,500 shares were outstanding. This data has been used as denominator for the determination of the basic earnings per share at 31 December 2008.
2008 2007
Number of shares: 317,663,500 322,500,000
Net Income (loss) attributable to Maire Tecnimont S.p.A. 73,731,000 15,447,000 Data per share (Euro):
Net Income (loss) attributable to Maire Tecnimont per share – basic in Euro
0.232 0.047
195
49.
Balance Sheet Items
49.1. Property, plant and equipment
(in Euro ‘000s) 2007 Changes in
the year
2008
Land and buildings 0 0 0
Plant and equipment 2 0 2
Industrial and commercial equipment 16 (8) 8
Other assets 4,662 (301) 4,361
Assets under construction and advance payments 0 15 15
Total 4,680 (294) 4,386
The following table outlines the changes in historical cost, depreciation funds and net book value:
Maire Tecnimont S.p.A.
196
(in Euro ‘000s) Land
and Property Plant and equipment Industrial and commercial equipment Assets under construction and payments on account Other assets Total Historical cost Accumulated depreciation
Net book value at January 1, 2006 0 0 0 0 0 0
Increases
Restatements/cost adjustments Asset disposals
Depreciation and asset write-downs
Net book value at 31 December 2006
0 0 0 0 0 0
Increases 0 2 20 750 5,043 5,815
Restatements/cost adjustments (750) (750)
Asset disposals
Depreciation and asset write-downs (4) (381) (385)
Net book value at 31 December 2007
0 2 16 0 4,662 4,680
Increases 0 0 0 15 118 133
Restatements/cost adjustments Asset disposals
Depreciation and asset write-downs (8) 0 (419) (427)
Net book value at 31 December 2008
0 2 8 15 4,361 4,386
Historical cost 0 2 20 15 5,161 5,198
Accumulated depreciation 0 0 (12) 0 (800) (812)
The main increases during the year related to the purchase of an automotive vehicle from the subsidiary Tecnimont S.p.A. for Euro 66 thousand, the purchase of office and electronic machines for Euro 46 thousand and to a deposit for the purchase of furniture and furnishings of Euro 15 thousand.
49.2. Other intangible assets
(in Euro ‘000s) 2007 Changes in
the year
2008
Concessions, licenses, trademarks and similar rights 5 379 384
Other 320 2,212 2,532
Assets under construction and advance payments 1,634 (1,453) 181
Total 1,959 1,138 3,097
The table below summarized the changes of historical costs, amortization funds and net book value:
197
(in Euro ‘000s) Patent
rights Concessions, licenses, trademarks and similar rights Other Assets under construction and advance payments Total Historical cost Accumulated depreciation
Net book value at January 1, 2006 0 0 0 0 0
Increases 0
Restatements/cost adjustments Asset disposals
Depreciation and asset write-downs 0
Net book value at 31 December 2006
0 0 0 0 0
Increases 0 6 400 1,634 2,040
Restatements/cost adjustments Asset disposals
Depreciation and asset write-downs (1) (80) 0 (81)
Net book value at 31 December 2007
0 5 320 1,634 1,959
Increases 0 575 1,131 181 1,887
Restatements/cost adjustments (80) 1,714 (1,634) 0
Asset disposals
Depreciation and asset write-downs 0 (116) (633) 0 (749) Of which
Net book value at 31 December 2008
0 384 2,532 181 3,097
Historical cost 0 581 3,165 181 3,927
Accumulated depreciation 0 (197) (633) 0 (830)
The amount of other intangible assets was Euro 3,097 thousand at 31 December 2008, a Euro 1,138 thousand increase compared to the previous year. Such an increase arose from the capitalization of the costs related to the new information system SIMT/SAP for Euro 1,131 thousand and new licenses for Euro 575 thousand.
The reduction in intangible assets in progress was due to the recognition of the costs to implement SAP, which was operative from January 2008 (Euro 1,634 thousand). The Euro 181thousand increase related to costs incurred for Information Technology projects that as of 31 December 2008 were still not yet operative (SAP Roll-out at the subsidiary Sofregaz and “Zucchetti” software (personnel time and attendance software).
Maire Tecnimont S.p.A.
198
49.3. Investments in subsidiaries
(in Euro ‘000s) 2007 Changes in
the year
2008
Subsidiaries:
Investment in Tecnimont 181,541 34,688 216,229
Investment in Met Development 5,940 7,300 13,240
Total 187,481 41,988 229,469
The last column of the following table illustrates the differences between book value (at cost) and the corresponding Shareholders’ Equity:
Company Corporate Headquarters Share Capital Curr.cy Shareholders’ Equity book value (*) % of share Shareholders’ Equity book value pro/quota (A) Profit/(loss) (*) Carrying value in the books (B) Delta (A-B) Tecnimont S.p.A Via Monte Grappa n°3 Milano (IT) 52,000 EUR 153,035 100% 153,035 75,626 216,229 (63,194) Met Development S.p.A Via di Vannina n°88/94 Roma (IT) 6,000 EUR 13,902 99% 13,763 595 13,240 523
(*) as from the Financial Statements at 31 December 2008 approved by the respective Boards of Directors In detail, the item had the following changes:
• a Euro 34,688 thousand increase in the investment of Tecnimont S.p.A. subsequent to the merger by incorporation of Maire Engineering S.p.A into Tecnimont S.p.a; the increase corresponded to the value of the stake that Maire Tecnimont S.p.A. held in Maire Engineering S.p.A.
• a Euro 7,300 thousand increase in the investment of Met Development S.p.A. arising from Maire Tecnimont S.p.A.’s decision to forsake a financial receivable due from its subsidiary. Such an amount has been recognized in the “advance payments for future increases in share capital” reserve in the shareholders’ equity of Met Development S.p.A in compliance with the Board of Directors’ resolution passed on July 30, 2008. The Investments in subsidiaries were valued at cost.
49.4. Deferred tax assets
(in Euro ‘000s) 2007 Increases decreases 2008
Receivables from fiscal Authorities for tax assets
469 293 (422) 340
Total 469 293 (422) 340
Tax assets totaled Euro 340 thousand at 31 December 2008 and mainly related to the deferral of taxes on M.B.O. provisions for the year 2008 (Euro 288 thousand) net of the utilizations of previous years’ provisions (Euro 132 thousand) and MBO provisions for 2007 (Euro 264 thousand).
199
49.5. Trade and other receivables
(in Euro ‘000s) 2007 Changes in
the year
2008
From subsidiaries within 12 months 11,729 7,025 18,754
From subsidiaries for fiscal consolidation 32,862 (31,695) 1,167
Total 44,591 (24,670) 19,921
Trade and other receivables amounted to Euro 19,921 thousand at FY 2008, a net decrease of Euro 24,670 thousand mainly due to the reduction in receivables from the fiscal consolidation (Euro 31,695 thousand) following the offsetting of related advances paid during 2008, net of the increase in receivables for the direction/coordination contract (Euro 7,025 thousand).
49.6. Current tax assets
(in Euro ‘000s) 2007 Changes in
the year
2008
Receivables for current tax assets 3,670 294 3,964
Total 3,670 294 3,964
Current tax assets totaling Euro 3,964 thousand at 31 December 2008 (a Euro 294 thousand increase compared to the previous year) related to receivables from Fiscal Authorities arising from IAS adjustments (Euro 1,247 thousand), receivables from Fiscal Authorities for excess advance payments of Ires (Euro 1,962 thousand) and Irap (Euro 321 thousand), receivables for income tax deducted in advance from payments made to self-employed individuals (Euro 316 thousand) and VAT credits (Euro 119 thousand).
49.7. Other current financial assets
(in Euro ‘000s) 2007 Changes in
the year
2008
Receivables from controlling companies within 12 months:
Financial companies 12 (12) 0
Total 12 (12) 0
Other current financial assets decreased by Euro 12 thousand during 2008, subsequent to the collection of receivables for interest income from the controlling company Maire Gestioni S.p.A.
Maire Tecnimont S.p.A.
200
49.8. Other current assets
(in Euro ‘000s) 2007 Changes in
the year
2008
Trade receivables:
Current assets within 12 months 33 101 134
Deferrals 94 (17) 77
Total 127 84 211
The item Other current assets amounted to Euro 211 thousand at FY 2008 (a Euro 84 thousand increase compared to the previous year) and was composed of positive deferrals on insurance premiums, hangaring expenses for the aircraft and receivables from others.
49.9. Cash and cash equivalents
(in Euro ‘000s) 2007 Changes in
the year
2008
Bank and post accounts 62,725 (49,513) 13,212
Cash and cash equivalents 4 (1) 3
Total 62,729 (49,514) 13,215
Cash and cash equivalents totaled Euro 13,215 thousand at year-end 2008. Compared to the previous year, cash and cash equivalents decreased by Euro 49,514 thousand, mainly as a result of the repayment of the financial liability to Tecnimont S.p.A., the share buyback program and a decrease in trade payables. For further information, please refer to the Cash Flow Statement.
49.10.Non-current Assets classified as held for sale
(in Euro ‘000s) 2007 Changes in
the year
2008
Non-current Assets held for sale 34,688 (34,688) 0
Total 34,688 (34,688) 0
The reduction in non-current assets held for sale occurred during 2008 stemmed from the reclassification of their amount at 31 December 2007 as an increase in the investment in Tecnimont S.p.A. subsequent to the merger by incorporation of the subsidiary Maire Engineering S.p.A. into the subsidiary Tecnimont S.p.A..
49.11.Shareholders’ Equity
SHAREHOLDERS’ EQUITY
Shareholders’ equity, amounted to Euro 265,747 thousand at year-end 2008, an increase of Euro 44,870 thousand compared to the previous year.