Palazzo Mezzanotte - Stock Exchange

Transcription

1 Palazzo Mezzanotte - Stock Exchange

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4 Fiera Milano - Piazzale Giulio Cesare

5 FIERA MILANO Financial Statements at 30 June 2002 Fiera Milano Spa P.le Giulio Cesare Milano Share capital: Euro fully paid Milan Company Register R.E.A Fiscal code + VAT number

6 CORPORATE BODIES AND OFFICERS BOARD OF DIRECTORS President and Chief executive officer Flavio Cattaneo Deputy Vice President Piergiacomo Ferrari Vice President Giuseppe Zola Directors Marco Accornero Simonpaolo Buongiardino Roberto Conforti Mauro Muzzolon Michele Perini Carlo Valli BOARD OF STATUTORY AUDITORS Chairman Antonio Franchitti Statutory Auditors Pietro Pilello Paolo Rossi Substitute Auditors Pietro Pensato Pierfrancesco Arancio INDEPENDENT AUDITORS Deloitte & Touche Spa 6

7 Message from the President and Chief Executive Officer The results for the second year of activity strengthen our optimism regarding the future of Fiera Milano Spa. We started out in October 2000, a young company, but enriched with the experience deriving from the 80 year history of the Fiera di Milano. We have just closed a year of great commitment but also of enormous satisfaction. We had to meet a double challenge: to realise, in the shortest time possible whilst in the widest manner, the program of radical change which was announced when Fiera Milano was set up; we had to implement those organisational and management initiatives without however interfering with the company s business, which was indeed required to realise further progress in the level of customer satisfaction and operating profitability. We may now proudly state that Fiera Milano Spa achieved both these objectives. Fiera Milano Spa no longer only rents out space, but offers its clientele the whole range of services connected to fair and exhibition activity. A result which required our courage, as well as that of our shareholders and of the members of our board of directors, together with a willing and confident approach. My thanks to them. The statements which we present here show, through the clarity of numbers, that the change was not only opportune but also heralded excellent results. We have increased the traditional profitability margins. we have initiated new and valid business segments and we have decided to develop others in the very short term. The results achieved last year strengthen our optimism regarding the future and our confidence in the face of the further challenges which await us is a year which will be recorded in the Fiera di Milano s history, since at my proposal the board of directors approved the beginning of the procedure to list the company on the Milan Stock Exchange. An ambitious challenge which we hope will be concluded by the end of this year. A point of arrival? No, a further point of departure. We must think of strengthening and establishing a presence of Fiera di Milano abroad, together with further increasing business areas, not only managed by Fiera di Milano Spa alone, but by a cohesive group of companies belonging to or which will belong to same, which will cover the whole chain of values of trade fair business. We will grow further, with the enthusiasm and energy which up to now have characterised us and we will further strengthen our leadership on the local and international market. We naturally could not have achieved anything without the constant personal commitment, as well as the shared corporate objectives, by all the Fiera di Milano Spa s management and staff, to whom I extend my sincere appreciation. Flavio Cattaneo

8 La ripresa siamo noi. Fiera Milano. Dal 1920 utile per tutti. FIERA MILANO Il Made in Italy decolla da qui. Fiera Milano. Dal 1920 utile per tutti. FIERA MILANO

9 Index Notice Convening Ordinary Shareholders Meeting FIERA MILANO SPA FINANCIAL STATEMENTS Report on Operations Introduction pag. 15 Summary of results pag. 19 General economic situation and trends in the trade fair market General economic situation pag. 21 Trends in the trade fair market pag. 21 Trends in the business pag. 25 Subsidiary and associated companies pag. 32 Edizioni Fiera Milano Spa pag. 32 Fiera Food System Spa pag. 32 ExpoPage Spa pag. 33 Significant post-balance sheet events pag. 34 Forecast development of the business pag. 35 Relationships with related parties pag. 36 Proposals for the General Meeting pag. 37 Statutory Financial Statements at 30 June 2002 Balance sheet pag. 38 Profit and loss account pag. 42 Notes to the accounts pag. 45 Appendix 1. List of shareholdings in subsidiary/associated companies pag. 74 Appendix 2. Statement of financial situation pag. 74 Report of the Board of Statutory Auditors pag. 75 Report of the Independent Auditors pag. 83 CONSOLIDATED FINANCIAL STATEMENTS Report on Operations pag. 89 Consolidated Financial Statements at 30 June 2002 Balance sheet pag. 90 Profit and loss account pag. 94 Notes to the accounts pag. 97 Appendix 1.: pag. 128 A) List of companies included in the consolidation performed using the full consolidation method B) List of shareholdings valued using the net equity method C) List of shareholdings valued at cost Appendix 2. Statement of financial situation pag. 128 Report of the Board of Statutory Auditors pag. 129 Report of the Independent Auditors pag

10 Call of Ordinary General Meeting Shareholders called to attend the Ordinary General Meeting in Milan, Piazzale Giulio Cesare, Porta Giulio Cesare, at the registered offices, on 3 September 2002 at 3pm on first call and, if necessary, on second call on 4 September 2002 at 3pm in the same location, to discuss and resolve on the following Agenda: 1. Resolutions pursuant to article 2364, sub-section 1, of the Civil Code and following; 2. Any other business. It is recalled that, pursuant to article 14.1 of the Articles of Association, those shareholders who have lodged their shares at the registered office at least five days before the meeting may attend. Milan, 26 July 2002 The Board of Directors (Notice published in the Official Gazette of the Italian Republic, Part II number 184 of 7 August 2002) 10

11 Resolutions adopted by the ordinary general meeting held on 3 September 2002 The Shareholders Meeting held at first call on 3 September 2002, having listened to the reports of the Board of Directors and the Board of Statutory Auditors resolves: 1. to approve the financial statements at 30 June 2002 and the Report on operations; 2. to apportion the Net profit of the year of 8,505, as follows: Net profit for the period 8,505, % to the Legal Reserve 425, for each of the 24,000,000 shares in circulation 7,920, Profit carried forward 160, to constitute a Reserve for accelerated depreciation of 1,210, by means of the utilisation of the Profits brought forward reserve for the same amount. 11

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13 Fiera Milano Spa Financial Statements at 30 June 2002

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15 Report on operations Shareholders, Fiera Milano SpA is the company that manages the Trade Fair district of Milan, from 1 October 2000 onwards, although its business represents a continuation of that which had been managed by the Fondazione Ente Autonomo Fiera Internazionale di Milano (henceforth Fondazione Fiera Milano or Foundation ) since the 1920s. During the course of the year 2000, Fondazione Fiera Milano adopted a new set of Articles of Association with which it maintained ownership of the trade fair district but entrusted to a newly constituted company, Fiera Milano SpA, the management of the exhibition spaces and the supply of services connected with the holding of trade fairs and shows. On average 70 fairs and shows are held annually in the Milan trade fair district, with the participation of approximately 30,000 exhibitors and 4,500,000 visitors. The number of fairs and shows varies from one year to the next on the basis of the frequency of the shows themselves, which may be held six monthly, annually or once every few years. Fiera Milano boasts one of the widest portfolios of fairs and shows in Europe, given that practically all sectors of marketable goods are represented. Numerous shows have an international character and represent, in terms of occupied space, approximately 45% of all international shows that are held in Italy. Fiera Milano makes available to event Organisers fitted-out space in the District and measures the related revenues in terms of square metres of display space sold at a unitary cost established with each Organiser. It also supplies additional services to the three categories of customers: Organisers, Exhibitors and Visitors. In the year to 30 June 2002 revenues of million and net profit of 8.5 million were achieved. 1.6 million net square metres of display space were sold. Up until 17 December 2001 Fiera Milano Spa managed the company unit for the carrying out of trade fair business on the basis of a contract for the leasing of the branch of business stipulated with Fondazione Fiera Milano on 29 September The leasing of the branch of business had been adopted as a means of speeding up the start of operational activities of Fiera Milano SpA, since the Parties had declared their intent to implement such actions as were necessary to definitively complete the transfer of the ownership of the branch of business to the lessee, under whatever legal form permissible and according to conditions, including economic issues, which the Parties were to identify. In line with the arrangement described above, Fondazione Fiera Milano and Fiera Milano Spa have agreed to put in place all necessary actions to achieve the definitive transfer of ownership of the trade fair company, as part of a strategy aimed at reinforcing the presence of Fiera Milano Spa in this specific sector in a stable and long-term way. As such Fondazione Fiera Milano and Fiera Milano Spa have, in the form of a conferment, identified the transaction that is most appropriate for the transfer of ownership and, for this purpose, Fondazione Fiera Milano has activated the assessment procedure as set out in article 2343 of the Civil Code. 15

16 The surveyor appointed by the Court of Milan has produced the assessment report which has identified a net conferment value of 26,855,000, made up thus: Conferment value Net fixed assets 4,890,846 Goodwill 42,629,902 Total assets 47,520,748 Financial debt 20,665,748 Net conferment value 26,855,000 To accomplish the conferment under discussion, the Extraordinary Meeting of 17 December 2001 approved the increase in share capital, with the exclusion of option rights in accordance with articles 2440 and 2441 of the Civil Code, from 10,000,000 to 24,000,000, by means of the issue of 140,000 new shares, each of 100 nominal value, with an overall share premium of 12,855,000. On the same date the deed of conferment was stipulated, which ratified the definitive transfer of ownership of the trade fair company. Following the conferment, Fiera Milano Spa and Fondazione Fiera Milano have also regulated the use of the trade-mark Fiera Milano, entering into an appropriate licence contract. The duration of said contract is for ten years, and at its expiry it is expected to renew automatically for the same period of time. A symbolic consideration of 1 Euro per year has been fixed for the licence, and Fiera Milano Spa has the right to use the trade-mark both in Italy and in the foreign countries where it is registered. The use of the areas constituting the Milan Trade Fair District remains governed by the property leasing contract, stipulated with Fondazione Fiera Milano on 29 September The leasing contract expires on 30 September 2009 and will be automatically renewed for nine year periods, provided there is no cancellation as provided for by the contractual terms. The possibility of receding from the contract early is excluded for both Parties. The annual rental payment for the property complex, as initially fixed, is equal to 29.4 million, revalued annually using 100% of the ISTAT consumer price index for working families from the previous year. The contract furthermore provides for procedures for handling new investments. In line with market practices and regulations currently in force, Fondazione Fiera Milano and Fiera Milano Spa furthermore agreed last July to the payment on the part of the lessee of a cautionary deposit equal to 7.6 million, corresponding to the current equivalent of one quarter s rent, to produce interest calculated using the legal rate in force. This amount also will be updated annually, as provided for in the case of the base rental payments. Now that the phase involving conferment of the branch of business previously the subject of the rental contract has been completed, Fiera Milano Spa in agreement with its shareholder Fondazione Fiera Milano has at the beginning of the current year 2002 begun detailed investigations into the initiation of a project to open share capital to third parties, to be carried out with the collaboration of experts to examine and evaluate all aspects of the operation. In its meeting held on 25 February 2002 the Board of Directors deliberated the initiation of the process to open the share capital of the company to third parties as well as the process to obtain a quotation, the objective being to be listed by the end of the current year, subject to the attainment of the necessary authorisations from the competent authorities and provided there is compatibility with conditions in the financial markets. Euro 16

17 Indeed the continuation of the process of the growth of the Company is partially linked with the possibility of obtaining adequate access to the capital markets and to new financial resources in order to support corporate strategies. The objective of the Company is to aim for a quotation in the STAR segment (Segmento Titoli ad Alti Requisti, High Requirement Securities Segment) of the Telematic Equity Market, organised and managed by Borsa Italiana S.p.A., for which a flotation of at least 35% of the share capital is required. The consultants that assisted Fiera Milano Spa in the process of quotation have been identified as: Interbanca Spa, to which the role of Advisor has been entrusted; UniCredit Banca Mobiliare Spa and Société Générale, to which the roles of Joint Global Coordinator and Joint Bookrunner have been assigned, as well as that of Co-Sponsor, in conformity with the provisions contained in the regulations issued by Borsa Italiana S.p.A. (to Unicredit Banca Mobiliare Spa has also been entrusted the role of organisation responsible for placing of the IPO). The Company is furthermore supported by legal and tax consultants (Studio Grimaldi-Clifford-Chance and Studio Vitali & Associati) as well as by other consultants who are required in order to tackle the specialist themes that the project of obtaining a quotation involves. 17

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19 Summary of results The year ending 30 June 2002 has been one of strong growth for Fiera Milano Spa, producing good results which show significant improvement on those of the prior year, even when these results are extrapolated over a full twelve month period. Gratifying results have been obtained both as regards revenues, with a significant development of revenue from services, and regarding costs, thanks to a rationalisation of processes and the containment of expenditure across the company. The most significant numbers for the year to 30 June 2002 are shown in the following table: Summary of principal data Actual Pro-forma Actual (9 months) (12 months) Net square metres of exhibition space 1,318,929 1,579,847 1,648,465 Reclassified profit and loss account millions % millions % millions % Revenues from sales and services Direct costs Gross margin Structural costs Rental and leasing payments Sundry income GROSS OPERATING MARGIN (EBITDA) Depreciation, amortisation and other provisions Operating Profit (EBIT) Financial income Adjustments to the value of financial assets Extraordinary income/(costs) Profit before taxation Taxation Net profit Cash flow (net profit+depreciation) Investment 4.1 n.d Net financial position as at 30 June Employees as at 30 June

20 The year ending 30 June 2002 is the first full trading year, as the prior period was nine months long only. In order to be able to make a proper comparison on a consistent basis, a pro-forma profit and loss account column has been calculated, shown in the above table, estimated over a full twelve month period. This profit and loss account shows a smaller gross operating margin compared to that for the 9 month period, since the structural costs in July and August are not covered by significant revenues and margins, due to an absence in this period of trade fairs and shows. The pro-forma profit and loss account has been calculated principally by making reference, for revenues, direct costs and structural costs, to the management accounts for the July-September 2000 quarter obtained from Fondazione Fiera Milano. In particular, with reference to revenues and direct costs of shows for which the Foundation is the organiser, the necessary adjustments have been applied to the figures in order to express them in such a way that they reflect the different role of Fiera Milano Spa in its capacity as manager of the trade fair district and as a supplier of services. The positive performance recorded in the year to 30 June 2002 should be seen in the context of a trade fair market that for many shows has shown considerable dynamism with sizeable increases compared to previous editions, save for some difficulties encountered following the tragic events of 11 September which, however, did not have an effect on the performance for the year. 20

21 General economic situation and trends in the trade fair market General economic situation Signs of recovery of the Italian economy are still weak and growth prospects seem reduced in the short term. This slow pace is in line with the consensus estimate of the most important national and international economic forecasting bodies: much reduced growth in the first part of 2002, followed by a modest acceleration in the second half of the year. The principal economic research institutes forecast average GDP growth during the year of approximately 1%, featuring fast growth following a weak first half, compared to an average annual growth figure of 1.8% in The main short term indicators showed a progressive improvement during the first half of 2002, and the more favourable data that is expected ought to start being confirmed as the economic situation evolves. As regards domestic demand, the gradual recovery phase will relate in particular to fixed investments, for which modest growth is predicted that is considerably below the level recorded last year (+2.4%). At the same time consumer demand is expected to be characterised by a situation of slowdown, confirming the phase of general weakness in domestic demand that persisted throughout Producer and consumer prices are expected to remain substantially under control, although consumer prices will continue to come under a limited amount of strain in the first half of the year linked to the effects of the changeover to the euro and the prolonged weakness of the single currency. As for inflation, a slow decline towards the stability threshold of 2% is expected during the course of Average price increases estimated for this year ought to be around the 2.2%-2.3% level for consumer prices and 0.5% for producer prices. The trends in the latter are, however, strongly conditioned by the market price for oil and the dollar exchange rate. Finally, to deal with interest rates, the bank rate is expected to remain basically unchanged during the second part of Interest rate changes by the Central European Bank do not seem likely for the next few months; at the present time the most likely scenario sees interest rates remaining unchanged at least until the end of Trends in the trade fair market In 2001 the Italian trade fair market recorded a slight fall in overall volumes compared to the prior year, penalised by a cyclical pattern which favours even-numbered years, in which biennial trade fairs and shows tend to fall. Against an increase in the number of shows, there were slight falls in the principal indicators: the area rented have declined (-2.3%), as have the numbers of direct exhibitors (-2.5%) and the number of direct foreign exhibitors (-4.4%), whereas the total number of visitors has increased slightly (+0.9%) notwithstanding a reduction in the foreign presence (-3.8%), as is shown in the following table: ITALY: TOTAL INTERNATIONAL TRADE FAIRS AND SHOWS 2001 Change % Number of shows 158 Surface area rented 4,017, % Direct exhibitors 82, % Direct foreign exhibitors 17, % Total visitors 10,921, % Foreign visitors 715, % Source: Osservatorio Fiere CERMES Bocconi With reference solely to shows held annually, slight growth has been recorded: the area rented grew by 2.1%, the number of direct exhibitors increased by 0.3%. Only the number of visitors fell by 0.3%, whereas the level of internationalisation grew, as regards both the number of exhibitors (+1.2%) and the number of visitors (+4.8%): 21

22 ITALY: TOTAL ANNUALLY-HELD INTERNATIONAL TRADE FAIRS AND SHOWS Number of shows Change % Surface area rented ,1% Direct exhibitors ,3% Direct foreign exhibitors ,2% Total visitors ,3% Foreign visitors ,8% Source: Osservatorio Fiere CERMES Bocconi The comparison of the numbers relating to the last four months of 2001 with those of the same period in the prior year shows that the events of the last part of the year have not had an effect on international-profile trade fair activities in Italy. For shows held annually an increase has been recorded in the surface area rented (+3.9%), the numbers of direct exhibitors (+1.4%) and of the related foreign participation (+3.9%), whereas both total visitor numbers and foreign visitor numbers have been maintained substantially at the levels recorded in ITALY: ANNUALLY-HELD INTERNATIONAL TRADE FAIRS AND SHOWS IN THE FINAL FOUR MONTHS Number of shows Change % Surface area rented 1,548, % Direct exhibitors 31, % Direct foreign exhibitors 6, % Total visitors 5,610, % Foreign visitors 208, % Source: Osservatorio Fiere CERMES Bocconi As regards the European trade fair market, the latest data available relates to the year 2000 as contained in the Annual Report on the Trade Fair Sector in Europe ( ) published by the Osservatorio Fiere del CERMES Bocconi (the CERMES trade fair study unit of the Bocconi University) was a year of growth for the European trade fair market: for the five principal countries (Germany, Italy, France, Spain, Great Britain), with all indicators signalling an increase compared to 1999: 9% growth in surface area rented, 8% increase in visitors numbers and 3% increase in numbers of direct exhibitors. This positive trend can also be confirmed by a comparison between two year periods, which permits a more correct analysis and long-term evaluation, by eliminating oscillations due to the cyclical nature of the trade fairs and shows held every two years. Compared to the variations in compared to , however, growth in the subsequent two year period ( compared to ) has been more limited. These numbers reflect the general market trend of recent years, which is beginning to realign itself to the excellent levels achieved in the early 1990s. In particular, the increase in the number of visitors has been significant, indicating a recovery compared to 1999, a year in which a slight drop had been recorded. The increase in the number of shows, +6%, signals a process of segmentation of the market with the proliferation of niche shows as a response to the requirements of exhibitors and visitors. 22

23 Germany has recorded increase in all indicators although, against a 15% growth in the number of shows the surface area rented increased by just 7% and the number of visitors by 2%. In 2000 Italy had an excellent year, as regards international shows, these being the only ones audited by Cermes: the surface area rented grew by 11%, direct exhibitors by 14.5% and visitors by 27.3%. France, on the other hand, recorded a positive fluctuation limited in size compared to 1999; the number of shows moreover remained unchanged and the number of direct exhibitors suffered a slight contraction (-0.8%). Spain also attained very positive results, although growth was lower than had been recorded in previous years. Still, the year on year comparison shows surface area sold increased by 17% and the number of shows by 10%. Finally, for Great Britain growth was recorded in all indicators: minimal as regards number of exhibitors and shows (+1%), more significant for surface area rented and number of visitors (+9% in both cases). STATUS OF THE TRADE FAIR MARKET IN THE PRINCIPAL EUROPEAN COUNTRIES IN 2000 NO. OF TRADE NET SQ DIRECT FOREIGN VISITORS FOREIGN FAIRS METRES EXHIBITORS EXHIBITORS VISITORS ITALY 143 5% 4,110,299 11% 85,079 14% 18,320 24% 10,819,433 27% 744,256 13% 22% 2% 7% -1% FRANCE 285 0% 4,123,663 2% 101,939-0,8% 22,818 7% 14,644,170 1% 848,498-0,4% 22% 1% 6% 0% GERMANY % 8,351,503 8% 218,886 7% 79,651 4% 17,039,936 2% 1,766,266 9% 36% -1% 10% 0% SPAIN % 3,238,989 17% 60,037 12% 5,946 14% 5,147,873 13% 135,397 31% 10% 0% 3% 1% GREAT BRITAIN 543 1% 2,317,832 9% 105,356 1% 4,787-4% 8,705,678 9% 151,981-21% 4% 0% 2% 0% TOTAL 5 COUNTRIES 1,699 6% 22,142,286 9% 571,297 3% 131,522 7% 56,357,090 8% 3,646,398 7% INTERNATIONAL ELEMENT Processed by FONDAZIONE FIERA MILANO Study and Development Service based on data from Osservatorio Fiere Cermes Bocconi 23

24 Looking at the international element, the percentages of foreign exhibitors and visitors have r emained stationary or slightly lower. As regards absolute values, on the other hand, Italy recorded a strong increase in both foreign visitors and exhibitors (+13% and +24% respectively). Great Britain, however, has been the country that has suffered the largest decrease: -4% for foreign exhibitors and all of 21% fewer foreign visitors. For 2001, from the available data it appears that for Italy there has been a fall in the number of total exhibitors and square metres sold compared to 2000, whereas for the number of visitors there has been a small increase. Germany records growth both in the surface areas rented and the number of exhibitors, whereas a comparison of visitor numbers against 2000 is impossible due to a change in the system of counting admissions. One can assume a fall in attendances, given that the available data remains substantially in line with 2000, whereas the modification to the system of counting admissions (for multiple-admission tickets the true number of admittances are counted, rather than just one single admission, as had previously been the case) would lead one to expect to see an increase in the total number as per the available data. The United States shows the strongest fall in trade fair activity in recent years, in particular with a fall of 7.4% in total visitor numbers. It should be remembered however that the US data includes attendances at conferences, which felt the effect of the events of 2001 particularly strongly. SQUARE METRES SOLD, NUMBER OF EXHIBITORS AND VISITORS IN ITALY, GERMANY AND THE UNITED STATES ( comparison) (indicative data) Square Metres Sold Total number of exhibitors Total number of visitors (% change) (% change) (% change) ItalY -2.3% -3.5% +0.9% Germany +1.5% +3% n.s. U.S.A. -2.5% -3.1% -7.4% Source: CERMES Bocconi, AUMA, Trade Show Week 24

25 Trends in the business The commentary shown below refers to the reclassified Profit and Loss account, shown above, which better represents the results that characterise the financial trends of the Company. During the year ending 30 June 2002 there were 71 trade fairs and shows in the Trade Fair District, with the participation of 30,540 Exhibitors, of whom 6,056 were foreign, equal to approximately 20% of the total. NUMBER OF EXHIBITORS PARTICIPATING IN THE SHOWS HELD DURING THE PERIOD Total 30,540 Italian 24,484 Foreign 6, ,000 10,000 15,000 20,000 25,000 30,000 35,000 Many shows have enjoyed significant increases in terms both of net exhibition space occupied and of numbers of exhibitors and visitors, notwithstanding the tragic events of 11 September. The sectors with the best performance were those concerned with capital goods (machinery and equipment) with the shows BIMU, VITRUM, SIMEI, FLUID, XYLEXPO/SASMIL, MOSTRA CONVEGNO EXPO- COMFORT, and those concerned with durable goods, with the shows SALONE DEL MOBILE, EUROCU- CINA, EIMU, EXPO TOUR E HOTEL PROJECT. Moreover even the MIFED show, the cinema exhibition-market whose most important exhibitors and visitors are largely represented by Americans and Canadians, held up well, despite the fact that it took place very close to the notorious terrorist attack. The performance of the SMAU show, the leading show in the IT sector, was below that of the previous edition, but in this case the trends in the sector of the so-called New Economy were of primary importance. During the last period Fiera Milano also hosted for the first time an international show (EFFTEX), for the trade only, dedicated to non-professional fishing equipment. The event was a great success, to such an extent that the (foreign) organisers are strongly interested in holding the show again in future, on a regular basis, in the Milan trade fair district. The EFFTEX case history underlines the development in the European trade fair market, no longer constrained by domestic laws that used to limit in various ways the entrepreneurial activities of show Organisers, but now inspired by criteria of greater competitiveness, favouring those trade fair districts that, due to their efficiency or particular adequacy of structure, can better meet the requirements of the most important shows of an international nature. During the period under review net square metres of exhibition space sold amounted to 1,648,465, this being 4.3% more compared to 30 June 2001 (12 month pro-forma). 25

26 NET SQUARE METRES OF EXHIBITION SPACE Pro-forma ,579, ,648, ,000 1,000,000 1,500,000 On the same number of shows compared to the total of the respective previous editions, the square metres of exhibition space sold displays a 1.4% increase. This increase can be attributed to a greater occupation of space for the Expocomfort, Expo-tour, Eicma Moto e Bici and Artigiano in Fiera shows, which absorbed the loss of space associated with the show SMAU. The occupation percentage, understood as the relationship between available gross surface area and net exhibition space sold, was on average equal to approximately 49.9%; it should be noted that between different shows significant differences in this statistic are recorded due to the special characteristics of each of the shows. The turnover index for the District can be calculated at around 9.5, given that the serviceable available exhibition space area is 348,230m2 and the gross exhibition space area reached 3,299,104m2. Revenues amounted overall to million, approximately 10% more compared to the year to 30 June 2001 (12 month pro-forma). Revenues can be divided by type as follows: (in millions of euro) Final Pro-forma Final (9 months) (12 months) Space and Basic services Supplementary services to organisers Services to Exhibitors Services to Visitors and others Total additional services Total Turnover Revenues for services, overall, show a substantial increase, reaching circa 38 million, compared to 28.5 million for the 12 month pro-forma prior year, an increase of 32%. Supplementary services to Organisers, equal to 24.8 million, show a revenue increase of 30% and relate principally to: hire of furnishing and carpet ( 9.5 million), conference services ( 1.5 million), reception services ( 3.5 million), advertising and press office ( 1.1 million), organisation of events linked to shows ( 3.5 million). Services to Exhibitors revenues increased by just under 51%, reaching 9.2 million; the main items are: high of fixtures and furnishings ( 1.4 million), plant and out-of-hours access to stands ( 2.7 million), security and insurance cover ( 2.8 million), additional cleaning services ( 0.8 million), advertising services ( 0.8 million). 26

27 Services to visitors, equal to 3.7 million, have seen a more contained increase in revenues, although still in the order of 12%, given that this category covers services such as the restaurant and parking. The ratio of revenues from services compared to the total has changed from 22.3% in the year to 30 June 2001 (pro-forma) to 26.8% in the year to 30 June RATIO OF ADDITIONAL SERVICES REVENUES TO TOTAL REVENUES Additional services Space/Basic services - Pro-forma Gross margin (revenues less direct costs) is equal to 96.7 million, a percentage of 68.8% on revenues. Compared to the pro-forma 2001 figure, gross margin has increased by 5.6 million with the increase in gross margin percentage caused by the greater weight of additional services. Structural costs (net of sundry income) amount overall to 46.4 million, of which 19.4 million is for personnel. Compared to pro-forma 2001 the ratio of these costs to revenues shows a remarkable reduction, equal to 6 percentage points, a consequence of the increased management efficiency achieved in this second year of trading of Fiera Milano Spa. The principal items of which structural costs are composed are as follows: (in millions of euro) Final Pro-forma Final (9 mouths) (12 mouths) Maintenance (excluding assistance during shows) 5.9 8,4 6.6 Energy consumption 5.5 7,3 5.9 Office running costs Security and other District services Advertising and promotion Professional services and co-operation Other costs Sub-total Personnel costs Sundry income Total N.B.: the differences that can be noted for some items compared to the numbers shown in the financial statements and notes to the accounts are allocated to direct show costs. Rental payments for the property and the lease of the branch of business, equal in total to 30.9 million are made up of approximately 30 million for the rental of the district, and approximately 1 million for the leasing of the trade fair business, which ceased on 17 December 2001 with the conferment already discussed. The combined effect of the higher Gross margin and the reduction in structural costs have led to the essential doubling of the Gross Operating Margin, compared to pro-forma 2001, from 10.1 million to 19.4 million. 27

28 Against this, depreciation, amortisation and other provisions increased from 1.2 million to 7.8 million, principally as an effect of the conferment with its associated tangible and intangible fixed assets, most notably goodwill. For this item the amortisation rate applied is of 10% per year, in conformity with the prevailing taxation legislation, considering also that market observations together with the estimate of the expert nominated by the Court of Milan, suggest that a ten year amortisation period for such costs, starting from the period during which the goodwill was recorded, should be regarded as reasonable. The operating profit, equal to 11.6 million, obviously reflects the higher amortisation and depreciation charges, but nevertheless shows a significant increase when compared to the same number for pro-forma 2001: +30.3%. Net financial income amounts to 2.3 million, with a significant increase compared to the pro-forma 2001 number ( 1.0 million), thanks to a careful management of cash flow generated by the business, by means of a focused use of available funds. Profit before taxation is equal to 13.9 million (against 9.9 million for pro-forma 2001), a margin approaching 10%. Taxation for the period, IRAP and IRPEG, is equal to 5.4 million overall, of which 0.4 million is represented by deferred taxation. In determining the taxation charge account has been taken both of the effect of Law 383/2001 (the so-called Tremonti-bis law) and of the benefit to be derived from the application of accelerated depreciation, subject to the recording of the relevant deferred taxation, for which the treatment recommended by Accounting Principles has been used. This policy moreover is conditional on the constitution of a special Reserve for accelerated depreciation in an amount equal to the accelerated depreciation, by the General meeting that will approve these financial statements. Finally the profit and loss for the period is closed with a Net profit of 8.5 million, representing a margin of 6% on revenues, and an increase on the pro-forma prior year number of 77%. The performance is still better in terms of Cash flow (Net profit plus amortisation and depreciation added back) which has almost tripled since the prior year, reaching 16.2 million, equivalent to over 11.5% of revenues. During the year tangible and intangible fixed asset investments of 52.3 million were made. Excluding goodwill, amounting as previously stated to 42.6 million, and the fixed assets acquired as a result of the conferment, equal to 4.7 million, the residual 5 million comprises the following projects: - Completion of new information technology system: 0.3 million; - Control of admissions and ticketing system: 1.8 million; - Installation of video surveillance system: 1.1 million; - Restructuring of buildings for commercial use and offices: 0.6 million; - hardware and software adaptation: 0.4 million; - fittings acquired: 0.4 million; - sundry acquisitions for personnel operating in contact with the public: 0.2 million; - purchase of scanner for checking of bags: 0.2 million. Equity investments amount to 0.8 million and relate to ExpoPage Spa ( 0.6 million) and the subscription to the capital increase resolved by the subsidiary Fiera Food System Spa ( 0.2 million). At 30 June 2002 the financial standing of the company is positive, at 38.2 million, including short term financial receivables of 20 million deriving from operations that make temporary use of available funds. Compared to the same figure for the period ending 30 June 2001, equal to 44.4 million, there has been a reduction of 6.2 million, resulting from the positive cash flow generated by the business offset by the payments due both to the taking over of debts during the conferment, for 20.7 million, and the payment of dividends of 7.2 million. 28

29 At 30 June 2002 there were 286 members of non-fixed term staff, made up as follows, with the variation compared to 30 June 2001 shown: situation at situation at 30 June 2001 joiners leavers 30 June 2002 Managers Cadre class and Clerical staff Total During the course of the period project quality was continued, a programme begun by Fiera Milano Spa since its operations started in order to offer continual improvements in Customer service. In this context the process of ISO series 9000 quality certification was developed, progressively involving all company services, with the objective of guaranteeing to the Customer transparency and efficacy of operative methods, the professionalism of Staff and the competence of suppliers utilised. The certification process was begun at the end of 2000 and in May 2001 had brought the first certification ISO 9001/1994 for the System of Reception and Information Points issued by DNV Det Norske Veritas, the authoritative international quality certification body. During the course of the period Fiera Milano Spa broadened its certification, in both an organisational and legal sense. In an organisational sense, in that in June 2002 the SATE (Technical Assistance to Exhibitors Service) was certified, again by DNV. This consists of a network of offices spread across the trade fair district and represents the front-office guaranteeing qualified and timely assistance to the exhibitor companies. In a legal sense, in that the SATE quality system was certified according to the year 2000 version of the ISO 9001 regulations, which are wider than those of 1994, placing particular emphasis on the management aspects of company processes and of the qualifications of the Personnel. In the course of the period being commented upon, at the same time the Euro came into use, the new management information system became operative from 1 January The chosen system is fully integrated and therefore will allow improved control and monitoring of company processes and trends. Pursuant to article 2428, sub-section 1, of the Civil Code, it is stated that the Company has not sustained costs that fall into the category research and development, due to the very nature of its business. 29

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32 Subsidiary and associated companies Edizioni Fiera Milano Spa Share capital 103,300 fully paid-up Proportion of share capital held: 100% EDIZIONI FIERA MILANO The company operates in the publishing sector and in particular in the production and sale of graphic and publishing products. Today its most significant business activity is the production of catalogues and other published products inherent to trade fair and conference activities undertaken within the sphere of the Milan trade fair district. The Extraordinary general meeting of 27 June 2002 resolved to change the date of the year end, moving it to 30 June of every year, thus aligning it to the date of the year end of its parent company Fiera Milano Spa. The Financial statements prepared by the company as at 30 June 2002 therefore refer to a period of just six months. Their most significant data is as follows: - Revenues: 683,505; - Shareholders funds: 261,333, inclusive of the loss for the period equal to 28,849 which was carried forward. At 30 June 2002 there were three clerical staff employees. Fiera Food System Spa Share capital 333,334, of which 170,000 had been paid-up at 30 June 2002 Proportion of share capital held: 70% The company was incorporated on 21 September 2001 by Gruppo Onama, the leading Italian operator in the restaurant and catering sector, on account of an agreement subsequently stipulated with Fiera Milano Spa. Indeed on 31 January 2002 share capital was increased from 100,000 to 333,334 with all new shares issued being entirely subscribed by Fiera Milano Spa, with the payment of 70,000. After the year end, during the month of July, the remaining amount of 163,334 was paid up. The proportions of share capital held are therefore as follows: - Fiera Milano Spa 70% - Gruppo Onama 30%. The business purpose of the company is to manage the commercial restaurant, bars and banqueting services, with particular regard to services associated with trade fair events, congresses, conferences and shows in general. By means of this initiative, Fiera Milano Spa intends directly to manage catering activities, availing itself of its partner s know-how and entrusting operating activities to leading operators (indeed including the Gruppo Onama) by means of appropriate supply contracts. Fiera Milano Spa thus can make use of its own trademark for the development of commercial catering services both within the Milan trade fair district and outside it, with the objective of presenting a consistent and constant supply of services and uniform company image at all sales points. Fiera Food System is operational from 1 July Indeed from that date it purchased the catering branch of business from Fiera Milano Spa that up until 30 June 2002 had been leased to Gruppo Onama. 32

33 The financial statements for the period ending 30 June 2002 show a loss of 70,098, due to costs sustained in the phase prior to the beginning of operations. As at 30 June 2002 the company did not have employees. ExpoPage Spa Share capital 3,000,000 fully paid-up Proportion of share capital held: 21% The business purpose of the company is the sale of services inherent to the promotion of trade fairs, shows, conferences and congresses, by use of the internet. ExpoPage intends to become the reference point for the Italian market and (subsequently) the international market of the e-business sector relative to the exchange of information, services and business between companies participating in trade fair shows in the real and/or virtual worlds. At 30 June 2002 the shareholder structure was composed as follows: - Fondazione Fiera Milano: 43%, - Fiera Milano Spa: 21%, - Fiera Milano International Spa: 5%, - Bitwolf Srl (technical partner): 10%, - Italian trade fair and show organisers: 21%. On 10 December 2001 the General meeting of the Company resolved to increase share capital from 100,000 to 3,000,000. Of this increase Fiera Milano Spa has subscribed to and paid-up its proportion of this increase, equal to 630,000. The Company closed its first financial year on 31 December 2001 with a loss of 305,226, to be carried forward. This result is due to the costs sustained in the start-up phase which have not yet been covered by revenues, in that the operational activities are expected to begin from September On 30 April 2002 the General meeting has deliberated a further increase from 3,000,000 to 5,000,000, giving the Board of Directors the mandate to establish the time scale and methods for its execution. At 31 December 2001 the company had one employee only, having made use of external support during the start-up phase. 33

34 Significant post-balance sheet events After the year end an agreement was made with Fondazione Fiera Milano of significant strategic relevance to Fiera Milano Spa. Indeed, it was agreed to assign to Fiera Milano Spa the role of co-ordination and control also of those activities still owned by Fondazione Fiera Milano, as part of the intention to allow the Company to be present in all phases of the value chain in the trade fair sector, ranging from the organisation of shows and conferences to the management of the Spaces and the supply of the related services. New corporate arrangements have therefore been put in place which provide for the assignment to Fiera Milano Spa of the shareholdings possessed by Fondazione Fiera Milano in the following companies: Fiera Milano International Spa (53% stake) and Rassegne Spa (53% stake), operative in the organisation of trade fairs and shows. The transfer of these companies will take place by means of the incorporation of a new company, jointly owned by Fondazione Fiera Milano and Fiera Milano Spa, with operative and financial control exercised by the latter; Fiera Milano Congressi srl (100% stake), operative in the organisation of conferences and congresses; ExpoPage Spa (43% stake), in which Fiera Milano already holds 21% of the share capital. The transfers will be performed on the basis of the values which emerge from the assessments currently in progress by independent valuers. Also in July the acquisition was decided of the branch of business Furnishings hire from Nolostand Srl, leader in the sector of stand preparation/dressing with high technological content and the design sector. The operation was accomplished at the end of July by means of the incorporation of a new company which assumed the name Nolostand Spa, of which Fiera Milano Spa holds 51%. Nolostand Spa, with a share capital of 7.5 million, acquired the branch of business referred to above for 22 million in total. The residual funds requirement was covered by Nolostand Spa by means of a ten year bond issue of 7,500,000, with the interest rate set at ABI less 1.5 percentage points, entirely subscribed by Fiera Milano Spa, and by bank finance of 3.5 million of a seven year duration. The remaining 3.5 million will be paid to the vendor one year after the date of the deed of transfer of the company. The branch of business acquired achieved revenues of approximately 25 million and an operating profit of approximately 3.5 million in the last period (the year 2001). The process of obtaining a Stock Exchange listing has also continued, with the General meeting on 26 July 2002 resolving: The increase in share capital up to a maximum of 16,000,000 shares, subject to a splitting of the nominal value of each share from 100 to 1, with the exclusion of option rights in accordance with articles 2441, sub-section 5, to the service the expected opening of the share capital to third parties; The free increase of capital for a maximum of 60,000 shares, to be reserved for the employees of Fondazione Fiera Milano, Fiera Milano Spa and their subsidiaries, in a proportion to be determined subsequently on the basis of the shares subscribed to by each employee at the time of the IPO and based on pre-established conditions; The increase of share capital up to a maximum of 1,000,000 shares in order to service a stock option plan, the regulations of which are in the process of being readied; The adoption of a new text for the Articles of Association, to take into account both the changes described above and those that are necessary in order for the text to conform to the Self-Regulation Code issued by Borsa Italiana Spa (the Stock Exchange); 34

35 Forecast development of the business In order to outline the forecast development of the business in the current period that will finish on 30 June 2003 it is necessary to take account of the following aspects: the trade fair year has only just begun with the month of September, but there are reasons to believe that the trends of the shows that are planned will at least confirm the results of the previous editions; depreciation and amortisation, and the results of the financial management of the company, will be influenced by the acquisitions discussed previously; in the second part of the year, the corporate results may be influenced by the proceeds that may be forthcoming from the conclusion at the end of the year of the quotation process, as well as by the costs that specifically relate to this contract. 35