Tiscali 2001 Annual Report Download

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TISCALI S.p.A.
Viale Trento, 39 - 09123 Cagliari
Ph. +39.070.46.011 - Fax +39.070.46.01400
e-mail: [email protected]
www.tiscali.com The European Internet Company
7.3mn active users, leading position in the European ISP market
97% reduction in losses at EBITDA level
Revenues up 267% to EUR 635.7mn
50,000 km of new generation network infrastructure
All acquired activities successfully restructured
2001 KEY FACTS

Table of contents

  • Page 1
    ... users, leading position in the European ISP market 97% reduction in losses at EBITDA level Revenues up 267% to EUR 635.7mn 50,000 km of new generation network infrastructure TISCALI S.p.A. Viale Trento, 39 - 09123 Cagliari Ph. +39.070.46.011 - Fax +39.070.46.01400 e-mail: [email protected] www.tiscali...

  • Page 2
    ... NETWORK CONTENT DISTRIBUTION ADSL Satellite Pre-paid cards VPN Post-paid services Leased lines Mobile services Hosting & Housing services Netfax Streaming solutions Communication Tools SERVICES VALUE ADDED VoIP Messaging and Chat - Web Portal - Audio/Video Streaming - Advertising...

  • Page 3
    The European Internet Company

  • Page 4

  • Page 5
    ... TISCALI SHARES REPORT ON OPERATING PERFORMANCE Market profile Group Operating Performance Revenues analysis Access Portal B2B Voice Operating costs Extraordinary operations Corporate restructuring Group balance sheet result Group investments Parent Company operating performance Breakdown of Parent...

  • Page 6

  • Page 7
    Other information Legal Issues Corporate Governance Stock Option Plan Shares Held by Directors and Auditors CONSOLIDATED FINANCIAL STATEMENTS Consolidated balance sheet Consolidated profit and loss statement Notes to the consolidated financial statements PARENT COMPANY FINANCIAL STATEMENTS Balance ...

  • Page 8

  • Page 9
    The European Internet Company ONE BRAND, ONE TECHNOLOGY, ONE COMPANY. 1

  • Page 10
    2

  • Page 11
    ...and consolidating its position as Europe's leading Internet Company. As a result, 16 European ISPs were acquired and integrated into the Company, taking its market share from 3% at end-2000 to 16% at end-2001, establishing Tiscali as a European brand. The Tiscali portal registered over 14.7mn unique...

  • Page 12
    ... Tiscali network, consisting of an international backbone extending over more than 12,000 km of long distance fibre backbone throughout Europe, was completed at the end of 2001. This network interconnects with all the Tiscali national networks giving the Company total control over connection quality...

  • Page 13
    The total integration of Tiscali's activities at European level has been made possible by the implementation of the Unit project. This is a single IT platform which provides unified and integrated management of Tiscali's customer base at all stages of the value chain, throughout Europe. 5

  • Page 14
    ONE BRAND, ONE TECHNOLOGY, ONE COMPANY. At the end of 2001, Tiscali had a solid presence in 15 European countries. This confirms Tiscali as the only Internet Company with a truly pan-European market strategy. This allows Tiscali to capitalise on the opportunities thrown up by evolving European ...

  • Page 15
    ... Lionetti SVP Internal Auditing & Special Projects Mario Mariani SVP Access, Applications & VAS Beatrice Niedda SVP Strategic Marketing & Communication Paolo Susnik SVP & CTO Sergio Cellini CEO UK Ruud Huisman CEO BENELUX Rafi Kouyoumdjian CEO France Carl Muehlner CEO Germany Peter Bredgaard...

  • Page 16

  • Page 17
    ... Hermann Hauser James Kinsella Elserino Piol Board of Statutory Auditors CHAIRMAN Andrea Zini PERMANENT AUDITORS Rita Casu Piero Maccioni SUBSTITUTE AUDITORS Giuseppe Biondo Livio Bianchi Accounting firm Deloitte & Touche SpA Effective since April 30, 2002 9

  • Page 18
    ...the Internet would radically change the way in which we communicate, work and interact with the world around us. With these convictions in mind, and following our stock market listing in October 1999, we believed that our market should not be limited to Italy but should extend to the whole of Europe...

  • Page 19
    ... be seen in the value of the synergies created. In the fourth quarter 2000, proforma consolidated operating losses, including all the Companies acquired by Tiscali, totalled approximately EUR 192.4mn. In the fourth quarter 2001, following integration, the Group was close to breakeven; slashing its...

  • Page 20
    ...Tiscali has been listed on the Italian Nuovo Mercato since October 1999, and the Nouveau Marché in Paris since June 2001. Last year the number of shares in the Company increased considerably, rising from 304,626,082 as of December 2000 to 358,417,658 twelve months later. The shareholder base at end...

  • Page 21
    ...é for almost a year, the Nuovo Mercato remains predominant, accounting for 98.7% of transactions. The daily average trading volume on the Nouveau Marché from June to December 2001 was 29,214 shares. During 2001 the Tiscali stock lost 30% of its value, compared to a 42% fall in the Numtel Index...

  • Page 22
    Tiscali 10.0, advertising campaign 2002

  • Page 23
    The European Internet Company REPORT ON OPERATING PERFORMANCE 15

  • Page 24
    ... which, together with Tiscali, account for about 54% of total market share: - T-Online, ISP subsidiary of Deutsche Telekom AG, and market leader in Germany; - Wanadoo, ISP subsidiary of France Telecom and market leader in France and the UK (operating as Freeserve); - AOL Europe, European branch of...

  • Page 25
    ...band access market still has considerable potential. During 2001 many new dial-up services appeared on the market. These included pre-paid packages, where users purchase a set number of hours of connectivity at a discounted rate as well as, unmetered access offers, in which users pay a fixed monthly...

  • Page 26
    ...a number of portals. However, sector experts are unanimous in forecasting an increase in on-line advertising and e-commerce spending, as advertising methods more effective than traditional banners are developed the net user base and average connection time increases and, new content and services are...

  • Page 27
    ... on Operating Performance Group Operating Performance During 2001, Tiscali launched an expansion campaign aimed at strengthening and consolidating its position as one of Europe's leading Internet Companies. Thanks to this strategy, Tiscali's European market share increased from 3% at end-2000 to 16...

  • Page 28
    ... in traffic volumes, price rises in France and Germany, the transfer of traffic onto the Group's own international IP network and the gradual streamlining of local access networks. More specifically, total Internet traffic on the Tiscali network in 2001 was 33.2bn minutes, a 37.8% increase on 2000...

  • Page 29
    ... in connectivity costs were achieved in the second half of 2001, as traffic driven on Tiscali's own network increased, and as the Group enjoyed increased bargaining power in renegotiating access contracts. As these costs constitute the main expense item, their percentage decrease against total...

  • Page 30
    ...to the acquisitions made so far and to organic growth. Portal revenues (on-line advertising and e-commerce) stood at 10% of the total, a sharp increase on the previous year, when they accounted for only 3%. Revenues from business-to-business services confirmed the importance of the B2B market, which...

  • Page 31
    ... agreements and via Tiscali's own access equipment. In order to enter the DSL services business, Tiscali bought a 20% share in Netchemya, an Italian XDSL provider, and signed an agreement with German Company QSC, which provides broadband services. Another broadband Internet access service using a bi...

  • Page 32
    ... portals, giving the Company the status of Europe's biggest web property as at December 2001. Tiscali unique visitors 2001 (in million) Source: Jupiter MMXI Top ten web property in Europe (December 2001) RANK MSN-MICROSOFT SITES YAHOO SITES AOL TIME WARNER NETWORK LYCOS SITES GOOGLE SITES TISCALI...

  • Page 33
    ... 11% to EUR 54.4mn in 2001, and accounted for 9% of total turnover. These services, available only in France, Italy and the UK, consist mainly of B2B services, pre-paid phone cards and voice/Internet packages. To improve this business area's profitability, low-margin products were withdrawn, and as...

  • Page 34
    ... caused by the acquisition of Companies in countries where Tiscali was already operating, the Company last year implemented a staff downsizing programme, cutting the total workforce from 4,200 (on a proforma basis) at December 31, 2000 to 3,020 at end-2001. The Group posted an EBITDA loss...

  • Page 35
    ... swaps, adjusted to the current market value of Tiscali shares, and those transferred or liquidated. Corporate restructuring As a consequence of acquisitions made in 2000 (including the World Online Group) and 2001 (including the Liberty Surf Group), the Tiscali Group has expanded to include, as...

  • Page 36
    ... Surf Telecom SA which, on December 31, 2001, incorporated by merger Praxitel SA and None Networks SA which had been fully taken over in November 2001. Also in 2001, Liberty Surf Telecom SA transferred its B2C operations to Liberty Surf SA, while World Online France SA (Tiscali Business) transferred...

  • Page 37
    ... economic impact of Tiscali Telecomunicaciones SA on the Parent Company's financial statements as a result of these operations was EUR 3.7mn. Again in 2001, World Online International BV transferred 49.2% of World Online Spain SA to World Internet Online SL (re-named Tiscali España SLU). Note...

  • Page 38
    ...by the increased size of the business, and because of payables to non-consolidated subsidiaries and affiliated Companies, which rose by EUR 99.9mn on 2000. These last arose from the corporate restructuring process. Group investments During 2001 the Group made investments totalling EUR 259mn, net of...

  • Page 39
    ... networks. The total length of the Tiscali network, including local access networks, is about 50,000 km. From this infrastructure Tiscali has built one of the world's largest IP networks, which runs across the whole of Europe from the Czech Republic, and reaches as far as the USA. This network...

  • Page 40
    ...services market, and to the Company's greater focus on its core business of Internet services for private and business customers. As a matter of fact, emphasise total revenues from Internet-related services rose by 38%, thanks to the growth of the Italian market and the success of Tiscali's services...

  • Page 41
    ...to 2000. This excellent performance, achieved despite the slump in the advertising market, was mainly due to the higher profile of Tiscali's portals and services, the market concentration and activities of Tiscali advertising, and the Company's advertising sales department. All these factors enabled...

  • Page 42
    ...-business services totalled EUR 3.9mn, an incremental rise of 11% on the previous year. During 2001, an internal technical and business unit dedicated to B2B services was set up, while the range of services offered was expanded and streamlined in the second half of the year. This will allow Tiscali...

  • Page 43
    ... During 2001, the Company's main investments consisted were effected through leasing and operating leases. Capital expenditure were mainly related to the acquisition of new routers, servers and switching exchanges in order to increase service capacity for future needs. Fixed assets increased by...

  • Page 44
    ...Company was bought in November 2000 via a Public Exchange Offer by Tiscali for all World Online shares, and was completed at the end of January 2001. At that date Tiscali held 287,333,645 World Online shares. The World Online Group began life in 1996 as a Netherlands-based Internet Services Provider...

  • Page 45
    ...,000 active users, who generate around 300mn minutes of traffic per month. Planet Interkom was recently rated one of the top dial-up providers by the German specialist press (Chip, PC Online, Tomorrow, PC Magazin). SurfEU.com Ltd In April 2001, Tiscali acquired SurfEU.com Ltd, an ISP and portal with...

  • Page 46
    ....7mn in cash and about 4.8mn new Tiscali shares. Springboard Internet Services Ltd (LineOne) At the end of April 2001, Tiscali acquired the British Company Springboard Internet Services Ltd (trading as "LineOne"), one of the UK's leading ISPs and portals, for a total price of EUR 100mn, of which EUR...

  • Page 47
    ...'s range of products for corporate customers in Germany. Intercall In June 2001, Tiscali, through its subsidiary Liberty Surf Group SA, acquired Intercall, a French Nouveau Marché-listed Company, via a capital increase made for the purpose. On the same date, Liberty Surf filed a simplified Public...

  • Page 48
    ...consultancy services to the Parent Company. These services were rendered at market value for a fee of about EUR 250,000. Recent events In early 2002, Tiscali continued to develop its activities in Europe, as part of its business strategy aimed at establishing the Group as a leading Internet Company...

  • Page 49
    ... UK. The most noteworthy new products are flat-rate schemes, offering unlimited Internet access against payment of a fixed fee, and ADSL. Both services, as well as pre-paid packages (in which the user purchases a set number of Internet connection hours in advance), will alter the Company's corporate...

  • Page 50
    ... custody of the shares. In December 2001, Dino Trovato, who in January 2000 sold Tiscali SpA 80% of the Swiss Company DataComm AG, filed for arbitration proceedings against Tiscali in Switzerland, in order to obtain payment of the put option price guaranteed in the acquisition agreement. The amount...

  • Page 51
    ... put the Company's management in contact with Tiscali. The total value of the litigation is about EUR 69mn. Corporate Governance Introduction The Voluntary Self-Regulatory Code Of Listed Companies, prepared by the Committee for Corporate Governance of Listed Companies, sets out a model of Company...

  • Page 52
    ... the controls required to monitor the progress of the Company. For the year ending December 31, 2001 and for the current year, the Board of Directors has drawn up a schedule of meetings to deliberate on and approve the periodic accounting documents relating to the Company (quarterly reports, interim...

  • Page 53
    ... is managed by the Investor Relations department, which prepares press releases and publishes them via a network of professional public relations Companies. More particularly: - Press releases covering regularly-issued information (that is, balance sheets, interim reports, quarterly reports etc...

  • Page 54
    ... The lists, which must be deposited at the Company's Head Office in advance of the date fixed for the meeting, contain detailed personal and professional information on nominees. It is not therefore felt necessary to take up the suggestion contained in the Self-Regulatory Code, and create an "ad hoc...

  • Page 55
    ...Company's internal control system, and adapted it to meet the recommendations contained in the Self-Regulatory Code, by creating a Committee for Internal Control and appointing a person to lead it. This person, who will shortly be appointed by the CEO, will not report to any operational area manager...

  • Page 56
    ... functions are performed through press releases, regular meetings with institutional investors and the financial community, and through documentation distributed on the Company's website in the section "Investor Relations". The Company can also be contacted at the e-mail address ([email protected]...

  • Page 57
    ...Plan On March 12, 2001, the Annual General Meeting of Tiscali SpA, meeting in ordinary session, adopted a Stock Option plan open to managers, employees and staff of all Tiscali Group Companies, tasking the Board of Directors with the definition of terms and assignment of options. At the same meeting...

  • Page 58
    ..., 2001 an Information Prospectus was filed with CONSOB. The Plan includes specific "stability commitment" obligations, whereby the options may be exercised only on condition that the beneficiary continues to work for or hold office continuously with Tiscali or another Group Company from the date of...

  • Page 59
    ... Performance Shares Held by Directors and Auditors As required by current legislation, in particular Article 79 of the implementing regulations of D.Lgs. 58/1998 issued by CONSOB, with decision 11971/1999, the number of shares held by Directors and Auditors is listed hereunder. No. OF SHARES...

  • Page 60
    Tiscali 10.0, advertising campaign 2002

  • Page 61
    The European Internet Company TISCALI GROUP CONSOLIDATED FINANCIAL STATEMENTS as of December 31, 2001 53

  • Page 62
    ... industrial and commercial equipment 201,494 other fixed assets 35,064 payments on account and fixed assets in course of acquisition 55,738 Total 386,161 Long-term investments Participations non-consolidated subsidiary Companies and affiliated Companies 12,448 Parent Companies other Companies 30,552...

  • Page 63
    ... than non-current assets participations in non-consolidated Group Companies participations in Parent Companies other investments own shares other securities Total Cash and cash equivalents bank and post-office deposits cheques cash and other negotiable instruments Total Total working capital 162...

  • Page 64
    ... bonds due to banks other short-term financing down payments trade accounts payable credit instruments payable due to non-consolid. subsidiaries & affiliated Companies due to controlling Companies taxes payable due to social security agencies other payables Total payables E) ACCRUED LIABILITIES AND...

  • Page 65
    ... To third parties sureties other other personal guarantees real guarantees Total B) Other memorandum accounts Leasing payments coming due Warrants Commitments Total C) 1) Guarantees received sureties Total TOTAL MEMORANDUM ACCOUNTS 12.31.2001 12.31.2000 251,532 6,020 29,227 186 195,280 446,812...

  • Page 66
    ...value and costs of production FINANCIAL INCOME AND CHARGES (+) income from participations in affiliated Companies in other Companies (+) income other than the above from receivables registered under non-current assets from third parties from affiliated Companies from Parent Companies from securities...

  • Page 67
    ...of long-term investments other than participations of securities registered in the working capital other than participations Total adjustments E) 20) a) b) 21) a) b) c) EXTRAORDINARY INCOME (CHARGES) (+) extraordinary income income capital gains from disposals of non-current assets (-) extraordinary...

  • Page 68
    Tiscali 10.0, advertising campaign 2002

  • Page 69
    The European Internet Company TISCALI GROUP NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as of December 31, 2001 61

  • Page 70
    ... Profit and Loss Account; - Consolidated Financial Report. 2) AREA OF CONSOLIDATION The Consolidated Financial Statements of the Tiscali Group include the Financial Statements of the Parent Company and those of the Italian and foreign Companies in which Tiscali has direct or indirect control of the...

  • Page 71
    Consolidated Financial Statements Companies of irrelevant entity are entered at their cost value. The listing of participations valued with the cost method is enclosed. Moreover, its should be noted that as regards foreign subholdings, the sub-consolidated financial statements drafted for the ...

  • Page 72
    ... time of their payment. Profits are included only if they accrued by the closing date of the financial year, whereas risks and losses are taken into account even if they became known at a later date. Miscellaneous items grouped under single accounts of the financial statements have also been valued...

  • Page 73
    ...which they were incurred. Intangible assets are posted at their purchase or internal production value including accessory charges and amortized by fixed amounts. Goodwill is posted among assets only if acquired for a valuable consideration, within the limit of the cost incurred. It is amortized over...

  • Page 74
    ... systematically either over the period of estimated future use, or that shown in the leasing contract, whichever is the shorter. Non-current assets whose market value at the end of the financial year is durably lower than their cost depreciated by means of the above criteria, are written down...

  • Page 75
    ... charges. This method allows representation of financial leasing operations according to the so-called "financial method", as established in I.A.S. (International Accounting Principle) No. 17. h) Long-term investments - PARTICIPATIONS IN NON-CONSOLIDATED SUBSIDIARY COMPANIES AND AFFILIATED...

  • Page 76
    ... and affiliated Companies for future disposal are valued at the lesser value between historical cost and market value. Other participations and securities are valued at their purchase cost, or - if lower - at their market value, which may be assessed on the basis of stock exchange quotations...

  • Page 77
    ... and prizes, and net of the taxes directly linked to the sale of services. Financial earnings are posted on the basis of the pro-tempore accounting principle. t) Amounts in foreign currencies Receivables and payables in foreign currencies are adjusted to the exchange rates valid at the end of the...

  • Page 78
    ...(2,924) The increase of the line item "R&D and advertising costs" in the FY is mainly referred to the sub-consolidated Tiscali International BV and in particular to the start-up costs of Tiscali International Network BV, the Company which will provide the whole Group with connectivity services. The...

  • Page 79
    ...Germany and Great Britain, updated valuation reports were taken as reference. Composition and changes which took place during the FY covering the line items under scrutiny are detailed below. CONSOLIDATION DIFFERENCE BALANCE COMPANY Tiscali SpA (*) Liberty Surf Group SA World Online Int. NV Tiscali...

  • Page 80
    ... increase Start-up costs Other Total 12.31.2001 14 5,203 3,552 403 9,172 12.31.2000 364 5,606 6,813 12,783 CHANGE (350) (403) (3,261) 403 (3,611) The account "Start-up and expansion costs" mainly refers to the Parent Company Tiscali SpA. It includes costs that will produce profits over a number...

  • Page 81
    ... 8.5mn, and Connect Software, posted for an amount of EUR 1mn. Participations in other Companies mainly consist of minority shareholding valued at cost, of Tiscali SpA for EUR 4.7mn, Tiscali International BV for EUR 12.7mn (including First Market Communication for EUR 9.1mn), Tiscali Finance for EUR...

  • Page 82
    ... from customers totalled EUR 245mn. They accrued from the sale of Internet services, mainly consisting of the invoicing of network access services, reverse interconnection traffic, advertising revenues and business to business and telephone services provided by the Group. The sharp increase recorded...

  • Page 83
    ...,086 66,411 Total Line item "Other credits" includes EUR 11mn accruing from Tiscali International BV towards non-consolidated Group Companies, mainly Liberty Surf Telecom UK and Liberty Surf Media UK. The remaining amount accrues mainly from Tiscali Deutschland GmbH and Liberty Surf Group SA. 75

  • Page 84
    ... NON-CURRENT ASSETS "Other securities" include the investment of liquid assets in bonded securities and other forms of short-term investment, to be found mainly in the financial statements of Tiscali International BV and Liberty Surf Group SA. 12.31.2001 Bonded securities Other securities Total 40...

  • Page 85
    ... of Tiscali International Network SA (formerly Nets SA), to hardware and software maintenance fees (which are one of the typical pre-paid expenses in the sector), pre-paid rentals for connectivity circuits and sponsoring costs. Amongst other deferred charges we have listed disagio on the issue of...

  • Page 86
    ...,943 The changes in shareholders' equity postings, in particular the amounts listed in the column "Other changes", refer to the enlargement of the consolidation area, and to the increases in share capital carried out by the Parent Company during FY 2001. The following schedule contains a synthesis...

  • Page 87
    ... RESERVES FOR RISKS AND FUTURE LIABILITIES Reserves for risks and future liabilities are detailed below: BALANCE 12.31.2000 For taxes Fund for risks and future liabilities Other Foreign exchange fluctuation fund Risk fund for current legal proceedings Other funds Total other funds Total 257 10,012...

  • Page 88
    ...the last six months of 2000 and by Tiscali International BV to fund the acquisition of Telinco UK. The loan contracted by Tiscali Finance is in the amount of EUR 250mn, and foresees lump-sum repayment after five years. The loan contracted by Tiscali International, of EUR 125mn, is posted among short...

  • Page 89
    ... payables" mainly refer to Tiscali International BV for about EUR 23mn; they consist largely of other allocations for future charges and debts not assignable to other line items; EUR 17mn may be ascribed to the Liberty Surf Group, and accrue from Infonie Promotions and Liberty Surf Telecom SA. 81

  • Page 90
    ...main of the deferral to following FYs of pre-paid services mainly accruing from Nets SA for EUR 23mn as pre-paid connectivity services, from the recording as deferred income of the contra-entry of tax credit posted in the assets of Tiscali SpA, matured on investments under Law 388/1999. The decrease...

  • Page 91
    ... amount posted, about EUR 18.5mn, refers to the increase in fixed assets for internal works borne by the Czech Republic and Germany for cabling or IRU projects. Revenue distribution by geographic area is shown below. BREAKDOWN OF REVENUES BY GEOGRAPHIC AREA EU sales Extra EU sales Total 12.31.2001...

  • Page 92
    ... services: 12.31.2001 Leased lines Purchase of traffic Advertising and promotion Maintenance costs Advisory services Cost of sales Utilities Bank and postal charges Transportation expenses Other services Total 209,425 166,603 100,380 16,877 20,992 18,006 7,787 1,528 6,639 44,098 592,335 12.31.2000...

  • Page 93
    ... France where the Group, besides Liberty Surf Telecom, has acquired Intercall SA, a Company specialising in pre-paid telephone services. Advertising and promotional costs. These costs, accounting for approximately 17% of total costs for services and 16% of total revenues, have increased considerably...

  • Page 94
    ... financial income is referred to income accrued on swap contracts issued by Tiscali Finance to cover the rate fluctuation risk and totals about EUR 30.4mn. Composition of interest payable and other financial charges: 12.31.2001 Financial charges on Bonds Amounts due to banks for overdrafts Amounts...

  • Page 95
    ...group credit devaluations which cannot be offset in the consolidation process since they concern Companies that are being wound up (or will soon be). The other restructuring charges pertaining to early termination of contracts and staff downsizing following mergers and winding-ups of Group Companies...

  • Page 96
    ... disclose the composition of the work force by job category, and the amounts payable to Directors and Statutory Auditors grouped by category. AVERAGE NUMBER OF EMPLOYEES GROUPED BY CATEGORY Middle Managers Office workers Executives Total 12.31.2001 431 2,528 123 3,082 12.31.2000 867 788 85 1,740...

  • Page 97
    ... SpA Nets SA Quinary SpA STS Srl Tiscali Belgium Holding SA being wound-up Tiscali Datacomm AG (ex Datacomm AG) Tiscali Finance SA Tiscali Reseaux SA (ex Tiscali France SA) Tiscali Deutschland GmbH (ex Nikoma) Tiscali Telecomunicaciones SA World Online International NV HEAD OFFICE Turin Prague Milan...

  • Page 98
    ...in non consolidated Group Companies calculated by means of the net equity method SHARE CAPITAL COMPANY NAME Andaledda SpA Connect Software Inc Gilla SpA Tiscali Czech Republic sro Tiscali Armement Sarl SurfEU.com Ltd being wound-up Total (***) Data refer to the updated financial status since the FY...

  • Page 99
    ... COMPANY NAME World Online International NV World Online GmbH SurfEU.com GmbH PlanetOne Internet Services GmbH Nacamar Internet Services GmbH Tiscali SA/NV Tiscali Denmark A/S 12Move Aps Denmark Tiscali OY SurfEU OY World Online OY Nacamar France Sarl World Online GmbH Tiscali Business GmbH Tiscali...

  • Page 100
    ...SA SurfEU.com AG World Online Kft World Online Acquisition Corp. World Online Merchandising LLC (*) The remaining 20% is held by Tiscali BV (**) The remaining 60% is held by World Online Partner BV (1) directly held by the Parent Company COUNTRY DIRECT INDIRECT TOTAL STAKE HELD BY Netherlands...

  • Page 101
    ...Cyber Press Publishing SA Loisir Net SA Respublica SA Cent pour Cent SA Liberty Surf AB Liberty Surf GmbH OVNI Web SA Tiscali Business SA Liberty Surf Telecom SA X-Stream Network Inc X-Stream Technologies Inc X-Stream Canada Inc Liberty Surf UK Ltd X-Stream The Netherlands BV Liberty Surf Network BV...

  • Page 102
    ... Time to Trade GmbH Finanzdirekt 24 Tiscali Voice GmbH Tiscali Technics GmbH Tiscali Telecomunicaciones SA Asepi SA Oem SA Tiscalinet SL Freelosophy SL Musica Por Internet X SL Jamas Navegaras Solo SL Sport Soul SL Net To Be SL Andar Por Las Redes SL Vol Trabajo Dedicado SL Spain Spain Spain Spain...

  • Page 103
    ... Parent Company BALANCE COMPANY World Online International NV Liberty Surf Group SA Tiscali Reseaux SA Tiscali Deutschland GmbH Addcomm AG Nets SA Tiscali Datacomm AG Tiscali Belgium Holding SA Tiscali Finance AG CD Telekomunikace sro Excite Italia BV STS Studi Tecnologie Sistemi SpA Quinary SpA...

  • Page 104
    ... Surf Group SA BALANCE 12.31.2000 Liberty Surf SA Tiscali Business Intercall SA Infonie Pro None Networks SA Praxitel SA Liberty Surf Telecom SA X- Stream AXS LTD AXS SA AXS Inc Liberty Surf Telecom BV Respublica Objectif Net Cent Pour Cent Hispavista CEIC Film Non Stop Ovniweb Chez.com Total 22...

  • Page 105
    ... BALANCE 12.31.2000 World Online Holding SA The Internet Plaza BV Freemail BV Tiscali Denmark A/S World Online SA CZ COM sro World Online Merchandising LLC Nacamar Group plc Vodacom Ltd Wol Telecom Ltd-UK World Online Italy Srl Wol France SA SurfEU.com OY Vodacom Word Internet Online SA CZ Com sro...

  • Page 106
    ... ASSETS Cash and banks Receivables from customers Inventories Accrued income & def. charges Other current assets Total current assets NON-CURRENT ASSETS Technical fixed assets Intangible assets Investments and securities Other fixed assets Total non-current assets TOTAL ASSETS 386,161 870,700 43...

  • Page 107
    ... for deferred taxes Reserves for risks & future liabilities Total medium/long-term liabilities Total liabilities SHAREHOLDERS' EQUITY Share capital Reserves Net profit Total shareholders' equity Third parties' equity and reserve Total shareholders' equity TOTAL 12.31.2001 30,355 352,114 213,370 77...

  • Page 108
    ...- PROFIT AND LOSS ACCOUNT PROFIT AND LOSS STATEMENTS Net sales Operating expenses Purchases Services Depreciation/amortization Cost of labour Increase (decrease) in inventories Other operating expenses Operating profit Financial income Financial charges Other income Other charges Profit before taxes...

  • Page 109
    ... customers Other receivables Inventories Accrued income and deferred charges Trade accounts payable Other liabilities Accrued liabilities and deferred income Reserve for taxes payable Cash flows generated from operations CASH FLOWS FROM INVESTMENT ACTIVITY Net increases in technical fixed assets Net...

  • Page 110
    Tiscali 10.0, advertising campaign 2002

  • Page 111
    The European Internet Company PARENT COMPANY FINANCIAL STATEMENTS as of December 31, 2001 103

  • Page 112
    ... equipment 4) other fixed assets 5) payments on account and fixed assets in course of acquisition Total III Long-term investments 1) Participations in a) Group Companies b) affiliated Companies d) other Companies 2) Receivables 3) Other securities 4) Own shares Total 12.31.2001 12.31.2000...

  • Page 113
    ... banks due to other backers advances trade accounts payable payables represented by negotiable instruments due to Group Companies due to affiliated Companies due to Parent companie taxes payable due to social security agencies other payables Total payables E) ACCRUED LIABILITIES AND DEFERRED INCOME...

  • Page 114
    ... guarantees given B) OTHER MEMORANDUM ACCOUNTS lease payments coming due warrants commitments Total other memorandum accounts C) 1) a) GUARANTEES RECEIVED from third parties and Group Companies sureties Total guarantees received TOTAL MEMORANDUM ACCOUNTS 12.31.2001 12.31.2000 250,000,000 250,000...

  • Page 115
    ... from sales and services changes in inventories of work in progress, semi-finished an finished products changes in work in progress to order increase in assets for work in progress/internal other revenues and income other revenues and income working account contributions Total (-) PRODUCTION COSTS...

  • Page 116
    ... of long-term investments other than participations of securities in the working capital other than participations Total adjustments EXTRAORDINARY INCOME AND CHARGES (+) extraordinary income income capital gains from disposals of non-current assets (-) extraordinary charges charges capital losses...

  • Page 117

  • Page 118
    Tiscali 10.0, advertising campaign 2002

  • Page 119
    The European Internet Company PARENT COMPANY NOTES TO THE FINANCIAL STATEMENTS as of December 31, 2001 111

  • Page 120
    ..., they are posted at the time of payment of the same. Profits are included only if accruing within FY closing date, while risks and losses are taken into account also if they became known at a later date. Miscellaneous items included in individual line items have been valued separately. Assets...

  • Page 121
    ... of value are considered no longer current. The analytical methods for the charging of depreciation and amortization are explained separately hereunder in these notes. c) d) Revaluations To date, no revaluations have been performed. Exceptions No exceptions to the valuation criteria provided by...

  • Page 122
    ...year. g) Long-term investments - INVESTMENTS IN SUBSIDIARY AND AFFILIATED COMPANIES Investments in subsidiary and affiliated Companies, which are non-current financial assets, are valued according to the cost method, taking into account that they are recent purchases and set-ups. Cost is decreased...

  • Page 123
    ...value. The guarantees issued are in the form of surety bonds issued in favor of third parties in execution of contract terms. Commitments refer to obligations resulting from stipulated agreements which have not as been yet executed, and from leasing and operating lease charges to be posted in future...

  • Page 124
    ... of traffic actually recorded as of the closure of the financial year. Financial revenues are recorded on the basis of the matching principle. s) Recording of amounts in foreign currencies Receivables and payables in extra-EUR-zone currencies are adjusted to the exchange rates valid at the end of...

  • Page 125
    ... and at the end of the period is detailed hereunder: 12.31.2001 COST Start-up and expansion costs R&D and advertising costs Industrial patent and intellectual property rights Concessions, licenses, trademarks Goodwill Payments on account and assets in course of acquis. Other Total 3,446 12,430...

  • Page 126
    ... account. This investment affects the whole Group. Another important project which has involved the Company during the FY, classified under the heading of assets in course of acquisition, is the Mobile Internet (about EUR 1.7mn) covering the offer of an Internet connecting service via mobile phone...

  • Page 127
    ... of acquisition Total Total Fixed assets mainly consist of technical equipment for the creation of internal networks and equipment for site setup, servers, personal computers, and call centre equipment. Increments in essence derive from the purchase of server equipment on which the information...

  • Page 128
    ...BALANCE 12.31.2001 280 847 865 1,991 287 455 742 216 665 103 984 3,717 Total Industrial and trade equipment network equipment and other specific equipment other equipment miscellaneous minor items Total Other goods office furniture IT and electric office automation other goods payments on acc. and...

  • Page 129
    ... equipment network equipment and other specific equipment other equipment miscellaneous and minor equipment Total Other office furniture IT and electric office automation other goods payments on acc. and assets in course of acquis. Total assets in course of acquisition payments on account...

  • Page 130
    ... up Tiscali Datacomm AG (ex Datacomm AG) Tiscali Finance SA Tiscali Reseaux SA (ex Tiscali France SA) Tiscali Deutschland GmbH (ex Nikoma) Tiscali Telecomunicaciones SA World Online International NV Andaledda SpA Tiscali Czech Republic sro Connect Software Inc Tiscali Armament Sarl Total COST REVAL...

  • Page 131
    ... Gilla SpA FreeTravel SpA Total 250 994 250 994 COST REVAL. (DEVAL.) B/S VALUE 744 744 1,250 250 1,500 12.31.2000 COST REVAL. (DEVAL.) B/S VALUE 1,250 250 1,500 12.31.2001 OTHER COMPANIES Crs4 Consorzio Green Management Mix Srl Stud Soc. Consortile Nets Broadband SpA Netchemya SpA Total COST REVAL...

  • Page 132
    ... Holding SA being wound up Tiscali Datacomm AG (ex Datacomm AG) Tiscali Finance SA Tiscali Reseaux SA (ex Tiscali France SA) Tiscali Deutschland GmbH (ex Nikoma) Tiscali Telecomunicaciones SA World Online International NV Andaledda SpA Tiscali Czech Republic sro Connect Software Inc Tiscali Armament...

  • Page 133
    ... order to run said operations at updated market value. The most significant transactions carried out during FY 2001 are briefly described below: AddCom AG In December 2000, Tiscali bought the whole of the share capital of Addcom AG, one of the leading German Internet Service Provider. In March 2001...

  • Page 134
    ... multiplying the number of active subscribers by a market value assigned to each subscriber. Ideare SpA This Company, taken over in February 2000 by means of the issue of Tiscali shares, was written down by about EUR 3.7mn in order to align its book value to the average quotation of Tiscali stock as...

  • Page 135
    ... quotation at acquisition date. SurfEU.com Ltd (being wound up) On April 23, 2001, Tiscali acquired SurfEU.com Ltd, a holding of the SurfEU Group, ISP and portal with a leading position in Germany by means of a transfer and purchase contract of said Company's whole share capital. Under the terms of...

  • Page 136
    ...Company, taken over in 2000 by means of the issue of new shares, was written down for about EUR 214mn in order to align its value to the average quotation of Tiscali stock as at January 2002, which was substantially lower than quotation at acquisition date. World Online International NV The increase...

  • Page 137
    ...IT resources and penetration in the Web market to offer customers an integrated system of contents and services on the cutting edge of the market. In November 2001, Tiscali SpA took over from Soner Info Communication Ltd (entirely held by Sonera Corporation) 12,500 Gilla SpA shares, making up 50% of...

  • Page 138
    ... France SA) Tiscali Deutschland GmbH (ex Nikoma) Tiscali Telecomunicaciones SA World Online International NV Andaledda SpA Tiscali Czech Republic sro Connect Software Inc Tiscali Armament Sarl Total (*) Data pertaining to sub-consolidated Companies HEAD OFFICE Turin Prague Milan Amsterdam Cagliari...

  • Page 139
    ... Statements Affiliated Companies SHARE COMPANY NAME Ariete Telemedia Srl FreeTravel SpA Total (*) Data referring to 12.31.2000 HEAD OFFICE Milan Milan CAPITAL (*) 52 (*) 500 SHAREHOLDERS' EQUITY (*) 114 (*) 365 PROFIT (LOSS) (*) 48 (*) (135) % HELD 40% 50% CARRYING VALUE 744 250 994 C) CURRENT...

  • Page 140
    ... from Group Companies are detailed as follows: FINANCIAL RECEIVABLES GROUP COMPANIES Tiscali International BV Liberty Surf Group SA Tiscali Reseaux SA (ex Tiscali France SA) Tiscali Deutschland GmbH (ex Nikoma) Nets SA Tiscali Datacomm AG Tiscali Finance SA CD Telekomunikace sro Excite Italia BV STS...

  • Page 141
    ... account in relation to its use. III - INVESTMENTS OTHER THAN NON-CURRENT ASSETS Details of cost and changes in the FY pertaining to investments other than non-current assets are detailed below. OTHER SECURITIES 12.31.2001 COST Italian bonded securities 8,536 REVAL. (DEVAL.) B/S VALUE 8,536 COST...

  • Page 142
    ... Insurance premiums Financial lease rental payments Rentals Pre-paid expenses Other deferred charges Total deferred charge Totale 63 2,503 440 201 5,020 8,227 8,229 2 2 12.31.2000 CHANGE 2 2 48 2,429 22 3,052 372 5,923 5,923 15 74 418 (2,852) 4,648 2,304 2,306 This line item covers leasing fees...

  • Page 143
    ...Company capital and share premium reserve which occurred during the FY under consideration came about as a result of take-over operations by means of share transfers. During the course of the FY, a total of 53,791,576 shares was issued, of which 38,216,038 at the nominal value preceding the increase...

  • Page 144
    ... Surf - Public offering Acquisition Connect Software Use of share premium reserve for free increase and EUR conversion of share capital Acquisition 20% CD Telecomunikace Acquisition 81,5% Guglielmo GmbH (Planet Interkom) Acquisition SurfEU Acquisition Springboard Internet Services Ltd - receivables...

  • Page 145
    Parent Company Financial Statements SHARE CAPITAL COMPOSITION (No. of shares in thousands) Nominal value of each share Category Ordinary shares Total EUR 0,50 12.31.2000 304,626,082 304,626,082 INCREASE 53,791,576 53,791,576 (DECREASE) 12.31.2001 358,417,658 358,417,658 B) RESERVES FOR RISKS AND ...

  • Page 146
    ... the dates shown net of advance payments made. The utilizations are indemnities paid to employees who resigned during the FY. D) LIABILITIES ANALYSIS OF PAYABLES BY DUE DATE 12.31.2001 Due to banks Other short-term financing Trade accounts payable Due to Group Companies Due to affiliated Companies...

  • Page 147
    ... are detailed as follows: FINANCIAL PAYABLES GROUP COMPANIES Tiscali International BV Liberty Surf Group SA Nets SA Tiscali Datacomm AG Tiscali Finance SA Excite Italia BV Quinary SpA Best Engineering SpA Informedia SpA Tiscali Telecomunicaciones SA Motorcity SpA Ideare SpA Energy Byte SpA Total 454...

  • Page 148
    ... for Internet services (domains) pertaining to FY 2002 and residual receivables from the sale of pre-paid phone cards. Deferred income for contributions pertains to the deferment to future FYs of EUR 6.2mn of contributions on investments made during FY 2001, since the contribution will be posted in...

  • Page 149
    ...(45,521) 1,096 1,096 (45,140) The reduction in memorandum accounts is mainly due to the writing off of the commitment for the issue of securities against the acquisition of World Online and Addcomm which effectively took place in 2001. On the other hand, new guarantees were given for the benefit of...

  • Page 150
    ... Internet traffic increased from 5,8bn in 2000 to 8,6bn in 2001. A positive effect was generated by the increase in revenues from ADSL, a service which came into being during the early part of the FY. B2B ("business to business") revenues were generated in the main from housing and hosting services...

  • Page 151
    ... Companies are detailed hereunder : ANALYSIS OF INTERCOMPANY SALES AND SERVICES COMPANY Tiscali International BV Liberty Surf Group SA Tiscali Reseaux SA (ex Tiscali France SA) Tiscali Deutschland GmbH (ex Nikoma) Nets SA Tiscali Datacomm AG Tiscali Finance SA CD Telekomunikace sro Excite Italia BV...

  • Page 152
    ... and administrative services to Group Companies as well as earnings on the differences in exchange rates, re-posted this year in the financial earnings line item. B) COSTS OF PRODUCTION PURCHASE OF RAW MATERIALS, SUPPLIES AND CONSUMABLES DESCRIPTION Purchase of sales goods Purchase of consumable...

  • Page 153
    ... PRODUCTION COSTS The following costs were incurred with respect to Group Companies: COMPANY Tiscali International BV Liberty Surf Group SA Excite Italia BV Quinary SpA Best Engineering SpA Informedia SpA Tiscali Telecomunicaciones SA Motorcity SpA Ideare SpA Energy Byte SpA Total 12.31.2001...

  • Page 154
    ... by Tiscali International BV refer in the main to the reversal of expenditure for services and personnel working in the offices of the Parent Company. The costs of Energy Byte, Excite Italia, Tiscali Telecomunicaciones and part (approximately EUR 0.3mn) of costs invoiced by Motorcity are advertising...

  • Page 155
    ... INCOME 31-12-2001 From securities listed under current assets which do not constitute participations Interest from other securities Income from dealings Total Income other than the above from third parties Bank interest receivable Interest receivable on other short-term credit Income from positive...

  • Page 156
    ... COMPANY Tiscali International BV Tiscali Finance SA Excite Italia BV Total 12.31.2001 8,850 5,306 372 14,528 ANALYSIS OF OTHER FINANCIAL INCOME 12.31.2001 Financial charges on Amounts due to banks for overdrafts Other short-term financing Trade accounts payable Other payables Negative exchange...

  • Page 157
    Parent Company Financial Statements E) EXTRAORDINARY INCOME AND CHARGES COMPOSITION OF EXTRAORDINARY INCOME DESCRIPTION Extraordinary gains Contingent assets and non-existent liabilities Total Gains on sales of fixed assets Gains on sales of investments Total 12.31.2001 5,747 5,747 2,849 2,849 ...

  • Page 158
    OTHER INFORMATION As required by current regulations, the tables below disclose the composition of the work force by job category. AVERAGE NUMBER OF EMPLOYEES AVERAGE 2001 Blue collar workers Office workers Middle management Executives Total 7 641 24 23 695 12.31.2001 7 670 28 26 731 AVERAGE 2000 4 ...

  • Page 159
    ...ANALYSIS To provide a comprehensive overview of the Parent Company's Financial ...current assets Total current assets NON-CURRENT ASSETS Fixed assets Intangible assets Investments and securities Other non current assets Total non-current assets TOTAL...44.79% 12.31.2001 % 12.31.2000 % CHANGE % CHANGE 151

  • Page 160
    ... LIABILITIES Loans Staff severance indemnity Reserves for risks and charges Total middle/long term liabilities Total liabilities SHAREHOLDERS' EQUITY Share capital Reserves Net profit (loss) for the year Total shareholders' equity TOTAL 12.31.2001 14,590 64,412 479,088 9,946 855 568,890 % 12.31...

  • Page 161
    Parent Company Financial Statements ANALYSIS OF PROFIT AND LOSS ACCOUNT PROFIT AND LOSS ACCOUNT Net sales Operating costs Purchases Services rendered Amortization/depreciations Labour costs Increase (decrease) in inventories Other running costs Operating result Financial income Financial charges ...

  • Page 162
    ...charges Trade accounts payable Other liabilities Accrued liabilities and deferred income Reserve for taxes payable Cash flows generated from operations CASH FLOWS FROM INVESTMENT ACTIVITY Net book value of assets sold Purchase of fixed assets Increases...12.31.2001 (1,041,208) 12.31.2000 (101,002) 154

  • Page 163
    ..., by means of the gathering of information from the Company officer responsible for organisational functions and meetings with the auditing company with the aim of a reciprocal exchange of relevant information. In reference to the suitability of the instructions given by the Parent Company to its...

  • Page 164
    ...by the Parent Company, was ceded during the first half of 2002 to Liberty Surf Telecom SA for the sum of Euro 5 million. In order to align the book value of the participation to the purchase price, Tiscali SpA has effected a write-down in the amount of Euro 124 million. As regards deals with related...

  • Page 165
    ..., pursuant to Article 2343 Civil Code, covering the transfer to Tiscali SpA share capital of participations in World On Line N.V. Report on the issue price of shares for the increase of company capital excluding the right of option pursuant to Article 2441 Civil Code and 158 Legislative Decree 58...

  • Page 166
    .../98 [Springboard Internet Services Ltd (purchased by World Online Holdings plc, controlled by Tiscali SpA), for the benefit of BT Holding Limited and Business Media International B.V.]. Report on the issue price of shares for increase of company capital excluding right of option pursuant to Article...

  • Page 167
    ...auditing company under consideration is fully equipped, both from an organisational and technical point of view, for the performance of a task of this size and complexity; the fee requested appears fair in relation to the operating volumes of Tiscali SpA; Deloitte & Touche SpA has acquired a certain...

  • Page 168
    ... should be made to the auditor's report issued by us on April 11, 2001. In our opinion, the consolidated financial statements present fairly the financial position of the Group as of December 31, 2001, and the results of its operations for the year then ended, and comply with the principles which...

  • Page 169
    ... the Company's management. Our responsability is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Auditing Standards recommended by CONSOB, the Italian Stock Exchange Commission. Those standards require that we plan and perform the...

  • Page 170

  • Page 171
    ... Internet Company Registered Headquarter Viale Trento, 39 - 09123 Cagliari VAT No. 02375280928 Share Capital fully paid up - EUR 179,208,829 REA 191784 Registered No. CA150434/97 Investor Relations Tiscali SpA - Viale Trento, 39 - 09123 Cagliari Ph. +39 070 46011 - Fax +39 070 4601296 Tiscali SpA...

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