ANNUAL REPORT 2007 Pargesa

Transcription

1 ANNUAL REPORT 2007 Pargesa Holding SA

2 Pargesa Holding SA 11, Grand-Rue Telephone : +41 (0) Geneva Fax : +41 (0) Switzerland - info@pargesa.ch

3 Contents Structure and key data 4 Board of Directors, Management and Auditors 6 Message from the Chairman 9 Business report 11 Introduction 12 Highlights 13 Group shareholdings consolidated results 15 Adjusted net asset value 18 Parent company income and proposed dividend 20 Proposals to the Annual General Meeting of 5 May Main shareholdings 21 GBL 23 Imerys 24 Suez 26 Total 28 Lafarge 30 Pernod Ricard 32 Corporate Governance report 35 Consolidated financial statements 43 Parent company financial statements 93 Annual report Pargesa

4 Structure and key data Economic diagram at 31 December 2007* Pargesa 48.6% GBL 27.3% 26.8% 9.3% 3.9% 17.9% 6.2% Imerys Suez Total Lafarge Pernod Ricard * shareholdings are expressed as a percentage of capital Main shareholdings key data at 31 December 2007 % of total voting rights % flowthrough interest (1) 2007 shareholders' equity () Company Currency Direct interest % Total interest % 2007 net profit () GBL EUR '280 31'201 Imerys EUR '712 Suez EUR '446 36'698 Total EUR '654 74'177 Lafarge EUR '136 18'186 Pernod Ricard (2) EUR '365 10'401 (1) flow-through interest assessed at the level of Pargesa (2) financial year ending on June 30 4 Annual report Pargesa 2007

5 Structure and key data Board of Directors, Senior Management and Auditors Message from the Chairman Business report Main shareholdings Corporate Governance report Consolidated financial statements Parent company financial statements Global and per-share data ARR IFRS IFRS IFRS IFRS (1) Consolidated shareholder's equity, Group's share 6' ' ' ' '170.7 Operating income Non-operating income ' Consolidated net profit, Group's share ' Gross dividend (2) Shares entitled to dividend 84'295'370 84'434'770 84'638'370 84'638'370 84'638'370 Market capitalisation at year-end '496 11'748 10'707 Adjusted net asset value at year-end 6'719 8'233 9'984 14'346 15'952 CHF per share Share price year-end high low average Consolidated shareholder's equity, Group's share Adjusted net asset value at year-end Operating income (3) Non-operating income (3) Consolidated net profit, Group's share Gross dividend (2) (Average) gross yield 3.3% 2.8% 2.3% 2.0% 2.0% (1) the accounting data published for 2004 and the following were prepared to IFRS standards, whilst the data for the previous years were prepared in accordance with the Swiss GAAP ARR standards. The fi gures are therefore not directly comparable (2) proposed to the Annual General Meeting (3) calculated on the weighted average of the number of shares outstanding during the year Stock exchange data Market price CHF Flow-through adjusted net asset value CHF SPI relative CHF Annual report Pargesa

6 Board of Directors Chairman Paul DESMARAIS* Vice-Chairmen Baron FRÈRE* Paul DESMARAIS Jr. Gérald FRÈRE André de PFYFFER* Directors Marc-Henri CHAUDET* Victor DELLOYE André DESMARAIS* Ségolène GALLIENNE Robert GRATTON Aimery LANGLOIS-MEURINNE Gérard MESTRALLET Michael NOBREGA Michel PÉBEREAU* Michel PLESSIS-BÉLAIR* Baudouin PROT Gilles SAMYN Amaury de SEZE Chairman of the Executive Committee, Power Corporation of Canada Chairman of the Board of Directors, Frère-Bourgeois SA Chairman of the Board and Co-Chief Executive Officer, Power Corporation of Canada Executive Director, Frère-Bourgeois SA Attorney-at-Law Attorney-at-Law Director and General Secretary, Compagnie Nationale à Portefeuille (CNP) President and Co-Chief Executive Officer, Power Corporation of Canada Director, Compagnie Nationale à Portefeuille (CNP) Chairman of the Board of Directors, Power Financial Corporation Managing Director, Pargesa Holding SA Chairman and Chief Executive Officer, Suez CEO, Ontario Municipal Employees Retirement System (OMERS) Chairman of the Board of Directors, BNP Paribas Vice-Chairman of the Board, Chief Financial Officer and Director, Power Corporation of Canada Chief Executive Officer, BNP Paribas Vice-Chairman and Executive Director, Compagnie Nationale à Portefeuille (CNP) Chairman of the Supervisory Board of PAI Partners * Term of offi ce due to expire, renewal proposed to the Annual General Meeting of May 5, Annual report Pargesa 2007

7 Committees Auditors Senior Management Structure and key data Board of Directors, Senior Management and Auditors Message from the Chairman Business report Main shareholdings Corporate Governance report Consolidated financial statements Parent company financial statements Audit Committee Chairman Marc-Henri CHAUDET Members André de PFYFFER Michel PLESSIS-BÉLAIR Gilles SAMYN Amaury de SEZE Compensation Committee Chairman André de PFYFFER Members Michel PLESSIS-BÉLAIR Gilles SAMYN Amaury de SEZE Auditors Deloitte SA Ernst & Young SA Senior Management Paul DESMARAIS Baron FRÈRE Paul DESMARAIS Jr. Aimery LANGLOIS-MEURINNE Pierre HAAS Jacques DRIJARD Andrew ALLENDER Mark KELLER Fabienne RUDAZ BOVARD Executive Director Executive Director Executive Director Managing Director Advisor to the Chairman Deputy Managing Director Financial Director and Secretary of the Board of Directors Chief Accountant Treasurer Annual report Pargesa

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9 Message from the Chairman Structure and key data Board of Directors, Senior Management and Auditors Message from the Chairman Business report Main shareholdings Corporate Governance report Consolidated financial statements Parent company financial statements Ladies and Gentlemen, The financial environment greatly deteriorated in 2007 and the economy may suffer from the backlash in What is called the credit crisis, in other words the over-indebtedness facilitated by securitisation and the abuse of financial engineering, has not stopped generating its perverse effects. Given that environment, your Group maintained its prudent investment policy, which is mainly financed through equity. Group equity was further strengthened at the mid year through a EUR 1.2 billion public share offer by GBL. Our investment portfolio is strong and healthy, and capable in our view of coping with a possible recession. It comprises companies that are well-managed, well-positioned strategically and well funded. This enables them to develop through organic and external growth. Suez achieved excellent results in 2007, thus demonstrating the quality of its business model. The expected merger with Gaz de France should make it one of the largest and most profitable world operators in an expanding sector that is undergoing consolidation. Total is one of the few leading companies in the oil industry that increased production and enjoyed real exploration successes in It has produced substantial results despite increased costs and taxation. We continue to place our confidence in Total even if the stock market does not fully appreciate its merits. Lafarge is in excellent health, the result of rigorous management and judicious strategic initiatives; the most recent of these, the Orascom transaction, which will enable Lafarge to accelerate the pace of its development in the emerging economies, is highly promising. Imerys grew its results again for the sixteenth year in a row. It has restructured and made acquisitions that should give further impetus to its profit growth in the years to come. Finally, Pernod Ricard has enriched its brand portfolio and added to its global network of locations. The company can thus make the most of the growth in the emerging countries and better stimulate the development of its strategic brands. For some years, your Group has had a foothold in the private equity market, specifically through Sagard and Ergon. This has been most successful, and even if the golden age of private equity is over, we intend to continue our investment in this field, selectively and on a modest scale in terms of our overall assets. Our proposal of a 10.5% rise in the dividend to CHF 2.62 per share is a testimony to the quality and profitability of our assets. My partner, Albert Frère, and I are well aware that tough times create opportunities and we are ready to grasp them. Geneva, 4 March 2008 Paul Desmarais Annual report Pargesa

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11 Business Grand report Titre Annual report Pargesa

12 1. Introduction Pargesa Holding SA, whose registered office is in Geneva, is the parent company of Pargesa Group, active in various industry and service sectors through its holdings in a number of operating companies. Pargesa Group s strategy is based on the following principles : concentrating the portfolio on a limited number of major holdings, with the aim of creating long-term value; seeking to exercise control, or major influence, over the companies in which the Group holds interests; ongoing professional activity as a strategic shareholder in the companies in which Pargesa invests, particularly in the following : - selecting senior management; - discussing and approving development strategies proposed by the management; - monitoring the course of business on a regular basis and participating in important decision-making; - participating in the definition of financial policy. Applying these principles, the Group s portfolio at 31 December 2007 was concentrated in five major holdings representing 95% of its adjusted net asset value : Imerys, Suez, Total, Lafarge and Pernod Ricard. Details of their operations and results are provided in pages 23 to 34 of this report. Four large operational shareholdings of the Pargesa Group are held through its subsidiary, Groupe Bruxelles Lambert (GBL), listed on EURONEXT in Brussels, of which Pargesa owned 48.6% of the share capital and 50.2% of the voting power at the end of December The controlling shareholding in Imerys is held jointly by Pargesa and GBL. The composition and analysis of Pargesa s results are described in section 4 of this business report and the structure of the adjusted net asset value and its trend are to be found in section Annual report Pargesa 2007

13 Structure and key data Board of Directors, Senior Management and Auditors Message from the Chairman Business report Main shareholdings Corporate Governance report Consolidated financial statements Parent company financial statements 2. Highlights In 2007, the Group redeployed its portfolio by reinvesting the proceeds from the 2006 sale of its interest in Bertelsmann, and new financial resources obtained through a rights issue by GBL, and the issue by Pargesa of bonds exchangeable into Pargesa shares. In 2007, the redeployment has already resulted in a significant increase of the dividends received by the Group. During the first quarter of 2007, GBL supported the Suez management and confirmed its role of historic shareholder by taking its share of Suez capital from 8.0% to 9.3%, acquiring over 20.3 million shares for the sum of EUR 798 million. GBL s investment in Lafarge has also been increased, from 15.9% at the end of 2006 to 17.9% at 31 December 2007, through the purchase of shares on the stock market amounting to an investment of EUR 332 million. During the first half of 2007, GBL continued to invest in Pernod Ricard, taking its 2.8% holding at the end of 2006 to 6.2% at 31 December 2007, through the purchase of shares on the stock market amounting to an investment of EUR 557 million. During the first half of 2007, GBL took a 3% position in the capital of Iberdrola, an investment of EUR million. This shareholding was partially disposed of during the fourth quarter, GBL having sold 1.6% of the company s capital for a total of EUR 905 million. GBL recorded a capital gain of EUR 137 million, Pargesa s share of which was CHF 113 million. On 5 June 2007, Pargesa Holding SA announced the placement of a CHF million convertible bond issued by its wholly-owned subsidiary, Pargesa Netherlands BV. These bonds carry a coupon of 1.75% per year and are convertible until their maturity in 2014 into shares to be created by Pargesa Holding SA. The sums raised on this occasion were used to pay Pargesa s 50.1% share in the EUR million capital increase announced by GBL on 1st June 2007, and which closed on 4 July Events after the 2007 balance sheet date : Pargesa spent CHF 114 million on stockmarket purchases of GBL shares, taking its investment from 48.6% to 49.2% of the capital and from 50.2% to 50.8% of the voting rights. GBL increased its position in Lafarge, through the purchase of shares on the stock market amounting to EUR 423 million, bringing its stake to 20.1% of the capital, and Paul Desmarais Jr, executive director of Pargesa and Thierry de Rudder, executive director of GBL, were appointed directors of the company by the Annual General Meeting of shareholders held on 18 January This investment will be accounted for under the equity method as of 1 January GBL again reduced its Iberdrola investment, from 1.4% to 0.6% of the capital, by disposing of shares to the value of EUR 436 million, realising a capital gain of EUR 47 million, or a Pargesa share of around CHF 38 million, which will be recognised in the first quarter of Annual report Pargesa

14 3. Group shareholdings All the Group s main shareholdings posted an improvement in operating performance in Imerys, a world leader in adding value to minerals, benefited in 2007 from generally positive markets led by the rapid development of the emerging economies. Imerys increased the pace of its development, improving the competitiveness of its existing businesses and implementing a sustained policy of external growth, thereby strengthening its positions in the emerging economies. Its net operating income grew for the 16th year in a row and its operating margin remained high. The Group s current operating income has grown 4.3% to EUR 478 million. Group current net earnings are up 2.7% to EUR 317 million. Group net earnings of EUR 284 million, compared with EUR 187 million in 2006, the year in which an exceptional net charge of EUR 121 million, compared with EUR 33 million in 2007, was taken into account. The dividend proposed at the Annual General Meeting of shareholders will be EUR 1.90 per share, an increase of 5.6%. At 31 December 2007, Pargesa-GBL held 54.1% of the capital and 69.9% of the voting rights of Imerys. Suez, an international industrial and services group, recorded a further increase in operating performance and profitability in 2007, on growth markets, with balanced contributions to net income growth from every business line. Revenues rose 7% and operating income was up 15% to EUR million. Group net income, at EUR million, is up by 8.8% compared with 2006, and by 8.1% per share. The dividend proposed at the Annual General Meeting of shareholders will be EUR 1.36 per share, an increase of 13.3%. At 31 December 2007, GBL held 9.3% of the capital and 13.9% of the voting rights of Suez. For Total, a leading international integrated oil company, 2007 was a year in which market conditions generally favoured the oil industry, the price of crude rising 11% due to strong demand and the increase in the cost of projects. Group net income reached EUR 13.2 billion compared with EUR 11.8 billion in 2006, an increase of 12%. Group net income excluding non-recurring items stands at EUR 12.2 billion, down 3%; adjusted net earnings per share are practically the same at EUR The dividend proposed at the Annual General Meeting of shareholders will be EUR 2.07 per share, an increase of 11%. At 31 December 2007, GBL held 3.9% of the capital and 3.6% of the voting rights of Total. Lafarge, a world leader in building materials (cement, aggregates & concrete, gypsum), demonstrated during 2007 its ability to accelerate its pace of growth, in an environment of growing world demand for cement, despite economic fluctuations. The year also saw the acquisition of Orascom Cement, finalised at the start of Revenues rose by 4% and current operating income by 17% to EUR million. Group net income, at EUR million, is up 39% compared with 2006, and 41% per share. The dividend proposed to the Annual General Meeting of shareholders will be EUR 4.00 per share, an increase of 33%. At 31 December 2007, GBL held 17.9% of the capital and 16.4% of the voting rights of Lafarge. Pernod Ricard, a leading world operator in wines and spirits, recorded a big increase in revenues and earnings for the 2006/2007 financial year, which ended on 30 June Current net income was EUR 833 million, a rise of 24%, and EUR 7.75 per share, a rise of 21%. Revenues for the first half of 2007/2008, which ended on 30 December 2007, reached EUR million, an increase of 5.9%. Current net income was EUR 594 million, a rise of 18.6%. At 31 December 2007, GBL owned 6.2% of the capital and 5.6% of the voting rights of Pernod Ricard. 14 Annual report Pargesa 2007

15 Structure and key data Board of Directors, Senior Management and Auditors Message from the Chairman Business report Main shareholdings Corporate Governance report Consolidated financial statements Parent company financial statements consolidated results 4.1. Presentation of results in accordance with IFRS The simplified presentation of the income statement under IFRS is as follows : Operating income Operating expenses ( ) ( ) Other income and expenses Operating profit from continuing operations Dividends and interest from long-term investments Other financial income (expenses) (70.3) 12.5 Taxes (136.1) (51.8) Income from associates Net profit from continuing operations Net profit from discontinued operations Consolidated net profit (including minorities) Minority interests (856.0) ( ) Consolidated net profit (Group share) Earnings per share, Group share (CHF) continuing operations (CHF) discontinued operations (CHF) Operating income and expenses are principally the turnover and operating expenses of Imerys, whose accounts are 100% integrated into Pargesa. Other income and expenses are net capital gains and losses and impairment on Group shareholdings and operations. In 2007, this item corresponds essentially to the proceeds from GBL s disposal of Iberdrola shares, and the proceeds of disposals through its private equity funds. The dividends and interest from long-term investments item concerns net dividends received by the Group, mainly from Total, Suez, Lafarge and, for the first time in 2007, Pernod Ricard. The other financial income (expenses) and taxes items consolidate the figures for Pargesa, GBL and Imerys. The income from associates item concerns the share in the consolidated net profit contributed by shareholdings accounted for in the Pargesa accounts using the equity method. In 2006, net profit from discontinued operations included income from the Bertelsmann and Orior Food operations up to the date that they were discontinued, as well as the capital gain recognised on the disposal of Bertelsmann. Minority interests essentially concern the share of income due to the minority shareholders of GBL and Imerys, these two companies being 100% consolidated into the Group s accounts. Annual report Pargesa

16 4.2. Economic presentation of Pargesa results As a supplement to the accounts drawn up using the format recommended by IFRS, Pargesa is continuing to publish an economic presentation of its results in order to provide continuous information over the long-term about the contribution of each of its major shareholdings to its results. Because the IFRS require a different accounting treatment depending on the percentage of capital held by the Group in each of its companies (full integration for Imerys, equity-accounting for Bertelsmann in 2006 and classification as financial instruments in the case of Total, Suez, Lafarge and Pernod Ricard), this continuous view would be interrupted without this additional information. The economic presentation shows, in terms of Group share, the operating contribution of the main shareholdings to the consolidated income of Pargesa together with the income from the operations of the holding companies (Pargesa and GBL). The analysis also draws a distinction between the operating and non-operating items in the results, the non-operating part being composed of capital gains in connection with disposals and restructuring costs and impairment. According to this approach, the economic results for 2007 can be analysed as follows : Operating contribution of the main shareholdings Consolidated (Imerys) or equity-accounted (Bertelsmann) : Imerys share of operating income Bertelsmann (sold ) share of operating income preferential dividend net operating contribution Non-consolidated : Total net dividend Suez net dividend Lafarge net dividend Pernod Ricard net dividend Operating contribution of the main shareholdings per share (CHF) Operating contribution of other shareholdings Operating income contributed by holding companies Operating income per share (CHF) Non-operating income from consolidated or equity-accounted companies (21.7) (77.2) Non-operating income contributed by holding companies '831.2 Net income '293.3 per share (CHF) Average number of shares in circulation (thousands) '623 EUR/CHF average exchange rate Annual report Pargesa 2007

17 Structure and key data Board of Directors, Senior Management and Auditors Message from the Chairman Business report Main shareholdings Corporate Governance report Consolidated financial statements Parent company financial statements Consolidated holdings : Imerys recorded a net operating income in 2007 up 2.7% to EUR 317 million. Pargesa s share of Imerys operating income, expressed in Swiss francs, increased by 9% to CHF million. Non-consolidated holdings : The contributions from Total, Suez, Lafarge and Pernod Ricard correspond to Pargesa s share of the net dividends received by GBL from these companies; the amounts expressed in Swiss francs are favourably influenced by the more than 4% gain of the euro against the Swiss franc compared with the average rate for This item has also benefited from the abolition on 1st January 2007 of the 15% withholding tax applied to the dividends of French companies owned more than 5%. Total paid the balance of the 2006 dividend in the second quarter of 2007, or a contribution to Pargesa of CHF 75.1 million. In accordance with its distribution policy, Total decided and announced on 5 September 2007 to pay a 15% higher unit interim dividend for 2007, Pargesa s share of which was CHF 75.5 million, paid on 16 November Suez paid its annual dividend for 2006 in the second quarter of 2007 (a unit rise of 20%). Pargesa s share of CHF million also reflects the effect of the acquisition of Suez shares by GBL. Lafarge paid its annual dividend for 2006 in the second quarter of 2007 (a unit rise of 18%). Pargesa s share of CHF 74.7 million also reflects the effect of the acquisition of Lafarge shares by GBL. Pernod Ricard, a shareholding acquired as of end 2006, contributed to the Group s results for the first time through an interim dividend paid in the first half of 2007, corresponding to a contribution of CHF 6.9 million, and through the balance of the dividend paid in the fourth quarter of 2007, corresponding to a contribution of CHF 7.0 million. Operating income of other shareholdings in 2007 is the contribution from Ergon Capital Partners, a GBL investment, of CHF 12.0 million (CHF 16.7 million in 2006), and also the Iberdrola interim dividend recorded by GBL. Operating income contributed by holding companies, which is the net sum of financial income and expenses, overheads and taxes, stands at CHF 20.6 million, compared with CHF 33.4 million in In 2007 this item benefited from the proceeds of disposals by GBL through its private equity funds, Pargesa s share being CHF 42.5 million. Non-operating income : the non-operating income from consolidated or equity accounted companies essentially consists of Pargesa s share of the non-operating income of Imerys. The non-operating income contributed by holding companies was CHF million in 2007, and essentially represents the capital gain recorded on the partial disposal of Iberdrola shares, whereas the sum of CHF million in 2006 reflected the capital gains recorded on the disposal of the Group s share in Bertelsmann. Annual report Pargesa

18 5. Adjusted net asset value Adjusted net asset value per share amounted to CHF at the end of 2007, compared to CHF at the end of Adjusted net asset value is calculated according to the following principles : Portfolio investments in listed companies are estimated at their market price and current exchange rates; Portfolio investments in unlisted companies are estimated on the basis of their shareholders equity and current exchange rates; Per-share values refer to one bearer share with a par value of CHF 20, registered shares with a par value of CHF 2 being retained at one-tenth of their number. Pargesa's flow-through adjusted net asset value Weighting as Weighting as Weighting as Amount % of total Amount % of total Amount % of total Suez % % % Total % % % Lafarge % % % Imerys % % % Pernod Ricard % % Bertelsmann % Major holdings % % % Other holdings % % % Total portfolio % % % Net cash (1) (99) (1.0%) % (108) (0.7%) Adjusted net asset value % % % per share Pargesa CHF Share price CHF EUR/CHF (closing) exchange rate (1) the market value of trading securities and net balance of current assets and liabilities are added to the net cash position The adjusted net asset value increased by 11% in 2007, following a rise of 44% in The changes in the components of the net assets, and their total value during the year include in particular the effects of the significant redeployment of the portfolio, as detailed in Section 2 "Highlights" of this Business Report, and to a lesser extent, the almost 3% firming of the euro against the Swiss franc from one year end to the other. The Suez weighting in the net asset value increased significantly at the end of 2007, as a result of further acquisitions and a 19% rise in its share price. The Total shareholding, which has not changed, saw its share price grow 4%. The Lafarge share of net asset value grew because of increased investment in this company but also as a result of the 10% rise in its share price during the period. The Imerys weighting is down, given the 17% fall in its share price, whilst Pernod Ricard, in which the Group increased its investment at the start of the year, experienced a 9% rise in its share price in Annual report Pargesa 2007

19 Structure and key data Board of Directors, Senior Management and Auditors Message from the Chairman Business report Main shareholdings Corporate Governance report Consolidated financial statements Parent company financial statements "Other holdings" at 31 December 2007 essentially comprises a 1.4% share of the capital of Iberdrola, representing a flow-through value of CHF 582 million. The Group s increased investment in its shareholdings was cash funded, and the net cash item in net asset value at the end of 2007 shows the balance between available cash and the debt constituted by the convertible bonds issued by Pargesa and GBL. Pargesa s adjusted net asset value at 3 March 2008 stood at CHF 162 per share, down 14% on that date compared with the start of the year, and breaks down as follows: Pargesa's flow-through adjusted net asset value at 3 March 2008 % of capital % economic interest Share price in local Flow-through currency value Weighting as % of total Suez 9.4% 4.6% EUR % Total 3.9% 1.9% EUR % Lafarge 20.1% 9.9% EUR % Imerys 54.3% 40.6% EUR % Pernod Ricard 6.2% 3.0% EUR % Major holdings % Other holdings % Total portfolio % Net cash (310) (2.3%) Adjusted net asset value % per share Pargesa CHF EUR/CHF exchange rate The change in adjusted net asset value since the start of the year is the result of the general decline of the financial markets; the downward trend did not spare the shares in the portfolio, and it was exploited in order to marginally increase certain shareholdings, mainly Lafarge (by GBL) and GBL (by Pargesa). The residual position in Iberdrola, included in the "other holdings", line was reduced from 1.4% to 0.6% of the capital through stockmarket sales, representing a flow-through value of CHF 211 million. Adjusted net asset value is expressed in Swiss francs whereas the shares in the portfolio are denominated in euros. It has therefore also been impacted by the more than 4% decline of the euro against the Swiss franc since the start of the year. Annual report Pargesa

20 6. Parent company income and proposed dividend The parent company s income amounted to CHF million, or CHF 2.39 per share. The Board of Directors proposes that the Annual General Meeting should approve payment of a dividend of CHF 2.62 per bearer share and CHF per registered share. This would bring the total dividend distribution for 2007 to CHF million, an increase of 10.5% compared with the dividend distributed the previous year. The sum of CHF 49.7 million would be carried forward, allowing for the allocation of CHF 10.2 million to the general legal reserve. Parent company income and dividend Parent company income () per share (CHF) Total dividend () (1) per share (CHF) 2.62 (1) 2.37 (1) proposed to the Annual General Meeting 7. Proposals to the Annual General Meeting of 5 May Allocation of earnings The Board of Directors proposes to the Annual General Meeting that the net profit for the year of CHF million, in addition to the balance of CHF 78.9 million, a total amount available to distribution of CHF million, be allocated as follows : Dividend CHF million General legal reserve CHF 10.2 million Retained earnings to be carried forward CHF 49.7 million 7.2. Appointments The term of office of Directors Paul Desmarais, Albert Frère, André de Pfyffer, Marc-Henri Chaudet, André Desmarais, Michel Plessis-Bélair and Michel Pébereau will end at the Ordinary Annual General Meeting on 5 May The Board of Directors will propose to the Annual General Meeting the renewal of their term of office for a period of three years. The Board of Directors will propose that the Annual General Meeting renew the appointment of Ernst & Young SA and Deloitte SA as the Group s auditors for a term of one year. 20 Annual report Pargesa 2007

21 Main shareholdings Annual report Pargesa

22 22 Annual report Pargesa 2007

23 Structure and key data Board of Directors, Senior Management and Auditors Message from the Chairman Business report Main shareholdings Corporate Governance report Consolidated financial statements Parent company financial statements GBL directly owns the Pargesa Group s holdings in Suez, Total, Lafarge and Pernod Ricard. GBL also holds a stake in Imerys, which is jointly controlled by Pargesa and GBL Global data (EUR million) Shareholders equity at 31 December 10'160 15'682 18'869 Market capitalisation at 31 December 11'458 13'400 14'179 Consolidated net profit 523 2' Total distribution Data per share (EUR) Consolidated net profit Dividend Issued shares (million) Pargesa's interest (%) GBL s consolidated financial statements show a net profit of EUR 779 million, compared to EUR million for 2006, the year in which a capital gain of EUR million was recorded from the sale of the 25.1% interest in Bertelsmann. In 2007, GBL s results featured a positive growth in "cash earnings", i.e. results that give rise to a cash movement for GBL and its wholly-owned subsidiaries, which increased from EUR 441 million to EUR 534 million in This 21% rise, following the redeployment of the portfolio after the sale of Bertelsmann, is due to a number of factors: higher unit dividends from Suez, Lafarge, Total and Imerys; the strengthening of existing shareholdings; the taking into account for the first time of dividends from Pernod Ricard; finally, the abolition of the 15% withholding tax on dividends from French companies when an investor holds more than 5%. In 2007, GBL declared its support for the Suez management and confirmed its role of historic shareholder by raising its shareholding in Suez from 8.0% to 9.3%, investing EUR 798 million. The Lafarge shareholding has gone from 15.9% of the capital at the end of 2006 to 17.9% at 31 December The change of position is the result of net investments of EUR 332 million. GBL continued to invest in Pernod Ricard during the first quarter of 2007, spending EUR 557 million to take its shareholding from 2.8% to 6.2% at the end of In the first half of 2007, GBL acquired a 3.0% shareholding in the Spanish company, Iberdrola, at a cost of EUR million. Part of this shareholding was disposed of during the fourth quarter, GBL selling 1.6% of the share for a total of EUR 905 million. Halfway through 2007, GBL issued 14 million new shares, providing net proceeds of EUR million. GBL s net cash at the end of 2007 amounted to EUR 1.8 billion compared with EUR 2.6 billion at the end of The variation takes account of the sum represented by its disposals and acquisitions, the proceeds from the capital increase, the cash earnings effect and GBL s appropriation of profit. Shareholders equity is EUR 18.9 billion. The distribution of a gross dividend of EUR 2.09 per share, a rise of 10% compared with 2006 and corresponding to a total distribution of EUR 337 million, will be proposed to the Annual General Meeting of shareholders on 8 April 2008 and distributed on 15 April Annual report Pargesa

24 Active in 47 countries and with more than 260 locations, Imerys is the world leader in adding value to minerals. Imerys follows a value-generating growth strategy based on the minerals it mines and processes from reserves with rare qualities, in order to develop solutions that improve the product performance and manufacturing efficiency of its industrial customers. The group s products have many applications in everyday life, including building, personal care products, paper, paint, plastics, ceramics, telecommunications and the filtration of liquid food-grade commodities Global data (EUR million) Shareholders equity at 31 December 1'672 1'630 1'640 Market capitalisation at 31 December 3'909 4'269 3'550 Consolidated net profit Total distribution Data per share (EUR) Net operating income Dividend Shares issued (million) Pargesa interest (%) (1) (1) of which 27.3% is owned by Pargesa and the rest by GBL Throughout 2007, Imerys benefited from generally strong markets led by the rapid development of the emerging economies. This dynamic growth also fed the demand for the industrial goods exported by the developed economies (Western Europe and the US), a trend that the Group was able to turn to advantage. The construction markets in France, and in Europe more generally, did well, but they declined markedly in the United States. The dollar depreciated further against the euro. Operating in that environment, Imerys continued to develop. Sales rose 3.5%, the current operating income increased by 4.3%, the operating margin was maintained at a high level, and net operating income rose for the sixteenth year in a row, by 2.7% overall and by 3.0% per share. In 2007, the Group intensified its pace of development, improving the competitiveness of its existing operations and implementing an active acquisition policy, strengthening thereby its positions in the emerging economies. Capital investments continued at a very sustained level. 24 Annual report Pargesa 2007

25 Structure and key data Board of Directors, Senior Management and Auditors Message from the Chairman Business report Main shareholdings Corporate Governance report Consolidated financial statements Parent company financial statements Imerys total revenue reached EUR million in 2007, (+3.5%). The growth reflects a negative exchange rate impact of -3.1% and a net effect of changes in group structure of +2.4%. At comparable group structure and exchange rates, turnover grew 4.2%, reflecting the improvement in the product offering and the rise in sales volumes. When analysed by business activity, the results are the following: Turnover in Performance Minerals and Pigments amounted to EUR million, down 3.1% compared with The decrease is essentially due to the negative exchange rate impact (-4.3%). Based on comparable group structure and exchange rates, sales grew 0.8% with product offering and volumes showing a positive trend. The improvement in paper offset the decline in performance minerals in the United States. Turnover in Materials & Monolithics amounted to EUR million, an increase of 9.7% compared with Based on comparable group structure and exchange rates, sales grew 9.1% and reflected the dual impact of the volume increase and improvement in product offering across all business groups. Ceramics, Refractories, Abrasives & Filtration posted revenues of EUR million, an increase of 4.7% compared with This growth reflects a net effect of changes in group structure of +5.0% due to acquisitions in high-growth areas (China, India, Argentina and Ukraine) and a negative exchange rate impact of -3.8%. Based on comparable group structure and exchange rates, sales grew 3.5%, the improvement mainly occurring in the price/mix component. The group s current operating income rose 4.3% to EUR 478 million (+7.9% based on comparable group structure and exchange rates). It takes account of a negative currency impact (EUR million), mainly the result of the depreciation of the American dollar, and of a net change in group structure of EUR 7.7 million. Restated for exchange rate and group structure impacts, net current income grew by EUR 36.1 million, or +7.9%. The strong improvement in the product offering over the period (EUR million) and the increase in sales volumes (EUR million) largely offset the negative impact of variable costs (EUR million, essentially due to the cost of certain commodities) and of fixed costs and overheads (EUR -9.5 million). Altogether, the group s operating margin was 14.1%, compared with 14.0% in The group share of current net income was EUR 317 million (+2.7%). This increase is after a lower financial profit, notably in connection with the increase in the group s average level of debt and the rise in interest rates, and a stable effective rate of tax. The group share of net profit is EUR 284 million, compared with EUR 187 million in In 2007, net profit includes the sum of EUR -33 million for other operating income and expenses net of tax, relating to the decision to adjust production capacities in the Performance Minerals division in the United States, given the persistent weakness of the construction market in that country. In 2006, it took into account EUR -121 million for other income and expenses net of tax, mainly incurred through the plan to reorganise the group s Kaolin for Paper production units. Group operating cash flow was unchanged at EUR 522 million. Capital investments increased during the period to EUR 367 million, EUR 159 million of which was devoted to production asset maintenance and EUR 208 million to Group development. External growth accounted for EUR 230 million, whilst asset disposals totalled EUR 41 million. At 31 December 2007, net consolidated financial debt was EUR million, or 81% of the consolidated shareholders equity. The distribution of a net dividend, increased by 5.6% to EUR 1.90 per share, compared with EUR 1.80 per share for the previous year, i.e. a total distribution of EUR 120 million, will be proposed to the Annual General Meeting on 30 April The dividend will be distributed on 13 May Annual report Pargesa

26 Suez is an international industrial services group, in the Energy (electricity and gas) and Environment (water, sanitation and waste services) sectors, providing services to public authorities, businesses and individuals. Suez is structurally integrated around four operating units in its two core businesses Energy and Environment : Suez Energy Europe (SEE), Suez Energy International (SEI), Suez Energy Services (SES) and Suez Environment (SE) Global data (EUR million) Shareholders equity at 31 December 16'511 19'504 22'193 Market capitalisation at 31 December 33'421 50'114 60'869 Consolidated net profit 2'513 3'606 3'924 Total distribution 1'271 1'533 1'778 Data per share (EUR) Net income Dividend Shares issued (million) 1' ' '307.0 Pargesa interest (%) In its Energy business, Suez is focused on the generation of electricity and heat, the trading, transmission and distribution of electricity and of natural and liquefied gas and also on the supply of energy and industrial services : engineering, installation, maintenance and operation especially of industrial or tertiary sites or heat networks. The Suez strategy for Energy is based on strengthening its positions in Europe from its core business locations (France and Benelux), and on the selective International development of its existing positions and of gas (LNG). In its Environment division, Suez is a supplier of Water, Sanitation and Waste Services. Through its Water branch, the group designs and manages potable water production and distribution systems and waste water treatment systems; it carries out engineering work and supplies a wide range of services to industry. Through its Sanitation and Waste branch, Suez undertakes the management (collection, sorting, recycling, treatment, deployment and storage) of ordinary and special industrial and domestic waste, Suez aims to develop its Environment business activities mainly through organic growth targeting the developed countries and especially Europe. Outside Europe, the emphasis is on the most promising markets and activities, and on being highly selective about opportunities in the strong core areas (China, USA, Australia, Middle East and North Africa). In a buoyant environment, Suez performances in 2007 were driven by organic growth in its two main businesses and by faster growth of its industrial development. 26 Annual report Pargesa 2007

27 Structure and key data Board of Directors, Senior Management and Auditors Message from the Chairman Business report Main shareholdings Corporate Governance report Consolidated financial statements Parent company financial statements In 2007, the Group invested EUR 6.1 billion in capital and financial projects, almost 60% more than in At the same time, financial discipline and the optimisation of the capital employed were maintained, Suez recording a return on capital employed (ROCE) of 13.7% at the end of 2007 compared with 13.0% at the end of All the operating units contributed to the growth in turnover and to the improvement of the results. The medium-term prospects of the group are strengthened by the proposed merger with Gaz de France, which is expected to take place in This operation is intended to create a European leader in the energy sector, with a portfolio that will take advantage of the convergence of gas and electricity and of geographical complementarities as well as significant synergies. The group s turnover increased to EUR 47.5 billion in 2007, a rise of 7.2% compared with 2006 (EUR 44.3 billion). The underlying organic growth, excluding effects of group structure, exchange rates and changes in gas prices, was 6.2% (7.0% excluding the climate effect). Suez revenues are all generated from the Energy and Environment businesses; the share of revenue achieved in Europe and North America represents 89% of the total, and 80% of that is produced by Europe. Group EBITDA is EUR 8.0 billion, a rise of 12.4% compared with 2006 (+9.8% excluding exchange rate and group structure effects). This growth is the result of improved performance in all four operating units. Current operating income stands at EUR 5.2 billion, a considerable increase in gross (+15.1%) and organic terms (+10.5%). Current operating income grew more than gross operating income and benefited in particular from higher than targeted synergies from the consolidation of Electrabel. The group share of net profit for 2007 is EUR 3.9 billion, a rise of 8.8% over 2006 (EUR 3.6 billion). This includes capital gains from limited disposals of EUR 0.3 billion, as against EUR 1.1 billion in 2006, but is helped by the capitalisation of deferred tax of EUR 0.5 billion. Corrected for non-recurring items, group share of net profit is EUR 3.1 billion, a rise of 12.3% compared with 2006 (EUR 2.8 billion). Group operating cash flow before financial expenses and tax totalled EUR 7.3 billion, an increase of 14% compared with Investments amounted to EUR 6.1 billion in 2007 as opposed to EUR 3.8 billion in 2006, EUR 1.6 billion of which concerned maintenance expenses; during the same period, disposals amounted to almost EUR 1.6 billion. Given that situation, part of the net cash flow was spent on implementing the share buyback programme (EUR 1.1 billion). Group net debt at the end of 2007 was EUR 13.1 billion as compared with EUR 10.4 billion at the end of 2006, and represents 53% of equity (46% at the end of 2006). The distribution of a dividend of EUR 1.36 per share will be proposed to the Annual General Meeting of shareholders on 6 May 2008, a 13.3% increase compared with the previous year. Annual report Pargesa

28 Formed through successive mergers between the Total, PetroFina and Elf Aquitaine groups, Total is a worldwide integrated oil and gas group with substantial chemical activities. Total is a leading international oil and gas company. With operations in more than 130 countries, the group s activities span all aspects of the energy industry from Upstream oil and gas exploration, development and production to Downstream refining and marketing of refined products, as well as international trading in both crude and refined products. Total is also a major player in the Chemicals markets and, moreover, involved in the development of renewable energies Global data (EUR million) Shareholders equity at 31 December 40'645 40'321 44'858 Market capitalisation at 31 December 130' ' '138 Consolidated net profit 12'273 11'768 13'181 Total distribution 3'999 4'474 4'959 Data per share (EUR) (1) Adjusted net income Dividend Shares issued (million) 2'460 2'426 2'396 Pargesa interest (%) (1) adjusted 2005 fi gures for the division by 4 of the Total share on 18 May 2006 In Total s Upstream sector, proven hydrocarbon reserves determined according to SEC rules give the company 13 years of production at current production rates. The group, which is based on a diversified asset portfolio, has outstanding prospects for growth from some of the biggest production facilities in the industry, thanks to its investments in competitively priced major engineering projects and in promising production blocks. Now that it has a presence in the liquefied natural gas industry, Total is also extending its operations to related market segments such as gas distribution or electricity generation. Downstream, Total is a leading group in Europe and Africa. It manages a refining capacity of 2.7 million barrels per day and markets refined products of 3.9 million barrels per day. It has interests in 25 refineries and operates a network of approximately service stations, mainly under the Total, Elf and Elan names, for the most part located in Europe and Africa. Total s Chemicals branch is a European or world leader on most of its markets. It has both petrochemical and major polymer operations that are characteristic of a major integrated oil company, and a specialty chemicals segment that focuses on rubber processing technologies and coating products. 28 Annual report Pargesa 2007

29 Structure and key data Board of Directors, Senior Management and Auditors Message from the Chairman Business report Main shareholdings Corporate Governance report Consolidated financial statements Parent company financial statements Throughout 2007 market conditions continued to be generally good for the oil industry. Crude prices on average were 11% higher than in 2006, sustained by robust demand and by the increased cost of projects. Refinery margins were higher than in 2006 against a background of strong volatility. The petrochemical environment was affected by the rapid rise in naphtha prices at the end of the year. The dollar depreciated 8% against the euro. Given this environment, Total s results expressed in euros are slightly down, whereas they are at record levels when translated into dollars. Overall, the group benefited from the growth of its hydrocarbon production operations and made the most of the continuing productivity programmes that enabled it to mitigate the effects of a cost inflation that is still very real. In this situation, the average return on capital employed in the segments was 27% in 2007, one of the best in the industry. Consolidated turnover for 2007 stood at EUR 159 billion, a rise of 3% compared with Adjusted net operating income from the various business lines decreased by 1% in 2007 to EUR 12.2 billion, compared with EUR 12.4 billion in 2006; expressed in dollars, on the other hand, it increased by 8%. Adjusted net operating income can be detailed as follows: Upstream, it is EUR 8.8 billion compared with EUR 8.7 billion in 2006, i.e. an increase of 2% (+11% in USD). This rise essentially reflects the positive effect of the increase in the average selling price of liquids (+11% to 68.9 USD/barrel), in line with that of the brent price (+11% to 72.4 USD/barrel). Downstream, it is EUR 2.5 billion, down 9% compared with 2006 (-1% in USD). The difference generally translates the impact of inflation and of the larger-scale maintenance operations in 2007, which offset the positive effect of production growth and the productivity plans. In Chemicals, it is EUR 0.8 billion compared with EUR 0.9 billion in 2006, i.e. a fall of 4% (+5% in USD), reflecting a positive effect from the performance improvement programmes and the operational growth pulled down by the weakness of the margins in Petrochemicals at the end of the year. Adjusted net profit fell 3% in 2007 to EUR 12.2 billion. Given the share buybacks by the group in 2007 (32.4 million shares or EUR 1.8 billion, i.e. 1.4% of the capital), adjusted net earnings per share for the year is EUR 5.37 and has declined by 1%. Expressed in dollars, it is USD 7.35 and has increased by 8% compared with The group share of net profit is EUR 13.2 billion, a rise of 12% compared with 2006 (+22% in USD). This is after non-recurring items for a positive amount of EUR 1.0 billion (a negative amount of EUR 0.8 billion was recorded in 2006). In 2007, the group s gross investments fell 1% to EUR 11.7 billion (EUR 11.9 billion in 2006). They were distributed on the basis of 76% Upstream, 16% Downstream and 8% Chemicals. Divestments calculated at their selling price accounted for EUR 1.6 billion. The distribution of a net dividend of EUR 2.07 per share, a rise of 11% compared with the previous year (EUR 1.87) will be proposed to the Annual General Meeting of shareholders on 16 May Taking into account the payment of an interim dividend of EUR 1.00 per share on 16 November 2007, the balance of the dividend, to be distributed on 23 May 2008, will be EUR 1.07 per share. Annual report Pargesa

30 With a presence in 80 countries, Lafarge is the world leader in building materials: Cement, Aggregates & Concrete, and Gypsum. Lafarge holds top-ranking positions in all its Businesses : it is the world s second leading producer of Cement, second in the world for Aggregates and Concrete, and ranked third in the world for the production of Gypsum Global data (EUR million) Shareholders equity at 31 December 9'758 10'403 10'998 Market capitalisation at 31 December 13'344 19'834 21'491 Consolidated net profit 1'096 1'372 1'909 Total distribution Data per share (EUR) Net income Dividend Shares issued (million) Pargesa interest (%) was marked by the growth of the group s operations in emerging markets and by the cost-cutting and refocusing action started in The acquisition of Orascom Cement Industries announced on 10 December 2007 is part of that new dynamic, enabling growth to proceed at a faster pace in the emerging countries and additional synergies to be obtained was also a year in which the Lafarge results improved in a highly contrasted economic environment; despite the slowing of the American market, the surging demand in the emerging countries, the generally favourable balance of supply and demand and the mobilisation of the group around the achievement of its Excellence 2008 goals meant that it was able actively to manage prices and costs. This trend continued through the last quarter of the year and a further improvement in the results is expected in The Cement business operated in the context of the slowdown in the United States, largely offset by strong growth in the emerging markets and the cost-cutting efforts. Sales volumes were higher, rising from 132 to 136 million tonnes, essentially due to the strong growth of the emerging countries, whose contribution to current operating income is now 53% compared with 49% in Revenue in the division thus grew 6.6% to EUR million, compared with EUR million in 2006, despite the adverse exchange rate impact of -3.7%. Based on comparable group structure and exchange rates, turnover increased by 9.9%. The impact of the price rise and product mix (+6.4%) is the main reason for this trend across all the markets. Volume growth at 3.5% is slightly down (+5.3% in 2006). 30 Annual report Pargesa 2007

31 Structure and key data Board of Directors, Senior Management and Auditors Message from the Chairman Business report Main shareholdings Corporate Governance report Consolidated financial statements Parent company financial statements Revenue in the Aggregates & Concrete business, at EUR million, grew 2.3% in 2007 (+19.6% in 2006), the slight decline in sales volumes and the negative exchange rate impact (-3.5%) being offset by a strong improvement in prices across all product lines, combined with increased penetration of high-value-added concrete products. Changes in group structure accounted for 0.4% and are essentially due to the acquisition of aggregate businesses in the United States and Poland, partly offset by the impact of the disposal of the operations in central Anatolia (Turkey). Based on comparable group structure and exchange rates, revenue grew 5.4% compared with 2006, recording a rise of 4.5% for pure aggregates (-3.9% in volume and 8.4% in price/mix) and 6.5% in ready-mixed concrete (-1.1% in volume and 7.6% in price/mix). Revenue in the Gypsum business fell 3.1% to EUR million compared with EUR million in 2006, following the adverse exchange rate impact. Based on comparable group structure and exchange rates, revenue is practically unchanged, the impact of the slowdown on the residential housing market in the United States being offset by the improvement in turnover in the other regions of the world. The turnover of Lafarge stands at EUR million, a rise of 4.2% compared with Internal growth benefited from a favourable balance of supply and demand in the main businesses, and from the group s exposure to the emerging markets. There were negative exchange rate impacts of 3.5%. Based on constant group structure and exchange rates, revenue rose 7.3%. Current operating income stands at EUR million, a rise of 17.0%. There was a negative exchange rate impact, mainly connected with the depreciation of the American and Canadian dollars and the South African rand against the euro. Based on constant group structure and exchange rates, current operating income grew by 21.3%. Net profit from continuing operations is EUR million (+27.9%). This increase takes account of the capital gain on the disposal of the operations in Turkey and restructuring provisions of EUR 81 million, essentially concerning the Excellence 2008 plan, and the fall in the effective tax rate to 26.2% in 2007 compared with 28.3% in Net profit from operations being disposed of produced a net profit of EUR 118 million, compared with a loss of EUR 4 million in This result is due to the capital gain on the disposal of the Roofing division of EUR 109 million. Group share of net profit rose 39.1% to EUR million, compared with EUR million in Minority interests grew 13.8% reflecting the net impact of the acquisition of minority interests in Lafarge North America, the purchase of minority shareholdings in Greece and the improvement of results in Romania, Malaysia, Russia, Serbia and Greece. The distribution of a net dividend per share of EUR 4.00, an increase of 33% compared to the dividend paid out in 2006, will be proposed to the Annual General Meeting on 7 May Annual report Pargesa

32 Pernod Ricard, second in the world for wines and spirits, occupies leading positions in every continent. Since it was established in 1975, major internal growth and numerous acquisitions, especially Seagram in 2001 and Allied Domecq in 2005, have enabled Pernod Ricard to become the second wines and spirits operator in the world. With a strong presence on every continent and good positioning in the emerging countries of Asia, Eastern Europe and South America, the group produces and distributes a range of wines and spirits spread across 15 strategic brands, 30 local brands that are leaders on their markets and a large number of regional brands. In spirits, the main group brands are : Chivas Regal, Ballantine s, Ricard, Martell, Malibu, Kahlua, Jameson, Beefeater, Stolichnaya, Havana Club, and The Glenlivet; in wines, the main brands are : Jacob s Creek, Montana and Mumm / Perrier Jouët (Champagne). 30 June June June 2007 Global data (EUR million) Shareholders equity 2'530 5'700 6'290 Market capitalisation 9'304 14'580 17'971 Consolidated net profit Total distribution Data per share (EUR) Net income Dividend (1) Shares issued (million) Pargesa interest (%) (2) (1) On , the Board of Directors decided to increase the company s capital by incorporating reserves and distributing free shares on the basis of one new share for every fi ve old shares held. These new shares will entitle the holder to the dividends. The stockmarket information presented predates the halving of the par value on and, for and , it predates the distribution of the free shares (2) at 31 December 2007 During , business was good throughout the world and especially in the emerging countries. The market for wines and spirits experienced sustained growth and the Pernod Ricard group was able to profit from this because of its global presence. Growth was further increased by the quality of the group s brand portfolio, especially in the premium segment occupied by its 15 strategic brands. Income was also boosted by commercial synergies of EUR 270 million achieved through the integration of Allied Domecq, in line with the plan presented at the time of the acquisition. 32 Annual report Pargesa 2007