Tiscali 2007 Annual Report Download - page 45

77.9 million), but stable in terms of a percentage of revenues
(11%), despite the acquisition of Pipex in the UK; this is a
good indicator of the satisfactory stage of completion of the
process for achieving the afore-mentioned cost synergies.
Marketing costs, including sales and distribution expenses,
amounting to EUR 89.2 million were also higher in absolute
value with respect to those in the previous year (EUR 75.9
million) and essentially stable in terms of a percentage of rev-
enues.
Other indirect operating costs in 2007 totalled EUR 75.5 mil-
lion, showing an increase over the EUR 51.5 million of 2006,
but with an impact on revenues remaining constant (8%) and
attenuating dynamics in absolute terms over the period, orig-
inating primarily from customer aftersales support costs which
naturally reflect the customer base trend, and from opera-
tions consultancy incurred in 2007.
To illustrate the matter more clearly, here are the details of
the operating costs/revenues making up the Gross Operating
Result, as shown in the income statement table. In particu-
lar, the reconciliation between “purchase of materials and
outsourced services” and “other operating costs” with the
indirect operating costs described in this paragraph is point-
ed out.
Operating result
The operating result during 2007 presented a negative bal-
ance of EUR 80.45 million. Net of restructuring costs partly
linked to the acquisition of Pipex in the UK, which were fully
expensed during the year, amounting to around EUR 40.1 mil-
lion (including about EUR 23.3 million due to Pipex operating
costs regarded as non-recurrent in the future, thanks to the
rationalization and restructuring operation), there would have
been an operating loss of EUR 40.3 million. The figure thus
adjusted improved with respect to the adjusted gross operat-
ing result in the previous year (a EUR 45.1 million loss). The
calculation is illustrated in the following table.
Overall Restructuring costs, provisions to risk reserves and other
writedowns in 2007 totalled EUR 40.1 million (EUR 45.1 million
in the same period of 2006). 2007 was affected by the restruc-
turing costs deriving from the Pipex integration plan in the UK,
amounting to around EUR 23.3 million and other charges, totalling
EUR 16.8 million. Writedowns on receivables amounted during
2007 to EUR 27.3 million, essentially stable in terms of their per-
centage of revenues when compared with 2006.
Furthermore, the 2007 operating result was influenced by the
charges relating to the fair-value assigned to the stock option
plans of Tiscali S.p.A. and Tiscali UK, with an overall amount
of EUR 9.9 million plus further benefits for the managers of
the Group, amounting to EUR 1.8 million.
Amortisation and depreciation for 2007 amounted to EUR
162.7 million, up with respect to the figure of EUR 130.1 mil-
lion in 2006. The balance, as already indicated, was influenced
by the significant investments made during the period for the
development of the unbundling network and the offer of ADSL
services (modem and customer activation costs).
Operating result by geographic area
It should be mentioned that the data provided relates to the
individual operations units, and therefore includes intra-group
elements.
Tiscali Italia S.p.A. closed the 2007 accounting period with
a gross operating result, net of infraGroup costs inherent in
particular to information technology provided by Tiscali Ser-
vices S.r.l., totalling EUR 50.5 million (18% of revenues), up
by 67% when compared with the EUR 30.1 million in 2006
(14% of revenues). The significant increase in the profitabil-
ity of the Italian subsidiary is linked to a rise in the gross mar-
gin which passed from 52% in 2006 to 58% in 2007, with
indirect costs (and in particular marketing costs) up by 2 per-
centage points on revenues. This bears witness to the suc-
cess of the migration of ADSL users to the direct network infra-
structure and the marketing campaigns which commercially
boosted the dual play products which offer greater ARPU.
The operating result of the Italian subsidiary presented a neg-
REPORT ON OPERATIONS
44
31.12.2007 31.12.2006
EUR (000)
Revenues 910.969 678.481
Other revenues 5.652 3.685
Purchase of materials and services, of which: 651.144 498.389
- marketing 89.172 75.902
- indirect costs (*) 72.787 47.853
- other direct costs 489.186 374.634
Staff costs 97.166 77.883
Other operating costs, of which: 6.885 5.472
- other indirect costs (*) 2.673 3.608
- other operating costs 4.212 1.864
Gross operating result 161.426 100.422
(*) Indirect cost total 75.460 51.461
CONSOLIDATED INCOME STATEMENT 2007 2006
EUR (OOO)
Operating result (80,448) (12,852)
Restructuring costs 40,101 45,013
Other atypical income (VNL dilution effect) - (77,229)
Adjusted operating result (40,347) (45,068)