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AnnuAl RepoRt 2009
Buongiorno. n°1 Company
in moBile entertainment
Contents
Letter to the shareholders 008
Board of Directors 010
Economic and Financial Highlights of the Buongiorno Group 011
Stock Performance and Capitalization 012
1 Directors’ report on operations 015
1.1 The Group at December 31, 2009, and Related Developments 016
1.2 The Market of Mobile Value Added Services (VAS) 020
1.3 Market Positioning and Evolution of Buongiorno’s Business 022
1.4 Profit and Loss Account and Balance Sheet Items of Buongiorno 025
1.4.1 Profit and Loss Account Items 025
1.4.2 Investment Operations 033
1.4.3 Financial Operations 035
1.5 Risk Management 040
1.6 Related-party Transactions 054
1.7 Foreseeable Evolution 056
1.8 Report on Operations of the Parent Company Buongiorno S.p.A. 056
1.8.1 Economic Operations 058
1.8.2 Financing and Investment Operations 061
1.9 Human Resources 064
1.10 Technological Innovation 065
1.11 Main Company Events in the Financial Year 067
1.12 Events Following December 31, 2009 069
1.13 Main Shareholders 070
1.14 Report on the Stock Option Plans 070
1.15 Shares Held by Directors, General Managers and Key Management Personnel 073
1.16 Annual Corporate Governance Report (Article 123-bis TUF) 074
1.17 Code Governing the Protection of Personal Data of the Personnel 074
1.18 Auditing 074
1.19 Treasury Stocks 075
1.20 Proposal for Allocating the Result for the Year 075
Contents
2 Consolidated annual report of the Buongiorno group as of December 31, 2009 077
2.1 Accounting Statements of the Consolidated Annual Report as of December 31, 2009 078
2.1.1 Consolidated Balance Sheet of the Buongiorno Group at December 31, 2009 079
2.1.2 Consolidated Profit and Loss Account of the Buongiorno Group at December 31, 2009 080
2.1.3 Consolidated Statement of Comprehensive Profit and Loss Account of the Buongiorno Group for 2009 081
2.1.4 Statement of Changes in Equity of the Buongiorno Group at December 31, 2009 081
2.1.5 Consolidated Cash Flow Statement of the Buongiorno Group for 2009 083
2.2 Financial Statements for the Year Ended December 31, 2009 - Buongiorno S.p.A. 150
3 report of the supervisory Committee 211
4 attestations of the executive in Charge of the Company’s Financial reports 221
5 independent auditors’ report 224
6 Company Data and information for shareholders 229
letter to the shareholders
Dear Shareholders,
During 2009, despite a challenging macro economic environment, Buongiorno delivered a strong business performance. Its
share price rose 87%: this performance compares favourably to a 20% increase for the Italian market and a 32% increase for
the Star Segment of the Italian Stock Exchange - the index on which Buongiorno is listed.
Within the context of a tough macro economy, Buongiorno ended 2009 with revenues of €259 million (down by 18%
compared to 2008, due to the rationalisation of the product portfolio and changes in the accounting treatment of certain
outstanding contracts) and EBITDA in line with 2008. Furthermore, the Group’s EBITDA margin increased from 12.4% to
15%. Pretax profit rose 165% relative to 2008, to €13.1 million, whilst net profit reduced by 1.4 million, to €7 million. The net
profit figure was strongly influenced by tax carried forward losses.
In a notably difficult year for the financial sector, Buongiorno was able to obtain a new loan facility with a pool of banks headed
by Banca Imi SpA (Intesa Sanpaolo Group). The multi-year loan facility, for a total consideration of €87 million, has significantly
strengthened Buongiorno’s financial structure. At the end of 2009 Buongiorno reported a consolidated net debt of €47.4
million; with a reduction of almost €20 million on the 2008 figure..
Buongiorno’s core business, which focuses on traditional mobile content, has not been significantly impacted by the macro
economic environment. This is thanks, in most part, to the opportunities of geographical growth on a global level. The total
number of users who subscribe to traditional B2C services - BlinkoGold and Movilisto - increased to 9 million during 2009
(6 million at the end of 2008).
In November 2009, the Company strengthened its B!Digital division (previously Buongiorno Marketing Services) with the
launch of its new website, www.buongiornodigital.com. B!Digital - which achieves a reach of over 25 million pages visited
from mobile devices and 4 million unique mobile users - offers companies, advertisers and publishers a Pan-European
platform to manage their digital campaigns via mobile phone.
In 2009, Buongiorno completed the integration with iTouch, which was launched on 30 June 2007. The integration generated
total savings of €14 million, exceeding the €10 million of savings that had been estimated in 2007.
The completion of the integration with iTouch was then followed by a management reorganisation of the Company. The
Company is now split into three main business areas: B2C B2B (which includes marketing services); and a New Business
area, which is responsible for all new initiatives. The result of these processes is the creation of a new, fully integrated
company in terms of products, processes, and technical and logistical infrastructures.
The success of Buongiorno also depends heavily on the strength of its employee base; 977 people located in 24 offices
around the world. The Company continues to dedicate significant resources to its employee base, investing in the training
and development required to maintain a work force that is up to speed with the challenges of the industry. In October
2009, Buongiorno became the first Italian company to receive the Dale Carnegie Leadership Award for management and
human resources training. This award recognised the Company’s ability to place value on its human resources and create
a workplace environment which allows its employees to realise their full potential as they strive towards the company’s
objectives.
The Company also continued its long-lasting commitment to Corporate Social Responsibility. In 2009, Buongiorno addressed
an issue very important to the company and the industry in which it operates - cyberbullying - which resulted in the publication
of the book “Stop cyberbullying.” This book is an invaluable instrument to both parents and teachers in addressing the
responsible use of modern technology.
Looking ahead to 2010, the Company is confident that, despite a continued challenging macro economic environment,
it will continue to grow in its traditional business. Buongiorno will continue to focus on its current B2C and B2B business,
leveraging its global platform and reshaped organisation, and taking advantage of it stronger financial structure. At the same
time, the Company plans to intensify its innovation efforts in identifying opportunities on the market where it can be expected
to play a significant role. In this context, the company has recently entered the online gaming and skill game industry, through
the acquisition of a proprietary Italian license, with Winga, which is a natural complement to Buongiorno’s traditional B2C
business in mobile entertainment.
Best Regards
Chairman of the Board of Directors of Buongiorno S.p.A.
Mauro Del Rio
8
9
Company Boards
Board of Directors
Mauro Del Rio
Sant’Ilario d’Enza (Reggio Emilia) - Italy, 02/20/1964 ChaiRMan
andrea Casalini
Parma - Italy, 05/02/1962 Chief exeCutive OffiCeR
holger van Den heuvel
Stuttgart - Germany, 11/15/1953 DiReCtOR
Riccardo Lia
La Spezia - Italy, 02/03/1965 DiReCtOR
nevid nikravan
Istanbul - Turkey, 04/30/1968 DiReCtOR
anna Gatti
Pavia - Italy, 01/30/1972 inDepenDent DiReCtOR
Giovanni Massera
Parma - Italy, 04/22/1961 inDepenDent DiReCtOR
anna puccio
Udine - Italy, 03/10/1964 inDepenDent DiReCtOR
felipe fernandez atela
Mexico city - Mexico, 03/01/1956 inDepenDent DiReCtOR
Wayne pitout
Ladysmith - South Africa, 07/22/1961 DiReCtOR
Giorgio Ricchebuono
Savona - Italy, 06/10/1946 DiReCtOR
The current Board of Directors was appointed by the Ordinary Shareholders’ Meeting held on May 2, 2007 and its term
will expire with the approval of this Annual Report. According to the one-tier system of governance adopted by Buongiorno
S.p.A. (hereinafter “Buongiorno”, “B!” or “the Company”), control of operations is performed by a Supervisory Committee
within the Board of Directors comprised solely of independent members of the Board: Giovanni Massera (Chairman), Anna
Puccio and Felipe Fernandez Atela.
Independent Auditors: PricewaterhouseCoopers S.p.A.
Executive in Charge of the Company’s Financial Reporting: Carlo Frigato
Pursuant to Art. 154-bis, paragraph 2 of Legislative Decree 58 dated February 24, 1998, the Executive in charge of the
Company’s Financial Reporting was appointed by the Board of Directors during the meeting held on October 22, 2007.
eConomiC and FinanCial highlights oF the Buongiorno group
The following table contains the consolidated economic and financial, balance sheet and operating highlights of Buongiorno
S.p.A. and its direct and indirect subsidiaries (hereinafter the “Buongiorno Group”, or the “Group”, or “Buongiorno).
(in thousands of Euro) YTD 2009 YTD 2008 Var. %
economic and financial highlights
Sales of Services 259,519 315,948 (18%)
Value of Production 262,618 318,938 (18%)
Added Value (Val. of prod. - Mat., cons. and services) 91,120 92,872 (2%)
Industrial Added Value (IAV) 115,599 121,106 (5%)
Normalized Gross Operating Margin 39,012 39,824 (2%)
Normalized Operating Profit (Loss) 22,798 20,113 13%
Financial Operations (4,062) (10,979) (63%)
Net non-recurrent earnings / (charges) (5,588) (4,177) 34%
Profit (Loss) before Taxes 13,148 4,957 165%
Profit (Loss) before Minority Interests 7,078 8,391 (16%)
Balance Sheet highlights
Net invested capital 205,501 217,061 (5%)
Net current assets (14,992) (10,091) 49%
Capital and reserves 158,118 150,373 5%
Net financial position (47,383) (66,688) 29%
earning ratios
Added value/Revenues 35.1% 29.4% 19%
Gross Operating Margin/Revenues 15.0% 12.6% 19%
Gross Operating Margin/Net invested capital 19.0% 18.3% 3%
Financial Charges/Gross Operating Margin (10.4%) (27.6%) (62%)
Operating Result/Revenues (ROS) 8.8% 6.4% 38%
Operating Result/Net invested capital (ROI) 11.1% 9.3% 20%
Profit (Loss) before Minority Interests/Capital and reserve (ROE) 4.5% 5.6% (20%)
Cost of staff
Staff (average of the period) 1,004 1,086 (8%)
Annual Revenues/Average staff 258 291 (11%)
Certain figures presented in the profit and loss account and balance sheet, above, as well as the indicators (PROFITABILITY AND FINANCIAL ratios), are not referred to by IAS/IFRS, but are
used by Buongiorno’s management to monitor and assess the Group’s operating performance. Management feels that such figures are important parameters for measuring the Group’s
operating performance.
The indicators/items that are not descriptive of the amounts they are intended to measure are explained below:
Value added: the difference between the value of production and all recurring direct costs (costs for services, leased assets and materials).
Industrial IAV: calculated as total revenues from core business minus variable costs of sales and marketing expenses.
Normalized Gross Operating Margin: calculated as Gross Operating Margin less all non-recurring restructuring costs.
Normalized Operating Profit: calculated as Operating Profit less all non-recurring restructuring costs.
Financial Operations: calculated as the sum of net finance income/expense and adjustments to financial assets. The “finance expense” indicated in the ratio “Finance Income/Gross
10
Operating Margin” includes expense/income relating to currency overlay.
Net Working Capital: it includes all current assets, inventories and current liabilities, excluding funds for risks.
Other balance sheet items: please refer to paragraph 1.4.2 of this Report.
11
stoCk perFormanCe and Capitalization
Sector Media
Market Segment STAR
Ticker Symbol BNG
Reuters Code BNI.MI
Bloomberg Code BNG IM
Isin Code IT0001488607
Specialist Centrobanca SIM S.p.A. (up to October 2009),
then Intermonte SIM S.p.A.
No. of shares at December 30, 2009 106,353,675
Par Value Euro 0.26 cad
Price at December 30, 2009 Euro 1.16
Capitalization at December 30, 2009 Euro 123 mn
Average Daily Volume 628,802
Buongiorno S.p.A. is listed in the MTA market, in the FTSE ITALIA STAR segment of Borsa Italiana S.p.A..
The role of Market Specialist was held by Centrobanca SIM until October 2009, then replaced by Intermonte SIM SPA.
As of December 31, 2009, the shareholders of Buongiorno SpA, in addition to Mauro Del Rio and Hoger Van Den
Huevel, include the investors Mitsui & Co Ltd with a 3.3% stake, and Axa Rosenberg with a 2% stake. On the same
date, the Company’s free float as a percentage of share capital stood at 71.5%.
BNG stock performed very well in 2009, recording 87% growth and closing the year with one of the best performances
compared to the other shares included in the FTSE ITALIA STAR index (which grew overall by 32%) .
The BNG share price closed the year at Euro 1.16 per share with a market capitalization of Euro 123.37 million.
The average price for the year was Euro 0.92, with a maximum value of Euro 1.49 recorded on September 29, 2009.
On average 628,802 shares were traded every day in 2009, up compared to the 528,936 shares traded in 2008.
12
13
1 Directors’ report on operations
123
124
Directors’ report on operations
Buongiorno S.p.A.’s Financial Statements at December 31, 2009 were prepared in compliance with the requirements of the
“Regulations for Implementing Legislative Decree No. 58 of February 24, 1998 regarding Issuers” (CONSOB Resolution No.
11971 of May 14, 1999 and subsequent amendments), European Community Regulations No. 1606 of July 19, 2002, on
international accounting standards.
The Annual Report refers to the consolidated situation of Buongiorno S.p.A. and its direct and indirect subsidiaries (hereinafter
the “Buongiorno Group” or the “Group”) as of December 31, 2009.
The consolidated financial statements have been prepared using the layout prescribed by the IAS/IFRS adopted by the
European Union.
1.1 The Group aT December 31, 2009, anD relaTeD DevelopmenTs
In 2009, the company successfully completed its two-year Buongiorno-iTouch merger plan, after iTouch was acquired at
the end of 2007, which resulted in the creation of a new, fully integrated entity in terms of corporate structure, products,
processes and technical and logistical infrastructures. The annualized savings generated by the company’s ambitious plan
to streamline operations and create synergies amounted to about Euro 13 million, compared to pro-forma results at June
30, 2007, far exceeding the objective of Euro 10 million. The main projects put in place under the merger plan continued
in 2009. In particular: the streamlining of the company’s processes and product offering allowed it to reduce the number of
employees to 977 at year-end 2009, down 22% from 1253 at the beginning of the plan (including employees added with
the acquisitions of Llama TV and By-Cycle), exceeding objectives by a large margin; Buongiorno also completed its plan to
streamline its technological processes. All of the planned Data Center closings were completed, and 31 of the 34 migration
projects undertaken following the iTouch merger were successfully completed (the last three projects, in Spain, Portugal and
Brazil, will be completed by the first half of 2010). These activities are in addition to those completed as of December 31,
2008, including the closing of offices in 13 countries and the transfer of Customer Care activities to South Africa.
The Group also continued the plan to rationalize the corporate structure, which led to a decrease in the number of active legal
entities from over 100 to 62 at the end of 2009.
The consolidation area of the Buongiorno Group compared to December 31, 2008 was as follows:
The following transactions became effective from a legal and accounting standpoint on January 1, 2009:
n acquisition of minority interests in the South African subsidiary iTouch South Africa (Pty) Ltd, increasing the stake from
87.5% to 100%;
n merger of Grupo iTouch Movilisto Mexico S.A. de CV in the Mexican company My Alert SL de CV;
n merger of iTouch (UK) Ltd. into Buongiorno UK Ltd.
On April 1, 2009:
n a procedure was initiated to close Telitas Sweden AB.
On May 25, 2009:
n iTouch Denmark A.S. was placed into liquidation.
On July 1, 2009:
n acquisition of minority interests in the Nigerian subsidiary iTouch Global Concepts Nigeria Ltd, increasing the stake from
80% to 100%;
n increase in the share capital of the Dutch holding company Buongiorno Marketing Services Netherland B.V., underwritten
through the contribution of the 100% equity investment in Buongiorno Russia LLC by the associate Buongiorno Hong
Kong Ltd. As a result of this transaction, the Buongiorno Group’s ownership of the Dutch holding company Buongiorno
Marketing Services Netherland B.V. fell from 60% to the present 54.5%. The other minority-interest shareholders are the
Mitsui & Co. Ltd. Group and the associate Buongiorno Hong Kong Ltd., which respectively hold 36.4% and 9.1% stakes
in Buongiorno Marketing Services Netherland B.V..
On September 30, 2009:
n merger of the Spain-based Movilisto S.A., Gruppo iTouch Movilisto S.A. and Initiatives Especiales S.A. into Buongiorno
MyAlert S.A.;
n sale of the Norwegian company Mobilnet A.S.;
n wounding up of the German company Fleck Capital GmbH.
On October 7, 2009:
n acquisition of minority interests in the Turkish subsidiary Buongiorno Dijital Iletisim A.S., increasing the stake from 79.66%
to 100%.
16
17
Directors’ report on operations
On November 30, 2009:
n merger of the French companies Mobivillage S.A. and iTouch Movilisto France into Buongiorno France S.A.;
In December 2009:
n winding-up procedures were started for the English companies iTouch Holdings Ltd and iTouch Ventures Ltd, the Spanish
companies Corporacion Crossbow SL, Kunno Systems SL and Movilisto TV, the Australian company Telequity Pty Ltd,
the New Zealand company iTouch New Zealand Ltd and the Bolivian company Buongiorno MyAlert Bolivia S. de R.L.;
n at the same time as the start of the above proceedings to wind up the companies iTouch Holdings Ltd and iTouch Ventures
Ltd, the parent company Buongiorno S.p.A. acquired from iTouch Holding Ltd (a company controlled by Buongiorno
S.p.A. through iTouch Ventures Ltd) a 100% stake in the company iTouch Ltd, at an equivalent value to the book value
of Buongiorno S.p.A.’s own holding in the company iTouch Venture Ltd in liquidation, which is also controlled. The above
transfer has resulted in inter-company payables and receivables being recognized in the financial statements of the
companies involved. At the end of the liquidation proceedings for iTouch Venture Ltd and its subsidiary iTouch Holding
Ltd, these inter-company payables and receivables will be offset so as not to alter the balance sheet and financial position
of the Buongiorno Group. It should be noted that at December 31, 2009 this inter-company transfer of equity had no
significance at consolidation level.
The following table shows an outline of the Buongiorno Group’s structure at December 31, 2009. A list of consolidated
companies at December 31, 2009 is included in Annex B.
Buongiorno S.p.a. - group Structure
18
19
Directors’ report on operations
1.2 The markeT of mobile value aDDeD services (vas)
In 2009, the global VAS (Value Added Services for mobile and fixed-line telephone users) market, after a decade of rapid
growth, remained stable, in spite of the climate of recession, at about Euro 24 billion (source: MEF). According to the
Business Confidence Index prepared by MEF and KPMG Advisory the industry could grow in the next 18 months up to
20% with regional variations between the different markets, recording major growth in the developing countries (Africa, South
America and India) and steady growth in the mature markets (Western Europe and the United States).
Multiple factors contribute to these inconsistent growth patterns, including regulatory issues, demand trends, and the
competitive strategies employed by the various players throughout the value chain. Buongiorno has confirmed its leading
position in terms of revenue volume in 3 countries and is one of the main players in another 5 key countries (with an overall
market share of 4% compared to market net value), despite operating in a competitive scenario which is still highly fragmented
and marked by a large number of small-size local players (with a turnover of less than Euro 20 million).
Demand in the VAS, or as it is also known the MC1.0 market, which represents the most substantial part of Buongiorno’s
business, continues to be steady despite the market’s rapid evolution. Moreover, as the business is very fragmented, there
is an expectation of further consolidation and hence good prospects for the leaders, including Buongiorno, to expand their
market share. However, the global web-mobile convergence trend requires the market and its evolution to be examined from
two different points of view. On the one hand, there are markets and geographies where the pure Mobile VAS players benefit
from a relatively protected business model, based on direct consumer billing (as opposed to an advertising-based model),
open VAS offerings (as opposed to closed offerings) by mobile phone manufacturers and where the telephone operators
are increasing their propensity to outsource, generating new opportunities for the pure Mobile VAS players because their
penetration is less than 15%, with substantial room for growth.
On the other hand, there are the more mature markets, particularly the United States, some of the Western European
countries, Japan and Korea, where the presence of smartphones and application stores is generating new opportunities for
the pure Mobile VAS players with the introduction of new business models.
According to a number of research studies, by 2013 the mobile phone will overtake the PC for Internet browsing; in fact,
by that date it is estimated that there will be 1.78 billion computers, whilst mobiles fitted with a browser will be 1.82 billion
(source: Gartner). This represents a very interesting opportunity for companies whose core business is the development and
distribution of mobile content and whose “silicon valley” is actually in Italy.
In 2009, Buongiorno also extended its position as a provider of solutions for telephone operators, managing its two leading
solutions: IMM (Intelligent Mobile Marketer) and SuperContest ― which allowed it to gain market shares in the CRM solutions
segment, a sector that generated a turnover of 8.9 billion dollars in 2008 and which is estimated to reach 13.3 billion dollars
by 2012 (values relating to CRM software, source: Gartner).
Turning to Marketing Solutions for Businesses (the B!Digital division of Buongiorno), the business model of which is founded
on advertising revenues, analysts and researchers agree in the belief that mobile advertising (estimated to reach Euro 7-12
billion by 2011), in a global context in which there are over four billion mobile telephone users, 1.4 billion televisions and one
billion personal computers, may attract an increasing share of the advertising expenditures of leading brands. In 2009, the
advertising sector saw (Nielsen data), on the one hand, Internet and digital media hold steady, with moderate growth (+7%)
at the same time as the move away from the use of offline media toward digital and mobility media. On the other hand, the
year witnessed a fall in advertising investments with a decrease in offline media (reductions between -17% and -30%). In
the mobile advertising market, the recent acquisitions of Admob by Google, Quattro Wireless by Apple and RingRing by
Amobee prove that the sector is going through a very tumultuous phase. In particular for Italy, the estimates published by the
Osservatorio (Monitoring Unit) of the Milan Polytechnic, confirm the mobile sector’s growing importance for the advertising
market. Indeed Italian companies’ investments on Mobile Advertising rose 21% reaching a turnover of more than Euro 15
million, in a scenario in which advertising investments on traditional media fell by more than 20%.
20
21
Directors’ report on operations
1.3 markeT posiTioninG anD evoluTion of buonGiorno’s business
Buongiorno is an Italian independent multinational, a leader in the digital mobile entertainment market (Mobile VAS) on an international
level. Buongiorno works with the major telephone and Internet service providers and media companies in 57 countries, designing and
distributing a broad range of mobile digital content and interactive applications: music, games, video, wallpaper, ringtones, user-generated
services, chat and advertising. As of the second half of 2008, Buongiorno has started operating also in the Mobile Social Networking
segment. Buongiorno is present in all the major European countries, in Russia, the United States, Australia, and several countries in Central
and South America, Africa and the Middle East. Through a joint-venture with Mitsui, it also operates in India, Vietnam and Philippines.
Buongiorno operates with two business lines: value-added services for mobile and fixed-line telephone users (B2C), and
services for telephone carriers and relationship marketing services for businesses (B2B).
B2c B2B
Telco and media B!Digital
n Designing, aggregating, delivering and CRM of mobile content n Designing, aggregating, delivering n Branding & Awareness; On device
subscriptions products trough proprietary brands and CRM of mobile content subscrip- applications & mobile internet sites;
What
tions products in white label for tele- Digital Loyalty & CRM; Social Media
com operators Marketing; Sales Promotion
n 9 million clients n Direct connection with 120 telecom n 1 pan European agency, several multi
Features
operators local offices, from Russia to UK
n Flagship products: BlinkoGold and Movilisto subscriptions, n Flagship products: Intelligent mobile n +500 clients served
Movisexy Club marketer (IMM), Mobile sweepstakes,
Music/game portal store
n Revenue share of end user price with telecom operator; Tele- n Upfront service management fee + n Consultancy fees + media space
Economics
com operator rebates monthly to B! revenue share of end user price
n End user pays to Telecom operator n Telecom operator pays B! for the up- n Brand owners, media agencies, ad
Who pays
front mgmt fee and rebates to B! part agencies pay B!MS
of the recurrent end user price
The size of its business, the extensiveness of its content and services portfolio and the geographical coverage provided by
its team of nearly 970 professionals have made Buongiorno the global leader in mobile entertainment. For Buongiorno, 2009
proved to be a year for consolidation in which the Company confirmed the quality of the business in terms of stable profits
and cash flows, and laid the foundations for developing new business lines.
As for the VAS market, the year saw a continuation of the inconsistent trend with a slight slowdown in mature markets
and stable growth in emerging markets. As of today, the number of B2C customers served by Buongiorno worldwide has
exceeded 9 million; this increase occurred against the backdrop of a rationalization of marketing expenses, which resulted
in lesser advertising investments on general channels and a greater focus on innovative markets and channels that offer a
higher return on investment.
22
23
Directors’ report on operations
Moreover, during 2009 the company enriched its B2B offering in several directions. On the one hand, Intelligent Mobile
Marketing (IMM) - the suite of technology and CRM services - was launched by the operator Telefonica O2 in England in
February 2009 and is now also implemented by the telephone operators Proximus in Belgium and Telecom Italia Mobile.
Moreover, Buongiorno extended its contracts in Africa to include two major telephone carriers, bringing its coverage to
16 countries in the continent. Buongiorno manages the WAP Orange World portal for Orange, which entails providing the
technology platform, applications, consulting and marketing formats for the portal in Cameroon, Côte d’Ivoire, Equatorial
Guinea, Kenya, Madagascar, Mali, Nigeria, Central African Republic and Senegal.
Management contracts for the exclusive management of mobile telephone contest initiatives, known as SuperContests, continued
on behalf of large telephone companies; this business was closely tied to the attractiveness in many emerging countries of basic
VAS (MC1.0) involving simple interactions through SMS text messages. The most significant agreements are in Latin America
and Africa. Finally, the supply contracts in place for Full Portal solutions offered by Buongiorno to the telephone operators (B2O)
have been expanded. These include the creation and management of the Game Store portal for TIM, the expansion of the alert
platform for the telephone operator Sprint in the United States and the development of the Brew solution customised for the INQ
telephone social networking (H3G) awarded a prize by the Mobile Entertainment Forum (MEF) for the best handset in 2009.
B!Digital (formerly Buongiorno Marketing Services), the Buongiorno division which offers advice to companies for marketing
campaigns on digital technologies, renewed up to 2011 the contract for the supply of a multi-year digital marketing programme,
known as Orange Wednesday, for the English operator Orange; it won the contract to manage and sell on an exclusive basis the
advertising concession for the mobile internet sites - including iPhone - of the L’Espresso Group (La Repubblica, Radio Deejay,
Repubblica Sport and TrovaCinema) and the Finelco Group (Radio 105, Radio Monte Carlo and Virgin Radio).
The division has entered into agreements for the supply of numerous mobile marketing campaigns for customers such as BMW,
Citroen, Ford and Terme di Sirmione, has managed the advertising campaigns for the community mobile MyMadrid dedicated to
fans of the Spanish football team Real Madrid, and has managed the interactive communication platform for Parque Reunidos
(one of the main amusement and water park companies in Europe) in 6 countries including Italy, Spain and the UK.
Buongiorno continued its innovation strategy with the development and placement of Hellotxt at Application Stores. Hellotxt,
an innovative social network and microblog aggregator that allows users to read their contacts’ updates and update their
status easily and immediately also from their mobile phones, which was already available through Vodafone 360 in Italy and
Spain, is now available on Android, while peoplesound, the mobile social networking service that has more than 500,000
subscribers is available at the iPhone Store, Nokia Ovi and Google Android.
In addition, during the year the Company pursued a strict process aimed at validating several options that tailor Buongiorno’s
expertise in the mobile-content market to fit new market opportunities (specifically, mobile payment, mobile skilled games,
and mobile social gaming).
1.4 profiT anD loss accounT anD balance sheeT iTems of buonGiorno
foreword
The operating data for 2009 have been analyzed using a normalized Gross Operating Margin figure that excludes the non-
recurring expenses recognized due to the Group’s integration/restructuring activities.
1.4.1 profit and loss account items
conSoLiDateD proFit anD LoSS account
(in thousands of Euro) YTD 2009 YTD 2008 VARIANCE
SaLeS oF gooDS anD SerViceS 259,519 315,948 (56,429)
Other income and increase of fixed assets for internal works 3,099 2,990 109
totaL VaLue oF proDuction 262,618 318,938 (56,320)
Services, use of third-party assets, consumables and goods (171,497) (226,066) 54,569
Personnel costs (52,109) (53,048) 939
groSS operating Margin 39,012 39,824 (812)
Amortization, depreciation and write-downs (13,674) (17,491) 3,817
Allowance for bad debts and other provisions (1,668) (427) (1,241)
Other operating costs (872) (1,793) 921
operating proFit / (LoSS) 22,798 20,113 2,685
Net financial earnings / (charges) 4,464 3,893 571
Value adjustments on financial assets (8,625) (13,246) 4,621
Earnings / (charges) from assets held for sale 99 (1,626) 1,725
Net non-recurrent costs (5,588) (4,177) (1,411)
proFit (LoSS) BeFore taXation 13,148 4,957 8,191
Current income taxes (2,402) (4,023) 1,621
Deferred income taxes (3,668) 7,457 (11,125)
conSoLiDateD proFit (LoSS) For tHe perioD 7,078 8,391 (1,313)
Profit (loss) for the period attributable to Minority Interests 140 264 (124)
group conSoLiDateD proFit (LoSS) For tHe perioD 6,938 8,127 (1,189)
Basic earnings per share (Basic epS) 0.0652 0.0764 (0.0112)
Diluted earnings per share (Diluted epS) 0.0617 0.0739 (0.0122)
24
25
Directors’ report on operations
The consolidated value of production for 2009 amounted to Euro 262.6 million (Euro 318.9 million at December 31,
2008), with an 18% decrease. Sales of goods and services generated by the core business amounted to Euro 259.5 million
(Euro 315.9 million at December 31, 2008), down by 18%.
The decline in revenues is primarily attributable to a differing method of recognition of an agreement with an Australian carrier
and the strategy of reducing less profitable services decided upon following the acquisition of iTouch, which allowed for a
significant decrease in fixed costs.
breakdown of revenues by Geographical area
Revenues for 2009 are broken down in accordance with IFRS 8. For this purpose, information is provided in terms of
revenues and gross operating margin by geographical area.
Buongiorno Group’s business was broken down in the following geographical areas:
n Iberia: including operations in Spain and Portugal;
n UK: including UK-based operations;
n Italy: including operations of Buongiorno S.p.A. and Buongiorno Marketing Services S.r.l.;
n France: including France-based operations;
n Other Euro Countries: including operations in the Netherlands, Germany, and Austria;
n Latam: including operations in South America;
n Other Non-Euro Countries: including operations outside Europe, specifically in North America, Africa, Turkey and Australia.
reVenueS BY geograpHicaL area
(in thousands of Euro) 2009 2008 VARIANCE VAR. %
IBERIA 96,353 107,979 (11,626) (10,8%)
UK 15,253 30,662 (15,409) (50,3%)
ITALY 26,688 33,062 (6,374) (19,3%)
FRANCE 24,300 24,499 (199) (0,8%)
OTHER EURO COUNTRIES 23,354 33,261 (9,907) (29,8%)
LATAM 22,604 22,518 86 0,4%
OTHER NON EURO COUNTRIES 50,738 63,713 (12,975) (20,4%)
SHARED SERVICES 229 254 (25) (9.8%)
totaL reVenueS 259,519 315,948 (56,429) (18%)
During 2009, consolidated revenues fell by approximately 18%. In further detail, a breakdown of revenues by geographical
area shows:
n a decrease in B2B operations (mainly services provided in partnership with Media operators and Call TV services) in Iberia,
the UK and other European countries (Other Euro countries), resulting in a total decline in revenues of approximately Euro
37 million. B2B operations are characterized by high volumes but low margins, with the result that this decline in revenues
had minimal effects on the Group’s operating margin. Given the reduction in fixed costs associated with the discontinued
services, net margin gains were actually achieved;
n a decline of approximately Euro 13 million in Other Non-Euro Countries (Rest of World). This decrease was chiefly the
result of a change in the agreement with an Australian company and the accounting treatment of the same, without an
impact on margins. The new commercial agreements call for Buongiorno to receive rebates of the portion of margins to
which it is entitled rather than to invoice the gross revenue paid by the telephone company;
n the decrease in Italy was primarily attributable to a decline in B2C operations.
Annex A1 to the Notes on the Consolidated Financial Statements contains a table showing a reconciliation of 2008 revenues
by geographical area classified according to the new organizational structure.
breakdown of revenues by business line
In order to provide a more detailed reporting analysis, revenues are shown by “business line”, representing a group of
activities and operations aimed at the supply of goods and services, featuring a certain level of business risk and a given level
of economic margin that differ from other business segments.
reVenueS BY BuSineSS Line
(in thousands of Euro) 2009 2008 VARIANCE VAR. %
CONSUMER SERVICES 242,914 299,908 (56,994) (19%)
MARKETING SERVICES 16,605 16,040 565 4%
totaL reVenueS 259,519 315,948 (56,429) (18%)
In terms of business lines, the largest share of core-business revenues was earned by Consumer Services, with Group
revenues for the segment reaching Euro 242.9 million (93.6% of the Group total) in the year. The share of the total accounted
for by revenues from Marketing Services amounted to Euro 16.6 million, or 6.4%.
The decrease in revenues in the Consumer Services line is attributable, as mentioned above, to a differing method of
recognition of an agreement with an Australian telephone carrier and voluntary withdrawal from agreements generating little
or no profit, whereas revenues from Marketing Services remained largely in line with the previous year.
26
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Directors’ report on operations
“other revenues” amounted to Euro 3 million in 2009, in line with 2008, and refer primarily to the internal capitalization of
technological research and development activities on the proprietary technological platform B!3A, and other projects.
industrial added value (iav), calculated as total revenues from core business minus variable costs of sales and marketing
expenses. In 2009 IAV was about Euro 115.6 million (45% on net sales), compared to Euro 121.1 million at December 31,
2008 (38% on net sales).
As regards operating costs, one of the main cost items for the Group was personnel costs. Personnel costs increased
as a percentage of revenues (20.1% for 2009, compared to 16.8% at December 31, 2008) due to the decline in revenues,
caused in part by the amendments to contractual terms with telephone companies. In absolute terms personnel costs fell
from Euro 53 million at 31 December 2008 to about Euro 52.1 million at the end of 2009. The balance includes about Euro
4 thousand of non-monetary costs servicing the stock option plans (about Euro 0.7 million at 31 December 2008) and about
Euro 5 million of costs relating to the variable components of gross remuneration for achieving objectives (about Euro 2 million
in 2008). The average number of employees went from 1,086 at December 31, 2008 to 1,004 at December 31, 2009.
In 2009, costs for services and use of third-party assets amounted to Euro 171.5 million compared to Euro 226.1
million in 2008, down by 24.1% and with an 18% decrease in sales. Costs for services stood at 66.1% of revenues, down
compared to 2008 (71.6% at December 31, 2008). The sharp reduction in costs of services is due to:
n the differing accounting treatment of an agreement with an Australian telephone carrier. In further detail, instead of
recognizing gross revenues and the associated expenses, the Company now recognizes net revenues, i.e. without the
associated expenses;
n the rationalization of several agreements that generated small margins while entailing very high costs;
n the restructuring plan which led to a significant reduction in fixed costs.
However, marketing expenses increased as a percentage of revenues, rising from 17.5% to 20.7%, despite decreasing
slightly in absolute value on the previous year, due to the lower costs of acquiring new subscribers.
Financial year 2009 closed with a normalized Gross operating margin of approximately Euro 39 million, corresponding
to 15% of revenues, compared to Euro 39.8 million in the same period of 2008 (12.6% of net consolidated revenues). The
stability of the normalized gross operating margin may be related primarily to a slight contraction in operating margins offset
by the aforesaid reduction in operating costs.
breakdown of Gross operating margin by Geographical area
The following table provides a breakdown of normalized Gross Operating Margin (GOM) by geographical area:
goM BY geograpHicaL area
(in thousands of Euro) IBERIA UK ITALY FRANCE oThER LATAM oThER ToTAL ShARED ToTAL
EURo NoN EURo REgIoN SERVICES
CoUNTRIES CoUNTRIES
Total value of production 96,353 15,253 26,688 24,300 23,354 22,604 50,738 259,290 229 259,519
Total operative costs (74,975) (11,541) (21,356) (15,645) (18,604) (19,489) (37,862) (199,472) (20,662) (220,134)
totaL groSS operating 21,378 3,712 5,332 8,655 4,750 3,115 12,876 59,818 (20,806) 39,012
Margin at 12.31.2009
Gross Operating Margin% 35.7% 6.2% 8.9% 14.5% 7.9% 5.2% 21.5% 100.0% (53%) 100.0%
totaL groSS operating 20,322 7,120 10,483 8,314 4,711 3,761 6,443 61,154 (21,330) 39,824
Margin at 12.31.2008
Gross Operating Margin% 33.2% 11.6% 17.1% 13.6% 7.7% 6.2% 10.5% 100.0% (53.6%) 100.0%
An analysis of individual geographical areas indicates:
n growth in the Iberia area thanks to the high profitability of the B2C segment;
n significant growth in the Rest of the World (Other Non-Euro Countries), essentially due to the increase in operations in
Australia, South Africa and Nigeria, an improvement in margins on operations in the United States of America, and certain
extraordinary projects in the Nordic area;
n a decrease in margins in Italy mainly due to a contraction in B2C operations. The UK has also been affected by this
reduction (drop in B2B margins). In the Latam region the reduced margin is linked primarily to a decrease in B2B operations
in Argentina and the higher advertising investments for B2C in the other countries.
Annex A1 to the Notes on the Consolidated Financial Statements contains a table showing a reconciliation of 2008 EBITDA
by geographical area classified according to the new organizational structure.
breakdown of Gom by business line
The following table provides a breakdown of GOM by business line.
BuSineSS Line
(in thousands of Euro) 2009 2008 VARIANCE VAR. %
CONSUMER SERVICES 37,862 38,034 (172) (0%)
MARKETING SERVICES 1,150 1,790 (640) (36%)
totaL groSS operating Margin 39,012 39,824 (812) (2%)
The Consumer Services business line was mostly in line with 2008 figures.
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Directors’ report on operations
On the other hand, the profitability of the Marketing Services segment decreased by approximately Euro 640 thousand
(GOM -36%). In relative terms, Marketing Services accounted for approximately 3% of total GOM (4% in 2008), whereas the
Consumer Services division accounted for 97% of the total (96% in 2008).
Depreciation and amortization amounted to about Euro 13.7 million in 2009 (Euro 17.5 million in 2008) and are broken
down as follows:
aMortizationS
(in thousands of Euro) YEAR 2009 YEAR 2008
Amortization of intangible fixed assets 10,937 11,087
Depreciation of tangible fixed assets 1,612 2,107
Other fixed assets write-downs 1,125 4,297
total amortization, depreciation and other write-downs 13,674 17,491
The reduction in amortization on intangible assets is due primarily to the completion of the amortization plan for a number of
exclusive commercial licenses relating to the B2O operations in Latin America totalling in the region of Euro 1.4 million in 2009
compared to Euro 2.6 million in 2008.
This item also includes the write-downs due essentially to impairment test for goodwill arising from the acquisition of the
business connected to Call TV amounting to Euro 1,111 thousand.
other operating expenses amounted to about 0.9 million in 2009, a decrease of about 51% compared to the previous
year (Euro 1.8 million in 2008). This is due primarily to the savings arising from the Group’s restructuring operations.
As a result, normalized operating profit for 2009 amounted to Euro 22.8 million, marking an increase of approximately
13% compared to the Euro 20.1 million reported in 2008.
net financial charges amounted to approximately Euro 4.2 million, compared to Euro 9.4 million in 2008. Financial charges
include about Euro 0.7 million of exchange gains from operations in Africa, South America and Australia. Net of exchange
gains, financial charges decreased by about 48%, primarily due to the decrease in the level of short-term interest rates, to
which the company’s debt is tied in its entirety, in addition to the decline in the average balance of borrowings due to the
redemptions during the period.
value adjustments on financial assets were positive at about Euro 0.1 million, compared to a negative value of about
Euro 1.6 million for 2008, mainly due to the valuation of the equity of the affiliated company Buongiorno Hong Kong Ltd. In
fact, the company Buongiorno Hong Kong Ltd, incorporated at the end of 2006, in 2009 completed the launch period of
Buongiorno’s core operations in the Asian countries and, whilst the initial years were marked by high levels of investments
due to the markets opening up, in line with the 2009 strategic plan, the company substantially broke even during the year.
non-recurring income and charges of Euro 5.6 million are primarily related to the costs incurred by the Group under the
restructuring process initiated in January 2008. In detail, the balance includes Euro 3 million for technology costs sustained
on rationalising the technology platforms, about Euro 1.3 million for voluntary redundancy incentives, Euro 494 thousand
for consultancy services related to Group restructuring and Euro 828 million for the provision for risks. The following table
provides a breakdown of non-recurring income and charges recognized through profit or loss in 2009:
(in thousands of Euro) YEAR 2009 YEAR 2008
Redundancy costs 1,259 966
Data center and platform restructuring 3,007 4,545
Legal entities closing 494 162
Other restructuring costs 828 (1,496)
total 5,588 4,177
In comparison with the previous year, it should be remembered that a large portion of the restructuring costs in 2008 had
been covered using provisions for restructuring previously set aside. This meant that the 2008 profit and loss account was
only partially impacted by the restructuring costs actually incurred.
pre-tax profit increased sharply by 165%, from about Euro 5 million for 2008 to about Euro 13.1 million for 2009.
30
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Directors’ report on operations
Income taxes for the year amounted to a negative Euro 6.1 million and consist of the sum between a total of approximately
Euro 2.4 million in current income taxes payable and the effect of deferred taxes amounting to Euro 3.7 million. The latter
are mainly due to the reversal effect from the use of prior tax losses previously included in the Group’s assets. Current taxes
were estimated on the basis of the profit and loss account figures of individual companies and refer primarily to the effect of
IRAP (regional production tax) in Italy and the income taxes of several foreign consolidated companies.
consolidated net income for 2009 amounted to about Euro 7.08 million compared to Euro 8.4 million for 2008, when
the result was strongly influenced by the positive effect of the use of part of the Group’s tax losses carried forward. During
the reporting period, Profit Attributable to Minority Interests amounted to Euro 140 thousand (compared to a profit of Euro
264 thousand in 2008). Accordingly, the Consolidated Net Profit Attributable to the Group amounted to Euro 6.94 million,
compared to Euro 8.1 million in 2008.
earnings per share
(in thousands of Euro) 12.31.2009 12.31.2008
Basic earnings per share (Basic EPS) 0.0652 0.0764
Diluted earnings per share (Diluted EPS) 0.0617 0.0739
Average No. of shares 106,352,187 106,353,675
Average No. of shares + No. of options and bonds convertible into shares 113,114,652 110,404,675
Interest payable on the convertible bond 36,812 37,089
basic
Basic EpS is calculated by dividing the net Group profit for the year by the average number of ordinary shares outstanding
during the period, namely 106,352,187 in 2009 (106,353,675 in 2008).
Diluted
Diluted EpS is calculated by dividing the net Group profit for the year, gross of interests on the convertible bond, by the
average number of ordinary shares outstanding during the period plus the number of outstanding options that can be
potentially exercised (or other instruments potentially convertible into ordinary shares, such as convertible bonds), or granted
at year-end, a total of 113,114,652 in 2009 (110,404,675 in 2008).
1.4.2 investment operations
The following table shows the reclassified consolidated balance sheet of the Buongiorno Group at December 31, 2009
compared with that at December 31, 2008.
recLaSSiFieD BaLance SHeet
(in thousands of Euro) 12.31.2009 12.31.2008 Variance
Intangible fixed assets 201,876 207,029 (5,153)
Tangible fixed assets 3,353 4,292 (939)
Financial fixed assets 3,646 2,894 752
Deferred tax assets 25,232 29,898 (4,666)
FiXeD aSSetS 234,107 244,113 (10,006)
Inventories 0 1,429 (1,429)
Trade receivables 55,481 68,432 (12,951)
Other assets 12,403 12,053 350
Trade payables (60,638) (77,276) 16,638
Other liabilities (22,236) (14,729) (7,507)
net WorKing capitaL (14,990) (10,091) (4,899)
SeVerance inDeMnitY FunD (1,054) (1,141) 87
DeFerreD taX proViSionS (4,451) (6,424) 1,973
proViSion For riSKS anD cHargeS (8,111) (9,396) 1,285
net inVeSteD capitaL 205,501 217,061 (11,560)
Paid-up capital 27,652 27,652 0
Reserves and profits (losses) carried forward 108,790 102,185 6,605
Profit (loss) for the period 6,938 8,127 (1,189)
Minority interests 14,738 12,409 2,329
capitaL anD reSerVeS 158,118 150,373 7,745
MeDiuM anD Long-terM BorroWingS 47,826 8,005 39,821
Cash and equivalents and other short-term financial assets (*) (38,761) (45,544) 6,783
Financial receivables (28) 0 (28)
Debts to bans and other financial institutions 38,346 104,227 (65,881)
SHort-terM BorroWingS (443) 58,683 (59,126)
net FinanciaL poSition 47,383 66,688 (19,305)
totaL SHareHoLDerS’ eQuitY anD BorroWingS 205,501 217,061 (11,560)
(*) if negative, it constitutes an asset for the Company
32
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Directors’ report on operations
At December 31, 2009, the Buongiorno Group’s net invested capital amounted to Euro 205.5 million, including: Net Fixed Assets
of Euro 234.1 million; a negative Net Working Capital of Euro 14.9 million; and Funds (including the Provision for Risks and Charges, the
Severance Indemnity Fund and Deferred Tax Liabilities) totaling approximately about Euro 13.6 million.
The detailed breakdown of movements in the main balance sheet items shows that:
n Net Fixed Assets decreased by approximately Euro 10 million, of which Euro 6.1 million was due to the negative change in
tangible and intangible assets, Euro 1 million to the increase in investments, and Euro 4.7 million to the reversal of prepaid
taxes;
n Net Working Capital decreased Euro 4.9 million; this movement is explained by trends of the individual components
making up the item, as per the breakdown presented in the above table of the reclassified balance sheet. Inventories at
31 December 2008 consisted of prepaid telephone cards relating to the Australian subsidiary and which had been entirely
transferred at 31 December 2009;
n The Severance Indemnity Fund for salaried employees remained substantially unchanged compared to 2008;
n Provisions for Risks and Charges decreased by Euro 1.3 million, declining from Euro 9.4 million at the end of 2008 to
approximately Euro 8.1 million as at December 31, 2009 due to the release thereof for restructuring activities during the
period;
n provisions for deferred taxes decreased by Euro 1.9 million, falling from Euro 6.4 million at the end of 2008 to approximately
Euro 4.5 million at December 31, 2009, primarily due to the release of deferred tax liabilities set aside during the purchase
price allocation for the iTouch Group.
Net Invested Capital consisted of Consolidated Shareholders’ Equity of Euro 158.1 million and net financial debt of Euro 47.4
million at the end of 2009.
1.4.3 financial operations
The following table shows the consolidated Net Financial Debt of Buongiorno as of December 31, 2009:
net conSoLiDateD FinanciaL poSition
(in thousands of Euro) 12.31.2009 12.31.2008
totaL caSH anD otHer FinanciaL aSSetS 38,761 45,545
Total payables to banks (2,711) (101,119)
Total bank loans - current share (33,514) (1,978)
Total other current financial liabilities (1,127) (1,900)
Guaranted convertible bond (994) 0
Financial receivables 28 0
totaL net current FinanciaL LiaBiLitieS (38,317) (104,997)
conSoLiDateD net current FinanciaL poSition 443 (59,452)
Total bank loans - non-current share (47,789) (5,296)
Guaranted convertible bond 0 (965)
Total other non-current financial liabilities (37) (975)
totaL non-current FinanciaL LiaBiLiiteS (47,826) (7,236)
net FinanciaL DeBt (poSition) (47,383) (66,688)
Buongiorno Group closed 2009 with consolidated net financial Debt of Euro 47.4 million, compared to Euro 66.7 million
at the end of 2008. The decrease may be ascribed entirely to cash provided by core business operations, inasmuch as the
investments for the period were not particularly significant. Working capital, despite increasing pressure due to the liquidity
crisis affecting stock markets, which has led to a lengthening of collection times from telephone carriers, has been tightly
controlled and has significantly contributed to the improvement of net financial debt.
cash and cash equivalents and short-term financial investments stood at approximately Euro 38.8 million and consisted
mainly of cash deposited in current accounts denominated primarily in euro and in US dollars, pounds sterling, Australian dollars,
South African rand, and Argentine pesos, in addition to investments in money market funds denominated in euro and managed
by leading financial institutions with maturities in the short term and immediate liquidity. The item decreased by Euro 6.5 million
compared to December 31, 2008 (Euro 45.5 million) due to the use of cash to sharply pay down the Group’s debt.
At December 31, 2009, this balance included Euro 3 million which was not available, being tied up for 3 months with a primary
English Bank to support a planned commercial transaction in India.
34
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Directors’ report on operations
current financial liabilities amounted to Euro 38.3 million at December 31, 2009, down compared to December 31, 2008
(Euro 105.0 million). A breakdown of current financial liabilities is provided below.
The item Debt to banks mainly refers to bank overdrafts in Euro, Columbian pesos and Turkish lira.
The current portion of bank borrowings (Euro 33.5 million) consists primarily of the share of borrowings maturing within
one year and the medium-/long-term revolving portion of the loan contracted in the total amount of Euro 87 million from a pool
of banks organized by Banca IMI (a member of the Intesa Sanpaolo Group). The funds were disbursed on June 26, 2009. In
particular, the sum of Euro 13.4 million refers to the portion of “Tranche A” of the pool loan maturing within one year. The line of
credit was authorized in the amount of Euro 67 million, matures in 2014, and calls for half-yearly payments, the first installment
of which will fall due on December 31, 2009. Said loan was contracted in order to make repayment in full of the loan originally
contracted from Banca IMI in the amount of Euro 100 million maturing on June 26, 2009. The new loan also calls for a line
of credit known as the “Revolving Credit Facility”, or “Tranche B”. Said line of credit was authorized in the amount of Euro 20
million, and on December 31, 2009 the Company applied to draw it down for Euro 18.0 million with use in the near term.
The facility matures in five years, calls for a gradual reduction in the credit limit beginning on December 31, 2012, and allows
for the possibility of multiple draw-downs with separate maturities and for separate amounts, within the maximum credit limit.
Both Tranche A and Tranche B of the loan call for the application of a spread of 300 basis points on the benchmark interest
rate. Said spread may vary on a half-yearly basis according to a reward mechanism involving the performance of the ratio of
gross financial debt to EBITDA. The shares of certain Group companies were pledged as security for the loan.
The loan agreement also calls for compliance with certain financial covenants, to be reviewed at the end of each half-year,
beginning on December 31, 2009. These parameters were determined according to a conservative medium-term business
plan and allow for headroom that the management currently considers wholly adequate.
These covenants are:
n the ratio of Consolidated Gross Operating Margin (EBITDA) to Consolidated Net Borrowing Costs;
n the ratio of Consolidated Gross Financial Debt to Consolidated Gross Operating Margin (EBITDA);
n the ratio of Consolidated Gross Financial Debt to Consolidated Equity.
At December 31, 2009 the covenants were respected.
With the new loan agreement, the Group has achieved its goal of extending the duration of its debt and scheduling repayment
according to its future debt-servicing capacity, prudentially estimated on the basis of the cash flow that the Company expects
its core business to generate.
The current share of bank loans also includes Euro 2.1 million in bank debt maturing within one year contracted with national
banks (Credito Emiliano and Medio Credito Centrale - a member of the Unicredit banking group) and Simest, a financial
company involved in the development and promotion of Italian enterprises outside Italy.
Current financial liabilities also include the outstanding portion of the convertible bond (Euro 1.0 million compared to an
original value of Euro 12 million) underwritten on September 22, 2005 by Mitsui & Co Ltd and Banca IMI and maturing in
2010. The balance at December 31, 2008 refers to the amount held by Banca IMI, net of the underlying option.
Convertible bonds, like other long-term financial liabilities, are valued at amortized cost, which is calculated bearing in mind all
related costs and using a market interest rate for equivalent non-convertible bonds or financial liabilities (IAS 32, Paragraphs
64, 28 and 31). In this connection, a net discount rate of 4.5% was used. This rate approximates those obtained by the
banking system for medium-/long-term loans at the time of issue of the convertible bond (September 2005).
other current financial liabilities amounted to Euro 1.1 million and consist mainly of amounts due in relation to recent
acquisitions and financial transactions. Specifically, this item is broken down as follows:
n Euro 1.0 million due to the former Axis Mundi S.A. (By-Cycle group) shareholders in relation to the deferred payment of
the sale price and earn-out clauses provided in the acquisition contract;
n Euro 0.1 million payable to former iTouch Ventures Ltd. shareholders as established at the closing of the transaction.
non-current financial liabilities amounted to Euro 47.8 million at the end of 2009 (Euro 7.2 million at December 31, 2008).
At December 31, 2009, the item consisted chiefly of:
n Euro 44.6 million representing the long-term portion of Tranche A of the loan issued by a pool of banks. As stated above,
the current portion of Tranche A of the loan is Euro 13.4 million;
n the approximately Euro 0.3 million long-term, fixed-rate loan issued at a subsidized rate by Simest S.p.A. (as per Italian
Law 394/81 on internationalization projects);
n Euro 0.9 million representing the medium-term portion of the floating-rate loan issued by Credito Emiliano S.p.A. in the
total amount of Euro 3.0 million;
n Euro 2.0 million long-term representing the medium/long-term portion of the unsecured loan issued by MCC S.p.A.
(Unicredit banking group) in the total amount of Euro 5 million.
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Directors’ report on operations
The consolidated cash flow statement at December 31, 2009 is shown in the following table:
recLaSSiFieD conSoLiDateD caSH FLoW StateMent
(in thousands of Euro) YTD 2009 YTD 2008
net FinanciaL poSition at perioD Start (66.688) (66.664)
caSH FLoW FroM operating actiVitieS
Consolidated Group result 6,938 8,127
Amortization, depreciation and write-off 13,575 19,117
Net change in the severance indemnity fund (87) 0
Net change in funds for risks and charges (1,285) (9,085)
Other ordinary activities items 3,812 (3,560)
22,953 14,599
cHange in WorKing capitaL 4,279 7,703
caSH FLoW FroM inVeSting actiVitieS
Intangible fixed assets (6,443) (12,067)
Tangible fixed assets (959) (3,188)
Investments (752) (262)
Changes in consolidation area 0 (54)
(8,154) (15,571)
caSH FLoW FroM Financing actiVitieS
Paid capital increase 0 504
Other changes in capital (1,854) (2,277)
(1,854) (1,773)
otHer cHangeS in tHe eQuitY anD FinanciaL Situation tHat Do not entaiL caSH FLoWS
Other increses (decreases) in capital (108) (5,189)
Minority interests 2,189 207
2,081 (4,982)
net FinanciaL poSition at perioD enD (47,383) (66,688)
The Cash Flow Statement was prepared using the indirect method.
The Group’s consolidated net debt amounted to approximately Euro 47.4 million at December 31, 2009, compared to net
debt of approximately Euro 66.7 million at December 31, 2008.
This change was mostly attributable to:
n cash flow generated by core business operations amounting to Euro 22.9 million;
n the change in net working capital, which had a negative impact on net debt of approximately Euro 4.2 million;
n investing activities totalling about Euro 8.2 million, mainly for:
n the subscription of shares in the company Digital Innovation India Private Ltd amounting to Euro 0.7 million, a company
which will receive the Indian assets of the Joint Venture with the Mitsui & Co. Ltd Group,
n as well as the investment in intangible assets due both to capitalization of internal costs for the development of the
proprietary platform and external acquisitions amounting to Euro 6.5 million.
38
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Directors’ report on operations
1.5 risk manaGemenT
General risk management principles
The principles that make up the Buongiorno Group’s risk management policy are based on preventing the main risks
associated with the Group’s objectives and relate to the Company’s strategic, operative and financial areas. The purpose of risk
management within the Buongiorno Group is to determine the opportunities and threats that might impact the achievement of
long-term objectives, as opposed to safeguarding a single event. As set out in the individual policies and corporate processes,
management of the Group’s exposure to risks is based on the principle according to which operating and financial risks are
managed by the process owner. The main risks are reported and discussed by the Group’s top management in order to create
the conditions necessary to ensure their coverage, obtain the necessary insurance and evaluate the residual risk.
operating risks
The Buongiorno Group takes steps to ensure that operating and product risks, as well as any losses that could be incurred
by the Group or its customers, are constantly monitored, managed or insured. For this purpose, the Buongiorno Group has
formulated a plan with a major international insurance broker that provides optimal coverage for risks that may be associated
with the Group’s main assets, including intangible assets (brand and intellectual property) and material investments. The plan
also covers liabilities that might arise as a result of product or software malfunctions experienced by customers or the Group’s
companies. Specific guidelines exist for the main financial risks, including interest rate risks and credit risks.
financial risks
The Buongiorno Group’s priorities are value creation, sustainable growth, profitability and the minimization of risks. Accordingly,
the Group’s financial structures are focused on guaranteeing the utmost efficiency in using credit lines for developing its
business and in minimizing financial risks associated with operating management (adverse risk). The Group’s Financial
Department, which is located in Milan, is governed by operating policies regarding interest rate, exchange rate, liquidity,
credit and price risks.
exchange rate risk
The Group is exposed to market risk deriving from fluctuations in exchange rates, insofar as it operates in an international context
in which transactions are carried out in currencies other than the Euro. Moreover, the Buongiorno Group has subsidiaries
in non-Euro areas; as such, the value of its shareholdings (and related equity) is affected by fluctuations in exchange rates
denominated in local currencies. Changes in net capital and reserves as a result of exchange rate fluctuations are charged
to a reserve called the “conversion reserve” in the consolidated balance sheet.
The following table highlights the balance of the Group’s foreign currency exposure as of December 31, 2009 and 2008.
(in thousands of Euro) totaL
2009 2008
current aSSetS
TRADE RECEIVABLES
- of which denominated in Pound Sterling 3,890 4,346
- of which denominated in US Dollars 2,880 3,874
- of which denominated in other currencies 11,034 17,837
CASH AND CASH EQUIVALENTS
- of which denominated in Pound Sterling 4,686 1,553
- of which denominated in US Dollars 4,613 4,898
- of which denominated in other currencies 14,059 13,757
non current LiaBiLiitieS
OTHER NON CURRENT FINANCIAL LIABILITIES
- of which denominated in Pound Sterling 0 0
- of which denominated in US Dollars 0 934
- of which denominated in other currencies 0 0
current LiaBiLitieS
TRADE PAYABLES
- of which denominated in Pound Sterling 4,035 7,038
- of which denominated in US Dollars 2,731 2,827
- of which denominated in other currencies 10,863 13,014
OTHER CURRENT FINANCIAL LIABILITIES
- of which denominated in Pound Sterling
- of which denominated in US Dollars 956 1,705
- of which denominated in other currencies 714 1,004
The trade receivables and payables and the cash and cash equivalents expressed in GBP and USD refer to the monetary
balances disclosed on the financial statements of foreign subsidiaries as arising from the operations of said subsidiaries. For
the purposes of the consolidated financial statements, these balances were converted into euro at the exchange rate on
December 31, 2009.
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Directors’ report on operations
interest rate risk
Risks associated with changes in cash flows due to interest rate fluctuations arise mainly as a result of existing financing.
Variable-rate financing exposes the Buongiorno Group to the risk of cash flow variations relating to interest charges. Fixed-
rate financing exposes the Buongiorno Group to the risk that the fair value of the loans received will change.
The Buongiorno group may make use of derivative contracts to hedge its interest rate risk, typically Interest Rate Swaps,
which allow floating rate exposure to be transformed into fixed rate exposure. Currently, the Group has not exchange rate
hedging contracts.
Buongiorno Group’s exposure to the risk of changes in fair value is associated with its fixed-rate soft loans; accordingly, the
effects of changes in the fair value of these loans could have a marginal impact on the Buongiorno Group’s financial position.
price risk
The Group is not exposed to the price risk generated by commodity purchases, given the nature of the business which
characterizes it.
The Buongiorno Group invests its short-term cash resources in monetary instruments listed on regulated markets that are
measured at their market prices.
credit risk
Trade receivables are reported in the balance sheet net of the write-down calculated on the basis of the default risk of the
individual counterparties. In accordance with Group policy, financing is not granted to customers, and rigorously defined
terms are imposed for normal accounts receivable collection. On a monthly basis, the Group’s Financial Department monitors
the risks associated with expired accounts receivable collection (aging) and the exposure of the main customers of each of
the Group’s companies. Such information is reported to Buongiorno’s CFO, who defines the guidelines to follow in monitoring
the risk and any credit safeguard policies.
liquidity risk
The liquidity risk to which the Group might be exposed is the failure to secure financial resources sufficient for its operations
and the development of its industrial and commercial activities. The two main factors that determine the Group’s liquidity
situation are the resources provided by or used in operating and investing activities and the maturity and extension of debt or
the liquidity of financial investments and market conditions. The cash flows and liquidity of the Group’s operating companies
are monitored by the finance department of the parent company with the objective of guaranteeing effective management of
financial resources.
As of December 31, 2009 the Group had access to a significant amount of liquidity immediately available for company
purposes and immediately available sufficient lines of credit issued by several banks and factoring companies. The Group
believes that the currently available funds and lines of credit, in addition to the resources that will be generated by operating
and financing activities, will permit it to satisfy its investment, working capital management, and debt-servicing needs at their
natural maturities.
During the year, group debt was repositioned, through the closure of the syndicated loan agreement for the sum of Euro 87
million to cover the financial needs related to the partial refinancing of the Bridge Loan provided by the IntesaSanpaolo Group
to Buongiorno S.p.A. and iTouch Ventures Ltd. in December 2007. In this way, a large part of the debt was positioned in the
medium-long term, and the short-term portion is balanced by the substantial liquidity available at December 31, 2009, and
so does not include the liquidity that will be generated during 2010 by core operations.
With the new loan agreement, the Company has achieved its goal of extending the duration of its debt and scheduling
repayment according to its future debt-servicing capacity, prudentially estimated on the basis of the cash flow that the
Company expects its core business to generate.
risks of a General nature
The Group operates in an industry that by its very nature is less exposed to the negative effects of the unfavorable economic
situation than others. Nonetheless, at present it is difficult to predict the extent of the economic crisis in the countries in which
the Group operates. As a consequence of the foregoing, if the current crisis should continue for a significant period, it could
have an impact on the Group’s earnings results.
additional information required by the international financial reporting standard n° 7
The Group is exposed to financial risks associated with its operations:
n credit risk relating to normal commercial relationships with clients and users;
n liquidity risk, with particular regard to the availability of financial resources and access to the credit market and the market
for financial instruments in general;
n market risks (principally with regard to exchange and interest rates), insofar as the Group operates at international level in
various currency areas and uses financial instruments which generate interest;
As described in the section relating to risk management, the Group, constantly monitors the financial risks to which it is
exposed, so as to evaluate the potential negative effects of these in advance and to take suitable action to mitigate them.
The following section provides qualitative and quantitative information on the incidence of such risks on the Group. The
quantitative data presented below do not have a predictive value, in particular, the sensitivity analyses of market risk cannot
reflect the complexity and correlated reactions of markets which may derive from every forecasted change.
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Directors’ report on operations
classes of financial instruments
Items of the Balance Sheet, classified according to the respective risk categories as of December 31, 2009 and 2008, are
presented below.
Situation at December 31, 2009
(in thousands of Euro) totaL cLaSSeS oF HoMogeneouS riSKS
12.31.2009 CREDIT LIQUIDITY INTEREST EXChANgE PRICE
RATE RATE
current aSSetS
TRADE RECEIVABLES 54,874
- of which denominated in Euro 37,070
- of which denominated in other currencies 17,804
OTHER RECEIVABLES 2,593 2,593
CURRENT FINANCIAL ASSETS 19
- of which SICAVs 19 19
- of which commercial paper
CASH AND CASH EQUIVALENTS 38,761
- of which denominated in Euro 15,402
- of which denominated in other currencies 23,358
non current LiaBiLiitieS
CONVERTIBLE BOND -
LONG TERM BANK BORROWINGS 47,789 47,789
OTHER NON CURRENT FINANCIAL LIABILITIES
- of which denominated in Euro
- of which denominated in other currencies
current LiaBiLitieS
TRADE PAYABLES 61,888
- of which denominated in Euro 44,259
- of which denominated in other currencies 17,629
SHORT TERM BANK BORROWINGS 36,231 36,231
OTHER CURRENT FINANCIAL LIABILITIES 2,114
- of which denominated in Euro
- of which denominated in other currencies 1,093 1,022
Situation at December 31, 2008
(in thousands of Euro) totaL cLaSSeS oF HoMogeneouS riSKS
12.31.2008 CREDIT LIQUIDITY INTEREST EXChANgE PRICE
RATE RATE
current aSSetS
TRADE RECEIVABLES 68,276
- of which denominated in Euro 42,219
- of which denominated in other currencies 26,057
OTHER RECEIVABLES 4,369 4,369
CURRENT FINANCIAL ASSETS 573
- of which SICAVs 573 573
- of which commercial paper
CASH AND CASH EQUIVALENTS 44,972
- of which denominated in Euro 24,765
- of which denominated in other currencies 20,207
non current LiaBiLiitieS
CONVERTIBLE BOND 965 965
LONG TERM BANK BORROWINGS 5,296 5,296
OTHER NON CURRENT FINANCIAL LIABILITIES 975
- of which denominated in Euro
- of which denominated in other currencies 41 934
current LiaBiLitieS
TRADE PAYABLES 77,805
- of which denominated in Euro 54,926
- of which denominated in other currencies 22,879
SHORT TERM BANK BORROWINGS 103,097 103,097
OTHER CURRENT FINANCIAL LIABILITIES 1,900
- of which denominated in Euro
- of which denominated in other currencies 195 1,705
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Directors’ report on operations
financial assets and liabilities categories
The following tables show Balance Sheet items classified according to the categories provided for by IAS 39 as of
December 31, 2009 and 2008.
The carrying amount of financial assets and liabilities was fairly equal to their fair value.
Situation at December 31, 2009
(in thousands of Euro) AT FAIR VALUE LoANS VALUED AT VALUED ToTAL FAIR
AND RECEIVABLES AMoRTIzED CoST AT CoST VALUE
current aSSetS
Trade receivables 54,874 54,874 54,874
Other receivables 2,593 2,593 2,593
Current financial assets 19 19 19
Cash and cash equivalents 38,761 38,761 38,761
non current LiaBiLitieS
Convertible bond -
Bank loans 47,789 47,789 47,789
Other financial liabilities -
current LiaBiLitieS
Trade payables 61,888 61,888 61,888
Bank loans 36,231 36,231 36,231
Other financial liabilities 2,114 2,114 2,114
Situation at December 31, 2008
(in thousands of Euro) AT FAIR VALUE LoANS VALUED AT VALUED ToTAL FAIR
AND RECEIVABLES AMoRTIzED CoST AT CoST VALUE
current aSSetS
Trade receivables - 68,276 - - 68,276 68,276
Other receivables - 4,369 - - 4,369 4,369
Current financial assets 573 - - - 573 573
Cash and cash equivalents 44,972 - - - 44,972 44,972
non current LiaBiLitieS
Convertible bond - - 965 - 965 965
Bank loans - - 5,296 - 5,296 5,296
Other financial liabilities - - - - 975 975
current LiaBiLitieS
Trade payables - - - 77,805 77,805 77,805
Bank loans - - 103,097 - 103,097 103,097
Other financial liabilities - - - 1,900 1,900 1,900
Trade and other receivables generated Euro 1,317 thousand in costs pertaining to losses on receivables and allocations to
the bad debt provision (Euro 477 thousand at December 31, 2008). It is deemed that the carrying value of these estimates
provides a reasonable approximation of their respective fair values.
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Directors’ report on operations
Other financial assets and cash and cash equivalents generated Euro 661 thousand in finance income and interest income
in 2009 (Euro 1,552 thousand in 2008).
Bank loans, in addition to current account overdrafts, generated total interest expenses of approximately Euro 5,574 thousand
(compared to Euro 7,877 thousand in 2008). This reduction is due to the lower average level of debt and the marked
reduction in interest rates to which most of the bank loans are linked. The current value of short-term bank borrowings was
measured by assuming a fair value corresponding to the recognized fair value inasmuch as said borrowings have maturities
falling in 2010 and bear interest at floating market rates. The fair value of borrowings with maturities beyond 2009, which also
bear interest at floating rates, approximates the market value.
Financial debts measured at cost arise from the acquisition of equity investments that do not have a quoted market price and
therefore their fair value cannot be reliably measured.
Guarantees
As of December 31, 2009 the Group had issued the following guarantees:
n pledge of the shares of a number of subsidiaries as collateral for the financing of the contract with Banca IMI S.p.A.;
n short-term pledge on the balances held in a current account amounting to Euro 3 million to support a commercial
transaction on the Indian market;
n pledge of the cash and cash equivalents in a current account for an amount of Euro 250,000 as security against any
default on the credit line granted by Simest to Buongiorno S.p.A.
liquidity risk
The following table shows financial liabilities, classified by maturity:
Situation at December 31, 2009
(in thousands of Euro) <1 YEAR >1 <2 YEARS >2 <3 YEARS >3 <4 YEARS >4 <5 YEARS >5 YEARS
non current LiaBiLitieS
Convertible bond - - - - - -
Bank loans - 14,891 13,989 13,097 5,812 -
Other financial liabilities - - - - - -
current LiaBiLitieS
Convertible bond 61,888 - - - - -
Bank loans 36,231 - - - - -
Other financial liabilities 2,114 - - - - -
Situation at December 31, 2008
(in thousands of Euro) <1 YEAR >1 <2 YEARS >2 <3 YEARS >3 <4 YEARS >4 <5 YEARS >5 YEARS
non current LiaBiLitieS
Convertible bond - 965 - - - -
Bank loans - 2,062 2,149 1,086 - -
Other financial liabilities - 975 - - - -
current LiaBiLitieS
Convertible bond 77,805 - - - - -
Bank loans 103,097 - - - - -
Other financial liabilities 1,900 - - - -
credit risk
The Group is subject to various concentrations of credit risk based on the nature of the business segments termed Marketing
Services (MS) and Consumer Services, (CS) as well as from the markets in question.
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Directors’ report on operations
For the purposes of this analysis, macroclasses of homogeneous risk have been highlighted, identified on the basis of the
business models of Group companies in order to represent their exposure to credit risk more accurately. The following
classes have been highlighted:
n Trade receivables consisting of such receivables deriving from identified business segments. The CS segment receivables
with leading companies operating in national and international mobile telephony markets are significant.
n Other receivables mainly consist of receivables arising on operations of a non-commercial nature for which an individual
solvency analysis has been carried out.
The following tables present the breakdown by maturity of the identified risk classes:
Situation at December 31, 2009
(in thousands of Euro)
cLaSSeS totaL eXpireD totaL to eXpireD Write-DoWnS
RECEIVABLES 0-30days 31-60days 61-90days more than 90 EXPIRED
Trade receivables 56,451 4,648 1,723 1,289 3,323 10,983 45,468 (1,577)
Other receivables 2,964 - - - - - 2,964 -
total 59,416 4,648 1,723 1,289 3,323 10,983 48,432 (1,577)
Situation at December 31, 2008
(in thousands of Euro)
cLaSSeS totaL eXpireD totaL to eXpireD Write-DoWnS
RECEIVABLES 0-30days 31-60days 61-90days more than 90 EXPIRED
Trade receivables 68,276 4,619 1,015 605 2,148 8,387 59,889 (695)
Other receivables 4,369 - - - - - 4,369 -
total 72,646 4,619 1,015 605 2,148 8,387 64,258 (695)
The Group does not renegotiate expired credits.
The notes to the consolidated financial statements present the movements in the fund for bad debts.
market risks: sensitivity analysis
In terms of market risks, the Group is exposed to interest rate risk, exchange rate risk, and price risk. A sensitivity analysis
was conducted of the balance sheet items that could undergo a change in value due to the fluctuation of exchange rates,
interest rates, and market prices. The estimate referred to the following balance sheet items in detail:
n trade receivables and payables in foreign currencies;
n bank deposits in foreign currencies;
n loans;
n financial liabilities;
n short-term financial assets.
The Group is exposed to risks deriving from the fluctuation of exchange rates which may have an impact on its profit or
equity. These risks mainly derive from the fact that some subsidiaries of the Group are located in countries not belonging
to the European Monetary Union, such as the United States, the United Kingdom, Turkey, Bolivia, Chile, Peru, Mexico,
Argentina, Brazil, Colombia, Ecuador, Hong Kong, South Africa, Nigeria, Australia, New Zealand, Norway, Denmark, Sweden,
Finland, Switzerland, Romania, Morocco and Venezuela. Since the Group’s reference currency is the Euro, the profit and
loss accounts of such companies are converted into Euros at the average exchange rate for the period, and for constant
revenues and margins in local currency, variations in exchange rates may have an effect on the countervalue in Euros of
the revenues, costs and profits. Assets and liabilities of the consolidated companies with a currency of account other than
the Euro may have different countervalues in Euro, depending on the evolution of exchange rates. As established by the
accounting principles adopted, the effects of such evolutions are recognized directly in equity under the item conversion
difference. At the reporting date, there were no hedges in existence for such exposure. The following assumptions and
methods were applied to conduct the sensitivity analysis:
n assumptions and calculation methods: the risk is substantially tied to the fluctuation of the USD and GBP, which are the
foreign currencies of greatest relevance to the Buongiorno Group. For these currencies, immediate positive and negative
shifts of 5% in the spot exchange rate at December 31 were assumed. The table shows the impact of this change on the
figure disclosed on the financial statements.
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Directors’ report on operations
With reference to interest rates, Group companies use external financial resources in the form of debt and deploy available
liquidity in money and financial market instruments. Changes in levels of market interest rates influence the cost and yield
of the various forms of financing, and applications, hence affecting the amount of net financial charges of the Group. The
following assumptions and methods were applied to conduct the sensitivity analysis:
n assumptions and calculation methods: the effect of an immediate increase and decrease of 0.5% in annual rates on the
profit and loss account was calculated. The interest rates on bank deposits that generate interest income are almost
entirely linked to the performance of interbank rates. To estimate the increase or decrease in interest income, a 0.5% shift
was applied to the average annual balance of bank deposits. Floating-rate loans generate interest expenses, the amount
of which is linked to the performance of the benchmark interest rates. To estimate the increase or decrease in interest
expenses, a 0.5% shift was applied to the principal of outstanding loans at the balance sheet date.
price risk applies to short-term cash investments. The following assumptions and methods were applied to conduct the
sensitivity analysis:
n assumptions and calculation methods: the effect of an immediate 5% increase and decrease in the market value of
financial assets at December 31, 2009 on the profit and loss account was calculated.
The following table shows the effects of the assumptions set out above on the consolidated financial statements:
intereSt rate riSK eXcHange rate riSK price riSK
-0,5% 0,5% -5% 5% -5% 5%
ChANgE ChANgE ChANgE ChANgE ChANgE ChANgE
INTEREST INTEREST EXChANgE EXChANgE NAV NAV
(in thousands of Euro) RATE RATE RATE RATE
aSSetS
TRADE RECEIVABLES IN FOREIGN CURRENCY
- of which denominated in Pound Sterling (194) 194
- of which denominated in US Dollar - - (144) 144 - -
caSH anD caSH eQuiVaLentS
- of which denominated in Euro (78) 78 - - - -
- of which denominated in Pound Sterling - - (234) 234 - -
- of which denominated in US Dollar - - (231) 231 - -
Short term financial assets (SICAVs) - - - - - -
Total impact of pre-tax financial assets (78) 78 (803) 803 - -
non current LiaBiLitieS
MEDIUM/LONG TERM BANKS LOANS 56 (56) - - - -
OTHER NON CURRENT FINANCIAL LIABILITIES - - - - - -
current LiaBiLitieS
TRADE PAYABLES
- of which denominated in Pound Sterling - - 202 (202) - -
- of which denominated in US Dollar - - 122 (122) - -
SHORT TERM BANK LOANS 82 (82) - - - -
OTHER CURRENT FINANCIAL LIABILITIES
- of which denominated in Pound Sterling - - - - - -
- of which denominated in US Dollar - - 48 (48) - -
Total impact of pre-tax financial liabilities 138 (138) 371 (371) - -
Impact on pre-tax results (60) 60 (432) 432 - -
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Directors’ report on operations
1.6 relaTeD-parTy TransacTions
At December 31, 2009, the Buongiorno Group maintained relationships with companies qualifying as related parties within
the meaning of the Code for Related-party Transactions:
Companies or parties holding rights in Group companies:
n Mitsui & Co. Ltd which holds a 18.96% stake in the share capital of the subsidiary Buongiorno USA inc and, consequently
of Rocket Mobile Inc; Mitsui & Co. Ltd also holds a 45.5% stake in the share capital of Buongiorno Marketing Services B.V.;
n Nevid Nikravan, a director of Buongiorno S.p.A., from whom was purchased on October 7, 2009 the minority holding
of 20.34% of the share capital that he held in the company Buongiorno Dijital Iletisim A.S. (Turkey) through Yamdez
Consulting Advisers SL, a company controlled by the same.
Commercial transactions pertaining to the core business of companies included in the consolidation area were realized with
the said companies\entities at arm’s length during the course of the year.
The Group holds a non-controlling interest in Buongiorno Hong Kong Ltd, in which Mitsui & Co. Ltd. holds 51% stake and
Buongiorno a 49% stake, and which was consolidated using the equity method. The Buongiorno Group effects, at arm’s
length, commercial transactions pertaining to its core business, with the same company and/or its subsidiaries.
Moreover, increase in the share capital of the Dutch holding company Buongiorno Marketing Services Netherland B.V.,
underwritten through the contribution of the 100% equity investment in Buongiorno Russia LLC by the associate Buongiorno
Hong Kong Ltd. As a result of this transaction, the Buongiorno Group’s ownership of the Dutch holding company Buongiorno
Marketing Services Netherland B.V. fell from 60% to the present 54.5%. The other minority-interest shareholders are the
Mitsui & Co. Ltd. Group and the associate Buongiorno Hong Kong Ltd., which respectively hold 36.4% and 9.1% stakes in
Buongiorno Marketing Services Netherland B.V..
On November 3, 2009, the company Buongiorno Digital Innovation India Private Ltd was set up, in which Mitsui & Co holds
a 51% stake and Buongiorno 49%; the company was consolidated by the latter using the equity method. At December 31,
2009 no commercial transactions had yet taken place with that company, given its recent formation.
Transactions completed during the year between Buongiorno and these related parties are summarized in the following table:
(in thousands of Euro) TURNoVER RE-DEBITINg oF DIRECT/INDIRECT FINANCIAL oThER
PERSoNNEL CoSTS CoSTS EXPENSES/INCoMES
Buongiorno Marketin Services España, S.L. 7 - 9 - -
Buongiorno Marketing Services B.V. 321 329 63 (6) -
Buongiorno Marketing Services Deutschland GmbH 8 - - - -
Buongiorno Marketing Services France S.A. 3 - - - -
Buongiorno Marketing Services GmbH At 4 - 16 - -
Buongiorno Marketing Services Italy S.r.l. 376 88 15 - -
Buongiorno Marketing Services UK Ltd 4 3 - - -
Buongiorno Marketing Services US Inc 2 - - - -
Buongiorno RUS LLC 7 - - - -
Buongiorno USA Inc 930 1 773 155 -
Hotsms.com B.V. 7 1 318 - -
Rocket Mobile Inc 444 - 156 - -
Yamdez Consulting Advisers SL - - - - (260)
Buongiorno Hong Kong Ltd - - 438 - -
Buongiorno Hong Kong Ltd INDIA 75 - 227 - -
At December 31, 2009, the Company held 35% of the share capital of the company Inches Music Group S.r.l. The latter
is partly owned by Capital B!, in which Mauro Del Rio - Buongiorno’s reference shareholder - holds the majority stake. The
company’s purpose is to manage and sell “Artist community” tracks. During the year, the Company made a payment of Euro
53,846 to Inches Music Group S.r.l. to replenish losses; the equity investment was then written down by a like amount.
The Group also undertook commercial transactions with said company and recognized costs of Euro 6,874.
With regard to related-party transactions, including inter-company transactions, it must be pointed out that the same do not
qualify as either atypical or unusual, since they were effected in the normal course of the business operations of the Group
companies in question, and concluded at arm’s length, in light of the features of the goods and services involved.
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Directors’ report on operations
1.7 foreseeable evoluTion
2009 was a difficult year due to the global crisis that has affected nearly all geographical areas in which Buongiorno operates,
albeit to varying extents. Buongiorno has, however, proved itself capable of tackling the situation and closed the year with
results in line with the expectations expressed by management at the beginning of the year. The Company has confirmed
the quality of its business in terms of stable profits and cash generation, as well as having laid the foundations for developing
new business lines.
Buongiorno is looking to 2010 with confidence and renewed growth prospects.
In detail:
In the B2C sector (which currently accounts for about 50% of Buongiorno’s Revenues) B! wants to strengthen its leadership
focusing on growing its market share in those areas where it is already present, opening up new markets and introducing
new products into its portfolio, including apps for iPhone and Android.
In the B2B sector (which includes services for the telephone operators and the brands) its aim is to grow by strengthening
successful products further in order to allow upselling on existing contracts as well as winning new contracts for: IMM
(Intelligent Mobile Marketing), SuperContest, Loyalty and CRM programs, Application and Games Stores, Messaging and
alert platforms and Mobile ADV platform and network.
Buongiorno’s core competencies offer very real potential for opening new business lines: the mobile social network and
related tools already feature in Buongiorno’s product portfolio, other services will require a longer period and significant
investments to generate profits. In 2010, the direction indicated by management has already identified at least 2 new
business lines capable of generating profits over the next 2-3 years.
1.8 reporT on operaTions of The parenT company buonGiorno s.p.a.
The Parent Company, confirming a trend which started last year, has strengthened its role as a service company for the
Group. This has involved greater commitment in terms of coordination, control and technical support, which has translated
into an increase in the services delivered to Group companies and, as a result, a rise in inter-company revenues (+11%
compared to December 31, 2008).
Revenues relating to third parties fell by about 23% compared to the previous year. This result has to be seen in a dual light:
although, on the one hand, revenues generated by the direct business model (“B2C”) in the Mobile Content 1.0 market fell
by about 11%, on the other hand, this reduction represents a significant achievement for a year in which market conditions
were difficult for the whole VAS sector. This business model, sustained by levels of advertising spending predicted to rise, is
expected to perform well during next year.
The “B2O” business line (based on collaboration with the main mobile telephone operators in which the Company provides
technology, content and marketing advice), on the other hand, experienced difficulties in replacing a number of services
terminated last year with new initiatives, resulting in a 47% fall in revenues. However, this segment is showing encouraging
signs resulting from the trials carried out during the last quarter on new types of services as part of the marketing advice
offered by the Company to the mobile telephone operators.
The combination of inter-company and third party revenues show a moderately negative trend. The Value of Production fell
from about Euro 51.6 million in 2008 to about Euro 47.1 million in 2009, a fall of 9%.
From a financial point of view, the refinancing operation led to the full repayment of the Loan originally taken out with Banca
IMI (Intesa Sanpaolo Group) falling due on June 26, 2009 and amounting to Euro 100 million. This took place at the same
time as the drawdown of the medium/long-term loan granted for the total amount of Euro 87 million taken out with a pool of
banks, which was organised by Banca IMI.
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Directors’ report on operations
1.8.1 economic operations
Separate proFit anD LoSS account
(in thousands of Euro) YTD 2009 YTD 2008 VARIANCE VAR. %
SaLeS oF gooDS anD SerViceS 45,008 49,715 (4,707) (9%)
Other income and increase of fixed assets for internal works 2,053 1,832 221 12%
totaL VaLue oF proDuction 47,061 51,547 (4,486) (9%)
Services, use of third-party assets, consumables and goods (31,099) (28,676) (2,423) 8%
Personnel costs (11,566) (10,804) (762) 7%
groSS operating Margin 4,397 12,066 (7,669) (64%)
Amortization, depreciation and write-downs (3,124) (2,278) (846) 37%
Allowance for bad debts and other provisions (686) (1,237) 551 (45%)
Other operating costs (254) (314) 60 (19%)
operating proFit / (LoSS) 333 8,238 (7,905) (96%)
Net financial earnings / (charges) (4,153) (5,861) 1,708 (29%)
Value adjustments on financial assets (54) - (54) -
Earnings / (charges) from assets held for sale - - - -
Net non-recurrent costs - - - -
proFit (LoSS) BeFore taXation (3,874) 2,376 (6,250) (263%)
Current income taxes (402) (702) 300 (43%)
Deferred income taxes (2,373) (3,421) 1,048 (31%)
net proFit (LoSS) For tHe perioD (6,650) (1,747) (4,903) 281%
Basic earnings per share (Basic epS) (0.0625) (0.0164) (0.0461) 281%
Diluted earnings per share (Diluted epS) (0.0585) (0.0155) (0.0430) 278%
Buongiorno S.p.A.’s revenues for 2009 were approximately Euro 47.1 million, marking a decrease of 9% compared to
December 31, 2008.
The following table provides a breakdown of revenues from third parties, subsidiaries and associates:
SaLeS oF gooDS anD SerViceS
(in thousands of Euro) YTD 2009 YTD 2008
Consumer Services 23,082 29,932
Intercompany Services 21,926 19,783
Associates Services - -
Sales of goods and services 45,008 49,715
Revenues from third parties, traditionally identified as “Consumer Services”, fell 23% during the year from Euro 29.9 million in
2008 to Euro 23.1 million in 2009 .
This reduction, as already illustrated above, can be attributed to the difficulties of replacing services offered in collaboration
with the mobile telephone carriers terminated during last year, as well as the difficult conditions in the entire VAS sector during
the year which led to the moderate fall also in revenues from the B2C business line.
Revenues from Intercompany Services, i.e. services provided by the Parent Company to its subsidiaries or associates,
increased by 11% as of December 31, 2009 compared to the previous year (from Euro 19.8 million in 2008 to Euro 21.9
million in 2009). This increase is attributable to the extension of services rendered to a growing number of Group companies.
The Parent Company’s Gross Operating Margin (GOM) at December 31, 2009 amounted to Euro 4.4 million, compared to
Euro 12.1 million for the previous year, a fall of 64%; this movement is due primarily to the drop in sales but also to the rise in
costs, both for personnel (due to the provision set aside to cover the variable portion of the remuneration which was higher
than last year’s provision) and for variable costs due to the increase in services rendered by other Group companies and in
the costs incurred to complete restructuring and reorganisation after the acquisition of the iTouch group.
The Operating Profit of Euro 0.3 million, down 96% compared to Euro 8.2 million at December 31, 2008. Provisions for
risks and charges decreased from Euro 1.2 million in 2008 to about Euro 0.7 million in 2009 and mainly refer to provisions
to partially cover penalty proceedings instigated by regulatory authorities and the Revenue Service. Although the company
deems that it is able to respond to the claims received with more than adequate evidence, it has considered it prudent to set
aside provisions to cover the amounts disputed.
“Other operating costs” amounted to Euro 0.25 million, with a slight decrease compared to the previous year (Euro 0.3
million).
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Directors’ report on operations
“Net financial charges” fell significantly from Euro 5.9 million in 2008 to Euro 4.2 million at December 31, 2009. The 29%
reduction of Euro 1.7 million can be attributed primarily to:
n lower financial and accessory charges on bank loans received, reducing from Euro 7.6 million in the previous year to
the current figure of Euro 4.7 million, a positive movement of Euro 2.9 million; the fall may be attributed both to the fall in
interest rates in the period in question and the significant reduction in the value of gross debt;
n reduced interest income accrued from Group companies, amounting to Euro 0.4 million at December 31, 2009, compared
to Euro 0.9 million in the previous year with a decrease of Euro 0.5 million;
n exchange gains of about Euro 0.1 million against Euro 0.8 million for the previous year, a decrease of Euro 0.7 million.
“Value adjustments on financial assets” at December 31, 2009 amounted to about Euro 54 thousand, whilst they showed a
zero balance at the end of the previous year.
Profit before taxation went from Euro 2.4 million at December 31, 2008 to Euro 3.9 million for 2009.
Income taxes for the year were negative at Euro 2.8 million compared to Euro 4.1 million for the previous year.
Deferred taxes relate to the reversal effect due to the expiry of prior tax losses of about Euro 3 million and the recognition of
Euro 0.6 million tax receivables relating to research and development costs incurred during 2009 and 2008.
Estimated taxes for the year, essentially IRAP, amounted to Euro 0.4 million, a reduction of Euro 0.7 million compared to the
previous year.
The result for the year thus showed a loss net of tax of Euro 6.65 million, compared to a net loss of Euro 1.8 million for 2008.
1.8.2 financing and investment operations
BaLance SHeet - Buongiorno S.p.a.
(in thousands of Euro) 12.31.2009 12.31.2008 VARIANCE
FiXeD aSSetS
Intangible fixed assets 8,300 6,938 1,362
Tangible fixed assets 252 194 59
Financial fixed assets 304,099 195,309 108,789
312,651 202,441 110,210
net WorKing capitaL
Inventories - - -
Trade receivables 26,188 21,780 4,409
Other assets 1,985 1,223 762
Trade payables (18,705) (12,228) (6,478)
Other liabilities (4,522) (2,837) (1,685)
4,946 7,938 (2,992)
SeVerance inDeMnitY FunD (933) (1,035) 102
proViSion For riSKS anD cHargeS (1,964) (1,352) (611)
net inVeSteD capitaL 314,700 207,991 106,709
capitaL anD reSerVeS
Paid-up capital 27,652 27,652 -
Reserves and profits (losses) carried forward 104.,366 106,318 (1,952)
Profit (loss) for the period (6,650) (1,747) (4,903)
125,369 132,223 (6,854)
MeDiuM anD Long-terM BorroWingS 19,529 (750) 20,279
SHort-terM BorroWingS -
Financial current assets (2,678) (3,921) 1,243
Cash (3,824) (4,210) 386
cash and equivalents (*) (6,502) (8,131) 1,629
Debts to bans and other financial institutions 176,305 84,649 91,656
169,803 76,518 93,285
net FinanciaL poSition 189,331 75,768 113,563
totaL SHareHoLDerS’ eQuitY anD BorroWingS 314,700 207,991 106,709
(*) if negative, it constitutes an asset for the Company
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Directors’ report on operations
At December 31, 2009, Buongiorno’s Net Invested Capital was Euro 314.7 million, composed of Net Fixed Assets of Euro
312.6 million, and Net Working Capital of Euro 4.9 million, net of the Provisions for Risks and Charges and the Severance
Indemnity Fund of Euro 2.9 million.
The main changes in the balance sheet for the year relate to the following movements due to utilization:
n investments rose by Euro 108.8 million primarily as the result of an inter-company transaction involving the acquisition
of a stake in iTouch Ltd for Euro 110 million from iTouch Holding Ltd. In fact, the latter company, together with its parent
company iTouch Venture Ltd, also an investee company of Buongiorno S.p.A., have been going through liquidation
proceedings since December 2009 (for further details about the transaction please refer to paragraph 1.1 “The Group at
December 31, 2009 and Related Developments”) . In addition, the subscription of 4,900,000 shares representing 49%
of the share capital of Buongiorno Digital Innovation India Private Ltd for a total of about Euro 0.7 million (in this regard see
paragraph 1.6 Related-party Transactions). Investments include the transfer to the profit and loss account of deferred tax
assets amounting to Euro 3 million. The balance went from Euro 14.4 million at December 31, 2008 to Euro 11.4 million
at December 31, 2009;
n net Working Capital decreased by Euro 3 million due to the increase in trade payables from Euro 12.3 million to Euro
18.7 million and other liabilities (up from Euro 2.8 to 4.5 million), which were only partly offset by the increase in trade
receivables from Euro 21.8 million to Euro 26.2 million and other assets that increased by Euro 762 thousand;
n the Severance Indemnity Fund for salaried employees decreased by Euro 102 thousand compared to about Euro 20
thousand for the previous year. Provisions for Risks and Charges increased by Euro 611 thousand mainly due to prudential
provisions made for proceedings instigated by regulatory authorities and the Revenue Service.
Net Invested Capital is covered by financial resources composed of Shareholders’ equity of Euro 125.4 and the net financial
debt of Euro 169.8.
Equity decreased by Euro 6.9 million due to:
n a decrease of about Euro 0.2 million relating to unrealized losses on receivables on the inter-company loan denominated
in USD;
n a decrease of Euro 6.7 due to the loss for the year.
The Reclassified Consolidated Cash Flow Statement as of December 31, 2009 is provided below:
recLaSSiFieD caSH FLoW StateMent oF Buongiorno S.p.a.
YTD 2009 YTD 2008 VARIAzIoNI
net FinanciaL poSition at perioD Start (75,768) (72,236) (3,532)
cash Flow from operating activities
Net result (6,650) (1,747) (4,903)
Amortization, depreciation and write-off 3,124 2,278 846
Net change in the severance indemnity fund (102) 20 (123)
Net change in funds for risks and charges 611 865 (254)
Other ordinary activities items 2,999 4,064 (1,065)
(18) 5,481 (5,498)
change in working capital 2,999 (4,181) 7,181
cash Flow from investing activities
Intangible fixed assets (4,388) (2,508) (1,879)
Tangible fixed assets (157) (19) (137)
Investments (111,792) (531) (111,261)
Non-current assets held for sale - - -
(116,336) (3,058) (113,278)
cash Flow from Financing activities
Paid capital increase 0 504 (504)
Other changes in capital (209) (2.277) 2,069
(209) (1,774) 1,565
other changes in the equity and financial - - -
situation that do not entail cash flows
net FinanciaL poSition at perioD enD (189,331) (75,768) (113,563)
The movement in the Net Financial Position appears to be contrary to the movement in the Group’s Net Financial Position,
since net financial debt for the period increased from Euro 75.8 million at December 31, 2008 to Euro 189.3 million. This
result is mostly due to the cash flow from loan activity which absorbed Euro 116.3 million (against Euro 3.1 million in the
previous year) and particularly to the inter-company loan taken out, in December 2009, to service the acquisition of the
holding in iTouch Ltd which will not generate monetary outlays (for further details about the operation refer to paragraph 1.1
“The Group at December 31, 2009 and Related Developments”).
Cash flow from operating activities was negative at Euro 18 thousand (as against a positive balance of Euro 5.5 million in the
previous year), whilst net working capital increased by about Euro 3 million.
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Directors’ report on operations
1.9 human resources
At December 31, 2009, Buongiorno’s workforce had a total of 977 employees and collaborators (1,045 units at December
31, 2008), despite 30 employees of Buongiorno Russia LLC being included in the consolidation scope. At December 31,
2009, employees and staff in Italy totaled 189, of which 168 in Buongiorno S.p.A. and 21 in Buongiorno Marketing Services
S.r.l., based in the offices in Milan and Parma.
During 2009, the Group’s integration and reorganization activities permitted, inter alia, a reduction in the total workforce,
despite the engagement of new personnel for the development of next-generation services.
Buongiorno’s professionals located in 24 different countries are driven by their passion and the global culture required to best
support the local spirit. Ongoing expansion in new countries represents a constant challenge in Resource management and
an opportunity to enhance knowledge and enrich expertise.
The workforce’s average age (32) and high level of education (75% of employees have a university degree or equivalent)
contribute to a young and dynamic environment that is always open and receptive to new professional challenges and
guarantees a strong capacity for innovation, flexibility, and an effective understanding of the logic underlying the consumption
of the Company’s services.
At Buongiorno, we privilege the hiring of young, high-potential resources, who, after a period of mentoring under the tutelage
of expert managers, may experiment in the field with the knowledge they have acquired during their studies, and who are
immediately involved in international projects. This approach allows us to increase the motivation of our new resources,
optimize the time required to integrate them into the company, and promote the sharing of knowledge, thereby ensuring the
continuity of the new company’s operations. We also provide specific relocation and international career plans for our most
talented employees.
Spreading and promoting the Group’s culture and sense of belonging have been, and remain, crucial top-priority goals during
the globalization process and the integration of new resources. The values of synergy, quality, innovation and commitment
have steered the establishment of shared management and control tools so that the Group’s resources, wherever in the
world they may be, can count on the same support and identify with the same management style and criteria of internal
equity.
Over the last two years, HR Recruiting has taken important action in terms of forming contacts with the academic world and
participating in events aimed at promoting the Company’s visibility and attracting new talent with a passion for technology,
such as job fairs and a presence in publications with a target readership consisting of recent graduates.
Finally, we can report that, during 2009:
n there were no dealings with trade unions;
n no use was made of redundancy arrangements and these are not expected to be used in the future;
n the current National Collective Labour Contract is generally the Metalworkers contract with a minority of employees being
covered by the Commerce and Journalist Contract.
1.10 TechnoloGical innovaTion
In 2009, Buongiorno made considerable investments in the following technological-/application-development projects:
b3a platform
n WEB/WAP Platform: The Group has completed the base components of the WEB and WAP site development platform
using a framework that is widely available on the market (Life Ray). The WEB/WAP platform is a development environment
based on reusable components (portlets). The introduction of this tool will allow the Group to speed up the time to market
and react more quickly to its customers’ needs. This framework has already been used to develop an Application Store for
an important mobile phone manufacturer and forms the basis for the migration of all the Spanish sites from the Movilisto
platform to the B3A platform.
n Content Management: During 2009, the Group developed a new content management environment, with a very simple
and effective interface and with functionalities that will significantly reduce the times for Content Ingestion activities and
management of the User Agents, which define the characteristics of mobile devices that interact with the B3A platform
for content download. An initial version of the environment based on the “Alfresco” product has been finalized and will be
distributed to all the company functions during 2010.
n Online Subscriber Acquisition: The Group implemented CAT (Customer Acquisition Tool). A technological environment to
assist in the acquisition of new subscribers, both directly and through marketing partners (affiliate networks). This set of
tools and methodologies allows marketing personnel to plan and design “splash pages” and link them directly to information
on new-user acquisitions. It enables the Group to act on the results of acquisition campaigns by allowing personnel to
easily change the related parameters in order to improve efficiency and reduce the average cost per acquisition (CPA).
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Directors’ report on operations
n IMM (Intelligent Mobile Marketing): The Group improved the functions available to customers for the iMM product aimed at
increasing subscriber retention and raising ARPU for large mobile network operators. The product was implemented both
on O2 UK and on TIM Italia and Proximus in Belgium.
n Social Networking Platform (peoplesound): The Group invested in resources and tools for the development of a Mobile
Social Networking platform (blinko). The platform is designed to meet the requirements of Mobile Content 2.0 and is
based on methodologies and technologies that meet the collaboration standards of WEB 2.0. The platform obtained
recognition and international Awards in 2009.
upgrading and enhancement of methodologies, processes and organization supporting
systems and services
During 2009, the Group invested in software, methodologies and processes for “7*24” monitoring of our systems. B2C
services require very high service continuity, especially during peak times for online acquisition, whilst B2O services, which
now impact on the loyalty of “voice” service subscribers, must likewise be available at any hour of the day or night. The
infrastructure management service consists of a team of monitoring technicians, located in South Africa, with shifts covering
24 hours a day every day of the year and second-level specialists who are activated if the monitoring service is unable to
resolve the problem. This team uses service coupon monitoring and management tools (Nagios and Request Tracker) which
are quite widely used at international level.
The monitoring service is also accompanied by the “Second-Level Help Desk”, also located in South Africa, which allows the
telephone Operators to interact with our agents at any time of the day or night.
The monitoring service watches over 500 servers located in Italy and France through 5500 “probes” which check the
functionality of the system base components and the operating parameters of our applications.
The Group will continue to leverage its geographical presence, including in regions with low labor costs, in order to achieve
the best optimization of infrastructure operating costs, thereby also ensuring better levels of service for our customers.
upgrading and enhancement of hardware and system components
In 2009, the Group continued to invest in the expansion and modernization of the basic hardware and software resources
supporting the services offered to our customers. Investments were made, in particular, to expand the capabilities for handling
SMS traffic and for the Internet connections to our systems, which have grown significantly during the year both downstream
the consolidations and migrations and due to the change in our service mix. During 2009 the number of SMS handled by the
infrastructure in Milan doubled and Internet band usage tripled. The handling of such volumes required investment in new-
generation networking equipment that can manage these traffic peaks effectively. Investments also continued in operating
system “virtualization”, with the acquisition of modern high-performance multiprocessor servers. In addition, extra storage
farms based on Storage Area Network technologies were acquired.
upgrading and enhancement of management applications
The Group invested in the improvement of its business-support applications. During 2009, the Group completed the
development of a Global Management Control System - this system, implemented by Accenture, allows the Group to obtain
up to date information on the business operation’s fundamental parameters, which improves the timeliness of decision-
making. The system rollout has been completed in the key regions (Spain, Italy, France, UK).
In 2009 the Group selected SAP HR as its standard platform for managing human resources at global level - two initial
components have been implemented on SAP HR: management of global master records and their alignment with all the
payroll systems distributed worldwide, the dynamic management of organization charts and management of performance
evaluations and calculation of bonuses. These initiatives allow the Group to base all human resources-related topics on a
single control point (SAP HR).
The Group has also improved the internal intranet, offering more information and services to its employees, with the aim of
raising productivity and increasing motivation.
Lastly, with reference to the Group’s technological restructuring and rationalization initiatives, in 2009, Buongiorno invested
in resources and methodologies to migrate its platforms towards Group standards. This migration programme includes
34 projects - 21 were completed in 2008 and 12 in 2009. In 2010 there remains to complete the tail-end of the project
to migrate the WEB/WAP sites in Spain, which will come to an end during the first 4 months of the year. To back up the
technological activities supporting the migrations, the Group has enlisted the support of external consultants in Spain, France
and Italy. These migration and consolidation activities have produced further operating savings in addition to those already
achieved during 2008.
1.11 main company evenTs in The financial year
In February:
n On February 16, 2009, the Board of Directors of Buongiorno S.p.A. analyzed the preliminary data for 2008.
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Directors’ report on operations
In March:
n On March 16, the Board of Directors of Buongiorno S.p.A. approved the draft 2008 Annual Report.
n On March 24, 2009, during its presentation to the financial community at the 2009 STAR Conference, the Company
announced its priorities for the current year and next few years and disclosed its preliminary results for the first two months
of 2009.
In April:
n On April 10, the Company published its annual Corporate Governance Report.
n On April 30, the Ordinary Shareholders’ Meeting of Buongiorno approved the 2008 Annual Report.
n During the same meeting, the shareholders authorized a buy-back of up to 10,000,000 own shares. The resolution
authorizes the Board of Directors to repurchase up to 10,000,000 ordinary Buongiorno shares at a par value of Euro 0.26
each (approximately 9.4% of the Company’s share capital) in one or more tranches on a revolving basis up to the approval
of the financial statements for the year ending December 31, 2009, or in the 18 months following the authorization given
by the Shareholders’ Meeting.
n In the same meeting, the Company signed a binding agreement with a pool of banks headed by Banca IMI for total
refinancing of Euro 87 million.
In May:
n On May 11, the Board of Directors of Buongiorno S.p.A. approved the financial statements for the first quarter of 2009.
n During the same meeting, the Board of Directors of Buongiorno S.p.A., acting on the authority vested in it by the
Extraordinary Shareholders’ Meetings held on May 2, 2006 and May 5, 2008, also resolved to cancel 868,000 options
considered no longer exercisable and assign 4,900,000 options to 40 of the Group’s managers, as part of its employee
incentive and loyalty programs, with a strike price of Euro 0.70 each, equal to the average price over the previous 30 days,
according to the criteria for determining the strike price approved by the Shareholders’ Meeting.
In June:
n On June 23, 2009, Buongiorno signed a loan agreement with a pool of banks headed by Banca IMI (Intesa Sanpaolo
Group) that provides for the granting of a new multi-year loan of Euro 87 million. The loan agreement is divided into a
five-year, Euro 67 million senior loan with payments due every six months (Tranche A) and a Euro 20 million revolving
credit facility, also with a duration of five years, with early repayment possible starting the fourth year after the issuance
date (Tranche B). The loan calls for a spread of 300 basis points with respect to the benchmark interest rate, subject to
adjustment on a six-monthly basis according to a reward mechanism linked to the ratio of gross financial debt to EBITDA.
In August:
n On August 4, the Board of Directors of Buongiorno S.p.A. analysed the preliminary consolidated results for the first half of
2009.
n On August 27, the Board of Directors of Buongiorno S.p.A. approved the financial statements for the first half of 2009.
n During the same meeting, the integration with iTouch was declared successfully concluded 24 months after the acquisition,
with savings exceeding those initially planned.
In November:
n On November 9, the Board of Directors of Buongiorno S.p.A. approved the financial statements for Q3 2009.
In December:
n Winding-up proceedings were started for the English companies iTouch Holdings Ltd and iTouch Ventures Ltd;
n at the same time as the start of the above proceedings to wind up the companies iTouch Holdings Ltd and iTouch Ventures
Ltd, the parent company Buongiorno S.p.A. acquired from iTouch Holding Ltd (a company controlled by Buongiorno
S.p.A. through iTouch Ventures Ltd) a 100% stake in the company iTouch Ltd, at an equivalent value to the book value
of Buongiorno S.p.A.’s own holding in the company iTouch Venture Ltd in liquidation, which is also controlled. The above
transfer has resulted in inter-company payables and receivables being recognized in the financial statements of the
companies involved. At the end of the liquidation proceedings for iTouch Venture Ltd and its subsidiary iTouch Holding Ltd,
these inter-company payables and receivables will be offset so as not to alter the balance sheet and financial position of
the Buongiorno Group. It should be noted that at December 31, 2009 this inter-company transfer of the equity investment
was not material at consolidation level.
1.12 evenTs followinG December 31, 2009
As of the date of preparation of these Financial Statements, the following significant events had occurred subsequent to
December 31, 2009:
n On February 1, 2010, the Board of Directors of Buongiorno S.p.A. analysed the preliminary results for 2009 and approved
the Group’s internal budget for 2010.
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Directors’ report on operations
1.13 main shareholDers
(Holdings as per the Share Register and/or disclosures pursuant to Article 120 of Legislative Decree 58/1998)
The chart below shows the equity investments of the shareholders who, at December 31, 2009, owned more than 2% of
Buongiorno S.p.A.’s Share Capital.
20.20%
3.32%
2.98% Mauro Del Rio*
2.03% Mitsui
Holger Van Den Heuvel
71.47% AXA Rosenberg
Market
*directly 17.02% and 3.18% through Capital B!
1.14 reporT on The sTock opTion plans
Buongiorno has always favored the possibility of implementing stock option plans, feeling that they are an appropriate tool in
building relationships between the Company and its employees/directors by providing an incentive to create a professional,
long-lasting relationship. As such, over the years various equity-based incentive plans have been implemented, in compliance
with CONSOB notice No. 11508 of February 15, 2000 regarding stock option plans, as described below.
Rispetto alla Situation at December 31, 2008, non si segnala l’emissione di nuovi piani di incentivazione azionaria.
As a consequence, the following Plans were in force as of December 31, 2009:
2006-2012 stock option plan (plan 6)
In the Shareholders’ Meeting of May 2, 2006, Buongiorno defined an increase in share capital for the purposes of assigning
options to employees and directors.
The objective of this plan, just as for previous plans, is to offer the Company the possibility of assigning new stock options to
the employees and directors of the Company and Group companies and to employees who are newly recruited or arriving
from acquired companies and who merit special professional recognition.
A reserved capital Increase, of a maximum of 4,500,000 new issue shares, has been approved to cover this plan.
characteristics of the incentive plan
The Plan is regulated by a Regulation, issued by the Board of Directors on May 10, 2006 on the basis of those already
existing for the previous plans.
Some of the most important terms and conditions are as follows:
n plan expiry: December 31, 2012, with the possibility for the Board to establish different dates, but always prior to December
31, 2012, as the latest date for exercising specific assignments;
n deadline for assigning stock options: June 30, 2011;
n stock option maturity: upon reaching objectives and/or following a minimum time of employment or director service with
the Company;
n determination of the stock option issue price: the exercise price for each option, to be paid to the Company in order
to obtain the relevant new issue share, will be the price that the Board of Directors has determined, when attributing
the options, for each beneficiary or category of beneficiaries, and in any event will not be below the market value of the
stock on the assignment date as laid down in the resolution of the Company’s Extraordinary Shareholders’ Meeting on
May 2, 2006.
2008-2014 stock option plan (plan 7)
In the Shareholders’ Meeting of May 5, 2008, Buongiorno defined an increase in share capital for the purposes of assigning
options to employees and directors.
The objective of this plan, just as for previous plans, is to offer the Company the possibility of assigning new stock options to
the employees and directors of the Company and Group companies and to employees who are newly recruited or arriving from
acquired companies and who merit special professional recognition.
A reserved capital Increase, of a maximum of 5,000,000 new issue shares, has been approved to cover this plan.
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Directors’ report on operations
characteristics of the incentive plan
The Plan is regulated by a Regulation, issued by the Board of Directors on May 11, 2009 on the basis of those already
existing for the previous plans.
Some of the most important terms and conditions are as follows:
n plan expiry: December 31, 2014, with the possibility for the Board to establish different dates, but always prior to December
31, 2014, as the latest date for exercising specific assignments;
n deadline for assigning stock options: June 30, 2013;
n stock option maturity: upon reaching objectives and/or following a minimum time of employment or director service with
the Company;
n determination of the stock option issue price: the exercise price for each option, to be paid to the Company in order
to obtain the relevant new issue share, will be the price that the Board of Directors has determined, when attributing
the options, for each beneficiary or category of beneficiaries, and in any event will not be below the market value of the
stock on the assignment date as laid down in the resolution of the Company’s Extraordinary Shareholders’ Meeting on
May 5, 2008.
summary of active stock option plans as of December 31, 2009
Further details on the stock option plans in effect at the end of the period are provided in the table below.
pLan 6
12.31.2008 YEAR 2009 12.31.2009
STRIKE NoT EXERCISED ASSIgNED EXERCISED EXPIRED CANCELLED To BE CANCELLED ToTAL
PRICE (EURo)
5.16 1,545,000 - - 56,000 164,000 1,325,000
4 133,000 - - - 40,000 93,000
3.86 35,000 - - - 35,000 -
2.79 75,000 - - - 75,000
1.94 1,938,000 - - 38,000 164,000 1,736,000
1.92 60,000 - - - 60,000
0.76 15,000 - - - 15,000
0.7 790,000 - - - 50,000 740,000
3,801,000 790,000 - - 94,000 453,000 4,044,000
pLan 7
12.31.2008 YEAR 2009 12.31.2009
STRIKE NoT EXERCISED ASSIgNED EXERCISED EXPIRED CANCELLED To BE CANCELLED ToTAL
PRICE (EURo)
0.7 - 4,110.000 - - - 200,000 3,910,000
- 4,110.000 - - - 200,000 3,910,000
The “To be cancelled” column includes those options relating to personnel who have left and so can no longer be exercised.
1.15 shares helD by DirecTors, General manaGers anD key manaGemenT
personnel
In compliance with the provisions of Article 79 of CONSOB regulation No. 11971/1999, the table below lists the shares
held during financial year 2009 by the Directors and Statutory Auditors of Buongiorno, as well as their spouses who are not
legally separated and children who are minors. These shares may be held directly or through subsidiaries, trust companies
or through third parties.
NAME AND SURNAME No. oF ShARES No. oF ShARES No. oF ShARES No. oF ShARES
AT YEAR-START ACQUIRED/SUBSCRIBED SoLD AT YEAR-END
Mauro DEL Rio, Chairman 18,282,173 249,300 (435,001) 18,096,472
Mauro DEL RIO, Chairman (through Capital B!) 3,385,698 - - 3,385,698
Andrea CASALINI, CEO 1,437,000 - - 1,437,000
Felipe FERNANDEZ ATELA, Director - - - -
Anna GATTI, Director 690 - - 690
Riccardo LIA, Director - - - -
Giovanni MASSERA, Director - - - -
Nevid NIKRAVAN, Director - - - -
Wayne PITOUT, Director * 296,378 - (296,378) -
Anna PUCCIO, Director - - - -
Giorgio RICCHEBUONO, Director 50,000 - - 50,000
Holger VAN DEN HEUVEL, Director 3,172,075 - - 3,172,075
Key management personnel 919,112 - (13,000) 906,112
* Wayne Pitout is the beneficiary of a Trust that at December 31, 2009 held 500,000 shares
72
73
Directors’ report on operations
1.16 annual corporaTe Governance reporT (arTicle 123-bis Tuf)
The Corporate Governance Report will be published on the website www.buongiorno.com in the section Investor Relations-
Corporate Governance.
1.17 coDe GoverninG The proTecTion of personal DaTa of The personnel
The company complies with Legislative Decree 196/03 “Code Governing the Protection of Personal Data”.
Complying with the order issued by the Italian Data Protection Authority on November 27, 2008, entitled “Requirements for
Data Controllers for data processed using electronic means regarding system administrator duties and extension of the time
limits for these to be discharged” as amended by the order dated June 25, 2009, Buongiorno S.p.A. has formally appointed
the system administrators within the time limits specified therein.
At the same time as appointing the administrators, the Company completed an early update of the security planning
document, provided for by Legislative Decree 196/2003, an update which generally takes place by March 31 of each year.
1.18 auDiTinG
The Consolidated and Separate Financial Statements of Buongiorno S.p.A. for the year ended December 31, 2009 have
been audited by PricewaterhouseCoopers S.p.A. based on the audit appointment (for the 2007-2011 period) approved by
the Shareholders in their meeting of May 2, 2007.
Audits of the other Group companies were carried out by Deloitte & Touche for Buongiorno France S.A., Dioranews Sas and
Buongiorno Marketing Services France Sas.
1.19 Treasury sTocks
At year-end 2009, the Company retained 1,488 treasury shares worth a total of Euro 1,326 (measured at the market price
of the last purchase undertaken). At the end of the previous year, the company held the same number of treasury stocks.
1.20 proposal for allocaTinG The resulT for The year
Shareholders,
We propose that you approve the Financial Statements and the Report on Operations, as presented to you herein. We also
ask you to deliberate on the proposal for replenishing the loss for the year of Euro 6,649,628.95 as follows:
n Euro 6,649,628.95 with Other Reserves.
Parma, March 15, 2010
On behalf of the Board of Directors of Buongiorno S.p.A.
The Chairman
Mauro Del Rio
74
75
2 Consolidated annual RepoRt
of the BuongioRno gRoup as
of deCemBeR 31, 2009
77
Consolidated annual RepoRt of
the BuongioRno gRoup as of deCemBeR 31, 2009
2.1 Accounting StAtementS of the conSolidAted AnnuAl RepoRt AS
of decembeR 31, 2009
The following accounting statements are included in the Buongiorno Group’s Consolidated Annual Report as of
December 31, 2009:
n Consolidated Balance Sheet at December 31, 2009;
n Consolidated Profit and Loss Account at December 31, 2009;
n Consolidated Statement of Comprehensive Profit and Loss Account at December 31, 2009;
n Statement of Changes in Equity at December 31, 2009;
n Consolidated Cash Flow Statement for 2009.
Related-party transactions are reported in Note 35 herein.
2.1.1 consolidated balance Sheet of the buongiorno group at december 31, 2009
CONSOLIDATED BALANCE SHEET
Note (in thousands of Euro) 12.31.2009 12.31.2008 VARIANCE
NON-CURRENT ASSETS
1) Goodwill 174,978 176,638 (1,660)
2) Other intangible assets 26,898 30,391 (3,493)
3) Tangible fixed assets 3,353 4,292 (939)
4) Investments in associate companies 2,459 1,727 732
5) Other non-current financial assets 1,187 1,167 20
6) Deferred tax assets 25,232 29,898 (4,666)
234,107 244,113 (10,006)
CURRENT ASSET
7) Inventories - 1,429 (1,429)
8) Trade debtors and other receivables 67,911 80,485 (12,574)
9) Other current financial assets 3,040 573 2,467
10) Cash and cash equivalents 35,721 44,972 (9,251)
106,672 127,459 (20,787)
11) NON-CURRENT ASSETS HELD FOR SALE - - -
TOTAL ASSETS 340,779 371,572 (30,793)
12) CAPITAL AND RESERVES 158,118 150,373 7,745
NON-CURRENT LIABILITIES
13) Long-term borrowings 47,826 7,236 40,590
14) Deferred taxes 4,451 6,424 (1,973)
15) Non-current provisions 2,075 2,855 (780)
54,352 16,515 37,837
CURRENT LIABILITIES
16) Trade creditors and other payables 79,672 90,061 (10,389)
17) Current tax payables 3,202 1,944 1,258
18) Short-term borrowings 4,831 103,019 (98,188)
18) Long-term borrowings (current part) 33,514 1,978 31,536
19) Current provisions 7,090 7,682 (592)
128,309 204,684 (76,375)
20) LIABILITIES DIRECTLY ATTRIBUTABLE - - -
TO NON-CURRENT ASSETS HELD FOR SALES
TOTAL LIABILITIES AND CAPITAL AND RESERVES 340,779 371,572 (30,793)
78
79
Consolidated annual RepoRt of
the BuongioRno gRoup as of deCemBeR 31, 2009
2.1.2 consolidated profit and loss Account of the buongiorno group at december 31, 2009
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Note (in thousands of Euro) ytd 2009 ytd 2008 VARIANCE
21) SALES OF GOODS AND SERVICES 259,519 315,948 (56,429)
22) Other income and increase of fixed assets for internal works 3,099 2,990 109
TOTAL VALUE OF PRODUCTION 262,618 318,938 (56,320)
23) Services, use of third-party assets, consumables and goods (174,197) (227,865) 53,668
24) of which other non recurrent costs (2,700) (1,799) (901)
25) Personnel costs (53,640) (55,215) 1,575
24) of which non recurrent personnel costs (1,531) (2,167) 636
GROSS OPERATING MARGIN 34,781 35,858 (1,077)
26) Amortization, depreciation and write-downs (13,674) (17,491) 3,817
27) Allowance for bad debts and other provisions (2,496) 1,069 (3,565)
24) of which other non recurrent accruals (828) 1,496 (2,324)
28) Other operating costs (1,401) (3,500) 2,099
24) of which other non recurrent costs (529) (1,707) 1,178
OPERATING PROFIT / (LOSS) 17,210 15,936 1,274
29) Net financial earnings / (charges) 4,464 3,893 571
30) Value adjustments on financial assets (8,625) (13,246) 4,621
31) Earnings / (charges) from assets held for sale 99 (1,626) 1,725
PROFIT (LOSS) BEFORE TAXATION 13,148 4,957 8,191
32) Current income taxes (2,402) (4,023) 1,621
32) Deferred income taxes (3,668) 7,457 (11,125)
CONSOLIDATED PROFIT (LOSS) FOR THE PERIOD 7,078 8,391 (1,313)
Profit (loss) for the period attributable to Minority Interests 140 264 (124)
33) GROUP CONSOLIDATED PROFIT (LOSS) FOR THE PERIOD 6,938 8,127 (1,189)
34) Basic earnings per share (Basic EPS) 0.0652 0.0764 (0.0112)
34) Diluted earnings per share (Diluted EPS) 0.0617 0.0739 (0.0122)
2.1.3 consolidated Statement of comprehensive profit and loss Account of the buongiorno
group for 2009
(in thousands of Euro) 12.31.2009 12.31.2008
Consolidated profit (loss) for the period (A) 7,078 8,391
Other incomes and costs
Gains (losses) from conversion of foreing currency balance sheet 1,005 (4,949)
Total other incomes and costs for the period (B) 1,005 (4,949)
Total Consolidated profit (loss) for the period (A+B) 8,083 3,442
Profit (loss) for the period attributable to the Group 8,046 3,029
Profit (loss) for the period attributable to Minority Interests 37 413
2.1.4 Statement of changes in equity of the buongiorno group at december 31, 2009
STATEMENT OF CHANGES IN CONSOLIDATED CAPITAL AND RESERVES AT 12/31/2009
(in thousands of Euro) shARE shARE othER pRofIt pRofIt tot CApItAl pRofIt totAl totAl
dEsCRIptIoN CApItAl pREmIum REsERVEs (loss) (loss) CApItAl ANd REsERVEs (loss) CApItAl CoNsolIdAtEd
ACCouNt CARRIEd of thE REsERVEs of mINoRItIEs of ANd REsERVEs CApItAl
foRwARd gRoup of thE gRoup INtEREst mINoRItIEs ofmINoRItIEs ANd
INtEREst INtEREst REsERVEs
Balance at period-start 27,651,955 69,905,466 31,938,385 341,963 8,126,724 137,964,493 12,144,469 264,303 12,408,772 150,373,265
- Allocation of profit (loss) for the period 8,126,724 (8,126,724) - 264,303 (264,303) -
- (-) Own shares 0 0
- Reserve of assigned stock options 3,880 3,880 3,880
- Capital increase and Stock Option Plan, exercised 0 0 0
- Change in % ownership (1,325,655) (1,325,655) 1,325,655 1,325,655 0
- Due Shareholders payments 0 0
- Other movements due to reclassification (421,122) (888,377) (1,309,499) 967,022 967,022 (342,477)
- Profit (loss) for the period 1,108,155 6,938,210 8,046,365 (102,857) 139,536 36,679 8,083,044
Balance at period-end 27,651,955 69,909,346 31,299,763 7,580,310 6,938,210 143,379,584 14,598,592 139,536 14,738,128 158,117,712
80
81
Consolidated annual RepoRt of
the BuongioRno gRoup as of deCemBeR 31, 2009
STATEMENT OF CHANGES IN CONSOLIDATED CAPITAL AND RESERVES AT 12/31/2008
(in thousands of Euro) shARE shARE othER pRofIt pRofIt tot CApItAl pRofIt totAl totAl
dEsCRIptIoN CApItAl pREmIum REsERVEs (loss) (loss) CApItAl ANd REsERVEs (loss) CApItAl CoNsolIdAtEd
ACCouNt CARRIEd of thE REsERVEs of mINoRItIEs of ANd REsERVEs CApItAl
foRwARd gRoup of thE gRoup INtEREst mINoRItIEs ofmINoRItIEs ANd
INtEREst INtEREst REsERVEs
Balance at period-start 27,651,955 80,455,616 26,364,089 (14,020,083) 13,858,371 134,309,949 12,088,786 (151,065) 11,937,721 146,247,670
- Allocation of profit (loss) for the period 13,858,371 (13,858,371) - (151,065) 151,065 -
- (-) Own shares (2,277,491) (2,277,491) (2,277,491)
- Reserve of assigned stock options 642,727 642,727 0 642,727
- Capital increase and Stock Option Plan, exercised 1,536,374 1,536,374 288,047 288,047 1,824,421
- Change in % ownership 0 0 -
- Due Shareholders payments 503,655 503,655 503,655
- Other movements due to reclassification (11,192,877) 12,445,644 (1,032,700) 220,067 (229,322) (229,322) (9,255)
- Profit (loss) for the period (5,097,512) 8,126,724 3,029,212 148,023 264,303 412,326 3,441,538
Balance at period-end 27,651,955 69,905,466 31,938,385 341,963 8,126,724 137,964,493 12,144,469 264,303 12,408,772 150,373,265
(note12)
2.1.5 consolidated cash flow Statement of the buongiorno group for 2009
Note (in thousands of Euro) yEAR 2009 yEAR 2008
Cash and cash equivalent at period start 44,972 59,567
A) Cash flow generated by (used for) ordinary activities 27,232 22,303
33) Group consolidated profit (loss) for the year 6,938 8,127
26) Depreciation and amortization 12,549 13,194
26) Write-downs of fixed assets 1,125 4,298
31) Write-downs of unconsolidated equity investments (99) 1,626
15) Net change in employee benefits (87) 0
15) e 19) Net change in provision for risks and charges (1,285) (9,085)
Minority interest 140 264
32) Change in deferred taxes 3,668 (4,477)
(Gains) losses and other non-monetary accounts 4 653
8) (Increase) / decrease in trade receivables 12,952 (6,441)
16) (Increase) / decrease in trade payables (16,638) 12,470
Change in other current asset items 7,965 1,674
Cash flow generated by ordinary activities 27,232 22,303
B) Cash flow generated by (used for) investing activities (7,581) (5,749)
Net (investments) disinvestments in:
1) e 2) - intangible assets (6,443) (12,076)
3) - property and equipment (959) (3,188)
4) e 5) - investments (752) (262)
Net change in current securities (*) 573 9,831
Change in consolidation area 0 (54)
Cash flow generated by investing activities (7,581) (5,749)
C) Cash flow generated by (used for) financing activities (28,902) (31,149)
Net change in other financial assets/liabilities 16,882 (20,521)
Short term loan reinbursment (100,005) 0
New loan increase 67,537 0
Medium and long-term borrowings reinbursment (13,544) (3,873)
Capital increase (reimbursement) 0 504
Exchange rate gains (losses) 673 (5,097)
12) Other changes in equity (445) (2,162)
Cash flow generated by financing activities (28,902) (31,149)
Cash flow for the period (A+B+C) (9,251) (14,595)
Cash and cash equivalent at period end 35,721 44,972
The Cash Flow Statement was prepared using the indirect method.
82
83
Consolidated annual RepoRt of
the BuongioRno gRoup as of deCemBeR 31, 2009
noteS on the AnnuAl conSolidAted finAnciAl StAtementS
general principles followed in preparing the consolidated Annual Report and Accounting
Standards Adopted
The consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards
(IFRS) issued by the International Accounting Standards Board (IASB) and endorsed by the European Commission for the
preparation of the consolidated financial statements of companies with equity and/or debt securities listed on a regulated
market within the European Community.
IFRS means all of the International Financial Reporting Standards, International Accounting Standards (IAS) and interpretations
of the Standing Interpretations Committee (SIC) that had been adopted by the European Union and were contained in the EU
Regulations as of the date the company’s Board of Directors approved the draft financial statements.
The consolidated financial statements have been prepared under the historical cost convention, except where IFRS require
measurement at fair value, as indicated in the accounting policies.
Figures are expressed in thousands of euro and any other currencies are specifically indicated.
measurement criteria, Accounting Standards, Amendments and interpretations not yet
Approved
The Group has not carried out “early adoptions” of approved international standards, the first-time adoption of which is
scheduled for January 1, 2010.
The Group has also considered the effects of Other Standards, Interpretations and Updates approved but not yet formally
adopted by the Community legislator, listed below, and has not found that these could have a material potential impact on its
balance/sheet, operating and financial position:
n amendments to IAS 24 : These simplify the reporting requirements concerning related parties where public bodies are
involved and provide a new definition of related parties;
n 2009 enhancements: Minor amendments to 12 IFRS; IFRIC 19 : These relate to situations where a lender reaches an
agreement with a debtor company to extinguish its debt by means of company shares;
n amendments to IFRIC 14: These concern the situation when a company has to comply with minimum funding requirements
for defined benefit plans and makes an early payment to guarantee such requirements;
n amendments to IFRS 2: These clarify the accounting treatment in separate financial statements of share-based payments
settled for cash at group level;
n IFRS 9: This establishes new criteria for classifying financial assets;
n Amendments to IFRS 1: Further exemptions during the IFRS transition phase.
consolidation process
consolidation method
The Consolidated Financial Statements include the Financial Statements of Buongiorno (Parent Company) and the companies
upon which it either directly or indirectly exercises control, starting at the date the strategic and operating control of such
companies is acquired and up to the time it ceases. Specifically, control can be exercised through the direct or indirect
possession of the majority of a company’s shares with voting rights or through the exercise of a dominant influence on the
company (including indirectly, through contractual or legal agreements) by virtue of its power to make the companies’ financial
and managerial decisions and thus obtain the related benefits, even without owning shares. Voting rights at the reporting date
of the Financial Statements are taken into account when determining control.
The Balance Sheet, Profit and Loss Account and Cash Flow Statement of the consolidated companies were prepared as of
December 31, 2009 and were specifically provided and approved by the Boards of Directors of the individual companies.
Where necessary, adjustments were made to adapt them to the accounting principles used by the Parent Company.
The following criteria were used in preparing the line-by-line consolidation of subsidiaries:
n assets, liabilities, charges and income are consolidated line by line; where applicable, the appropriate portion of equity
and the net result for the period are attributed to minority shareholders;
n transactions involving business combinations whereby control of an entity is acquired are recognized using the purchase
method. The purchase cost corresponds to the fair value at the date of acquisition of the assets sold, the liabilities
assumed, the equity instruments issued and any other type of direct related incidental costs. The difference between
purchase cost and the fair value of the assets and liabilities acquired is recognized in the Goodwill, if positive, or in the
Profit and Loss Account if negative;
n profits and losses related to third parties and arising from transactions between companies consolidated on a line-by-line
basis that have not yet been realized are eliminated, if material. The same method is used for reciprocal receivables and
payables, costs and revenues and finance income and expense;
n profits or losses arising from the sale of equity investments in consolidated companies are recognized through profit
or loss for an amount corresponding to the difference between the sale price and the portion of assets and liabilities
transferred.
84
85
Consolidated annual RepoRt of
the BuongioRno gRoup as of deCemBeR 31, 2009
Equity stakes in companies over which the Buongiorno Group exercises a significant influence (hereinafter the “associates”),
or in which the Group holds a stake of 20%-50%, were recognized using the equity method. The equity method is applied
in the following manner:
n the book value of the equity investments is aligned with the equity of the investee company (at the latest available date);
where necessary, equity is adjusted to reflect the application of accounting standards that conform to those used by
Buongiorno and, where appropriate, any goodwill recognized at the time of the acquisition;
n the profits or losses attributable to the Buongiorno Group are recognized through profit or loss starting on the date the
significant influence begins and until the date it ends. If, due to the losses incurred, the Company records negative equity,
the book value of the equity investment is written off and any excess amounts attributable to the Buongiorno Group
are recognized in a special reserve - only in the case that the Buongiorno Group has taken steps to fulfil its legal or
constructive obligations to cover such losses. Changes in equity of the associates that are not determined by the results
of the Profit and Loss Account are accounted for as direct adjustments to the reserves;
n unrealized profits and losses on transactions carried out between the Company and/or subsidiaries or associates are
eliminated in proportion to Buongiorno Group’s investment in the subsidiaries or associates. Unrealized losses are
eliminated except when they reflect an impairment loss.
The financial statements of the companies included in the consolidated accounts are prepared based on the currency used
in the main economic context in which the companies operate (“functional currency”). The Consolidated Financial Statements
are presented in euro, which is the functional currency of the Company and the currency used to present the consolidated
financial statements. The following rules apply for translating financial statements denominated in foreign currencies other
than the euro:
n assets and liabilities are converted using the exchange rates prevailing on the reporting date;
n costs and income are converted using the period’s average exchange rate;
n the “foreign currency conversion reserve” is used to record both exchange rate differences arising from the conversion of
amounts using a different exchange rate than the one prevailing at the end of the period as well as those arising from the
translation of opening equity using a different exchange rate than the one prevailing at the end of the accounting period;
n goodwill and fair value adjustments arising on the acquisition of foreign entities are treated as assets and liabilities of the
foreign entities and translated using the exchange rate prevailing at the end of the period.
The following table shows the companies in which Buongiorno holds a direct or indirect stake, and which were included in
the consolidation area:
LIST OF COMPANIES INCLUDED IN CONSOLIDATION AREA
Name Country of Incorporation % Consolidation
Buongiorno S.p.A. Italy -
Akumiitti Content Services Ltd Finland 100.0%
Akumiitti Oy Finland 100.0%
Axis Mundi S.A. Argentina 100.0%
Buongiorno CS Limited UK 100.0%
Buongiorno Deutschland GmbH Germany 100.0%
Buongiorno Dijital Iletisim A.S. Turkey 100.0%
Buongiorno France S.A. (formerly Freever France Sas) France 100.0%
Buongiorno Hellas Mobile Ltd Greece 100.0%
Buongiorno Marketing Netherlands B.V. The netherlands 54.5%
Buongiorno Marketing Service Deutschland GmbH Germany 54.5%
Buongiorno Marketing Services España, S.L. Spain 54.5%
Buongiorno Marketing Services France S.A. France 54.5%
Buongiorno Marketing Services Italy SRL Italy 54.5%
Buongiorno Marketing Services UK Ltd UK 54.5%
Buongiorno Marketing Services US INC US 54.5%
Buongiorno MyAlert Brasil Servicios Celulares Ltda. Brasil 100.0%
Buongiorno MyAlert Colombia SRL Colombia 100.0%
Buongiorno MyAlert Ecuador S.A. Ecuador 100.0%
Buongiorno MyAlert S.A. Spain 100.0%
Buongiorno MyAlert Servicios de Telecomunicaciones Chile Ltda. Chile 100.0%
Buongiorno Russia LLc Russia 54.5%
Buongiorno uk Ltd UK 100.0%
Buongiorno USA Inc. US 81.0%
Buongiorno Venezuela, S.A. Venezuela 100.0%
BY Cycle Perù SAC Peru 100.0%
Dioranews S.A. France 100.0%
Groupo iTouch Movilisto Maroc SARL Marocco 100.0%
Grupo iTouch Movilisto Mexico Servicios, S.A de CV Mexico 100.0%
Grupo iTouch Movilisto R.S.R.L Romania 100.0%
Hotsms.com B.V. The Netherlands 54.5%
Intouch Technologies Ltd (t/a iTouch Ireland) Ireland 100.0%
86
87
Consolidated annual RepoRt of
the BuongioRno gRoup as of deCemBeR 31, 2009
Name Country of Incorporation % Consolidation
iTouch Australia Pty Ltd Australia 100.0%
iTouch Finance 1 Ltd UK 100.0%
iTouch Finance 2 Ltd UK 100.0%
iTouch Global Concepts Nigeria Ltd Nigeria 100.0%
iTouch Ltd UK 100.0%
iTouch Movilisto Portugal Lda Portugal 100.0%
iTouch Nordics A.S. Norway 100.0%
iTouch South Africa (Pty) Ltd South Africa 100.0%
iTouch Spain Holdings SL Spain 100.0%
Jippii Mobile Entertainment Oy Finland 100.0%
Jippii Schweiz AG Switzerland 100.0%
Jippii Spain SL Spain 100.0%
Llama Television S.L. Spain 100.0%
MyAlert S.L. de C.V. Mexico 100.0%
Ostrich Media Limited UK 100.0%
Pajala B.V. The Netherlands 100.0%
Producciones y Promociones Especiales de Television S.L. Spain 100.0%
Rainbow Development sa Argentina 100.0%
Rivertam S.A. Uruguay 100.0%
Rocket Mobile Inc. US 81.0%
SMS Cosmos A.S. Norway 100.0%
sms.at Holding AG Austria 100.0%
sms.at Marketing Services GmbH Austria 54.5%
sms.at Mobile Internet Services GmbH Austria 100.0%
sms.ch AG Switzerland 100.0%
Telitas Belgium B.V. Belgium 100.0%
Tutch Mobile Media B.V. The Netherlands 100.0%
Xama TV Televisao Interactiva L.d.a. Portugal 100.0%
Buongiorno Hong Kong Ltd China 49.0%
(*) consolidated with net equity method
In 2009, the consolidated area underwent some changes compared to December 31, 2008. See paragraph 1.1 above for
a detailed analysis of the main changes in the consolidation area.
The changes relate to the purchase of minority interests in companies already previously controlled and the increase in share
capital of the Dutch Holding Buongiorno Marketing Services Netherland B.V. subscribed through the contribution of the 100%
stake in Buongiorno Russia LLC held by the affiliated company Buongiorno Hong Kong Ltd. As a result of this transaction,
the Buongiorno Group’s ownership of the Dutch holding company Buongiorno Marketing Services Netherland B.V. fell from
60% to the present 54.5%. The other minority-interest shareholders are the Mitsui & Co. Ltd. Group and the associate
Buongiorno Hong Kong Ltd., which respectively hold 36.4% and 9.1% stakes in Buongiorno Marketing Services Netherland
B.V.. Although the above transactions have entailed changes to the consolidation area, they have not produced significant
changes to the Group’s capital and financial structure.
It is reported that the assets and liabilities as well as the costs and revenues arising from the financial statements of the
Venezuelan company are of an insignificant amount, bearing in mind that operations’ level of the company is minimal. For this
reason the routine procedures to be followed in the case of “hyperinflationary” economies have not been carried out.
Accounting Standards Adopted
The accounting standards applied are listed below:
intangible Assets
(a) Goodwill
Consolidation differences arising from the higher value of equity investments with respect to the subsidiary’s portion of equity
at the time it was acquired (fair value of the company’s net assets) have been recognized as goodwill (IFRS 3).
Goodwill is reduced by the amount of any losses that may result from the impairment test, which are recognized in the Profit
and Loss Account (IAS 36). An impairment test is carried out at least once a year or, in any case, whenever an impairment
indicator emerges.
During acquisition, goodwill is allocated to a cash-generating unit (CGU). A CGU is the smallest group of assets and liabilities
that generates cash inflows and outflows (associated with the goodwill subject to impairment) that are largely independent of
the cash flows generated by other CGUs.
88
89
Consolidated annual RepoRt of
the BuongioRno gRoup as of deCemBeR 31, 2009
In the case of acquisitions of non-controlling equity holdings no goodwill is recognized although an adjustment is made
to equity for the difference between the value of the shareholdings and the affiliated company’s portion of equity at the
acquisition date.
Specifically, the CGUs that correspond to the goodwill recognized in the financial statements represent Buongiorno Group’s
investment in a particular geographic area (primary reporting segment) in which cash flows are discounted at a rate that
incorporates both the timeframe and the level of risk of the investment itself. When these net discounted flows associated
with the CGU are unable to justify the goodwill value recognized in the Balance Sheet, the excess is recognized in the Profit
and Loss Account as an impairment loss. Impairment losses that have been previously recognized in the Profit and Loss
Account are not reversed.
(b) Intangible Assets with Finite Useful Life
Intangible assets and expenses the useful life of which is deemed to extend beyond the period to which they refer, and that
can be separated and used or sold separately from other assets included in the Balance Sheet are recognized as assets on
the Balance Sheet. Intangible assets are recognized at purchase or production cost, including ancillary costs, and they are
systematically amortized based on their potential residual use (finite useful life).
The main categories of capitalized intangible assets are as follows:
n Research and development costs are recognized in the Profit and Loss account for the year in which they are incurred,
except for development costs recognized among intangible assets that satisfy all of the following conditions:
n the project is clearly identified and the costs associated with it can be identified and measured in a reliable manner;
n the technical feasibility of completing the project has been demonstrated;
n the intention to complete the project and sell the intangible assets generated by it has been demonstrated;
n the existence of a market for the intangible asset has been demonstrated or, if it is to be used internally,
the usefulness of the intangible asset;
n for the production of intangible assets generated by the project has been demonstrated;
n the availability of adequate technical and financial resources to complete the project has been demonstrated.
Amortization charges associated with development costs are included under intangible assets from the date on which the
product/service generated by the project becomes available for sale. Development costs are amortized on a straight-line
basis over three years, which is the estimated useful life of the capitalized costs. In detail:
n costs incurred for purchasing patent and intellectual property rights, licenses and similar rights are capitalized on the basis
of the charges incurred for their purchase and are amortized on a straight-line basis over a period of three years;
n the costs borne for the creation and registration of trademarks are amortized at a fixed percentage over a period of ten
years;
n internal software development costs are amortized on a straight-line basis over a three-year period and represent the
costs of personnel directly involved in software development.
When external events or changes in conditions (so-called “trigger events”) indicate the permanent impairment of intangible
assets, an impairment test is conducted. If necessary, the assets are written down to the higher of their value in use or
recoverable amount, i.e., selling price less incidental disposal costs (IAS 36). As opposed to goodwill, if appropriate, the value
can be reversed to the extent of the impairment losses previously recognized in the Profit and Loss Account.
property and equipment
Property and equipment are recognized at purchase or production cost, including ancillary costs, and they are systematically
depreciated based on their potential residual use (finite useful life). The book value of property and equipment, together with
their remaining useful life, is reviewed annually and, if necessary, the relevant depreciation rates are adjusted. In the case of
permanent impairment loss, the carrying value is written down in order to bring it in line with the recoverable value from the use
or sale of the asset.
Costs for ordinary maintenance are recognized fully in the profit and loss account; any such costs that increase the life of the
asset to which they refer are attributed at increasing rates for the cost of the assets and are depreciated in relation to possible
residual use.
It is also reported that, during the year, there were no revaluations of assets, nor were any financial charges capitalized to
increase their value since the conditions specified in IAS 23 do not apply.
If the tangible asset consists of several significant components having different useful lives, depreciation is calculated separately
for each component.
90
91
Consolidated annual RepoRt of
the BuongioRno gRoup as of deCemBeR 31, 2009
The annual depreciation rates that were used are detailed below:
pERCENtAgE
Plant and machinery 10%
Industrial and commercial equipment 15%
Other fixed assets:
- furnishing and ordinary office equipment 12%
- electrical and electronic office equipment 20%
investments
This account shows the non-controlling interests held by the Parent Company or by other Group companies, and thus in
unconsolidated subsidiaries (See paragraph “Consolidation Process”).
Shareholdings in affiliated companies were evaluated using the equity method, whereas those in other companies have been
evaluated at the cost adjusted to take account of impairment losses, as their fair value could not be determined.
business combination
Acquisitions in subsidiary companies are accounted for using the “acquisition method”. The acquisition cost will hence
be determined taking into account the fair value of any of the Group’s equity instruments issued following the transaction,
increased by all the costs directly attributable at the date of the acquisition and allocated to the fair value of the assets
acquired, the certain and potential liabilities assumed without taking account of any minority interests.
The cost in excess of the fair value of the net assets of the acquired company is first allocated to intangible assets not
recognized in the balance sheet of the acquired company and any excess is then recognized as goodwill. In contrast, if the
acquisition cost is lower than the fair value of the assets acquired after allocation of intangible assets which has not already
been recognized, the difference is accounted for through profit or loss
inventories
Inventories are measured at the lower of cost and net realizable value. The estimate of net realizable value takes into
consideration the market price during the ordinary activity of the company, less costs to sell. The cost is calculated using the
weighted average cost method and includes all ancillary costs of purchase.
Receivables, payables, derivatives and convertible bonds
Receivables are measured at amortized cost and if there is objective evidence indicating an impairment loss, they are
reduced through a provision for doubtful receivables to the amount of the expected realizable value. The provisions are
recognized in the Profit and Loss Account. Payables are recognized at their nominal value.
The amounts of receivables and payables thus calculated approximate fair value since discounting of these amounts would
not result in any significant adjustment.
Derivative financial instruments are measured at fair value based on the market values on reference active markets.
Contracts that include an obligation for the Group to acquire its own equity instruments by the exchange of cash or other
financial assets, give rise to a financial liability for the actual value of the reimbursement amount (future buyback price or option
exercise price), even where the obligation to acquire is subordinate to the right of the counterparty to reimbursement (Put
option). Whenever the contract falls due without completion, the carrying value of the financial liability is transferred to equity
(IAS 32, Paragraph 23).
Convertible bonds, like other financial liabilities, are measured at amortized cost, which is calculated bearing in mind all related
costs and using a market interest rate for equivalent non-convertible bonds or financial liabilities. The difference between the
amortized cost and the redemption amount represents the capital component or the amount of the conversion right and is
included in the Group’s equity under “Other reserves” (IAS 32, Paragraphs 64, 28 and 31).
cash and cash equivalents
Cash and cash equivalents mainly include cash, demand deposits with banks and other highly liquid short-term investments
(that can be turned into cash within 90 days). To determine the net financial position, current account liabilities, which are
included under “Short-term financial liabilities” are recognized net of cash and cash equivalents. The elements included in net
liquidity are measured at fair value, and changes recognized through profit or loss.
92
93
Consolidated annual RepoRt of
the BuongioRno gRoup as of deCemBeR 31, 2009
interest-bearing borrowings
Interest-bearing borrowings are initially recognized at their fair value, net of ancillary costs. Subsequent to initial recognition,
interest-bearing borrowings are measured based on the amortized-cost method. The difference between the resulting value
and the value at initial recognition is recognized through profit and loss account over the duration of the loan on the basis of
the loan’s repayment schedule.
provisions for Risks and charges
Provisions for risks and charges include certain or probable costs of a specific nature, the amount or settlement date of which
could not be determined at year-end. Provisions are recognized when:
(i) it is probable that there is a present obligation (legal or constructive) arising from a past event;
(ii) it is probable that an outflow of resources will be required to settle the obligation;
(iii) the amount of the obligation can be reliably estimated.
The amount recognized as a provision is the best estimate of the amount the company would reasonably pay to settle the
obligation or transfer it to a third party at year-end. Where the effect of time value of money is material and the payment date
of the obligation can be reliably estimated, the amount of the provision must be discounted.
The costs the Group expects to incur to implement restructuring programs are recognized in the year in which the program is formally
planned and a valid expectation has been created among interested parties that it will take place.
The amount of the provisions is adjusted on a regular basis to reflect changes in cost estimates, completion times and discount rates.
Changes to estimates are recognized in the same item for which the provision is made.
The notes to the financial statements provide information on potential liabilities, which include:
(i) possible, but not probable, obligations arising from past events whose existence can be confirmed only by the
occurrence or non-occurrence of one or more uncertain future events that are not completely under the company’s
control;
(ii) present obligations arising from past events where the amount cannot be reliably estimated or it is probable that
financial resources will not be required to settle the obligation.
employee benefits: Severance indemnity fund
Following the changes in employee benefit regulations introduced by Law 296/06 (the “2008 Finance Act”) and subsequent
decrees and regulations issued over the first few months of 2008, the severance indemnity fund accrued as of December
31, 2006 was classified as defined-benefit plan and hence required an actuarial assessment involving a series of factors
(current cost of labor, personnel turnover, expected return, financial charges, actuarial gains and losses, etc.). The portion
of the severance indemnity accrued after January 1, 2007 is considered a defined-contribution plan, regardless of whether
the participants opt for supplementary pension planning or earmark their indemnities for the treasury fund maintained by
INPS (the Italian social-security agency); the accounting treatment of said portion will therefore be assimilated to the current
treatment of other types of contribution payments. The portion of the severance indemnities accrued prior to December 31,
2006 was therefore allocated as required by law, labor contracts in force, and actuarial adjustments provided for by IAS 19.
It reflects the liabilities that have fallen due to employees of the Italian companies included in the consolidation area at the
reporting date, net of any advances already disbursed.
Stock options
IFRS 2 specific accounting treatment is adopted for transactions that involve share-based payments and, specifically, for the
Stock Options plans assigned to employees and collaborators.
In accordance with IFRS 2, the valuation of stock option plans currently in force leads to the disclosure of non-monetary costs
in the Profit and Loss Account, in the item “Personnel costs”.
Recognition of Revenues and costs
Revenues and costs are recognized at the fair value of the consideration received (recognized net of returns, discounts,
rebates and premiums). Revenues are recognized and accounted for in the Profit and Loss Account when it is probable
that the related future economic benefits will be enjoyed by the company (probability of receiving the amount underlying the
revenue) and when the amount can be reliably ascertained.
In detail, revenues and costs of the main business lines have been recognized as follows:
Advertising costs and revenues: these are recognized through profit or loss in accordance with the underlying contract,
based on the accruals concept (length of contract) or on the actual number of advertising services rendered or received the
year;
Costs and revenues for Business Services: these are recognized through profit or loss in accordance with the underlying
contract and with regard to the status of service delivery;
Costs and revenues for Consumer Services: these are recognized through profit or loss based on the actual number of
contacts made by the end user and/or on the actual telephone traffic generated;
Costs and revenues from the sale of royalties and licenses: these are recognized through profit or loss according to the
underlying contracts.
94
95
Consolidated annual RepoRt of
the BuongioRno gRoup as of deCemBeR 31, 2009
conversion criteria for entries in other currencies
Receivables and payables denominated in currencies other than the Euro were initially converted into Euro at contractual
exchange rates or the rates in force at the time of the individual transactions. The exchange gains and losses that arose when
receivables were collected and payables were paid in foreign currency have been recognized in the Profit and Loss Account.
Exchange gains or losses for items in currencies of countries that are not members of the European Monetary Union and
that arise from the adjustment to the precise period-end exchange rates are reflected in the Profit and Loss Account for the
period.
finance income and expense
Finance income and expenses are recognized through profit and loss according to the accruals concept and on the basis
of the “effective rate method”. Profits and losses arising from valuation of assets and liabilities at fair value are carried through
profit and loss. Financial instruments in the closing balance sheet are similarly treated.
current and deferred taxes
Income taxes recognized in the profit and loss account include current and deferred taxes. Income taxes are generally
recognized in the profit and loss account, except when they pertain to items recognized directly in equity. In this case, income
taxes are also recognized directly in equity.
Current taxes are taxes that it is expected will be paid as calculated by applying the tax rate in force on the balance sheet
date to taxable income and adjustments to taxes from previous years.
Deferred taxes are calculated by using the liability method on temporary differences between the assets and liabilities
recognized on the consolidated balance sheet and the corresponding figures for tax purposes. Deferred taxes are calculated
as a function of the required method of reversal of temporary differences by using the tax rate that is expected to be in force
in the years when the temporary differences are realized or cancelled.
Deferred tax assets are only recognized where it is likely that sufficient taxable income will be generated in future years to
realize the assets.
Also recorded in the financial statements are the benefits relating to tax losses permitted for carryforward without time limit in
subsequent years, which relate to the core business of the Group.
Segment Reporting
The primary segment for the Group’s structure is the geographical segment and represents a set of activities and transactions
involved in the supply of products and services in a given geographical area, featuring a certain level of business risk and a
given level of economic margin that differs from other geographical segments.
In order to provide a more detailed reporting analysis, revenues are shown by “business line”, representing a group of
activities and operations aimed at the supply of goods and services, featuring a certain level of business risk and a given level
of economic margin that differ from other business segments.
earnings per Share
Basic earnings per share is calculated by dividing the Group’s net profit (loss) by the weighted average number of shares
outstanding during the period. To calculate diluted earnings per share, the weighted average number of shares outstanding
is adjusted to assume conversion of all potential dilutive shares.
use of estimates
The preparation of the financial statements and consolidated financial statements requires that management use accounting
principles and methodologies that at times may be based on complex subjective evaluations and estimates linked to past
experience and on assumptions that are considered reasonable and realistic given the circumstances at hand. The use of
such estimates and assumptions influences the amounts reported in the balance sheet, profit and loss account, cash flow
statement and this report. The amounts reported in the financial statements on the basis of the aforementioned estimates and
assumptions may differ from actual amounts due to the uncertainty surrounding the assumptions and conditions on which
such estimates are based. Estimates and assumptions are reviewed on an ongoing basis, and adjustments are recognized
in the period in which the estimates are revised and in any future period affected. The accounting estimates that require a
higher level of subjectivity on the part of management and for which changes in conditions may have a significant impact on
the financial statements are: goodwill, deferred taxes, provisions for bad debts and the fund for risks and charges.
further information
Pursuant to article 2428 of the Italian Civil Code, as well as Art. 40 of Legislative Decree 127/1991, we hereby specify that:
n the Parent Company, Buongiorno S.p.A., is not, in turn, controlled by other companies;
n no subsidiaries hold shares in the Company, either directly or through trust companies or other intermediaries;
n the Company held 1,488 treasury shares at December 31, 2009.
96
97
Consolidated annual RepoRt of
the BuongioRno gRoup as of deCemBeR 31, 2009
directors’ Report on operations
The reader is referred to the Directors’ Report on Operations for a discussion on the nature of the activities carried out by the
Buongiorno Group and significant events following December 31, 2009.
noteS on the ASSet itemS of the conSolidAted bAlAnce Sheet
non-current assets
1. goodwill
Goodwill amounted to Euro 176,079 thousand. Details on changes to goodwill during 2009 are provided below.
(in thousands of Euro) 12.31.2008 dECREAsE othER moVEmENts 12.31.2009
Goodwill 176,638 (1,111) (549) 174,978
The balance at December 31, 2009 was broken down as follows (amounts in thousands of euro):
CAsh gENERAtINg uNIt 12.31.2009 12.31.2008 dEltA
Buongiorno Myalert - Movilisto (Spain) 64,145 64,145 -
Rocket Mobile Inc (Business to Operator in US) 16,546 17,127 (581)
Freever - DioràNews - Mobivillage (France) 24,277 24,277 -
Llama TV group 5,897 5,897 -
Axis Mundi (By-Cycle group) 7,283 7,250 33
South Africa 17,016 17,016 -
Gsmbox S.r.l. (Buongiorno S.p.A.) 6,141 6,141 -
Tutch Media Mobile B.V. (Benelux) 5,989 5,989 -
HotSMS.com B.V. 4,080 4,080 -
Buongiorno MS Uk Ltd (già Flytxt Ltd) 3,839 3,840 (1)
Call TV - 1,111 (1,111)
Australia 11,072 11,072 -
Sms.at 8,693 8,693 -
Total 174,978 176,638 (1,660)
Under IAS 36, goodwill is not amortized, but is tested for impairment annually or more frequently if specific events or
circumstances indicate that an asset might be impaired. Goodwill was tested for impairment at the time of the preparation of
the consolidated financial statements at December 31, 2009.
It is important to note that, although the past and current global economic and financial crisis has been generating partial
uncertainty as to possible future economic scenarios, the Group’s results at December 31, 2009 were in line with the 2009
budget.
For purposes of impairment test preparation, an evaluation was carried out for the above “cash generating units (CGU)” of
the impact that such changed conditions have had on expected operating cash flows and on the related implicit projections.
The information and data used were those contained in the Budget 2010 document approved by the Board of Directors
on 1 February 2010 . As a result of the above, prospective economic plans have been prepared up to 2012 for the CGUs
identified.
It should be noted that CGUs are the smallest group of assets and liabilities that generate cash inflows and outflows
(associated with the goodwill subject to impairment) that are largely independent of the cash flows generated by other CGUs.
To estimate recoverable amounts, the value in use of the CGUs’ net invested capital was determined using the discounted
cash flow method, which considers the cash flows expected by the company on the basis of the aforementioned budget
plan.
Cash flow projections are based on ordinary operating conditions and therefore do not consider cash flows arising from
extraordinary operations.
The formula used to calculate the discounted cash flow is provided below:
where:
FCF = free cash flow, i.e., cash flow generated by operating activities (net of the tax effect), adjusted for changes in net
working capital and Capex;
WACC = Weighted Average Cost of Capital (net of the tax effect);
n = explicit forecast period;
TV = terminal value, i.e., the value of all cash flows after the explicit forecast period.
98
99
Consolidated annual RepoRt of
the BuongioRno gRoup as of deCemBeR 31, 2009
Cash flows for periods after 2012 were calculated using the following formula (Gordon formula):
where:
FCFn = sustainable cash flow beyond the last year of the explicit forecast period;
g = growth rate of business beyond the anticipated plan period;
WACC = weighted average cost of capital.
The main assumptions used to calculate the value in use have been revised to reflect the specific situations by geographical
Area/reference country for the individual CGUs and are indicated below:
n rate of growth beyond the explicit forecast period (“g”) generally equal to 1.5% except for Argentina (Bycycle) equal to
8.6% and South Africa equal to 5.5% since these are “emerging” countries with a higher rate of inflation;
n rate of discount (Weighted Average Cost of Capital – WACC) at Group level: 9.8% (weighted average for the Buongiorno
Group). This rate varies from 8.4% to 10.3% with reference to the “mature” Countries (Euro Area, UK and US) and from
11% to 19.7% with reference to “emerging” Countries with a higher inflation rate (South America, South Africa, Australia).
The discount rate used reflects the specific risk of the industry in which the Group operates.
To estimate the value in use, the recoverable amount of each CGU that was tested for impairment was compared to the
relative carrying amount of Net Invested Capital at December 31, 2009 (including goodwill). The results obtained indicated
that it was necessary to write down the goodwill of the subsidiary Call TV Ltd amounting to Euro 1,111 thousand. The write-
down was reflected in the consolidated profit and loss account for 2009.
In accordance with the contents of document No. 4 of March 3, 2010 issued by the Bank of Italy-Consob-Isvap, any
external signs of “impairment loss”, have been identified and analyzed. Mention is made, within this context, of the market
capitalization of BuongiornoS.p.A. below its equity value. In this regard, one should note both the marked improvement in
the price of the BuongiornoS.p.A. stock (and hence the respective Stock market capitalization) compared to December 31,
2008 (up by about 90%), and the consideration that current stock market values continue to suffer the current economic-
financial crisis that has generally affected the national and international markets in the past 18 months. We do not therefore
believe that this market undercapitalization is due, in the specific case, either to the economic performance of the sector
concerned nor to the economic-financial results of the Buongiorno Group, but rather to the general market trend.
As required by the joint document issued by Banca d’Italia, CONSOB (Italy’s stock market regulator) and ISVAP (Italy’s
insurance sector regulator), a sensibility analysis was also carried out. In the worst-case hypothesis formulated which
envisages a 0.5 percentage point increase in the cost of capital used to discount the expected flows (equal to 10.3% at
Group weighted average level) and a fall of 0.5 percentage points in the perpetual growth rate (equal to 1%), there would be
no further impairments of the goodwill recognized in the balance sheet at December 31, 2009.
In relation to movements during the period, the net decrease of Euro 1,660 thousand recorded during 2009 is given:
n by the aforesaid write-down of goodwill relating to the subsidiary Call TV;
n by the adjustment to the year-end exchange rate for goodwill in Rocket Mobile Inc originally stated in a foreign currency. In
this regard it is reported that this goodwill amounts to 23,836 thousand dollars (USD) and that the adjustment to the year-
end exchange rate has resulted in a negative exchange difference of Euro 581 thousand accounted for in the translation
reserve.
2. other intangible Assets
The net values of intangible assets and movements for 2009 are listed below:
(in thousands of Euro) 12.31.2008 Increase Amortization Other movements 12.31.2009
R&D Costs 718 1774 (1,854) 2,576 3,214
Patents and intellectual property rights 3,050 21 (1,651) (217) 1,203
Concessions, licenses, trademarks and sim.rights 17,348 521 (2,995) 219 15,093
Other intangible assets 9,275 4,127 (4,437) (1,577) 7,388
Total 30,391 6,443 (10,937) 1,001 26,898
Movements in intangible assets at December 31, 2008 are given in the following table:
31.12.2007 Increase Amortization Other movements 12.31.2008
(in thousands of Euro) Restated
R&D Costs 92 574 (193) 245 718
Patents and intellectual property rights 196 5373 (3,034) 515 3,050
Concessions, licenses, trademarks and sim.rights 19,214 812 (2,760) 82 17,348
Other intangible assets 10,679 5969 (5,100) (2,273) 9,275
Total 30,181 12,728 (11,087) (1,431) 30,391
“Development Costs” refer to the capitalization of external costs, consultancy costs particularly, sustained primarily to develop
a new asset portfolio and business line management system amounting to Euro 0.7 million and the mobile social network
Peoplesound amounting to Euro 0.5 million.
100
101
Consolidated annual RepoRt of
the BuongioRno gRoup as of deCemBeR 31, 2009
“Patents and intellectual property rights” include costs of purchasing management and accounting software developed and
sold by third parties.
The item “Concessions, licenses and trademarks” includes the residual balance of the costs of registering trademarks in Italy
and in the rest of the world as well as the costs of purchasing Group domains (particularly ”Buongiorno”, “Blinko”, as well as
the Trademarks valued during the Purchase Price Allocation for the iTouch Group amounting to a net carrying amount at 31
December 2009 of Euro 13.9 million).
The item “Other assets” also includes:
n approximately Euro 3.7 million paid by iTouch South Africa to acquire rights associated with agreements with a local
telephone service provider for the distribution of digital contents on the South African market;
n the costs incurred to develop technology. During the year, this item increased by approximately Euro 4 million; in further
detail, this includes the investments in the development of new modules of the internally developed proprietary platform
known as “B!3A” (Euro 1.2 million) and for the creation of a platform devoted to mobile social networking (Blinko) (Euro 0.4
million);
n approximately Euro 1.2 million associated with the valuation of the Customer Relationship Management acquired through
iTouch and based on the calculation of the current value of iTouch’s assets;
n approximately Euro 2.0 million associated with the valuation of the software acquired through iTouch and based on the
calculation of the current value of iTouch’s assets.
The other movements refer to reclassifications of intangible asset items amounting to approximately Euro 1.6 million,
reclassifications of tangible assets amounting to Euro 0.5 million and, for the remaining amount, to exchange differences
arising from the translation of the financial statements in foreign currency.
3. property and equipment
Below is a description of the changes to property and equipment in terms of Historical Cost, Accumulated Depreciation, and
Net Value at December 31, 2009 and 2008. At December 31, 2009:
Historical cost Cumulated Net value Net value
(in thousands of Euro) 12.31.2009 depreciation 12.31.2009 12.31.2008
Plant and machinery 76 (56) 20 209
Industrial and commercial equipment 15 (7) 8 36
Other assets 12,198 (8,873) 3,325 4,047
Total tangible fixed assets 12,289 (8,936) 3,353 4,292
At December 31, 2008:
Historical cost Cumulated Net value Net value
(in thousands of Euro) 12.31.2008 depreciation 12.31.2009 12.31.2007
Plant and machinery 956 (747) 209 118
Industrial and commercial equipment 48 (12) 36 13
Other assets 13,150 (9,103) 4,047 2,783
Total tangible fixed assets 14,154 (9,862) 4,292 2,914
plant and machinery
This item includes telephone and electrical systems. The changes that took place during the year are shown in the following table:
(in thousands of Euro)
plANt ANd mAChINERy hIstoRICAl Cost CumulAtEd dEpRECIAtIoN NEt VAluE
Year start 956 (747) 209
Increase 0 0 0
Decrease 0 0 0
Changes in consolidation area and other changes (880) 695 (185)
Depreciation 0 (4) (4)
At December, 31 2009 76 (56) 20
No purchases of significant amounts were made during the reporting period.
Movements at December 31, 2008 are reported in the following table:
(in thousands of Euro)
plANt ANd mAChINERy hIstoRICAl Cost CumulAtEd dEpRECIAtIoN NEt VAluE
Year start 542 (424) 118
Increase 473 - 473
Decrease (82) 69 (13)
Changes in consolidation area and other changes 23 2 25
Depreciation - (394) (394)
At December, 31 2008 956 (747) 209
102
103
Consolidated annual RepoRt of
the BuongioRno gRoup as of deCemBeR 31, 2009
industrial and commercial equipment
The following changes took place during the year:
(in thousands of Euro)
INdustRIAl ANd CommERCIAl EquIpmENt hIstoRICAl Cost CumulAtEd dEpRECIAtIoN NEt VAluE
Year start 48 (12) 36
Increase 0 0 0
Decrease 0 0 0
Changes in consolidation area and other changes (33) 5 (28)
Depreciation 0 0 0
At December, 31 2009 15 (7) 8
No purchases of significant amounts were made during the reporting period.
Movements at December 31, 2008 are reported in the following table:
(in thousands of Euro)
INdustRIAl ANd CommERCIAl EquIpmENt hIstoRICAl Cost CumulAtEd dEpRECIAtIoN NEt VAluE
Year start 21 (8) 13
Increase 6 - 6
Decrease - - 0
Changes in consolidation area and other changes 21 4 25
Depreciation - (8) (8)
At December, 31 2008 48 (12) 36
other Assets
This item includes furnishings, office equipment and computers. Changes during the year were as follows:
(in thousands of Euro)
othER AssEts hIstoRICAl Cost CumulAtEd dEpRECIAtIoN NEt VAluE
Year start 13,150 (9,103) 4,047
Increase 991 0 991
Decrease (117) 81 (36)
Changes in consolidation area and other changes (1,826) 1,759 (67)
Depreciation 0 (1,610) (1,610)
At December, 31 2009 12,198 (8,873) 3,325
The increase of Euro 0.1 million is attributable to the acquisition of office furniture and equipment.
Movements at December 31, 2008 are reported in the following table:
(in thousands of Euro)
othER AssEts hIstoRICAl Cost CumulAtEd dEpRECIAtIoN NEt VAluE
Year start 11,163 (8,380) 2,783
Increase 2,571 - 2,571
Decrease (1,800) 1,398 (402)
Changes in consolidation area and other changes 1,216 (416) 800
Depreciation - (1,705) (1,705)
At December, 31 2008 13,150 (9,103) 4,047
4. investments in Associates
At December 31, 2009 the following interests were held:
n the equity investment in Buongiorno Hong Kong Ltd equivalent to a 49% stake in the share capital, for a value of Euro
2,809 thousand at December 31, 2009;
n the shareholding in Inches Music Srl for a value of about Euro 74 thousand with a 35% stake in the share capital;
n the shareholding in Buongiorno Digital Innovation India Private Ltd, incorporated on November 23, 2009 for a value of Euro
732 thousand equal to 49% of share capital.
104
105
Consolidated annual RepoRt of
the BuongioRno gRoup as of deCemBeR 31, 2009
These shareholdings were measured using the equity method (on the basis of the most recent available data).
(in thousands of Euro)
shAREholdINgs IN AssoCIAtE CompANIEs hEld by shAREholdINg VAluE wRItE-dowNs 12.31.2009
Buongiorno Hong Kong Ltd Buongiorno S.p.A. 1,653 0 1,653
Buongiorno Digital Innovation India Private Ltd Buongiorno S.p.A. 732 0 732
Inches Music S.r.l. Buongiorno S.p.A. 74 0 74
TOTAL SHAREHOLDINGS 2,459 0 2,459
There were no movements during the year in the investment in Buongiorno Hong Kong which, at the end of 2008, amounted
to Euro 1,653 thousand, since the percentage of equity owned in Euro was substantially in line with the investment’s book
value.
During the year 4,900,000 shares were subscribed, representing 49% of the share capital of Buongiorno Digital Innovation
India Private Ltd, a company set up on November 23, 2009, for a value equal to Euro 732 thousand. For this reason the
percentage of equity owned in Euro was substantially in line with the investment’s book value.
In July 2005, the Company subscribed to 35% of the share capital (about Euro 74 thousand) of the company Inches Music
Srl. The latter is partly owned by Capital B! S.p.A., in which Mauro Del Rio - Buongiorno’s reference shareholder - holds the
majority stake. The company’s purpose is to manage and sell “Artist community” songs. The book value of this investment
approximates the value of equity relating to the percentage owned.
5. other financial Assets
This item includes:
n non-current receivables totalling Euro 452 thousand (Euro 431 thousand at December 31, 2008); these essentially
include amounts paid as guarantee deposits at the time of stipulating rental contracts for the offices used by the various
companies of the Group;
n other minor shareholdings (not in subsidiaries or associates) held by the Parent Company or by other Group companies
for Euro 736 thousand.
The table below lists the gross book value of the shareholdings, the write-downs that were taken, and the net value posted
in the Financial Statements:
(in thousands of Euro)
shAREholdINgs IN AssoCIAtE CompANIEs hEld by shAREholdINg VAluE wRItE-dowNs 12.31.2009
77Agency Ltd Buongiorno S.p.A. 736 - 736
TOTAL SHAREHOLDINGS 736 - 736
6. deferred tax Assets
This item totaled Euro 25,232 thousand (Euro 29,898 thousand at December 31, 2008) and pertains chiefly to tax-loss
carry-forwards. Of these, approximately Euro 11.4 million refer to the Parent Company, of which the majority (approximately
Euro 10.6 million) may be carried forward indefinitely, approximately Euro 9.2 million to the Group’s Spanish companies,
and approximately Euro 1 million to certain of the Group’s French companies, approximately Euro 1.6 million to other Group
companies while approximately Euro 2 million was recognized following the determination of the current value of the assets
arising from the acquisition of iTouch.
It should be noted that the Group has cumulative tax losses carried forward totaling Euro 156 million, of which Euro 84 million
have been recognized as deferred tax assets.
current assets
7. inventories
These showed a zero balance at December 31, 2009 with a decrease of Euro 1,429 thousand on the previous year; the
amount was due solely to the cost of prepaid cards in Australia by the company iTouch Australia Pty Ltd.
8. trade and other Receivables
(in thousands of Euro)
12.31.2009 12.31.2008
Trade debtors 54,874 67,947
Receivables from subsidiaries and associate companies 606 485
Financial receivables 28 0
Tax receivables 7,190 5,599
Other debtors 2,964 4,369
Accrued income and prepayments 2,249 2,085
Trade debtors and other receivables 67,911 80,485
106
107
Consolidated annual RepoRt of
the BuongioRno gRoup as of deCemBeR 31, 2009
trade Receivables
The balance at December 31, 2009 is detailed below:
(in thousands of Euro)
12.31.2009 12.31.2008
Trade debtors 56,451 68,641
Fund for bad debts (1,577) (694)
Total 54,874 67,947
The Fund for bad debts was established pursuant to specific and timely analysis and is considered to be adequate to adjust
the receivable amounts based on their estimated realizable value. The following changes in the fund for bad debts took place:
(in thousands of Euro)
Fund for bad debt at December 31, 2008 694
Use (49)
Allocations 932
Fund for bad debt at December 31, 2009 1,577
All trade receivables are due within twelve months.
Movements at December 31, 2008 are reported in the following table:
(in thousands of Euro)
Fund for bad debt at December 31, 2008 902
Use (685)
Allocations 477
Fund for bad debt at December 31, 2008 694
Receivables from Subsidiaries and Associates
At December 31, 2009, receivables from subsidiaries and associates amounted to Euro 606 thousand (at December 31,
2008 they amounted to Euro 485 thousand). These receivables relate to Buongiorno Hong Kong Ltd.
financial Receivables
At December 31, 2009 financial receivables totalled Euro 28 thousand. These relate to the amount payable by Buongiorno
Digital Innovation India Private Ltd to the Parent Company Buongiorno S.p.A...
tax Receivables
This item includes:
(in thousands of Euro)
12.31.2009 12.31.2008
Tax receivables 7,190 5,599
Tax receivables amounted to Euro 7,190 thousand (Euro 5,599 thousand at December 31, 2008) and pertain to the VAT credit
of Euro 2,243 thousand, tax credits due to prepayments of Euro 2,299 thousand, credits due to withholding taxes paid of Euro
1,501 thousand, and other tax receivables from the Treasury of Euro 1,147 thousand among which Euro 0.6 million for research
and development tax credits held by the Parent Company. The increase in this item compared to the previous year was mainly
due to tax receivables of the parent company Buongiorno S.p.A. and its subsidiaries Buongiorno MyAlert S.A., Buongiorno
MyAlert Brasil Servicios Celulares Ltda, iTouch Global Concept Nigeria and iTouch South Africa (Pty) Ltd.
other Receivables
This item is broken down as follows:
(in thousands of Euro)
12.31.2009 12.31.2008
Trade debtors and receivables from employees for advances 2,047 3,047
Other receivables 917 1,322
Total 2,964 4,369
Other receivables decreased by Euro 1.4 million on the previous year.
108
109
Consolidated annual RepoRt of
the BuongioRno gRoup as of deCemBeR 31, 2009
other prepayments and Accrued income
This item is broken down as follows:
(in thousands of Euro)
12.31.2009 12.31.2008
Accrued income 0 329
Prepayments 2,249 1,756
Total 2,249 2,085
Prepayments refer mainly to operating costs and rent. Operating costs can essentially be attributed to the contractual terms
for content offered by the music labels, which required payment of guaranteed minimums as well as advance payment for
the licensing agreements and for marketing costs.
9. other investments
At December 31, 2009, these amounted to Euro 3 million and referred to deposits not available since they were tied up for
3 months with a primary English Bank to support a commercial transaction planned in India.
10. cash and cash equivalents
At December 31, 2009 this item amounted to Euro 36 million and was broken down as follows:
(in thousands of Euro)
12.31.2009 12.31.2008
Bank and similar accounts 35,712 44,948
Cash-in-hand and cash equivalents 9 24
Total 35,721 44,972
Investment flows relating to 2009 are shown and explained in the consolidated Cash Flow Statement.
For the notes on the net financial position see Paragraph 1.4.3 of the Directors’ Report on Operations.
Cash and cash equivalents amounted to Euro 35.7 million and consisted of cash deposited in current bank accounts
denominated primarily in euro and in U.S. dollars, pounds sterling, Australian dollars, South African rand, and Argentine
pesos, in addition to investments in money market funds denominated in euro and managed by leading financial institutions
with maturities in the short term and immediate liquidity. The item decreased by Euro 9.3 million compared to December 31,
2008 (Euro 44.9 million) due to the use of cash to pay down the Group’s debt.
11. non-current Assets held for Sale
At December 31, 2009 there were no assets held for sale or disposal.
noteS on the liAbilitY itemS of the conSolidAted bAlAnce Sheet
12. equity
At December 31, 2009, consolidated equity was broken down as follows:
(in thousands of Euro)
12.31.2009 12.31.2008
Share capital 27,652 27,652
Share premium account 69,909 69,905
- other reserves 36,825 38,571
- exchange reserve (5,525) (6,633)
Total other reserve 31,300 31,938
Profit (loss) carried forward 7,581 342
Profit (loss) for the Group 6,938 8,127
Equity attributable to the Group 143,380 137,964
Equity attributable to Minority interest 14,738 12,409
Consolidated equity and profit for the period 158,118 150,373
Annex B details the reconciliation between the Equity and the results of Buongiorno with the same items for the Group, while
the changes for the items composing the consolidated equity are shown in the Statement of Changes in Equity (attached to the
consolidated Balance Sheet and Profit and Loss Account).
The increase in consolidated equity (Euro 158.1 million at December 31, 2009 compared to Euro 150.4 million at December
31, 2008) amounting to Euro 7.7 million, is attributable to the consolidated net profit for the year, amounting to about Euro 7.1
million, the increase in the foreign currency translation reserves amounting to approximately Euro 1 million, the decrease in the
reserves following the changes to the consolidation area and in particular due to the liquidation of certain Group companies, the
110
111
Consolidated annual RepoRt of
the BuongioRno gRoup as of deCemBeR 31, 2009
acquisition of the company Buongiorno Russia LLC and the minorities of the South African subsidiary iTouch South Africa (Pty)
Ltd, the Turkish subsidiary Buongiorno Dijital Iletisim A.S and the Nigerian subsidiary iTouch Global Concept Nigeria amounting
to Euro 0.6 million and to other increases of Euro 0.2 million.
Share capital
As of December 31, 2009, the share capital of Buongiorno was composed of 106,353,675 ordinary shares with a par value
of Euro 0.26 each.
The objectives identified by the Group in managing capital are to create value for shareholders in general, protect the
business as a going concern and support Group development. For this reason the Group wishes to maintain an adequate
level of capitalization, so as to provide at the same time a satisfactory financial return for shareholders as well as ensure
affordable access to external sources of funding, also through the award of a suitable rating. The Group constantly monitors
movements in the level of indebtedness in relation to equity, particularly the level of net debt and the cash generation of
industrial activities. In order to achieve the above objectives the Group constantly strives to improve the profitability of the
businesses in which it operates. In addition, the Board of Directors may propose to the Shareholders’ Meeting a reduction or
increase in share capital or, where allowed by the law, the distribution of reserves. In this context the Group also purchases
treasury stocks, always within the limits authorized by the Shareholders’ Meeting, following the same value creation criteria,
consistent with the objectives of achieving financial balance and improving the rating.
In line with standard practice in the sector, the Group monitors capital based on the gearing ratio. This ratio is calculated as
the ratio of net debt to total share capital.
(in thousands of Euro)
12.31.2009 12.31.2008
Net financial position (A) 47,383 66,688
Consolidated equity and profit for the period (B) 158,118 150,373
Total capital [(A)+(B)]=C 205,501 217,061
“Gearing ratio” (A)/ (C) 23.1% 30.7%
consolidated profit for the Year
Net profit of the Buongiorno Group for the year was Euro 6,938 thousand.
minority interests
Minority interests at December 31, 2009 amounted to Euro 14,738 thousand, and result attributable to minority interests was
Euro 140 thousand.
Statement of Reconciliation for the Result Attributable to the group and to minority interests
RECONCILIATION CONSOLIDATED PROFIT 2009
(in thousands of Euro) gRoup CoNsolIdAtEd pRofIt (loss) foR CoNsolIdAtEd
pRofIt thE pERIod AttRIbutAblE REsult
foR thE pERIod to mINoRIty INtEREsts
Other reserve 1,108 (103 ) 1,005
Group consolidated Profit/loss 6,938 140 7,078
Consolidated result 8,046 37 8,083
RECONCILIATION CONSOLIDATED PROFIT 2008
(in thousands of Euro) gRoup CoNsolIdAtEd pRofIt (loss) foR CoNsolIdAtEd
pRofIt thE pERIod AttRIbutAblE REsult
foR thE pERIod to mINoRIty INtEREsts
Other reserve 5,097 (148) 4,949
Group consolidated Profit/loss 8,127 264 8,391
Consolidated result 3,030 412 3,442
eARningS peR ShARe
basic
Basic EpS is calculated by dividing the net Group profit for the year by the average number of ordinary shares outstanding
during the period, namely 106,352,187 in 2009 (106,353,675 in 2008).
diluted
Diluted EpS is calculated by dividing the net Group profit for the period, gross of interests on the convertible bond, by
the average number of ordinary shares outstanding during the period plus the number of outstanding options that can be
potentially exercised (or other instruments potentially convertible into ordinary shares, such as convertible bonds), or granted
at the end of the period, a total of 113,114,652 in 2009 (110,404,675 in 2008).
112
113
Consolidated annual RepoRt of
the BuongioRno gRoup as of deCemBeR 31, 2009
non-current liabilities
13. long-term borrowings
Long-term borrowings may be broken down as follows:
(in thousands of Euro)
12.31.2009 12.31.2008
Total bank loans - current share 47,789 5,296
Guaranted convertible bond 0 965
Total other current financial liabilities 37 975
Total 47,826 7,236
non-current financial liabilities amounted to Euro 47.8 million at the end of 2009 (Euro 7.2 million at December 31, 2008).
At December 31, 2009, the item consisted chiefly of:
n Euro 44.6 million representing the long-term portion of Tranche A of the loan issued by a pool of banks. As stated above,
the current portion of Tranche A of the loan is Euro 13.4 million. Both Tranche A and Tranche B of the loan call for the
application of a spread of 300 basis points on the benchmark interest rate. Said spread may vary on a half-yearly basis
according to a reward mechanism involving the performance of the ratio of gross financial debt to EBITDA. The shares of
certain Group companies were pledged as security for the loan;
n the approximately Euro 0.3 million long-term, fixed-rate loan issued at a subsidized rate by Simest S.p.A. (as per Italian
Law 394/81 on internationalization projects);
n Euro 0.9 million representing the medium-term portion of the floating-rate loan issued by Credito Emiliano S.p.A. in the
total amount of Euro 3.0 million;
n Euro 2.0 million long-term representing the medium/long-term portion of the unsecured variable rate loan issued by MCC
S.p.A. (Unicredit banking group) in the total amount of Euro 5 million.
14. deferred tax liabilities
The balance of deferred tax liabilities was Euro 4,451 thousand at December 31, 2009 (Euro 6,424 thousand at December
31, 2008). This balance derives primarily from the tax effects of the fair value measurement of the assets and liabilities arising
from the iTouch acquisition (Euro 4,366 thousand) and the recognition of intangible assets during previous years following the
acquisition of Rocket Mobile (Euro 76 thousand).
15. non-current provisions
These include employee benefits (severance indemnity provision) for the employees of the Italian companies in the Group
and the Provisions for risks and charges.
According to Italian GAAP, the severance indemnity fund represents the actual amount due to employees in accordance with
laws and labor contracts in force, considering every form of compensation on an ongoing basis.
The total amount corresponds to the total of the single indemnities accrued in favor of employees at the reporting date, net
of payments on account, and equal to the amount that would have been due to employees if the work relationship were to
have ended on that date.
Pursuant to the provisions of IAS 19, the severance indemnity fund is considered a defined contribution plan that requires
an actuarial valuation, taking a series of factors into account (current cost of labor, turnover of personnel, expected return,
financial charges, actuarial gains and losses, etc.). The principal actuarial assumptions used for the calculation of the
Severance Indemnity Fund at December 31, 2009 are as follows:
n technical annual discount rate of 3.5%;
n annual inflation rate of 2%;
n annual rate of increase of severance indemnity fund of 3.9%;
n annual rate of employee turnover of 11%;
n under reformed employee benefit regulations, the annual rate of wage increases is no longer taken as a reference
parameter, inasmuch as future accruals to the severance indemnity provision will no longer flow to the company, but rather
to a supplementary pension program or the treasury fund maintained by the INPS (the Italian social-security agency).
The measurement of severance indemnity provisions using actuarial techniques in accordance with IAS 19 resulted in a Euro
73 thousand increase in the provision at December 31, 2009.
114
115
Consolidated annual RepoRt of
the BuongioRno gRoup as of deCemBeR 31, 2009
Movements in the severance indemnity provision during the year were as follows:
(in thousands of Euro)
Severance indemnity fund at December 31, 2008 1,141
Allocation 69
Payments (156)
Severance indemnity fund at December 31, 2009 1,054
Provisions for risks and charges include: the provision for restructuring charges, the provision covering losses of unconsolidated
subsidiaries, the provisions to cover future costs or losses arising from completed operations, and the funds for legal
contingencies or commercially-related contractual risks.
(in thousands of Euro)
12.31.2008 AlloCAtIoNs dECREAsE othER ChANgEs 12.31.2009
Provisions for legal contingencies 417 0 (345) 0 72
Other provisions 1,297 32 (533) 153 949
Total Provision for risks and charges (non current) 1,714 32 (878) 153 1,021
Changes in the fund for legal contingencies from year-end 2008 relate principally to settlements reached during the year and
certain contingencies existing in the French subsidiary Buongiorno France S.A..
The item “Other provisions” had a balance of Euro 949 thousand and mainly refers to funds intended for the current restructuring
plan. In detail, Buongiorno UK allocated a provision of Euro 0.7 million for the refurbishment of the London offices.
current liabilities
16. trade and other payables
(in thousands of Euro)
12.31.2009 12.31.2008
Trade creditors 60,638 77,276
Other tax payables 5,943 4,269
Providence and social security charges 2,424 1,919
Other creditors 8,404 5,175
Accrued expenses and deferred income 2,263 1,422
Trade creditors and other creditors 79,672 90,061
trade payables
(in thousands of Euro)
12.31.2009 12.31.2008
Trade creditors 60,638 77,276
At December 31, 2009 trade payables amounted to approximately Euro 60 million. The decrease in trade payables compared
to last year is mainly due to a reduction in costs due to decreased business volumes.
At December 31, 2009, there were no amounts falling due after more than 12 months, nor any borrowing secured by
collateral (“real securities”). Trade payables at the end of the year mainly involved content-production services, rebates to
telephone carriers and media operators on revenues from telephone traffic, and advertising and promotion of Consumer
Services.
tax payables
(in thousands of Euro)
12.31.2009 12.31.2008
Other tax payables 5,943 4,269
Tax payables at December 31, 2009 were about Euro 5.9 million (Euro 4.3 million at December 31, 2008) and mainly
included Euro 0.6 million in withholding for employees and freelancers, and Euro 4.5 million in VAT payable.
116
117
Consolidated annual RepoRt of
the BuongioRno gRoup as of deCemBeR 31, 2009
providence and Social Security charges
(in thousands of Euro)
12.31.2009 12.31.2008
Providence and social security charges 2,424 1,919
This item refers to contributions that have accrued but have not yet been paid to providence and social security institutions.
At the end of the reporting period, these charges were Euro 2.4 million.
other payables
At December 31, 2009, other payables totaled Euro 8.4 million and were broken down as follows:
(in thousands of Euro)
12.31.2009 12.31.2008
Account payables to employees 6,980 4,443
Other 1,424 732
Total 8,404 5,175
Payables to employees and collaborators are composed of liabilities related to bonuses still to be paid, paid holidays and
untaken leaves, reimbursement of expenses to staff as well as payment in lieu of notice.
Other payables include interest payable, fees payable to directors, former directors and statutory auditors accrued during the
year, and other amounts payable, none of which is individually material.
Accrued expenses and deferred income
Accrued expenses and deferred income totaled approximately Euro 2.3 million at December 31, 2009 and can be broken
down as follows:
(in thousands of Euro)
12.31.2009 12.31.2008
Accruals 21 42
Deferred income 2,242 1,380
Total 2,263 1,422
Deferred income, increasing about Euro 0.9 million compared to previous year, consists of the portion of income referring to
the next fiscal year deriving from advertising campaigns and business services already invoiced by the Company which will
be completed after the end of the current year. These sums are recognized based on the percentage of the campaign that
has been completed or on an accruals-basis according to the underlying contracts entered into with customers. The balance
can be attributed primarily to deferred income in the Austrian company sms.at Mobile Internet Services GmbH (Euro 605
thousand) and the Australian company iTouch Australia Pty Ltd (Euro 1 million).
17. current tax payables
(in thousands of Euro)
12.31.2009 12.31.2008
Current tax payables 3,202 1,944
Total 3,202 1,944
Current tax payables consist of Euro 0.5 million for IRAP with the balance representing tax payables to foreign tax authorities.
18. Short-term borrowings
(in thousands of Euro)
12.31.2009 12.31.2008
Total payables to banks 2,710 101,119
Total bank loans - current share 33,514 1,978
Total other current financial liabilities 1,127 1,900
Guaranted convertible bond 994 0
Total 38,345 104,997
current financial liabilities amounted to Euro 38.3 million at December 31, 2009, down compared to December 31, 2008
(Euro 105.0 million). A breakdown of current financial liabilities is provided below.
118
119
Consolidated annual RepoRt of
the BuongioRno gRoup as of deCemBeR 31, 2009
The item payables to banks mainly refers to bank overdrafts in Euro, Columbian pesos and Turkish lira.
The current portion of bank borrowings (Euro 33.5 million) consists primarily of the share of borrowings maturing within
one year and the medium-/long-term revolving portion of the loan contracted in the total amount of Euro 87 million from a pool
of banks organized by Banca IMI (a member of the Intesa Sanpaolo Group). The funds were disbursed on June 26, 2009. In
particular, the sum of Euro 13.4 million refers to the portion of “Tranche A” of the pool loan maturing within one year. The line of
credit was authorized in the amount of Euro 67 million, matures in 2014, and calls for half-yearly payments, the first installment
of which will fall due on December 31, 2009. Said loan was contracted in order to make repayment in full of the loan originally
contracted from Banca IMI in the amount of Euro 100 million maturing on June 26, 2009. The new loan also calls for a line
of credit known as the “Revolving Credit Facility”, or “Tranche B”. Said line of credit was authorized in the amount of Euro 20
million, and on December 31, 2009 the Company applied to draw it down for Euro 18.0 million with use in the near term.
The facility matures in five years, calls for a gradual reduction in the credit limit beginning on December 31, 2012, and allows
for the possibility of multiple draw-downs with separate maturities and for separate amounts, within the maximum credit limit.
Both Tranche A and Tranche B of the loan call for the application of a spread of 300 basis points on the benchmark interest
rate. Said spread may vary on a half-yearly basis according to a reward mechanism involving the performance of the ratio of
gross financial debt to EBITDA. The shares of certain Group companies were pledged as security for the loan.
The loan agreement also calls for compliance with certain financial covenants, to be reviewed at the end of each half-year,
beginning on December 31, 2009. These parameters were determined according to a conservative medium-term business
plan and allow for headroom that the management currently considers wholly adequate.
These covenants are:
n the ratio of Consolidated Gross Operating Margin (EBITDA) to Consolidated Net Borrowing Costs;
n the ratio of Consolidated Gross Financial Debt to Consolidated Gross Operating Margin (EBITDA);
n the ratio of Consolidated Gross Financial Debt to Consolidated Equity.
At December 31, 2009 the covenants were respected.
With the new loan agreement, the Company has achieved its goal of extending the duration of its debt and scheduling
repayment according to its future debt-servicing capacity, prudentially estimated on the basis of the cash flow that the
Company expects its core business to generate.
The current share of bank loans also includes Euro 2.1 million in bank debt maturing within one year contracted with
national banks (Credito Emiliano and Medio Credito Centrale – a member of the Unicredit banking group) and Simest,
a financial company involved in the development and promotion of Italian enterprises outside Italy (interest rates are
discussed in note 14).
Current financial liabilities also include the outstanding portion of the convertible bond (Euro 1.0 million compared to an
original value of Euro 12 million) underwritten on September 22, 2005 by Mitsui & Co. Ltd and Banca IMI and maturing in
2010. The balance at December 31, 2008 refers to the amount held by Banca IMI, net of the underlying option.
Convertible bonds, like other long-term financial liabilities, are valued at amortized cost, which is calculated bearing in mind all
related costs and using a market interest rate for equivalent non-convertible bonds or financial liabilities (IAS 32, Paragraphs
64, 28 and 31). In this connection, a net discount rate of 4.5% was used. This rate approximates those obtained by the
banking system for medium-/long-term loans at the time of issue of the convertible bond (September 2005).
other current financial liabilities amounted to Euro 1.1 million and consist mainly of amounts due in relation to recent
acquisitions and financial transactions. Specifically, this item is broken down as follows:
n Euro 1.0 million due to the former Axis Mundi S.A. (By-Cycle group) shareholders in relation to the deferred payment of
the sale price and earn-out clauses provided in the acquisition contract;
n Euro 0.1 million payable to former iTouch Ventures Ltd. shareholders as established at the closing of the transaction.
19. current provisions
Provisions for risks and charges include the provisions for restructuring charges, the provisions covering losses of
unconsolidated subsidiaries, the provisions to cover future costs or losses arising from completed operations, and the
provisions for legal contingencies or commercially-related contractual risks. These provisions were included in current
liabilities as their use by the end of the following year is considered probable.
(in thousands of Euro)
12.31.2008 AlloCAtIoNs dECREAsE othER ChANgEs 12.31.2009
Provisions for legal contingencies 303 0 (80) (32) 191
Other provisions 7,379 1,583 (2,067) 4 6,899
Total Provision for risks and charges (current) 7,682 1,583 (2,147) (28) 7,090
The Fund for legal contingencies includes potential liabilities associated with litigation underway with the Argentine company
Axis Mundi S.A..
120
121
Consolidated annual RepoRt of
the BuongioRno gRoup as of deCemBeR 31, 2009
Other Provisions, which amounted to Euro 6.9 million, refers to provisions intended to cover potential liabilities related
possible future charges generated by current business activity undertaken by various Group companies. In detail:
n Euro 4.5 million is for potential liabilities associated with the restructuring of the iTouch Group companies; as this initiative
had already been approved by the Group’s former management prior to the acquisition, such liabilities were allocated to
goodwill;
n Euro 1.1 million is for other restructuring and reorganization expenses incurred by the Buongiorno Group;
n Euro 1.3 million refer to other operating charges and losses related to commercial contracts. Said provision also includes
Euro 225 thousand set aside to account for the risk of payment of a financial penalty levied by AGICOM, which, additionally
Buongiorno S.p.A. does not believe it owes, as a consequence of which the Company has submitted a petition to the
Regional Administrative Court.
20. non-current liabilities directly Associated with Assets held for Sale
At December 31, 2009 there were no non-current liabilities held for sale or disposal.
noteS on the mAin itemS of the conSolidAted pRofit And loSS Account
Value of production
Value of production can be broken down as follows:
(in thousands of Euro)
12.31.2009 12.31.2008
Sales of goods and services 259,519 315,948
Increase of fixed assets for internal works 2,950 2,667
Other incomes 149 323
Total value of production 262,618 318,938
21. Sales of goods and services
A breakdown is given below of revenues by geographical area and business line.
It should be noted that, for purposes of preparing segment information, the data analyzed by top managers in the Buongiorno
Group (the highest operational decision-making level) focuses primarily on the major economic values (Revenues and Gross
Operating Margin) since, taking account of the type of typical activity carried out by the companies belonging to the Group,
the balance sheet values are not particularly significant in terms of “non-current assets”, except for the deferred tax assets,
trademarks and goodwill items. Given the nature of these balance sheet items, they have not been included in the analysis
and valuation of the profits and losses of the segments examined by the most senior operational decision-making level, but
have been the subject of separate less frequent analyses and different reporting procedures from the analyses carried out on
the profit and loss account figures. Therefore it has not been considered necessary in these financial statements to provide
information on the assets and liabilities of each segment.
breakdown of Revenues by geographical Area
The analysis of revenues for 2009 is in line with the provisions of IFRS 8. To this end, we can report that the information is
represented by revenues and gross operating margin by geographical area.
Buongiorno Group’s business was broken down in these geographical areas:
n Iberia: including operations in Spain and Portugal;
n UK: including UK-based operations;
n Italy: including operations of Buongiorno S.p.A. and Buongiorno Marketing Services S.r.l.;
n France: including France-based operations;
n Other Euro Countries: including operations in the Netherlands, Germany, and Austria;
n Latam: including operations in South America;
n Other Non-Euro Countries: including operations outside Europe, specifically in North America, Africa, Turkey and Australia.
REVENUES BY GEOGRAPHICAL AREA
(in thousands of Euro) 2009 2008 VARIANCE VAR. %
IBERIA 96,353 107,979 (11,626) (10.8%)
UK 15,253 30,662 (15,409) (50.3%)
ITALY 26,688 33,062 (6,374) (19.3%)
FRANCE 24,300 24,499 (199) (0.8%)
OTHER EURO COUNTRIES 23,354 33,261 (9,907) (29.8%)
LATAM 22,604 22,518 86 0.4%
OTHER NON EURO COUNTRIES 50,738 63,713 (12,975) (20.4%)
SHARED SERVICES 229 254 (25) (9.8%)
TOTAL REVENUES 259,519 315,948 (56,429) (18%)
122
123
Consolidated annual RepoRt of
the BuongioRno gRoup as of deCemBeR 31, 2009
During 2009, consolidated revenues fell by approximately 18%. In further detail, a breakdown of revenues by geographical
area shows:
n a decrease in B2B operations in Iberia, the UK, and other European countries (Rest of Euro Area), resulting in a total
decline in revenues of approximately Euro 56 million. B2B operations are characterized by high volumes but low margins,
with the result that this decline in revenues had minimal effects on the Group’s operating margin. Given the reduction in
fixed costs associated with the discontinued services, net margin gains were actually achieved;
n a decline of approximately Euro 13 million in Other Non-Euro Countries (Rest of World). This decrease was the result of
a change in the agreement and the accounting treatment with an Australian company without an impact on margins. The
new commercial agreements call for Buongiorno to receive rebates of the share of margins to which it is entitled rather
than to invoice the gross revenue paid by the telephone company;
n the decrease in Italy was primarily attributable to a decline in B2C operations.
Annex A to the Notes on the Consolidated Financial Statements contains a table showing a reconciliation of 2008 revenues
by geographical area classified according to the new organizational structure.
breakdown of Revenues by business line
In order to provide a more detailed reporting analysis, revenues are shown by “business line”, representing a group of
activities and operations aimed at the supply of goods and services, featuring a certain level of business risk and a given level
of economic margin that differ from other business segments.
BUSINESS LINE
(in thousands of Euro) 2009 2008 VARIANCE VAR. %
CONSUMER SERVICES 242,914 299,908 (56,994) (19%)
MARKETING SERVICES 16,605 16,040 565 4%
TOTAL REVENUES 259,519 315,948 (56,429) (18%)
In terms of business lines, the largest share of core-business revenues was earned by Consumer Services, with Group
revenues for the segment reaching Euro 242.9 million (93.6% of the Group total) in the year. The share of the total accounted
for by revenues from Marketing Services amounted to Euro 16.6 million, or 6.4%.
The decrease in revenues in the Consumer Services line is attributable, as mentioned above, to a differing method of
recognition of an agreement with an Australian telephone carrier and voluntary withdrawal from agreements generating little
or no profit, whereas revenues from Marketing Services remained largely in line with the previous year.
breakdown of gross operating margin by geographical Area
The following table provides a breakdown of normalized Gross Operating Margin (GOM) by geographical area:
GOM BY GEOGRAPHICAL AREA
(in thousands of Euro) IbERIA uK ItAly fRANCE othER lAtAm othER totAl shAREd totAl
EuRo NoN REgIoN sERVICEs
CouNtRIEs EuRo
CouNtRIEs
Total value of production 96,353 15,253 26,688 24,300 23,354 22,604 50,738 259,290 229 259,519
Total operative costs (74,975) (11,541) (21,356) (15,645) (18,604) (19,489) (37,862) (199,472) (20,662) (220,134)
TOTAL GROSS OPERATING MARGIN AT 12.31.09 21,378 3,712 5,332 8,655 4,750 3,115 12,876 59,818 (20,806) 39,012
Gross Operating Margin% 35.7% 6.2% 8.9% 14.5% 7.9% 5.2% 21.5% 100.0% (53%) 100.0%
TOTAL GROSS OPERATING MARGIN AT 12.31.08 20,322 7,120 10,483 8,314 4,711 3,761 6,443 61,154 (21,330) 39,824
Gross Operating Margin% 33.2% 11.6% 17.1% 13.6% 7.7% 6.2% 10.5% 100.0% (53.6%( 100.0%
An analysis of individual geographical areas indicates:
n growth in the Iberia area thanks to the high profitability of the B2C segment;
n significant growth in the Rest of the World (Other Non-Euro Countries), essentially due to the increase in operations in
Australia, South Africa and Nigeria, an improvement in margins on operations in the United States of America, and certain
extraordinary projects in the Nordic area;
n a decrease in margins in Italy substantially due to a contraction in B2C operations. A decrease was also reported in the
UK (B2B profitability decrease) and Latam (mainly in Argentina and Venezuela).
Annex A to the Notes on the Consolidated Financial Statements contains a table showing a reconciliation of 2008 EBITDA
by geographical area classified according to the new organizational structure.
breakdown of gom by business line
The following table provides a breakdown of normalized GOM by business line.
BUSINESS LINE
(in thousands of Euro) 2009 2008 VARIANCE VAR. %
CONSUMER SERVICES 37,862 38,034 (172) (0%)
MARKETING SERVICES 1,150 1,790 (640) (36%)
TOTAL GROSS OPERATING MARGIN 39,012 39,824 (812) (2%)
124
125
Consolidated annual RepoRt of
the BuongioRno gRoup as of deCemBeR 31, 2009
The Consumer Services business line was mostly in line with 2008 figures.
On the other hand, the profitability of the Marketing Services segment decreased by approximately Euro 640 thousand (GOM
-36%). In relative terms, Marketing Services accounted for approximately 3% of total EBITDA (4% in 2008), whereas the
Consumer Services division accounted for 97% of the total (96% in 2008).
22. other Revenues and increase of fixed Assets for internal Works
increase in fixed Assets for internal Work
Capitalizations refer to internal costs borne for the expansion and further development of management operating programs,
e-mail and SMS services, and the upgrade of the technological platform to meet growing business needs arising from the
rapid growth of the Consumer Services market on both a domestic and international level.
other Revenues
Major items within “Other revenues” include the effects of corrections to prior-period estimates, revenues generated by the
subleasing of offices and insurance compensation.
costs of production
23. costs for Services and use of third-party Assets
This item can be broken down as follows:
(in thousands of Euro)
2009 2008
Variable costs of production 90,185 139,530
Marketing costs 53,735 55,312
Fixed structural costs 30,277 33,023
of which non re-current costs 2,700 1,799
Total costs for services, use of third-party assets, consumable and goods 174,197 227,865
Variable costs of production decreased by 35%, going from Euro 139.5 million in 2008 to Euro 90.2 million in 2009, and
include bandwidth leasing costs, costs for the purchase of SMS and content, amounts recognized to media partners
(Televisa and Telecinco), to list owners and telcos, and technology costs for housing and hosting, royalties and the recording
companies’ and the artists’ rights. ). The sharp decline in costs for services is closely tied to the decrease in revenues and is
chiefly attributable to two phenomena:
n the differing accounting treatment of an agreement with an Australian telephone carrier. In further detail, instead of
recognizing gross revenues and the associated expenses, the Company now recognizes net revenues, i.e. without the
associated expenses;
n the rationalization of several agreements that generated small margins while entailing very high costs.
Marketing costs decreased slightly compared to the same period of 2009 and include advertising investments for all media
channels, marketing consulting, commissions paid to media centres, and all production costs for marketing initiatives.
Fixed structural costs also dropped by 7%, from Euro 33 million in 2008 to Euro 30.3 million in 2009, and include principally
rental costs of offices and rental fees relating to hardware used by Group companies as well as consultancy expenses,
office expenses, maintenance costs, insurance, the costs of sundry services and travel and accommodation costs for all
employees.
24. non-recurring expenses
(in thousands of Euro)
yEAR 2009 yEAR 2008
Redundancy costs 1,259 966
Data center and platform restructuring 3,007 4,545
Legal entities closing 494 162
Other restructuring costs 828 (1,496)
Total 5,588 4,177
Non-recurring expenses refer to costs incurred by Group companies in connection with restructuring activity and was not
covered by sums allocated to the provision for risks at December 31, 2009. The balance of restructuring costs includes
Euro 1.259 thousand pertaining to redundancy incentives provided and Euro 3 million associated with technological costs
incurred for various activities in support of the rationalization and reorganization of technological platforms.
The companies primarily responsible for such restructuring costs include the Spanish company Buongiorno My Alert,
Buongiorno S.p.A. and the French company Buongiorno France.
126
127
Consolidated annual RepoRt of
the BuongioRno gRoup as of deCemBeR 31, 2009
25. personnel costs
This item includes the costs for employees, including provisions required by the law and by collective contracts, as well as
the cost of holidays that had matured but were still unused at December 31, 2009. The balance of Euro 53.4 million includes
Euro 1,259 thousand in restructuring costs associated with early retirement incentives. The Group’s workforce, net of former
iTouch Group employees, was broken down as follows (average workforce for the year):
(in thousands of Euro)
AVERAgE 2009 AVERAgE 2008
Employees and middle management 969 1,046
Executives 35 40
Total 1,004 1,086
Personnel costs include the notional cost, amounting to about Euro 4 thousand, relating to the issue of options under the
stock option plans existing at the period-end in favor of employees, collaborators and directors (IFRS 2).
Report on the Stock option plan
Buongiorno has always favored the possibility of implementing stock option plans, feeling that they are an appropriate tool in
building relationships between the Company and its employees/directors by providing an incentive to create a professional,
long-lasting relationship. As such, over the years various equity-based incentive plans have been implemented, in compliance
with CONSOB notice No. 11508 of February 15, 2000 regarding stock option plans, as described below.
No new share-based incentive plans have been issued with respect to the situation at December 31, 2008.
As a consequence, the following Plans were in force at December 31, 2009:
2006-2012 Stock option plan (plan 6)
In the Shareholders’ Meeting of May 2, 2006, Buongiorno defined an increase in share capital for the purposes of assigning
options to employees and directors.
The objective of this plan, just as for previous plans, is to offer the Company the possibility of assigning new stock options to
the employees and directors of the Company and Group companies and to employees who are newly recruited or arriving
from acquired companies and who merit special professional recognition.
A reserved capital Increase, of a maximum of 4,500,000 new issue shares, has been approved to cover this plan.
characteristics of the incentive plan
The Plan is regulated by a Regulation, issued by the Board of Directors on May 10, 2006 on the basis of those already
existing for the previous plans.
Some of the most important terms and conditions are as follows:
n plan expiry: December 31, 2012 with the possibility for the Board to establish different dates, but always prior to December
31, 2012, as the latest date for exercising specific assignments;
n deadline for allotting stock options: June 30, 2011;
n stock option maturity: upon reaching objectives and/or following a minimum time of employment or director service with
the Company;
n determination of the stock option issue price: the exercise price for each option, to be paid to the Company in order
to obtain the relevant new issue share, will be the price that the Board of Directors has determined, when attributing
the options, for each beneficiary or category of beneficiaries, and in any event will not be below the market value
of the stock on the assignment date as laid down in the resolution of the Company’s Extraordinary Shareholders’
Meeting on May 2, 2006.
2008-2014 Stock option plan (plan 7)
In the Shareholders’ Meeting of May 5, 2008, Buongiorno defined an increase in share capital for the purposes of assigning
options to employees and directors.
The objective of this plan, just as for previous plans, is to offer the Company the possibility of assigning new stock options to
the employees and directors of the Company and Group companies and to employees who are newly recruited or arriving
from acquired companies and who merit special professional recognition.
A reserved capital Increase, of a maximum of 5,000,000 new issue shares, has been approved to cover this plan.
128
129
Consolidated annual RepoRt of
the BuongioRno gRoup as of deCemBeR 31, 2009
characteristics of the incentive plan
The Plan is regulated by a Regulation, issued by the Board of Directors on May 11, 2009 on the basis of those already
existing for the previous plans.
Some of the most important terms and conditions are as follows:
n plan expiry: December 31, 2014 with the possibility for the Board to establish different dates, but always prior to December
31, 2014, as the latest date for exercising specific assignments;
n deadline for assigning stock options: June 30, 2013;
n stock option maturity: upon reaching objectives and/or following a minimum time of employment or director service with
the Company;
n determination of the stock option issue price: the exercise price for each option, to be paid to the Company in order
to obtain the relevant new issue share, will be the price that the Board of Directors has determined, when attributing
the options, for each beneficiary or category of beneficiaries, and in any event will not be below the market value
of the stock on the assignment date as laid down in the resolution of the Company’s Extraordinary Shareholders’
Meeting on May 5, 2008.
Summary of Active Stock option plans as of december 31, 2009
Further details on the stock option plans in effect at the end of the period are provided in the table below.
PLAN 6
12.31.2008 yEAR 2009 12.31.2009
stRIKE Not ExERCIsEd AssIgNEd ExERCIsEd ExpIREd CANCEllEd to bE CANCEllEd totAl
pRICE (EuRo)
5.16 1,545,000 - - 56,000 164,000 1,325,000
4 133,000 - - - 40,000 93,000
3.86 35,000 - - - 35,000 -
2.79 75,000 - - - 75,000
1.94 1,938,000 - - 38,000 164,000 1,736,000
1.92 60,000 - - - 60,000
0.76 15,000 - - - 15,000
0.7 790,000 - - - 50,000 740,000
3,801,000 790,000 - - 94,000 453,000 4,044,000
PLAN 7
12.31.2008 yEAR 2009 12.31.2009
stRIKE Not ExERCIsEd AssIgNEd ExERCIsEd ExpIREd CANCEllEd to bE CANCEllEd totAl
pRICE (EuRo)
0.7 - 4,110.000 - - - 200,000 3,910,000
- 4,110.000 - - - 200,000 3,910,000
The “To be cancelled” column includes those options relating to personnel who have left and so can no longer be exercised.
26. depreciation, Amortization and impairment losses
(in thousands of Euro)
12.31.2009 12.31.2008
Amortization of intangible fixed assets 10,937 11,087
Depreciation of tangible fixed assets 1,612 2,107
Other fixed assets write-downs 1,125 4,297
Total amortization, depreciation and other write-downs 13,674 17,491
Amortization
Amortization for the year (a total of Euro 10.9 million) is detailed in the notes on intangible assets.
depreciation
Depreciation for the year, amounting to Euro 1,612 thousand, was determined using technical and economic rates established
based on possible residual asset use as previously illustrated in the Notes on evaluation criteria for tangible assets.
impairment losses
This item includes the impairment of Call TV goodwill amounting to Euro 1,111 thousand.
130
131
Consolidated annual RepoRt of
the BuongioRno gRoup as of deCemBeR 31, 2009
27. Write-downs of bad debts and other provisions
(in thousands of Euro)
12.31.2009 12.31.2008
Write-downs of bad debt and other provisions 2,496 (1,069)
of which non re-current allocations 828 (1,496)
Total Write-downs of bad debt and other provisions 2,496 (1,069)
This item corresponds to the provision for bad debts, a measure taken after specific analysis to adjust the total amount to its
probable break-up value and allocations to other provisions for potential liabilities. In 2009, provisions for bad debts amounted
to Euro 1.3 million, provisions for risks and charges amounted to Euro 1.6 million, mainly due to contingent liabilities related
to restructuring activities and transfer to profit and loss account amounting to Euro 0.4 million.
28. other operating costs
Other operating costs at December 31, 2009 amounted to Euro 2,084 thousand (Euro 3,500 thousand at December 31,
2008) and include all remaining costs, normally for amounts that are not individually material, which by their nature are not
classifiable in other items of the aggregated amount of “production costs” which are deducted from the operating result (Euro
872 thousand) and other restructuring costs for Euro 1,212 thousand.
29. finance income
Finance income at December 31, 2009 may be broken down as follows:
(in thousands of Euro)
12.31.2009 12.31.2008
Interest incoms 669 1,462
Other financial incomes 12 90
Exchange gains 3,783 2,341
Total 4,464 3,893
The change with respect to the previous year was primarily due to the increase in exchange profits.
30. finance expense
Finance expense at December 31, 2009 may be broken down as follows:
(in thousands of Euro)
12.31.2009 12.31.2008
Interest expenses (3,535) (7,878)
Other interest expenses (2,040) (2,197)
Exchange losses (3,050) (3,171)
Total (8,625) (13,246)
Interest expense amounted to approximately Euro 8.6 thousand for the year (Euro 13.2 thousand for 2008). In 2009, there
was a sharp decline in the balance of interest expense, primarily due to the decrease in short-term interest rates, to which the
Company’s debt is tied in its entirety, in addition to the decline in the average balance of borrowings due to the redemptions
during the period.
31. Value Adjustments on financial Assets
Value adjustments on financial assets were positive at about Euro 0.1 million, compared to a negative value of about Euro
1.6 million for 2008, mainly due to the write-down of the equity investment of Buongiorno S.p.A. in the associate Buongiorno
Hong Kong Ltd.
32. income taxes (current and deferred)
Income taxes for 2009 amounted to Euro 6.1 million, of which Euro 2.4 million refers to current taxes and Euro 3.7 million to
the use of tax losses previously recognized under assets.
The companies that have used the tax losses primarily are the Spanish company Buongiorno My Alert S.A., Buongiorno
S.p.A. and the French company Buongiorno France S.A..
132
133
Consolidated annual RepoRt of
the BuongioRno gRoup as of deCemBeR 31, 2009
The table below provides a reconciliation of the notional and the actual tax rate for the Buongiorno Group at December 31, 2009:
RECONCILIATION BETWEEN STATUTORY AND EFFECTIVE INCOME TAXES
(in thousands of Euro) ItAly spAIN fRANCE AfRICA AustRAlIA othER totAl
Profit (loss) before taxation (3,664) 4,460 4,906 4,113 2,833 500 13,148
Statutory tax rate 27.5% 30.0% 33.3% 30.4% 30.0% - 30.0%
Statutory income taxes (1,008) 1,338 1,635 1,250 850 (122) 3,944
Fiscal effect on temporary and permanent differences 2,003 (333) (9) (66) 101 3,016 4,713
Fiscal effect from utilization of fiscal losses carried forward (996) (1,043) (1,579) 0 (3,071) (6,689)
IRAP and other income taxes calculated on different basis 434 - - - - - 434
Effective income taxes 434 (38) 47 1,184 951 (176) 2,402
Release/allocation of deferred taxes 2,201 492 904 0 (248) 319 3,668
Effective deferred taxes 2,201 492 904 0 (248) 319 3,668
Total taxes as at 31.12.2009 2,635 454 951 1,184 703 143 6,070
Effective tax rate (*) 10% 19% 29% 25% - 46%
(*) Not applicable on negative result.
33. profit for the Year
The Group’s result for the period net of Minority interests amounted to Euro 6,938 thousand, compared to a profit for 2008
of Euro 8,127 thousand.
34. earnings per Share
(in thousands of Euro)
12.31.2009 12.31.2008
Basic earnings per share (Basic EPS) 0.0652 0.0764
Diluted earnings per share (Diluted EPS) 0.0617 0.0739
Average No. of shares 106,352,187 106,353,675
Average No. of shares + No. of options and bonds convertible into shares 113,114,652 110,404,675
Interest payable on the convertible bond 36,812 37,089
basic
Basic EpS is calculated by dividing the net Group profit for the year by the average number of ordinary shares outstanding
during the period, namely 106,352,187 in 2009 (106,353,675 in 2008).
diluted
Diluted EpS is calculated by dividing the net Group profit for the period, gross of interests on the convertible bond, by
the average number of ordinary shares outstanding during the period plus the number of outstanding options that can be
potentially exercised (or other instruments potentially convertible into ordinary shares, such as convertible bonds), or granted
at the end of the period, a total of 113,114,652 in 2009 (110,404,675 in 2008).
35. Related-party transactions
At December 31, 2009, the Buongiorno Group maintained relationships with companies qualifying as related parties within
the meaning of the Code for Related-party Transactions:
Companies or parties holding rights in Group companies:
n Mitsui & Co. Ltd which holds a 18.96% stake in the share capital of the subsidiary Buongiorno USA Inc and, consequently
of Rocket Mobile Inc; Mitsui &Co. Ltd also holds a 45.5% stake in the share capital of Buongiorno Marketing Services B.V.;
n Nevid Nikravan, a director of Buongiorno S.p.A., from whom was purchased on October 7, 2009 the minority holding
of 20.34% of the share capital that he held in the company Buongiorno Dijital Iletisim A.S. (Turkey) through Yamdez
Consulting Advisers SL, a company controlled by the same.
Commercial transactions pertaining to the core business of companies included in the consolidation area were realized with the
said companies/entities at arm’s length during the course of the year.
The Group holds a non-controlling interest in Buongiorno Hong Kong Ltd, in which Mitsui & Co. Ltd. holds 51% stake and
Buongiorno a 49% stake, and which was consolidated using the equity method. The Buongiorno Group effects, at arm’s length,
commercial transactions pertaining to its core business, with the same company and/or its subsidiaries.
Moreover, a share capital increase was carried out for the Dutch holding company Buongiorno Marketing Services Netherland
B.V., underwritten through the contribution of the 100% equity investment in Buongiorno Russia LLC by the associate Buongiorno
134
135
Consolidated annual RepoRt of
the BuongioRno gRoup as of deCemBeR 31, 2009
Hong Kong Ltd. As a result of this transaction, the Buongiorno Group’s ownership of the Dutch holding company Buongiorno
Marketing Services Netherland B.V. fell from 60% to the present 54.5%. The other minority-interest shareholders are the Mitsui &
Co. Ltd. Group and the associate Buongiorno Hong Kong Ltd., which respectively hold 36.4% and 9.1% stakes in Buongiorno
Marketing Services Netherland B.V..
On November 3, 2009, the company Buongiorno Digital Innovation India Private Ltd was set up, in which Mitsui & Co holds a
51% stake and Buongiorno 49%; the company was consolidated by the latter using the equity method. At December 31, 2009
no commercial transactions had yet taken place with that company, given its recent formation.
Transactions completed during the year between Buongiorno and these related parties are summarized in the following table:
(in thousands of Euro)
YEAR 2009
RElAtEd CompANy tuRNoVER RE-dEbItINg dIRECt/INdIRECt fINANCIAl othER
of pERsoNNEl Costs Costs ExpENsEs/INComEs
Buongiorno Marketin Services España, S.L. 7 - 9 - -
Buongiorno Marketing Services B.V. 321 329 63 (6) -
Buongiorno Marketing Services Deutschland GmbH 8 - - - -
Buongiorno Marketing Services France S.A. 3 - - - -
Buongiorno Marketing Services GmbH At 4 - 16 - -
Buongiorno Marketing Services Italy S.r.l. 376 88 15 - -
Buongiorno Marketing Services UK Ltd 4 3 - - -
Buongiorno Marketing Services US Inc 2 - - - -
Buongiorno RUS LLC 7 - - - -
Buongiorno USA Inc 930 1 773 155 -
Hotsms.com B.V. 7 1 318 - -
Rocket Mobile Inc 444 - 156 - -
Yamdez Consulting Advisers SL - - - - (260)
Buongiorno Hong Kong Ltd - - 438 - -
Buongiorno Hong Kong Ltd INDIA 75 - 227 - -
At December 31, 2009, the Company held 35% of the share capital of the company Inches Music Group S.r.l. The latter
is partly owned by Capital B!, in which Mauro Del Rio - Buongiorno’s reference shareholder - holds the majority stake. The
company’s purpose is to manage and sell “Artist community” tracks. During the year, the Company made a payment of Euro
53,846 to Inches Music Group S.r.l. to replenish losses; the equity investment was then written down by a like amount.
The Group also undertook commercial transactions with said company and recognized costs of Euro 6,874.
With regard to related-party transactions, including inter-company transactions, it must be pointed out that the same do not
qualify as either atypical or unusual, since they were effected in the normal course of the business operations of the Group
companies in question, and concluded at arm’s length, in light of the features of the goods and services involved.
36. Additional information Required by the international financial Reporting Standard n° 7
The Group is exposed to financial risks associated with its operations
n credit risk relating to normal commercial relationships with clients and users;
n liquidity risk, with particular regard to the availability of financial resources and access to the credit market and the market
for financial instruments in general;
n market risks (principally with regard to exchange and interest rates), insofar as the Group operates at international level in
various currency areas and uses financial instruments which generate interest;
As described in the section relating to risk management, the Group, constantly monitors the financial risks to which it is
exposed, so as to evaluate the potential negative effects of these in advance and to take suitable action to mitigate them.
The following section provides qualitative and quantitative information on the incidence of such risks on the Group. The
quantitative data presented below do not have a predictive value, in particular, the sensitivity analyses of market risk cannot
reflect the complexity and correlated reactions of markets which may derive from every forecasted change.
136
137
Consolidated annual RepoRt of
the BuongioRno gRoup as of deCemBeR 31, 2009
classes of financial instruments
Items of the Balance Sheet, classified according to the respective risk categories as of December 31, 2009 and 2008, are
presented below.
Situation at December 31, 2009
(in thousands of Euro) ClAssEs of homogENEous RIsKs
totAl CREdIt lIquIdIty INtEREst ExChANgE pRICE
12.31.2009 RAtE RAtE
CURRENT ASSETS
TRADE RECEIVABLES 54,874
- of which denominated in Euro 37,070
- of which denominated in other currencies 17,804
OTHER RECEIVABLES 2,593 2,593
CURRENT FINANCIAL ASSETS 19
- of which SICAVs 19 19
- of which commercial paper
CASH AND CASH EQUIVALENTS 38,761
- of which denominated in Euro 15,402
- of which denominated in other currencies 23,358
NON CURRENT LIABILIITIES
CONVERTIBLE BOND -
LONG TERM BANK BORROWINGS 47,789 47,789
OTHER NON CURRENT FINANCIAL LIABILITIES
- of which denominated in Euro
- of which denominated in other currencies
CURRENT LIABILITIES
TRADE PAYABLES 61,888
- of which denominated in Euro 44,259
- of which denominated in other currencies 17,629
SHORT TERM BANK BORROWINGS 36,231 36,231
OTHER CURRENT FINANCIAL LIABILITIES 2,114
- of which denominated in Euro
- of which denominated in other currencies 1,093 1,022
Situation at December 31, 2008
(in thousands of Euro) ClAssEs of homogENEous RIsKs
totAl CREdIt lIquIdIty INtEREst ExChANgE pRICE
12.31.2008 RAtE RAtE
CURRENT ASSETS
TRADE RECEIVABLES 68,276
- of which denominated in Euro 42,219
- of which denominated in other currencies 26,057
OTHER RECEIVABLES 4,369 4,369
CURRENT FINANCIAL ASSETS 573
- of which SICAVs 573 573
-of which commercial paper
CASH AND CASH EQUIVALENTS 44,972
- of which denominated in Euro 24,765
- of which denominated in other currencies 20,207
NON CURRENT LIABILIITIES
CONVERTIBLE BOND 965 965
LONG TERM BANK BORROWINGS 5,296 5,296
OTHER NON CURRENT FINANCIAL LIABILITIES 975
- of which denominated in Euro
- of which denominated in other currencies 41 934
CURRENT LIABILITIES
TRADE PAYABLES 77,805
- of which denominated in Euro 54,926
- of which denominated in other currencies 22,879
SHORT TERM BANK BORROWINGS 103,097 103,097
OTHER CURRENT FINANCIAL LIABILITIES 1,900
- of which denominated in Euro
- of which denominated in other currencies 195 1,705
138
139
Consolidated annual RepoRt of
the BuongioRno gRoup as of deCemBeR 31, 2009
financial Assets and liabilities categories
The following tables show Balance Sheet items classified according to the categories provided for by IAS 39 as of December
31, 2009 and 2008.
The carrying amount of financial assets and liabilities was fairly equal to their fair value.
Situation at December 31, 2009
(in thousands of Euro)
At fAIR VAluE loANs VAluEd VAluEd totAl fAIR VAluE
ANd At AmoRtIzEd At Cost
RECEIVAblEs Cost
CURRENT ASSETS
Trade receivables 54,874 54,874 54,874
Other receivables 2,593 2,593 2,593
Current financial assets 19 19 19
Cash and cash equivalents 38,761 38,761 38,761
NON CURRENT LIABILITIES
Convertible bond -
Bank loans 47,789 47,789 47,789
Other financial liabilities -
CURRENT LIABILITIES
Trade payables 61,888 61,888 61,888
Bank loans 36,231 36,231 36,231
Other financial liabilities 2,114 2,114 2,114
Situation at December 31, 2008
(in thousands of Euro)
At fAIR VAluE loANs VAluEd VAluEd totAl fAIR VAluE
ANd At AmoRtIzEd At Cost
RECEIVAblEs Cost
CURRENT ASSETS
Trade receivables 68,276 68,276 68,276
Other receivables 4,369 4,369 4,369
Current financial assets 573 573 573
Cash and cash equivalents 44,972 44,972 44,972
NON CURRENT LIABILITIES
Convertible bond 965 965 965
Bank loans 5,296 5,296 5,296
Other financial liabilities 975 975
CURRENT LIABILITIES
Trade payables 77,805 77,805 77,805
Bank loans 103,097 103,097 103,097
Other financial liabilities 1,900 1,900 1,900
Trade and other receivables generated Euro 1,317 thousand in costs pertaining to losses on receivables and allocations to
the bad debt provision (Euro 477 thousand at December 31, 2008). It is deemed that the carrying value of these estimates
provides a reasonable approximation of their respective fair values.
Other financial assets and cash and cash equivalents generated Euro 661 thousand in finance income and interest income
in 2009 (Euro 1,552 thousand in 2008).
Bank loans, in addition to current account overdrafts, generated total interest expenses of approximately Euro 5,574 thousand
(compared to Euro 7,877 thousand in 2008). This reduction is due to the lower average level of debt and the marked
reduction in interest rates to which most of the bank loans are linked. The current value of short-term bank borrowings was
measured by assuming a fair value corresponding to the recognized fair value inasmuch as said borrowings have maturities
falling in 2010 and bear interest at floating market rates. The fair value of borrowings with maturities beyond 2009, which also
bear interest at floating rates, approximates the market value.
140
141
Consolidated annual RepoRt of
the BuongioRno gRoup as of deCemBeR 31, 2009
Financial debts measured at cost arise from the acquisition of equity investments that do not have a quoted market price and
therefore their fair value cannot be reliably measured.
guarantees
As of December 31, 2009 the Group had issued the following guarantees:
n pledge of the shares of a number of subsidiaries as collateral for the financing of the contract with Banca IMI S.p.A.;
n short-term pledge on the balances held in a current account amounting to Euro 3 million to support a commercial
transaction on the Indian market;
n pledge of the cash and cash equivalents in a current account for an amount of Euro 250,000 as security against any
default on the credit line granted by Simest to Buongiorno S.p.A.
liquidity risk
The following table shows financial liabilities, classified by maturity:
Situation at December 31, 2009
(in thousands of Euro)
<1 yEAR >1 <2 yEARs >2 <3 yEARs >3 <4 yEARs >4 <5 yEARs >5 yEARs
NON CURRENT LIABILITIES
Convertible bond
Bank loans 14,891 13,989 13,097 5,812
Other financial liabilities
CURRENT LIABILITIES
Convertible bond 61,888
Bank loans 36,231
Other financial liabilities 2,114
Situation at December 31, 2008
(in thousands of Euro)
<1 yEAR >1 <2 yEARs >2 <3 yEARs >3 <4 yEARs >4 <5 yEARs >5 yEARs
NON CURRENT LIABILITIES
Convertible bond 965
Bank loans 2,062 2,149 1,086
Other financial liabilities 975 - -
CURRENT LIABILITIES
Convertible bond 77,805
Bank loans 103,097
Other financial liabilities 1,900
credit risk
The Group is subject to various concentrations of credit risk based on the nature of the business segments termed Marketing
Services (MS) and Consumer Services, (CS) as well as from the markets in question.
For the purposes of this analysis, macroclasses of homogeneous risk have been highlighted, identified on the basis of the
business models of Group companies in order to represent their exposure to credit risk more accurately. The following
classes have been highlighted:
n trade receivables consisting of such receivables deriving from identified business segments. The CS segment receivables
with leading companies operating in national and international mobile telephony markets are significant.
n Other receivables mainly consist of receivables arising on operations of a non-commercial nature for which an individual
solvency analysis has been carried out.
The following tables present the breakdown by maturity of the identified risk classes:
Situation at December 31, 2009
(in thousands of Euro)
ClAssEs totAl ExpIREd totAl to ExpIREd wRItE-dowNs
0-30dAys 31-60dAys 61-90dAys moRE thAN 90 ExpIREd
Trade receivables 56,451 4,648 1,723 1,289 3,323 10,983 45,468 (1,577)
Other receivables 2,964 - - - - - 2,964 -
Total 59,416 4,648 1,723 1,289 3,323 10,983 48,432 (1,577)
142
143
Consolidated annual RepoRt of
the BuongioRno gRoup as of deCemBeR 31, 2009
Situation at December 31, 2008
(in thousands of Euro)
ClAssEs totAl ExpIREd totAl to ExpIREd wRItE-dowNs
0-30dAys 31-60dAys 61-90dAys moRE thAN 90 ExpIREd
Trade receivables 68,276 4,619 1,015 605 2,148 8,387 59,889 (695)
Other receivables 4,369 - - - - - 4,369 -
Total 72,646 4,619 1,015 605 2,148 8,387 64,258 (695)
The Group does not renegotiate expired credits.
The notes to the consolidated financial statements present the movements in the fund for bad debts.
market Risks: Sensitivity Analysis
In terms of market risks, the Group is exposed to interest rate risk, exchange rate risk, and price risk. A sensitivity analysis
was conducted of the balance sheet items that could undergo a change in value due to the fluctuation of exchange rates,
interest rates, and market prices. The estimate referred to the following balance sheet items in detail:
n trade receivables and payables in foreign currencies;
n bank deposits in foreign currencies;
n loans;
n financial liabilities;
n short-term financial assets.
The Group is exposed to risks deriving from the fluctuation of exchange rates which may have an impact on its profit or
equity. These risks mainly derive from the fact that some subsidiaries of the Group are located in countries not belonging
to the European Monetary Union, such as the United States, the United Kingdom, Turkey, Bolivia, Chile, Peru, Mexico,
Argentina, Brazil, Colombia, Ecuador, Hong Kong, South Africa, Nigeria, Australia, New Zealand, Norway, Denmark, Sweden,
Finland, Switzerland, Romania, Morocco and Venezuela. Since the Group’s reference currency is the Euro, the profit and
loss accounts of such companies are converted into Euros at the average exchange rate for the period, and for constant
revenues and margins in local currency, variations in exchange rates may have an effect on the countervalue in Euros of
the revenues, costs and profits. Assets and liabilities of the consolidated companies with a currency of account other than
the Euro may have different countervalues in Euro, depending on the evolution of exchange rates. As established by the
accounting principles adopted, the effects of such evolutions are recognized directly in equity under the item conversion
difference. At the reporting date, there were no hedges in existence for such exposure. The following assumptions and
methods were applied to conduct the sensitivity analysis:
n assumptions and calculation methods: the risk is substantially tied to the fluctuation of the USD and GBP, which are the
foreign currencies of greatest relevance to the Buongiorno Group. For these currencies, immediate positive and negative
shifts of 5% in the spot exchange rate at December 31 were assumed. The table shows the impact of this change on the
figure disclosed on the financial statements.
With reference to interest rates, Group companies use external financial resources in the form of debt and deploy available
liquidity in money and financial market instruments. Changes in levels of market interest rates influence the cost and yield
of the various forms of financing, and applications, hence affecting the amount of net financial charges of the Group. The
following assumptions and methods were applied to conduct the sensitivity analysis:
n assumptions and calculation methods: the effect of an immediate increase and decrease of 0.5% in annual rates on the
profit and loss account was calculated. The interest rates on bank deposits that generate interest income are almost
entirely linked to the performance of interbank rates. To estimate the increase or decrease in interest income, a 0.5% shift
was applied to the average annual balance of bank deposits. Floating-rate loans generate interest expenses, the amount
of which is linked to the performance of the benchmark interest rates. To estimate the increase or decrease in interest
expenses, a 0.5% shift was applied to the principal of outstanding loans at the balance sheet date.
price risk applies to short-term cash investments. The following assumptions and methods were applied to conduct the
sensitivity analysis:
n assumptions and calculation methods: the effect of an immediate 5% increase and decrease in the market value of
financial assets at December 31, 2009 on the profit and loss account was calculated.
144
145
Consolidated annual RepoRt of
the BuongioRno gRoup as of deCemBeR 31, 2009
The following table shows the effects of the assumptions set out above on the consolidated financial statements:
(in thousands of Euro)
INtEREst RAtE RIsK ExChANgE RAtE RIsK pRICE RIsK
-0,5% 0,5% -5% 5% -5% 5%
ChANgE ChANgE ChANgE ChANgE ChANgE ChANgE
INtEREst INtEREst ExChANgE ExChANgE NAV NAV
RAtE RAtE RAtE RAtE
ASSETS
TRADE RECEIVABLES IN FOREIGN CURRENCY
- of which denominated in Pound Sterling (194) 194
- of which denominated in US Dollars (144) 144
CASH AND CASH EQUIVALENTS
- of which denominated in Euro (78) 78
- of which denominated in Pound Sterling (234) 234
- of which denominated in US Dollars (231) 231
Short term financial assets (SICAVs)
Total impact of pre-tax financial assets (78) 78 (803) 803
NON CURRENT LIABILITIES
MEDIUM/LONG TERM BANKS LOANS 56 (56)
OTHER NON CURRENT FINANCIAL LIABILITIES
CURRENT LIABILITIES
TRADE PAYABLES
- of which denominated in Pound Sterling 202 (202)
- of which denominated in US Dollars 122 (122)
SHORT TERM BANK LOANS 82 (82) - -
OTHER CURRENT FINANCIAL LIABILITIES
- of which denominated in Pound Sterling -
- of which denominated in US Dollars 48 (48)
Total impact of pre-tax financial liabilities 138 (138) 371 (371) - -
Impact on pre-tax results 60 (60) (432) 432
37. other information
1. The following table provides a summary of the emoluments for 2009, disbursed or payable for any reason, to the
members of the Board of Directors of Buongiorno S.p.A..
offICE hEld At 12.31.2009 tERm of offICE REmuNERAtIoN REmuNERAtIoN VARIAblE totAl stoCK
As dIRECtoR fEEs** REmuNERAtIoN optIoN Costs
Casalini Andrea Chief Executive Officer 01.01 - 12.31.2009 €330,000 €90,000 €204,000 €624,000 €97,505***
Del Rio Mauro Chairman of the Board of Directors 01.01 - 12.31.2009 na €350,000 €187,000 € 537,000 €0
Pitout Wayne * Director 05.01 - 12.31.2009 €239,887 €20,000 na € 259,887 €49,928****
Holger Van Den Heuvel Director 01.01 - 12.31.2009 €20,000 €20,000
Riccardo Lia Director 01.01 - 12.31.2009 € 20,000 € 20,000
Nevid Nikravan Director - Remuneration Committe 01.01 - 12.31.2009 € 27,500 € 27,500
Anna Gatti Indipendent Director - 01.01 - 12.31.2009 €27,500 €27,500
Remuneration Committe
Giovanni Massera Indipendent Director - 01.01 - 12.31.2009 €41,000 €41,000
Head Supervisor Committe
Anna Puccio Indipendent Director - Supervisor 01.01 - 12.31.2009 €49,500 € 49,500
Committe - Remuneration Committe
Felipe Fernandez Atela Indipendent Director - 01.01 - 12.31.2009 €34,500 €34,500
Supervisor Committe
Giorgio Ricchebuono Director 05.01 - 12.31.2009 €20,000 €20,000
* Wayne Pitout left his office on April 31, 2009 remaining as not executive director of the BoD and his remuneration includes the severance indemnity.
** Variable fees for 2009 to be paid in 2010
*** Notional costs booked on profit/loss for 2009 related to stock options assigned during 2006 and 2007, for an excercise price of each option of respectively
5.16 Euro and 1.94 Euro and therefore “out of the money”. The options will expire on December 31, 2012
**** Notional costs booked on profit/loss for 2009 related to stock options assigned during 2007, for an excercise price of each option of 1.94 Euro
and therefore “out of the money”. The options will expire on December 31, 2012
2.In accordance with Article 149-duodecies of the Rules for Issuers amended by CONSOB Resolution N. 15915 of May 3,
2007 (published in Italy’s Official Journal No. 111 of May 15, 2007, Ordinary Supplement No. 115), the amounts for 2009
for services provided to the Group by accounting firm and entities belonging to its network are listed below:
n audit of Parent Company Euro 254 thousand;
n audit of subsidiaries Euro 834 thousand;
n other services to subsidiary company Euro 288 thousand.
On behalf of the Board of Directors of Buongiorno S.p.A.
The Chairman
Mauro Del Rio
146
147
Consolidated annual RepoRt of
the BuongioRno gRoup as of deCemBeR 31, 2009
ANNEx A
RECONCILIATION STATEMENTS OF REVENUES AND EBITDA BY GEOGRAPHICAL AREA AT DECEMBER 31, 2008
CLASSIFIED ACCORDING TO THE NEW ORGANIzATIONAL STRUCTURE
Breakdown of 2008 revenues by geographical area
(in thousands of Euro) Ib uK It fR EuR lAtAm REst ss fy 2008
ITALY & MED 33,062 3,583 3,527 40,172
FRANCE 24,499 24,499
IBERIA 107,979 107,979
GSA 11,118 307 11,425
LATAM 22,518 22,518
UK & INTERNATIONAL 30,662 18,560 41,001 90,223
NORTH AMERICA 18,878 18,878
Netting+Shared Service 254 254
TOTAL REVENUES 107,979 30,662 33,062 24,499 33,261 22,518 63,713 254 315,948
EBITDA 2008 by geographical area
(in thousands of Euro) Ib uK It fR EuR lAtAm REst ss fy 2008
ITALY & MED 10,483 808 (114) (79) 11,098
FRANCE 8,314 (22) (2,990) 5,302
IBERIA 20,322 (269) 20,053
GSA 1,566 (168) (79) 1,319
LATAM 3,761 (79) 3,682
UK & INTERNATIONAL 7,120 2,337 6,429 (242) 15,644
NORTH AMERICA 318 (136) 182
Netting+Shared Service (17,456) (17,456)
TOTAL GOM 20,322 7,120 10,483 8,314 4,711 3,761 6,443 (21,330) 39,824
ANNEx b
RECONCILIATION BETWEEN THE FINANCIAL STATEMENTS OF BUONGIORNO S.P.A. AND THE CONSOLIDATED FINANCIAL
STATEMENTS: EQUITY AND CONSOLIDATED PROFIT (LOSS) OF BUONGIORNO S.P.A. AT DECEMBER 31, 2009
(in thousands of Euro) CApItAl ANd REsERVEs moVEmENts IN ChANgE pRofIt (loss) CApItAl ANd REsERVEs
12.31.2008 CApItAl ANd REsERVEs CoNsolIdAtIoN AREA foR thE pERIod 12.31.2009
Buongiorno S.p.A. 132,223 (204) - (6,650) 125,369
Elimination of equity investments (170,897) (5,186) 4,417 14,699 (156,967)
Consolidated goodwill 176,638 (549) - (1,111) 174,978
Capital and reserves and 137,964 (5,939) 4,417 6,938 143,380
profit (loss) of the Group
Capital and reserves and profit 12,409 864 1,325 140 14,738
(loss) of Minority interests
Consolidated capital and 150,373 (5,075) 5,742 7,078 158,118
reserves and profit (loss)
148
149
Consolidated annual RepoRt of
the BuongioRno gRoup as of deCemBeR 31, 2009
2.2 finAnciAl StAtementS foR the YeAR ended decembeR 31, 2009 - buongioRno S.p.A.
The financial statements of Buongiorno S.p.A. have been prepared in accordance with IAS 1.
SEPARATE BALANCE SHEET
Note (in thousands of Euro) 12.31.2009 12.31.2008 VARIANCE
NON-CURRENT ASSETS
1) Goodwill 4,095,876 4,095,876 -
2) Other intangible assets 4,204,071 2,842,042 1,362,029
3) Tangible fixed assets 252,312 193,756 58,556
4) Investments in associate companies 292,639,381 180,847,386 111,791,995
5) Other non-current financial assets 28,344,798 7,103,294 21,241,504
6) Deferred tax assets 11,375,249 14,370,549 -2,995,300
340,911,688 209,452,903 131,458,785
CURRENT ASSET
7) Inventories - - -
8) Trade debtors and other receivables 30,850,517 26,923,585 3,926,932
9) Other current financial assets - - 0
10) Cash and cash equivalents 3,824,494 4,209,974 -385,480
34,675,011 31,133,559 3,541,452
11) NON-CURRENT ASSETS HELD FOR SALE - - -
TOTAL ASSETS 375,586,699 240,586,462 135,000,237
12) CAPITAL AND RESERVES 125,368,727 132,223,069 (6,854,342)
NON-CURRENT LIABILITIES
13) Long-term borrowings 47,789,451 6,261,893 41,527,558
14) Deferred tax provisions - - -
15) Non-current provisions 932,783 1,035,088 (102,305)
48,722,234 7,296,981 41,425,253
CURRENT LIABILITIES
16) Trade creditors and other payables 162,489,648 19,986,600 142,503,048
17) Current tax payables 414,023.16 12,401.00 401,622
18) Short-term borrowings 3,113,871 77,736,706 (74,622,835)
19) Long-term borrowings (current part) 33,514,450 1,978,425 31,536,025
20) Current provisions 1,963,747 1,352,280 611,467
201,495,738 101,066,412 100,429,326
21) LIABILITIES DIRECTLY ATTRIBUTABLE - - -
TO NON-CURRENT ASSETS HELD FOR SALES
TOTAL LIABILITIES AND CAPITAL AND RESERVES 375,586,699 240,586,462 135,000,237
SEPARATE PROFIT AND LOSS ACCOUNT
Note (in thousands of Euro) yEAR 2009 yEAR 2008 VARIANCE VAR%
22) SALES OF GOODS AND SERVICES 45,007,894 49,714,850 (4,706,956) (9%)
23) Other income and increase of fixed assets for internal works 2,053,019 1,831,700 221,319 12%
TOTAL VALUE OF PRODUCTION 47,060,913 51,546,550 (4,485,636) (9%)
24) Services, use of third-party assets, consumables and goods (31,098,799) (28,676,250) (2,422,549) 8%
25) Personnel costs (11,565,561) (10,804,051) (761,511) 7%
GROSS OPERATING MARGIN 4,396,553 12,066,249 (7,669,696) (64%)
26) Amortization, depreciation and write-downs (3,123,721) (2,277,814) (845,907) 37%
27) Allowance for bad debts and other provisions (686,466) (1,236,500) 550,034 (44%)
28) Other operating costs (253,548) (314,275) 60,727 (19%)
OPERATING PROFIT / (LOSS) 332,818 8,237,659 (7,904,841) (96%)
29) Net financial earnings / (charges) (4,152,928) (5,861,082) 1,708,154 (29%)
30) Value adjustments on financial assets (53,846) - (53,846) 100%
31) Earnings / (charges) from assets held for sale - - - -
32) Net non-recurrent costs 0 (323) 323 (100%)
PROFIT (LOSS) BEFORE TAXATION (3,873,956) 2,376,254 (6,250,211) (263%)
33) Current income taxes (402,228) (701,540) 299,312 (43%)
34) Deferred income taxes (2,373,445) (3,421,476) 1,048,031 (31%)
35) PROFIT (LOSS) FOR THE YEAR (6,649,629) (1,746,762) (4,902,867) 281%
36) Basic earnings per share (Basic EPS) (0.0625) (0.0164) (0.0461) 281%
37) Diluted earnings per share (Diluted EPS) (0.0585) (0.0155) (0.0430) 278%
TOTAL PROFIT (LOSS) ACCOUNT
(in thousands of Euro) 12.31.2009 12.31.2008
Net result (A) (6,649,629) (1,746,762)
Other incomes and costs
Exchange losses from loans (208,578) -
Total other incomes and costs (B) (208,578) -
Total profit (loss) for the period (A+B) (6,858,207) (1,746,762)
150
151
Consolidated annual RepoRt of
the BuongioRno gRoup as of deCemBeR 31, 2009
STATEMENT OF CHANGES IN CAPITAL AND RESERVES OF BUONGIORNO S.P.A. AT 12/31/2009
(in thousands of Euro) shARE shARE lEgAl pRofIt (loss) owN RECEIVAblEs Vs pRofIt totAl
dEsCRIptIoN CApItAl pREmIum REsERVE CARRIEd shAREs shAREholdERs (loss) CApItAl ANd
ACCouNt foRwARd foR duE of thE yEAR REsERVEs
pAymENts
Balance at period-start 27,651,956 69,905,466 1,394,958 35,018,777 (1,326) - (1,746,775) 132,223,055
- Allocation of profit (loss) for the period: (1,746,775) 1,746,775 -
- Paid-out dividends -
- Reserve for derivative instruments (IRS) -
- Reserve of assigned stock options 3,880 3,880
- Capital increase (decrease) -
- Capital increase and Stock Option Plan, exercised -
- Own shares purchase -
- Own shares sales -
- Other movements due to reclassification (208,578) (6,649,629) (6,858,207)
- Profit (loss) for the year -
Balance at period-end 27,651,956 69,909,346 1,394,958 33,063,423 (1,326) 0 (6,649,629) 125,368,727
Use possibility B A,B,C B A,B,C
A: for capital increase B: for losses coverage C: for shareholders
STATEMENT OF CHANGES IN CAPITAL AND RESERVES OF BUONGIORNO S.P.A. AT 12/31/2008
(in thousands of Euro) shARE shARE lEgAl pRofIt (loss) owN RECEIVAblEs Vs pRofIt totAl
dEsCRIptIoN CApItAl pREmIum REsERVE CARRIEd shAREs shAREholdERs (loss) CApItAl ANd
ACCouNt foRwARd foR duE of thE yEAR REsERVEs
pAymENts
Balance at period-start 27,651,956 69,262,738 766,165 25,347,881 - (503,655) 12,575,854 135,100,939
- Allocation of profit (loss) for the period: 628,793 11,947,061 (12,575,854) -
- Paid-out dividends -
- Reserve for derivative instruments (IRS) -
- Reserve of assigned stock options 642,727 642,727
- Capital increase (decrease) -
- Capital increase and Stock Option Plan, exercised 503,655 503,655
- Own shares purchase (4,845,597) (4,845,597)
- Own shares sales 2,568,106 2,568,106
- Other movements due to reclassification (2,276,165) 2,276,165 -
- Profit (loss) for the year (1,746,775) (1,746,775)
Balance at period-end 27,651,956 69,905,466 1,394,958 35,018,777 (1,326) - (1,746,775) 132,223,055
Use possibility B A,B,C B A,B,C
A: for capital increase B: for losses coverage C: for shareholders
RENDICONTO FINANzIARIO SEPARATO
(in thousands of Euro) yEAR 2009 yEAR 2008
Cash and cash equivalent at period start 4,209,974 14,032,363
A) Cash flow generated by (used for) ordinary activities 3,035,656 1,299,562
Profit (loss) for the year (6,649,627) (1,746,762)
Depreciation and amortization 3,123,721 2,238,142
Write-downs of fixed assets 53,846 39,672
Dividends received - -
Write-downs of unconsolidated equity investments - -
Net change in employee benefits (102,305) 20,447
Net change in provision for risks and charges 611,467 865,000
Change in deferred taxes 2,995,300 3,421,476
(Gains) losses and other non-monetary accounts 3,880 642,727
(Increase) / decrease in trade receivables (4,408,514) 1,331,936
(Increase) / decrease in trade payables 6,477,528 (5,599,312)
Change in other current asset items 930,361 86,235
Cash flow generated by ordinary activities 3,035,656 1,299,562
B) Cash flow generated by (used for) investing activities (137,638,992) (2,900,363)
Net (investments) disinvestments in:
- intangible assets (4,387,788) (2,508,363)
- property and equipment (156,518) (19,054)
- investments (133,094,686) (530,548)
Change in non-current assets held for sale - -
Net change in current securities - 157,602
Cash flow generated by investing activities (137,638,992) (2,900,363)
C) Cash flow generated by (used for) financing activities 134,217,856 (8,221,589)
subsidiaries debts increase 134,742,540 -
IMI new loan (non current share) 31,536,025 -
Net change in other financial assets/liabilities 3,943,346 (4,501,569)
IMI loan (current share) reinbursment (77,323,020) -
Net change in medium and long-term borrowings 41,527,559 (1,946,184)
Capital increase (reimbursement) - 503,655
Dividend payout - -
Other changes in equity (208,593) (2,277,491)
Cash flow generated by financing activities 134,217,856 (8,221,589)
Cash flow for the period (A+B+C) (385,480) (9,822,390)
Cash and cash equivalent at period end 3,824,494 4,209,973
152
153
Consolidated annual RepoRt of
the BuongioRno gRoup as of deCemBeR 31, 2009
noteS on the SepARAte finAnciAl StAtementS
general principles followed in preparing the Separate financial Statements and Accounting
Standards Adopted
The Separate Financial Statements of Buongiorno S.p.A. (hereinafter also “Buongiorno” or the “Company”), which consist
of the Balance Sheet, Profit and Loss Account, Cash Flow Statement, Statement of Changes in Equity and Notes to the
Consolidated Financial Statements, were prepared in compliance with the requirements of the “Regulations for implementing
Legislative Decree No. 58 of February 24, 1998 regarding Issuers” (CONSOB Resolution No. 11971 of May 14, 1999
and subsequent amendments), European Community Regulation No. 1606 of July 19, 2002 on international accounting
principles, and Legislative Decree No. 38 of February 28, 2005, which defines rules for exercising the options described in
Article 5 of the aforementioned European Regulation.
In particular, following the entry into force of Regulation (EC) No. 1606/2002 of the European Parliament and Council of July
19, 2002, as from 2006 companies with securities admitted for trading in a regulated market of European Union member
states prepare separated financial statements in accordance with the international accounting standards (IAS/IFRS) approved
by the European Commission.
Figures are expressed in euro and any other units are specifically indicated.
The financial statements indicated above refer to the figures from Buongiorno S.p.A.’s Separate Financial Statements at
December 31, 2009 and, for comparison purposes, at December 31, 2008.
The Parent Company Buongiorno adopted the IAS/IFRS that were issued by the International Accounting Standards Board
and approved by the European Commission following the entry into force, as of January 1, 2006, of European Regulation
No. 1606 of July 2002.
The accounting standards are those described hereafter and have been applied consistently for all the periods presented.
Summary of the most Significant “iAS/ifRS” Standards Applied
The most significant accounting standards applied are listed below:
iAS 38 - intangible Assets
(a) goodwill
Goodwill is reduced by the amount of any losses that may result from the impairment test, which are recognized in the Profit
and Loss Account (IAS 36). An impairment test is carried out at least once a year or, in any case, whenever an impairment
indicator emerges.
During acquisition, goodwill is allocated to a cash-generating unit (CGU). A CGU is the smallest group of assets and liabilities
that generates cash inflows and outflows (associated with the goodwill subject to impairment) that are largely independent of
the cash flows generated by other CGUs.
In the case of acquisitions of non-controlling equity holdings no goodwill is recognized although an adjustment is made
to equity for the difference between the value of the shareholdings and the investee company’s portion of equity at the
acquisition date.
Specifically, the CGUs that correspond to the goodwill recognized in the financial statements represent Buongiorno Group’s
investment in a particular geographic area (primary reporting segment) in which cash flows are discounted at a rate that
incorporates both the timeframe and the level of risk of the investment itself. When these net discounted flows associated
with the CGU are unable to justify the goodwill value recognized in the Balance Sheet, the excess is recognized in the Profit
and Loss Account as an impairment loss. Impairment losses that have been previously recognized in the Profit and Loss
Account are not reversed.
(b) intangible Assets with finite useful life
Intangible assets and expenses the useful life of which is deemed to extend beyond the period to which they refer, and that
can be separated and used or sold separately from other assets included in the Balance Sheet are recognized as assets on
the Balance Sheet. Intangible assets are recognized at purchase or production cost, including ancillary costs, and they are
systematically amortized based on their potential residual use (finite useful life).
154
155
Consolidated annual RepoRt of
the BuongioRno gRoup as of deCemBeR 31, 2009
The main categories of capitalized intangible assets are as follows:
n Research and development costs are charged to the Profit and Loss Account the year in which they are incurred, except
for development costs recognized under intangible assets that satisfy all of the following conditions:
n the project is clearly identified and the costs associated with it can be identified and measured in a reliable manner;
n the technical feasibility of completing the project has been demonstrated;
n the intention to complete the project and sell the intangible assets generated by it has been demonstrated;
n a potential market exists or, in the case of in-house use, the usefulness of the intangible asset has been demonstrated
for the production of intangible assets generated by the project;
n he availability of adequate technical and financial resources to complete the project has been demonstrated.
Amortization charges associated with development costs are included under intangible assets from the date on which the
product/service generated by the project becomes available for sale. Development costs are amortized on a straight-line
basis over three years, which is the estimated useful life of the capitalized costs.
n Costs incurred for purchasing patent and intellectual property rights, licenses and similar rights are capitalized on the basis
of the charges incurred for their purchase and are amortized on a straight-line basis over a period of three years;
n the costs incurred for the creation and registration of trademarks are amortized at a fixed percentage over a period of ten
years;
n internal software development costs are amortized on a straight-line basis over a three-year period and represent the
costs of personnel directly involved in software development.
When external events or changes in conditions (so-called “trigger events”) indicate the permanent impairment of intangible
assets, an impairment test is conducted through the allocation of the assets to the CGU to which they relate. If necessary,
the assets are written down to the higher of their value in use or recoverable amount, i.e., selling price less incidental disposal
costs (IAS 36). As opposed to goodwill, if appropriate, the value can be reversed to the extent of the impairment losses
previously recognized in the Profit and Loss Account.
iAS 16 - property and equipment
Property and equipment are recognized at purchase or production cost, including ancillary costs, and they are systematically
depreciated based on their potential residual use (finite useful life). The book value of property and equipment, together with
their remaining useful life, is reviewed annually and, if necessary, the relevant depreciation rates are adjusted. In the case of
permanent impairment loss, the carrying value is written down in order to bring it in line with the recoverable value from the
use or sale of the asset.
Costs for ordinary maintenance are recognized fully in the profit and loss account; any such costs that increase the life of
the asset to which they refer are attributed at increasing rates for the cost of the assets and are depreciated in relation to
possible residual use.
Moreover, during the year there were no revaluations of assets, nor were any financial charges capitalized to increase their
value since the conditions specified in IAS 23 do not apply.
If the tangible asset consists of several significant components having different useful lives, depreciation is calculated
separately for each component.
The annual depreciation rates that were used are detailed below:
RAtE
Plant and machinery 10%
Industrial and Commercial Equipment 15%
Other fixed assets:
- Furnishings and ordinary office equipment 12%
- Electrical and electronic office equipment 20%
iAS 27 and 28 - investments
Investments in subsidiaries and associates and in other companies were measured using the cost method, whereas those in
other companies were measured at cost, and write-downs were taken in the event of losses that are considered permanent
and long-term, to align the carrying value to the fair value.
ifRS 3 - business combination
Acquisitions in subsidiary companies are accounted for using the “acquisition method”. The acquisition cost will
hence be determined taking into account the fair value of any of the Group’s capital instruments issued following the
operation, increased by all the costs directly attributable at the date of the acquisition and allocated to the fair value of
the assets acquired, the certain and potential liabilities assumed. The cost in excess of the fair value of the net assets
of the acquired company is first allocated to intangible assets not recognized in the balance sheet of the acquired
company and any excess is then recognized as goodwill. In contrast, if the acquisition cost is lower than the fair value
of the assets acquired after allocation of intangible assets which has not already been recognized, the difference is
accounted for through profit or loss.
156
157
Consolidated annual RepoRt of
the BuongioRno gRoup as of deCemBeR 31, 2009
iAS 32 and 39 - Receivables, payables, derivatives and convertible bonds
Receivables are recognized based on presumable realizable value, done via entry in a write-down provision to lower their
nominal value. The provisions are recognized in the Profit and Loss Account. Payables are recognized at their nominal value.
The amounts of receivables and payables thus calculated approximate fair value since discounting of these amounts would
not result in any significant adjustment.
Derivative financial instruments are measured at fair value based on the market values on reference active markets.
Contracts that include an obligation for the Company to acquire its own equity instruments by the exchange of cash or other
financial assets, give rise to a financial liability for the actual value of the reimbursement amount (future buy-back price or
option exercise price), even where the obligation to acquire is subordinate to the right of the counterparty to reimbursement
(Put option). Whenever the contract falls due without completion, the carrying value of the financial liability is transferred to
equity (IAS 32, Paragraph 23).
Convertible bonds, like other financial liabilities, are measured at amortized cost, which is calculated bearing in mind all related
costs and using a market interest rate for equivalent non-convertible bonds or financial liabilities. The difference between the
amortized cost and the redemption amount represents the capital component or the amount of the conversion right and is
included in the Company’s equity under “Other reserves” (IAS 32, Paragraphs 64, 28 and 31).
cash and cash equivalents
Cash and cash equivalents mainly include cash, demand deposits with banks and other highly liquid short-term investments
(that can be turned into cash within 90 days). To determine net liquidity, current account liabilities, which are included in the
item “Short-term financial liabilities” are stated net of cash and cash equivalents. The elements included in net liquidity are
measured at fair value, and changes recognized through profit or loss.
interest-bearing borrowings
Interest-bearing borrowings are initially recognized at their fair value, net of ancillary costs. Subsequent to initial recognition,
interest-bearing borrowings are measured based on the amortized-cost method. The difference between the resulting value
and the value at initial recognition is recognized through profit and loss account over the duration of the loan on the basis of
the loan’s repayment schedule.
provisions for Risks and charges
Provisions for risks and charges include certain or probable costs of a specific nature, the amount or settlement date of which
could not be determined at year-end. Provisions are recognized when:
(i) it is probable that there is a present obligation (legal or constructive) arising from a past event;
(ii) it is probable that an outflow of resources will be required to settle the obligation;
(iii) the amount of the obligation can be reliably estimated.
The amount recognized as a provision is the best estimate of the amount the company would reasonably pay to settle the
obligation or transfer it to a third party at year-end. Where the effect of time value of money is material and the payment date
of the obligation can be reliably estimated, the amount of the provision must be discounted.
The costs the Group expects to incur to implement restructuring programs are recognized in the year in which the program
is formally planned and a valid expectation has been created among interested parties that it will take place.
The amount of the provisions is adjusted on a regular basis to reflect changes in cost estimates, completion times
and discount rates. Changes to estimates are recognized in the same item of the profit and loss account for which the
provision is made.
The notes to the financial statements provide information on potential liabilities, which include:
(i) possible, but not probable, obligations arising from past events whose existence can be confirmed only by the occurrence
or non-occurrence of one or more uncertain future events that are not completely under the company’s control;
(ii) present obligations arising from past events where the amount cannot be reliably estimated or it is probable that financial
resources will not be required to settle the obligation.
employee benefits: Severance indemnity fund
Following the changes in employee benefit regulations introduced by Law 296/06 (the “2008 Finance Act”) and subsequent
decrees and regulations issued over the first few months of 2008, the severance indemnity fund accrued as of December
31, 2006 was classified as defined-benefit plan and hence required an actuarial assessment involving a series of factors
(current cost of labor, personnel turnover, expected return, financial charges, actuarial gains and losses, etc.). The portion
of the severance indemnity accrued after January 1, 2007 is considered a defined-contribution plan, regardless of whether
the participants opt for supplementary pension planning or earmark their indemnities for the treasury fund maintained by
INPS (the Italian social-security agency); the accounting treatment of said portion will therefore be assimilated to the current
treatment of other types of contribution payments. The portion of the severance indemnities accrued prior to December 31,
158
159
Consolidated annual RepoRt of
the BuongioRno gRoup as of deCemBeR 31, 2009
2006 was therefore allocated as required by law, labor contracts in force, and actuarial adjustments provided for by IAS 19.
It reflects the liabilities that have fallen due to employees of the Italian companies included in the consolidation area at the
reporting date, net of any advances already disbursed.
ifRS 2 – Stock options
IFRS 2 specific accounting treatment is adopted for transactions that involve share-based payments and, specifically, for the
Stock Options plans assigned to employees and collaborators.
In accordance with IFRS 2, the valuation of stock option plans currently in force leads to the disclosure of non-monetary costs
in the Profit and Loss Account, in the item “Personnel costs”.
Recognition of Revenues and costs
Revenues and costs are recognized in accordance with the accruals principle, and are net of returns, discounts, rebates and
premiums. Revenues are recognized and accounted for in the Profit and Loss Account when it is probable that the related
future economic benefits will be enjoyed by the Group (probability of receiving the amount underlying the revenue) and when
the amount can be reliably ascertained.
In detail, Costs and Revenues of the main business lines have been recorded as follows:
n Costs and Revenues for Consumer Services: these are recognized through profit or loss based on the actual number of
contacts made by the end user and/or on the actual telephone traffic generated;
n Cost and Revenues from the Sale of royalties and licenses: these are recognized through profit or loss according to the
underlying contracts.
conversion criteria for entries in other currencies
Receivables and payables denominated in foreign currencies were initially converted into Euro at contractual exchange rates
or the rates in force at the time of the individual transactions. The exchange gains and losses that arose when receivables
were collected and payables were paid in foreign currency have been recognized in the Profit and Loss Account.
Exchange gains or losses for items in currencies of countries that are not members of the European Monetary Union and
that arise from the adjustment to the precise period-end exchange rates are reflected in the Profit and Loss Account for the
period.
finance income and expense
These are recognized in the Profit and Loss Account according to the accruals principle and on the basis of the “effective
rate method”. Profits and losses arising from valuation of assets and liabilities at fair value are carried through profit and loss.
Financial instruments in the closing balance sheet are similarly treated.
iAS 12 - current and deferred taxes
Income taxes recognized in the profit and loss account include current and deferred taxes. Income taxes are generally
recognized in the profit and loss account, except when they pertain to items recognized directly in equity. In this case, income
taxes are also recognized directly in equity.
Current taxes are taxes that it is expected will be paid as calculated by applying the tax rate in force on the balance sheet
date to taxable income and adjustments to taxes from previous years.
Deferred taxes are calculated by using the liability method on temporary differences between the assets and liabilities
recognized on the consolidated balance sheet and the corresponding figures for tax purposes. Deferred taxes are calculated
as a function of the required method of reversal of temporary differences by using the tax rate that is expected to be in force
in the years when the temporary differences are realized or cancelled.
Deferred tax assets are only recognized where it is likely that sufficient taxable income will be generated in future years to
realize the assets.
Also recorded in the financial statements are the benefits relating to tax losses permitted for carryforward without time limit in
subsequent years, which relate to the core business of Buongiorno S.p.A.
ifRS 8 - Segment reporting
As opposed to the segment identified at Group level in the consolidated financial statements, the segment is the business
segment and represents a set of activities and operations involved in the supply of goods and services, featuring a certain
level of business risk and a given level of economic margin that differ from other business segments.
use of estimates
The preparation of the financial statements requires that management use accounting principles and methodologies that
at times may be based on complex subjective evaluations and estimates linked to past experience and on assumptions
that are considered reasonable and realistic given the circumstances at hand. The use of such estimates and assumptions
influences the amounts reported in the balance sheet, profit and loss account, cash flow statement and this report. The
amounts reported in the financial statements on the basis of the aforementioned estimates and assumptions may differ from
160
161
Consolidated annual RepoRt of
the BuongioRno gRoup as of deCemBeR 31, 2009
actual amounts due to the uncertainty surrounding the assumptions and conditions on which such estimates are based.
Estimates and assumptions are reviewed on an ongoing basis, and adjustments are recognized in the period in which the
estimates are revised and in any future period affected. The accounting estimates that require a higher level of subjectivity on
the part of management and for which changes in conditions may have a significant impact on the financial statements are:
goodwill, deferred taxes, provisions for bad debts and the fund for risks and charges.
noteS on the ASSet itemS of the bAlAnce Sheet
non-current Assets
1. goodwill
Goodwill remained unchanged compared to December 31, 2008, amounting to Euro 4,095,876 and refers to the acquisition
of the business line from the company Gsmbox Srl, finalized in 2006.
(in thousands of Euro) 12.31.2008 INCREAsE wRItE-dows ANd othER moVEmENts 12.31.2009
Goodwill 4,095,876 0 0 4,095,876
The Goodwill section in the Notes to the Consolidated Financial Statements provides further information on the impairment
test carried out.
2. other intangible Assets
The net values of intangible assets and movements for 2009 are listed below:
(in thousands of Euro) 12.31.2008 INCREAsE AmoRtIzAtIoN wRItE-dows ANd 12.31.2009
othER moVEmENts
R&D Costs 61,644 1,638,996 (602,218) - 1,098,423
Patents and intellectual property rights 160,674 1,570 (114,661) - 47,583
Concessions, licenses, trademarks and sim.rights 483,117 196,964 (389,749) - 290,333
Other intangible assets 1,776,468 2,905,199 (1,919,131) - 2,762,537
Work in progress and advances suppliers 360,138 (354,942) - - 5,196
Total 2,842,042 4,387,787 (3,025,758) 0 4,204,071
The following table reports movements for the previous year:
(in thousands of Euro) 12.31.2007 INCREAsE AmoRtIzAtIoN wRItE-dows ANd 12.31.2008
othER moVEmENts
R&D Costs 77,771 33,741 (49,868) - 61,644
Patents and intellectual property rights 167,179 137,403 (143,908) - 160,674
Concessions, licenses, trademarks and sim.rights 518,693 321,176 (356,751) - 483,117
Other intangible assets 1,490,694 1,887,915 (1,602,141) - 1,776,468
Work in progress and advances suppliers 273,764 126,046 0 (39,672) 360,138
Total 2,528,102 2,506,280 (2,152,667) (39,672) 2,842,042
“Development costs” refer primarily to the capitalization of the costs of technological consultancy for developing new products
and services completed during the year and for developing the technology platform.
“Patents and intellectual property rights” include costs of purchasing management and accounting software developed and
sold by third parties.
“Concessions, licenses and trademarks” primarily include costs sustained for the registration of trademarks in Italy and
around the world, as well as costs related to the purchase of Internet domains for the Group (“Buongiorno” and “Blinko” in
particular). The increases relate to the purchase of licenses and personalisation of software produced by third parties.
The item Other intangible assets primarily includes the capitalization of internal costs of employees assigned to the development
of new modules of the internally produced “B!3A” software program. The increases derive from the capitalization of internal
costs and external consultancy relating to the “Management Control and Reporting System” project which entered production
in the last quarter and the introduction of a personalized version of the SAP and Microsoft Sharepoint software. During 2009,
internal costs of Euro 2,046,661 were capitalized; the balance of Euro 858,538 relates to costs for third party consultancy.
The change in “Works in progress and advances to suppliers” can be related primarily to the capitalization of costs prepaid
in previous years relating to the Management Control and Reporting System project.
162
163
Consolidated annual RepoRt of
the BuongioRno gRoup as of deCemBeR 31, 2009
3. tangible Assets
Below is a description of the changes to property and equipment in terms of Historical Cost, Accumulated Depreciation, and
Net Value at December 31, 2009
(in thousands of Euro) hIstoRICAl Cost dEpRECIAtIoN NEt VAluE NEt VAluE
12.31.2009 fuNd 12.31.2009 12.31.2008
Plant and machinery 76,148 (55,902) 20,245 24,198
Industrial and commercial equipment 2,164 (2,164) - -
Other assets 2,333,184 (2,101,117) 232,067 169,558
Total tangible fixed assets 2,411,495 (2,159,183) 252,312 193,756
and 2008:
(in thousands of Euro) hIstoRICAl Cost dEpRECIAtIoN NEt VAluE NEt VAluE
12.31.2008 fuNd 12.31.2008 31.12.2007
Plant and machinery 76,147.74 (51,949) 24,198 28,151
Industrial and commercial equipment 2,163.52 (2,164) - -
Other assets 2,176,665 (2,007,108) 169,558 232,026
Total tangible fixed assets 2,254,977 (2,061,221) 193,756 260,177
plant and machinery
This item includes telephone and electrical systems. The following changes took place during the year:
(in thousands of Euro)
plANt ANd mAChINERy hIstoRICAl Cost dEpRECIAtIoN fuNd NEt VAluE
At December 31, 2008 76,148 (51,949) 24,198
Increase 0
Decrease
Depreciation (3,953) (3,953)
At December 31, 2009 76,148 (55,902) 20,245
industrial and commercial equipment
The following changes took place during the year:
(in thousands of Euro)
INdustRIAl ANd CommERCIAl EquIpmENt hIstoRICAl Cost dEpRECIAtIoN fuNd NEt VAluE
At December 31, 2008 2,164 (2,164) 0
Increase - - -
Decrease - - -
Depreciation - - -
At December 31, 2009 2,164 (2,164) -0
other Assets
This item includes furnishings, office equipment and computers. Changes during the year refer to the purchase of new
furnishings for a total amount of Euro 11,603, and the purchase of new servers for a total amount of Euro 144,916 thousand.
Changes during the year were as follows:
(in thousands of Euro)
othER AssEts hIstoRICAl Cost dEpRECIAtIoN fuNd NEt VAluE
At December 31, 2008 2,176,665 (2,007,108) 169,558
Increase 156,519 156,519
Decrease
Depreciation (94,010) (94,010)
At December 31, 2009 2,333,184 (2,101,117) 232,067
4. Shareholdings
Shareholdings amounted to Euro 292,639,381 at December 31, 2009 and the item is broken down as follows:
(in thousands of Euro) bAlANCE At INCREAsE dECREAsE wRItE-dowNs bAlANCE At
12.31.2008 12.31.2009
Subsidiaries 176,760,579 111,059,807 - 287,820,386
Associates 3,351,296 786,035 - (53,846) 4,083,485
Other companies 735,510 - - - 735,510
TOTAL EQUITY INVESTMENTS 180,847,386 111,845,841 0 (53,846) 292,639,381
164
165
Consolidated annual RepoRt of
the BuongioRno gRoup as of deCemBeR 31, 2009
investments in Subsidiaries
At December 31, 2009, investments in subsidiaries were as set out in the table below. They were measured at the acquisition
cost, net of write-downs for impairment.
(in thousands of Euro) bAlANCE At INCREAsE dECREAsE wRItE-dowNs bAlANCE At
12.31.2008 12.31.2009
iTouch Ltd - 109,980,876 - - 109,980,876
iTouch Ventures Limited 109,980,876 817,302 - - 110,798,178
Freever UK Ltd 22,353,970 - - - 22,353,970
iTouch Spain Holdings SL 21,895,137 - - - 21,895,137
Buongiorno Marketing Services Netherlands B.V 9,718,000 - - - 9,718,000
Tutch Mobile Media B.V. 6,327,791 - - - 6,327,791
Buongiorno US Inc 6,110,948 - - - 6,110,948
Buongiorno Dijital Iletisim A.S. - 261,629 - - 261,629
Buongiorno Deutschland GmbH 182,662 - - - 182,662
Buongiorno UK Ltd 173,326 - - - 173,326
Buongiorno Hellas S.A. 17,820 - - - 17,820
Buongiorno MyAlert Bolivia S. de R.L. 41 - - - 41
Buongiorno MyAlert Ecuador S.A. 8 - - - 8
TOTAL SHAREHOLDINGS 176,760,579 111,059,807 0 0 287,820,386
The year 2009 saw the following movements with regards to investments in subsidiaries:
n inter-company acquisition of an equity stake in Itouch Ltd for Euro 109,980,876 from Itouch Holding Ltd. In fact, the latter
company, together with its parent company Itouch Venture Ltd, in which Buongiorno S.p.A. also holds a stake, are in the
process of being wound up (for more information on this operation refer to paragraph 1.1 “The Group at December 31,
2009 and Related Developments”);
n acquisition of the residual minority shareholding in the company Buongiorno Digital Iletisim A.S. amounting to 99,999
shares representing 20% of the share capital. At year-end the company held a 100% stake.
investments in Associates
At December 31, 2009, investments in associates owned by Buongiorno S.p.A. were as set out in the table below. They
were measured at the acquisition cost, net of write-downs for impairment:
(in thousands of Euro) bAlANCE At INCREAsE dECREAsE wRItE-dowNs bAlANCE At
12.31.2008 12.31.2009
Buongiorno Hong Kong Ltd 3,277,796 - 0 3,277,796
Inches Music srl 73,500 53,846 - (53,846) 73,500
Buongiorno Digital Innovation India Private Ltd - 732,189 - - 732,189
TOTAL SHAREHOLDINGS 3,351,296 786,035 - (53,846) 4,083,485
During 2009, the following transactions took place:
n subscription of 4,900,000 shares representing 49% of the share capital of Buongiorno Digital Innovation India Private Ltd,
a company set up on November 23, 2009;
n payment of Euro 53,846 to cover losses followed by the write-down of the same amount in the company Inches Music
Group Srl in which 35% of the share capital is held.
The associate company Buongiorno Hong Kong Ltd, in which the Parent Company has a 49% stake, closes its
financial year on March 31. The following table shows highlights from the company’s approved and audited balance
sheet as of March 31, 2009:
(in thousands of Euro) bAlANCE shEEt buoNgIoRNo hoNg KoNg ltd
03.31.2009 03.31.2008 03.31.2009 03.31.2008
NON CURRENT ASSETS 1,007 845 CAPITAL AND RESERVE 3,928 2,810
CURRENT ASSETS 4,858 3,899 NON CURRENT LIABILITIES 124 1
CURRENT LIABILITIES 1,812 1,933
TOTAL ASSETS 5,865 4,745 TOTAL LIABILITIES AND CAPITAL AND RESERVE 5,865 4,745
166
167
Consolidated annual RepoRt of
the BuongioRno gRoup as of deCemBeR 31, 2009
The following table shows the company’s estimated unaudited balance sheet figures as at December 31, 2009, following the
capital increase subscribed by the company, the change in exchange rates, and the results for the year:
(in thousands of Euro) bAlANCE shEEt buoNgIoRNo hoNg KoNg ltd
12.31.2009 12.31.2008 12.31.2009 12.31.2008
NON CURRENT ASSETS 3,670 1,104 CAPITAL AND RESERVE 5,741 3,374
CURRENT ASSETS 4,504 3,899 NON CURRENT LIABILITIES 171 138
CURRENT LIABILITIES 2,262 1,491
TOTAL ASSETS 8,174 5,003 TOTAL LIABILITIES AND CAPITAL AND RESERVE 8,174 5,003
The investment was not written down in that management feels that the company will not sustain any impairment loss in
coming years.
Shareholdings in other companies
(in thousands of Euro) bAlANCE At INCREAsE dECREAsE wRItE-dowNs bAlANCE At
12.31.2008 12.31.2009
77Agency Ltd 735,510 - - - 735,510
TOTAL SHAREHOLDINGS 735,510 - - - 735,510
During 2009 the shareholding in the company 77Agency Ltd purchased in 2007 for Euro 735,510 was maintained,
representing 10% of share capital.
5. other financial Assets
(in thousands of Euro) bAlANCE At INCREAsE dECREAsE wRItE-dowNs bAlANCE At
12.31.2008 12.31.2009
LONG TERM LOANS TO SUBSIDIARIES 7,011,996 22,381,322 (1,132,478) - 28,260,840
GUARANTEE DEPOSITS 91,298 (7,340) - 83,958
TOTAL OTHER NON CURRENT FINANCIAL ASSETS 7,103,294 22,381,322 (1,139,818) - 28,344,798
Loans to subsidiaries consist of a partially repaid loan in US dollars to Buongiorno US Inc and a loan of Euro 22 million
to Itouch Ltd. The loan to Buongiorno UK Limited in place at the end of the previous year has been extinguished in full.
Movements in this item are detailed below:
(in thousands of Euro) bAlANCE At INCREAsE dECREAsE wRItE-dowNs bAlANCE At
12.31.2008 12.31.2009
iTouch Ltd - 22,169,327 - - 22,169,327
Buongiorno US Inc. 6,863,291 211,995 (983,772) - 6,091,514
Buongiorno UK Limited 148,706 - (148,706) - 0
LONG TERM LOANS TO SUBSIDIARIES 7,011,996 22,381,322 (1,132,478) - 28,260,840
The guarantee deposits include the amounts paid as guarantee deposits at the time of stipulating rental contracts for the
offices amounted to about Euro 83,958.
6. deferred tax Assets
Deferred tax assets are recognized in respect of tax losses to the extent that management feels that it is probable that
Buongiorno will be able to use such losses to offset future taxable income. At December 31, 2009, the balance was Euro
11,375,249, calculated as follows:
(in thousands of Euro)
dEfERREd tAx AssEts yEAR 2009
Balance at year start 14,370,549
Increase -
Reversal (2,995,300)
Balance at year end 11,375,249
current Assets
7. inventories
There are no inventories at the end of the year in question nor in the previous year.
168
169
Consolidated annual RepoRt of
the BuongioRno gRoup as of deCemBeR 31, 2009
8. trade and other Receivables
The balance at December 31, 2009 is detailed below:
(in thousands of Euro) 12.31.2009 12.31.2008
Trade debtors 5,250,929 5,142,118
Debtors from subsidiaries 23,039,476 20,085,977
Debtors from associates 575,514 472,466
Tax receivables 1,677,524 870,890
Other debtors 33,720 45,246
Accrued income and prepayments 273,355 306,888
Trade debtors and other receivables 30,850,517 26,923,585
trade Receivables
(in thousands of Euro) 12.31.2009 12.31.2008
Trade debtors 5,274,178 5,165,367
Fund for bad debts (23,249) (23,249)
Total 5,250,929 5,142,118
Trade receivables have remained more or less stable despite the reduction in Consumer Services turnover (-23%) due to the
lengthening of customer payment times.
The Provision for bad debts pursuant to specific and timely analysis did not change compared to last year and is considered
to be adequate to adjust the receivable amounts based on their estimated realizable value.
(in thousands of Euro)
Fund for bad debt at December 31, 2008 (23,249)
Use -
Allocations -
Fund for bad debt at December 31, 2009 (23,249)
All trade receivables are due within twelve months.
The following table reports movements for the previous year:
(in thousands of Euro)
Fund for bad debt at December 31, 2007 (110,869)
Use 159,134
Allocations (71,514)
Fund for bad debt at December 31, 2008 (23,249)
Receivables from Subsidiaries
At December 31, 2009, receivables from associates amounted to Euro 23,039,476 million (at December 31, 2008 they
amounted to Euro 20,085,977 thousand), broken down as follows:
(in thousands of Euro) 12.31.2009 12.31.2008
Buongiorno MyAlert S.A. 5,980,209 6,707,303
Buongiorno UK Ltd 2,889,027 1,986,226
iTouch South Africa (Pty) Ltd 2,093,245 811,618
iTouch Spain Holdings SL 1,618,480 1,513,000
Buongiorno US Inc 1,365,108 1,193,873
Buongiorno France S.A. 1,361,228 32,970
Buongiorno Dijital Iletisim A.S. 1,023,802 686,697
Buongiorno Marketing Services Italia S.r.l. 983,222 638,847
MyAlert S.L. de C.V. 735,151 25,968
iTouch Movilisto Portugal Lda 710,158 4,900
Buongiorno Deutschland GmbH 689,626 377,323
Buongiorno Marketing Services Netherlands B.V 650,373 487,333
Buongiorno Hellas S.A. 627,125 425,805
Rocket Mobile Inc. 457,671 467,319
LlamaTV S.L. 356,103 132,924
Buongiorno Myalert Brasil Serv.Celulares Ltd 343,500 4,549
Ostrich Media Limited 216,858 392,086
iTouch Australia Pty Ltd 172,727 693,800
sms.at Mobile Internet Services GmbH 133,185 131
Tutch Mobile Media B.V. 128,767 323,889
iTouch Spain Holdings SL -
DioraNews S.a.s. 82,170 148,131
iTouch Ltd 79,554 1,057,840
170
171
Consolidated annual RepoRt of
the BuongioRno gRoup as of deCemBeR 31, 2009
(in thousands of Euro) 12.31.2009 12.31.2008
iTouch Nordics AS 71,014 65,067
iTouch Global Concepts Nigeria Ltd 57,934 461,307
Buongiorno Marketing Services Deutschland GmbH 50,868 54,824
Buongiorno MyAlert Venezuela, S.A. 27,110 -
Buongiorno MyAlert Equador S.A. 16,223 556
Axis Mundi S.A. 14,259 83,084
Buongiorno MyAlert Servicios de Telecomunicaciones Chile Ltda. 14,115 -
Grupo iTouch Movilisto Mexico Servicios, S.A de CV 12,805 6,089
Telitas Netherlands NV 11,725 100,214
Hotsms.com B.V. 11,285 3,736
Jippii Schweiz AG 8,467 13,540
Akumiitti Oy 8,257 4,029
Buongiorno Marketing Services Uk Ltd 7,370 3,381
Buongiorno Russia LLC 6,649 -
BY Cycle Perù SAC 5,608 3,077
Intouch Technologies Ltd 3,685 156,903
Buongiorno.at email services GmbH 3,552 -244
Buongiorno Marketing Services España, S.L. 3,420 2,682
Buongiorno MyAlert Colombia S.R.L. 2,487 315
Xama TV Televisao Interactiva L.d.a. 2,405 804
Buongiorno Marketing Services US Inc. 1,832 1,409
Buongiorno Marketing Services France S.a.s 1,046 923
Jippii Spain SL 538 158
sms.at Holding AG 486 -
Movilisto S.A. 374 374
Producciones y Promociones Especiales de Television S.L. 340 194
SMS Cosmos AS 283 162
Grupo iTouch Movilisto R.S.R.L 233 -
Rivertam S.A. 36 36
iTouch New Zealand Ltd 3 3
Group iTouch Movilisto Espana SL - 869,175
iTouch (UK) Ltd - 119,814
Mobivillage S.A. - 15,938
(in thousands of Euro) 12.31.2009 12.31.2008
Mobile Fun Sistemas de Informatica Ltda - 3,473
iTouch Ventures Limited - 1,186
Buongiorno MyAlert Bolivia S.r.l. - 60
iTouch Denmark AS - 60
Mobilnet AS (2,222) 1,119
TOTAL DEBTORS FROM SUBSIDIARIES 23,039,476 20,085,977
of which financial receivables
iTouch Spain Holdings SL 1,513,000 1,513,000
Buongiorno UK Ltd 798,930 -
Buongiorno Marketing Services Italia S.r.l. 246,286 16,286
Buongiorno MyAlert S.A. 72,344 1,051,013
Buongiorno Dijital Iletisim A.S. 11,308 11,308
Buongiorno Hellas S.A. 8,011 274,139
iTouch Ltd - 1,055,106
2,649,880 3,920,852
In order to optimize cash flows, the Company, as the Group’s Parent, provides a centralized treasury service to the Group.
The financial receivables listed in the table reflect this service.
Receivables from Subsidiaries and Associates
Receivables from subsidiaries and associates, amounting to Euro 575,514, increased 22% compared to the end of the
previous year. In the breakdown by company set out below, it should be noted that the receivable from Buongiorno Hong Kong
Ltd. is a trade receivable whilst the receivable from Buongiorno Digital Innovation India Private Limited is of a financial nature.
(in thousands of Euro) 12.31.2009 12.31.2008
BUONGIORNO (HONG KONG) LIMITED 547,703 472,466
BUONGIORNO DIGITAL INNOVATION INDIA PRIVATE LIMITED 27,811 -
Total 575,514 472,466
tax Receivables
(in thousands of Euro) 12.31.2009 12.31.2008
Tax receivables 1,677,524 870,890
This item consists primarily of approximately Euro 621,855 accrued pursuant to Law 296/06 art. 1 paragraph. 280-283 TAX
CREDIT FOR RESEARCH AND DEVELOPMENT EXPENSES, approximately Euro 556,558 for IRAP paid on account and
Euro 483,943 for VAT receivable.
172
173
Consolidated annual RepoRt of
the BuongioRno gRoup as of deCemBeR 31, 2009
other Receivables
This item is broken down as follows:
(in thousands of Euro) 12.31.2009 12.31.2008
Trade debtors and receivables from employees for advances 3,426 15,278
Other debtors 30,294 29,968
Total 33,720 45,246
Accrued income and prepayments
This item is broken down as follows:
(in thousands of Euro) 12.31.2009 12.31.2008
Accrued income - -
Prepayments 273,355 306,888
Total 273,355 306,888
Prepayments primarily relate to the cost of software licenses, insurance, rental fees and commissions applicable to 2010 not
yet rendered at December 31, 2009.
9. other financial Assets
This item shows a zero balance, which is the same as the previous year.
10. cash and cash equivalents
Cash and cash equivalents amounted to Euro 3,824,494 at December 31, 2009 (Euro 4,209,974 at December 31, 2008).
They are broken down as follows:
(in thousands of Euro) 12.31.2009 12.31.2008
Bank and similar accounts 3,824,324 4,205,155
Cheques 0 -
Cash-in-hands and cash equivalents 169 4,819
Total 3,824,494 4,209,974
Bank deposits include :
n a Euro 258,122 tied-up current account given in pledge by the Company to guarantee a bank bond issued by a Credit
Institution in favor of Simest S.p.A.., relating to the loan issued by the latter, totaling Euro 993,285 thousand;
n an escrow account with a Euro 101,460 balance at year-end associated with an obligation to a former shareholder of the
iTouch Ventures Limited Group.
Cash flows relating to 2009 are shown and explained in the consolidated Cash Flow Statement. The breakdown of the Net
Financial Position as of December 31, 2009 is reported in the table below:
(in thousands of Euro)
NEt fINANCIAl posItIoN 12.31.2009 12.31.2008 VARIANCE
Cash and cash equivalents 3,824,494 4,209,974 (385,480)
Financial receivables from subsidiaries 2,677,691 3,920,852 (1,243,161)
TOTAL CASH AND OTHER FINANCIAL ASSETS 6,502,185 8,130,826 (1,628,641)
Total payables to banks (2,015,847) (77,534,389) 75,518,542
Total bank loans - current share (33,514,450) (1,978,425) (31,536,025)
Guaranted convertible bond (993,639) - (993,639)
Total other current financial liabilities (104,386) (195,602) 91,216
Short term loans to subsidiaries (139,676,725) (4,940,901) (134,735,824)
INDEBITAMENTO FINANzIARIO CORRENTE (176,305,047) (84,649,317) (91,655,730)
SHORT NET FINANCIAL POSITION (169,802,862) (76,518,491) (93,284,371)
Long term financial receivables from subsidiaries 28,260,840 7,011,997.00 21,248,843
Total bank loans - non-current share (47,789,451) (5,296,662) (42,492,789)
Guaranted convertible bond - (965,230) 965,230
TOTAL NON CURRENT FINANCIAL LIABILITIES (47,789,451) (6,261,892) (41,527,559)
NET FINANCIAL POSITION (189,331,472) (75,768,386) (113,563,086)
174
175
Consolidated annual RepoRt of
the BuongioRno gRoup as of deCemBeR 31, 2009
Buongiorno’s net financial debt at December 31, 2009 amounted to Euro 189,331,472, significantly worsening compared to
year-end 2008 (Euro 75,768,386).
The balance of cash and cash equivalents (Euro 3,824,494) reflects current account balances. The balance has remained
virtually unchanged (Euro -385,480) compared to December, 31 2008 (when the balance amounted to Euro 4,209,974).
Short-term payables to banks refer to the current account overdraft facility granted by Credito Emiliano S.p.A. for a maximum
amount of Euro 2 million. At December 31, 2008 this item included the residual amount of the secured loan provided by the
Banca Intesa group for the acquisition of the iTouch Ventures Limited group; this loan was then extinguished and replaced
with the pool loan for the original sum of Euro 87 million described in detail in paragraph 17 of this report.
The current portion of the bank loans, amounting to Euro 33,514,450 is represented by the part of the pool loan falling
due in 2009 for an original amount of Euro 87 million, the amount relating to bank borrowings taken out with national banks
(Credito Emiliano and Medio Credito Centrale - Unicredit banking group) and the amount falling due in the year of the loan
obtained from Simest, a financial company for the development and promotion of Italian companies abroad. All the items are
commented in detail in paragraph 17 of this report.
Bonds issued amounting to Euro 993,639 comprise the remaining portion of the convertible bond having an original value of
Euro 12 million subscribed on September 22, 2005 by Mitsui & Co. Ltd and Banca IMI and falling due in 2010.
Other current financial liabilities amounted to Euro 104,386 and consist of financial payables due to one of the former iTouch
Ventures Limited shareholders as established at the closing of the transaction.
Medium/long-term financial borrowings at the end of 2009 amounted to Euro 47,789,451 and consisted of the portion falling
due after the year-end of the pool loan for an original sum of Euro 87 million, the amount relating to bank loans taken out with
national banks (Credito Emiliano and Medio Credito Centrale - Unicredit banking group), the portion falling due in the year of
the loan obtained from Simest, a financial company for the development and promotion of Italian companies abroad. All the
items are described and commented in detail in paragraph 12 of this report.
Additional information Required by the international financial Reporting Standard n° 7
The Company is exposed to financial risks associated with its operations:
n credit risk relating to normal commercial relationships with clients and users;
n liquidity risk, with particular regard to the availability of financial resources and access to the credit market and the market
for financial instruments in general;
n market risks (principally with regard to exchange and interest rates), insofar as the Group operates at international level in
various currency areas and uses financial instruments which generate interest.
As described in the section relating to risk management, the Company constantly monitors the financial risks to which it is
exposed, so as to evaluate the potential negative effects of these in advance and to take suitable action to mitigate them.
The following section provides qualitative and quantitative information on the incidence of such risks on the Company. The
quantitative data presented below do not have a predictive value, in particular, the sensitivity analyses of market risk cannot
reflect the complexity and correlated reactions of markets which may derive from every forecasted change.
176
177
Consolidated annual RepoRt of
the BuongioRno gRoup as of deCemBeR 31, 2009
classes of financial instruments
Items of the Balance Sheet, classified according to the respective risk categories as of December 31, 2009 and 2008, are
presented below.
Situation at December 31, 2009:
(in thousands of Euro) ClAssEs of homogENEous RIsKs
totAl CREdIt lIquIdIty INtEREst ExChANgE pRICE
RAtE RAtE
NON CURRENT ASSETS
LONG TERM LOANS TO SUBSIDIARIES 28,261 22,169 6,092
CURRENT ASSETS
SHORT TERM LOANS TO SUBSIDIARIES 2,678 2,678 -
TRADE RECEIVABLES 5,142 4,729 414
OTHER RECEIVABLES 34 34
CURRENT FINANCIAL ASSETS
CASH AND CASH EQUIVALENTS 3,824 3,824
NON CURRENT LIABILIITIES
CONVERTIBLE BOND 985 985
LONG TERM BANK BORROWINGS 47,789 47,789
OTHER NON CURRENT FINANCIAL LIABILITIES
CURRENT LIABILIITIES
TRADE PAYABLES 13,322 12,787 535
SHORT TERM BANK BORROWINGS 35,484 35,484
OTHER CURRENT FINANCIAL LIABILITIES 104 104
Situation at December 31, 2008:
(in thousands of Euro) ClAssEs of homogENEous RIsKs
totAl CREdIt lIquIdIty INtEREst ExChANgE pRICE
RAtE RAtE
NON CURRENT ASSETS
LONG TERM LOANS TO SUBSIDIARIES 7,012 149 6,863
CURRENT ASSETS
SHORT TERM LOANS TO SUBSIDIARIES 3,921 3,921 -
TRADE RECEIVABLES 5,142 5,115 27
OTHER RECEIVABLES 45 45
CURRENT FINANCIAL ASSETS -
CASH AND CASH EQUIVALENTS 4,210 4,210
NON CURRENT LIABILIITIES
CONVERTIBLE BOND 965 965
LONG TERM BANK BORROWINGS 5,297 5,297
OTHER NON CURRENT FINANCIAL LIABILITIES -
CURRENT LIABILIITIES
TRADE PAYABLES 9,930 9,863 67
SHORT TERM BANK BORROWINGS 79,512 79,512
OTHER CURRENT FINANCIAL LIABILITIES 196 196
178
179
Consolidated annual RepoRt of
the BuongioRno gRoup as of deCemBeR 31, 2009
financial Assets and liabilities categories
The following tables show Balance Sheet items classified according to the categories provided for by IAS 39 as of December
31, 2009 and 2008.
Situation at December 31, 2009
(in thousands of Euro)
At fAIR VAluE loANs VAluEd VAluEd totAl fAIR VAluE
ANd At AmoRtIzEd At Cost
RECEIVAblEs Cost
NON CURRENT ASSETS
LONG TERM LOANS TO SUBSIDIARIES 28,261 28,261 28,261
CURRENT ASSETS
SHORT TERM LOANS TO SUBSIDIARIES 2,678 2,678 2,678
TRADE RECEIVABLES 5,142 5,142 5,142
OTHER RECEIVABLES 34 34 34
CURRENT FINANCIAL ASSETS
CASH AND CASH EQUIVALENTS 3,824 3,824 3,824
NON CURRENT LIABILIITIES
CONVERTIBLE BOND 985 985 985
LONG TERM BANK BORROWINGS 47,789 47,789 47,789
OTHER NON CURRENT FINANCIAL LIABILITIES
CURRENT LIABILIITIES
TRADE PAYABLES 13,322 13,322 13,322
SHORT TERM BANK BORROWINGS 35,484 35,484 35,484
OTHER CURRENT FINANCIAL LIABILITIES 104 104 104
Situation at December 31, 2008
(in thousands of Euro)
At fAIR VAluE loANs VAluEd VAluEd totAl fAIR VAluE
ANd At AmoRtIzEd At Cost
RECEIVAblEs Cost
NON CURRENT ASSETS
LONG TERM LOANS TO SUBSIDIARIES 7,012 7,012 7,012
CURRENT ASSETS
SHORT TERM LOANS TO SUBSIDIARIES 3,921 3,921 3,921
TRADE RECEIVABLES 5,142 5,142 5,142
OTHER RECEIVABLES 45 45 45
CURRENT FINANCIAL ASSETS - -
CASH AND CASH EQUIVALENTS 4,210 4,210 4,210
NON CURRENT LIABILIITIES -
CONVERTIBLE BOND 965 - 965 965
LONG TERM BANK BORROWINGS 5,297 - 5,297 5,297
OTHER NON CURRENT FINANCIAL LIABILITIES - -
CURRENT LIABILIITIES
TRADE PAYABLES 9,930 9,930 9,930
SHORT TERM BANK BORROWINGS 79,512 79,512 79,512
OTHER CURRENT FINANCIAL LIABILITIES 196 196 196
Trade and other receivables did not generate any costs pertaining to losses on receivables and allocations to the fund for
bad debts (about Euro 23 thousand in 2008). It is deemed that the carrying value of these estimates provides a reasonable
approximation of their respective fair values.
Other financial assets and cash and cash equivalents generated financial income and interest of approximately Euro 10
thousand during the year, compared to approximately Euro 151 thousand in 2008.
Bank borrowings generated a total of approximately Euro 3,040 thousand in interest expenses (Euro 6,127 thousand in
2008). The current value of short-term bank borrowings was measured by assuming a fair value corresponding to the
180
181
Consolidated annual RepoRt of
the BuongioRno gRoup as of deCemBeR 31, 2009
recognized fair value inasmuch as said borrowings have maturities falling in 2010 and bear interest at floating market
rates. The fair value of borrowings with maturities beyond 2009, which also bear interest at floating rates, approximates
the market value.
guarantees
As of December 31, 2009, the Company had issued the following guarantees:
n pledge of the shares of a number of subsidiaries as collateral for the financing of the contract with Banca IMI S.p.A.;
n pledge of the cash and cash equivalents in a current account for an amount of Euro 258,000 as security against any
default on the credit line granted by Simest to Buongiorno.
liquidity risk
The following table shows financial liabilities, classified by maturity:
Situation at December 31, 2009:
(in thousands of Euro)
<1 yEAR >1 <2 yEARs >2 <3 yEARs >3 <4 yEARs >4 <5 yEARs >5 yEARs
NON CURRENT LIABILIITIES
CONVERTIBLE BOND 985
LONG TERM BANK BORROWINGS 14,891 13,989 13,097 5,812
OTHER NON CURRENT FINANCIAL LIABILITIES
CURRENT LIABILIITIES
TRADE PAYABLES 13,322
SHORT TERM BANK BORROWINGS 35,484
OTHER CURRENT FINANCIAL LIABILITIES 104
Situation at December 31, 2008:
(in thousands of Euro)
<1 yEAR >1 <2 yEARs >2 <3 yEARs >3 <4 yEARs >4 <5 yEARs >5 yEARs
NON CURRENT LIABILIITIES
CONVERTIBLE BOND - 965 - - - -
LONG TERM BANK BORROWINGS 2,062 2,149 1,086 - -
OTHER NON CURRENT FINANCIAL LIABILITIES -
CURRENT LIABILIITIES
TRADE PAYABLES 9,930
SHORT TERM BANK BORROWINGS 79,512
OTHER CURRENT FINANCIAL LIABILITIES 196
credit risk
For the purposes of this analysis, macro-classes of homogeneous risk have been highlighted, identified on the basis of the
business models of Company in order to represent its exposure to credit risk more accurately. The following classes have
been highlighted:
n trade receivables, which include amounts due from major companies operating in national and international mobile
telephone markets.
n other receivables mainly consist of receivables arising on operations of a non-commercial nature for which an individual
solvency analysis has been carried out.
The following tables present the breakdown by maturity of the identified risk classes:
Situation at December 31, 2009:
(in thousands of Euro)
ClAssEs totAl ExpIREd totAl to ExpIREd wRItE-dowNs
0-30dAys 31-60dAys 61-90dAys moRE thAN 90 ExpIREd
Trade receivables 5,142 1,201 285 58 - 1,545 3,597
Other receivables 34 - - - - - 34
Total 5,177 1,201 285 58 - 1,545 3,631
182
183
Consolidated annual RepoRt of
the BuongioRno gRoup as of deCemBeR 31, 2009
Situation at December 31, 2008:
(in thousands of Euro)
ClAssEs totAl ExpIREd totAl to ExpIREd wRItE-dowNs
0-30dAys 31-60dAys 61-90dAys moRE thAN 90 ExpIREd
Trade receivables 5,142 2 1 50 53 5,113 (23)
Other receivables 45 - - - - - 45 -
Total 5,188 2 1 - 50 53 5,158 (23)
The Company does not renegotiate expired credits.
The notes to the financial statements present the movements in the provision for bad debts.
market Risks: Sensitivity Analysis
In terms of market risks, the Group is exposed to interest rate risk, exchange rate risk, and price risk. A sensitivity analysis
was conducted of the balance sheet items that could undergo a change in value due to the fluctuation of exchange rates,
interest rates, and market prices. The estimate referred to the following balance sheet items in detail:
n trade receivables and payables in foreign currencies;
n bank deposits in foreign currencies;
n loans;
n financial liabilities;
n short-term financial assets.
The Group is exposed to risks deriving from the fluctuation of exchange rates which may have an impact on its profit or
equity. These risks derive from the fact that some subsidiaries of the Group are located in countries not belonging to the
European Monetary Union, such as the United States, the United Kingdom, Turkey, Bolivia, Chile, Peru, Mexico, Argentina,
Brazil, Colombia, Ecuador, Hong Kong, South Africa, Nigeria, Australia, New Zealand, Norway, Denmark, Sweden, Finland,
Switzerland, Romania and Morocco. Since the Group’s reference currency is the Euro, the profit and loss accounts of such
companies are converted into Euros at the average exchange rate for the period, and for constant revenues and margins
in local currency, variations in exchange rates may have an effect on the countervalue in Euros of the revenues, costs and
profits. Assets and liabilities of the consolidated companies with a currency of account other than the Euro may have different
countervalues in Euro, depending on the evolution of exchange rates. As established by the accounting principles adopted,
the effects of such evolutions are recognized directly in equity under the item conversion difference. At the reporting date,
there were no hedges in existence for such exposure. The following assumptions and methods were applied to conduct the
sensitivity analysis:
n assumptions and calculation methods: the risk is substantially tied to the fluctuation of the USD and GBP, which are the
foreign currencies of greatest relevance to the Buongiorno Group. For these currencies, immediate positive and negative
shifts of 5% in the spot exchange rate at December 31 were assumed. The table shows the impact of this change on the
figure disclosed on the financial statements.
With reference to interest rates, Group companies use external financial resources in the form of debt and deploy available
liquidity in money and financial market instruments. Changes in levels of market interest rates influence the cost and yield
of the various forms of financing, and applications, hence affecting the amount of net financial charges of the Group. The
following assumptions and methods were applied to conduct the sensitivity analysis:
n assumptions and calculation methods: the effect of an immediate increase and decrease of 0.5% in annual rates on the
profit and loss account was calculated. The interest rates on bank deposits that generate interest income are almost
entirely linked to the performance of interbank rates. To estimate the increase or decrease in interest income, a 0.5% shift
was applied to the average annual balance of bank deposits. Floating-rate loans generate interest expenses, the amount
of which is linked to the performance of the benchmark interest rates. To estimate the increase or decrease in interest
expenses, a 0.5% shift was applied to the principal of outstanding loans at the balance sheet date.
price risk applies to short-term cash investments. The following assumptions and methods were applied to conduct the
sensitivity analysis:
n assumptions and calculation methods: the effect of an immediate 5% increase and decrease in the market value of
financial assets at December 31 on the profit and loss account was calculated.
184
185
Consolidated annual RepoRt of
the BuongioRno gRoup as of deCemBeR 31, 2009
The following table shows the effects of the assumptions set out above on the consolidated financial statements:
(in thousands of Euro)
INtEREst RAtE RIsK ExChANgE RAtE RIsK pRICE RIsK
-0,5% 0,5% -5% 5% -5% 5%
ChANgE ChANgE ChANgE ChANgE ChANgE ChANgE
INtEREst INtEREst ExChANgE ExChANgE NAV NAV
RAtE RAtE RAtE RAtE
ASSETS
LONG TERM LOANS TO SUBSIDIARIES
TRADE RECEIVABLES (21) 21
Total impact of pre-tax financial assets (21) 21
NON CURRENT LIABILIITIES
LONG TERM BANK BORROWINGS 3 (3)
CURRENT LIABILITIES
TRADE PAYABLES
SHORT TERM BANK BORROWINGS
OTHER CURRENT FINANCIAL LIABILITIES
Total impact of pre-tax financial liabilities 3 (3)
Impact on pre-tax results 3 (3) (21) 21
11. non-current Assets held for Sale
At December 31, 2009 there were no assets held for sale or disposal.
noteS on the liAbilitY itemS of the SepARAte bAlAnce Sheet
12. equity
Share capital
The company’s share capital remained at Euro 27,651,956 in 2009. As of December 31, 2009, the share capital of
Buongiorno is therefore composed of 106,353,675 ordinary shares with a par value of Euro 0.26 each.
other changes in equity
Equity changed as follows during the year:
n no transactions took place on treasury stocks, the balance at December 31 is hence equal to 1,488 treasury stocks
having a countervalue of Euro 1,326 recognized as a deduction from equity;
n the total of unrealized exchange differences (equal to Euro 208,578) arising from the inter-company loan to Buongiorno
USA Inc denominated in USD (see note 5) was recognized as a deduction from this item.
profit (loss) for the Year
Buongiorno’s net loss for the year was Euro 6,649,629.
A statement of changes in equity follows the balance sheet and profit and loss account.
186
187
Consolidated annual RepoRt of
the BuongioRno gRoup as of deCemBeR 31, 2009
non-current liabilities
13. long-term borrowings
Medium and long-term borrowings at the end of the year amounted to Euro 47,789,451 million (Euro 6,261,892 at December
31, 2008) and included the following items:
n Remaining portion of Euro 57,973,434 (including Euro 44,573,429 included in long-term liabilities) of the secured loan
for an original amount of Euro 67 million (Tranche A) provided by a pool of banks headed by Banca Imi (Intesa San Paolo
banking group) disbursed on June 26, 2009. The amount falling due within the year totalling Euro 13,400,000 has been
accounted for in short-term liabilities;
n the remaining balance of a Euro 5 million unsecured loan granted by MCC S.p.A. (Unicredit banking group) on December
18, 2007 (Euro 3,217,167, of which Euro 1,968,392 is long-term).
n a long-term loan issued on April 27, 2007 by Credito Emiliano S.p.A. amounting to Euro 1,577,408; the portion recognized
amongst long-term liabilities amounted to Euro 949,644, whereas the remainder was included amongst short-term
liabilities;
n the remaining balance of a fixed-rate soft loan granted by Simest S.p.A. under Italian Law 394/81 regarding internationalization
projects (Euro 496,642 , of which Euro 297,986 is long-term).
Convertible bonds, like other long-term financial liabilities, are valued at amortized cost, which is calculated bearing in mind all
related costs and using a market interest rate for equivalent non-convertible bonds or financial liabilities (IAS 32, Paragraphs
64, 28 and 31). The net interest rate used was 4.5%, which corresponds to the rate obtained by the banking system on
medium- and long-term loans.
The main conditions applied to medium and long-term loans are summarized in the following table:
typE of fINANCINg pRINCIpAl mAtuRIty INtEREst RAtE
IMI (TRANCHE A) 57,973,434 30/06/2014 3.44%
MCC 3,217,167 13/02/2012 2.55%
Credito Emiliano 1,577,408 27/04/2012 1.97%
SIMEST 496,643 25/03/2012 1.32%
A statement and discussion of cash flows for 2009 are reported after the balance sheet, the profit and loss account and the
statement of changes in equity.
14. deferred taxes
There are no deferred tax liabilities at the end of the year, nor at December 31, 2008.
15. non-current provision
This item includes the severance indemnity fund amounting to Euro 932,783, at December 31, 2009. According to Italian
GAAP, the severance indemnity fund represents the actual amount due to employees in accordance with laws and labor
contracts in force, considering every form of compensation on an ongoing basis.
The total amount corresponds to the total of the single indemnities accrued in favor of employees at the reporting date, net
of payments on account, and equal to the amount that would have been due to employees if the work relationship were to
have ended on that date.
Pursuant to the provisions of IAS 19, the severance indemnity fund is considered a defined contribution plan that requires
an actuarial valuation, taking a series of factors into account (current cost of labor, turnover of personnel, expected return,
financial charges, actuarial gains and losses, etc.). The principal actuarial assumptions used for the calculation of the
Severance Indemnity Fund at December 31, 2009 are as follows:
n technical annual discount rate of 3.5%;
n annual inflation rate of 2%;
n annual rate of increase of severance indemnity fund of 3%;
n annual rate of employee turnover of 10%;
n under reformed employee benefit regulations, the annual rate of wage increases is no longer taken as a reference
parameter, inasmuch as future accruals to the severance indemnity provision will no longer flow to the company, but rather
to a supplementary pension program or the treasury fund maintained by the INPS (the Italian social-security agency).
The measurement of the severance indemnity provision using actuarial techniques applied in accordance with IAS 19 resulted
in a Euro 14,141 increase in the provision at December 31, 2008.
188
189
Consolidated annual RepoRt of
the BuongioRno gRoup as of deCemBeR 31, 2009
Movements in the severance indemnity provision during the year were as follows:
(in thousands of Euro)
Severance indemnity fund at December 31, 2008 1,035,088
Allocation 31,906
Payments -134,211
Severance indemnity fund at December 31, 2009 932,783
current liabilities
16. trade and other payables
(in thousands of Euro) 12.31.2009 12.31.2008
Trade creditors 13,322,155 9,961,752
Trade creditors from subsidiaries 145,059,715 7,200,047
Other tax payables 435,423 479,455
Providence and social security charges 954,992 663,827
Other creditors 2,712,990 1,677,146
Accrued expenses and deferred income 4,373 4,373
Trade creditors and other creditors 162,489,648 19,986,600
trade payables
(in thousands of Euro) 12.31.2009 12.31.2008
Trade creditors 13,322,155 9,961,752
At December 31, 2009, trade payables amounted to Euro 13,322,155, up 34% compared to about Euro 9,961,752 at
year-end 2008.
At December 31, 2009 there were no trade payables falling due after more than 12 months.
payables to Subsidiaries
Payables to subsidiaries at December 31, 2009 amounted to Euro 145,059,715 million, a sharp increase from Euro
7,200,047 million at December 31, 2008, and were broken down as follows:
(in thousands of Euro) 12.31.2009 12.31.2008
iTouch Holding 110,798,178 -
Myalert.com S.A. 11,854,672 720,202
Buongiorno France S.A. 11,696,251 1,935,327
Buongiorno UK Ltd 4,289,679 55,034
Dioranews S.A. 3,113,271 3,058,061
Buongiorno US Inc 1,100,102 327,061
Tutch Mobile Media B.V. 901,638 715,988
sms.at Mobile Internet Services GmbH 341,299 99,797
Hotsms.com B.V. 318,183 -
Buongiorno Hellas Mobile Ltd 200,105 -
Rocket Mobile Inc. 155,607 -
Axis Mundi S.A. 79,457 -
Buongiorno Marketing Services Italia S.r.l. 78,753 109
Buongiorno Marketing Netherlands BV 63,048 -
iTouch South Africa (Pty) Ltd 19,868 -
Buongiorno Marketing Services Espana s.l.u. 13,887 5,061
Buongiorno Deutschland GmbH 8,987 61,477
iTouch Movilisto Portugal Lda 8,674 -
Buongiorno MyAlert Brasil Servicios Celulares Ltda. 7,880 -
Buongiorno Dijital Iletisim A.S. 6,334 6,334
Buongiorno.at email services GmbH 3,843 22,443
Group iTouch Movilisto Espana SL - 193,153
Total trade creditors from subsidiaries 145,059,715 7,200,047
The significant increase in payables to subsidiaries is due primarily to financial movements. In fact this item amounted to
Euro 139,676,725 compared to Euro 4,934,184 at the end of the previous year. Bearing in mind that the Company, in its
capacity as a Parent Company, carries out the centralized treasury function, mention should be made of the inter-company
acquisition of the investment in Itouch Ltd amounting to approximately Euro 110 million from the company Itouch Holding
Ltd. This transaction carried out as part of the group’s corporate restructuring has generated a financial liability of the same
amount in respect of the subsidiary Itouch Holding Ltd.
190
191
Consolidated annual RepoRt of
the BuongioRno gRoup as of deCemBeR 31, 2009
tax payables
(in thousands of Euro) 12.31.2009 12.31.2008
Other tax payables 435,423 479,455
At Euro 435,423, tax payables (against Euro 479,455 in 2008) mainly reflect amounts withheld from compensation paid to
employees and independent contractors.
providence and Social Security charges
(in thousands of Euro) 12.31.2009 12.31.2008
Providence and social security charges 954,992 663,827
This item refers to contributions that have accrued but have not yet been paid to providence and social security institutions.
At the reporting date, these charges were Euro 954,992.
other payables
At December 31, 2009, other payables totaled Euro 2,712,990 million and were broken down as follows:
(in thousands of Euro) 12.31.2009 12.31.2008
Debts to employees 2,756,252 1,713,320
Other -43,261 -36,174
Total 2,712,990 1,677,146
Payables to employees and collaborators are composed of liabilities related to bonuses still to be paid, paid holidays and
untaken leaves, reimbursement of expenses to staff as well as payment in lieu of notice. The increase at December 31, 2008
is mainly attributable to an increase in employee bonuses and allocations for vacations and paid but unused leaves.
Accrued expenses and deferred income
Accrued expenses amounted to Euro 4,373 at December 31, 2009. There was no deferred income at that date (no change
from 2008).
(in thousands of Euro) 12.31.2009 12.31.2008
Accrued expenses 4,373 4,373
Total 4,373 4,373
17. current tax payables
(in thousands of Euro) 12.31.2009 12.31.2008
Current tax payables 414,023 12,401
Total 414,023 12,401
Current tax payables amounted to Euro 414,023 at December 31, 2009, compared to Euro 12,401 at the end of 2008.
18. Short-term borrowings
(in thousands of Euro) 12.31.2009 12.31.2008
Payables to banks 2,015,846 77,534,388
Convertible bond 993,639
Payables to other lenders 104,386 202,318
Total 3,113,871 77,736,706
Short-term payables to banks
Short-term payables to banks refer to the current account overdraft facility granted by Credito Emiliano S.p.A. for a maximum
amount of Euro 2 million. This unsecured facility is based on 2 credit lines each of Euro 1 million which are similar in terms of
operation but one expires on July 31, 2010, whilst the other can be revoked on the request of the lender.
At December 31, 2008, this item included the residual amount of the secured loan provided by the Banca Intesa group for
the acquisition of the iTouch Ventures Limited group, for the original sum of Euro 100 million; this loan was then extinguished
and replaced with the pool loan described in detail in paragraph 17 of this report.
192
193
Consolidated annual RepoRt of
the BuongioRno gRoup as of deCemBeR 31, 2009
A statement and discussion of cash flows for 2009 are reported after the balance sheet, the profit and loss account and the
statement of changes in equity.
bonds issued
This item refers to the remaining portion of the convertible bond having an original value of Euro 12 million, subscribed on
September 22, 2005 by Mitsui & Co. Ltd. and by Banca IMI and falling due in 2010. The balance at December 31, 2008
amounted to Euro 965,230 and was recognized under long-term liabilities.
payables to other lenders
Payables to other lenders amounted to Euro 104,386 at December 31, 2009. They mainly reflect amounts due to a former
iTouch Ventures Limited shareholder. At December 31, 2008, the item amounted to Euro 202,318.
19. long-term borrowings (current portion)
The current portion of bank borrowings (Euro 34,514,450 million compared to Euro 1,978,425 at December 31, 2008)
consists primarily of the share of borrowings maturing within one year and the medium-/long-term revolving portion of the
loan contracted in the total amount of Euro 87 million from a pool of banks organized by Banca IMI (a member of the Intesa
Sanpaolo Group). The funds were disbursed on June 26, 2009.
In detail, the balance consists of:
n the sum of Euro 13,400,000 referring to the portion of “Tranche A” of the pool loan maturing within one year. This line of
credit was originally granted for a total amount of Euro 67 million, with maturity in 2014 and hafl-yearly amortization. Said
loan was contracted in order to make repayment in full of the loan originally contracted from Banca IMI in the amount of
Euro 100 million maturing on June 26, 2009;
n the sum of Euro 18 million under a line of credit known as the “Revolving Credit Facility”, or “Tranche B”, of the pool loan.
This line of credit was granted in the amount of up to Euro 20 million on June 30, for short-term use. It may be used for
a maximum period of five years and calls for a gradual reduction of the credit limit beginning on December 31, 2012 and
the possibility of multiple draw-downs with differing maturities and amounts, while remaining within the maximum credit
limit in each period;
n the sum of Euro 2,114,450, maturing within one year, contracted from national banks (Credito Emiliano and Medio Credito
Centrale - a member of the Unicredit banking group) and Simest, a financial company involved in the development and
promotion of Italian enterprises outside Italy. The amount was 1,978,425 at December 31, 2008.
Both Tranche A and Tranche B of the loan call for the application of a spread of 300 basis points on the benchmark interest
rate. Said spread may vary on a half-yearly basis according to a reward mechanism involving the performance of the ratio
of Gross Financial Debt to EBITDA.
The shares of certain Group companies were pledged as security for the loan.
The loan agreement also calls for compliance with certain financial covenants, to be reviewed at the end of each half-year,
beginning on December 31, 2009.
These covenants are:
n the ratio of Consolidated Gross Operating Margin (EBITDA) to Consolidated Net Borrowing Costs;
n the ratio of Consolidated Financial Debt to Consolidated Gross Operating Margin;
n the ratio of Consolidated Financial Debt to Consolidated Equity.
At December 31, 2009 the covenants were respected.
With the new loan agreement, the Company has achieved its goal of extending the duration of its debt and scheduling
repayment according to its future debt-servicing capacity, prudentially estimated on the basis of the cash flow that the
Company expects its core business to generate.
20. current provisions
Current provisions include Euro 1,963,747 to cover future costs or losses on equity investments, operational activities that
have already been completed, legal risks and commercial contract risks.
A breakdown is provided below:
(in thousands of Euro) 12.31.2009 12.31.2008
Provisions for legal contingencies 7,280 82,280
Provisions for write-downs of investments 1,070,000 1,070,000
Other provisions 886,466 200,000
Total provision for risk and charges 1,963,747 1,352,280
194
195
Consolidated annual RepoRt of
the BuongioRno gRoup as of deCemBeR 31, 2009
In detail:
n the provision for write-downs of investments reflects allocations made to cover impairment losses on subsidiaries
Buongiorno Dijital Iletisim A.S. and Buongiorno Deutschland GmbH;
n the amounts included in other provisions relate primarily to penalty proceedings instigated by regulatory authorities and
the Italian Revenue Service.
21. liabilities directly Attributable to non-current Assets held for Sale
This item showed a zero balance both at December 31, 2009 and at the previous year-end.
Sureties and guarantees
Sureties and guarantees granted by third parties in the interest of buongiorno
Buongiorno has received outstanding guarantees at the end of the year for a total amount of Euro 955,097 million, mainly
attributable to:
n guarantees for Euro 549,181 from Cassa di Risparmio di Parma e Piacenza, Unionfidi and Banca Antonveneta in relation
to financing obtained from Simest;
n guarantees for Euro 217,264 from Coface Assicurazioni and Banca Monte Paschi pertaining to announced prize
competitions;
n guarantees for Euro 115,200 from banks Cassa di Risparmio di Parma e Piacenza and Banca Imi in relation to leases.
Sureties and guarantees granted by buongiorno in the interest of Subsidiaries
At December 31, 2009, Buongiorno had provided a total of Euro 1,104,800 to guarantee bank loans to the following
subsidiaries:
(in thousands of Euro) 12.31.2009
Buongiorno.at email services GmbH 80,000
Buongiorno Deutschland GmbH 100,000
Buongiorno Dijital Iletisim A.S. 924,800
Total sureties in favour of subsidiaries 1,104,800
noteS on the mAin itemS of the pRofit And loSS Account
Value of production
Value of production can be broken down as follows:
(in thousands of Euro) yEAR 2009 yEAR 2008
Sales of goods and services 45,007,894 49,714,850
Other incomes and increase of fixed assets for internal works 2,053,019 1,831,700
Total value of production 47,060,913 51,546,550
22. Sales of goods and Services
A breakdown by type of revenue (in the table below) shows a decrease in Consumer Services revenues of about 23%
compared to 2008.
The result has to be seen from two distinct perspectives: on the one hand, revenues generated by the direct business model
( “B2C”) in the Mobile Content 1.0 market fell by about 11% from one year to the next; this reduction, in a year in which market
conditions proved to be difficult for the whole VAS sector, actually represents a substantially solid performance.
In the “B2O” business line (based on collaboration with the main mobile telephone operators in which the Company provides
technology, content and marketing consultancy), on the other hand, difficulties were experienced in replacing a number of
services terminated last year with new initiatives; this led to a 47% reduction in turnover.
(in thousands of Euro) yEAR 2009 yEAR 2008
Consumer Services 23,082,184 29,931,662
Intercompany services 21,925,710 19,783,188
Associates services - -
Total sales of goods and services 45,007,894 49,714,850
Revenues on Intercompany Services, i.e. on services provided by the Parent Company to its subsidiaries or associates,
increased by 11% as of December 31, 2009 compared to the previous year. This increase can be attributed primarily to the
Company’s increased commitment in the delivery of inter-company services in its parent company role.
196
197
Consolidated annual RepoRt of
the BuongioRno gRoup as of deCemBeR 31, 2009
SALES FOR INTERCOMPANY SERVICES AND ASSOCIATES
CompANy yEAR 2009 yEAR 2008
Buongiorno MyAlert S.A. 7,717,000 8,549,288
Buongiorno France S.A.S 2,546,834 1,009,658
Buongiorno.uk Ltd 2,128,552 1,256,558
iTouch South Africa (Pty) Ltd 1,281,627 811,618
Buongiorno USA Inc. 930,660 865,681
MyAlert S.L. de C.V. 841,252 25,968
iTouch Movilisto Portugal Lda 705,259 4,900
Buongiorno Marketing Netherlands BV 650,373 532,010
Buongiorno Hellas Mobile Ltd 573,883 151,666
Buongiorno MyAlert Brasil Servicios Celulares Ltda 486,038 8,900
Axis Mundi S.A. 473,081 97,497
Buongiorno Marketing Services Italy SRL 464,006 569,408
Buongiorno Deutschland GmbH 459,966 260,603
Rocket Mobile Inc. 443,916 426,661
Tutch Mobile Media B.V. 343,530 347,219
Buongiorno Dijital Iletisim A.S. 337,105 327,839
iTouch Australia Pty Ltd 274,674 705,981
LlamaTV S.L. 223,179 134,257
Ostrich Media Limited 216,858 394,752
Dioranews S.A. 182,754 162,976
Mobile Fun Sistemas de Informatica Ltda 159,335 5,022
sms.at Mobile Internet Services GmbH 133,185 291,319
iTouch Spain Holdings SL 105,480 60
iTouch Ltd 79,554 4,878
Buongiorno MyAlert Venezuela, S.A. 27,110 55
Buongiorno MyAlert Ecuador S.A. 16,223 556
Jippii Schweiz AG 16,034 13,707
Buongiorno MyAlert Servicios de Telecomunicaciones Chile Ltda. 14,115 36
Telitas Netherlands NV 11,725 102,130
iTouch Nordics AS 11,091 66,400
Buongiorno Marketing Services Deutschland GmbH 7,854 8,746
Hotsms.com B.V. 7,550 3,736
CompANy yEAR 2009 yEAR 2008
Buongiorno Marketing Services UK Ltd 7,370 7,187
Buongiorno Marketin Services España, S.L. 6,907 3,349
Grupo iTouch Movilisto Mexico Servicios, S.A de CV 6,716 4,962
Buongiorno Russia LLC 6,649 3
Akumiitti Oy 4,228 5,861
Buongiorno.at email services GmbH 3,797 4,877
Intouch Technologies Ltd 3,685 158,569
Buongiorno Marketing Services France S.A. 2,757 923
BY.Cycle Perù SAC 2,531 3,077
Buongiorno MyAlert Colombia SRL 2,172 315
Buongiorno MyAlert Bolivia S. de R.L. 2,009 60
Buongiorno Marketing Services US INC 1,832 2,075
Xama TV Televisao Interactiva L.d.a. 1,601 804
Mobilnet AS 1,103 1,285
iTouch Global Concepts Nigeria Ltd 977 461,807
sms.at Holding AG 692 1,046
Jippii Spain SL 380 158
Grupo iTouch Movilisto R.S.R.L 233 966
Producciones y Promociones Especiales de Television S.L. 146 194
SMS Cosmos AS 121 162
Group iTouch Movilisto Espana SL - 959,980
Mobivillage S.A. - 527,768
iTouch Movilisto France S.A.S - 374,524
iTouch (UK) Ltd - 120,466
iTouch Ventures Limited - 1,186
Grupo iTouch Movilisto Mexico S.A. de CV - 1,126
Movilisto S.A. - 374
TOTAL INTERCOMPANY 21,925,710 19,783,188
Buongiorno Hong Kong Ltd. - -
Buongiorno Digital innovation India Private Ltd. - -
TOTAL INTERCOMPANY AND ASSOCIATES 21,925,710 19,783,188
198
199
Consolidated annual RepoRt of
the BuongioRno gRoup as of deCemBeR 31, 2009
23. other income and increase of fixed Assets for internal Works
This item amounted to Euro 2,053,019 at December 31, 2009, up 12% compared to last year. Other Income refer to the
capitalization of costs for technological development, especially pertaining to Buongiorno’s proprietary B!3A platform, and
mobile social networking.
costs of production
24. costs for Services and use of third-party Assets
Costs for services and use of third-party assets amounted to Euro 31,098,799 for 2009, up 8% compared to last year. A
breakdown is provided below:
(in thousands of Euro) 12.31.2009 12.31.2008
Variable costs of production 7,281,352 8,096,198
Marketing costs 8,890,398 9,407,928
Fixed structural costs 14,927,049 11,172,124
Total costs for services, use of third-party assets, consumable and goods 31,098,799 28,676,250
of which Intercompany 5,684,096 1,771,487
Variable costs of production include costs for the purchase of SMS and content, amounts recognized to media partners and
telcos, and technology costs for housing and hosting, royalties and the Majors’ and the artists’ rights.
The 11% fall from Euro 8,096,198 to the current figure of Euro 7,281,352 is due to the downturn in Consumer Service
revenues; marketing costs are 6% down from Euro 9,407,928 in 2008 to Euro 8,890,398 in 2009 and include advertising
investments on all the media channels, marketing consultancy, commissions paid to media centres and all production costs
for marketing initiatives.
Fixed structural costs rose by 34%, from Euro 11,172,124 to Euro 14,927,049 at year-end, and include principally the rental
cost of offices and leasing installments relating to hardware used by Group companies as well as consultancy expenses,
office expenses, maintenance costs, insurance, the costs of sundry services and travel and accommodation costs for all
employees.
A portion of the costs for services and use of third-party services recognized in 2009 were intercompany, i.e., they related to
services supplied by the subsidiaries to the Parent Company and amounted to Euro 5,684,096. The table below presents a
breakdown by subsidiary at December 31, 2009 and a comparison with 2008.
INTERCOMPANY COSTS
CompANy yEAR 2009 yEAR 2008
Buongiorno MyAlert S.A. 2,275,792 1,124,428
Buongiorno.uk Ltd 781,882 4,358
Buongiorno USA Inc. 773,042 26,269
Buongiorno France S.A.S 722,273 186,560
Hotsms.com B.V. 318,183 -
sms.at Mobile Internet Services GmbH 249,825 91,474
Tutch Mobile Media B.V. 185,650 210,000
Rocket Mobile Inc. 155,607 -
Buongiorno Deutschland GmbH 95,172 103,780
Buongiorno Marketing Netherlands BV 63,048 -
iTouch South Africa (Pty) Ltd 19,868 -
Buongiorno Marketing Services Italy SRL 15,756 109
Buongiorno Marketin Services España, S.L. 8,825 1,263
iTouch Movilisto Portugal Lda 8,674 -
Buongiorno MyAlert Brasil Servicios Celulares Ltda 7,881 -
MyAlert S.L. de C.V. 2,618 -
Buongiorno Dijital Iletisim A.S. - 16,271
iTouch Australia Pty Ltd - 6,876
Buongiorno.at email services GmbH - 99
TOTAL 5,684,096 1,771,487
25. personnel costs
The amount of Euro 11,565,561 at December 31, 2009 increased 7% compared to Euro 10,804,050 at December 31,
2008. The item include the costs for employees including provisions required by the law and by collective contracts, as well
as the notional cost, amounting to Euro 3,880, relating to the issue of options under the stock option plans existing at the
period-end in favor of employees, collaborators and directors (IFRS 2).
200
201
Consolidated annual RepoRt of
the BuongioRno gRoup as of deCemBeR 31, 2009
The calculation was carried out based on options exercisable at non-market conditions.
The summary of the stock option plan existing at period-end is shown in Section 1.14 of the Directors’ Report on Operations.
The breakdown of employees is as follows:
(in thousands of Euro)
12.31.2009 12.31.2008 AVERAgE 2009
Employees and middle management 146 145 144
Executives 23 23 23
Total 169 168 167
The total number of employees increased by 1 compared to December 31, 2008.
26. depreciation, Amortization and impairment losses
The items “Depreciation, amortization and impairment losses” and “Write-downs of bad debts and other provisions” include
the following costs:
(in thousands of Euro) yEAR 2009 yEAR 2008
Amortization of intangible fixed assets 3,025,758 2,152,667
Depreciation of tangible fixed assets 97,963 85,475
Total amortization and depreciation 3,123,721 2,238,143
Other fixed assets write-downs - 39,672
Total amortization, depreciation and write-downs 3,123,721 2,277,815
Write-downs of bad debt and other provisions 686,466 1,236,500
Total amortization, depreciation and other write-downs 3,810,187 3,514,315
Amortization
Amortization for the year (a total of Euro 3,025,758) is detailed in the notes on intangible assets.
depreciation
Depreciation for the year, amounting to Euro 97,963, was determined using technical and economic rates established based
on possible residual asset use as previously illustrated in the Notes on measurement criteria for property and equipment.
other fixed Asset Write-downs
No write-downs were carried out on intangible assets at the year-end date, whereas in 2008 write-downs totalled
Euro 39,672.
27. Write-downs of bad debts and other provisions
This item, amounting to Euro 686,466, refers primarily to amounts set aside to partially cover penalty proceedings instigated
by regulatory authorities and the Italian Revenue Service. Although the Company believes that it can respond to these claims
with more than adequate evidence, it has deemed it prudent to make provision to cover the amounts disputed.
After special analyses, the decision was also taken not to set aside any amount to the provision for bad debts since the
receivables are considered to be in line with their estimated realizable value.
28. other operating costs
Other operating costs at December 31, 2009 amounted to Euro 253,548 (Euro 314,275 at December 31, 2008) and include
all remaining costs, normally for amounts that are not individually material, which by their nature are not classifiable in other
items of the aggregated amount of “production costs” which are deducted from the operating result. The most significant
costs are those for memberships and subscription fees.
29. finance income and expense
Finance income and expense comprise borrowing costs incurred during the period, which amounted to Euro 4,152,928
compared to Euro 5,861,084 for 2008.
The decrease was mainly due to a strong decrease in interest rates charged by banks, as can be seen in the information on
interest and other finance expense.
(in thousands of Euro) yEAR 2009 yEAR 2008
Finance incomes 379,799 944,703
Finance expenses (4,654,563) (7,606,206)
Exchange profits (losses) 121,835 800,419
Total (4,152,928) (5,861,084)
202
203
Consolidated annual RepoRt of
the BuongioRno gRoup as of deCemBeR 31, 2009
finance income
This item is broken down as follows:
(in thousands of Euro) yEAR 2009 yEAR 2008
Earned banking interests 10,122 258,039
Interests from Group companies 349,877 681,405
Dividends from Group companies 19,801 -
Other incomes - 5,258
Total 379,799 944,702
Of which from Group companies:
EARNED INTERESTS INTERCOMPANY
CompANy yEAR 2009 yEAR 2008
Buongiorno USA Inc. 155,347 455,104
iTouch Ventures Limited 87,761 -
iTouch Ltd 81,566 -
Buongiorno MyAlert S.A. 21,331 51,013
Buongiorno Hellas Mobile Ltd 3,872 3,938
Buongiorno.uk Ltd - 148,449
iTouch Spain Holdings SL - 22,902
TOTAL 349,877 681,406
finance expense
This item is broken down as follows:
(in thousands of Euro) yEAR 2009 yEAR 2008
Financial charges paid to financial institutions 199,591 363,275
Interests and banking fees 4,244,549 7,044,288
Interests paid to Group companies 178,394 76,835
Other minor charges 32,029 121,808
Total 4,654,563 7,606,206
Of which to Group companies:
INTEREST PAID TO INTERCOMPANY
CompANy yEAR 2009 yEAR 2008
Buongiorno France S.A.S 83,237 10,514
Dioranews S.A. 55,210 50,266
Buongiorno MyAlert S.A. 25,718 -
Buongiorno.uk Ltd 8,371 -
Buongiorno Marketing Netherlands BV 5,752 -
Buongiorno Hellas Mobile Ltd 105 -
Group iTouch Movilisto Espana SL - 16,055
TOTAL 178,394 76,835
Interest and banking fees have fallen sharply due to the reduction in bank borrowing and the fall in the EURIBOR rates during
the year to which the largest loans (MCC, Imi pool loan) are linked.
exchange gains
This item is broken down as follows:
(in thousands of Euro) yEAR 2009 yEAR 2008
Exchange profits 143,052 858,356
Exchange losses (21,217) (57,937)
Total 121,835 800,419
30. Value Adjustments on financial Assets
During the year, steps were taken to minimize the losses of the associate company Inches Music Group S.r.l., at the same
time writing down “Shareholdings” for the same amount. There were no movements on this item during the previous year.
31. income and charges from assets held for sale
This item shows the same balance as at the end of the previous year.
32. non-recurring income and charges
This item amounted to Euro 323 at the end of the previous year whilst its shows a zero balance at this year-end.
204
205
Consolidated annual RepoRt of
the BuongioRno gRoup as of deCemBeR 31, 2009
33. current income taxes
Income taxes for 2009 were recognized based on the best possible estimate using the tax rates prevailing at year-end (Euro
402,228 at December 31, 2009 compared to Euro 701,540 at December 31, 2008). Appendix B provides details of the
reconciliation between actual and theoretical tax charges.
34. deferred income taxes
The impact of the reversal effect due to the utilization of receivables arising from previous tax losses was recognized in
the income statement; this produced a negative amount of Euro 2,995,300 partially mitigated by the recognition of tax
receivables for research and development costs sustained during the year and the previous year totalling Euro 621,855. The
net impact is negative at Euro 2,373,475, compared to the negative impact of Euro 3,421,476 in the previous year.
35. profit (loss) for the Year
Buongiorno reported a loss of Euro 6,649,629 after tax for the year, compared to a loss of Euro 1,746,762 for 2009.
earnings per Share
36. basic
Basic EpS was negative at Euro 0.0625. It is calculated by dividing the net profit for the year by the average number of
ordinary shares outstanding in the period, amounting to 106,352,187. Basic EpS for 2008 was negative at Euro 0.0164
(calculation based on 106,353,675 shares).
37. diluted
Diluted EpS was negative at Euro 0.0585. it is calculated by dividing the net Group profit for the period, gross of interests
on the convertible bond, by the average number of ordinary shares outstanding during the period plus the number of
options (or other instruments potentially convertible into ordinary shares) outstanding at the end of the period, a total of
113,114,652 potential ordinary shares in 2009. In the previous year EpS was negative at Euro 0.0155 (calculation based
on 110,404,675 shares).
ANNEx A
LIST OF EQUITY INVESTMENTS OF BUONGIORNO S.P.A. IN SUBSIDIARIES, ASSOCIATES AND OTHER COMPANIES
(in thousands of Euro)
CompANy NAmE REgIstEREd offICE % of VotINg shAREs dIRECt holdER % oN shARE CApItAl
Shareholdings in subsidiaries:
Akumiitti Content Services Ltd Finland 100.00% Akumiitti Oy 100.00%
Akumiitti Oy Finland 100.00% iTouch Nordics AS 100.00%
Axis Mundi S.A. Argentina 99.98% Buongiorno MyAlert S.A. 50%
Rainbow S.A. 50%
Buongiorno Deutschland GmbH Germany 100.00% Buongiorno S.p.A. 100.00%
Buongiorno Dijital Iletisim A.S. Turkey 100.00% Buongiorno S.p.A. 100.00%
Buongiorno France Sas (già Freever Sas) France 100.00% iTouch Spain Holding 55.02%
Buongiorno S.p.A. 44.98%
Buongiorno Hellas S.A. Greece 100.00% Buongiorno S.p.A. 100.00%
Buongiorno Marketing Services Deutschland GmbH Germany 54.50% BMS Netherlands B.V 100.00%
Buongiorno Marketing Services Espana s.l.u. Spain 54.50% BMS Netherlands B.V 100.00%
Buongiorno Marketing Services France S.a.s France 54.50% BMS Netherlands B.V 100.00%
Buongiorno Marketing Services Italia S.r.l. Italy 54.50% BMS Netherlands B.V 100.00%
Buongiorno Marketing Services Netherlands B.V the Netherlands 54.50% Buongiorno S.p.A. 54.50%
Buongiorno Marketing Services UK Ltd. (già Flytxt Ltd) UK 54.50% BMS Netherlands B.V 100.00%
Buongiorno Marketing Services US Inc. (già Flytxt inc) USA 54.50% BMS Netherlands B.V 100.00%
Buongiorno MyAlert Brasil Servicios Celulares, Ltda. Brazil 99.98% Buongiorno MyAlert S.A. 100.00%
Buongiorno MyAlert Colombia S.R.L. Colombia 99.98% Buongiorno MyAlert S.A. 100.00%
Buongiorno MyAlert Ecuador S.A. Ecuador 99.98% Buongiorno MyAlert S.A. 100.00%
Buongiorno MyAlert S.A. Spain 99.98% iTouch Spain Holding 98.57%
iTouch Ltd 1.41%
Buongiorno MyAlert Servicios de Telecomunicaciones Chile Limitada Chile 99.98% Buongiorno MyAlert S.A. 100.00%
Buongiorno US Inc. USA 81.04% Buongiorno S.p.A. 81.04%
Buongiorno.at email services GmbH Austria 54.50% BMS Netherlands B.V 100.00%
Buongiorno.UK Ltd. UK 100.00% Buongiorno S.p.A. 100.00%
Buongiorno.Venezuela S.A. Venezuela 99.98% Buongiorno MyAlert S.A. 90%
MyAlert S. De R.L. de CV 10%
By Cycle Perú S.A.C. Perù 99.98% Axis Mundi S.A. 100.00%
DioraNews S.a.s. France 100.00% Buongiorno France S.a.r.l. 100.00%
Groupo iTouch Movilisto Maroc SARL Marocco 100.00% iTouch Ltd 100.00%
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Consolidated annual RepoRt of
the BuongioRno gRoup as of deCemBeR 31, 2009
(in thousands of Euro)
CompANy NAmE REgIstEREd offICE % of VotINg shAREs dIRECt holdER % oN shARE CApItAl
Shareholdings in subsidiaries:
Grupo iTouch Movilisto Mexico Servicios, S.A de CV Mexico 100.00% iTouch Spain Holdings SL 98%
Buongiorno MyAlert S.A. 2%
Grupo iTouch Movilisto R.S.R.L Romania 100.00% iTouch Spain Holdings SL 100.00%
Hotsms.com B.V. the Netherlands 54.50% BMS Netherlands B.V 100.00%
iTouch Australia Pty Ltd Australia 100.00% Pajala BV 100.00%
iTouch Finance 1 Ltd UK 99.98% Buongiorno MyAlert S.A. 100.00%
iTouch Finance 2 Ltd UK 99.98% Buongiorno MyAlert S.A. 100.00%
iTouch Global Concepts Nigeria Ltd Nigeria 100.00% iTouch Ltd 100.00%
iTouch Holdings Ltd UK 100.00% iTouch Ventures Limited 100.00%
iTouch Ltd UK 100.00% Buongiorno S.p.A. 100.00%
iTouch Movilisto Portugal Lda Portugal 100.00% iTouch Ltd 25%
Buongiorno MyAlert 75%
iTouch Nordics AS Norway 100.00% iTouch Ltd 100.00%
iTouch South Africa (Pty) Ltd South Africa 100.00% Pajala BV 100.00%
iTouch Spain Holdings SL Spain 100.00% SMS Cosmos AS 58.27%
Buongiorno S.p.A. 25.43%
iTouch Ltd 16.30%
Intouch Technologies Ltd Irlanda 100.00% Pajala BV 100.00%
Buongiorno CS Ltd UK 100.00% Buongiorno.UK Ltd. 100.00%
iTouch Ventures Limited UK 100.00% Buongiorno S.p.A. 100.00%
Jippii Mobile Entertainment Oy Finland 100.00% iTouch Spain Holdings SL 100.00%
Jippii Schweiz AG Swiss 100.00% Jippii Mobile Entertainment Oy 100.00%
Jippii Spain SL Spain 100.00% Jippii Mobile Entertainment Oy 100.00%
LlamaTV S.L. Spain 100.00% iTouch Spain Holdings SL 100.00%
MyAlert S. De R.L. de CV Mexico 99.98% Buongiorno MyAlert S.A. 100.00%
Ostrich Media Limited Regno Unito 100.00% iTouch Ltd 100.00%
Pajala BV the Netherlands 100.00% iTouch Ltd 100.00%
Producciones y Promociones Especiales de Television S.L. Spain 100.00% iTouch Spain Holdings SL 100.00%
Rainbow Development S.A. Argentina 99.98% Buongiorno MyAlert S.A. 100.00%
Rivertam S.A. Uruguay 99.98% Axis Mundi S.A. 100.00%
Rocket Mobile Inc. USA 81.04% Buongiorno US Inc. 100.00%
(in thousands of Euro)
CompANy NAmE REgIstEREd offICE % of VotINg shAREs dIRECt holdER % oN shARE CApItAl
Shareholdings in subsidiaries:
SMS Cosmos AS Norway 100.00% iTouch Ltd 100.00%
sms.at Holding AG Austria 100.00% iTouch Ltd 100.00%
sms.at Mobile Internet Services GmbH Austria 100.00% sms.ch 99%
sms.at holding AG 1%
sms.ch AG Swiss 100.00% sms.at Holding AG 100.00%
Telitas Belgium BV the Netherlands 100.00% iTouch Nordics A.S. 100.00%
Tutch Media Mobile B.V. the Netherlands 100.00% Buongiorno S.p.A. 100.00%
Xama TV Televisao Interactiva L.d.a. Portugal 100.00% LlamaTV S.L. 90%
iTouch Spain Holdings SL 10%
Shareholdings in associate companies:
Buongiorno Hong Kong Hong Kong - Buongiorno S.p.A. 49.00%
Buongiorno Digital Innovation India Private Ltd India - Buongiorno S.p.A. 49.00%
Shareholdings in other companies:
77 Agency Ltd. UK - Buongiorno S.p.A. 10.00%
Inches Music Group S.r.l. Italia - Buongiorno S.p.A. 35.00%
Victory 247.com Malta Ltd Malta - Victory 247.com S.A. 11.00%
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3 RepoRt of the SupeRviSoRy Committee
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124
RepoRt of the SupeRviSoRy Committee
Milan - April 12, 2010
Report of the Supervisory Committee to the General Shareholders’ Meeting, pursuant to
Article 153 of Legislative Decree No. 58/1998 and Article 2429, paragraph 3 of the Italian
Civil Code
Shareholders,
in compliance with the provisions of Legislative Decree No. 58/1998, of Art. 2429,
paragraph 3 of the Italian Civil Code, and indications provided by CONSOB in Notice
No. DEM/1025564 of April 6, 2001, we report to you as follows:
we monitored compliance with laws and the Articles of Incorporation; at least
quarterly, the Chief Executive Officer provided us with information on operations
and major transactions carried out by the Company and its subsidiaries that were
most significant from an economic, financial and equity standpoint;
we verified that the Company has not undertaken atypical or unusual transactions
with Group companies, associates, related parties, or third parties. With regard to
related-party transactions, including inter-company transactions, it must be
pointed out that the same do not qualify as either atypical or unusual, since they
were effected in the normal course of the business operations of the Group
companies in question, and concluded at arm’s length, in light of the features of
the goods and services involved. At December 31, 2009, the Buongiorno Group
maintained relationships with companies qualifying as related parties within the
meaning of the Code for Related-party Transactions. The following entities or
persons own interests in Group companies:
- Mitsui & Co. Ltd which holds a 18.96% stake in the share capital of the
subsidiary Buongiorno USA Inc and, consequently of Rocket Mobile Inc; Mitsui
&Co. Ltd also holds a 45.5% stake in the share capital of Buongiorno Marketing
Services B.V. From November 2009, also the company Buongiorno Digital
Innovation India Private Ltd, incorporated on November 3, 2009 and 51% held by
Mitsui & Co;
- Nevid Nikravan, a director of Buongiorno Spa, from whom the Company
purchased on October 7, 2009 the minority holding of 20.34% of the share capital
that he held in the company Buongiorno Dijital Iletisim AS (Turkey);
- Buongiorno Hong Kong Ltd, in which Mitsui & Co. Ltd. holds a 51% stake and
Buongiorno a 49% stake, and which was consolidated using the equity method.
The Company and its subsidiaries carried out transactions relating to the Group's
core business with this company at market conditions.
Finally, we point out that at December 31, 2009, Buongiorno S.p.a. held 35% of the
share capital of the company Inches Music Group S.r.l., in which Mauro Del Rio —
Buongiorno’s reference shareholder — holds the majority stake. The company’s
purpose is to manage and sell “Artist community” tracks. During the year, the
Company made a payment of Euro 53,846 to Inches Music Group S.r.l. to replenish
losses; the equity investment was then written down by a like amount. The Group
also undertook commercial transactions with said company and recognized costs of
Euro 6,874.
we monitored the most significant transactions in terms of impact on the
Company’s income, cash flows, financial position and organization. The majority
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RepoRt of the SupeRviSoRy Committee
of these transactions were related to the reorganization and streamlining of the
Buongiorno Group's structure. Details are provided below:
- effective January 1, 2009, minority interests in the South African subsidiary
iTouch South Africa (Pty) Ltd were acquired, increasing the stake from 87.5% to
100%;
- effective January 1, 2009, Grupo Itouch Movilisto Mexico SA de CV was merged
in the Mexican company My Alert SL de CV.
- effective January 1, 2009, iTouch (UK) Ltd. was merged into Buongiorno UK Ltd.
- on April 1, 2009, a procedure was initiated to close Telitas Sweden AB;
- on May 25, 2009, iTouch Denmark AS was placed into liquidation.
- on July 1, 2009, minority interests in the Nigerian subsidiary iTouch Global
Concepts Nigeria Ltd were acquired, increasing the stake from 80% to 100%;
- on September 30, 2009, the Spain-based Movilisto S.A., Gruppo Itouch
Movilisto S.A. and Initiatives Especiales S.A. were merged into Buongiorno MyAlert
S.A.;
- on September 30, 2009, the Norwegian company Mobilnet AS was sold;
- on September 30, 2009, the German company Fleck Capital GmbH was
liquidated;
- on October 7, 2009, minority interests in the Turkish subsidiary Buongiorno Dijital
Iletisim A.S. were acquired, increasing the stake from 79.66% to 100%;
- on November 30, 2009, the French companies Mobivillage SA and iTouch
Movilisto France were merged into Buongiorno France SA;
- in December 2009, winding-up procedures were started for the English
companies iTouch Holdings Ltd and iTouch Ventures Ltd, the Spanish companies
Corporacion Crossbow SL, Kunno Systems SL and Movilisto TV, the Australian
company Telequity Pty Ltd, the New Zealand company iTouch New Zealand Ltd
and the Bolivian company Buongiorno MyAlert Bolivia S. de R.L.;
- at the same time as the start of the above proceedings to wind up the
companies iTouch Holdings Ltd and iTouch Ventures Ltd, the parent company
Buongiorno Spa acquired from iTouch Holding Ltd (a company controlled by
Buongiorno Spa through iTouch Ventures Ltd) a 100% stake in the company
iTouch Ltd, at an equivalent value to the book value of Buongiorno Spa’s own
holding in the company iTouch Venture Ltd in liquidation, which is also controlled.
we have verified that the information provided by the Directors in the Report on
Operations adequately meets the guidance issued by CONSOB;
we have verified that the Directors pursued the interests of the Company in all
transactions undertaken;
the independent Auditors' Report on the financial statements and the
consolidated financial statements does not raise any significant issues or call for
informational notes on areas of special attention;
no dividend proposal was evaluated as no resolution has been passed in this
regard;
we have not received any notices of claims pursuant to Article 2408 of the Italian
Civil Code, nor complaints by third parties, including the CONSOB;
we have established that there are no critical issues relating to the independence
of the independent auditors;
we met with the independent auditors on three occasions. During these meetings,
no significant issues came to light that required us to conduct specific enquiries;
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RepoRt of the SupeRviSoRy Committee
we have verified the adequacy of the management structure of the Company with
regards to the principles of correct management;
we have not identified any specific corrective actions taken or to be undertaken to
improve the Company’s management structure;
we have evaluated the appropriateness of the Company’s instructions to
subsidiary companies as defined under article 114, paragraph 2 of the TUF;
we have not identified any specific corrective actions taken or to be undertaken to
improve the Company’s instructions to subsidiary companies;
through our periodic meetings with PricewaterhouseCoopers, we have obtained
information from the local Independent Auditors of subsidiary companies as
required under article 151-ter, paragraph 4 of the TUF;
we feel that the organizational structure is adequate as regards matters within the
scope of the Control Committee;
we held eight Supervisory Committee meetings and met with independent
auditors Pricewaterhouse Coopers on three occasions to exchange information
on the key accounting and internal control issues facing the Company. The
Internal Auditor participated in all the meetings reporting on its operations, and
internal control measures implemented and to be implemented. In light of the one-
tier governance system adopted by the Company, we attended all nine of the
Board of Directors’ Meetings of Buongiorno S.p.A. as non-executive and
independent directors;
we felt that the internal control system and the activities carried out by the person
who, during 2009, conducted financial audits (in accordance with Italian Law No.
262/2005) and compliance audits (in accordance with Italian Legislative Decree
231/2001) on a significant sample of Buongiorno Group companies were
adequate. Overall audit results were positive and satisfactory. We monitored the
preparation of adequate procedures by the Company and the update of the
Organization, Management and Control Model 231 approved on November 9,
2009 by the Company's Board of Directors;
we did not identify any corrective actions that must be taken to improve the
internal control system, except as regards the resignation of the Internal Auditor,
who was immediately replaced by appointing a new head of internal auditing
chosen within the company;
we consider the system of accounting administration to be reliable and suitable to
giving a true and fair view of the business;
in the course of our auditing activities, we encountered no oversights, infractions
or irregularities;
we did not exercise our powers to call a meeting of the Board of Directors;
we did not carry out further engagements pursuant to art. 2409–octiesdieces,
paragraph 5, subsection c) of the Italian Civil Code.
pursuant to article 149, paragraph 1, sub-paragraph c)-bis of Legislative Decree
of February 24, 1998, we acknowledge that the Directors in their corporate
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RepoRt of the SupeRviSoRy Committee
governance report state that the Company has adopted the Corporate
Governance Code of Italian listed companies; we found that the regulations
envisaged by said Code were effectively complied with, as widely explained in the
corporate governance report to which the reader is referred for complete and
adequate information.
Based on the above observations, we believe that, for the year ended December 31,
2009, the Company, its internal control system, its accounting and administration
systems, and its ability to provide a true and fair view of operating performance have
been accurately and effectively monitored.
Supervisory Committee
Signed
Giovanni Massera
Anna Puccio
Felipe Fernandez Atela
Annex 1
LIST OF POSITIONS HELD BY MEMBERS OF THE SUPERVISORY COMMITTEE (ARTICLE
144 – QUINQUIES-CIES OF THE RULES FOR ISSUERS) AT THE REPORTING DATE
GIOVANNI MASSERA - CHAIRMAN
COMPANY NAME OFFICE EXPIRY
Prosciuttificio Ghirardi Onesto S.p.A Statutory Auditor 04/30/2010
Verdi Multimedia S.r.l. Statutory Auditor 04/30/2012
Egthecnology S.r.l. Statutory Auditor 04/30/2010
Azienda Cartaria Lombarda Statutory Auditor 04/30/2012
Casa di Cura Privata Sant’Antonino S.r.l. Statutory Auditor 04/30/2010
Mediterraneo S.a.p.a. di Mauro Mambrini Statutory Auditor 06/30/2012
Soffieria Mezzadri S.r.l. Statutory Auditor 04/30/2010
Boschi Pietro e C. S.r.l. Statutory Auditor 04/30/2012
Champion Europe S.p.A. Statutory Auditor 06/30/2012
Analisi Società di Revisione S.p.A Statutory Auditor 12/31/2012
Mineralbirra S.r.l. Statutory Auditor 04/30/2012
Meverin S.r.l. Statutory Auditor 04/30/2010
Champion Europe Services S.r.l. Statutory Auditor 06/30/2012
La Rocca Golf Club Statutory Auditor 04/30/2012
Game 7 Athletic S.p.A. Statutory Auditor 06/30/2012
Impresa Edile Casino di Marore S.r.l. Statutory Auditor 04/30/2011
Calamo Studi S.r.l. Director n/a
ALFA – Agenzia Logistica Filiere Agro – Statutory Auditor 06/30/2012
Alimentari - Spa
Uni-edil Srl Statutory Auditor 04/30/2012
Geom.G. Ferrari Spa Statutory Auditor 04/30/2012
Number of positions held with issuers (other than the issuer) 0
Total number of positions held (other than with the issuer)) 20
ANNA PUCCIO - MEMBER
COMPANY NAME OFFICE EXPIRY
Number of positions held with issuers (other than the issuer) 0
Total number of positions held (other than with the issuer)) 0
FELIPE FERNANDEZ ATELA - MEMBER
COMPANY NAME OFFICE EXPIRY
Number of positions held with issuers (other than the issuer) 0
Total number of positions held (other than with the issuer)) 0
218
219
4 AttestAtions of the executive
in chArge of the compAny’s
finAnciAl reports
123
124
AttestAtions of the executive in chArge
of the compAny’s finAnciAl reports
Attestation on the Consolidated Financial Statements Pursuant to Article 81-ter of CONSOB Regulation No.
11971 (which makes reference to article 154-bis, paragraph 5 of the consolidated finance law, TUF) of May 14,
1999, as amended
The undersigned Andrea Casalini, in his capacity as Chief Executive Officer, and Carlo Giuseppe Frigato, in his capacity as
Executive in Charge of the Company’s Financial Reports of Buongiorno S.p.A., taking into account the provisions set out in
article154-bis, paragraphs 3 and 4 of the Legislative Decree No. 58 of February 24, 1998:
DECLARE
1. that the administrative and accounting procedures followed are adequate in light of the Company’s characteristics (even
in consideration of any changes occurred during the year) and have been consistently applied in the preparation of the
consolidated financial statements for 2008.that the appropriateness of the administrative and accounting procedures for
preparing the financial statements for the year ended December 31, 2009 was assessed based on the Internal Control
– Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, which is
generally accepted as a reference framework at international level;
2. The undersigned further declare that:
a) the consolidated financial statements reflect the accounting books and records;
b) the consolidated financial statements were prepared in accordance with the International Financial Reporting Standards
endorsed by the European Union and the provisions enacting Legislative Decree No. 38/2005, and, to the best of our
knowledge, they provide a true and fair view of the assets, liabilities, profit or loss and financial position of the issuer and
its consolidated companies.
c) the report on operations provides a reliable analysis of operations, operating result, and the situation of the issuer
and its consolidated companies, as well as a description of the main risks and uncertainties regarding the issuer and its
consolidated companies.
Date: March 15, 2010
Signed Signed
Chief Executive Officer Carlo Frigato
Andrea Casalini Executive in Charge of the Company’s Financial Reports
Attestation on the Financial Statements of Buongiorno S.p.A. Pursuant to Article 81-ter of CONSOB Regulation
No. 11971
(which makes reference to article 154-bis, paragraph 5 of the consolidated finance law, TUF) of May 14, 1999,
as amended
The undersigned Andrea Casalini, in his capacity as Chief Executive Officer, and Carlo Giuseppe Frigato, in his capacity as
Executive in Charge of the Company’s Financial Reports of Buongiorno S.p.A., taking into account the provisions set out in
article154-bis, paragraphs 3 and 4 of the Legislative Decree No. 58 of February 24, 1998: 58:
DECLARE
1.that the administrative and accounting procedures followed are adequate in light of the Company’s characteristics and have
been consistently applied in the preparation of the consolidated financial statements for 2008. that the appropriateness
of the administrative and accounting procedures for preparing the financial statements for the year ended December
31, 2009 was assessed based on the Internal Control – Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission, which is generally accepted as a reference framework at international level;
2. The undersigned further declare that:
a) the financial statements prepared in accordance with Italian Civil Code requirements reflect the accounting books and
records;
b) the Company’s financial statements were prepared in accordance with the International Financial Reporting Standards
endorsed by the European Union and the provisions enacting Legislative Decree No. 38/2005, and, to the best of our
knowledge, they provide a true and fair view of the assets, liabilities, profit or loss and financial position of the issuer.
c) the report on operations provides a reliable analysis of operations, operating result, and the situation of the issuer, as
well as a description of the main risks and uncertainties regarding the issuer.
Date: March 15, 2010
Signed Signed
Chief Executive Officer Carlo Frigato
Andrea Casalini Executive in Charge of the Company’s Financial Reports
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5 Independent AudItors’ report
224
225
Independent AudItors’ report
226
227
Independent AudItors’ report
6 Company Data anD InformatIon
for ShareholDerS
Buongiorno S.p.A.
Registered office and headquarters:
Borgo Masnovo 2
43100 Parma, Italy
Offices:
Via Cosimo Del Fante 10
20122 Milan, Italy
www.buongiorno.com
Fully subscribed and paid-up capital stock: Euro 27,654,555.50 (February 11, 2010)
Tax code and Register of Companies of Parma No. 02699820045
Court of Parma - VAT code 07863930017
Investor Relations:
Email: investor.relations@buongiorno.com
Tel: +39 02 582131
Fax: +39 02 58431008
228
229
The Ordinary Shareholders’ meeting, held in Parma on April 30, 2010 – in its second call – resolve to approve the Annual Report
for the year ended December 31, 2009.
230
231
Buongiorno S.p.A. pArMA
MilAn
Borgo MASnovo, 2 london
43100 pArMA, itAly MAdrid
ph. +39 0521 533110 liSBon
pAriS
viA CoSiMo del FAnte, 10 MuniCh
20122 MilAn, itAly MArSeille
ph. +39 02 582131 MoSCow
wien
inFo@Buongiorno.CoM grAz
www.Buongiorno.CoM AMSterdAM
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iStAnBul
duBlin
CApe town
SAn FrAnCiSCo
MexiCo City
SAo pAulo
BuenoS AireS
lAgoS
dehli
Sidney
