Tiscali 2007 Annual Report Download - page 84

of borrowing.
Indeed, in 2006 debt was made up primarily of a financial
instrument convertible into shares (bond issue), while in 2007
debt was made up entirely of bank instruments entailing high-
er credit spreads, in the framework of a general increase in
market rates.
In detail, the loan with Silver Point, repaid on 23 February
2007, involved rates considerably higher with respect to the
new loan with Banca Intesa SanPaolo.
In conclusion, the sale and lease back transaction on the Sa
Illetta property led to an increase in the absolute value of the
debt by around EUR 30.5 million.
14.2 Other net financial Income (Charges)
The item Other net financial income and charges during the peri-
od under review, totalling EUR 17.8 million, includes the penal-
ties linked to the transactions with Silver Point (EUR 13.3 mil-
lion, essentially relating to the early repayment of the loan) and
with Banca Intesa SanPaolo (EUR 4.5 million relating to the penal-
ty for the late collection on the sale of the Dutch activities). The
corresponding balance in 2006, totalling EUR 21.9 million, also
included penalties linked to the transactions with Silver Point.
EUR (000) 31.12.2007 31.12.2006
Other net financial income (charges) (17,881) (21,985)
(17,881) (21,985)
15. Income taxes
EUR (000) 31.12.2007 31.12.2006
Deferred taxes 18,195 7,811
Current taxes (890) (1,960)
Net taxes for the year 17,305 5,851
In December 2007, a tax assets allocation equalling EUR 18.2
million was carried out on the Dutch fiscal unit. That alloca-
tion amounts to the tax burden estimated for the years 2008-
2010, calculated in relation to the profits of the fiscal unit
assessed in the business plan, and whose overall value equalled
EUR 34.3 million.
Current taxes relate to IRAP (Regional tax on productive activ-
ities) of Italian subsidiaries.
Deferred tax assets
At 31 December 2007, the total deferred tax assets due to pre-
paid tax were EUR 106.6 million.
EUR (000) 31.12.2007 31.12.2006
Deferred tax assets 106,634 144,706
Total 106,634 144,706
Deferred tax assets recorded in the financial statements mainly
relate to tax losses brought forward by Tiscali Group companies. As
envisaged by the applicable accounting standards, these repaid
value of the Group’s equity interests in that company. In fact, fol-
lowing the VNL business combination concluded via a 100% share
swap and increase in shareholders’ equity in Tiscali UK, the Group
achieved a net increase in equity value even if its control percent-
age was reduced. This increase, in accordance with reference
accounting standards, is reflected under the relevant item of the
income statement, coherent with the "parent company approach"
of the current versions of IFRS 3 and IAS 27.
.
14. Financial Income (Charges)
14.1 Net financial Income (Charges)
A breakdown of net financial income (charges) for the year,
presenting a negative balance of EUR 72.8 million, is provid-
ed below.
EUR (000) 31.12.2007 31.12.2006
Financial income
Interest on bank deposits 2,832 673
Interest earned 1,598 268
Other 13 383
4,443 1,323
Financial charges
Interest on bonds - 8,904
Interest and other charges due to banks 77,245 22,160
77,245 31,064
Net financial income (Charges) (72,802) (29,741)
The item Financial income mainly includes the fair value valua-
tion of the IRS recorded by Tiscali International BV, for a total of
around EUR 1.3 million as well as other interest earned from
loans (of which, first of all, EUR 1.1 million from the Barclays
loan and EUR 0.6 million from the Banca Intesa JP Morgan loan).
The item Financial charges totalling EUR 77.2 million includes
interest expense charged by Silver Point for EUR 6.7 million,
interest charged by Banca Intesa SanPaolo for EUR 16.1 mil-
lion, interest recorded by the UK subsidiary on the Barclays
loan for EUR 4.8 million and EUR 29 million in interest on the
new Banca Intesa SanPaolo loan.
Still for the UK subsidiary EUR 7.8 million financial charges
were recorded, originating from the income statement inclu-
sion of amounts due to the former shareholders of VNL, relat-
ing to the current value of previous losses concerning such
company, as well as lease interests for EUR 1.1 million and
trading payable interests for EUR 0.9 million.
Furthermore, there are interests recorded by the Italian sub-
sidiary amounting to EUR 6.8 million, minor amounts record-
ed by other Group companies for EUR 1.45 million, and EUR
1.9 million in interest on the amounts due to shareholders.
The balance for 2007 is higher than that in the same period
last year due to the different composition and the related cost
CONSOLIDATED FINANCIAL STATEMENTS AND EXPLANATORY NOTES AT 31 DECEMBER 2007
83