Tiscali 2008 Annual Report Download - page 33

Risks associated with dealings with employees and suppliers
Both in Italy and the UK, Group employees are protected by
various laws and/or collective labour agreements which ensure
them, via local and national delegations, the right to be
consulted with regard to specific matters, including therein
downsizing or the closure of departments and the reduction
of the workforce. These laws and/or collective labour agreements
applicable to the Group and to its suppliers could influence its
flexibility when strategically redefining and/or repositioning its
activities. Tiscali’s ability and that of its suppliers to make any
staff reductions or take other measures, temporary or otherwise,
for the interruption of the employment relationship, is
conditioned by governmental authorizations and by the consent
of the trade unions. Trade union protests by workers could
negatively influence the Company’s activities.
Risks associated with the turnover of management and other human
resources with key roles
The Company’s future depends greatly on the ability of its
executives to handle it effectively. The loss of the services of an
executive director, a first level manager or other key resources
without adequate replacement, as well as the inability to attract
and maintain new and qualified resources, could therefore have
negative effects on the prospects, activities and economic and
financial results of the Group.
REPORT ON OPERATIONS
32
establishing long-term financial equilibrium, the drawing out of
the negotiations could negatively influence the Company’s
activities. For further details, reference should be made to the
section
Assessment of the business as a going-concern and
business outlook
and prospects on page 39.
Risks associated with fluctuations in interest and Exchange rates
The Tiscali Group, which operates both in Italy and in the UK, is
naturally exposed to market risks associated with fluctuations in
exchange and interest rates. The exposure to exchange risks is
mainly linked to the different geographic distribution of the
commercial activities, which lead it to have flows denominated in
various currencies (Euro and GB Sterling).
The Tiscali Group uses various forms of financing with the aim
of covering the requirements of its activities. Changes in the levels
of the interest rates may lead to increases or reductions in the
cost of the loans.
On a consistent basis with its risk management policies, the Tiscali
Group tries to deal with the risks relating to exchange rate and
interest rate fluctuations by means of recourse to financial hedging
instruments.
Despite these financial hedging transactions, sudden fluctuations
in exchange and interest rates could have a negative impact on the
Group’s economic and financial results.
CONSOLIDATED INCOME STATEMENT 31.12.2008 31.12.2007 CHANGE CHANGE %
EUR (Mln)
Revenues 983.6 883.1 100.5 11.4%
Other income 12.4 5.2 7.3 139.7%
Purchase of materials and outsourced services 710.5 633.3 77.2 12.2%
Payroll and related costs 91.1 90.0 1.1 1.3%
Other operating costs (2.5) 6.3 (8.8) -140.0%
Gross operating result (adjusted EBITDA) 197.0 158.7 38.2 24.1%
Writedowns of receivables from customers 34.3 27.1 7.2 26.5%
Stock option plan cost 7.6 11.7 (4.1) -35.0%
Gross operating result (EBITDA) 155.1 119.9 35.2 29.4%
Restructuring costs, provisions for risk reserves and writedowns 78.8 39.7 39.2 98.7%
Amortisation/depreciation 176.1 155.2 21.0 13.5%
Operating result (99.9) (74.9) (25.0) 33.3%
Share of results of equity investments valued using the equity method (0.1) - (0.1) 0.0%
Net financial income (charges) (96.5) (72.6) (23.9) 32.9%
Other net financial income (charges) (17.9) 17.9 -100.0%
Pre-tax result (196.5) (165.5) (31.0) 18.7%
Income taxes (64.9) 17.5 (82.4) -470.2%
Net result from operating activities (on-going) (261.4) (147.9) (113.4) 76.7%
Result from assets disposed of and/or destined to be disposed of (9.7) 72.6 (82.4) -113.4%
Net result (271.1) (75.3) (195.8) 259.9%
Minority interests (28.4) (10) (18.3) 183%
Group Net Result (242.7) (65.3) (177.4) 272%
ECONOMIC POSITION