SAVINO DEL BENE GROUP INTERNATIONAL FREIGHT FORWARDERS SHIPPING AGENT Directors Report on the consolidated financial statements CONSOLIDATED IFRS FINANCIAL STATEMENTS FOR THE YEAR ENDED AS OF 31ST DECEMBER 2010
Directors Report on the consolidated financial statements as of 31st December 2010 The consolidated financial statements as of 31st December 2010 have been prepared in accordance with the International Reporting Standards (hereafter referred to as the IFRS or International reporting standards ) issued by the International Accounting Standards Board (IASB) and adopted by the European Commission in accordance with Article No. 6 of EC Regulation No. 1606/2002 of the European Parliament and of the Council on 19th July 2002 as well as the provisions issued by way of implementation of Article No. 9 of Legislative Decree No. 38/2005. 1. GROUP PROFILE The Group operates in the multimodal shipping sector both in Italy and abroad, concentrating mainly on shipment by sea and by air. Specifically, the Group s activities involve the supply of multimodal shipping services, through the combined use of different carrier systems (road, rail, sea and air), capable of offering flexible services tailored to meet specific requirements. These activities are carried out without using the Group s own ships and planes but rather by putting together different logistics systems belonging principally to specialist external operators and adopting organisational solutions with a high technological content. Over time the Group s activities have assumed an increasingly international dimension as witnessed both by the existence of over 80 Group companies worldwide, with approximately 2,500 employees, and by the growth in the volume of traffic outside Italy, predominantly on South America/Far East/India routes. The Group s network of subsidiary companies, branches, commercial offices and agents (176 as of 31st December 2010) has been built up gradually in order to guarantee a widespread presence throughout the world, necessary both in order to provide our customers with a high quality service and to promote commercial initiatives aimed at the acquisition of additional market shares. Each company, in conjunction with the parent company, outlines the corporate and commercial strategies to be followed and periodically analyses the results associated with the achievement of objectives established beforehand. The Group has always concentrated greatly on the globalisation of the traffic, creating an international network over time which plays a leading role in this growth. The Group is in fact particularly active in developing logistical and organisational solutions with a high-tech content, which also make it possible to provide customers with the most Savino Del Bene Group 2
varied and differentiated highly-specialised logistics services with elevated added value, as well as more prompt information flows thereby permitting a considerable increase in work productivity. Each Group company, also based on its size and on the type of activity carried out, has its own sales force, divided up, in certain cases, by sector (sea/air and/or import/export). The Group also avails itself of sales staff with particular local expertise, in the event of wellestablished trade relations with specific countries and/or geographic areas. In addition to the function performed by the sales department, each Group company which carries out shipping activities also has an administrative and audit department, an operating department and, in certain cases, an information technology department as well. With regard to the Group structure, the following table shows the subsidiary companies included in the scope of consolidation as of 31st December 2010, with the relative direct parent company: Company name Registered offices Curre ncy Share capital (in thousands of local currency) Direct parent company Group % Albatrans (UK) Limited Glasgow (UK) GBP 50 Albatrans S.p.A. 35 Albatrans Cina Limited (Shanghai ) Shanghai (China) CNY 870 Albatrans S.p.A. 25 Albatrans France S.a.r.l Bordeaux (France) EUR 8 Albatrans S.p.A. 50 Albatrans GmbH Frankfurt (Germany) EUR 25 Albatrans S.p.A. 50 Albatrans Inc. New York (USA) USD 50 Albatrans S.p.A. 47.5 Albatrans International Pty Ltd. Sydney (Australia) AUD 200 Albatrans S.p.A. 50 Albatrans Limited (China) Hong Kong (China) HKD 1,000 Albatrans S.p.A. 25 Albatrans New Zealand Auckland (New Zealand) NZD Albatrans S.p.A. 25.5 Albatrans S.p.A. Scandicci (Florence) EUR 258 50 Albatrans Spain, S.L. Barcelona (Spain) EUR 60 Albatrans S.p.A. 50 Albatrans-Robert Group Logistic Inc Montreal (Canada) CAD 151 Albatrans S.p.A. 25.5 Alpha Line Limited Hong Kong (China) HKD 0.1 SDB Finanziaria S.A. 99 Arimar International S.p.A. Scandicci (Florence) EUR 124 B.B.A Breakbulk, Inc. New York (USA) USD 2 SDB Finanziaria S.A. C.R.T. Combined Railway Transport S.r.l. S. Giorgio (Bologna) EUR 10 Novibrama S.r.l. Cavallino S.r.l. Scandicci (Florence) EUR 10 CDC Caribe Inc. San Juan (Puerto Rico) USD 4 CDC S.p.A. 57.17 CDC RE S.r.l. Livorno EUR C.D.C S.p.A. 57.17 CDC S.p.A. Livorno EUR 1,690 57.17 Savino Del Bene Group 3
Company name Registered offices Curre ncy Share capital (in thousands of local currency) Direct parent company Group % Centro Spedizioni Internazionali S.p.A. Vicenza EUR 20 Commercial Department Containers CDC Canada Inc. Commercial Department Containers CDC De Mexico S.A. Toronto (Canada) CAD 1 CDC S.p.A. 57.17 Mexico City (Mexico) MXN 450 CDC S.p.A. 54.31 DG Air Cargo S.A. Buenos Aires (Argentina) ARS 352 SDB Finanziaria S.A. 96 DO.CA de Venezuela C.A. Caracas (Venezuela) VEB 19,000 Do.Ca S.r.l. 67.4 Do.Ca S.r.l. Livorno EUR 51 Fiorino Shipping S.r.l. Sesto Fiorentino (Florence) EUR 26 G. Noli Argentina Buenos Aires (Argentina) ARS 12 General Freight Inc. Canada Montreal (Canada) CAD 0.1 General Freight USA, Inc. New York (USA) USD 10 General Noli do Brasil Ltda São Paulo (Brazil) BRL 464 General Noli S.L. Valencia (Spain) EUR 500 General Noli Spedizioni Internazionali S.p.A. Modena EUR 1,000 Leonardi & C. S.p.A. Sassuolo (Modena) EUR 1,354 General Noli Spedizioni Internazionali S.p.A. General Noli Spedizioni Internazionali S.p.A. General Noli Spedizioni Internazionali S.p.A. General Noli Spedizioni Internazionali S.p.A. General Noli Spedizioni Internazionali S.p.A. Leonardi & Co. USA New York (USA) USD 2 Leonardi & C. S.p.A. 58.88 Leonardi Iberia S.A. Valencia (Spain) EUR 60 Leonardi & C. S.p.A. 58.88 Novibrama S.r.l. Livorno EUR 10 P.T. Savino Del Bene (Indonesia) Jakarta (Indonesia) IDR 200,000 SDB Finanziaria S.A. Sacid S.r.l. Rome EUR 10 Samawat Shipping Services Company Tripoli (Libya) LYD 1,000 SDB Finanziaria S.A. 65 60 67.4 60 58.88 51 Savino Del Bene Naklyiati Ltd. Istanbul (Turkey) TRY 927 Savino Del Bene (S) PTE Ltd. Singapore SGD 620 SDB Finanziaria S.A. Savino Del Bene (Switzerland) AG Basel (Switzerland) CHF 225 SDB Finanziaria S.A. Savino Del Bene (Thailand) Ltd. Bangkok (Thailand) THB 5,000 SDB Finanziaria S.A. Savino Del Bene (U.K.) Ltd. Basildon (UK) GBP 20 Savino Del Bene Argentina S.A. Buenos Aires (Argentina) ARS 510 SDB Finanziaria S.A. Savino Del Bene Australia Pty Ltd. Sydney (Australia) AUD 500 SDB Finanziaria S.A. Savino Del Bene Group 4
Company name Registered offices Curre ncy Share capital (in thousands of local currency) Direct parent company Group % Savino Del Bene Bulgaria EAD Sofia (Bulgaria) BGN 120 SDB Finanziaria S.A. Savino Del Bene Chile S.A. Santiago (Chile) CLP 29,752 SDB Finanziaria S.A. Savino Del Bene China Ltd Hong Kong (China) HKD 5,960 Savino Del Bene Colombia Bogotá (Colombia) COP 184,584 Savino Del Bene Corp. (Canada) Mississauga (Canada) CAD 40 Savino Del Bene Costa Rica S.A. Costa Rica CRC 59,375 Savino Del Bene d.o.o. Rijeka (Croatia) HRK 123 Trans Solutions Latino America S.A. 99.99 Savino Del Bene do Brasil Ltda São Paulo (Brazil) BRL 1,641 SDB Finanziaria S.A. Savino Del Bene Egypt Cairo (Egypt) EGP 530 SDB Finanziaria S.A. Savino Del Bene France S.A. Roissy (France) EUR 305 SDB Finanziaria S.A. 99.94 Savino Del Bene Freight Forwarders. (India) Pvt. Ltd. Bombay (India) INR 20,000 SDB Finanziaria S.A. Savino Del Bene Ghana Ltd. Tema (Ghana) GHS 113.6 SDB Finanziaria S.A. Savino Del Bene GMBH Hamburg (Germany) EUR 79 SDB Finanziaria S.A. Savino Del Bene GMBH (Austria) Vienna (Austria) EUR 73 SDB Finanziaria S.A. Savino Del Bene Japan Co., Ltd. Tokyo (Japan) JPY 96,000 Savino Del Bene Korea Co. Ltd. Seoul (South Korea) KRW 800,000 SDB Finanziaria S.A. Savino Del Bene LLC (Ukraine) Kiev (Ukraine) UAH 200 SDB Finanziaria S.A. Savino Del Bene Mexico S.A. Mexico MXN 1,764 SDB Finanziaria S.A Savino Del Bene Panama S.A. Panama USD 10 Trans Solutions Latino America S.A Savino Del Bene Perù SAC. Lima (Peru) PEN 2 SDB Finanziaria S.A. Savino Del Bene Poland S.p.z. o.o Warsaw (Poland) PLN 220 Savino Del Bene Portouguesa Lda Perafita (Portugal) EUR Savino Del Bene Russia, LLC St. Petersburg RUB 10 SDB Finanziaria S.A. Savino Del Bene S.A. Chiasso Chiasso (Switzerland) CHF 250 SDB Finanziaria S.A. 98.8 Savino Del Bene S.L. Alicante (Spain) EUR 800 Savino Del Bene Shanghai Co. Ltd. Shanghai (China) CNY 11,698 Savino Del Bene South Africa Ltd Johannesburg (South Africa) ZAR 0.4 SDB Finanziaria S.A. Savino Del Bene Uruguay S.A. Montevideo (Uruguay) UYU 1,125.6 SDB Finanziaria S.A. Savino Del Bene Group 5
Company name Registered offices Curre ncy Share capital (in thousands of local currency) Direct parent company Group % Savino Del Bene U.S.A Group. New York (USA) USD 1,200 SDB Finanziaria S.A. Savitransport Inc. New York New York (USA) USD 2 Savitransport S.p.A. 51 Savitransport S.p.A. Sesto Fiorentino (Florence) EUR 200 Savitransport Triveneto S.r.l. Sesto Fiorentino (Florence) EUR Savitransport S.p.A. 27.03 SDB Finanziaria S.A. Luxembourg EUR 8,553 SDB Information Technology S.r.l. Scandicci (Florence) EUR SDB Venezuela, C.A. Caracas (Venezuela) VEB 5 World Wide Cargo C.V. 50 Trans Solutions Latinoamerica S.A. Panama USD 200 SDB Finanziaria S.A World Wide Cargo C.V. The Netherlands EUR 891 SDB Finanziaria S.A 50 51 Savino Del Bene Group 6
2. REVENUES BY GEOGRAPHIC AREA The breakdown of sales revenues by geographic area in which the Group operates, net of the elimination of intercompany revenue totalling Euro 125,547 (Euro 98,384 as of 31st December 2009), is presented in the table below: Geographic area 31 Dec. 2010 % total 31 Dec. 2009 % total % change Dec. 10- Dec. 09 EUROPE 487,394 60.89% 367,470 64.18% 32.64% NORTH AMERICA 143,479 17.92% 90,450 15.80% 58.63% ASIA - OCEANIA 68,757 8.59% 51,406 8.98% 33.75% MIDDLE EAST - AFRICA 43,828 5.48% 24,107 4.21% 81.81% CENTRAL-SOUTH AMERICA 57,004 7.12% 39,143 6.84% 45.63% Total 800,462.00% 572,576.00% 39.80% There was an increase in sales revenues of 39.80% when compared with the previous year. The positive trend concerned all five geographic areas where the Group operates. The most significant increases were reported in Europe and North America. Sales revenue by geographic area as of 31st December 2010 Sales revenue by geographic area as of 31st December 2009 Savino Del Bene Group 7
Savino Del Bene Group 8
3. REVENUES BY BUSINESS SECTOR Revenues by business sector as of 31st December 2010 and 31st December 2009, net of intercompany eliminations for Euro 125,547 (Euro 98,384 as of 31st December 2009) are presented below: Business sector 31 Dec. 2010 % total 31 Dec. 2009 % total % change Dec. 10- Dec. 09 BY AIR 139,256 17.40% 101,014 17.64% 37.86% BY SEA 533,548 66.66% 377,817 65.99% 41.22% BY LAND 22,536 2.82% 17,473 3.05% 28.98% IMPORT, BROKERAGE AND DISTRIBUTION 105,122 13.13% 76,272 13.32% 37.83% Total 800,462.00% 572,576.00% 39.80% Analysis of the data presented above discloses an increase in air sales revenues of 37.86%, sea sales revenues of 41.22%, land sales revenues of 28.98% and import, brokerage and distribution sales revenues of 37.83%. Analysis by business sector as of 31st December 2010 and 31st December 2009 1,000,000 900,000 800,000 700,000 600,000 500,000 400,000 300,000 200,000,000 0 139,256 101,014 533,548 377,817 22,536 17,473 105,122 76,272 BY AIR BY SEA BY LAND IMPORT, BROKERAGE AND DISTRIBUTION 31 Dec. 2010 31 Dec. 2009 Savino Del Bene Group 9
4. VOLUME OF TRAFFIC The Group shipped a total of 295,716 TEUS by sea during 2010, 1 compared with 242,595 TEUS as of 31st December 2009, disclosing an increase of 21.90% with respect to the previous year. The table below shows the percentages, with respect to the total, of the TEUS shipped by the various geographic areas: TEUS by geographic area 31 Dec. 2010 % total 31 Dec. 2009 % total % change Dec.10-09 EUROPE 191,556 64.78% 161,686 66.65% 18.47% NORTH AMERICA 16,496 5.58% 12,667 5.22% 30.23% ASIA - OCEANIA 60,079 20.32% 43,778 18.05% 37.24% MIDDLE EAST - AFRICA 1,326 0.45% 901 0.37% 47.17% CENTRAL-SOUTH AMERICA 26,259 8.88% 23,563 9.71% 11.44% TOTAL SDB GROUP 295,716.00% 242,595.00% 21.90% With regard to the geographic areas concerned with the shipment of goods, the main area of traffic by sea remains North America, even if the routes towards the Far East are becoming increasingly important. TEUS - 31st December 2010 and 2009 comparison TEUS by geographic area 250,000 200,000 150,000,000 50,000 0 191,556 161,686 EUROPE 60,079 12,667 43,778 16,496 1,326 901 NORTH AMERICA ASIA - OCEANIA MIDDLE EAST - AFRICA 26,259 23,563 CENTRAL- SOUTH AMERICA 31 Dec. 2010 31 Dec. 2009 Geographic areas The by air sector presented the following results by contrast: kilos shipped by the Group amounted to 47,360 thousand as of 31st December 2010, against 37,702 thousand as of 31st December 2009, disclosing an increase of 25.62% with respect to 2009. 1 TEUS: Twenty feet Equivalent Unit- Container Standard equal to around 30m 3 used as the static measurement of the flows of the traffic capacities. Savino Del Bene Group 10
Kg/0 Directors Report on the consolidated financial statements as of 31st December 2010 In detail, the table below shows the percentage of kilos shipped in the various geographical areas, compared with the total: KG/1,000 by geographic area 31 Dec. 2010 % total 31 Dec. 2009 % total % change Dec.10-09 EUROPE 32,258 68.11% 25,150 66.71% 28.26% NORTH AMERICA 6,835 14.43% 6,120 16.23% 11.68% ASIA - OCEANIA 6,432 13.58% 4,384 11.63% 46.72% MIDDLE EAST - AFRICA 197 0.42% 275 0.73% -28.36% CENTRAL-SOUTH AMERICA 1,638 3.46% 1,773 4.70% -7.61% TOTAL SDB GROUP 47,360.00% 37,702.00% 25.62% There was an increase in traffic in the Asiatic, European and North American areas; the Middle East-African area and the Central-Southern American area were down slightly. Kg/1,000 31st December 2010 and 2009 comparison Kg/1,000 by geographic area 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 32,258 25,150 6,835 6,120 6,431 4,384 197 1,638 275 1,773 31 Dec. 2010 31 Dec. 2009 EUROPE NORTH AMERICA ASIA - OCEANIA MIDDLE EAST - AFRICA CENTRAL- SOUTH AMERICA Geographic areas During the financial year 2010, just the companies under the Savino Del Bene brand shipped 174,599 TEUS by sea (equivalent to 59.04% of the total volume shipped by the Group as a whole), compared to 138,949 TEUS as of 31st December 2009, disclosing an increase of 25.66% with respect to the previous year. By Sea 31 Dec. 2010 % total 31 Dec. 2009 % total SAVINO DEL BENE Companies Brand % change Dec.10-09 174,599 59.04% 138,949 57.28% 25.66% Total Group 295,716.00% 242,595.00% 21.90% Savino Del Bene Group 11
By Sea The kilos shipped by air by just the companies under the Savino Del Bene brand as of 31st December 2010 amounted to 36,572 thousand (equivalent to 77.22% of the total shipped by the entire Group) compared to 29,229 thousand as of 31st December 2009, disclosing an increase of 25.12% with respect to last year. By Air (KG/1,000) 31 Dec. 2010 % total 31 Dec. 2009 % total SAVINO DEL BENE Companies Brand % change Dec.10-09 36,572 77.22% 29,229 77.53% 25.12% Total Group 47,359.00% 37,702.00% 25.61% By Air Savino Del Bene Group 12
5. SUMMARY CONSOLIDATED INCOME STATEMENT (in thousands of Euro) 31 Dec. 2010 % 31 Dec. 2009 % Change 2010-2009 Change % 2010-2009 Revenues from sales and services 800,462 99.39% 572,576 99.11% 227,886 39.80% Other revenues 4,878 0.61% 5,130 0.89% (252) -4.91% REVENUES 805,340.00% 577,706.00% 227,634 39.40% Cost of raw and consumable materials (1,645) -0.20% (1,473) -0.25% (172) 11.68% Services (669,709) -83.16% (465,288) -80.54% (204,421) 43.93% ADDED VALUE 133,986 16.64% 110,945 19.20% 23,041 20.77% Payroll and related costs (90,410) -11.23% (81,775) -14.16% (8,635) 10.56% Other operating costs (4,549) -0.56% (4,721) -0.82% 172-3.64% Depreciation and amortisation (6,422) -0.80% (6,482) -1.12% 60-0.93% Provisions and write-downs (844) -0.10% (724) -0.13% (120) 16.57% OPERATING PROFIT/(LOSS) - (EBIT) 31,761 3.94% 17,243 2.98% 14,518 84.20% GROSS OPERATING MARGIN (EBITDA) 39,027 4.85% 24,449 4.23% 14,578 59.63% Income from associated companies carried at equity 52 0.01% 20 0.00% 32 160.00% Financial charges (4,732) -0.59% (7,885) -1.36% 3,153-39.99% Financial income 262 0.03% 314 0.05% (52) -16.56% GROSS PROFIT (EBT) 27,343 3.40% 9,692 1.68% 17,651 182.12% Income tax (11,619) -1.44% (5,957) -1.03% (5,662) 95.05% NET PROFIT 15,724 1.95% 3,735 0.65% 11,989 320.99% As of 31st December 2010, the Group generated consolidated sales revenues of Euro 800 million, compared with Euro 572 million as of 31st December 2009, and added value of Euro 134 million compared with Euro 111 million last year. The increase in these two balances with respect to the previous year (+39.80% and +20.77%) is essentially attributable to the generalised pick-up in traffic. The gross operating margin (EBITDA) and net operating result (EBIT), respectively Euro 39 million (+59.63% compared with last year) and Euro 31.76 million (+84.20%), disclose considerable growth in profitability. The EBITDA as a percentage of revenues rose from 4.23 to 4.85 (+0.62%). Net profit amounted to Euro 15.72 million, up sharply with respect to the 2009 result (+320.99%). Savino Del Bene Group 13
The economic and financial performance during the year led to a positive change in the main profitability and financial ratios as shown below: Fixed asset funding ratios 31 Dec. 2010 31 Dec. 2009 Fixed asset to equity capital margin net equity fixed assets (48,461) (63,498) Fixed asset to equity capital ratio net equity / fixed assets 0.58 0.44 Fixed asset to equity capital and mediumlong term debt margin (net equity + consolidated debt) - fixed assets (3,169) (25,681) Fixed asset to equity capital and mediumlong term debt ratio (net equity + consolidated debt) / fixed assets 0.97 0.77 Gearing ratios Total indebtedness 312,003 249,182 Financial debt 136,638 113,298 Gearing/leverage ratio financial debt / net equity 2.08 2.26 Solvency ratios Liquidity margin current assets current liabilities 29,092 6,316 Liquidity ratio current assets / current liabilities 1.12 1.04 Profitability ratios Gross operating margin/revenues 4.85% 4.23% Return on investments (ROI) net operating income / average assets 9.07% 5.25% Return on sales (ROS) net operating income / revenues from services 3.97% 3.01% Return on equity (ROE) net profit-loss / average net equity 24.29% 6.10% Incidence of materials consumption on the value of production Incidence of services consumption on the value of production Incidence of the payroll and related costs on the value of production 0.20% 0.25% 83.16% 80.54% 11.23% 14.16% Value of production per worker 333 236 A number of alternative performance ratios (EBITDA and adjusted EBITDA) are presented in this report on operations - in addition to the conventional ratios envisaged by the IFRS - used by Savino Del Bene Group management to monitor and assess the operating performance of the same; as they are not identified as an accounting measure within the sphere of the IFRS, they must not be considered as alternative measures for the assessment of the performance of the Savino Del Bene Group s results. Since the composition of the EBITDA and adjusted EBITDA is not disciplined by the reference accounting standards, the calculation criteria applied by the Savino Del Bene Group may not be consistent with those adopted by others and therefore may not be comparable. These ratios are constructed as indicated below: Savino Del Bene Group 14
31 Dec. 2010 31 Dec. 2009 Gross profit/loss (EBT) 27,343 9,692 + Financial charges 4,732 7,885 - Financial income (262) (314) +/- Income/charges from equity investments in associated companies (52) (20) Operating profit/(loss) - (EBIT) 31,761 17,243 + Restructuring costs - - + Amortisation/depreciation 6,422 6,482 +/- Atypical income/charges - - Gross operating result (EBITDA) 38,183 23,725 + Write-down of receivables from customers (trade) 844 724 + Stock options plan costs - - Gross operating result (adjusted EBITDA) 39,027 24,449 Savino Del Bene Group 15
6. CONSOLIDATED NET FINANCIAL POSITION (in thousands of Euro) 31 Dec. 2010 31 Dec. 2009 Change 2010-2009 Change % 2010-2009 Cash and cash equivalents 52,992 26,273 26,719 102% Current financial assets 731 357 374 105% Medium and long term loans (45,378) (37,817) (7,561) 20% Financial liabilities (91,260) (75,481) (15,779) 21% Total net indebtedness (82,915) (86,668) 3,753 +4% The Group s net financial position as of 31st December 2010 disclosed a negative balance of Euro 82.91 million, compared with Euro 86.67 million at 31st December 2009, having increased 4%, or around Euro 3.8 million. The trend in the net financial position has been penalised in the past by the medium/long term debt contracted by the Parent Company in order to finance the IPO in 2003 and by the debts acquired during 2007 as a result of the inverse merger operation between the Parent Company and Cargo Venture S.p.A. The improvement in the net financial position has been possible thanks to the improved activities for handling trade receivables and the consequent reduction in the timescales (days) for collection of payments. The Group s liquidity for the period (ratio of current assets to current liabilities) comes to 1.12 and improved with respect to last year (1.04) see ratios table. 7. COVENANTS Covenants are contractual clauses upon which the continuation of the loan depends; these clauses are often linked to financial statement ratios or to company results which, if not met, render the loan repayable. In this connection, as of 31st December 2010 the Parent Company had the following mortgage contracts which envisage the following clauses: UniCredit Banca d Impresa: - Ratio of net financial indebtedness to shareholders equity of 2.5 or less; - Ratio of net financial indebtedness to gross operating margin of 5 or less. Mediocredito Centrale: - Ratio of net financial indebtedness to shareholders equity of 2.5 or less; Monte dei Paschi di Siena, this envisages the obligation to deposit at least 6% of the incoming cash flows deriving from the collection of receivables with the bank. The Savino Del Bene Group 16
occurrence of the hypothesis foreseen by Article No. 1186 of the Italian Civil Code gives the bank the right to cancel the contract. Mediocredito Italiano: - Ratio of net financial indebtedness to gross operating margin, at consolidated level, of 4 or less; BNL: - - Ratio of net financial indebtedness to gross operating margin of 3.0 or less for 2010 and 2011; after 2011, max 2.7; - Ratio of net financial indebtedness and shareholders equity of 2.2 or less until 2010; 1.5 maximum after. With regard to UniCredit, in the event of the failure to meet both of the abovementioned parameters, the bank reserves itself the right to apply a step up clause of 15 basis points per annum for those years in which the parameters are not met. As for Mediocredito Centrale, the failure to meet even one of the contractual obligations envisaged (covenants and disclosure obligations) gives the bank the right to cancel the contract unless, following the company s justified request, the bank consents to continue the loan. Furthermore, the loan agreement entered into with Monte dei Paschi di Siena, for Euro 5,000 thousand, envisages the obligation to deposit at least 6% of the incoming cash flows deriving from the collection of receivables with the bank. All of the above covenants had been observed as of 31st December 2010. 8. INVESTMENTS Fixed assets (tangible and intangible) have undergone various changes, due to commercial operations carried out as part of the Group s ongoing strategy of expansion on all of the principal markets, and a greater globalisation and internationalisation of its business. As part of the growth project, the Group assesses the appropriateness of carrying out further corporate acquisitions, or of putting together extraordinary business combinations with complementary companies and/or those which operate in the sector of the core business; transactions which could allow the market position to be strengthened. The principal changes in the consolidation area as of 31st December 2010 with respect to 31st December 2009, are summarised below. Savino Del Bene Group 17
Companies consolidated for the first time: - Samawat Shipping Services with registered offices in Tripoli (Libya), established in June 2010, share capital 1,000,000.00 Libyan dinars; SDB Finanziaria S.A. subscribed 65% of the share capital; - Savino Del Bene Russia, LLC, with registered offices in St. Petersburg, established in September 2010: the share capital of 10,000 roubles was fully subscribed by SDB Finanziaria S.A.; - Savino Del Bene Uruguay S.A. with registered offices in Montevideo; the share capital, amounting to UYU 1,126 thousand, was fully subscribed by SDB Finanziaria S.A.; - Savino Del Bene Ghana Ltd with registered offices in Tema (Ghana); the share capital, amounting to GHS 114 thousand, was fully subscribed by SDB Finanziaria S.A. Other changes worthy of note: - Acquisition in July 2010, by SDB Finanziaria S.A., of an additional 44% in the share capital of DG Air Cargo while the remaining 4% was acquired by Savino Del Bene Argentina S.A. By means of these latter acquisitions, DG Air Cargo is now wholly owned by the SDB Group; - Increase in the share capital of Savino Del Bene do Brasil Ltda for a total of Euro 550,000.00. - Increase in the share capital of Savino Del Bene Korea Co Ltd for a total of Euro 350,000.00. 9. RISKS AND UNCERTAINTIES TO WHICH THE COMPANY IS EXPOSED Risks associated with the general economic situation The results of the Group s activities are directly influenced by the volume of international commercial traffic, which in turn is influenced by economic, political and social factors outside the Group s control. The occurrence of such factors, which are often difficult to forecast, could determine a drop in future demand for the services offered by the Company, with possible negative effects on its economic, equity and financial situation. The profitability of the services rendered is also influenced by the trend in charter freight charges (which represent the core costs of the business activities) and which in turn depend directly on certain unpredictable factors such as the trend in oil prices, the availability of space on the various routes, the volume of goods Savino Del Bene Group 18
shipped at worldwide or local level, as well as the application of stricter legislation in this sector which renders the transport more costly for the carrier. In the absence of contractual coverage designed to exclude or limit the eventual effects of a fall in margins and in volumes handled, it is possible that the occurrence of such events could give rise to negative effects on the Company s economic, equity and financial situation. Credit risk The Group s exposure to credit risk is related almost entirely to trade receivables and to a lesser extent to other receivables. The Group only deals with known and reliable customers. It is Group policy to submit those customers who request extended terms of payment to verification procedures on the related credit class. In addition, the receivable balances are monitored throughout the year in order to contain the extent of exposure to losses. The trade receivables are stated in the financial statements net of the allowance for doubtful accounts, calculated on the basis of the risk of non-payment by the customer, determined considering the information available on the solvency of the customer and taking into account past experience. Trade receivables by geographic area as of 31st December 2010, compared with the previous year, are shown below: In thousands of Euro 31 Dec. 2010 % total 31 Dec. 2009 % total % change Dec.10-09 Europe 119,105 60.75% 91,154 62.71% 30.66% North America 36,488 18.61% 26,558 18.27% 37.39% Central-South America 10,485 5.35% 7,459 5.13% 40.57% Asia and Oceania 10,943 5.58% 7,979 5.49% 37.15% Middle East And Africa 19,042 9.71% 12,217 8.40% 55.86% Total 196,063.00% 145,367.00% 34.87% The table below shows the analysis of trade receivables by maturity: In thousands of Euro 31 Dec. 2010 % total 31 Dec. 2009 % total % change Dec.10-09 Between 0 and 60 days 164,726 80.41% 116,842 75.61% 40.98% Between 60 and 90 days 13,948 6.81% 15,067 9.75% -7.43% Between 90 and 120 days 5,517 2.69% 5,272 3.41% 4.65% Between 120 and 180 days 4,503 2.20% 2,845 1.84% 58.28% Between 180 and 365 days 16,153 7.89% 14,505 9.39% 11.36% Gross Total 204,847.00% 154,531.00% 32.56% Savino Del Bene Group 19
Provision for doubtful receivables (8,784) -4.29% (9,164) -5.93% -4.15% Net total as per Financial statements 196,063 145,367 No significant exposure to credit risk exists related to any single customer. All the balances which refer to trade receivables, both as of 31st December 2010 and 31st December 2009, relate to receivables due within 12 months. Interest rate risk The Group s sensitivity to interest rate risk is handled by appropriately taking into account the overall exposure; as part of its general policy of optimising its financial resources, the Group tries to reach an equilibrium by using less costly forms of finance. It is also Group policy that the hedge repayment plan mirrors, in terms of maturity date and notional value, the repayment plan for the underlying debt. During 2010, no operations were undertaken for the hedging of interest rate risk related to medium and long term loans. The cost of indebtedness towards banks is linked to the Euribor/Libor rate for the period, plus a spread that depends upon the type of credit facilities utilised in any event equal per type of facility. The utilisation varies from a minimum of a few days up to a maximum of one year. The margins applied are in line with the market standards. The interest rate risk to which Group companies are exposed derives mainly from outstanding financial liabilities. Exchange rate risk The Savino Del Bene Group is exposed to fluctuations in the exchange rates of the currencies in which it invoices its sales, which translates into the risk that the equivalent value in Euro of revenues is insufficient to cover production costs and achieve the desired margin. This risk is emphasised due to the significant time lapse between the moment in which the shipping prices are set and the moment in which the revenues are converted into Euro. In order to limit the exposure to exchange rate risk deriving from its commercial operations, the Parent Company and a number of its subsidiary companies enter into forward currency sales/purchase contracts aimed at defining the exchange rate in advance, or a pre-defined range of exchange rates at a future date. Further details are disclosed in Note 41 to the consolidated financial statements. Savino Del Bene Group 20
10. TRANSACTIONS WITH ASSOCIATED COMPANIES AND OTHER RELATED PARTIES These are disclosed in detail in Note 38 to the consolidated financial statements. 11. RESEARCH AND DEVELOPMENT ACTIVITIES During the financial year, the Group continued its activities for the training and constant updating of personnel for the diffusion of standardised methods and for the use of office automation programmes. Customised applications continue to be spread among the Group companies for the main customers, achieved on the WEB in order to permit interconnection between the IT system of certain Group companies and that of said customers. 12. SIGNIFICANT EVENTS AFTER THE END OF THE ACCOUNTING PERIOD No significant events arose after the end of 2010, which would have modified the figures shown in these financial statements. In January 2011, the Company s ordinary shareholders meeting authorised the purchase of treasury shares consequent to the manifestation by the "MPS Venture 1" shareholder of its will to sell the equity investment of 7.48% held in the Parent Company s share capital. The main reasons are attributable to the following aspects: (i) maintaining the Savino shareholding structure unchanged, avoiding that M.P.S. Venture SGR S.p.A. sells its investment to shareholders outside the current structure; (ii) using treasury shares as investment for an efficient use of the liquidity generated by the Company s core activities, taking into account that the purchase price is fair given the significant growth prospects of the Group of companies; (iii) availing of securities to be used as payment within the sphere of any extraordinary and/or strategic transactions such as stock market listing, also by means of exchange of equity investments with other parties, including industrial and/or commercial partners; (iv) establishing the funding necessary for executing any stock option plans which may be approved in the future, plans which may be launched for the purpose of making the ability to attract and maintain the best managerial skills within the Company more competitive. Furthermore, it should be noted that the current political situation in Libya and the related logistical consequences (closure of the ports to traffic, intermittent business activities care of all the offices) have left the new company opened in Tripoli in June 2010 on stand-by. At present, neither the write-down nor the disposal of the same is envisaged since it is a company established to serve a specific clientele linked to the energy sector, located in this geographic area; a resumption in working activities to a greater extent is envisaged just as soon as the political situation is back to normal. Savino Del Bene Group 21
13. DISCLOSURE PURSUANT TO ITALIAN LEGISLATIVE DECREE NO. 196 DATED 30TH JUNE 2003 In relation to the fulfilments envisaged by Italian Legislative Decree No. 196/03, the Group has carried out all of the checks and/or activities necessary for the updating of its Data security planning document each time this is required in relation to any corporate or legislative changes. In any event, even when no changes have taken place, a careful review of the adequacy and efficiency of the measures adopted is envisaged during the year. 14. TREASURY SHARES Pursuant to the matters envisaged by Article No. 2428, sections 3 and 4 of the Italian Civil Code, it should be noted that in January 2011 the Parent Company authorised (for a period of 18 months) the Board of Directors (represented by the Chairman) to purchase a maximum number of treasury shares equating to 8,113,788 shares for a total of Euro 11,582,060. This purchase was consequent to the manifestation by the "MPS Venture 1" Closed-End Property Fund shareholder of its will to sell the equity investment of 7.48% held in the share capital of Savino 15. BUSINESS OUTLOOK During 2010, the Group reported a generalised pick-up in traffic with a decisive increase in sales revenues, profitability and the main income and financial ratios (the gross operating margin achieved rose around 60% when compared with 2009) involving a significant improvement in the net result with respect to the previous year, exceeding the budget expectations envisaged. With regard to the forecast economic scenario, 2011 will see the continuation of the core business activities, consolidated and confirmed both on foreign markets and in Italy and, in the absence of negative events which cannot be foreseen at present, a positive evolution of the balance sheet and income statement situation of the Group is envisaged together with noticeable growth and development. The Group s efforts will continue to be focused on the generation of important cash flows and the improvement of the significant operating margins achieved in 2010. This assessment is the direct consequence of the analysis of the quantitative data for the first quarter of 2011, clearly up with respect to last year. Scandicci (Florence), Italy, 30th March 2011 on behalf of the Board of Directors Paolo Nocentini - Chairman Savino Del Bene Group 22