Board of Directors approves the draft financial statements for 2001

03/25/2002 - 00:00 PM

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Board of Directors approves the draft financial statements for 2001 Extraordinary charges for plan for the reorganization of Group activities affected the financial results. The mission of multiplatform media company enhanced

SEAT PAGINE GIALLE GROUP

SALES AND SERVICE REVENUES: EURO 1,957 MILLION (+46.9%, +2.6% USING THE SAME CONSOLIDATION AREA)
GROSS OPERATING PROFIT: EURO 444 MILLION (+22,9%)
VALUATION ADJUSTMENTS AND NET EXTRAORDINARY EXPENSE: EURO 378 MILLION
NET RESULT: EURO -313 MILLION
NET DEBT: EURO 922 MILLION

DIRECTORIES
SALES AND SERVICE REVENUES: EURO 1,161 MILLION (+4.4 % on pro forma data)
GROSS OPERATING PROFIT ON THE RISE: 50% OF REVENUES
ADVERTISERS: 759.000 (+3,1%)

THE INTERNET
SALES AND SERVICE REVENUES: EURO 145 MILLION (-1,2%)
TIN.IT CLOSE TO BREAKEVEN POINT
VIRGILIO IS THE LEADER CON 3.9 BILLION PAGEVIEWS (+ 77.3%)

OFFICE PRODUCTS AND SERVICES
SALES AND SERVICE REVENUES: EURO 257 MILLION (+12,4%)
NEW MISSION: SERVICES AND PRODUCTS FOR SMEs

TELEVISION
SALES AND SERVICE REVENUES: EURO 85.5 MILLION (+4.5%)
NEW LA7 PROGRAMME SCHEDULE LAUNCHED

The Board of Directors of Seat Pagine Gialle (Telecom Italia Group) met in Milan today, under the chairmanship of Enrico Bondi, and approved the draft financial statements for the year ended 31 December 2001, as proposed by Managing Director Paolo Dal Pino. The document will be presented to the General Shareholders’ Meeting for approval.

The financial year 2001 of the Seat Pagine Gialle Group

The financial statements for 2001 show growing revenues and gross operating profit but also a net loss due to extraordinary expense. The year was characterized by an economic slowdown, a slower-than-expected development of the Internet market, and the crisis in advertising, a sector that generates the largest amount of turnover for the Seat Pagine Gialle Group

Against this background, in 2001 the Directories area grew by 4.4% and is and is expected to continue its anti-cyclical trend in 2002, achieving higher revenues and profits. This may be achieved also thanks to constant product innovation and effective sales policies.

The year 2001 was also characterized by a marked reorganization and strategic reorientation of the Internet business and of the television business that affected the results for the year.
Streamlining policies are expected to yield a noteworthy increase in profitability for the Internet business as early as 2002, and a lower breakeven point for the TV business.

In the current financial year, Seat Pagine Gialle expects to improve its operating profit significantly as compared to 2001 and to reduce its consolidated financial debt through better management and careful investment policies, based on the “multiplatform media company” model.

Group consolidated results

Sales and service revenues reached euro 1,957 million compared to 1,333 million in the previous year, for a 46.9% increase. This growth is mostly due to the larger consolidation area that, for the first time which included new shareholdings such as Consodata, Thomson Directories, Telegate, HMC (La7) and the Tin.it division (for 12 months). Based on a uniform consolidation area, the organic increase in revenues was 2.6%.

The gross operating profit was euro 444 million, much higher than the previous year’s figure of euro 361 million (+22.9%). This improvement is a result of the general activity of cost rationalisation and especially of the higher profitability of the Directories Business (equal to 50.4% of revenues, compared to 48% in the pro forma financial statements for 2000) and of a lower gross operating loss in the Internet business, which dropped from euro 110 million to euro 61 million.

Operating income before non-operating amortization and depreciation was euro 219 million. The euro 232 million drop compared with the previous year is due to the enlargement of the consolidation perimeter. Instead, the increase in amortization of goodwill – a result of acquisitions made in this period – explains the drop in Operating income, which came to euro 31 million, as compared to euro 1 million in pro forma results for 2000 and euro 142 million in the previous year.

Valuation adjustments of financial activities and net extraordinary expense totaled euro 378 million. This may be attributed both to year losses by companies in which the group has a stake, and to the work done to streamline and reorganize operations in order to improve efficiency and focus more on activities by restructuring, divesting and closing certain businesses In particular, net extraordinary expense of euro 122 million were entered in the data concerning the Internet area, based on the rationalization plan underway.

The Group´s net result for 2001 is negative by euro 313 million, compared to euro 1 million the previous year.

Net financial debt at the end of 2001 reached euro 922 million compared to euro 461 million in 2000. Approximately one-forth of the financial resources used during the period can be attributed to management and industrial investments, whereas the remaining amount went toward enlargement of the consolidation area, acquisition of shareholding and financial investments.

Business areas

The results of the Group’s four main business areas are listed below.
Directories area revenues increased to euro 1,161 million (+4,4% compared to pro forma data). The number of advertisers increased significantly from 736,000 to 759,000 (+3.1%), and in Italy from 647,000 to 670,000 (+3.6%). Profitability increased both in the UK and in Italy, which were characterized by a marked improvement in the profit of multimedia products such as Pagine Gialle on line. Among new products, the new Pagine Bianche directory is scheduled to be launched by the end of this year. This directory will replace the current Alphabetical Directory of Telecom Italia subscribers and will include the telephone numbers of subscribers to the services of all the main telephone operators on the market.

In the Internet area – where revenues amounted to euro 145 million (-1.2%) – the crisis of the advertising market hit the portal business and the Group immediately took steps to streamline activities. Virgilio consolidated its leadership in Italy and doubled the number of pageviews from 2.2 billion in 2000 to 3.9 billion in 2001, while unique users increased from 4.9 to 6.4 million, with a reach of 61.3%.
In the ISP area (tin.it), active users in the past 45 days totaled 1,800,000. . Thanks to greater efficiency and a positive sales trend in ADSL internet connection services (133,000 at year end, compared to approximately 7,000 last year), gross operating profit of ISP services almost reached the breakeven point (with a loss of euro 3).

In the office products and services business, which posted a turnover of euro 257 million (+12.4%), Buffetti’s strategic repositioning plan was launched, with the goal of making this company a “full service provider” for Italian SMEs by changing the product mix.

La7 has also undergone strategic repositioning, which largely affected extraordinary expense. On March 18, the TV channel launched a new program schedule. Revenues in the TV business, which came to euro 85.5 million, increased by a total of 4.5% compared with the previous year, thanks to the contribution of MTV Italia (consolidated as of May 2001), which now broadcasts on the frequencies of the former TMC2.

The financial statements of parent company Seat PG S.p.A. ended with euro 1,090 million revenues (up 5%), an operating profit of euro 285 million (+67%) and after value adjustments for extraordinary and financial expense, it shows a loss of euro 260 million. Net negative financial results are euro 291 million.


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The Board of Directors accepted the resignations of Paolo Ainio, Gilberto Benetton and Pierpaolo Cotone and thanked them for their work. It appointed Carlo Bertazzo, Aldo Cappuccio and Enrico Parazzini to replace them. The General Shareholders´ Meeting – that will be called on April 30 and, for organisation reasons, on May 2 (instead than on 3 May as it was previously announced), first call and second call, respectively, will thus appoint the three new board members and will appoint the auditing firm for the 2002-2004 period.

The Board of Directors also approved the launch of the phase to implement the project announced last December to integrate Seat realty to augment their value. Based on guidelines, this project is scheduled to be implemented through the transfer of these assets to a newly incorporated company – following reorganization for the purposes of this operation – and the subsequent inclusion of these assets in a closed-end real estate trust.

The tables of the consolidated statement of income and balance sheet are attached.