Put Rome At the centRe of the woRld
Annual Report 2012
our mission
Put Rome at the centre of the world
The Gemina Group manages the Rome airport system with the aim of supporting the constant expansion of its market by guaranteeing a service that is in line with international top quality standards through the state-of-the-art and constantly maintained infrastructures and systems available. the Group is committed to developing the airport capacity to face the traffic growth expected by 2044 (about 100 million passengers).
I figures
Infrastructure worthy of a capital city
With over 41.5 million passengers a year, the Rome airport system represents the most important transport infrastructure in the whole of Italy.
the "leonardo da Vinci" airport alone manages a traffic of 37 million passengers (about 30% of the entire national market), making it the main Italian airport, the sixth hub and the seventh airport in europe in terms of traffic volume.
II market
More than 200 routes for one destination
The Rome airport system enjoys a strategic position due to both the attractiveness of one of the most sought after tourist destinations in the world and its geographic position, which is central with respect to the Italian peninsula and the entire Mediterranean area. the more than 100 airlines that service fiumicino and ciampino airports with about 230 routes can also count on a catchment area that provides a user base of 12 million potential passengers in a radius of only 250 km.
III Investments
We give value to our future
In the last ten years the Gemina Group has invested almost one billion euro in the maintenance and safety of the existing assets, entirely relying on self-financing despite the absence of a reference tariff framework.
A significant increase in expenditure for the creation of new structures is expected already this year, thanks to the approval of the new Planning Agreement - 1.2 billion in the first 4 years (2013- 2016) and 3.1 billion in the first 10 years (2013-2022) to progressively reach about 12 billion euro until the end of the concession.
IV Quality management
A commitment taking us high up
Despite the limitations imposed by the infrastructural saturation, the quality of the services offered to carriers and passengers is improving progressively thanks to restructuring and managerial optimization actions.
In 2011 IAtA certified such progress by awarding the “leonardo da Vinci” airport the Best Improvement premium for the improvements attained in baggage handling. moreover, in 2012 fiumicino proved to be the european airport with the lowest number of left behind baggage.
V People
We invest in our most valuable asset
To encourage the human and professional growth of our about 2,300 employees, the Group actively promotes the spreading and sharing of knowledge by constantly investing in training programs.
13,000 hours of courses were held last year to develop the key skills of the various professional figures and promote a well-rooted safety culture at all levels, which is an indispensable element to safeguard the well-being of our employees.
VI environmental sustainability
Aiming for the sky while respecting the earth
The Gemina Group works while respecting the environment. thanks to the saving actions implemented in the last three years, in 2012 the energy consumption of the leonardo da Vinci airport decreased by 23,000,000 kwh compared to the trend data, with a 13% saving equivalent to the average consumption of 25,000 inhabitants. this result was possible thanks to some actions taken by the Group: extraordinary maintenance, calibrations and supply adjustments, in addition to an intense awareness-raising campaign addressing the employees and external bodies. fiumicino development will go hand in hand with high environmental sustainability, thanks to the self- production of energy by using renewable sources, the harmonization of the new infrastructures with the local territorial context, the integrated management of the waste cycle and the conduction of advanced environmental mitigation projects.
VII Growth prospects
Italy restarts from here
The Rome airport system significantly contributes to the economic development of the Lazio region and the whole of Italy.
A traffic increase of one million passengers a year at both airports corresponds to about 1,000 direct and 4,000 indirect jobs created, in addition to obtaining an added value higher than 400 million euro. moreover, the implementation of the new development plan approved in 2012 will result in 30,000 new employees in the next 10 years to reach about 230,000 in 2044, combined with a rise in GdP equal to 20% on a regional basis and 0.6% on a national scale.
VIII contents
2 SYnthetIc dAtA And GeneRAl InfoRmAtIon
10 mAnAGement RePoRt on oPeRAtIonS
85 conSolIdAted fInAncIAl StAtementS
156 GemInA S.P.A. SePARAte fInAncIAl StAtementS SYnthetIc dAtA And GeneRAl InfoRmAtIon letter to shareholders
Dear shareholders, the Gemina Group plays a major role in the Italian and international air transport scenario as it manages two airports strategically positioned in the mediterranean basin, which continuously attract passengers from around the globe thanks to the solidity and growing importance of Rome as a tourist destination. the Rome airport system is an essential element of the system of communication and exchanges in Italy and europe, providing indispensable support for Italy's economic and social growth.
2012 was an important year for the Gemina Group as it marked the signing of the Planning Agreement that, after years of waiting, has resulted in a new regulatory framework based on clear, transparent and long-lasting rules until the end of the concession. on december 21, 2012 the Prime minister approved the new Planning Agreement signed on october 25, 2012 between Aeroporti di Roma S.p.A. (“AdR”) and the Italian civil Aviation Authority (enAc). the new tariff plan, which will come into force by the first half of 2013 with an average tariff equal to about 25 euro per outbound passenger, significantly reduces the gap with the european reference tariffs, which remain higher on average. the increases take into account the objectives of productivity, service efficiency and quality as well as the respect for the environment, ensuring the creation of sustainable value for all of our stakeholders.
Investments will be considerably boosted in the next four years (2013-2016) and will amount to approximately 1,250 million euro compared to less than 300 million euro worth of investments made in the previous four years. the Group is committed to completing an overall investment plan of about 12 billion euro as of 2044 to enhance the Rome airport system and adjust it to face the growing demand for traffic. the extent and complexity of this development project have no equal in the national and european scenario. this important challenge will fill the growing competitive gap formed in the last ten years and immediately relaunch the current airport in preparation for the development of the new airport of fiumicino nord. By 2022 a modern and efficient infrastructure will manage 55 million passengers, making fiumicino one of the main european hubs; this figure will rise to 100 million in 2044, providing direct access to Italy and a city that has always been one of the most beautiful and sought after by tourists and business people from all over the world. the new tariff regime will encourage the development and growth of the Rome airport system and the new investment plan will be very important for Italy and its economy. the airport is a development engine that may have a significant positive impact on Italian GdP and directly and indirectly employ over 230,000 people. the new regulatory framework will also promote the development of long distance traffic from emerging markets. over the last few years the attractiveness of our offer towards them has been negatively affected also by the current infrastructural deficiency and the saturation in peak hours. 2012 was an important year also in terms of organization. Spin-off transactions and sales of
2 companies and company branches were carried out, which led to greater focus being placed on the airport core business, aligning AdR with international best practices. In particular, the process was completed for the sale of the “duty free core categories” business to the company Aelia, from the lagardere Group, for a total price of about 230 million euro, resulting in considerable multiples when compared with the market average. this confirms our unique growth potential. the companies AdR mobility S.r.l. and AdR Security S.r.l. were established with the aim of improving the level of service to customers, while the vehicle maintenance company branch was transferred to a specialised operator. moreover, despite the uneasy financial market situation, AdR payable of 500 million coming due on 20 february 2013 (line A1 Romulus) was refinanced by a pool of 8 banks, setting the new maturity term to february 2015.
the negative economic situation and the difficulties faced by the main carriers, Alitalia in particular, contributed to a traffic reduction of 2.2%; the slight improvement of the economic results was deemed satisfactory in consideration of the scenario described above.
An important aspect for the Group management in 2012, and increasingly in the future, is the attention paid to the main stakeholders according to a business model inspired by sustainability. focus on value creation is combined with attention to the main social and environmental issues. An important confirmation comes from this new edition of the financial statements, which is supplemented by the Sustainability Section. Against this backdrop, the Group will continue along its strategic growth path, committed to guaranteeing efficient company management focused on the infrastructural development of the market while communicating constructively with the expanded community of stakeholders to create sustainable value and contribute to improving Italy's economy.
finally, it is pointed out that a possible integration with Atlantia S.p.A. is being considered, which, among other things, may support the fulfilment of the commitments envisaged by the new Planning Agreement.
The Chairman The Managing Director
3 the Group’s main economic and financial figures
5(9(18(6)520$,53257 2SHUDWLQJDQG¿QDQFLDOUHVXOWV 2012 2011 0$1$*(0(17 (+0.0%) (Mn euro) 2011 544.3 Revenues from airport management 544.6 544.3 2012 544.6 EBITDA 266.0 263.8 EBITDA % 48.8% 48.5% EBIT 99.2 93.9 EBIT % 18.2% 17.3%
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4 Information for investors and financiers
Gemina share information 2012 Share capital as at 31 December 2012 1,472,960,320 No. of ordinary shares 1,469,197,552 No. of savings shares 3,762,768 Market capitalisation as at 31 Decembre 2012 (Mn euro) 1,611.9 Earnings per share (euro) (*) 0.132 FFO per share (euro) (*) 0.098 Price at year end (euro) 1.074 High (28/12/2012 - euro) 1.074 Low (12/01/2012 - euro) 0.539 Rating (referred to ADR): - Standard & Poor’s BBB– - Moody’s Baa3
Gemina shareholders as at 31 December 2012 (on ordinary share capital)
Sintonia S.p.A. (1) 35.931% Silvano Toti Holding S.p.A. 12.836% Mediobanca S.p.A. (1) 12.560% Worldwide United (Singapore) Pte Ltd (1) (Changi Airport Group) - 8.359% Fondiaria Sai S.p.A. (1) 4.185% UniCredit S.p.A. (1) 3.415% UBS AG 3.198% Assicurazioni Generali S.p.A. (1) 3.055% Norges Bank 2.048% Float 14.278% (2)
(*) Consolidated figures (1) Companies adhering to Gemina’s shareholders’ agreement (2) Except treasury shares in portfolio, equal to 0.136% Source: shareholders’ ledger, Consob, other available information 5
Gemina share performance in 2012
1.20 20
18
1.00 16
14 0.80 12
0.60 10
8 0.40 6
4 0.20
2
0 0 1Q 2Q 3Q 4Q Price Volumes
Market proce (euro) Daily volumes (million)
Gemina share performance for 2010-2012
1.20 20
18
1.00 16
14 0.80 12
0.60 10
8 0.40 6
4 0.20
2
0 0 2010 2011 2012 Price Volumes
Market price (euro) Daily volumes (millions)
6 corporate bodies
Board of Directors In office until the Meeting to approve the Financial Statements 2012 fabrizio Palenzona Chairman carlo Bertazzo Managing Director Giuseppe Angiolini Independent Director Giuseppe Bencini Independent Director Stefano cao Director carlo cimbri (1) Director Giovanni fontana Independent Director Beng huat ho Director Sergio Iasi Independent Director Alberto minali (2) Director Gianni mion (3) Director Vittorio ogliengo (4) Director clemente Rebecchini Director Antonio Sanna Secretary
Internal Control Committee In office until the Meeting to approve the Financial Statements 2012 Giuseppe Angiolini Stefano cao (5) Sergio Iasi
Remuneration and Human resources Committee In office until the Meeting to approve the Financial Statements 2012 Giuseppe Bencini Giuseppe Angiolini Stefano cao Giovanni fontana clemente Rebecchini
Board of Statutory Auditors In office until the Meeting to approve the Financial Statements 2014 luca Aurelio Guarna Chairman mario tonucci Statutory Auditor lelio fornabaio Statutory Auditor Antonio Santi Alternate Auditor carlo Regoliosi Alternate Auditor luca Zoani Alternate Auditor
Independent Auditors Appointment extended by the shareholders’ meeting of 07 May 2007 for the 2007-2012 period deloitte & touche S.p.A.
(1) coopted by the Board of directors on 01 february 2013 in place of massimo Pini (2) coopted by the Board of directors on 25 october 2012 in place of massimo Perona, resigned on 22 october 2012 (3) coopted by the Board of directors on 2 August 2012 in place of Valerio Bellamoli, resigned on 24 July 2012 (4) coopted by the Board of directors on 25 october 2012 in place of Piergiorgio Peluso, resigned on 8 october 2012 (5) Appointed by the Board of directors on 2 August 2012 in place of Valerio Bellamoli, resigned on 24 July 2012 7 Group structure
Aeroporti Fiumicino di Roma S.p.A. Energia S.r.l. 95.90% 87.14%
10% 90%
Leonardo Energia Soc. ADR Consortile a r.l. 100% Mobility S.r.l.
ADR 100% Security S.r.l. Pentar S.p.A. 16.38% ADR ADR 100% Engineering Assistance 100% S.p.A. S.r.l.
ADR 1% ADR 100% Sviluppo TEL 99% S.r.l. S.p.A.
ADR Advertising 51% S.r.l.
8 mAnAGement RePoRt on oPeRAtIonS Annual Report 2012 Report on operations
Report on operations
CORE BUSINESS 11 Reference scenario 12 Consolidated economic and financial performance 21 The Gemina Group businesses 27 Investments of the Group 31 Risk factors of the Gemina Group 33 Economic and financial performance of Gemina S.p.A. 40 Corporate transactions 42 The new Planning Agreement 44 SUSTAINABILITY 51 Corporate governance 52 Human resources 58 Airport Safety 62 Relationships with the territory 64 Service quality 65 Suppliers 67 Environment 69 OTHER INFORMATION 75 Adjustments and amendments to the reference legal framework 76 Intercompany relations and transactions with related parties 77 Subsequent events 79 Business outlook 81 PROPOSALS TO THE SHAREHOLDERS' MEETING 83 Proposals to the shareholders' meeting 84
10 core business Annual Report 2012 Report on operations
Reference scenario
Airport sector performance
Aviation Air transport performance was and is significantly affected by the macroeconomic situation existing internationally and in individual geographic areas. The difficult economic scenario has negatively influenced passengers' propensity to fly, thus conditioning the supply and affecting the turnover of the carriers, which in turn continue to pursue strategies that focus on costs, with consequent measures to rationalize their networks. Mostly affected were lower-traffic and/or less profitable routes, also due to the high incidence of the cost of fuel. In 2012 world air traffic recorded a total of about 4.1 billion passengers and 66.9 million tonnes of transported cargo, with a 3.9% increase in passengers and a 0.2% decrease in cargo, compared to 2011, respectively. The growth of passenger traffic was driven by the trend of international traffic (+5.3%), while domestic traffic rose by 2.8% compared to the previous year1. In 2012 airport traffic at European level recorded an overall increase in passenger traffic of 1.8% compared to 2011, also in this case driven by the rise in international traffic (+2.8%), which more than offset the decrease in domestic traffic (-1.8%). Overall cargo traffic decreased by 3.0% compared to 20112. In the same period the air transport in Italy saw passenger volumes decrease by 1.3%, up 1.7% at international level against a 5.2% drop at domestic level, while cargo traffic decreased by 4.9%3.
GRAPH 1. % change vs. 2011 in passenger traffic: World, Europe and Italy 5.4% 4.9% 4.7% 4.6% 4.6% 7.3% 3.2% 3.2% 3.2% 3.1% 3.1% 3.0% 2.6% 2.5% 2.4% 2.4% 2.4% 2.3% 1.9% 1.8% 1.1% 1.0% 0.8% 0.7% 0.5% 0.3% 0.3% 0.1% 0.2% 0.4% - - 0.9% - 1.4% - - 2.1% - 4.7% - 6.2% Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. - Dec. 7.4% - World 4.9% 7.3% 5.4% 4.7% 3.0% 4.6% 2.4% 4.6% 2.6% 2.3% 3.2% 2.5% Europe 3.1% 3.2% 3.2% 1.9% 1.0% 3.1% 1.1% 2.4% 1.8% 0.3% 0.8% -0.9% Italy -0.4% -2.1% -1.4% 2.4% 0.5% 0.7% 0.3% -0.1% -0.2% -4.7% -6.2% -7.4%
1 Source: ACI 2 Source:ACI 3 Source: Assaeroporti
12 Annual Report 2012 Report on operations
In 2012 the main European airport operators recorded results ranging between +2.6% for Amsterdam and -9.0% for Madrid; the graph below shows overall traffic volumes and the relevant percentage differences compared to the previous year.
GRAPH 2. Results of the main airport systems in Europe
140 4
120 2
100 0
80 -2
60 -4
40 -6
20 -8
- -10 Rome Milan London Paris Frankfurt Amsterdam Madrid Munich (FCO+CIA) (MXP+LIN) Pax (mil.) 122 89 58 51 45 42 38 28 ∆% vs previous year 0 5 0 8 1 9 2 6 -9 0 -2 2 1 6 -2 3 ......
Non Aviation The Travel Retail market recorded an overall positive trend at both national and international level. At European level4 in particular the sector experienced an 8.0% growth with a trend of revenues per passenger rising by 5.0% compared to the previous year. With reference to sales to the public at shops in airports and ports, onboard ferries and planes, the Travel Retail market is estimated to have a value of about 11.4 billion euro at European level, 8.3 billion euro of which for airports5 only, which represent the most important channel. The value of this market in Italy is about 600 million euro. As regards refreshment outlets, the Food & Beverage market is estimated at about 2.88 billion euro in Europe and 250 million euro in Italy6.
GRAPH 3. Mix by sale channel Mix by product segment
Tobacco Food 10 % Other 9% (s weet and savory) 12 % Ferries Airplanes Wine & 23% Alcohol 47% 19 %
Perfumes & Fashion C o s metic s A irpo rts Brand 35% 21% 24%
4 Provisional data ETRC (European Travel Retail Council) index 5 Source: Generation/ETRC/ATRI (Associazione Travel Retail Italia) 6 Source: ATRI
13 Annual Report 2012 Report on operations
The Rome Airport System
Aviation During 2012 about 41.6 million passengers used the Rome airport system, recording a 2.2% decrease compared to the previous year. In terms of capacity, a decrease was recorded in movements (-4.9%), aircraft tonnage (-3.9%) and seats (-3.4%). The lower drop in passengers compared to the capacity offered led to a higher average load rate (71.8%), which grew by 0.9 percentage points.
TABLE 1. Main traffic data of the Rome airport system
2012 2011 Δ% Movements (no.) 364,516 383,210 (4.9%) Fiumicino 313,850 328,496 (4.5%) Ciampino 50,666 54,714 (7.4%) Passengers (no.) 41,562,107 42,480,476 (2.2%) Fiumicino 37,063,000 37,693,465 (1.7%) Ciampino 4,499,107 4,787,011 (6.0%) of which: boarded 20,699,423 21,175,179 (2.2%) Fiumicino 18,449,268 18,781,304 (1.8%) Ciampino 2,250,155 2,393,875 (6.0%) Cargo (tonnes) 152,791 161,678 (5.5%) Fiumicino 135,848 142,835 (4.9%)
Ciampino 16,943 18,843 (10.1%) Carriers (no.)7 Fiumicino 102 105 Ciampino 2 3
Destinations (no.)8 Fiumicino 200 194 Ciampino 51 50
The graph below shows the monthly trend of passenger traffic both in terms of absolute volumes and percentage difference compared to the previous year. In 2012 in particular some events must be highlighted which negatively affected the traffic at the Rome airport system: the snow emergency (February 2012) and some days of strike, which led to an overall estimated loss of about 130 thousand passengers and more than 700 flight cancellations.
7 These are determined on the basis of commercial passenger traffic which took at least one flight a week on average during the year (minimum 104 movements a year). 8 See previous note.
14 Annual Report 2012 Report on operations
GRAPH 1. Monthly trend in 2012 of passenger traffic in the Rome airport system compared to the previous year
5.0 2% 4.5 0% 4.0 3.5 -2% 3.0 2.5 -4% 2.0 -6% 1.5 1.0 -8% 0.5 0 -10% Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec. Pax (mil.) 2.8 2.5 3.2 3.6 3.7 3.8 4.3 4.3 4.0 3.7 2.9 2.8 ∆% vs previous year 0.3% -3.1% -1.4% 0.9% -1.7% -1.7% -0.2% -0.3% -0.3% -5.2% -6.2% -9.1%
In terms of passenger traffic distribution by geographic area, with the sole exception of Italy (- 7.9%) and North America (-5.4%), all the other areas show a positive change, particularly for the regions in the Middle East (+11.0%) and Central South America (+6.3%).
GRAPH 2. Passenger traffic distribution at the Rome airport system by geographic area 20.0 15 % 18 .0 16 .0 10 % 14 .0 12 .0 5% 10 .0 8.0 0% 6.0 \ 4.0 -5% 2.0 - -10% Wes tern E as tern No rth C /S o uth Middle Italy Far East Africa Europe Europe America America East
T o tal 12.9 17.8 3.5 2.2 0.8 1.7 1.2 1.5 ∆% vs previous year -7.9% -0.3% 3.7% -5.4% 6.3% 11. 0 % 1. 2 % 1. 2 %
A more synthetic breakdown by sector shows how the Extra EU segment represents the main growth driver for the Rome airport system (+3.1% with a 24.7% share compared to total traffic).
GRAPH 3. 2012 traffic composition at Rome airport system
Change 2012 / 2011 +3.1% -2.2%
10.2 -0.7% 25% 31%
18.4 41.5 -7.9%
44% 12.9
Domestic UE Extra UE Total
15 Annual Report 2012 Report on operations
TABLE 2. Average fees applied to domestic, EU and Extra EU traffic (euro)
UNIT 2012 2011 Δ% Outbound passenger fees domestic and EU pax 5.57 5.54 0.6% Extra EU pax 7.64 7.59 0.7% Landing and take-off fees domestic and EU tonnes 1.63 1.62 0.7% Extra EU tonnes 2.43 2.41 0.8% Parking fees national tonnes 0.07 0.07 n.a international tonnes 0.07 0.07 n.a
In terms of network, the Rome airport system, with the two airports of Fiumicino and Ciampino, connected about 230 destinations through 100 carriers. The carriers and the most significant destinations are reported in the graphs below.
GRAPH 4. Main destinations serviced
THOUSANDS OF PASSENGERS
MILAN (*) 2,041 LONDON 1,911 PARIS 1,897 CATANIA 1,614 PALERMO 1,367 MADRID 1,353 BARCELONA 1,032 AMSTERDAM 928 CAGLIARI 899 TURIN 882
(*) Linate + Malpensa
GRAPH 5. Main carriers
THOUSANDS OF PASSENGERS
ALITALIA 16,732 RYANAIR 4,356 EASYJET 2,913 BLUE PANORAMA 1,180 LUFTHANSA 1,098 VUELING 977 AIR FRANCE 881 WIZZ AIR 754 BRITISH AIRWAYS 735 MERIDIANA FLY 682
16 Annual Report 2012 Report on operations
Fiumicino The result for 2012, with a passenger traffic of over 37 million and a 1.7% reduction compared to last year, was driven by the development of international traffic (+2.0%), consequently to the performance of both the component from/to the European Union (+1.0%) and that from/to Extra EU destinations (+3.7%), against an 8.7% decrease in the domestic segment. The average load factor stands at 71.3%, with a growth of 1.1% compared to the previous year.
GRAPH 6. 2012 traffic composition for Fiumicino airport
Change 2012 / 2011 +3.7% -1.7%
10.2 +1.0% 28% 32%
15.0 37.1
-8.7%
40% 11.9
Domestic UE Extra UE Total
The negative domestic performance, in addition to the negative macroeconomic scenario mentioned above, is related to the difficult situation faced by some national airlines (insolvency of WindJet in August 2012, financial difficulties of the carriers Blu Panorama and Meridiana) and the reduction in the flights operated by Alitalia. This is compounded at international level by the insolvency of some airlines (Malev, Cimber Sterling) and the review of the network by some carriers to increase the performance. In such a difficult and fragmented context, ADR has developed the network by increasing the routes to countries/markets with higher development rates and a higher added value, including: Russia, with the new connections of Transaero to Moscow and Saint Petersburg, the increased frequency of Alitalia and Aeroflot Russian to Moscow and Rossiya Airlines to Saint Petersburg; Turkey, with increased frequency of Turkish Airlines to Istanbul; Brazil, with increased frequency of Alitalia to Rio de Janeiro; China, with increased frequency of China Eastern to Shanghai. This expansion also concerned the States of the former Soviet Union (Azerbaijan Airlines to Baku; Alitalia and Meridiana to Yerevan; Uzbekistan Airlines to Tashkent) and the Middle East (Saudi Arabian to Jeddah and Riyadh, Alitalia to Abu Dabhi) as well as the opening of new flights within the European Union such as Jet2.com to Glasgow and Newcastle, Monarch Airlines to Birmingham and London Luton, Alitalia to Zurich, Vueling and Transavia France to Nantes. Traffic performance at Fiumicino airport is certainly correlated to the main carrier (Alitalia), which in 2012 recorded an overall loss of passengers equal to 4.6% compared to the previous year, attributable to the drop recorded in both the Domestic (-6.4%) and EU (-6.5%) segment against a rise of 2.1% recorded by the Extra EU component.
17 Annual Report 2012 Report on operations
GRAPH 7. 2012 traffic composition for Alitalia
+2.1% Change 2012 / 2011 -4.6%
3.8 -6.5% 23%
3.6 -6.4%
16.7 55% 22%
9.3
Domestic UE Extra UE Total
Ciampino Ciampino airport while maintaining the maximum limit of a hundred commercial movements a day as capacity that can be allocated, in 2012 recorded a decrease in passenger traffic (-6.0%) and offered capacity (movements -7.4%, seats -5.5%), combined with a slight decrease in the load factor (equal to 76.2%, -0.4%). The reduced traffic is partly attributable to the closure of the airport for 9 days (from September 24 to October 2, 2012), needed to carry out maintenance work at the airstrip, which implied the transfer of flights from Ciampino to Fiumicino (more than 1,000 movements and about 115,000 passengers). These effects are compounded by the reduction of the Ryanair network (main carrier at the airport) by about 25% starting from November, as was the case in other European airports due to the weaker demand and the trend of fuel prices.
GRAPH 8. 2012 traffic composition for Ciampino airport
-41.5% 2% Change -7.3% -6.0% 2012 vs. 2011
0.1 22%
3.4 4.5
76% +3.3%
1.0
Domestic UE Extra UE Total
Non aviation Non-aviation activities within the Rome airport system generated 46.6% of total revenues from the group's activities. At structure level, the performance of the non-aviation segment was driven in particular by the increase in average spend per passenger for commercial activities, to be attributed to the improved traffic mix on the one hand (increase in the Extra EU component, with a higher
18 Annual Report 2012 Report on operations
propensity to purchase), and the shorter lines at security checks and the business development actions on the other. Royalties are also growing, thanks to the reviewed tender strategies and the improved conditions of the currency exchange contracts following the tender completed in the first half of the year.
TABLE 1. Main indicators of non aviation activities for Fiumicino
UNIT 12/31/2012 12/31/2011 Δ% Shop average spending €/outbound passenger 12.96 12.36 4.9% Retail area per million of passengers m2 718 698 2.8% Refreshment average spending €/outbound passenger 4.40 4.18 5.3% Refreshment outlet per million of passengers m2 637 615 3.6% Passenger car parking average spending €/outgoing passenger 1.72 1.81 -5.0%
TABLE 2. Main indicators of non aviation activities for Ciampino
UNIT 12/31/2012 12/31/2011 Δ% Shop average spending €/outbound passenger 4.14 4.66 -11.2% Retail area per million of passengers m2 381 340 12.0% Refreshment average spending €/outbound passenger 2.84 2.90 -2.1% Refreshment outlet per million of passengers m2 213 195 9.2% Passenger car parking average spending €/outgoing passenger 1.03 0.98 5.1%
Legal and regulatory context
The legal apparatus and Reference authorities The Italian airport sector features a complex and continuously evolving regulatory framework. At national level the reference authorities in charge of predisposing legislation and regulations are, in particular, the Italian Civil Aviation Authority (“ENAC”) and the Ministry of Infrastructure and Transport. National provisions combine with community directives and regulations set by international treaties. The reference authorities include the International Civil Aviation Organisation (ICAO) and the European Aviation Safety Agency (EASA).
The airport management agreement and the Planning agreement ADR manages the Rome airport system on an exclusive basis under the concession granted to the company with law no. 755 of November 13, 1973, and Management Agreement no. 2820 of June 30, 1974. This deed governs the relationships between the concessionaire, ENAC and the Government Authorities and was superseded by the Single Deed - Planning Agreement entered into between ENAC and ADR on October 25, 2012, expiring on June 30, 2044. The second and last public consultation convened by ENAC (Italian Civil Aviation Authority) and concerning the fee regulation and the trend for 2012-2016 was held on September 12, 2012. On October 25, 2012 ENAC and ADR signed the Planning Agreement, which contains both the new airport management regulations and the fee structure for the services offered by ADR on an exclusive basis. With Decree by the Prime Minister – on the proposal of the Ministry of
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Infrastructure, in agreement with the Minister of the Economy – on December 21, 2012, pursuant to art. 17, subsection 34 bis of Italian Legislative Decree 78/2009 converted into Law no. 102/09, the Planning Agreement was approved with some provisions, which were adopted with a new specific Additional deed, signed by ENAC and ADR on December 27, 2012. On December 28, 2012 the notice of subscription by the Council of Ministers Presidential Decree was published in the Official Gazette together with the publication of the Single Deed and related attachments in the websites of ENAC and the Ministry of Infrastructure and Transport. This publication took place on January 8, 2013.
IMAGE 1. Process of approval of the Planning Agreement DECEMBER 21, DECEMBER 28, OCTOBER 25, 2012 2012 2012 BY MARCH 9, 2013 MARCH 9, 2013 ENAC Ministry of Prime Minister's Official Gazette Court of Auditors ADR Infrastructure/Ministry of the Office Economy Approval ENAC BoD (10/19) Proposal of the Ministry of Definitive approval Publication Registration with Application of the Signing of the Contract Transport and Infrastructure with Council of the Court of new fees ENAC-ADR (10/25) to the Prime Minister in Ministers Auditors agreement with Ministry of Presidential the Economy Decree (DPCM)
The new fees will apply from March 9, 2013. The new regulatory framework approved by ENAC has defined a consistent set of transparent and sound rules valid until the end of the concession (June 2044), which will enable the financing of ADR investment plan through private funds. The pillars of the new Planning Agreement are: central role of the investment plan in both the short and long term for a total remuneration of 12 billion euro: clear strategic map for the future of the Rome airport system with the central role of Fiumicino and Ciampino, to be repositioned as a "City Airport" (Viterbo airport is no longer included in the Plan), clear rights and obligations of the concessionaire and the grantor in all circumstances, including the issues of conflict that may lead to the termination of the contract, identification of objectives of productivity, efficiency and quality of airport services subject to economic regulation, updating of the criteria to determine the fees based on the actual cost of services, estimated traffic, the investment plan and the quality objectives of the services, in line with international best practices, simplification of the fees currently applied.
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Consolidated economic and financial performance
Compared to December 31, 2011, the 100% owned companies established in 2012 that are part of the ADR Group were included in the consolidation area: ADR Mobility S.r.l. (“ADR Mobility”), ADR Security S.r.l. (“ADR Security”) and ADR Retail S.r.l. (“ADR Retail”); for the latter only the economic results until September 30, 2012 were consolidated, the last day the company was managed as part of the ADR Group before being sold to third parties, thus excluding the asset values as of the abovementioned date. In consideration of the sale of the subsidiary ADR Retail occurring on September 28, 2012 and the "vehicle maintenance" company branch taking place on October 31, 2012, the above mentioned businesses were qualified as “discontinued operation” in this report, pursuant to IFRS 5.
Consolidated economic performance
TABLE 1. Consolidated income statement
MILLIONS OF EURO 2012 2011 (*) Δ Revenues from airport management of which 544.6 544.3 0.3
Revenues from aviation activities 321.7 323.4 (1.7)
Revenues from non-aviation activities 222.9 220.9 2.0 Construction services 9.1 27.6 (18.5) Other revenues 7.8 11.8 (4.0) TOTAL REVENUES 561.5 583.7 (22.2) Consumption and other operating costs (177.4) (183.5) 6.1 Costs of construction services (8.9) (25.8) 16.9 VALUE ADDED 375.2 374.4 0.8 Staff costs (109.2) (110.6) 1.4 EBITDA 266.0 263.8 2.2 Amortisation/ depreciation (106.9) (107.3) 0.4 Allocations to renovation provisions (59.9) (62.6) 2.7 EBIT 99.2 93.9 5.3 Financial income (expenses) (89.2) (88.1) (1.1) PRE-TAX PROFIT (LOSS) ON CONTINUING OPERATIONS 10.0 5.8 4.2 Tax revenues (charges) (16.6) (23.2) 6.6 NET PROFIT (LOSS) ON CONTINUING OPERATIONS (6.6) (17.4) 10.8 Income from discontinued operations/assets held for sale 210.6 4.0 206.6 Profit (loss) for the year 204.0 (13.4) 217.4 Profit (loss) attributable to minority shareholders 10.3 1.4 8.9 PROFIT (LOSS) FOR THE PERIOD ATTRIBUTABLE TO THE GROUP 193.7 (14.8) 208.5 Net earnings per share: from continuing operations (0.006) (0.013) 0.007 from discontinued operations/assets held for sale 0.138 0.003 0.135
(*) the data relating to 2011 was reclassified pursuant to IFRS 5 based on the transfer to third parties of the direct retail and vehicle maintenance businesses.
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In 2012 the Group’s economic result was affected by a slightly negative performance of passenger traffic and the transfer of the retail business, through the sale of the subsidiary ADR Retail.
Revenues Revenues from airport management amounted to 544.6 million euro, basically in line with 2011 (+0.3 million euro) since the positive contribution of the non aviation segment, growing by 0.9%, was offset by the slight drop in aviation activities (-0.6%), having benefitted from the fee increase related to programmed inflation rate only starting from the month of June 2012. For a more extensive description of the consolidated revenue performance reference should be made to the section on “The Gemina Group businesses”. Revenues for construction services total 9.1 million euro, with an 18.5 million euro decrease on 2011 resulting from a reduction in construction services provided in connection with the airport concession. Other revenues, equalling 7.8 million euro, are down by 4.0 million euro compared to 2011, which included 6.7 million euro paid to ADR as an indemnity for the favourable sentence of the dispute regarding the service of performing 100% screening of hold baggage.
Costs Consumption and other operating costs of 177.4 million euro total a 6.1 million euro decrease compared to the previous year due to the combined effect of: a drop in costs for services of 4.9 million euro thanks to the decreased consultancy costs and professional services, communication expenses as well as to the canteen management costs having ceased in the second half; lower load of allocations to bad debt provision and provisions for risks and charges, for 4.7 million euro compared to 2011 even if with a greater weight of allocations to bad debt provision (20.9 million euro). The latter were necessary in the face of greater risks on the recoverability of receivables deriving from the financial difficulties of numerous customers and disputes on some fees deriving from the uncertain legal framework prior to the approval of the Planning Agreement; an increase in the purchases of raw materials and consumables for 1.6 million euro attributable to the higher external costs to purchase gas and, to a lesser extent, electricity, as a consequence of price increase. On the other hand, the production of electric energy by the co- generation plant, to supply the energy needs of the Fiumicino airport, was GWh 155.8, down by 6.8% compared to the reference period due to the lower consumption by ADR. The costs of construction services dropped by 16.9 million euro compared to 2011 as a result of fewer services provided. Staff costs amounted to 109.2 million euro, recording a 1.3% decrease compared to 2011, which had been affected by the one-off costs incurred for the termination of labour contracts with the personnel in the Milan offices of the Parent company; the positive effect of the reduced average number of staff employed was substantially offset by a less positive breakdown of the workforce mix.
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EBITDA EBITDA equalled 266.0 million euro, up 2.2 million euro compared to 2011, thus recording growth of 0.8%. The “normalised” EBITDA9 was 293.9 million euro, up 9.0 million euro on the comparison period, with an impact on revenues from airport management increasing from 52.3% to 54.0% in 2012.
Amortisation, depreciation and allocations to the renovation provision Amortisation of intangible fixed assets and depreciation of tangible fixed assets mainly refer to amortisation of the airport management concession held by the subsidiary ADR. Allocations to the renovation provision amounted to 59.9 million euro and represent the estimate of the costs for restoration and replacement actions needed in the future to comply with maintenance commitments on these assets under the terms of the concession. They were lower by 2.7 million euro compared to the previous year.
EBIT As a result of lower amortisation, depreciation and allocations to the renovation provision, EBIT stood at 99.2 million euro, up 5.3 million euro (+5.7%) on 2011.
Financial expenses Net financial expenses amounted to 89.2 million euro, up 1.1 million euro compared to 2011. The decrease in interest expense deriving from the progressive reduction in debt and the favourable performance of variable rates was in fact offset by an increase in other financial expenses, most of which referred to greater expenses for the discounting of the system renovation provision due to unfavourable interest rates compared to 2011.
Net profit (loss) on continuing operations Net of fiscal charges (totalling 16.6 million euro), 2012 closed with a net loss on continuing operations of 6.6 million euro, up by 10.8 million euro compared to 2011.
Income from discontinued operations/assets held for sale This item amounted to 210.6 million euro in 2012 (4 million euro in 2011) and mainly includes the consolidated capital gain from the transfer of the subsidiary ADR Retail which, net of the tax effect and the additional charges for the sale (a total of 13.9 million euro) and the price adjustment established by the contractual agreements (1.2 million euro), amounted to 206.3 million euro. This item also includes the result of the transfer of the vehicle maintenance branch and the economic results, net of the tax effect, relating to the direct retail (until September 2012) and vehicle maintenance (until October 2012) businesses.
Profit (loss) for the period attributable to the Group The Group closed the year with a net profit of 193.7 million euro compared to a loss of 14.8 million euro recorded last year.
9 calculated with the exclusion of the provisions and extraordinary items, and for 2011, the positive effect of the litigation Hold Baggage
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Consolidated financial performance
TABLE 2. Consolidated financial position
MILLIONS OF EURO 12/31/2012 12/31/2011 ∆ Net non-current, non financial assets 3,227.7 3,332.0 (104.3) Net working capital 118.5 76.5 42.0 System renovation provision (267.7) (231.6) (36.1) Provisions for risks, charges and employee severance indemnities (310.9) (329.7) 18.8 NET CAPITAL INVESTED 2,767.6 2,847.2 (79.6) Financed by: Shareholders’ equity 1,794.6 1,598.8 195.8 Net financial indebtedness 973.0 1,248.4 (275.4) TOTAL 2,767.6 2,847.2 (79.6)
Non-current non-financial assets The non-current non-financial assets were down by 104.3 million euro due to the amortisation of the year and ADR Retail leaving the consolidation area, partially offset by the investments made in 2012.
Net working capital Net working capital recorded a 42.0 million euro increase compared to the end of the previous year, largely due to: an increase in deferred tax assets of 20.2 million euro in relation to net allocations to the bad debt provision, to the renovation provision, and to the negative change in the fair value of derivatives; increase in current tax assets of 11.1 million euro for the tax receivables deriving from the above mentioned allocation of the recovered IRES corresponding to the failed deduction of IRAP on the staff cost (7.7 million euro) and the payment of excessive advances compared to the estimated tax burden for the year; a reduction in the trade payables of 26.2 million euro attributable to ADR Retail leaving the consolidation area and the contained volume of investments; a reduction in the payables for current taxes for 8.1 million euro; a reduction in the other liabilities mainly for lower payable surcharges (-3.2 million euro). These effects were partly compensated by: a reduction in inventories of 9.0 million euro due to ADR Retail leaving the consolidation area and the sale of the “maintenance” company branch; a reduction in trade receivables of 19.6 million euro mainly attributable to the higher allocations to bad debt provision.
System renovation provision The system renovation provision, which includes the current value of estimated costs payable against the contractual obligation of restoration and replacement of assets under concession, increased by 36.1 million euro due to allocations for the year net of uses.
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Net capital invested The consolidated net capital invested, equal to 2,767.6 million euro as at December 31, 2012, decreased by 79.6 million euro compared to the end of the previous year.
Shareholders’ equity Shareholders’ equity rose by 195.8 million euro compared to December 31, 2011 substantially as a result of the comprehensive income results for the year (196.8 million euro, including the negative change in the fair value of derivatives) and the purchase of own shares for 1.3 million euro.
Net financial indebtedness Net financial indebtedness totalled 973 million euro as at December 31, 2012, down 275.4 million euro compared to the end of the previous year.
TABLE 3. Net financial position
MILLIONS OF EURO 12/31/2012 12/31/2011 ∆ a. cash and cash equivalents 397.7 180.2 217.5 other receivables – financial assets 45.7 60.4 (14.7) b. current financial assets 45.7 60.4 (14.7) C. TOTAL CURRENT FINANCIAL ASSETS (A)+(B) 443.4 240.6 202.8 D. NON-CURRENT FINANCIAL ASSETS 9.6 - 9.6 e. current financial liabilities (526.5) (92.1) (434.4) f. derivatives (133.1) (129.1) (4.0) G. TOTAL CURRENT FINANCIAL LIABILITIES (E)+(F) (659.6) (221.2) (438.4) h. financial indebtedness (139.8) (150.1) 10.3 i. outstanding bonds (626.6) (1,117.7) 491.1 L. TOTAL NON-CURRENT FINANCIAL LIABILITIES (H)+(I) (766.4) (1,267.8) 501.4 NET FINANCIAL INDEBTEDNESS (C)+(D)+(G)+(L) (973.0) (1,248.4) 275.4 of which: current net financial assets (c)+(g) (216.2) 19.4 (235.6)
TABLE 4. The following contribute to forming the net financial indebtedness:
MILLIONS OF EURO 12/31/2012 12/31/2011 ∆ ADR 923.1 1,198.4 (275.3) Fiumicino Energia10 13.2 16.8 (3.6) Gemina 36.7 33.2 3.5
Total current financial assets Total current financial assets rose by 202.8 million euro mainly due to the income from the sale of ADR Retail, partly offset by the repayment of the bank payables by ADR, as mentioned below.
10 Also includes the net financial position of the subsidiary Leonardo Energia S.c.ar.l.
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Non-current financial assets Non-current financial assets rose by 9.6 million euro in relation to the additional charges related to the “Term Loan” granted to ADR in May 2012, which can be used in February 2013 to repay Tranche A1 of the bond issue.
Total current financial liabilities Current financial liabilities totalled 659.6 million euro, up 438.4 million euro mostly due to the combined effect of: reclassification to current liabilities of Tranche A1 of the bonds issued by Romulus Finance S.r.l. for 499.8 million euro, measured at amortised cost and expiring in February 2013; ADR’s repayment of the final balance on the Term Loan Facility for 65.5 million euro, expiring February 20, 2012.
Non-current financial liabilities Non-current financial liabilities amounted to 766.4 million euro, recording a net decrease of 501.4 million euro deriving substantially from the reclassification under current liabilities of Tranche A1 of the bonds issued by Romulus Finance S.r.l. as mentioned above.
Reconciliation of the reclassified statements and the financial statements
The items of the Income Statement and of the Balance Sheet can be deduced from the financial statements, considering the following. Non-current non-financial assets include: “Non-current assets”, with the exclusion of “Deferred tax assets”, “Other non-current assets” and “Other non-current financial assets” Net working capital comprises: “Current assets”, with the exclusion of “Financial instruments - derivatives” among assets, “Other current financial assets” and “Cash and cash equivalents”; the following items under “Non-current assets”: “Deferred tax assets” and “Other non-current assets”; the following items under “Current liabilities”: “Trade payables”, “Current tax liabilities” and “Other current liabilities”; “Assets held for sale” and “Liabilities held for sale”.
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The Gemina Group businesses
Aviation activities
The aviation activities directly connected to airport sector include airport fees, centralised infrastructures, security services etc.
GRAPH 1. Economic performance of aviation activities (in millions of euro)
+5.6% -0.6% Change 2012/2011! -2.9% 32.8
+2.8% 68.3 -1.5% 41.6 321.7
179.0
Airport fees Centralized Security Other Total revenues 2012 infrastructures
Airport Fees Revenues from airport fees, equal to 179.0 million euro, decreased by 1.5% compared to 2011, deriving from: landing, take-off and parking fees: equal to 56.9 million euro, down by 2.5% due to a reduction in the number of movements (-4.9%), partly mitigated by a slight increase in extra-EU tonnage with a higher unit fee and an increase in fees occurred on June 6, 2012 to bring them in line with the target inflation (+1.5%), subsequently corrected from December 12, 2012 to +2.0%; passenger boarding fees: these amount to 119.2 million euro, with a slight decrease compared to 2011 (-0.9%) since the lost revenues due to the reduction in the number of domestic passengers handled (-8.1%) was offset by an increase in extra-EU passengers (+3.2%) with a higher unit fee and the mentioned adjustment to the target inflation; cargo revenues: the revenues stand at 2.9 million euro, down by 6.2% consequently to the reduced goods transported compared to the previous year (-5.5%).
Centralized infrastructures The management of centralised infrastructures registered revenues of 41.6 million euro equal to an increase of 2.8% compared o the previous year attributable to: revenues from baggage handling systems: a 3.2% increase; revenues relating to the “loading bridges”: 3.3% increase compared to the previous year in revenues relating to the loading bridges due to the greater availability of some systems of Satellite Ovest (subject to penalization for upgrade works in 2011) and improvements in bridge management.
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Despite the lower aircraft (-4.5%) and passenger (-1.7%) traffic in Fiumicino in 2012, there were 162,202 flights served with loading bridges, an increase of 1.0% compared to 2011, for a total number of 21,035,536 passengers served, with a 1.0% increased compared to the previous year.
Security Security activities (security checks on passengers and carry-on and checked baggage, 100% screening of checked baggage, explosive detection checks, other security checks requested) generated revenues of 68.3 million euro in 2012, 2.9% lower than in 2011. This performance derives from a decrease in passenger traffic and revenues for on-demand services provided at Fiumicino.
Other Revenues from aviation activities reached 32.8 million euro, + 5.6% compared to the previous year: assistance to passengers with reduced mobility (“PRM”), provided by ADR via a service agreement entrusted to the subsidiary ADR Assistance: revenues of 16.3 million euro, up by 11.5% compared to the previous year, due to the different unit fees applied in 2012: this effect is partly mitigated by the reduction in passenger traffic; passenger check-in desks: revenues, equalling 11.4 million euro, increased by 2.5% compared to last year due to the combined effect of the reduction in outgoing flights and the new methods of use which, being based on a maximum number of passengers to be accepted per flight on the individual desks, encourage a more intense use of the infrastructure; other aviation revenues: equal to 5.1 million euro, in line with 2011, and consisting of revenues for the use of common assets, luggage porters and left luggage, self-service trolleys, etc.
Non-aviation activities
Non aviation activities include real estate activities, commercial activities (sales, sub- concessions and utilities, car parks, advertising and refreshment outlets) and other. Since, pursuant to IFRS 5, the two businesses of direct retail and vehicle maintenance were qualified as “discontinued operation” (as described in subsection Financial and economic performance of the Group), the revenues achieved to date in the form of revenues of direct sales (by the subsidiary ADR Retail) and vehicle maintenance, are recorded and quantified, despite the sale of ADR Retail and the vehicle maintenance branch to third parties, as the value of the royalties from sub-concession and the instalments contractually agreed.
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GRAPH 1. Economic performance of non aviation activities (in millions of euro)
+11.6% +0.9% Change 2012 vs. 2011 -7.3% -48.5% 16.9 -5.6% 3.8 16.0 +8.0% 29.8
222.9
93.6
-0.1%
62.8
Real estate Sub-concession of Car parks Advertising Canteen Other revenues Total management retail outlets
The non aviation revenues increased from 220.9 million euro in 2011 to 222.9 million euro in 2012 (+0.9%). Among the most significant components the following are recorded:
Real estate management The revenues generated by the real estate activities amount to 62.8 million euro (-0.1%) divided as so: revenues from retail and other sub-concessions, deriving from fees and utilities at Fiumicino and Ciampino airports, amount to 47.7 million euro, registering a 1% increase compared with the previous year. This trend is basically attributable to the adjustment of the unit values of the sub- concession fees to the inflation trends; income originating from other fees charged at Fiumicino and Ciampino, calculated on the volume of activities carried out (consideration on jet fuel, catering activities, hotels, car hire, etc.) equal to 15.1 million euro (-3.7%).
Commercial sub-concessions Revenues of 93.6 million euro were recorded, with an 8.0% increase compared to 2011. Commercial activities benefited from a favourable traffic mix linked to the growing extra-EU component - typically with higher spending - compared to the domestic component. The improved security times recorded from May also contributed to this growth by shortening lines and lengthening the time available for shopping. Together with the business action implemented, the results obtained were better than the traffic trend, despite the unfavourable macroeconomic scenario. In detail:
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Core Categories: the royalties (30.0 million euro) generated by the retail outlets under sub- concession in favour of ADR Retail, which was acquired by the Aelia Group on October 1, 2012, increased by 2.7%. The performance improved considerably in the last three months, with an 8.7% growth of the average spend per passenger; Specialist Retail: revenues for royalties of 33.7 million were recorded, up by 13.5% in absolute terms and 16.2% in terms of average revenue per passenger. The "Luxury" and "Fine Food" segments continued to record a positive trend with a growth of 25.7% and 12.5% in terms of average revenue per passenger, respectively; Food & Beverage: revenues reached 22.9 million euro, with a growth of 7%; the revenue per passenger rose by 9.5%; Other commercial activities: the passenger service activities recorded revenues equal to 7.0 million euro, rising by 9.6% compared to 2011 and by 12.1% in terms of unit revenues, attributable essentially to the renewed current exchange activities.
Car parks The management of car parks generated revenues for 29.8 million euro with a decrease of 5.6% compared to the previous year. The reduction was slightly higher than the trend of the potential customer market, consisting of “outgoing” passengers, which dropped by 3%, thus determining a negative value in expenditure terms per passenger equal to -2.6%. In detail the following trends were registered: passenger car parking: revenues equalling 25.4 million euro (-6.4%) with an average expenditure down by 3.5%, affected by the mix of outbound passengers, which saw a considerable decrease in domestic outbound passengers; airport operator car parking: revenues of 4.4 million euro (-0.6%). In 2012, new fee actions were implemented aiming to recover profitability margins in the passenger car park customer segments of the booking on line and walk-in distribution channels. Web marketing activities were continued in support of the booking-on-line service; the “The VIP” was also created, a complementary service package dedicated to Easy Parking customers and accessible at facilitated conditions (fast track, VIP room, free trolleys).
Advertising Revenues from the management of advertising spaces equalled 16.0 million euro, down by 7.3% compared to 2011, attributable to both the persisting difficulties experienced by the sector.
Other revenues Revenues from refreshments, amounting to 3.8 million euro, cannot be compared with 2011. Concerning the plan to focus on the core business, since July 1, 2012, the management of canteens for airport operators is no longer carried out by ADR but directly by the service supplier ADR provided spaces and equipment to by sub-concession. The canteen service was started on the same date, reserved for employees of ADR Group. Other assets, which include revenues for cleaning fees and biological wastewater treatment, other sales (fuels, consumables, etc.), computer services, service activities, generated revenues for 16.9 million euro, up by 11.6% compared to the reference period.
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Investments of the Group
After self-financing investments for about 1 billion euro in the last 10 years, the volume of the Group's works was recently focused further still. In 2012 capital investment totalled 51.8 million euro, with a decrease compared to 69.6 million euro in 2011. It focused on the extraordinary maintenance needed to maintain the current safety and quality standards.
TABLE 1. Details of the investments of the Gemina Group in 2012
MILLIONS OF EURO 2012(*) INVESTM. RENEWALS (**) TOTAL
Departure area E/F (Pier C and 3rd Bhs) 8.0 - 8.0 Maintenance and optimisation work in the terminals 0.6 6.2 6.8 Fiumicino – elec. network and air-con. maint. op. - 5.6 5.6 Improvements to runways and aircraft aprons - 5.4 5.4 Ciampino – infrastructure upgrade works 0.5 3.9 4.4 Fiumicino – electrical system maintenance - 4.3 4.3 Works on baggage system and x-ray machines 0.6 2.0 2.6 Fiumicino – electromechanical system maintenance 0.1 1.7 1.8 Fiumicino – civil engineering works maintenance - 1.8 1.8 Fiumicino - discharge and water net. maint. op. 0.1 1.7 1.8 Airport access route improvements - 1.7 1.7 Improvements to commercial and parking areas - 0.9 0.9 Fiumicino Nord: long-term development plan 0.8 - 0.8 Purchase of vehicles and equipment 0.6 - 0.6 Maintenance of buildings in sub-concession - 0.2 0.2 Ex Alitalia cargo HBS/BHS 0.1 - 0.1 Other 3.6 1.4 5.0 TOTAL 15.0 36.8 51.8
(*) including the works charged to the Civil Aviation Authority
(**) these amounts are to be used by the renovation provision
The main investments for the various categories are illustrated below. The interventions, in terms of both individual implementation proposals presented by ADR management and investment programs in relation to the necessary financial coverage, are examined and monitored by a specific Investment Committee with consulting functions towards the Board of Directors.
Runways and aprons Following the sentence of the Regional Administrative Court in ADR's favour, the contact was signed for runway 2 upgrading works to be carried out in 2013. Upgrading works at the northern part of Runway 3 and at the Bravo-Delta taxiway were completed.
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The works have begun to replace the rain water collection grilles. The works to upgrade the vertical signs for the access roads to the terminals have been completed, except for the part concerning the highway tables, for which authorization from ANAS is awaited. On September 30, 2012 the works to upgrade the runway at Ciampino airport were completed (ahead of schedule), which required the closing of the airport and the diversion of the flights to Fiumicino. The preliminary project to upgrade Runway 3 and the executive projects concerning the upgrade of the Charlie taxiway and the strip of the central runway were delivered to the Civil Aviation Authority for approval. The executive project to upgrade Runway 3 and the one to upgrade the NG-EG taxiways are being completed. The monitoring activities of the airport surfaces have been completed underway according to the provisions of the Airport Manual (PMS- Pavement Management System).
Terminals The works continue at a slow pace to complete the structure of the new pier according to the agreement formalized with A.T.I. Cimolai while waiting for the Planning Agreement signed on December 21, 2012 to be finalized. Regarding the works of the Pier, in order to carry out the activities that precede the start of the works at the front part from the beginning of 2013, the works to install the new service elevator that were completed for the handling of goods intended to the Direct Retail warehouses of Terminal 3. A series of initiatives were undertaken that concern the terminals and passenger departure piers, including the "smart action" program begun in September 2012 and aiming to improve the image and service provided to passengers: at the Terminal 3 departures, the works were started to upgrade the security control area and reorganize the passport control area; regarding passenger information, two new ADR information desks were installed, one at the root of departure area B and the other in the land-side arrival hall of Terminal 1; at T3 the ADR information point was renovated in the departure hall with the annexed offices and two new information points and related signals were installed; the program to renovate the restrooms was continued with the completion of the restructuring works of a group of restrooms in December 2012 and another three halfway through January; a public tender was called in August to entrust the works relating to the organization of the Terminal 3 arrival area, which envisages the decongestion of the hall of the Terminal, former Terminal B side, by expanding the spaces for operating activities and the circulation of passengers, making them easier to use, through the movement of the commercial boxes for services to passengers, currently located opposite the exit doors of the baggage hall, and the concentration and reconfiguration of the customs entry points and the relevant Government Authority offices, the upgrading and renovation of rest rooms both land side and air side; the works to upgrade the granite paving of the departure hall and the mezzanine floor of Terminal 3 were awarded; these are scheduled to start in January 2013. In December a project with the FS Group was started for the integration/modification of the signs to direct passengers at Terminals 1 and 3, with particular reference to the exit route, baggage reclaim and transit halls, transportation and external services such as trains, taxis, buses, rent a car and multilevel signs.
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Systems The restructuring works were completed in the former Alitalia cargo area that will host the automated baggage handling system dedicated to Terminal 1; in the meanwhile, the executive design of the system has been completed. At front T3 airside, a manual checked baggage handling carousel was created to serve as back- up for the sorters of the BHS in departure area D. This temporary system is located inside a canopy structure and will be removed when the area is turned into a worksite to create the front building of Pier C. Also concluded were the consultations with the authorities responsible for issuing the water and government permit for the creation of the Tevere industrial water suction; the works have been contracted and the tender procedure completed.
Infrastructure and buildings 5 recycling points were completed for the sorting of waste from the activities of the Terminals; 3 are placed “air side” and 2 “land side”. The works were concluded to remake the road connections on the departures flyover. The adaptation of the curbside route to the departure hall was also completed, including the new car park next to the Ceremonial Office.
Research and development The Group did not carry out any research and development activities during 2012.
Risk factors of the Gemina Group
The correct management of the risks inherent in performing the company's businesses is a fundamental element for the Gemina Group to maximize opportunities and reduce the potential losses associated to unexpected events, preserve the creation of economic value in the long- term and protect the tangible assets and intangible interests of the stakeholders. The Group's risk management system is divided over three levels of responsibility: the Board of Directors outlines the guidelines of the risk management system, assesses their suitability and identifies the key corporate figures; the Internal Audit manager, appointed by the Board of Director, is responsible for checking the suitability and effectiveness of the internal control and risk management system; the Board of Statutory Auditors. The management of the Gemina Group ensures the general suitability of the system by participating in its correct operation, also through suitable control and monitoring activities, guaranteeing its effectiveness and efficiency over time and preventing irregularities. The Gemina Group has adopted a preventive approach to risk management, to direct choices and activities of the management, with the belief that a suitable process of identification,
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measurement, management and monitoring of the main risks contributes to guaranteeing that the company is run smoothly, correctly and in line with the strategic objectives. The key principles of the internal control and risk management system of the Gemina Group are based on: defining roles and responsibilities with the objective of creating synergies among the players in the process and a suitable system of operating mandates that consider the nature, normal size and risks of the individual categories of operations; periodic and continuous repetition of the risk identification and assessment process, periodic assessment of the effectiveness and efficiency of the company processes; continuous monitoring of the internal control system carried out by the line management first, and of the checks of the Internal Audit department to ensure the actual application of the procedures and compliance with regulations in force; the division of roles and the compliance with suitable authorization and decision tracking processes; a suitable protection of the assets of the organization and access to data strictly necessary to perform the assigned activities; continuous supervision of periodic assessment activities and their constant updating. During 2012, through various initiatives, a process was started to strengthen the internal control and risk management system to emphasize the integration role of the mechanisms and figures involved in risk identification and mitigation and envisage methods of coordination among these subjects, with the aim of maximizing the efficiency and reducing any redundancies. The system strengthening project is also aimed at conveying an overall view of the company risks to analyze and compare risks of various nature, progressively and with a view to updating the reference framework; strengthen the risk management culture in the company processes by spreading a common “language” and uniform tools/methodologies for the representation and management of risks. As part of the first phase of the process, a general risk assessment activity was started, which is aimed at assisting the organization to enhance the ability to identify and assess the risks that may jeopardize the effectiveness and efficiency of the company processes while identifying actions to be implemented to strengthen the internal control system. In addition, this phase of the process provided the management with a tool to evolve the risk and control culture in the organization, encouraging the empowerment of staff.
The risks of the Gemina Group may be divided into four categories: (i) strategic, (ii) operational, (iii) financial and (iv) compliance risks.
Strategic risks The strategic risk factors may significantly affect the long-term performance, thus determining reviews of the Group's development policies.
Risks linked to the evolution of the air transportation market: the Group's economic results are highly affected by the trend of air traffic which, in turn, is conditioned by the economic scenario, the economic-financial conditions of the individual carriers, the alliances among the carriers and the competition, on some routes, and alternative transport. The risk management tools are: (i) short and long-term analysis of the competitive scenario, (ii) monitoring the trends
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of the demand, (iii) investment program in close cooperation with the stakeholders, (iv) diversification of the customers of the operating carriers.
Risks linked to image and reputation: a negative perception or poor publicity may undermine the Group's public image and its “license to work”. The risk management tools are: (i) efficient communication strategy, (ii) continuous dialog with the stakeholders, (iii) creation of the alliances for the development of relations with the territory.
Operational risks The operational risk factors are strictly connected to the performance of the company activities and, though able to affect the short and long-term performance, do not imply significant consequences on the strategic choices.
Risks linked to safety and security management: the occurrence of incidents means negative consequences on the Group's activity and may also have repercussions on passengers, local residents and employees. The risk management tools are: (i) safety management system, (ii) progressive investments in safety and security (iii) staff training, (iv) security standard control and monitoring.
Risks linked to the discontinuation of the activities: the Group's activities may suffer discontinuation following: (i) strikes of its staff and those of airlines, the staff employed for air traffic control services and public emergency service operators; (ii) incorrect and inaccurate performance of services by third parties and (iii) adverse weather conditions (snow, fog, etc.). The risk management tools are: (i) emergency plan and procedures, (ii) highly trained and skilled staff, (iii) insurance policies.
Risks linked to human resource management: achieving Group objectives depends on internal resources and the relations established with the employees. Unethical or inappropriate behaviour by employees may have legal and financial consequences on company activities. The risk management tools are: (i) optimal working environments, (ii) development programs for talented people, (iii) continuous cooperation and communication with trade unions, (iv) Code of Ethics; (v) procedure 231.
Risks linked to dependence on third parties: airport operator activities depend on third parties to a large degree such as, for example, local authorities, carriers, handlers, etc. Any interruption of their activity or unacceptable behaviour by third parties may damage the reputation and business of the Group. This risk is heightened by the condition of Fiumicino as hub for the reference carrier, which is experiencing a delicate phase of reorganization. The risk management tools are: (i) constant updating of agreements with third parties, (ii) selection of partners based on economic-financial and sustainability criteria, (iii) suitable contract management.
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Financial risks
Credit risk This is the risk that a customer or the counterparty in a financial instrument fails to meet its obligations, thereby causing a loss. As at December 31, 2012, the ADR Group’s maximum theoretical exposure to this risk is the nominal value of the guarantees provided for third parties’ debt or commitments, the carrying value of the financial assets shown in the financial statements and especially trade receivables to customers. For an analysis of the policies in place to control the investment in credits as well as the particular situation of concentration deriving from the relationship with the main carrier Alitalia, please see note 11 of the Consolidated financial statements.
Liquidity risk Liquidity risk occurs when the Group does not hold and finds it difficult to find the resources needed to face future financial commitments. The financial structure of the ADR Group is distinguished by a moderate incidence of the financial leverage component, since financial indebtedness is 3.7 times the EBITDA at the end of 2012. Nevertheless, a substantial portion of the financial resources generated by operations is absorbed by the debt service and, with a view to the future, by the need to repay debt tranches coming due. The current loan agreements in place require costs that change according to the rating issued by Moody’s and Standard & Poor’s; the rating level also affects the application of stricter clauses included in the "Security Package", which assists the agreements to guarantee the priority allocation of the generated cash to service the debt. These additional measures are activated in connection with the rating, but also in the case certain financial ratios do not exceed the minimum levels previously agreed. However, in case of temporary additional financial requirements for operations, in addition to cash and cash equivalents, a revolving line of credit is available (currently not use) destined for this purposes by contract.
To address the risk of repaying the important debt tranche (A1) expiring in February 2013 (500 million euro), on May 31, 2012 ADR signed a financial agreement called “Revolving and Term Loan Facility Agreement” with a syndicate of eight banks for a total amount up to 500 million euro for a loan expiring in February 2015, broken down as so: up to 400 million euro in the form of “Term Loan” to be disbursed in February 2013; 100 million euro as revolving line replacing the previous line of the same amount already re- financed in August 2011 and falling due in February 2013. See also note 11 of the consolidated financial statements.
Interest rate risk The Group uses external financial resources. Changes in interest rates affect the cost of the funds borrowed, with their effects on the amount of interest expense. To face these risks, the
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Group uses interest rate swap to manage its exposure to unfavourable fluctuations in interest rates. See also note 11 of the consolidated financial statements.
Exchange rate risk This is linked to unfavourable variations in the exchange rate with consequent increases in the outgoing cash flows. As far as commercial transactions are concerned, the Group bears a negligible exposure to the risk as the transactions in extra-EU currencies are attributable to some supplies of goods and services of an insignificant amount. The financial indebtedness, expressed in currency other than the Euro (Tranche A4 in Pounds Sterling), was covered by a currency swap in euro. See also note 11 of the consolidated financial statements.
Risks related to outstanding loan agreements
Gemina In 2011 the company signed a loan agreement for a maximum amount of 60.1 million euro with expiry in December 2014 including 42.1 million euro regarding “Line A” and 18.0 million euro “Line B revolving” allocated to cover future cash needs related to the company business. The loan is backed by a senior pledge on a number of ADR shares representing at least 35% of the share capital. The number of shares to be subjected is in any case calculated, and possibly adjusted, each quarter depending on the trend of the Gemina share. Gemina has undertaken the following commitments towards the UniCredit Group, in relation to the financial indebtedness transferred by Sistemi di Energia S.p.A. to Fiumicino Energia as a result of the spin-off: maintaining the ratio of Net financial indebtedness/Shareholders’ equity at fair value at 3 or less in the Fiumicino Energia financial statements; issuing guarantees for 6 million euro and a pledge on 86.12% of the share capital of Fiumicino Energia to guarantee the loans.
ADR
Rating ADR and its debt are subject to assessment by Standard & Poor’s and Moody’s. ADR’s rating was as follows in 2012: Moody’s: on June 15, 2012 the agency confirmed ADR's rating at level “Ba2”; the assigned outlook is positive. On January 8, 2013, following the approval of the new Planning Agreement, the agency placed ADR's rating under review for upgrade; Standard & Poor’s: on March 2, 2012, the agency Standard & Poor’s had confirmed the rating assigned to ADR as BB and placed the Company in “CreditWatch with developing implications”. On June 7, 2012 the agency raised the long-term rating of the company from “BB” to “BB+”, also with a positive outlook and credit watch position. Nevertheless, the Trigger Event condition persists included in the Security Package and so does the application of the Cash Sweep regime, both active since November 30, 2007 due to the rating going below the contractually agreed thresholds (BBB+/Baa3 – BBB-/Baa2stable).
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The two Cash Sweep and Trigger Event conditions impose more restrictive constraints on the company for the management of cash flows. Among these: a) the obligation, as debt service dates approach, to allocate the residual cash available to the repayment/collateralization of repayable/non-repayable debt, b) prohibition to distribute dividends and c) obligation to identify, with the support of an external consultant entrusted by lenders, the remedy measure to restore the minimum required rating in the ordinary regime. ADR has in any case operated in derogation regime due to the subsequent waivers granted over time by the lenders, the last of which was approved on September 4, 2012 and valid until March 20, 2013 to reiterate the derogation regime with exclusion of points a), b) and c) above. However, with the approaching deadline for the repayment of Tranche A1 of the Romulus loan, with priority of application on the cash sweep regime, an additional constraint was imposed throughout 2012 on the allocation of available cash (“Retention Regime”) based on which, on the application dates of March and September, the available cash (equal to 48.3 million euro) was deposited in a constrained bank account to repay the debt falling due. The balance of this account (Retention Account) at the end of 2012, also following the transfers in 2011, equalled 100.5 million euro entirely allocated to repay the mentioned line.
Security Package: covenants The structure of the current loan agreements reflects the need to guarantee a “pari passu” regime for various types of lenders. Since February 2013 ADR owes 700 million euro to a vehicle – Romulus Finance – established pursuant to Law no. no. 130/99, which, acquired in turn, following a securitization transaction, a pre-existing bank loan through a Luxembourg bond issue subscribed by institutional investors and guaranteed by a monoline insurance company which guaranteed the issue of the rating AAA making use of the Security Package mentioned several times. At the end of February 2013 ADR also owes 253.8 million euro to banks through agreements with guarantees aligned to the same “Security Package” of the Romulus Finance bonds. The Security Package consists of a set of guarantees and requires compliance to the principal control covenants (defined on the basis of final and forecast data) which include: (i) Debt Service Coverage Ratio (DSCR), measuring the ratio between available cash flow and debt servicing; (ii) Concession Life Cover Ratio (CLCR), measuring the ratio between discounted future cash flows and net indebtedness; and (iii) Leverage Ratio, that is the ratio between net indebtedness and EBITDA. These ratios are checked twice a year, on two of the four dates available to made the payments regarding the debt service (application dates) of March 20 and September 20, by applying the calculation methods of the respective ratios to the relative data at December 31 and June 30. If the above ratios are exceeded, dividends can be distributed (if any surplus cash is available) and if the ratios are exceeded by higher margins, further borrowing may be undertaken. On the other hand, if the ratios fall below specific thresholds, a trigger event or an event of default may occur. With reference to the most sensitive ratio to short-term changes, represented by the DSCR, the table below summarizes the different DSCR levels and the related consequences laid down in the agreement.
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Level Condition >=1.7 Additional debt >=1.5 Dividend distribution <1.25 Trigger Event <1.1 Default
As regards the financial ratios calculated on the basis of the results of the financial statements as at December 31, 2012, it is estimated that the DSCR assumes the value of 1.59, the Leverage Ratio 4.64 and the CLCR 6.66, thus ensuring a suitable margin of safety compared to the risk thresholds. Moreover, the loan agreements call for acceleration, termination and withdrawal conditions typical for loans with similar characteristics.
Compliance risks The ADR Group operates in a sector that is highly regulated at domestic, EU and international level.
Compliance with the Concession Agreement: the airport operator performs the activities under a concession agreement, in compliance with a series of obligations whose non-fulfilment may cause the termination or cancellation of the concession. The risk management tools are: (i) respecting the obligations of the concession, (ii) cooperation with the reference authorities to update the fee programs, (iii) transparency on the fee programs adopted, (iv) participation in discussions with the government authorities responsible. This compliance risk must be managed even more carefully at the time of disruption represented by the approval of the new Planning Agreement.
Compliance with regulations regarding noise and the environment: the operator is obliged to respect the national and international laws on respecting noise limits and environmental protection. The risk management tools are: (i) respect of laws and regulations, (ii) cooperation with the reference authorities for the definition of laws and regulations, (iii) implementing activities to protect the environment.
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Economic and financial performance of Gemina S.p.A.
Economic performance
TABLE 1. Economic position
MILLIONS OF EURO 2012 2011 ∆ Income (charges) on equity investments - - - Net financial income (expenses) (2.6) (2.8) 0.2 Revenues 0.8 1.0 (0.2) Operating costs (3.5) (6.6) 3.1 Provisions - (0.1) 0.1 PRE-TAX PROFIT (LOSS) (5.3) (8.5) 3.2 Income taxes 1.0 1.9 (0.9) PROFIT (LOSS) FOR THE YEAR (4.3) (6.6) 2.3
Net financial expenses Net financial expenses dropped 0.2 million euro compared to 2011 due to the lower interest rates applied.
Operating costs Operating costs dropped by 3.1 million euro due to the reduced staff costs and the non-recurring costs incurred in the previous year, and particularly to charges for incentives to leave in connection with the transfer of the registered office from Milan to Rome.
Profit (loss) for the year 2012 consequently closed with a loss of 4.3 million euro, with an improvement of 2.3 million euro compared to the loss of 2011.
Financial performance
TABLE 2. Financial position
MILLIONS OF EURO 12/31/2012 12/31/2011 ∆ Equity investments 1,843.6 1,843.3 0.3 Net working capital 1.5 5.7 (4.2) Provisions for risks, charges and employee severance indemnities (9.4) (11.2) 1.8 NET CAPITAL INVESTED 1,835.7 1,837.8 (2.1) Financed by: Shareholders’ equity 1,799.0 1,804.6 (5.6) Net financial indebtedness 36.7 33.2 3.5 TOTAL 1,835.7 1,837.8 (2.1)
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Equity investments They comprise the investments held in ADR for 1,835.9 million euro (up 0.3 million euro compared to 2011) and in Fiumicino Energia for 7.7 million euro.
Net working capital Equalling 1.5 million euro, it recorded a reduction of 4.2 million mainly due to the collection from the group companies included in the tax consolidation of the tax balance for 2010 and 2011 (about 6 million euro), partly offset by the credit relating to the income from consolidated taxation for 2012 (about 1 million euro).
Provisions for risks, charges and employee severance indemnities Down by 1.8 million euro in connection with the payment made after the order of payment concerning the tax audit carried out by the Revenue Office on 2006 was notified.
Net capital invested As at December 31, 2012 the net capital invested equalled 1,835.7 million euro, down by 2.1 million euro compared to the end of 2011.
Shareholders’ equity Shareholders’ equity reduced by 5.6 million euro as a result of the comprehensive income results (down 4.6 million euro, including the change in the fair value of derivatives) and the purchase of own shares for 1.3 million euro, net of the increase in shareholders’ equity reserves for 0.3 million euro regarding the fair value of the options attributed to the Group’s employees accrued in the year.
Net financial indebtedness Net financial indebtedness increased by 3.5 million euro, mainly due to the payment of operating expenses and the mentioned purchase of own shares, partly offset by the collection relating to the tax consolidation.
TABLE 3. Net financial position
MILLIONS OF EURO 12/31/2012 12/31/2011 ∆ a. cash and cash equivalents 3.2 5.3 (2.1) b. current financial assets 2.8 3.3 (0.5) c. total current financial assets (A)+(B) 6.0 8.6 (2.6) d. non-current financial assets 0.1 0.2 (0.1) e. current financial liabilities (0.5) (0.6) 0.1 f. derivatives (0.7) (0.2) (0.5) g. total current financial liabilities (E)+(F) (1.2) (0.8) (0.4) h. non-current financial liabilities (41.6) (41.2) (0.4) NET FINANCIAL INDEBTEDNESS (C)+(D)+(G)+(H) (36.7) (33.2) (3.5) of which: current net financial assets (C)+(G) 4.8 7.8 (3.0)
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Non-current financial liabilities Total non-current financial liabilities amount to 41.6 million euro and refer to liabilities related to the new loan contract stipulated with a pool of banks expiring in December 2014, for a total amount of 42.1 million euro, calculated with the amortised cost method.
TABLE 4. Statement of reconciliation between the shareholders’ equity of Gemina and the consolidated shareholders’ equity and the consolidated profit (loss) SHAREHOLDERS’ NET PROFIT MILLIONS OF EURO EQUITY (LOSS) Gemina shareholders’ equity and profit (loss) for the year 1,799.0 (4.3) Cancellation of the book value of the Consolidated equity investments (54.6) 198.0 and effects of the consolidation difference between book value and pro-rata value of shareholders’ (54.5) equity profit (loss) of consolidated companies, supplemented by the 198.0 consolidation effects Write-off of impact of transactions performed between consolidated 6.7 - companies guarantees provided to subsidiary companies 6.7 Group shareholders’ equity and net profit (loss) for the year 1,751.2 193.7 Minority interests in shareholders’ equity and net profit (loss) for the year 43.4 10.3 Consolidated shareholders’ equity and profit (loss) for the year 1,794.6 204.0
Corporate transactions
In 2012 ADR started a process to reorganize the Group's corporate structure with the aim of maximizing the managerial focus on the core business in light of the Plan to re-launch ADR. This reorganization is set in a market scenario of increasing complexity, where the main subjects operating at the airport show an increasingly aggressive approach towards cutting costs, requiring efficiency from the operator. In particular the objectives pursued were: progressively aim for high levels of operating efficiency to align ADR to the best practices of the industry at international level, strengthen and focus the managerial control on the core businesses of development and management through the most effective organizational solutions and a progressive disengagement from the direct management of the activities of a lower added value for the end user. Initiatives were thus begun to divest some ADR businesses and transfer them to special purpose companies at the same time, in line with the corporate model already existing and in line with numerous international and national references.
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Direct Retail ADR directly managed some commercial businesses in the airport (core categories /duty free). In order to maximize the potential expressible by the business area in economic and employment terms, the identification of a specialized partner was deemed worthwhile. Therefore, following the establishment of ADR Retail (100% ADR), which was entrusted with managing 8 duty free/duty paid outlets at Fiumicino and Ciampino airports, for a total surface currently equal to about 3,100 square meters, a recruitment procedure was conducted, which ended on July 3, 2012, which involved the main reference operators in the airport Duty Free market at global level. Aelia (Lagardère Services group) was deemed the best bidder based on the committed investment for the entire period of the sub-concession (14 years) and the economic bid. The sub-concession agreement envisages the annual payment of royalties on average equal to 32.5% of the turnover generated by ADR Retail. On July 17, 2012 the preliminary agreement was signed for the sale of the investment (100%) held by ADR in ADR Retail to Aelia for a face value of 229.4 million euro. On September 28, 2012 after the completion of the Antitrust authority investigation and the authorization of ADR’s financing institutions, the transaction was finalized for the sale of ADR Retail capital to the French company Aelia S.A.S., through its Italian secondary office, effective from September 30, 2012.
Car parks In May 2012 ADR Mobility was established, which manages the car parks of Fiumicino and Ciampino. The car park business has a high growth potential due to both the possibility of attracting new passengers who currently use other modes of transport and the ability to recover market share from competitors. To seize these opportunities, ADR identified, within the new Industrial Plan, specific actions for its re-launch and full valorisation also with reference to the best practice of the sector and in May 2012 a tender procedure was started to search for a specialized partner able to bring skills and find synergies. Upon the expiry of the terms indicated, four binding bids were received, which did not prove to be in line with the potential value of the business. Nevertheless, the bids received in any case confirmed a strong industrial interest from specialized operators, thus confirming the high development potential of the asset. In light of the above, ADR decided to continue managing the business directly, promptly implementing the valorisation actions of the Plan.
Security With the aim of increasing the managerial effectiveness and encouraging and monitoring the implementation of the improvement actions identified, ADR deemed it worthwhile to dispose of the security business and transfer it to a 100% owned special purpose company. ADR Security was established on May 2, 2012 to be transferred the activity of passenger and goods control at the airports of Fiumicino and Ciampino. Starting from this date, a set of actions were identified and implemented in line with the Industrial Plan through the “Fly in Five” project. The aim of the project is to align line times at Fiumicino with those of the best European airports, in order to offer an excellent service in a critical phase of the process for passengers. The main lines of
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action regard the infrastructure, micro-processes, staff and the introduction of technological innovations.
Vehicle maintenance The ADR “vehicle maintenance” division used to carry out activities mainly for third parties (handlers) and in a limited manner towards ADR. In recent years the profitability of this business has constantly decreased due to downward price pressure associated to the serious economic situation experienced by most handlers and very fierce competition. In addition, in the main European and Italian airports, the airport operator carries out maintenance activities only when also providing handling service; thus this activity may not be considered as core for the activities institutionally entrusted to ADR. Therefore, in order to guarantee the takeover of a specialized operator to ensure stable employment and continuity of operations, a selection was started to transfer the company branch. Following a competitive procedure which involved a significant number of national and international operators assessed based on technical and economic criteria, ADR identified SIMAV, which works throughout the country and is connected to an international Group. The transfer of the company branch took place on October 31, 2012, at the same as granting under sub-concession the real estate areas of Fiumicino and Ciampino airports intended to carry out the activities. The transfer concerned the assets and liabilities belonging to the company branch, including machinery, equipment and work relationships (71 resources).
The new Planning Agreement
The new Planning Agreement The signing of the Planning Agreement represents an important step towards the creation of infrastructural investments that are fundamental to tackle the passenger growth expected in the coming years at the Rome airport system (and Fiumicino in particular) and guarantee an improved operating efficiency and higher quality standards for passenger services. The Agreement will allow, through the revision of airport fees, the implementation of the Development Plan, defined with the support of Changi Airport, which envisages investments for 3.1 billion euro in the next decade (intended for the implementation of the current airport infrastructure and the preparatory works to extend the airport to the north) as part of a plan for a total of 12 billion euro up to 2044.
The strategic objectives The long-term objective of the ADR Group is to create, in the validity period of the Concession, an airport system in line with international best practices to drive the social-economic development of the local territory and the Italian system and serve as access point for intercontinental traffic. The following actions are envisaged in particular:
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the development of Fiumicino in order to turn it into one of the main hubs at global level both in terms of volume, increasing the capacity to more than 100 million passengers from the current 35, and service standards offered to passengers; the upgrading of Ciampino as a City Airport to make it compatible with the environmental constraints, limiting the impact on the surrounding urban area, and to service the business component of Commercial Aviation and General Aviation of the Capital's traffic.
The creation of the Development Plan The creation of the new infrastructure is planned according to a specific schedule to guarantee a balanced supply and demand ratio over the years while supporting the constant improvement of the service level offered to passengers. The initial phase includes the completion of the current infrastructural organization of Fiumicino Sud with the aim of adjusting the function and layout of the airport to the evolving traffic/alliances. The works are arranged within the project for the completion of Fiumicino Sud, approved by ENAC on July 22, 2011. The Environmental Impact Assessment procedure is being completed with the Ministry of the Environment. The project aims to maximize the capacity manageable in the coming 10-15 years through the creation of all the flight and terminal infrastructures until the saturation of the current site, thus aligning the airport to the main European hubs. The main objectives of the completion project are: reach the capacity of 55 million passengers/year at the Terminals in the short/medium term; support the growing traffic with suitable airside infrastructure; raise the service level offered to passengers; complete the use of the areas inside the current site; ensure the full compliance and environmental and urban compatibility; strengthen the intermodality and the connection system and accessibility to the airport. A subsequent phase, through the purchase of new land, includes the expansion of the airport to the north of the current runway 07-25 defined inside the long-term Masterplan of Fiumicino. The completion of the Development Plan will increase the overall capacity of Fiumicino from 35 to more than 100 million passengers/year. The expansion of the airport will be in line with the best international examples, state-of-the-art in terms of efficiency, energy savings, technology and architectonic opportunities. The peculiarities of the airport infrastructure included in the development area lie in the flexibility and high level of intermodality concerning the connections with the territory and the city.
In detail, the main elements of the Planning Agreement are as follows.
Fee structure: the fee structure is based on criteria recognized at international level in correlation with the costs of infrastructure and services, promoting the efficiency objectives in accordance with directive 2009/12/EC and Law 27/2012. The fee rules are set until the end of the concession and are based on: "price cap” method ("RAB-based"), which correlates the fees with the costs of the services subject to economic regulation. In addition, the initial RAB value is calculated as at January 1, 2013 at 1.8 billion euro, which is then updated, year on year, with the rules of the regulatory accounts; "dual till" based on which all the revenues of the commercial activities are kept by the airport company;
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provision of bonuses/ penalties when the values recorded concerning environmental and quality indicators are above / below the objectives set with the ENAC (Civil Aviation Authority). Fee review: the new Planning Agreement clearly defines, in terms of content, methods and schedules, the mechanisms and reasons that require the update of the economic-financial plan at 2044, of the ten-year regulator periods, in turn subdivided into regulator sub-periods, of the variable contained in the mechanism of the annual fees. Permissible remuneration: for the first fee period (2012-2016) the real pre-tax WACC equals 11.91%, corresponding to a post-tax nominal value of 8.58%. The Planning Agreement defines all the parameters and criteria to update the return recognized on the capital; most of them must be updated every five or ten years. The real pre-tax WACC, for the new works of particular strategic and environmental value, will be increased with a range of 2% to 4%. Differences between forecast and final traffic: the variations in traffic compared to the forecasts within a +/-5% range will be to the benefit of/charged to ADR. In the presence of greater variations, 50% of the higher revenues will be allocated for future investments without any impact on the fees; if lower, 50% of the lower revenues will be included in the costs permitted for the fee calculation of the next sub-period of five years. Particularly significant traffic variations may legitimate the request to change to the planned structural works.
The Investment plan 2012-2016
In the period 2013-2016 infrastructural elements of essential importance will be made available to increase the capacity and level of service with the following financial commitment:
2012 2013 2014 2015 2016 TOTAL MILLIONS OF EURO 2012-2016
Terminals and piers 14 62 120 154 87 436 Runways and aprons 10 46 88 65 65 274 Baggage sub-systems and airport systems 4 14 41 50 41 149 Technological systems and networks 5 13 42 32 30 122 Information systems 2 7 6 5 6 26 Expansion to the north of Fiumicino airport 1 1 6 5 6 19 Other 14 32 40 69 77 231 Total 49 174 341 380 312 1,258 Pier C - financed portion 4 6 25 12 0 46 GRAND TOTAL 53 180 366 392 312 1,304
The hypotheses of the issuing plan reflect strict but realistic schedules to obtain the necessary authorizations and assume the actual effectiveness of the coverage envisaged by the new fee system.
Airport intermodality and connectivity For an airport like Fiumicino the development of accesses is of the utmost importance in order to best address the mobility and accessibility needs connected to the demand of air transport for Rome. For this reason, since 2006 ADR has been promoting issues linked to airport accessibility with the various Institutions in charge of with territorial planning, in order to allow the correct
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introduction in the town-planning tools of suitable road and rail structures to support the mobility demand linked to air transport. In May 2007, thanks to ADR's promotional activities, a work group was set up, consisting of the four companies that manage Rome's mobility (ADR, ANAS, Roma Mobilità, RFI), with the aim of enhancing and improving the accessibility of the West Area of the city, called “technical table”. The technical table has the purpose of studying and creating a multimodal transportation system by upgrading the infrastructural network and transportation services for the airport. This multimodal system translated into the “Roma Intermodale” project, co-financed by the European Union as part of the TEN-T networks and devised on the basis of the following objectives: meet the airport's future accessibility needs, as a necessary condition to reach the level of infrastructural development required to adjust these works to traffic growth trends and forecasts; guide the transport demand towards a sustainable mobility model by working in the direction of increasing the supply on rail to decongest the road networks; increase the use of public transportation systems for airport accessibility as a strategic option for the reduction of the emission balance. The “Roma Intermodale” project is part of Fiumicino long-term masterplan, estimating that 50% of passengers will reach the new airport with integrated and connected public means of transport. The new terminal will be directly connected to an innovative Ground Transportation Center where all the access systems will meet. Investments for about 5.3 billion euro are planned for the future access infrastructure at the new airport, not to be borne by ADR.
Environmental sustainability Another key element for infrastructural development is the high environmental sustainability that will characterize Fiumicino as a good example of Green Airport, thanks to projects such as: rationalization of consumption and use of renewable energy sources with a consequent reduction in CO2 emissions; system innovation, supervision and control; integration of the new infrastructure with the main environmental and local territorial elements; implementation of the environmental quality of buildings (exposure, natural ventilation, use of recyclable materials or materials that can be used at the end of the life cycle etc.); integrated management of the waste cycle, increasing recycling and creating a pneumatic waste collection system; creation of an efficient water management and treatment system; implementation of a suitable plan for water course management and ground drainage creation of suitable environmental compensation and mitigation works.
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TABLE 1. Medium term development: Fiumicino Sud completion project
89 new aircraft parking aprons, of which 39 with loading bridges, for a total of 158 aprons 180,000 square meters of new terminal surfaces for a total of 500,000 square meters 20,000 square meters of new commercial areas for a total of 50,000 square meters Creation of the People Mover Implementation of the new baggage handling system BHS/HBS Completion of the car parks for the passenger and employee vehicle parking
Fiumicino Sud completion project – central area infrastructure
Fiumicino Sud completion project – Terminal 1 and new departure areas A, C
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TABLE 2. Long term development: the Masterplan of Fiumicino Nord
New runways New Terminal system High level of service (maximum comfort for passengers in terms of available spaces and usability of the infrastructure) 200 aircraft aprons of which 155 with loading bridges New daily rail connections New commercial areas Environmental integration and sustainability
Fiumicino Nord Masterplan
Masterplan of Fiumicino Nord – New Terminal and Ground Transportation Center
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TABLE 3 Future structure of the mobility system for Rome western area
1. Road connection SS1 - Fiumicino Nord 7. Unification SS8 - Via Ostiense 2. Rail connection to the new North Terminal and link roads 8. Scafa bridge FR5-FR1 3. Upgrade of current rails services 9. Mobility corridor C9 4. Rome-Latina corridor (including bypass A12-SR148) 10. Corridor C5 11. Connection to 5. Motorway SR148-A1 Dir. Fiumicino commercial port 6. Gronda Sud railway 12. People mover GRTS
Intermodal mobility
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Corporate governance
The structure of corporate governance adopted by Gemina draws inspiration from the recommendations and rules contained in the Code of Conduct adopted by the Corporate Governance Committee of Borsa Italiana Spa, amended many times, in 2006 first and with the latest revision in 2011 (“Borsa Italiana Code”). The Board of Directors of Gemina adopted its Code of Conduct in 2007 for the first time, in line with the principles contained in the Borsa Italiana Code. It subsequently approved it with amendments in 2011 and lastly during the meeting of the Board of Directors of December 12, 2012 to take into account the updates to the Borsa Italiana Code of Conduct of November 2011. Gemina's new Code of Conduct, with the objective of creating an increasingly more structured and efficient system of rules and ensuring maximum transparency to the market, adopted some changes with reference in particular to the organisation and tasks of the committees within the board of directors and the internal control and risk management system. The name and tasks of the “Internal control and corporate governance committee” were changed, renaming it “Risk control and corporate governance committee”. To prevent any duplication of activity, it was specified that the active members of the Internal control and risk management system, suitably coordinated one with the other, are: the Board of Directors, which entrusts the Director in charge of the internal control and risk management system, who may coincide with the Managing Director, with creating the Control and risk management system and keeping it effective, and sets up the Risk control and corporate governance committee with the task of supporting the decisions of the Board regarding the same system as well as those relating to the approval of the periodic financial reports; the Internal Audit manager in charge of verifying the adequacy and effectiveness of the Internal control and risk management system; the Board of Statutory Auditors. During the meeting of March 8, 2013 the Board of Directors of Gemina approved, pursuant to art. 123 bis of Italian Legislative Decree 58/98 (TUF), the Annual Report on corporate governance and the ownership structures regarding the year 2012, available on the website www.gemina.it (corporate governance section). Below is a summary of the most important aspects of the Annual Report on corporate governance and the ownership structures. During the meeting of October 25, 2012, to ensure a suitable development at group level of the relations with institutional investors and the stakeholders in general, the Board of Directors established the “Investor Relation” organisational unit, with Mr. Marco Troncone in charge; the investor relation activity had been previously entrusted to Gemina's CFO, Mr. Sandro Capparucci. In the Board of Directors’ meeting of December 12, 2012, Gemina amended the Articles of Association to adjust them to Law 120/2011 reporting “Modifications to the consolidation act of the previsions concerning financial intermediation, under Italian Legislative Decree 58/1998, regarding the parity of access to the administration and control bodies of the companies listed in regulated markets”. According to these regulations, listed companies must include a criterion of separation in the articles of association that ensures a balance of genders in the composition of the statutory boards. In particular the least represented gender must obtain, in the first mandate, at least one
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fifth of the directors and statutory auditors elected and at least one third in the next two mandates, starting from the first renewal of the bodies after August 12, 2012. Gemina's articles of association that govern the methods of appointment and replacement of directors (articles 11 and 12) and the Board of Statutory Auditors (art. 20) were amended accordingly. In the same meeting of December 12, 2012, the Board of Directors also approved the new Procedures “on the management of confidential information” and on the “Keeping of Registers” concerning internal dealing with the aim of adjusting them to Gemina's and the subsidiary ADR's organizational needs to encourage a greater information flow for the identification (employees/consultants) of those who have access to confidential/privileged information. Starting from September 17, 2012 Gemina adhered to the opt-out regime pursuant to articles 70, subsection 8 and 71, subsection 1-bis, of Consob Issuers’ Regulation, as amended by Consob Resolution no. 18079 of January 20, 2012, while exercising the right to deviate from the obligations of publication of the information documents in case of significant merger, spin-off and capital increase transactions through contribution in kind, acquisition and transfer. Gemina used this regime with reference to the transaction for the sale of ADR company Retail Srl by the subsidiary ADR. As mentioned above, the information on Corporate Governance is summarised in this section since it is already included in the Annual Report on corporate governance and the ownership structures. The following documents regarding Corporate Governance and Sustainability are available in English and Italian in the corporate website, www.gemina.it: Gemina Code of Conduct The Articles of Association Report on Corporate Governance and the ownership structures Code of Conduct in the matter of Internal Dealing The procedure in the matter of transactions with related parties The Code of Ethics The documents for the approval by the Shareholders' Meeting Gemina’s corporate governance follows a traditional model that – notwithstanding the tasks of the Shareholders' Meeting – entrusts the management to the Board of Directors, the control functions to the Board of Statutory Auditors and the audit of the financial statements to the Independent Auditors. Gemina exercises management and coordination activity pursuant to Article 2497 bis of the Italian Civil Code on the subsidiaries ADR, Fiumicino Energia and Leonardo Energia.
Board of Directors The Board of Directors of Gemina, appointed by the Shareholders' Meeting through the voting by list procedure (art. 11 of the Articles of Association), is the corporate body in charge of administering the company. It has the exclusive competence and full ordinary and extraordinary powers to manage the company and implement the direction and coordination of the subsidiaries belonging to the Group. As at December 31, 2012, the Board of Directors comprised 12 Directors, of whom 10 non-executive and 2 executive directors (the Chairperson of the Board of Directors and the Managing Director). A suitable number of non-executive directors were acknowledged with the requirement of independent directors, based on the provisions of the internal Code of Conduct, which includes the principles of the Code of Conduct of companies listed on the stock exchange. In Gemina's Board of Directors the following
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directors qualified as independent: Giuseppe Angiolini, Giuseppe Bencini, Giovanni Fontana and Sergio Iasi. During 2012 the Board of Directors of Gemina S.p.A met 10 times, with an average attendance percentage of about 90% (the participation percentage of each director currently in office is indicated in the table below. The Administration, Finance and Control Manager participated in every Board meeting pursuant to the Code of Conduct. The table below shows the breakdown of the Board of Directors of Gemina as at December 31, 2012.
TABLE 1. Table of the Board of Directors NON- INDEPENDENCE INDEPENDENCE OTHER NAME OFFICE SINCE LIST EXECUTIVE EXECUTIVE GEMINA CODE TUF % BOD OFFICES PALENZONA M X NA NO 100 10 FABRIZIO Chairman 04/28/2010 BERTAZZO Director 04/19/2011 - X NA NO 100 3 CARLO director ANGIOLINI 4 Director 04/28/2010 M X YES YES 90 GIUSEPPE BENCINI 1 GIUSEPPE Director 04/28/2010 M X YES YES 100
CAO STEFANO Director 04/28/2010 M X NO NO 90 7 FONTANA Director 04/28/2010 M X YES YES 70 - GIOVANNI HO Director 04/28/2010 M X NO NO 90 1 BENG HUAT IASI Director 04/28/2010 M X YES YES 100 3 SERGIO MINALI Director 10/25/2012 - X NO NO 75 - ALBERTO MION Director 08/02/2012 - X NO NO 100 7 GIANNI OGLIENGO Director 10/25/2012 - X NO NO 50 4 VITTORIO REBECCHINI Director 04/28/2010 M X NO NO 90 4 CLEMENTE
In the meeting of February 1, 2013, pursuant to art. 2386 of the Italian Civil Code, the Board of Directors appointed the Director Carlo Cimbri, to replace the late Mr. Massimo Pini. Thus the Board of Directors currently consists of 13 Directors, with expiry on the meeting to approve the financial statements as at December 31, 2012. The Board of Directors granted the Chairman, Mr. Palenzona, pursuant to Art. 18 of the Articles of Association, signing authority and legal representation before third parties and in matters of the court. In addition to calling the Board of Directors’ meeting, the Chairman sets the agenda, sends the Directors any necessary documentation suitably in advance to allow for effective participation in Board business and directs the meetings, ensuring adequate information flows between any Board committees and the Board itself and making certain that the decisions of the Company’s corporate boards are consistent. The Chairman ensures that the Board of Directors and the Board of Statutory Auditors are duly informed of any significant events and, at least quarterly, reports on the overall performance of the Company and its subsidiaries. The Chairman is also granted certain managing powers. The Chairman, in particular, exercises an executive role since, in addition to the powers assigned by law and the articles of association, he/she is entrusted with the following duties:
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consistently with the programmes approved by corporate bodies, the Chairman supervises general initiatives for promoting the image of the Company and its subsidiaries, oversees the performance of corporate affairs and the proper implementation of corporate bodies’ resolutions, the Chairman is responsible for the Company’s and its subsidiaries’ institutional relationships with Italian and foreign authorities, agencies and bodies, including international bodies, and defines the related institutional communication. Mr. Palenzona is also Chairman of ADR’s Board of Directors. The Board of Directors granted the Managing Director, Mr. Carlo Bertazzo managing powers. In addition to signing authority and legal representation before third parties and in matters of the court, the Managing Director is vested with all ordinary management powers of the Company that are not reserved for the Board of Directors and Chairman, with free and several signature powers up to a limit of 1 million euro for each single transaction, for signing agreements or the undertaking of commitments of any kind whatsoever (including, but not limited to, loans or issue of guarantees). The Managing Director is responsible for executing the resolutions of the Board of Directors. Likewise the Managing Director draws up and defines the proposals to the Board of Directors regarding: budgets, strategic, business and financial plans, including multi-year plans, intervention and investment plans for Company and its subsidiaries, overseeing their execution. The Managing Director must also oversee the Company’s performance, the performance of its equity investments, the Gemina organisational structure, as well as carry out the Company’s business communications, particularly in regards to relationships with supervisory bodies and the stock exchange management company. Designated bodies report to the Board regarding the activities carried out during the year in exercise of the powers at the first suitable meeting and at least on a quarterly basis.
Board of Statutory Auditors On April 19, 2012, the Shareholders' Meeting elected, through the voting by list procedure and in compliance with art. 20 of the Articles of Association, which provides for two statutory auditors and one alternate auditor to be appointed by minorities, the Board of Statutory Auditors for the three-year period 2012-2014. The Board of Statutory Auditors is currently made of up three statutory auditors: Luca Aurelio Guarna (Chairman), Mario Tonucci and Lelio Fornabaio, and three alternate auditors, Antonio Santi, Carlo Regoliosi and Luca Zoani. With reference to 2012, until the Meeting of April 19, 2012, the chairman of the Board of Statutory Auditors comprised Luca Aurelio Guarna, Maurizio Dattilo and Giorgio Oldoini. The Board of Statutory Auditors met five times during 2012.
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TABLE 2. Table of the Board of Statutory Auditors
NAME OFFICE SINCE UNTIL INDEPENDENCE % CS OTHER OFFICES Luca Aurelio Chairman 01/01/2012 YES 100 7 Guarna Lelio Fornabaio Statutory Auditor 04/19/2012 YES 100 7
Mario Tonucci Statutory Auditor 04/19/2012 YES 100 3
Maurizio Dattilo Statutory Auditor 04/19/2012 YES 100 2
Giorgio Oldoini Statutory Auditor 04/19/2012 YES 100 1
Executive Committee An Executive Committee has not been established.
Remuneration and Human Resources Committee The Remuneration and Human Resources Committee provides the Committee with investigation, advisory and designative duties, towards the Board of Directors of Gemina and its subsidiaries. It currently comprises 5 non-executive directors (Giuseppe Bencini, Giuseppe Angiolini, Stefano Cao, Giovanni Fontana Clemente Rebecchini), the majority of whom is independent in compliance with art. 3 of the Code of Conduct of the Company (Giuseppe Bencini, Giuseppe Angiolini, Giovanni Fontana and Giuseppe Bencini). The Chairman of the Boards of Statutory Auditors or another Auditor, as requested by the same, participates in Committee meetings. In 2012 the Committee held 6 meetings (the percentage of attendance of the members of the Committee in the meeting is stated in the table below).
TABLE 3. Attendance at the meetings of the Remuneration and Human Resources Committee of Gemina in 2012
ANGIOLINI FONTANA REBECCHINI BENCINI GIUSEPPE GIUSEPPE CAO STEFANO GIOVANNI CLEMENTE % RC 100 100 100 100 90
Risk control and corporate governance committee The role of the Committee is to provide advice, forward proposals and give support to verify the correct operation of the internal auditing and corporate governance system. Its role was implemented after the adoption, during the Board of Directors’ meeting held on December 12, 2012, of the new Code of Conduct, with special reference to the assessment of the Internal Control and Risk Management system and the proposals of the Internal Audit department. It currently comprises 3 non-executive directors, the majority of whom are independent in compliance with art. 3 of the Code of Conduct of the Company (Giuseppe Angiolini, Chairman, Sergio Iasi and Stefano Cao as members - in place of the resigning Valerio Bellamoli from August 2, 2012). The Chairman of the Boards of Statutory Auditors or another Auditor, as requested by the same, participates in Committee meetings. In 2012 the Committee held 5 meetings (the percentage of attendance of the members of the Committee in the meeting is stated in the table below).
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TABLE 4. Attendance at the meetings of the Risk Control and Corporate Governance Committee of Gemina in 2012
ANGIOLINI BELLAMOLI GIUSEPPE VALERIO CAO STEFANO IASI SERGIO % RC 100 100 100 100
Internal control system, Supervisory Body and Organisational, Management and Control Model The Board of Directors, with the assistance of the Risk Control and Corporate Governance Committee, defines the guidelines of the internal control system, periodically examines the main company risks and assesses, at least annually, the adequacy, effectiveness and actual operation of the internal control system. In the meeting of December 12, 2012, with the adoption of the new Code of Conduct mentioned above, the Board made some changes to the internal control and risk management system, identifying the following players: i) the Board of Directors; ii) the Internal Audit manager; iii) the Board of Statutory Auditors. The Supervisory Body of Gemina was established in compliance with the provisions of Italian Legislative Decree 231/01 (and subsequent amendments) with the task of defining the organisational, management and control model for all the companies of the Gemina Group to prevent the company's responsibilities for administrative offences. The Supervisory Body of Gemina is made up of the Chairman, Mr. Renato Colavolpe, Mr. Giuseppe Angiolini and Mrs. Cinzia Versace. The body met five times in 2012. The Organisational, Management and Control Model under Italian Legislative Decree 231/2001 of March 25, 2004 was updated during 2011 in compliance with the new applicable provisions and in line with the requirements deriving from the full service contract entered into with ADR SpA.
Code of Ethics Gemina has its own Code of Ethics that defines the ethical values and the business principles of the Group, indicating the rules of behaviour to be followed by the staff and the members of the statutory boards in external relations and within the company. The Code of Ethics is available at www.gemina.it in the Corporate Governance section.
Procedure regarding transactions with related parties The procedure, approved by the Board of Directors in the meeting of November 12, 2010, states the principles of behaviour to conduct transactions with related parties and defines the criteria to identify them in order to ensure transparency and correctness in terms of substance and procedures. The current procedure complies with the regulations in force and the Consob provisions under resolution no. 172221 of March 12, 2010 and has been in force since January 2011. The Procedure also governs the processes of approval of the transactions carried out through subsidiaries and the disclosure that should be provided regarding transactions with related parties. Reference is made to the section on “Changes that occurred after the end of the
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period” for the resolutions made by the Board of Directors during the meeting of January 16, 2013 regarding this procedure.
Independent Auditors The task of auditing the financial statements, including the consolidated financial statements, and the half-year report as well as carrying out the other activities provided by Article 155 of the Consolidated Financial Act (Testo Unico della Finanza, TUF) is entrusted to Deloitte & Touche S.p.A. The appointment was extended by the Shareholders’ Meeting of May 7, 2007 for the 2007-2012 period. In November 2012, the Chairman of the Board of Statutory Auditors of Gemina started the selection process, for the supply of professional services connected to the auditing of the accounts of Gemina and its subsidiaries for the 2013-2021 period, defining the requirements and criteria for participation in the selection. Subsequently, the Board of Statutory Auditors identified “Reconta Ernst & Young S.p.A.” as the best bid.
Human resources
As at December 31, 2012 the Gemina group employed 2,232 people, recording a decrease of 14% compared to 2011. The change is due to the (i) transfer of ADR Retail, which left the consolidation area in October 2012, (ii) the outsourcing of the vehicle maintenance activity, sold in November 2012 and (iii) actions to upgrade the activities of Fiumicino Energia and making the Gemina office more efficient. Staff costs for 2012 equalled 109.2 million euro (equal to 29% of the added value) down compared to 2011 by 1.3%. The Group workforce on permanent contracts as at December 31, 2012 equalled 1,875 people, with a change of 146 people compared to December 31, 2011 (-7%). This decrease is linked (i) to the outsourcing of Vehicle maintenance operations (-71 people) and the sale of ADR Retail (-187 people), (ii) the transformation of temporary contracts in all the companies in the ADR Group (+126 people) for the application of the general legislation and (iii) the difference between new recruits (+8 people) and leaving staff (-22 people). The Group's average headcount equals 2,322.6 in 2012, down by 79.9 resources compared to the previous year. This decrease is the result of the managerial measures taken to optimise the use of staff in operating activities (for example by using more suitable contractual forms), the efficiency programmes started in 2011 becoming fully operations and outsourcing.
Development The Gemina Group, with the aim of ensuring an optimal management of people, is committed to defining professional routes and succession plans in line with individual motivations and expectations and the needs of the business to manage mobility processes and define tools to measure the performance and related incentive systems. In particular, since 2007 the Group
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has been adopting a procedure for the assessment of expertise and professional skills. In 2012, 319 employees were subject to assessment (equal to 13% of total).
Training In 2012, 41,145 training hours were provided, which involved 817 employees, equal to 36% of the total and with an economic commitment of about 233 thousand euro. Training activities were addressed mainly to issues of health and safety in the workplace (23.8%), airport security (16.9%), technical-specialist training (43.9%) and managerial training (15.4%). Training activities also concerned environmental and energetic aspects with courses targeting reference regulations. Among the development initiatives created and concluded in 2012, worth mentioning are (i) the ADR Quality project aimed at the professional family of airport employees for a total of 1,000 hours provided, (ii) the training course designed for Procurement figures and (iii) the “Progetto contabilità e finanza (Accounting and finance project)” aimed at the administration, finance and management control professional family.
Wage system The Group's wage system aims at valuing professionalism and awarding excellence. The Group's wage package is arranged into fixed wages, variable wages and additional benefits. Specifically, the fixed wage consists of the contractual consideration and any productivity bonus; the variable wage includes long-term incentives linked to achieving predefined targets as part of the MBO policy. During 2012 the Ordinary general meeting of the shareholders of Gemina SpA approved the general lines and the regulation framework of the stock option plan 2012. For more details, reference should be made to the document “Remuneration Report”, available at www.gemina.it in the Corporate Governance section.
Organizational Model The structural change within the Group has stimulated the review and redefinition of the governance system, directing it towards an organizational model that entrusts the Parent Company with guidance and governance functions. Furthermore, the service functions were identified which directly support operations, where also the activity of the subsidiary undertakings and the four business areas converge: (i) aviation, (ii) non aviation commercial, (iii) real estate and (iv) infrastructure development. With the same objective, the most important organizational processes were reviewed also in light of Italian Legislative Decree 231: (i) planning cycle, (ii) passive cycle, (iii) system of mandates and proxies, (iv) operating instruction to entrust the commercial sub-concession spaces. In May, ADR's Board of Directors resolved on the new governance tools (“Contract Governance Committee”, “Committee for the Management of the Valorization Process and the Transfer of the Business Direct Retail and Mobility areas”).
Industrial and trade union relations 2012 mainly concerned the following issues:
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contribution in kind in April and May of the three company branches, including the staff belonging to them; as part of this action, on March 29, 2012 an Agreement was signed with Cisl, Uil and Ugl of the Air Transportation with a temporary validity (2014), which envisages a 16% reduction in salaries (basic and contingent) for new recruits, both temporary and permanent, and the conversion of staff to permanent contracts. Cgil did not sign the agreement as it does not support the planned action since this deviates from the contractual regulation (being renewed); for ADR Security and ADR Assistance two agreements were signed with the company trade union representatives from Fit Cisl, Uil Trasporti and Ugl Trasporti on the use of part time contracts with 4 hours shifts, governing beforehand the use of this type of contract for the years 2012/2013 for both peak periods and low periods. Likewise the agreements included the conversion of part-time contracts to full-time contracts: 46 units for ADR Security (to be carried out in October 2012 and January 2013) and 21 for ADR Assistance (to be carried out by October 2012); on August 30, 2012 the trade union procedure was started for the transfer of the “vehicle maintenance” company branch. The transaction, which was not shared by the trade union organizations, ended on October 8, 2012 with the formalization of the failed trade union consent. The transfer of the activities and dedicated resources – 71 units – took effect in November 1, 2012.
Health and safety in the workplace Regarding the protection of health and safety in the workplace, the Gemina Group has a management system in place, certified according to the OHSAS 18001 international standard. In 2012, 194 accidents were recorded, of which 70% at work and 30% while travelling to and from work. The improvement actions adopted allowed a reduction in the number of accidents in the period 2010-2012 equal to 30%. Among the initiatives undertaken, worth mentioning are those in favour of: (i) security employees, who were provided with anti cut protective gloves which offer, in addition to specific protection, excellent manoeuvrability and tactile sensitivity; (ii) employees in charge of terminal operations, who were made aware of the importance of observing the operating instructions concerning the handling and transportation of baggage on trolleys and (iii) Vehicle/ Electrical /Electromechanical maintenance operators, for whom a specific training course was scheduled to raise awareness on the behavioural aspects involved in maintenance activities.
TABLE 1. Main Indicators Human Resources
UNIT 2012 2011 2010 Group workforce (headcount) no. 2,232 2,593 2,658 Group workforce (average headcount) FTE 2,322.6 2,402.5 2,368.9 Group workforce by title (headcount) 2,232 2,593 2,658 Executives no. 46 46 49 Managers no. 181 186 206 Employees no. 1,554 1,792 1,775 Workers no. 451 569 628 Group workforce by title (average headcount) 2,322.6 2,402.5 2,368.9 Executives no. 43.9 44.2 48.7 Managers no. 183.8 181.8 175.3 Employees no. 1,573.8 1,626.0 1,578.4 Workers no. 521.1 550.5 566.5
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UNIT 2012 2011 2010 Group workforce by company (headcount) 2,232 2,593 2,658 Gemina no. 1 2 11 ADR and subsidiary companies no. 2,227 2,589 2,646 Fiumicino Energia no. 4 2 1 Group workforce by company (average headcount) 2,322.6 2,402.5 2,368.9
Gemina FTE 1.0 2.0 11.0 ADR and subsidiary companies FTE 2,318.0 2,399.0 2,356.9 Fiumicino Energia FTE 3.6 1.5 1.0 Group workforce by type of contract (headcount) 2,232 2,593 2,658
Open-ended contracts no. 1,875 2,021 1,952 Fixed-term contracts no. 357 572 706 Passengers/Employees FTE no. 17,895 17,682 17,269 Group workforce by age group <35 % 35% 38% 40% 36-45 % 33% 34% 33% 46-55 % 25% 22% 21% >55 % 7% 7% 6% Group workforce by qualification Degree % 21% 17% 16% Diploma % 58% 61% 61% Turnover rate Overall turnover % 0.4% (0.7%) 0.9% Employees leaving % 12.1% 6.8% 1.6% Employees entering % 12.5% 6.1% 2.4% Industrial relations Percentage of employees taking part in collective agreement % 100 100 100 Number of agreements signed with trade unions no. 54 20 52 Diversity Women in the total workforce % 33% 34% 31% Women in managerial positions % 0.002% 0.003% 0.002% Training Training expenses €000 212 288 446 Average hours of training per employee per annum h 18 16 13 Training by area: Health % 24% 10% 12% Airport security % 17% 48% 46% Managerial % 15% 7% 9% Functional to the Specialist Technical role % 44% 35% 32% Health and safety in the workplace Health expenses in the workplace €000 700 700 600 Employee accidents no. 194 209 274 Employee accident severity index % 3.4% 4.0% 4.2% Fatalities no. 0.0 0.0 0.0 Percentage of workers represented in the Health and Safety committee % 6% 6% 6%
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Airport Safety
Airport certification The regulation for the construction and operation of airports issued by the Italian Civil Aviation Authority (“ENAC”) in 2003 lays out that each airport open to commercial traffic must be certified by the Aeronautical Authority as regards the safety requirements of operations defined by the same Civil Aviation Authority regulation. Fiumicino and Ciampino airports were certified by ENAC on November 27, 2003 and November 30, 2004, respectively (the airport certification is subject to renewal every three years). During 2012 the renewal of the Fiumicino airport certificate was obtained. The certificates of the Fiumicino and Ciampino airports are valid until November 26, 2015 and November 30, 2013, respectively.
Monitoring of safety levels In line with the provisions of the Regulation for the construction and the operation of airports, since 2006 ADR has adopted a Safety Management System (SMS), i.e. a suitable system to guarantee that airport operations are carried out in the preset safety conditions. The SMS carries out the continuous monitoring of the safety standards, making use of the system to collect and manage data (reporting system) relating to aviation events taking place in airport operations. In order to support the Accountable Manager (i.e. the manager of the ENAC certification of airports) in implementing the safety policies, on September 26, 2006 ADR appointed a committee called the Safety Board, consisting of an Accountable Manager, Post Holders (safety managers for the respective areas of responsibility) and the Safety Manager (responsible for the SMS). The Board meets periodically and is proactive in discussing all the safety aspects in order to review and improve the system. In addition, the respective Safety Committees were established at both airports. These are advisory committees involving Operators/Companies (airlines, handlers, ENAV, etc.) and the public bodies at the airport (ENAC, fire department, etc.) on the subject of safety of airside operations.
Safety of airside operations The safety of operations in the area where aircraft move (airside) is ensured by the ADR's Operational Safety, which carries out the scheduled and requested (h24) airside inspections, measures runway braking actions, controls airside works and provides a bird and wild fauna control service through the Bird Control Unit (BCU) operating 24 hours a day. During 2012 the new operating aircraft fuelling procedure was implemented at both airports for the safe execution of fuelling operations with and without passengers on board or during passenger embarking/disembarking operations in the absence of the fire department, in line with the provisions of Ed. 2 Iss. 6 of ENAC Regulation and Min. Decree of June 30, 2011.
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Airport emergency plan for air accidents Full scale aircraft accident emergency exercises were carried out on October 10, 2012 at Fiumicino airport and on November 23, 2012 at Ciampino airport. A B 737 simulator owned by the Fire Department and used for training at both airports was placed at the technical area near the cargo city of Fiumicino. The exercise of October 10, 2012 at Fiumicino airport was successfully carried out using the above mentioned simulator. The staff of the ADR Group dedicated to emergencies was fitted with customized waistcoats with the identification of the related operational role (ADR airport manager, Safety Supervisor, Security Supervisor, Medical Triage, Terminal Supervisor, psychologist and evacuation employee). As part of the initiatives aiming to increase the sensitivity of the staff towards safety in the workplace, the training activities continued during 2012, both basic and refreshers, for the fire fighting teams and the employees of the emergency teams.
TABLE 1. Fiumicino Airport - main indicators Airport Safety
UNIT 2012 2011 2010 Aircraft damage accrual * 0.16 0.18 0.22 Other damage (without aircraft involvement) accrual * 0.21 0.24 0.47 Right of way violations towards aircraft accrual * 0.11 0.10 0.10 Runway incursions11, 12, accrual * 0.045 0.027 0.049
* Number of events every 1,000 aircraft movements
TABLE 2. Ciampino Airport - main indicators Airport Safety
UNIT 2012 2011 2010 Aircraft damage accrual * 0.06 0.11 0.04 Other damage (without aircraft involvement) accrual * 0.08 0.05 0.06 Right of way violations towards aircraft accrual * 0.14 0.20 0.11 Runway incursions accrual * 0.000 0.018 0.000
* Number of events every 1,000 aircraft movements
11 Runway incursions: erroneous presence of aircraft, vehicles or people in the protected area of the surface intended for aircraft landing and take-off. 12 Data provided by ENAV
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Relationships with the territory
The Gemina Group is committed to establishing cooperative relations with its reference stakeholders, deeming the relationship with the surrounding economic and social environment fundamental. Special importance is thus given to the relationships with local stakeholders (Lazio Regional Board, Amministrazione di Roma Capitale, the municipality of Fiumicino, the municipality of Ciampino, the municipality of Viterbo and the Provincial Board of Rome) with the aim of ensuring a common territorial development program. To this end the Gemina Group uses various tools and authorizing and consulting measures, whether voluntary or imposed by regulations. In 2012 significant communication and consultation activities were undertaken with the local stakeholders during the process for the definition and approval of the Planning Agreement. In this context a number of meetings were organized, which involved a host of subjects including: the Municipality of Rome, the Municipality of Fiumicino, the Lazio Regional Board, the Provincial Board of Rome and the local and national operators of the transportation infrastructure (ANAS, RFI, Roma Servizi per la mobilità). The issues discussed mainly concerned the infrastructural network that will derive from the implementation of the Rome airport system development plan and the expansion of Fiumicino Sud and Nord. In this context, in September 2012 a public consultation was held at Fiumicino airport, conducted by Civil Aviation Authority to present the documentation relating to the fee structure of the Planning Agreement, in which Associations and representatives of the airlines and the handlers took part, as well as the consumers and couriers. In addition, as part of the infrastructure planning and development activities, ADR's check and approval of the Masterplan documents and the integrated environmental study, consisting of reports and discussions, were completed. These elements will be sent to ENAC for examination and approval by June 30, 2013 as set in the Planning Agreement. The environmental impact assessment (EIA) procedure was started and successful concluded for the project of completion of the Fiumicino Sud infrastructure, at the Ministry of the Environment together with the Minister for Cultural Assets and activities; the related ministerial decree is awaited, currently being issued by the competent ministries. Thus ENAC has requested the Public Works Administration (MIT) to convene the Conference of the services, concluding the urban authorization procedure.
The communication approach taken with the leading stakeholder categories has led to other shared and approved choices; of these, the “Roma Intermodale” project planned by ADR, ANAS, RFI and Roma Servizi per la Mobilità, relating to the interventions on the intermodal infrastructure to encourage accessibility to Fiumicino airport and the western area of Rome is particularly important. Furthermore, in light of intermodal development, in the last quarter of 2012 contacts were made with representatives of the Municipality of Fiumicino and the Port Authorities for the activities to create the infrastructure connecting the two Port and Airport poles with the surrounding intermodal network. These contacts continue with the aim of sharing, together with the Municipality of Fiumicino, the intermodal connections between the two poles. The structure of the intermodal accessibility as a whole is being shared with the Lazio Regional Board to include the infrastructural framework of the area of the quadrant in the regional program and schedule; to this end, with a specific resolution and decision of the Lazio Regional Board, a work group was formed, which is aimed at processing the issues connected to the
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development of the Western Area of the Rome Metropolitan Area where the Leonardo da Vinci airport is located. This group, coordinated by regional managers from the Institutions and Territory Department, includes the managers of the Lazio Regional Board of the Environmental, Infrastructure, Transportation and Urban departments, the representatives of the Ministries of Infrastructure and Transportation, ENAC and ADR.
As part of the relationships with environmental institutions, ADR has met some of the associations and groups more concerned about protecting and sustaining the environment. Specific meetings were organized with the representatives of the National and Local branches of WWF, Legambiente and LIPU during which infrastructures, methods and processes connected with the environment were displayed. In particular a visit was arranged to the site of the biological purifier, the energy cogeneration plant, the acoustic monitoring stations and the photovoltaic fields of the car park. The representatives appreciated the availability, awareness and desire of ADR in its careful and respectful environmental management.
As part of the activities aiming to reduce acoustic pollution and the reduction of the related impacts on the territory and the surrounding communities, ADR is committed to constantly monitoring the airport noise at both airports in compliance to specific legal provisions. In particular, studies are being developed in agreement with ENAC and ENAV to reduce these areas. In any case, having the terms elapsed to send to the competent authorities the documents with the indication of the areas exceeding the acoustic limits, on part of the areas where the excesses were estimated, preliminary activities were carried out to identify the properties falling within the critical area and which may be subject to acoustic redevelopment by ADR. This is necessary to detect the extent and type of the interventions needed to carry out the acoustic redevelopment plans.
Service quality
To effectively and continuously meet the needs and expectations of customers and passengers, the Group is constantly engaged in defining and implementing a policy to improve the quality standards of the offered services.
Service Charter The Service Charter, published and distributed each year in two languages (Italian/English) starting from 2002, is the document that summarizes the requirements and parameters the company undertakes to respect and uses as a benchmarks for its work at the two airports of Fiumicino and Ciampino. During 2012, monitoring of the level of service provided at Fiumicino and Ciampino airports was ensured, as established by the Quality Plan, by about 56,000 objective checks being carried out. The quality of the main services provided to passengers was verified and in particular: check-in, carry-on baggage checks, baggage reclaim and punctuality of departing flights. At Fiumicino airport, the analysis of the overall performance of the quality levels highlights an improvement compared to the indicators of the Service Charter and the levels reached in 2011
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in the carry-on luggage security control processes, the wait time at the check in for the domestic segment and the punctuality of the flights. Starting from July 2012, for the check-in, security and baggage reclaim processes, the service standards were reviewed and improved. The introduction of the new standards made respecting the Service Charter more difficult. With reference to the security controls for carry-on luggage, it should be noted that the negative trend in quality levels provided, which concerned the first part of the year in connection with the enforcement of new control procedures to adjust to the security measures requested by ENAC and ECAC (European Civil Aviation Conference) and the spin-off phase which led to the creation of ADR Security, improved notably in the period July-December 2012 with a 95.5% compliance with the Service Charter. At Ciampino airport, the quality level trend analysis in 2012 shows the compliance of the provisions in the Service Charter; the comparison with last year records improvements, as part of the services relating to check-in, baggage reclaim and flight punctuality. These results were possible thanks to the constant commitment of the Group in offering passengers more and more efficient services with a view to continuous improvement.
TABLE 1. Main indicators Service Quality
UNIT 2012 STANDARD 2011 2010 STANDARD
Fiumicino Average score % 86.2 90 86.1 82.9 90
Lines at national check-in desk, within 8 minutes % 96.1 90 95.2 85.9 90 Lines at international check-in desk, within 18 minutes % 85.5 90 86.1 84.9 90 Waiting time for carry-on baggage security checks, % 89.3 90 87.5 92.0 90 within 10 minutes Wait on board to disembark first passenger, within 3 % 88.7 90 92.4 90.3 90 minutes Delivery of first bag from block-on by set time % 86.9 90 88.3 81.1 90
Delivery of last bag from block-on by set time % 89.1 90 90.8 86.2 90 Punctuality of incoming flights (flights arrived with less % 83.9 n.a. 83.3 77.5 n.a. than 15 minutes of delay) Punctuality of departing flights (flights leaving with less % 80.6 75 78.6 70.1 75 than 15 minutes of delay) Number of complaints no. 3,658 n.a. 3,002 1,917 n.a. Average time to settle complaints no. 15 days 30 days 12 days 10 days 30 days
Ciampino Average score % 84.1 90 78.2 80.9 90
Lines at check-in desk, within 20 minutes % 96.1 90 94.4 73.7 90 Waiting time for carry-on baggage security checks, % 97.4 90 98.3 96.0 90 within 14 minutes Wait on board to disembark first passenger, within 4 % 96.5 90 97.5 96.2 90 minutes Delivery of first bag from block-on by set time % 98.6 90 97.2 93.4 90 Delivery of last bag from block-on by set time % 99.5 90 98.3 94.5 90 Punctuality of incoming flights (flights arrived with less % 88.2 n.a. 86.7 79.0 n.a. than 15 minutes of delay) Punctuality of departing flights (flights leaving with less % 87.3 83 84.3 73.8 83 than 15 minutes of delay) Number of complaints no. 182 n.a. 235 188 n.a. Average time to settle complaints no. 15 days 30 days 12 days 10 days 30 days
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Suppliers
Selecting suppliers The Group's activities aimed at awarding work contracts, supplies and services are conducted according to the following principles: compliance with National and Community Legislation (Leg. Decree 163/06, hereafter indicated as “Contract Code”), compliance with the Regulation to award public tenders of amounts lower than community threshold (hereafter indicated as “Contract Internal Regulation”), respect of competition and non discrimination among the possible competitors, conduct transparency in every phase of competition and negotiation, efficiency and effectiveness of the company's action.
The Contract Governance Committee, governed by an influential component on the subject and external to the company, provides guidance and support activities in the most important decisions referring to procurement and contracting.
Public tender contracts are awarded according to the provisions of the Contract Code in case their estimated value, net of VAT, is equal to or greater than the community thresholds: a) 0.4 million euro for contract of supplies and services and b) 5 million euro for works contracts. The contracts of an estimated value lower than these thresholds, directly referring to the activities under art. 213 of the Contract Code, are awarded, in compliance with the principles laid down by the EU Treaty protecting competition, through a Contract Internal Regulation adopted pursuant to art. 238, c 7 of the Contract Code available in the Business/Vendor section of the website www.adr.it (www.adr.it/bsn-fornitori). This Regulation governs the principles to be adopted in the rotation of the suppliers and sets the minimum number of suppliers to be invited: from three to ten suppliers according to the type and economic thresholds. All competitors are guaranteed the necessary information on the tender notices and outcome of the tender procedures. The suppliers are obliged to enrol in the ADR corporate Supplier Register. A supplier qualification process is in place as specified in the Contract Internal Regulation. In addition, the suppliers are obliged to run their business in compliance with the principles and provisions of the corporate Code of Ethics, available in the Company/About ADR Group/Corporate Governance/Ethic code section of the site www.adr.it. A specific clause for the acceptance of the Code of Ethics is included in each contract and its non-compliance constitutes serious non- fulfilment of the obligations of the contract and legitimates the Purchaser to assess suitable protection measures to be adopted, including the right to terminate the contract. For awarding the tenders, whatever the amount and method, the Group adopts procedures managed electronically on the “Purchasing Portal” platform. Introduced in 2008, this platform electronically manages the purchasing processes and provides: maximum transparency and equal opportunities in the tender awarding process, cutting the times required to prepare and send bids, more efficiency and effectiveness in interaction thanks to the automation and standardization of the communication and authenticity protocols, competition and integrity in data exchange.
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Local suppliers The economic impact generated by the Group's activity on the surrounding territory in terms of purchasing activity is particularly important: in 2012 the number of orders to local suppliers or supplier located in the Lazio region was a stable 55% compared to the subdivision of the previous year. In terms of economic value, trade with local suppliers represents 40% of the total with a decrease compared to the division in 2011 in favour of suppliers in other Italian regions.
TABLE 1. Main indicators Suppliers13
UNIT 2012 2011 2010 Suppliers used no. 527 505 463 Qualified suppliers no. 638 329 n.a. of which in the last year % 48% n.a. Number of orders by type Supplies % 39% 46% 50% Works % 16% 11% 11% Services % 45% 43% 39% Value of orders by type Supplies % 16% 27% 18% Works % 51% 24% 37% Services % 33% 48% 45% Number of orders by geographic origin Local % 55% 55% 55% Other Italy % 42% 40% 42% Abroad % 3% 4% 4% Value of orders by geographic origin Local % 40% 46% 51% Other Italy % 59% 49% 41% Abroad % 0% 5% 7%
13 The 2012 data is based on the purchasing activities carried out by the Tenders, Purchases and ICT unit, which represent about 93% of the total external traded company value. The 2010 data on the number of suppliers is not comparable as it is based on the new regulation established since January 1, 2011.
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Environment
ADR is committed to supplying quality products and services while continuously respecting the environment and health and safety in the workplace. With the Service Order the “Integrated policy for quality, environment, energy and health and safety in the workplace”, approved in October 2012, the Group explains the policies and objectives it intends to pursue in terms of environmental protection and guidelines for a sustainable development. In line with this policy, management systems have been implemented for several years according to standards recognized at international level. ADR is ISO 9001 certified for the Quality of two corporate processes (Airport quality monitoring Airport security), ISO14001 for the Environment, OHSAS18001 for Health and Safety in the workplace and ISO50001 for Energy for all corporate processes. The subsidiaries ADR Assistance, ADR Security and ADR Engineering are ISO9001 certified while ADR Advertising and ADR Security are OHSAS 18001 certified. The Planning Agreement with ENAC defines a series of environmental indicators for Fiumicino and Ciampino to be kept under strict supervision.
Water consumption The use of water has a significant environmental impact in the airport. Water consumption as part of ADR activities includes the use of water for drinking and industrial use. Drinking water is supplied by the manager of the local water service and consumed mostly within the airports for the various services. Industrial water, on the other hand, is used for the irrigation of green areas, the cleaning of tanks and lifting pumps, fire fighting services and thermal stations. As one of the solutions adopted by the Group for a more efficient use of water resources, a UV plant has been active for years in Fiumicino for the treatment of waste water from the biological purifier for reuse in industrial applications. Ciampino airport uses exclusively drinking water taken directly from the public aqueduct and used mainly for restrooms, and secondarily for thermal stations and green areas. Water consumption during the last few years has remained mostly constant. In terms of quality of drinking water, chemical-biological analyses are run regularly; in 2012 in particular, 122 analyses were conducted in Fiumicino and 28 in Ciampino.
Energy consumption The main energy sources used for airport activities include electricity, produced internally by cogeneration (98%) or purchased from the distribution network (2%), and thermal energy, produced internally by cogeneration or by the methane gas or diesel oil power generating stations. Two large thermal power stations are present in Fiumicino: (i) a methane-gas driven cogeneration power plant for the synergic production of electric and thermal energy of an overall deliverable power of about 26 MW and (ii) a methane-gas driven power plant with an overall power of 48.8 MW (following the disposal of 3 boilers in 2012), serving as back-up for the cogeneration power plant. Five methane gas driven thermal central stations are present in Ciampino, three with a potential higher than 3 MW.
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A decreasing energy consumption trend has been recorded at Fiumicino in the last few years due to significant actions taken to improve energy efficiency, such as: creation of a new lighting system using low consumption luminaires in the areas Terminal 1 - departure area C, Terminal 3 - departure area D, Terminal 3 - hall check-in and transit gallery; works to replace engines with high efficiency equipment at baggage handling systems at Terminal 3; installation of LED lamps on runways; implementation of a system to control the consumption of medium voltage cabinets. These are accompanied by management measures taken to save energy: turning off of billboards at night, turning off of manually and remotely managed lighting systems at night, twilights switching system, air-conditioning systems working for fewer hours a day, installation of inverters, set point adjustment at Air Treatment Units at Terminals and Production Stations and extraordinary maintenance of refrigeration units and evaporation towers. An electricity saving of about 7% compared to 2011 was achieved in 2012. Traditional ceiling lights will be replaced with new generation ones at Ciampino during 2013, comprising LED high luminosity lighting. The area concerned is the departure terminal, implying energy savings of about 50% per ceiling light. Regarding mobility at the airport, energy consumption is related to the use of unleaded petrol and diesel oil for the movement of airport means, including the vehicle fleet acquired via long- term hire and operational vehicles owned by ADR, comprising cars, special vehicles/ramp and electric means. ADR is assessing the possibility of using company means with a lower environmental impact. One of the initiatives envisages the inclusion of the environmental requirement of CO2 emissions lower than 120 gCO2/km among the specifications for the public tender for rental vehicles.
CO2 emissions ADR, as part of its approach against climate change, has taken a series of measures to control and reduce direct and indirect CO2 emissions related to its activities and those of operators, aircraft and all the entities working within the airport system. To this end ADR has taken part in the Airport Carbon Accreditation (ACA) initiative launched by ACI Europe (Airport Council International), which provides for four accreditation levels based on the mapping of emissions. In 2011 ADR obtained accreditation Level 3+ “Optimization”, implying the quantification of all direct and indirect emissions as well as other emissions of ADR (Scope 1, 2 and 3) and the implementation of a corporate carbon management system that in ADR was integrated with the environmental management system already active for years. In 2012, in addition to maintaining the ACA accreditation for Fiumicino, ADR obtained level 1 “Mapping” for Ciampino, implying the quantification of scope 1 and 2 emissions only (direct and indirect emissions deriving from the electricity acquired). A significant reduction in emissions was recorded in Fiumicino over the years (-17% based on the indicator regarding passengers in the period 2008-2011), with the contribution of the actions implemented in various areas, of which the commissioning of the cogeneration system is the most significant. Moreover, in 2012 the energy management system was ISO50001 certified and the CDM (Collaborative Decision Making) platform was activated in collaboration with ENAV to reduce the taxi time of aircraft and consequently the emissions associated with it.
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Waste production The main areas where waste is produced include terminals and offices, the vehicle maintenance activities, infrastructures, green areas, the activities of the contracted firms and the sub- concessionaires. The waste predominantly consists of waste comparable to urban waste, which accounts for about 60% of the total waste produced in Fiumicino and 93% of the waste produced in Ciampino. In 2011 five areas were designed for the ad-hoc disposal of the waste at terminals, which were put into operation in 2012. This new management method resulted in significant benefits in terms of sorting of airport waste, contributing to the increase in the relevant percentage for the Fiumicino site, which reached 34% in 2012. In 2012 ADR also involved ENAC in the issue of an airport ordinance on waste management (Ord. no. 2/2012). The trend for special waste quantity over time is linked to the execution of special types of work (such as replacements, renovations, etc.), which may cause an anomalous increase in some waste materials. A waste separation and recycling area was set up in 2011 in Fiumicino, available to all airport operators at Fiumicino airport also to dispose of, subject to prior written agreement, cumbersome waste (such as, for example, furniture, wooden platforms) and waste from electronic equipment (e.g. unused computers, printers, neon lamps, lead batteries and other batteries). In 2012 ADR was authorized (pursuant to art. 110 of Italian Legislative Decree 152/2006) by the Provincial Board of Rome to confer to its purifier liquid waste from airport septic tanks and the maintenance of the water networks, thus reducing the environmental impact related to the disposal of waste through third parties while achieving significant economic savings. The overall quantity of waste produced at Ciampino has decreased (-6% in the period 2011 - 2012), with special reference to waste comparable to urban waste (-7%); the percentage of sorted recyclable waste instead remained limited, which in the years 2010-2012 stood at 6% (including urban and special waste).
Water discharges An airport produces solid and liquid waste of different types from civil discharges, technological equipment and the washing of the operating areas. ADR manages water discharges through treatment systems that allow the discharge of water into the final receiving body characterized by a concentration of pollutants that is well below the legal limits. Fiumicino airport in particular has: (i) a biological activated sludge system for wastewater treatment (via F.lli Wright) able to treat up 8,000 m3 of waste/day; (ii) a biodisc biological activated sludge system for wastewater treatment (Cargo City area) with a capacity of 150 m3/day and (iii) four oil extracting plants for the treatment of water from washing runways and aprons.
Noise pollution Airport infrastructure generates a significant impact in terms of noise related to aircraft take-off, landing and overfly operations. A complex system of European, national and regional rules is aimed at measuring, limiting and/or regulating the emissions of noise to ensure a high quality of life in the territories around an airport. Based on these rules, Fiumicino and Ciampino airports have a monitoring system in place that regularly detects any excess of the limits and connects this information with the data and trajectory of the aircraft concerned. The number of central
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units has been increased over the years; in 2012 there were 17 central units in Fiumicino (two of which can be relocated) and 6 in Ciampino. Fiumicino and Ciampino airports were the first in Italy to set up the airport commissions (in which many entities participate, such as ENAC, ENAV, the Ministry of the Environment, regional, municipal and provincial boards, ARPA, airlines) envisaged by the regulation with the task of defining anti-noise procedures, the acoustic characterization of the airport perimeters and the indexes that classify the airport. In order to mitigate the acoustic effects produced, over time ADR has carried out several interventions on the ground at Fiumicino airport, including: 4 to 6 meter high artificial dunes to the side of runway 1 to limit the noise during the taxiing phase; a vegetal barrier made of maquis, shrub and trees along the Roma-Fiumicino motorway to dampen the noise within the airport borders; "fast exits" on runway 1 to allow landing aircraft to free the runway without using the reverse command and remaking of the engine test apron with the creation of soundproof barriers and acoustic screens.
Electromagnetic fields The use of electronic equipment and radars to control air traffic and telecommunications at airports means that electromagnetic fields are generated. In 2010 ADR conducted electromagnetic monitoring campaigns with the objective of highlighting the levels of respect of the parameters and thresholds linked with safeguarding the travelling staff and the personnel employed at airports and adopting suitable preventive and protective measures. The monitoring network used in the Rome airport system includes 15 remote monitoring units (7 outdoor and 8 indoor) in Fiumicino and 5 central units (1 indoor and 4 outdoor) in Ciampino. The measurements taken demonstrated the respect of the legal limits in force.
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TABLE 1. Main indicators Environment – Fiumicino
UNIT 2012 2011 2010 Water consumption Total water withdrawal per source of supply: m3 1,822,300 2,088,461 2,134,446 drinking water m3 722,300 888,461 1,004,446 industrial water m3 1,100,000 1,200,000 1,130,000 Energy consumption Total consumption of energy by type: Electricity kWh 159,322,706 171,278,496 176,268,122 Methane (1) m3 10,009,251 10,661,317 10,170,208 Diesel oil (2) l 25,000 114,555 96,365 Consumption of green fuel for vehicle fleet l 96,508 111,763 118,682 Consumption of diesel oil for vehicle fleet l 213,135 214,215 190,043 Emissions Direct CO2 emissions tonnes 1,116 1,135 1,037 Indirect CO2 emissions tonnes 68,297 69,459 73,275 Nox emissions (3) tonnes 1,800 1,854 1,854 Waste Production of waste by type: tonnes 9,508 8,788 10,281 Municipal waste % 60.2% 74.3% 68.7% Special waste % 39.8% 25.7% 31.3% Sorting of waste by type: tonnes 1,333 983 899 Paper and cardboard packaging % 47.0% 30.7% 23.1% Wood packaging % 12.7% 7.6% 4.9% Mixed packaging % 30.8% 59.5% 69.5% Plastic packaging % 7.9% 1.4% 2.4% Glass packaging % 1.6% 0.8% 0.0% Waste produced per 1,000 passengers (4) tonnes 0.2 0.2 0.2 Water discharges COD and BOD5 concentration of the purifiers via F.lli Wright- annual average incoming COD mg/l 328 566 565 incoming BOD5 mg/l 85 181 167 outgoing COD mg/l 32 58 64 outgoing BOD5 mg/l 10 16 17 COD and BOD5 concentration of the cargo area purifier - annual average incoming COD mg/l 155 363 377 incoming BOD5 mg/l 41 116 189 outgoing COD mg/l 27 58 53 outgoing BOD5 mg/l 11 17 16 Spills Number of significant spills no. n.a. n.a. n.a. Volume of significant spills m3 n.a. n.a. n.a. Noise No. of noise/aircraft movement detection central units * 1,000 no. 4.84 n.a. n.a.
(1) Inclusive of the thermal energy purchased, expressed in m3 and methane gas for boilers. (2) Diesel oil for heating and generators. (3) The value is estimated in consideration of the same type of aircraft and the same number of annual movements recorded in 2009. (4) Municipal solid waste.
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TABLE 2. Main indicators Environment – Ciampino
UNIT 2012 2011 2010 Water consumption Total water withdrawal per source of supply: m3 134,622 248,681 248,681 drinking water m3 134,622 248,681 248,681 industrial water m3 - - - Energy consumption Total consumption of energy by type: Electricity KWh 11,219,250 11,693,525 12,022,873 Methane m3 736,663 826,958 807,825 Diesel oil (1) l 1,000 3,300 19,521 Consumption of green fuel for vehicle fleet l 12,676 12,719 12,337 Consumption of diesel oil for vehicle fleet l 27,125 27,254 21,981 Emissions Direct CO2 emissions tonnes 1,570 1,670 n,a, Indirect CO2 emissions tonnes 5,612 5,971 n,a, Nox emissions (2) tonnes 300 346 346 Waste Production of waste by type: tonnes 749 793 793 Municipal waste % 93.0% 97.9% 98.7% Special waste % 7.0% 2.1% 1.3% Sorting of waste by type: tonnes 33 30 35 Paper and cardboard packaging % 56.0% 86.7% 74.3% Wood packaging % n.a. n.a. n.a. Mixed packaging % 44.0% 13.3% 25.7% Plastic packaging % n.a. n.a. n.a. Waste produced per 1,000 passengers (3) tonnes 0.2 0.2 0.2 Noise No. of noise/aircraft movement detection central units * 1,000 no. 12.9 n.a. n.a.
(1) Diesel oil for heating and generators (2) The value is estimated in consideration of the same type of aircraft and the same number of annual movements recorded in 2009. (3) Municipal solid waste.
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Adjustments and amendments to the reference legal framework The regulatory framework underwent several changes during 2012 regarding both the airport sector in general and ADR: “Liberalization” Law Decree (“Urgent provisions for competition, development of infrastructures and competitiveness”, converted with amendments to law no. 27/2012, published in Gazette on March 24, 2012): introduces important innovations to modernize and enhance the national infrastructures and encourage market liberalization and competition. “Simplification” Law Decree (“Urgent provisions concerning simplification and development" published in Ordinary Supplement 27/L to OG no. 33 of 2/9/2012 and published in the Gazette on April 6, 2012): in particular it introduces the provisions to protect the procedures underway for the stipulation of the Planning agreements with the airport management companies until December 31, 2012. “Milleproroghe” (so-called “Thousand-Extensions”) Law Decree ("Conversion into law, with amendments, of Law Decree no. 216 of December 29, 2011), for the extension of the terms set by legislative provisions”, law no. 14/2012 published in the Gazette of February 27, 2012): it extends to December 31, 2012 the term for the identification of the airports and airport systems of national interest and the term set for adjusting the extent of the airport fees to the rate of inflation planned for 2012. ”Revised airport fees for 2011” (Ministerial Decree of November 11, 2011 published in the Gazette on May 4, 2012): it establishes the new scope of airport fees updated to the rate of planned inflation for 2011, equal to 1.5%; the scope of the airport fees, under Ministerial Decree 391/2011, was subsequently adjusted to take into account the change of the rate of planned inflation 2011 (2% instead of 1.5%) occurred after the issue of the “Note for the update of the Economic and Financial Document 2011”. “Additional provisions for the implementation of art. 24 of Law no. 42 of May 5, 2009, concerning the Roma Capitale order” (art. 12, subsection 4 of Italian Legislative Decree no. 61 of April 18, 2012, published in the gazette on May 18, 2012): it establishes that, for the exclusive financing of the investments included in the long-term programs for infrastructural development in the territory of Roma Capitale, the latter may “impose, limited to the period of amortization of the works, an additional municipal surtax on passenger fees on airplanes leaving from the airports of the city of Rome, up to a maximum of one euro per passenger”. Changes concerning municipal surtax on passenger fees (Law no. 92 of June 28, 2012, regarding the reform of the labour market with a view to growth, published in the Gazette of July 3, 2012): changes, starting from January 1, 2016, the allocation of the higher amounts of the additional municipal surtax on passenger fees, which must be devoted to the management of the assistance works and to support the INPS’s social security provisions. New elements are also introduced regarding the collection activities currently carried out by the operator concerning the portion of the municipal surtax destined to INPS, with the entrustment of specific responsibilities as regards monthly communications to INPS and the application of sanctions in case of non- fulfilment. Starting from July 1, 2013, the additional municipal surtax on passenger fees will rise by 2 euro per passenger.
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A national airport development plan is being defined, which includes a proposal to identify airports of national interest. This Plan proposes a classification of airports of national interest and is aimed at encouraging the sustainable development of the segment by identifying actions to rationalize ground and in-flight services, concentrating investments on priority infrastructural actions and increasing the competitiveness of the system as a whole.
Intercompany relations and transactions with related parties
Intercompany relations Relations between the Parent Company and its subsidiaries and associates are governed at market terms and conditions, taking account of services rendered. In particular: loans to Fiumicino Energia pursuant to the contract stipulated on December 4, 2009 and on June 8, 2010, for a total amount of 4 million euro which, as at December 31, 2012 amounted to 2.6 million euro, disbursed upon request in the form of a giro account; agreement for the provisions of services by ADR to Gemina within the company’s business, legal, administrative and control activities, purchasing, IT, general services and domiciliation; tax consolidation agreements with ADR, ADR Tel, ADR Engineering and ADR Sviluppo Srl, ADR Assistance, Fiumicino Energia and Leonardo Energia; re-debiting of staff costs to and from ADR.
Transactions with Related Parties During the year no significant transactions or transactions that significantly affected the Group's financial position or results took place. The transactions listed below did not undergo any change or development that had a significant effect on the Group's financial position or results.
As regards the Parent Company, reference should be made to: the loan stipulated on August 30, 2011 for a total of 60.1 million euro of which 18.0 million euro as revolving line, which includes the equity investment of Mediobanca and Unicredit as financing banks together with a pool of another five banks with equal shares; a fixed-term current account contract in favour of Mediobanca, established for the settlement of cash flows as part of the loan transaction; surety of 4.0 million euro in the interest of subsidiary Fiumicino Energia to guarantee the fulfilment of obligations deriving from the lease contract entered into with UniCredit Leasing S.p.A. (“Unicredit Leasing”); guarantees for a maximum of 2 million euro in the interest of subsidiary Fiumicino Energia to guarantee the fulfilment of obligations deriving from the loan agreement entered into with Unicredit; subscription of a joint deed of pledge on the entire share, equal to 86.12% of the share capital, held in Fiumicino Energia as guarantee of all receivables deriving from the lease agreement entered into with Unicredit Leasing;
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signing of insurance policies with Assicurazioni Generali S.p.A. (“Assicurazioni Generali”) and Fondiaria-SAI S.p.A..
With regard to ADR and its subsidiaries, the following is worth noting: Assicurazioni Generali: the ADR Group has taken out its principal insurance policies with this insurance group; Autogrill S.p.A. (indirect subsidiary undertaking of Edizione S.r.l. which, indirectly, holds a sufficient interest in Gemina to have a significant influence on the latter) and WDFG Italia S.r.l. (subsidiary undertaking of Autogrill S.p.A.): revenues derive from retail sub-concessions, royalties, utilities, car parks and sundry services; Telepass (indirect subsidiary of Edizione Srl which, indirectly, holds a sufficient interest in Gemina): incurring costs linked to the Telepass system introduced at ADR car parks; Changi Airport Planners and Engineers Pte. Ltd (indirect subsidiary of Changi Airports International Pte Ltd which, indirectly, holds a sufficient interest in Gemina): a contract is in place for the support to prepare the master plan for Fiumicino airport. Mediobanca: several relations exist in connection with the role played by the latter in existing loan agreements. The role of Security Agent representing all of ADR's creditors and of Administrative Agent must be highlighted, in addition to being the holder of an escrow account called the Debt Service Reserve Account. ADR incurred towards the bank costs regarding bank commissions, advisory costs regarding the transfer of ADR Mobility, reimbursement of expenses and commissions regarding the Term Loan (up-front fee) for the share pertaining to Mediobanca; Unicredit S.p.A.: several relations exist in connection with the role played by Unicredit S.p.A. in existing loan agreements. Worth mentioning in particular is the role played by Unicredit Group as holding bank (Account bank) for the current accounts of ADR (“Debt Service Account”, “Interim Proceeds Account”, “Recoveries Account” and “Loan Collateral Account”), regulated by the loan agreements, and some companies in the ADR Group. ADR reported revenues per retail sub-concessions and mainly incurred bank charges for the financial advisory contract regarding the transfer of the mobility business as well as the commissions relating to the Term Loan (upfront fee) for the share pertaining to Unicredit.
Regarding Fiumicino Energia and Leonardo Energia: loan granted by UniCredit for the financial coverage necessary for the construction of civil engineering works of the co-generation power plant in Fiumicino, for an original aggregate amount of 2.0 million euro; finance lease for the construction of the co-generation power plant, entered with Unicredit Leasing, for a financed amount of 18.0 million euro; two insurance agreements regarding the co-generation power plant to cover civil liability risks for damages due to the operation of the Power Plant and the possible pollution risks of such operation, entered with Assicurazioni Generali.
78 Annual Report 2012 Report on operations
Subsequent events
Traffic trends in the first two months of 2013 In the first two months of 2013 the Rome airport system recorded a 7.0% decrease in passengers due to the drop in the domestic (-13.1%) and international component (-3.6%, -6.9% for EU and + 2.1% for extra-EU, respectively).
TABLE 1. Main traffic data of the Rome airport system
JAN. – FEB. 2013 JAN. – FEB. 2012 Δ% Movements (no.) 47,555 52,133 (8.8%) Fiumicino 41,235 44,068 (6.4%)
Ciampino 6,320 8,065 (21.6%) Passengers (no.) 4,944,437 5,315,264 (7.0%) Fiumicino 4,414,277 4,645,976 (5.0%) Ciampino 530,160 669,288 (20.8%) Cargo (t) 21,479 20,889 2.8% Fiumicino 18,630 18,171 2.5% Ciampino 2,849 2,718 4.8%
Fiumicino The drop in passengers equalled 5.0%, accompanied by a net reduction in capacity offered in terms of aircraft movements (-6.4%) and tonnage (-5.8%). This trend led to a slight increase in the load factor (+1.3 p.p.), which stood at 65.4% in the two months. This negative performance is attributable to the losses of the domestic segment (-10.9%) and the more modest decrease in the international segment (-1.6%); the extra-EU segment rose by 2.2% while EU traffic dropped by 4.2%. A 1.4% reduction in passenger volumes was recorded in February 2013, thus improving in comparison to the results of January (-8.2%).
Ciampino The airport ends the first two months of 2013 with a 20.8% reduction in passenger volume. The same trend was followed by the capacity offered, with aircraft movements and tonnage decreasing by 21.6% and 22.9%, respectively. The results relate mainly to the reduced network operated by the main carrier at the airport (Ryanair). In February 2013 alone Ciampino recorded an 18.7% drop in passenger volume, also in this case accompanied by a reduction in the capacity offered of 18.5% for movements and 21.7% for aircraft tonnage.
79 Annual Report 2012 Report on operations
Other significant events On January 8, 2013, ENAC formally informed IATA, in accordance with the practice in force, that March 9, 2013 is the term when the collectability by ADR of the new fees valid for the year 2013 becomes effective. This refers to the necessary adjustment of the ticket systems of the carriers. On January 23, 2013 ADR made sure, with a communication of its own, that the same communication was given to those concerned. In the meeting of January 16, 2013, following the start of contacts with Atlantia S.p.A. to analyse the existence of the industrial, financial, economic and legal assumptions for a possible corporate integration operation with the same Atlantia, the Board of Directors of Gemina confirmed its intention to continue with the abovementioned analysis activities. The Board of Directors, in the same meeting, also established the Independent Director Committee set under art. 4.2. of the “Transactions with Related Parties Procedure” of November 12, 2010, appointing Mr. Sergio Iasi as Chairman and Mr. Giuseppe Angiolini and Mr. Giuseppe Bencini as its members. The Board also appointed Barclays Bank Plc and Unicredit S.p.A as advisors, for the financial part, and Studio Chiomenti, for the legal issues to assist the Board of Directors in the analysis and assessment of the feasibility of the transaction. Still with reference to the assessment of the corporate integration between Gemina and Atlantia, the Independent Directors identified Leonardo & Co (Banca Leonardo) and Credit Suisse as advisors. Likewise the company appointed Bain & Company for the assessment of the Business Plan of the Atlantia Group and BNP Paribas for the preparation of the “fairness opinion” on the transaction. For an extensive description of the transactions and the motivations, please refer to the Explanatory Report of the Directors of the merger project. On January 29, 2013 the Ministry of Infrastructure and Transport issued the "Guidelines to define the national airport development plan”, which includes a proposal to identify the airports of national interest. This deed will be forwarded to the Permanent State-Region Conference for the necessary agreement and will be subsequently adopted with a special decree by the President of the Republic. The Plan places Fiumicino airport within the Core Network-Ten-T, i.e. the airports considered of “strategic importance at EU level”, while the Ciampino airport is included in the Comprehensive Network, i.e. the airports that are “indispensable to ensure territorial continuity”. The guidelines do not envisage the creation of new airports, thus including Viterbo airport. The set investments will be allocated to upgrading the infrastructure at Fiumicino. During the meeting of February 1, 2013, the Board of Directors of the company approved the updated Group's Economic and Financial Plan at 2044, integrating it with the provisions on the investment plan specified by Prime Ministerial Decree of December 21, 2012 which, as is known, approved the new Planning Agreement of the subsidiary ADR.
80 Annual Report 2012 Report on operations
Line A1 Romulus (500 million euro) was repaid on the maturity date of February 20, 2013. This repayment is known to have already been ensured through the subscription of the bank facility of 400 million euro mentioned several times (for more details reference is made to the specific dedicated sections in the financial statements) which, together with the cash reserved for the repayment (about 100 million euro) would have ensured the repayment of the most significant tranche of the Romulus loan payable by ADR when falling due. A well-arranged series of operational initiatives combined with the positive outcome of the necessary authorization steps with ADR's financial creditors meant that only 156 million euro of the 400 available on the bank facility 2012 were used, at fixed rate through a simultaneous heading transaction. This result also made it possible to reach an agreement with the same syndicate of banks for the conversion of part of the unused funding to increase the pre-existing revolving facility, to ensure more liquidity to support the corporate plans following the signing of the tariff agreement. From February 20, 2013 this was thus increased from the original 100 million euro to the current 150 million euro. On February 27, 2013, ADR was notified three appeals (Assohandlers, Assaereo and Codacons) to Lazio Regional Administrative Court contesting the Planning Agreement, the Prime Ministerial Decree of December 21, 2012 and all the other conditioning, connected and consequent deeds. On February 28, 2013 a similar appeal to Lazio Regional Administrative Court was notified by the Municipality of Viterbo, with a claim for damages. On March 7, 2013 the rating agency Standard & Poor’s, having positively assessed the stronger credit profile of the company, owing to the considerable improvement of the financial situation and the definitive approval of the Planning Agreement, increased ADR's long-term rating from “BB+” to “BBB-”, placing the company back in the "Investment Grade" bracket. The positive outlook is confirmed. On March 11, 2013 also Moody’s reinstated the rating on ADR’s debt to the “Investment Grade” (“Baa3”) bracket, reporting a “stable” outlook. The considerable improvement by as many as two notches is closely connected, as expressed by the agency in its communication, to the approval of the Planning Agreement that finally provides the Company with a clear and stable regulatory framework as a fundamental element to implement the investment plan and finalise the debt refinancing project that ADR is committed to in the near future.
Business outlook
All the official sources confirm a situation of economic weakness for Italy persisting throughout 2013 and the volatility of the financial markets at European level. This economic scenario is expected to affect traffic volumes in 2013, which are in any case constantly monitored in order to undertake even more significant reactive measures in case of even more drastic drops in activity levels or a worsening of the situations of specific carriers. However, a recovery for the macroeconomic European and Italian scenario is predicted starting from 2014, which should lead to a considerable improvement of the demand for air transport. ADR will continue to pursue its strategy of development of its relationships with intercontinental carriers and destinations, particularly for the geographic areas with greater growth potential; it will also proceed with the parallel consolidation of the current supply of short-medium distance flights to premium destinations and the start of new routes currently not serviced.
81 Annual Report 2012 Report on operations
The signing of the Planning Agreement in December 2012 will lead to the start of an important plan to modernize and expand the Rome airport system with a significantly improved service quality. The investment plan will be activated in 2013 (3.1 billion in the first 10 years and 12 billion until 2044) to address the issue of structural saturation, financed through the new tariff system. Alongside the development of the new Infrastructural Plan, the Gemina Group will continue its search for maximum efficiency in managing its core business, trying to develop activities that are currently only limited valorised.
82 Proposal to the shareholders’ meeting Annual Report 2012 Report on operations
Proposals to the shareholders' meeting
Gemina S.p.A. closed the year with a 4,252,190 euro loss. You are therefore invited to adopt the following
RESOLUTION
The Shareholders’ Meeting: having heard the Report of the Board of Directors on operations, taking note of the Report of the Board of Statutory Auditors, taking note of the Report of the Independent Auditors, having read and examined the financial statements as at December 31, 2012 which report a loss of 4,252,190 euro,
RESOLVES to approve: the Report of the Board of Directors on operations; the Income Statement, the Balance Sheet and the related Explanatory Notes to the financial statements for the year ended December 31, 2012, which report a loss of 4,252,190 euro, as presented by the Board of Directors, both as a whole and with regards to the individual entries, together with the allocations and provisions proposed therein; to carry forward the loss as at December 31, 2012, equal to 4,252,190 euro.
Fiumicino, March 8, 2013
for the Board of Directors The Chairman (Fabrizio Palenzona)
84 conSolIdAted fInAncIAl StAtementS Annual Report 2012 Consolidated Financial Statements and notes
Consolidated Financial Statements
CONSOLIDATED FINANCIAL STATEMENTS 88 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 95 Note 1 General information 96 Note 2 Form and content of the financial statements 96 Note 3 Accounting standards applied 97 Note 4 Consolidation area, criteria and methods 109 Note 5 Discontinued operations 110 Note 6 Concession agreement 111 Note 7 Information on the items in the consolidated income statement 115 Note 8 Information on the items of the consolidated statement of financial position 122 Note 9 Guarantees and major covenants on payables 136 Note 10 Categories of assets/liabilities IAS 39 139 Note 11 Information on financial risk 140 Note 12 Guarantees and commitments 143 Note 13 Other information 144 List of equity investments 150 Certification of the Consolidated Financial Statements in accordance with art. 81-ter of Consob Regulation no. 11971 of May 14, 1999 and subsequent amendments and additions 152 REPORT OF THE INDEPENDENT AUDITORS 153
86 Annual Report 2012 Consolidated Financial Statements and notes
87 consolidated balance sheet and income statement Annual Report 2012 Consolidated Financial Statements and notes
Consolidated income statement
OF WHICH DUE OF WHICH DUE TO RELATED TO RELATED (THOUSANDS OF EURO) NOTES 2012 PARTIES 2011 (°) PARTIES Revenues from airport management 544,533 11,092 544,319 10,836 Construction services 9,141 27,566 Other income and revenues 7,806 11,830 21 Revenues 7.1 561,480 11,092 583,715 10,857 Consumption of raw materials and consumables 7.2 (31,596) (29,972) Staff costs 7.3 (109,162) (13) (110,623) (25) Costs of construction services (8,893) (25,769) (690) Other operating costs 7.4 (145,694) (3,671) (153,572) (3,281) Amortisation, depreciation and write-downs of fixed assets 7.5 (106,930) (107,283) Allocations to system renovation provisions 7.6 (59,949) (62,550) EBIT 99,256 7,408 93,946 7,552 Financial income (expenses) Financial income: 7.7 Interest income 2,054 1,367 2,880 2,086 Income on derivatives 5,748 7,555 7,545 Exchange gains 122 183 Other income 1,975 1,583 Financial expenses: 7.8 Interest expense (73,672) (627) (71,047) (1,989) Expenses on derivatives (4,404) (9,590) (3,929) Exchange losses (6,059) (7,618) Other expenses (14,988) (107) (12,056) (54) Total financial income (expenses) (89,224) 633 (88,110) 3,659
Income (charges) on equity investments 7.9 (21) 30 Pre-tax profit (loss) on continuing operations 10,011 5,866 Tax revenues (charges) 7.10 (16,608) (23,269) Profit (loss) on continuing operations after tax (6,597) (17,403) Net income from discontinued operations/assets held for sale 7.11 210,583 4,032 Profit (loss) for the year 203,986 (13,371) Profit (loss) attributable to minority shareholders 10,265 1,416 Profit (loss) for the year attributable to the Group 193,721 (14,787) Net earnings per share (euro): 7.12 from current assets (0.006) (0.013) from discontinued operations/assets held for sale 0.138 0.003
(°) the data relating to 2011 was reclassified pursuant to IFRS 5 based on the businesses being sold to third parties: direct retail and vehicle maintenance
89 Annual Report 2012 Consolidated Financial Statements and notes
Consolidated statement of comprehensive income
(THOUSANDS OF EURO) 2012 2011
Consolidated profit (loss) for the year 203,986 (13,371) Profit (loss) from fair value measurement of derivative instruments (cash flow hedge) (9,901) 9,381 Tax effect 2,722 (2,580) Reclassifications of the components in the Statement of Comprehensive Income to the Income Statement: Profit (loss) from fair value measurement of derivative instruments (cash flow hedge) 556 Tax effect (154) TOTAL CONSOLIDATED COMPREHENSIVE INCOME (LOSS) FOR THE YEAR 196,807 (6,168) of which Group 186,823 (7,867) Minority shareholders 9,984 1,699
90 Annual Report 2012 Consolidated Financial Statements and notes
Consolidated statement of financial position
Assets
OF WHICH DUE OF WHICH DUE 12/31/2012 TO RELATED TO RELATED (THOUSANDS OF EURO) NOTES PARTIES 12/31/2011 PARTIES Non-current assets Airport management concession 2,742,260 2,829,266 Airport management concession – investments in 470,139 483,756 infrastructure in concession Other intangible fixed assets 3,728 4,210 Total intangible fixed assets 8.1 3,216,127 3,317,232 Plant and machinery 6,308 8,097 Fixtures and fittings tools and other equipment 1,034 1,408 Construction in progress and advances 84 894 Other tangible fixed assets 1,847 2,141 Total tangible fixed assets 8.2 9,273 12,540 Other equity investments 8.3 2,257 2,254 Deferred tax assets 8.4 136,357 116,110 Other non-current assets 8.5 26,573 24,166 Other non-current financial assets 8.6 9,666 32 304 63 TOTAL NON-CURRENT ASSETS 3,400,253 32 3,472,606 63
Current assets Inventories 8.7 2,363 11,346 Contract work in progress 8.8 359 497 Trade receivables 8.9 171,596 1,712 191,176 898 Other receivables 8.10 13,659 59 8,806 Current tax assets 8.11 11,958 828 Other current financial assets 8.12 45,704 43,419 60,427 56,397 Cash and cash equivalents 8.13 397,742 169,085 180,196 129,788 TOTAL CURRENT ASSETS 643,381 214,275 453,276 187,083 Assets held for sale - - TOTAL ASSETS 4,043,634 3,925,882
91 Annual Report 2012 Consolidated Financial Statements and notes
Shareholders’ equity and liabilities
OF WHICH DUE OF WHICH DUE 12/31/2012 TO RELATED TO RELATED (THOUSANDS OF EURO) NOTES PARTIES 12/31/2011 PARTIES
Shareholders’ equity Share capital 1,472,960 1,472,960 Treasury shares (1,278) - Capital reserves 199,707 199,707 Hedging reserve (48,475) (41,577) Other reserves 83,381 83,106 Profit (loss) from previous years (148,831) (134,044) Profit (loss) for the year 193,721 (14,787) Group Shareholders’ Equity 1,751,185 1,565,365 Minority shareholders in capital and reserves 33,161 32,062 Minority interest in profit (loss) for the year 10,265 1,416 Minority interest in Shareholders’ Equity 43,426 33,478 TOTAL SHAREHOLDERS’ EQUITY 8.14 1,794,611 1,598,843
Non-current liabilities Employee benefits 8.15 17,731 20,596 Provision for risks and charges – beyond 12 months 8.16 268,420 285,460 Provision for restoration charges – beyond 12 months 8.17 170,584 133,779 Financial indebtedness net of current share 8.18 139,793 11,874 150,445 12,254 Outstanding bonds 8.19 626,639 1,117,698 TOTAL NON-CURRENT LIABILITIES 1,223,167 11,874 1,707,978 12,254
Current liabilities Trade payables 8.20 110,682 476 136,923 332 Current tax liabilities 8.21 4,803 12,874 Current financial liabilities 8.22 526,488 730 92,096 1,175 Provisions for risks and charges – within 12 months 8.16 24,791 23,607 Provisions for restoration charges – within 12 months 8.17 97,055 97,814 Financial instruments – derivatives 8.23 133,150 130,260 129,096 127,745 Other current liabilities 8.24 128,887 126,651 TOTAL CURRENT LIABILITIES 1,025,856 131,466 619,061 141,506 Liabilities held for sale - - TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES 4,043,634 3,925,882
92 Annual Report 2012 Consolidated Financial Statements and notes
Statement of consolidated cash flows
(THOUSANDS OF EURO) 2012 2011 Profit (loss) for the year 203,986 (13,371) Amortisation and depreciation of tangible and intangible fixed assets 106,930 108,296 Increase (decrease) of employee severance indemnities and other provisions (7,858) 8,522 (Increase) decrease in deferred/prepaid tax liabilities (24,507) (24,196) Allocations to system renovation provisions, including financial expenses 72,558 72,916 (Revaluation) write-down of equity investments valued at equity - - (Gains) losses on disposal of non-current assets, net of transfer costs and tax (206,051) (34) effect Operating profit (loss) before changes in working capital (operating cash 145,058 152,133 flow - FFO) (Increase) decrease in inventories of contract work in progress 138 (201) (Increase) decrease in trade receivables 18,534 (1,566) (Increase) decrease in other current non financial assets (11,364) (1,501) Increase (decrease) in trade payables (11,352) (22,767) Increase (decrease) in other current non financial liabilities (12,549) 26,201 Total changes in working capital (16,593) 166 Total cash and cash equivalents generated (absorbed) by operations 128,465 152,299 Statement of cash flows from investment activities Airport investments and changes in tangible and intangible fixed assets (45,678) (64,725) Changes in other items in non-current non financial assets and liabilities (2,410) (7,219) Value realised from the divestment of consolidated equity investments and 206,014 62 company branches (°) Total cash and cash equivalents generated (absorbed) by investment 157,926 (71,882) Statement of cash flows from financing activities (Increase) decrease in financial receivables 5,361 (1,285) Increase (decrease) in financial payables 3,190 4,620 Raising of medium/long-term bank payables - 41,236 Repayment of medium/long-term bank payables (76,356) (146,594) Other changes in shareholders’ equity (including purchase of treasury shares) (1,040) 141 Total cash and cash equivalents generated (absorbed) by financing (68,845) (101,882) activities Net increase (decrease) in cash and cash equivalents 217,546 (21,465) Cash and cash equivalents at the beginning of the year 180,196 201,661 Cash and cash equivalents at the end of the year 397,742 180,196
(°) in 2012 this item includes the sale price, net of transfer costs and tax effect (214.2 million euro) of ADR Retail, net of cash and cash equivalents transferred (7.8 million euro).
Additional information to the statement of cash flows
Income taxes paid 62,449 42,551
Interest payable and other financial expense paid, net of interest income and 68,298 73,423 other financial income collected
93 Annual Report 2012 Consolidated Financial Statements and notes
Statement of changes in consolidated equity
MINORITY PROFIT SHAREHOL (LOSS) DERS IN FROM PROFIT CAPITAL TOTAL SHARE TREASUR CAPITAL HEDGING OTHER PREVIOUS (LOSS) FOR SHAREHOLDERS’ AND SHAREHOLD (THOUSANDS OF EURO) CAPITAL Y SHARES RESERVES RESERVE RESERVES YEARS THE YEAR EQUITY GROUP RESERVES ERS’ EQUITY
Balances as at 1,472,960 - 199,707 (48,427) 83,106 (98,055) (37,267) 1,572,024 32,846 1,604,870 12/31/2010
Transactions with shareholders Allocation of results (37,267) 37,267 as at December 31, - - 2010 Other changes (70) 1,278 1,208 (1,067) 141 Total comprehensive 6,920 (14,787) (7,867) 1,699 (6,168) income for the period Balances as at 1,472,960 - 199,707 (41,577) 83,106 (134,044) (14,787) 1,565,365 33,478 1,598,843 12/31/2011
Transactions with shareholders Allocation of results (14,787) 14,787 as at December 31, 2011 Purchase of treasury (1,278) (1,278) (1,278) shares Valuation of stock 275 275 (36) 239 option plans and other movements
Total comprehensive (6,898) 193,721 186,823 9,984 196,807 income for the period Balances as at 1,472,960 (1,278) 199,707 (48,475) 83,381 (148,831) 193,721 1,751,185 43,426 1,794,611 12/31/2012
94 notes to consolidated financial statements Annual Report 2012 Consolidated Financial Statements and notes
Note 1 General information
The Gemina Group is mainly engaged in the management of the concession for the creation and management of the airport system in Rome, made up of the “Leonardo da Vinci” Airport of Fiumicino and the “G. B. Pastine” Airport of Ciampino. The Parent Company Generale Mobiliare Interessenze Azionarie S.p.A. (hereafter also “Gemina” or “Company”), whose shares are listed on the Milan Stock Exchange, operates as an investment holding company with the mission of developing financial and growth strategies in the airport infrastructure sector, and does not play a direct operating role. The Company has its registered office in Fiumicino, Via dell’Aeroporto di Fiumicino, 320 and has no secondary offices. On the date of preparing these financial statements Sintonia S.p.A. is the shareholder that, directly and/or indirectly, holds the majority regarding Gemina shares, and adheres to a shareholders’ agreement with other shareholders; Sintonia S.p.A., which is in turn a subsidiary company of Edizione S.r.l., does not exercise management and coordination activities with respect to Gemina. Pursuant to art. 126 of Consob (Commissione Nazionale per le Società e la Borsa) Regulation no. 11971/1999, the list of the significant equity investments held by the Gemina group is attached to these explanatory notes. These financial statements were approved by the Board of Directors of the company in the meeting of March 8, 2013. These consolidated financial statements were prepared on an on-going concern. Indeed, the Group deemed that, despite the persisting difficult economic and financial situation, there is no significant uncertainty as to the on-going concern. The financial statements have been translated into English from the original version in Italian.
Note 2 Form and content of the financial statements
The consolidated financial statements for the year ended December 31, 2012 were prepared pursuant to articles 2 and 4 of Italian Legislative Decree 38/2005, in compliance with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board and approved by the European Commission, in effect on the date of the financial statements, which include the interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC), as well as the previous International Accounting Standards (IAS) and the interpretations of the Standard Interpretations Committee (SIC) still in force on the same date. For simplicity reasons, the set of all the standards and interpretations listed above is defined below as “IFRS”. Furthermore, reference was made to the provisions issued by Consob implementing subsection 3 of article 9 of Italian Legislative Decree 38/2005.
96 Annual Report 2012 Consolidated Financial Statements and notes
The consolidated financial statements comprise the consolidated accounting statements (income statement, statement of comprehensive income, statement of financial position, statement of cash flows, statement of changes in Shareholders’ equity) and these explanatory notes, applying the provisions of IAS 1 “Presentation of Financial Statements” and the general criterion of the historical cost, with the exception of the financial statement items that according to IFRS are recognised at their fair value, as stated in the valuation criteria of the individual items. The statement of financial position is presented on the basis of the framework that envisages a distinction of assets and liabilities into current and non-current, while in the income statement the costs are classified based on their nature; the statement of cash flows is presented by using the indirect method. IFRS were applied consistently with the indications of the “Framework for the Preparation and Presentation of Financial Statements” and no issues emerged that required derogations pursuant to IAS 1. It is highlighted that during 2012 no significant non-recurring, atypical or unusual transactions were carried out with third parties or with related parties that are such to require the inclusion in the accounting statements of sub-items in addition to those required by IAS 1 and the other international accounting standards, according to Consob Resolution no. 15519 of July 27, 2006. All the values are expressed in thousands of euro, unless otherwise stated. For each item in the consolidated financial statements, the corresponding value of the previous year is reported for comparison purposes. The figures of the income statement of the comparison year were reclassified pursuant to IFRS 5 as described in note 5. For the purposes of better representation, the receivables for current taxes were reclassified in the balance sheet of the year from the item Other receivables to the item Current tax assets.
Note 3 Accounting standards applied
Described below are the most important accounting standards and valuation criteria applied in preparing the consolidated financial statements for the year ended December 31, 2012, which comply with those used to prepare the financial statements of the previous year, since no new accounting standards, interpretations and amendments to the accounting standards and the interpretations already in force came into force during 2012, which have a significant effect on the consolidated financial statements.
Revenues Revenues are measured to the extent to which it is possible to reliably determine their fair value and that the related economic benefits are likely to be enjoyed. Depending on the type of transaction, revenues are recorded on the basis of the specific criteria reported below: a) the revenues from the sale of assets when the significant risks and benefits of the ownership of the same are transferred to the purchaser;
97 Annual Report 2012 Consolidated Financial Statements and notes
b) the revenues from service provisions based on the stage of completion of the activities. If the value of revenues cannot be reliably determined, the revenues are recorded until reaching the costs incurred that are deemed as recoverable; c) the rental income and the royalties in the accrual period, based on the contractual agreements signed.
Costs Costs are valued at the fair value of the amount paid or to be paid, and are recognised in the income statement on an accrual basis and in correlation with any related revenues. Any expense related to transactions of share capital increase is recorded as reduction in the shareholders’ equity.
Share-based payments The cost of the services rendered from employees, associates and/or directors of the Group, remunerated through stock option plans, is measured based on the fair value of the rights granted, assessed by independent actuaries on the concession date of the plan. This fair value is entered in the income statement, counterbalanced by an equity reserve, in the accrual period stated in the plan.
Financial income and expenses Financial income and expenses are recorded in the income statement on an accrual basis, and calculated on the value of the respective financial assets and liabilities using the actual interest rate.
Dividends Dividends are measured when the right of the Company to receive their payment arises.
Income taxes The tax on the income of the year is calculated based on the tax expenses to be paid, in compliance with current legislation. Prepaid and deferred taxes resulting from temporary differences between the financial statement value of assets and liabilities, calculated by applying the criteria described in this section, and their tax value, deriving from the application of current legislation, are recorded: a) the former, only if sufficient taxable income is likely to allow the recovery; b) the latter, if any, in any case. Prepaid and deferred taxes are recorded in the income statement, with the exception of those relating to items that are directly recorded in shareholders’ equity. In that case, also prepaid and/or deferred taxes are charged to shareholders’ equity. For the years 2010-2012 Gemina has decided to adopt the national consolidated financial statements based on Italian Legislative Decree 344/2003, with the adherence of its subsidiary
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companies Aeroporti di Roma S.p.A. (“ADR”), ADR Engineering S.p.A. (“ADR Engineering”), ADR Tel S.p.A. (“ADR Tel”), ADR Sviluppo S.r.l. (“ADR Sviluppo”), ADR Assistance S.r.l. (“ADR Assistance”), Fiumicino Energia S.r.l. (“Fiumicino Energia”) and Leonardo Energia S.c.ar.l. (“Leonardo Energia”).
Tangible fixed assets Tangible fixed assets are recorded at historical cost, inclusive of any directly attributable accessory charges. The cost of tangible fixed assets whose use is limited over time is systematically amortised on a straight-line basis in each year based on the estimated economic-technical life. If significant parts of these tangible fixed assets have different useful lives, these components are recorded separately. Depreciation is recorded from the time the fixed asset is available for use, or is potentially capable of providing the economic benefits associated therewith. The annual depreciation rates applied are: Plant and machinery: from 7% to 25%; Fixtures and fittings: from 10% to 25%; Other assets: from 10% to 25%. The tangible assets purchased with finance lease are initially recorded as tangible fixed assets with the related debt as balancing entry, at a value equal to the related fair value or, if lower, the current value of the minimum payments due contractually. The lease fee consists of the two components of financial expenses recorded in the income statement and of the capital repayment recorded as a reduction of the financial debt. In the presence of specific indicators regarding the risk of failed recovery of the book value of tangible assets, these undergo an impairment test, as described in the specific paragraph. Tangible assets are no longer shown in the financial statements after their transfer or if no future economic benefit exists expected from the use; any deriving profit or loss (calculated as the difference between the transfer value, net of sale costs, and the book value) is recorded in the income statement of the year of sale. Any ordinary maintenance costs are charged to the income statement. For the transition to IFRS and the preparation of the opening financial statements (as of January 1, 2004) according to the international accounting standards selected by the Parent Company, IFRS 3 – Business Combinations, was not applied retroactively to the acquisitions made before January 1, 2004; consequently, the book value of tangible assets on that date, determined on the basis of the previous accounting standards, were maintained for these acquisitions.
Intangible fixed assets Intangible fixed assets are assets without physical substance, controlled by the company and able to produce future economic benefits, and goodwill acquired in business combinations. An asset is classified as intangible when there is the possibility of it from the goodwill. This condition is normally met when: (i) the intangible fixed asset arises from contractual or legal rights, or (ii) the asset is separable, i.e. can be sold, transferred, rented or exchanged autonomously or as an integral part of other assets. The company controls an asset if it has the
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power to obtain future economic benefits generated by the underlying assets and to restrict the access of others. Except for the “airport management concession”, intangible assets are stated at cost as determined by the methods indicated for tangible assets, only when the latter can be reliably valued and when these assets can be identified, are controlled by the company and can generate future economic benefits. For the intangible assets represented by the “airport management concession”, the recording value includes: a) the fair value of the construction and/or improvement services provided to the concessionaire (measured as illustrated in the standard regarding “construction contracts and services being executed”), net of the parts represented as financial assets, corresponding to the portions in the form of contribution; b) the rights acquired from third parties in relation to the acquisition of the subsidiary ADR. For the transition to IFRS and the preparation of the opening financial statements (as of January 1, 2004) according to the international accounting standards selected by the Parent Company, IFRS 3 – Business Combinations, was not applied retroactively to the acquisitions made before January 1, 2004; consequently, the book value of intangible assets on that date, determined on the basis of the previous accounting standards, were maintained for these acquisitions. Intangible assets with a definite useful life are amortised, starting from the time when they are available for use, based on their residual possibility of use with respect to the residual useful life. On the other hand, concession rights are amortised throughout the entire concession, with a criteria that reflects the methods with which the economic benefits will be received by the company, with the use of constant rates determined with reference to the expiry of the concession in 2044. The amortisation starts from the time when the rights in question start to generate the relevant economic benefits. The profit or loss deriving from the sale of an intangible asset is the difference between the sale value, net of sale costs, and the book value, and is recorded in the income statement of the year of sale.
Equity investments Equity investments in unconsolidated subsidiary companies and other companies, which can be classified in the category of financial assets held for sale as defined in IAS 39, are initially recorded at cost, as determined on the settlement date, as it represents the fair value, inclusive of the directly attributable transaction costs. These equity investments are subsequently valued at fair value, if this can be determined, with the effects being attributed to the statement of comprehensive income and in a specific shareholders’ equity reserve. At the time of a loss of value from impairment, or when this is recognised, the profits and losses in this reserve are posted in the income statement. Any losses in value identified as described in the section regarding “Impairment of assets”, are restored in the other components of the comprehensive income statement if the reasons for the write-downs made cease to apply. If the fair value cannot be determined in a reliable manner, the equity investments classified under financial assets held for resale are valued at cost, adjusted by the impairment losses; in this case the losses in value are not subject to reinstatement.
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Equity investments in associated companies and joint ventures are valued according to the net equity method, with the portion of profits or losses of the year accrued for the Group being recorded in the income statement, except for the effects related to other changes in the shareholders’ equity of the investment, reflected directly in the comprehensive income statement of the Group. The risk deriving from possible losses that exceed the book value of the equity investment is recorded in a specific liability fund proportionally to the investor’s commitment to fulfilling the legal or implicit obligations towards the investee or in any case covering its losses. The equity investments held for sale or in liquidation in the short term are recorded under current assets at the lower between the book value and the fair value, net of possible sale costs.
Construction contracts and services being executed The construction contracts being executed are assessed on the basis of the contractual payments accrued with reasonable certainty in connection with the work progress using the percentage of completion criterion determined with the methodology of physical measurement of the works executed in order to attribute the revenues and the economic result of the contract to the years of accrual proportionally to the work progress report. The positive or negative difference between the value of the contracts performed and the value of the advances received is posted as an asset or liability in the statement of financial position, respectively, in consideration also of possible write-downs made for risks related to the failed recognition of the works executed for the principals. The revenues from the contract, in addition to the contractual consideration, include the variations, the price reviews and any claims to the extent these are likely to represent actual revenues that can be determined reliably. In case a loss is expected from the execution of the contract activities, this is immediately recorded in full in the accounts, regardless of the progress made in the contract. The construction services in favour of the grantor pertaining to the concession agreement held by ADR are specifically recorded in the income statement based on the progress of the works. Revenues for construction and/or improvement services in particular, which represent the consideration due for the activity performed, are valued at their fair value, calculated on the basis of the total costs incurred, which mainly comprise the costs of materials and external services, the costs of benefits for the employees devoted to these activities and the attributable financial expenses. These revenues for construction services are set off against a financial assets or the “airport concession” entered as intangible assets as shown in this paragraph.
Inventories Inventories are valued at the lower of acquisition or production cost and the net realisable value that can be obtained from their sale during normal operations. The acquisition cost is determined by applying the weighted average cost method.
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Payables and receivables Receivables are initially recognised at fair value and then valued at the amortised cost by using the effective interest rate method, net of any impairment related to the sum considered non- performing and recorded in the specific bad debt provisions. The amounts considered non-performing are estimated on the basis of the value of the expected cash flows. These flows consider the expected recovery terms, the likely salvage value, any guarantees as well as the costs that are estimated to be incurred to recover the receivables. The original value of the receivables is reinstated in the next years as the reasons for its adjustment cease to apply. In this case the value reinstatement is recorded in the income statement cannot exceed the amortised costs that the credit would have had in the absence of previous adjustments. Payables are initially recorded at cost, corresponding to the fair value of the liability, net of any directly attributable transaction cost. Subsequently, payables are valued with the amortised cost criterion by using the effective interest rate method. Trade receivables and payables whose expiration falls within the normal commercial terms are not discounted.
Cash and cash equivalents Cash and cash equivalents are recorded at par value and include the values that meet the requirements of high liquidity, availability on demand or in a very short term, good outcome and negligible risks of change in their value.
Treasury shares Treasury shares are entered as a reduction in the shareholders’ equity. The economic effects deriving from any subsequent sales are recorded in the shareholders’ equity.
Financial derivatives All financial derivatives are recorded in the statements of financial position based on their fair value, determined on the date when the period ends. Derivatives are classified as hedging instruments when the relationship between the derivative and the subject of the hedge is formally documented and the hedge has a high hedge ranging between 80% and 125%, as initially and periodically checked. For the instruments hedging against the risk of change in the cash flows of the assets and/or liabilities being hedged (cash flow hedge), the changes in fair value are recorded in the income statement in consideration of the relevant deferred tax effect; the ineffective part of the hedge is recorded in the income statement. The changes in the fair value of derivatives that do not meet the conditions for qualification pursuant to IAS 39, as hedging financial instruments are recorded in the income statement.
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Other financial assets and liabilities Any financial assets which the Group intends and has the ability to maintain until maturity, based on the provisions of IAS 39, and the financial liabilities are recorded at cost, as measured on the settlement date, represented by the fair value of the initial remuneration, increased in the case of assets and decreased in the case of liabilities, by any transaction costs that are directly attributable to the acquisition of the assets and the issue of the financial liabilities. After initial recording, these financial assets and liabilities are valued with the amortised cost criterion by using the effective interest rate method. Any financial assets held with the intention of obtaining a profit in the short term are recorded and valued at fair value, with recognition of the effects in the income statement; any financial assets other than those above are classified as financial instruments available for sale, recorded and valued at fair value with recognition of the effects in the comprehensive income statement. Financial instruments included in these categories have never been reclassified. Financial assets and liabilities are no longer shown in the financial statements when, consequently to their sale or redemption, the Company is no longer involved in their management nor is liable for the risks and benefits related to these sold/redeemed instruments.
Hierarchical levels to assess the fair value of financial instruments As regards the financial instruments valued at fair value and recorded in the statement of financial position, IFRS 7 “Financial Instruments: Disclosures” provides for these to be classified hierarchically on the basis of the relevance of the inputs of values used to determine the fair value. The standard makes a distinction between the following levels for the financial instruments valued at fair value: a) level 1 – quoted prices in active markets; b) level 2 – when the values, other than the quoted prices above, can be observed directly (prices) or indirectly (deriving from prices) in the market; c) level 3 – inputs not based on observable market data. In 2012 there were no transfers between the various hierarchical levels for fair value. Furthermore, no financial instruments can be classified as level 3 in terms of fair value.
Employee benefits The liabilities relating to short term benefits granted to employees, disbursed during the employment relationship, are recorded for the amount accrued at year end. The liabilities related to benefits granted to employees and paid during or after the termination of the employment relationship through defined contribution plans, mainly consisting of the employee severance indemnities of the Group companies accrued until December 31, 2006 (or, where applicable, until the next date of adhesion to the complementary compensation fund), are recorded in the year when the right arises, net of any assets assisting the plan and the advances paid; these are calculated on the basis of actuarial assumptions and measured on an accrual basis in line with the services needed to obtain the benefits; the liabilities are valued by independent actuaries. Profits or losses deriving from the actuarial calculation and changes in
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the actuarial assumptions used are recorded in the income statement to the extent that their unrecorded value at the beginning of the financial year exceeds 10% of the liability (the so- called corridor method), in consideration of the related deferred tax effect.
Provisions for risks and charges Provisions for risks and charges include the allocations arising from current obligations of a legal or implicit nature, deriving from past events, and the fulfilment of which will probably require the employment of resources, of which the amount cannot be reliably estimated. Provisions are allocated based on a best estimate of the costs required for fulfilling the obligation at the year-end date or to transfer it to third parties. If discounting produces a significant effect, allocations are determined by discounting the financial flows expected in the future at a discount rate that reflects the current market change of the current value of cost of money, and the specific risks related to the liability. When discounting, the increase in the allocation due to time passing is recorded as financial expense. The “allocations to the renovation provision” for the assets under concession, consistently with the conventional obligations in place, includes, at year end, the allocations regarding maintenance actions to be carried out in the future and aimed at ensuring the necessary functionality and safety of the airport infrastructure. The allocations to these provisions are determined according to the use and wear of the infrastructure, in consideration of the financial component related to time passing, when significant.
Non-current assets held for sale and assets/liabilities being disposed of and/or connected to discontinued operations Non-current assets held for sale and the assets/liabilities being disposed of and/or connected to discontinued operations, for which the book value will be recovered primarily through the sale and continuous use, are presented separately from the other assets and liabilities in the statement of financial position. Immediately before being classified as held for sale, these are stated on the basis of the specific reference IFRS applicable to each asset and liability, and subsequently recorded at the lower of the book value and the estimated fair value, net of the related sale costs. Any loss is immediately recorded in the income statement. Regarding exposure in the income statement, disposed operations or operations being disposed are classifiable as “discontinued operations” when they meet the requirements below: a) they represent an important independent operational branch or geographical area of operation; b) they are part of a single coordinated plan to discontinue an important branch or geographical area; c) they are subsidiaries acquired exclusively in order to be sold at a later stage. The economic effects of these transactions, net of the related tax effects, are recorded under a single item in the income statement, with reference to the date in the year of comparison.
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Impairment of assets (impairment test) At year-end, the book value of tangible, intangible and financial assets and of equity investments is tested to find any indication of impairment of these assets. If these indications exist, the recoverable amount of these assets is estimated to determine the amount of any write-down to be recorded. For any intangible assets with an indefinite useful life and any assets under construction, the impairment test described above is performed at least once a year, regardless of the occurrence of events that suggest impairment, or more frequently in case events or changes in the circumstances take place, which may lead to possible impairment. If the recoverable value of an asset cannot be estimated individually, the estimate of the recoverable value is included within the framework of the unit generating financial flows the assets belong to. This test estimates the recoverable value of the asset (represented by the greater of the likely market value, net of sale costs, and the value in use) and compares it with the relevant net book value. If the latter is higher, the asset is written down until reaching the recoverable value. In determining the value in use, the financial flows expected in the future after taxation are discounted by using a discount rate, after taxation, which reflects the current market estimate referred to the cost of capital in connection with the time and specific risks of the asset. Losses of value are recorded in the income statement and classified differently depending on the nature of written down asset. These losses in value are reinstated, within the limits of the write-down made, if the reasons that generated them ceased to apply, except for goodwill.
Estimates and valuations According to IFRS, the preparation of the financial statements requires estimates and valuations to be made, which affect the determination of the book value of assets and liabilities as well as the information provided in the explanatory notes, also with reference to the assets and liabilities potentially existing at the end of the year. These estimates and hypotheses are used, in particular, to determine the cash flows used as basis for the impairment of the assets (including the valuation of receivables), provisions for risks and charges, benefits for the employees, the fair value of financial assets and liabilities, deferred and prepaid taxes. Therefore, the actual results recorded may differ from these estimates; furthermore, the estimates and valuations are reviewed and updated periodically and the effects deriving from any variation are immediately reflected in the financial statements.
Conversion of the items in currencies Any transaction in a currency other than the euro is recorded at the exchange rate of the date of the transaction. The related monetary assets and liabilities denominated in currencies other than the euro are subsequently adjusted at the exchange rate in force on the date of closing the year of reference and any resulting exchange rate differences are reflected in the income statement. Non-monetary assets and liabilities denominated in currency and recorded at historical cost are converted by using the exchange rate in force on the date the transaction is first recorded.
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Earnings per Share Basic earnings per share are calculated by dividing the result for the year by the weighted average number of shares outstanding during the year. Diluted earnings per share are calculated in consideration, for both the result for the year and the mentioned weighted average, of the effects related to the subscription and/or total conversion of all the potential shares that may be issued consequently to certain outstanding options being exercised.
Information by industry segment Following the administrative and financial integration of Gemina and ADR, the Group is engaged in one sector only, i.e. the development and management of airport infrastructures. Thus the Group’s operations are subject to reporting and analysis by management as an individual unit. Consequently, with reference to the provisions of IFRS 8, no (financial and/or economic) segment information is provided for the business sectors, as this is not applicable.
Accounting standards and newly issued interpretations, revisions and amendments to existing standards not yet in force or not yet endorsed by the European Union
No new accounting standards or interpretations came into force in 2012, or amendments to the accounting standards and interpretations already in force, which significantly affected the consolidated financial statements of the Gemina Group. As requested by IAS 8, stated below are the new accounting standards and interpretations, in addition to the amendments to the already applicable standards and interpretations not yet in force or not yet endorsed by the European Union (EU), which may be applied in the future to the financial statements of the Group.
IAS 9 – Financial Instruments On November 12, 2009, IASB published standard IFRS 9 – Financial Instruments: the same standard was then amended on October 28, 2010. The standard, applicable from January 1, 2015 retrospectively, represents the first part of a process in phases that has the purpose of fully replacing IAS 39 and introducing new criteria for the recognition and measurement of financial assets and liabilities. For financial assets in particular the new standard adopts a unique approach based on the methods of managing financial instruments and on the characteristics of the contractual cash flows of the same financial assets in order to determine their assessment criterion, replacing the different rules envisaged by IAS 39. Instead, for financial liabilities, the main amendment concerns the accounting treatment of the changes in fair value of a financial liability designated as financial liability valued at fair value through the Income Statement, in case these are due to the changed credit worthiness of the same liability. According to the new standard these changes must be recorded in the Statement of the “Other total profits and losses” and will no longer be posted in the Income Statement. Phase two and three of the project on the financial instruments relating to the impairment of financial assets and the hedge accounting, respectively, are still underway. Furthermore, IASB
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is assessing limited improvements to IFRS 9 for the part relating to the recognition and measurement of financial assets.
IFRS 10 – Consolidated Financial Statements, IAS 27 – Separate Financial Statements and IFRS 12 – Disclosure of Interests in Other Entities On May 12, 2011 IASB issued the new accounting standard IFRS 10, completing the project associated with redefining the concept of control and overcoming the discrepancies found in applying this concept; while IAS 27 – Consolidated and Separate Financial Statements, defines the control on an entity as the power to make certain financial and managerial choices of an entity while obtaining the relevant benefits, SIC 12 – Consolidation - Special Purpose Entities places more emphasis on the risks and benefits. The new standard, which was issued at the same time as IAS 27 – Separate Financial Statements, replaces the old IAS 27 and SIC 12 and contains a new definition of control as well as the methodologies to be used to prepare the financial statements according to IFRS, already contained in the old IAS 27 and which were not amended. According to IFRS 10 an investor controls an entity when it is exposed, or holds rights, to variable returns on its investment in the entity and has the ability to change these returns through its power on the entity. Therefore, control is based on the following three elements: (i) power on the entity, (ii) exposure or right to variable returns on the investment of the entity, and (iii) ability to use the power over the entity to influence the returns on the investment. According to IFRS 10, in assessing the existence of control, only the essential rights must be considered, i.e. those that can be exercised in practice when important decisions for the acquired company must be taken. IFRS 10 provides practical guides to assist in assessing the existence of control in complex situations such as de facto control, potential voting rights, the situations where it must be established whether the one entrusted with decision-making power is acting as agent or principal. Finally, IFRS 10 refers to the new IFRS 12 – Disclosure of Interests in Other Entities (issued at the time of the other new standards stated), regarding information to be provided in the statements for each type of equity investment, including those in subsidiaries, joint venture agreements, associated companies, purposefully established companies and other unconsolidated vehicle companies. Instead, the new IAS 27 – Separate Financial Statements – is an extract of part of the old standard as it only governs the methods of reporting and information for investments in subsidiaries as well as the requirements for the preparation by an entity of the financial statements for the year; the new standard did not introduce any changes with regard to these aspects. The new standards IFRS 10, IFRS 12 and IAS 27 are applicable retrospectively from January 1, 2014. The Group has not yet analysed the effects of this standard on the consolidation area. On June 28, 2012 IASB published a document that contains the amendments to IFRS 10, IFRS 11 and IFRS 12. It aims to clarify the transitional rules of IFRS 10 Consolidated Financial Statements: for an entity with year coinciding with the calendar year and first application of IFRS 10 to the financial statements as at December 31, 2013, the initial application date will be January 1, 2013. In case the conclusions on the consolidation area are the same according to IAS 27, SIC 12 and IFRS 10 on the initial registration date, the entity will have no obligation. No obligation will arise
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in case the equity investment was transferred during the comparison period (and as such no longer present on the initial application date). The document intends to clarify how an investor must retrospectively adjust the comparison period/s in case the conclusions on the consolidation area are not the same according to IAS 27 / SIC 12 and IFRS 10 on the initial registration date. When a retrospective adjustment as defined above is not feasible, in particular an acquisition/transfer will be recorded at the start of the comparative period presented, with a consequent adjustment recorded under retained profits.
IFRS 13 – Fair Value Measurement IFRS 13, issued on May 12, 2011, clarifies the determination of the fair value for the purpose of valuation and information in the financial statements, and applies to all IFRS requiring or allowing the measurement of fair value or presentation of information based on the fair value. The standard is applicable prospectively from January 1, 2013.
IAS 1 - Presentation of Financial Statements On June 16, 2011 IASB published an amendment to IAS 1 to request companies to group the elements included in the statement of comprehensive income according to whether these may be reclassified subsequently in the statement of income or not. The amendment is applicable for the years starting after or from July 1, 2012.
IAS 19 – Employee Benefits In June 2011 IASB approved the new IAS 19 regarding the treatment of benefits to employees. The main changes are: a) all actuarial profits and losses accrued on the balance sheet date must be immediately recorded in the comprehensive income statement, thus eliminating the possibility of deferring them through the corridor method; b) any cost related to changes in the plans that imply variations in the services already provided must be recorded in the period when the plan is changed, and can no longer be deferred in the future service periods; c) any benefit implying a service obligation after the termination of the employment relationship is not included in the termination benefit category, with consequent reduction in the number of agreements that can be included in this category. Furthermore, a liability for termination benefit can be recorded in the accounts only when the entity measures the related restructuring cost or when it cannot avoid offering the termination benefit. The amendment is applicable retrospectively from the year starting after or from January 1, 2013. The effects of applying this standard to the balances as at December 31, 2012 that can be reasonably estimated amount to 3.7 million euro.
IAS 28 - Investments in Associates and Joint Ventures On May 12, 2011, IASB, at the same time as issuing the new standards IFRS 10, IFRS 11, IFRS 12 and IAS 27 mentioned above, issued the new IAS 28 – Investments in Associates and Joint Ventures. The new standard, which replaces the old IAS 28 – Investments in Associates, introduces the obligation to apply the net equity method to the valuation of equity investments in joint ventures, thus confirming the methods of application of the net equity method established by the old IAS 28. The new IAS 28 will enter into force mandatorily on January 1, 2013
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IAS 32 and IFRS 7 – Offsetting Financial Assets and Financial Liabilities On December 16, 2011, IASB published an amendment to IAS 32 and IFRS 7 on the methods of presentation of the offsetting of financial assets and liabilities, and the related information to be provided in the financial statements. The entity drawing up the financial statements has a legal right to offset the amounts of financial assets and liabilities already recorded in the accounts only when this right: a) is not conditioned to the occurrence of future events; b) can be exercised in case of continuous operation of the entity drawing up the financial statements and all the parties involved, in case of default, insolvency or bankruptcy. The amendments are applicable retrospectively for the years starting from or after January 1, 2014.
The Group is in the process of assessing any impact deriving from the future application of all of these newly issued standards and interpretations, as well as the revisions or amendments to the existing standards.
Note 4 Consolidation area, criteria and methods
In addition to the Parent Company Gemina, the companies directly or indirectly controlled by it are also included in the consolidation area. Consolidated in particular are the entities in which the Parent Company exercises the control both by virtue of the shares directly or indirectly held to obtain the majority of votes in the meeting and due to exercise of a prevailing influence expressed by the power to make financial and managerial choices for the entity while obtaining the related benefits, also setting aside shares. Excluded from the consolidation with the integral method are some minor entities whose exclusion, with reference to operations (e.g. companies that are not yet or no longer operational, companies for which a liquidation process has almost been completed), would be negligible in terms of quantity and quality for the purposes of correctly representing the income statement, statement of financial position and cash flow information of the Group. The controlled entities are included in the consolidation area as of the date when control is acquired by the Group and are excluded from the consolidation area from the date the Group loses control over them. The list of companies included in the consolidation area is reported in attachment “List of equity investments”. Compared to December 31, 2011, the 100% owned companies established in 2012 that are part of the ADR Group are included in the consolidation area: ADR Mobility S.r.l. (“ADR Mobility”), ADR Security S.r.l. (“ADR Security”) and ADR Retail S.r.l (“ADR Retail”), until the date of sale to third parties (September 30, 2012). For consolidation purposes, the financial statements of the subsidiary companies approved by the respective Board of Directors were used, adjusted according to the IFRS adopted by the Group.
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The main consolidation criteria are set forth below: all assets and liabilities, charges and income of companies consolidated using the line-by-line method are fully included in the consolidated financial statements; the book value of the equity investments is set off against the corresponding share of Shareholders’ Equity in the investee companies, attributing to the single asset and liability items their current value at the date of acquisition of control; where necessary, adjustments have been made to the financial statements of subsidiaries to bring their accounting criteria in line with those adopted by the group; minority interests in the Shareholders’ equity of subsidiaries is separately indicated with regard to Group Shareholders’ equity; profits and losses that have not yet been realised by the Group, as they arise on intercompany transactions, have been eliminated, as well as significantly large items that give rise to payables and receivables, income and charges between consolidated companies; where applicable, consolidation adjustments take into account their deferred tax effect; dividends received in the year from subsidiaries that are recorded in the income statement of the Parent Company as income from equity investments have been set off against “profits carried forward”.
Note 5 Discontinued operations As part of the strategy to focus on the core business, selling procedures in the following businesses were finalised during 2012: direct retail, managed by the wholly owned subsidiary ADR Retail, which on April 2, 2012 ADR transferred the relevant company branch to; this company was sold to third parties on September 30, 2012; “vehicle maintenance”, ADR company branch, sold to third parties effective from November 1, 2012. Pursuant to IFRS 5 – Non-current assets held for sale and discontinued operations, the abovementioned businesses were qualified as “discontinued operation” in these financial statements. Therefore, both the result of the sale, net of the relevant tax effect and the costs incurred in connection with the sale, and the contribution of both businesses to the consolidated economic result of 2012, until the date of the possession, is presented in the item “ Net income from discontinued operations/assets held for sale”, rather than being included in the relevant items of the consolidated income statement of continuing operations. The consolidated income statement of 2011, used for comparison purposes, was reclassified with respect to the one published in the annual report as at December 31, 2011. In compliance with IFRS 5, the comparison equity information as at December 31, 2011 was not re-posted. Finally, in the cash flows represented in the Statement of consolidated cash flows, the cash and cash equivalents generated by operations and attributable to the businesses held for sale equal 5 million euro both in 2012 and in the year of comparison.
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Note 6 Concession agreement
Concessionary relationship ADR’s corporate purpose is the construction and management of airports or of a part thereof, and the exercise of any activity related or complementary to air traffic of any type or speciality. This purpose is achieved based on a concession granted by the Italian Civil Aviation Authority. The company holding the concession (ADR) ensures the management and development of the Rome airport system (comprising the “Leonardo da Vinci” airport of Fiumicino and the “G.B. Pastine” airport of Ciampino) in compliance with international, European and national provisions as well as ENAC regulations that govern the operation of airports open to civil traffic. The original Agreement for the management concession 2820/74 was in force until December 28, 2012, when the new Single Planning Agreement was approved, which, with a single deed, governs both the relations regarding the airport management concession and the criteria to determine and periodical update the consideration applicable to the “regulated services”. The principle stating that the management must take place according to the criteria of economy and coherent organisation stays in place, as governed by Law no. 755 of November 10, 1973 and subsequent amendments.
Duration of the concession The concession expires on June 30, 2044 as established by art. 14 of law no. 359 of August 8, 1992 and art. 1-quater of law no. 351 of August 3, 1995, and reinstated with notes of the Ministry of Transport and Navigation on September 12, 1994 and January 23, 1998. The causes of repeal, cancellation and termination of the concessionary relationship are specified by the new Agreement in articles 18-19-20 as well as art. 20 bis for the effects envisaged by the natural expiry of June 30, 2044.
Subject of the Concession Law 755/73 (Art. 1) sets forth the subject of the concession, consisting in the single management of the Capital’s airport system, to be carried out under the supervision of the Ministry of Transport (now ENAC - Italian Civil Aviation Authority - pursuant to Italian Legislative Decree 250/1997) according to the provisions of the Navigation Code and regulations currently in force. ADR also carries out passengers with carry-on baggage and hold baggage security checks, always under the concession.
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Income Pursuant to Art. 6, subsection 1, of Law 755/73, “all revenues of the State, which derive from the management of the two airports, belong to the company holding the concession”. Art. 10 of the Single Agreement lists the income of the concessionaire in detail, also providing for a fair payment to be made to it by whoever carries out, also occasionally, a profit-making non aviation activity, which is not remunerated otherwise, in the airports under concession. This article also specifies the income deriving from or connected to the trade activities non included in the fee regulation of the new Planning Agreement. The latter governs the “regulated remuneration”, i.e. those airport services originally identified in the “Reordering framework regarding the tariff system for airport services rendered on an exclusive basis” proposed by the Minister of Transport and Navigation in conjunction with the Minister of Finance and approved with CIPE's resolution no. 86 of August 4, 2000 finally replaced by Resolution no. 51/08. In addition airport fees, the remuneration includes all the payments for services render on an exclusive basis. The provisional adjustment regime established by law continued to be applied throughout 2012 while awaiting the completion of the procedure to approve the planning agreements, particularly regarding the adjustment of airport fees. Law no. 31 of February 28, 2008 converting Law Decree 248/2007 (“Milleproroghe” Decree) governed the transitional methods of adjustment of the fees to be applied with decree of the Minister of Transport based, year on year, on the programmed inflation rate. The latest update with Ministerial Decree was made with Ministerial Decree of July 25, 2012, which updated the airport fees to the programmed inflation of 2011 (2%, previously set at 1.5% by Ministerial Decree of November 11, 2011, entered into force on June 3, 2012).
Concession fee Italian Legislative Decree 251/95 converted into law 351/95 introduced the obligation to pay a concession fee. The reference parameter in force to determine the fee (“WLU” - Work Load Unit) was adopted according to the Decree of the State Property Office of June 30, 2003. The WLU corresponds to one passenger or 100 kg of cargo or post and is calculated using the data reported in the statistical yearbook of the Ministry for Infrastructure and Transport - ENAC (Italian Civil Aviation Authority)”. This method for quantifying airport management fees was extended to 2012 by a subsequent Decree of the State Property Office of December 30, 2009. Finally, pursuant to art. 11-decies of Law 248/2005, the 75% reduction of the state concession fees was applied also in 2012. This reduction ceases in 2013 consequently to the application of the new Planning Agreement. On this point it is useful to specify that according to art. 2, par. 4 of this last deed, should the concession fee be changed, following regulatory provisions and/or administrative measures, compared to the one in force at the time of the stipulation or should forms of taxation be introduced with an equivalent effect on the account of the Concessionaire, the latter shall be entitled to a specific fee increase to cover the greater disbursement.
112 Annual Report 2012 Consolidated Financial Statements and notes
The assets regime In art. 12 the new Single Convention governs the regime of possession of assets by the Concessionaire. The same is to be interpreted in any case in combination with the provisions in articles 41 and 703 of the Navigation Code. Additional rules contained in the new Agreement contribute to defining the legal treatment of the assets (e.g. art. 9 paragraph 7 and art. 20 bis) which, though conditioned by the pertinence of the principle of correlation for the use to perform regulated activities or alternatively commercially (unregulated) activities, does not significantly differ from the pre-existing regime. In particular: the assets received under concession at the time of establishing the concessionaire or subsequently created by the concessionaire by virtue of laws of the State with public funds, are possessed by the concessionaire under the right of use regime as these are government property; the assets acquired/created by the Concessionaire with funding from its accounts and used to perform activities subject to fee regulation are possessed under the concession ownership regime. This leads to the obligation to hand them over to the Grantor upon the natural expiry of the concession; this action will be in any case conditioned by the repayment of their value to be established according to the new convention rules; the same treatment applies to the goods acquired/created by the Concessionaire with funding from its accounts but used to perform (unregulated) commercial activities, provided these are related to real estate; for commercial movable properties, the ownership is full; the Grantor is granted a right to purchase (art 20 bis 4.d) upon the natural expiry of the concession, which can be exercised by paying the former concessionaire their residual book value.
Valuation of the concession As stated in the paragraph regarding the concession relationship, ADR’s corporate purpose is the management of the Rome airport system. The concession is the legal instrument that enables ADR to carry out this activity, settling fees and obligations both during and at the end of the concession. As a result, the valuation of the concession effectively corresponds to the valuation of the company, and vice versa. The part of the airport management concession related to the acquired rights is recorded in the consolidated financial statements for a value of 2,742 million euro, originating as follows:
113 Annual Report 2012 Consolidated Financial Statements and notes
(IMILLIONS OF EURO) 1) Value entered at the time of the first consolidation of Leonardo S.p.A. (now ADR), related to the difference in value between the price paid by Leonardo S.p.A. and ADR’s shareholders’ equity: net value as at December 31, 2006 for the 51.08% share of ADR owned by 1,151 Gemina net value as at July 1, 2007 for the 44.68% share of ADR purchased by 891 Macquarie (change in consolidation area) Subtotal 2,042 2) Value measured as at July 1, 2007: difference between ADR’s shareholders’ equity and the price paid to 930 Macquarie deferred taxes on the value of 930 257 1,187 3) Value recognised while consolidating Fiumicino Energia 7 4) Depreciation regarding 2007-2011 (407) 5) Value of concession as at December 31, 2011 (1+2+3+4) 2,829 6) Amortisation regarding 2012 (87) 7) Value of concession as at December 31, 2012 (5+6) 2,742
The value of the concession is amortised on a straight-line basis in each year along the duration of the concession, i.e. until June 30, 2044.
Considerable discontinuity was recorded 2012 compared to the previous years: the new Planning Agreement outlines a new regulatory and tariff framework, which is substantially consistent with the previous pro tempore schemes submitted to the Board of Directors for examination, with sound and transparent rules valid until the end of the concession. The impairment test ran on the basis of the financial flows of the company estimated with reference to the business plan prepared in consideration of the new Planning Agreement, showed that the recoverability of the book value of the concession at December 31, 2012 is already ensured with a discounting rate higher than the average consensus rate expressed by the market, equal to about 7.67%. The two main ADR’s business areas, aviation and non aviation, were considered as one single Cash Generating Unit for both their strict interconnection and the fact that one single value was assigned to the concession. Forecasts are based on the following assumptions: conduction of investments for about 12 billion euro by 2044, of which about 2.8 billion euro by 2021, aimed at increasing the accommodation capacity of Fiumicino Sud (for about 4.4 billion euro), building the new airport area of Fiumicino Nord for about 7.2 billion euro and re-qualifying Ciampino as a “city airport”, with the exclusion of Viterbo, no longer included in the National airport development plan; passenger traffic forecast up to 50 million at the end of the first regulatory period (2021) to reach up to 98 million by 2044; definition of a tariff structure based on the “price cap” (RAB based) method with clear correlation between the costs and the maximum admitted revenues, in “dual till” regime and determination of the value of the initial Rab at 1.8 billion euro at January 1, 2013; identification, for the first regulatory period (2012/2016), of a remuneration (real pre-tax wacc) of 11.91%, with clear indication of the methods of calculation of the variables in the subsequent periods.
114 Annual Report 2012 Consolidated Financial Statements and notes
The market capitalization of the Gemina security, subsequently to the approval of the new Planning Agreement, also confirms the lack of indicators as to the possible impairment of the equity investment.
Note 7 Information on the items in the consolidated income statement
7.1 – Revenues
(MILLIONS OF EURO) 2012 2011 (°) CHANGE % CHANGE
Aviation 321.7 323.4 (1.7) (0.6%) Airport fees 179.0 181.6 (2.6) (1.5%) Centralised infrastructures 41.6 40.5 1.1 2.8% Security 68.3 70.3 (2.0) (2.9%) Other 32.8 31.0 1.8 5.6% Non Aviation 222.9 220.9 2.0 0.9% Real Estate 62.8 62.9 (0.1) (0.2%) Trade sub concessions - shops 93.6 86.6 7.0 8.0% Car parks 29.8 31.6 (1.8) (5.6%) Advertising 16.0 17.2 (1.2) (7.3%) Refreshments 3.8 7.4 (3.6) (48.5%) Other 16.9 15.2 1.7 11.6% Revenues from airport management 544.6 544.3 0.3 0.0% Construction services 9.1 27.6 (18.5) (66.7%) Other revenues 7.8 11.8 (4.0) (33.9%) TOTAL 561.5 583.7 (22.2) (3.8%)
(°) the data relating to 2011 was reclassified pursuant to IFRS 5 based on the transfer: direct retail and vehicle maintenance
Revenues from airport management are substantially in line with 2011. Revenues for construction services total 9.1 million euro, with an 18.5 million euro decrease resulting from a reduction in the investment volume during the year. Other income and revenues in 2011 included the amount of 6.7 million euro finally paid to ADR as an indemnity for the favourable sentence of the State Council on the dispute regarding the 100% screening of hold baggage. For a detailed analysis of revenues, reference is made to section “The Gemina Group businesses” of the Report on operations.
115 Annual Report 2012 Consolidated Financial Statements and notes
7.2 – Consumption of raw materials and consumables
2012 2011 Combustibles 16,058 14,224 Fuel and lubricants 3,557 3,309 Electricity 8,100 7,197 Consumables and various spare parts 3,881 5,242 TOTAL 31,596 29,972
The costs of raw materials and consumables are slightly up compared to 2011, essentially due to the increase in the external cost to purchase electricity and particularly the gas that fuels the co-generation power plant in Fiumicino.
7.3 – Staff costs 2012 2011 Salaries and wages 81,635 81,873 Social security charges 23,888 23,418 Post-employment benefits 5,000 5,345 Restructuring costs 0 1,108 Previous years cost of labour adjustments (2,495) (2,189) Other costs 1,134 1,068 TOTAL 109,162 110,623
Staff costs decreased by 1.5 million euro compared to 2011, which had been affected by the restructuring costs of the same amount, which comprise the one-off costs for the termination of the work contracts of the Parent Company in connection with the transfer of the headquarters from Milan to Rome in August 2011. The positive effect of the reduced average number of staff employed (about 48 people when considering the workforce net of the workforce of the sold businesses) was almost entirely offset by a less positive breakdown of the workforce mix (fixed-term/open contracts and contractual levels).
7.4 - Other operating costs 2012 2011 Service charges 102,281 107,045 Costs for use of third party assets 11,502 12,141 Allocation to provision for risks 2,661 20,936 Write-downs of receivables 20,905 7,367 Other operating expenses 8,345 6,083 TOTAL 145,694 153,572
"Service charges" decreased by 4.8 million euro thanks to the decreased consultancy costs and professional services, communication expenses as well as to the canteen management costs having ceased in the second half. The items “Allocation to provision for risks” and “write-downs of receivables” are more contained overall (4.7 million euro) compared to 2011, even if with a greater weight of the bad debt
116 Annual Report 2012 Consolidated Financial Statements and notes
provision (20.9 million euro). The latter were necessary in the face of greater risks on the recoverability of receivables deriving from the financial difficulties of numerous customers and disputes on some fees deriving from the uncertain legal framework prior to the approval of the Planning Agreement.
7.5 - Amortisation, depreciation and write-downs of fixed assets 2012 2011 Amortisation of intangible fixed assets 102,592 102,492 Depreciation of tangible fixed assets 4,338 4,791 TOTAL 106,930 107,283
The amortisation of intangible fixed assets is broken down as follows:
2012 2011 Amortisation of airport management concession “acquired 87,007 87,007 rights” Amortisation of airport management concession 12,513 11,958 “investments in infrastructure” Amortisation of other intangible fixed assets 3,072 3,527 TOTAL 102,592 102,492
Total amortisation of the airport management concession -“acquired rights” - amounted to 87.0 million euro, similarly to the previous year, and it is broken down as follows:
Amortisation of concession recorded in ADR’s financial statements 49,284 Amortisation of concession recorded in Gemina’s consolidated financial statements from 5,472 consolidation of 51.08% of ADR Amortisation of concession recorded in Gemina’s consolidated financial statements from 32,051 consolidation of 44.68% of ADR Amortisation of concession recorded in Gemina’s consolidated financial statements of 200 Fiumicino Energia TOTAL 87,007
7.6 - Allocations to system renovation provisions
These amount to 59,949 thousand euro compared to 62,550 thousand euro in 2011; for more information please refer to note 8.17 “System renovation provisions”. Financial expenses accrued in the year in relation to time passing, which derive from the discounting of the same provision, are highlighted in note 7.8.
117 Annual Report 2012 Consolidated Financial Statements and notes
7.7 – Financial income 2012 2011 Interest income 2,054 2,880 interest on bank deposits and loans 2,054 2,880 Income on derivatives 5,748 7,555 Valuation of derivatives 5,744 7,549 IRS differentials 4 6 Exchange gains 122 183 Other income 1,975 1,583 Default interest on current receivables 0 95 Interest from customers 1,879 1,424 Other income 96 64 TOTAL 9,899 12,201
“Interest income”, equal to 2,054 thousand euro, decreased by 826 thousand euro compared to 2011, despite the greater average liquidity of the year, due to lower interest rates. The income from “valuation of derivatives” refers to the change occurred in the year in the fair value of cross currency swap contracts aimed at hedging the bonds issued in a currency other than the euro, illustrated in note 8.19. This income balances off the corresponding exchange losses deriving from the change in the value of these liabilities and included in the “financial expenses” as shown in note 7.8.
7.8 – Financial expenses 2012 2011 Interest expense 73,672 71,047 Interest on outstanding bonds 58,044 60,091 Interest on bank loans 9,588 7,829 Effects of application of the amortised cost method 6,040 3,127 Interest on financial payables - - Expenses on derivatives 4,404 9,590 IRS differentials 4,404 9,590 Exchange losses 6,059 7,618 Other expenses 14,988 12,056 Financial expenses from discounting benefits for employees 354 822 Financial expenses from discounting system renovation 12,608 10,366 provisions Other expenses 2,026 868 TOTAL 99,123 100,311
“Interest on bank loans” rose by 1.8 million euro, despite the lower average exposure deriving from the repayments of the Term Loan Facility, consequently to the increase in the commissions on non-use on the Revolving Facility and the commissions on ADR's new Term Loan facility usable in February 2013. “Interest on outstanding bonds” decreased by 2.0 million euro due to the reduction of the interest paid on Tranche A2 and A3 settled at variable rate “IRS differentials” decreased by 5.2 million with the expiry in February 2012 of the two “Interest Rate Collar Forward Start” hedging contracts of ADR.
118 Annual Report 2012 Consolidated Financial Statements and notes
“Exchange losses”, substantially deriving from the change in the rate of the bonds issued in a currency other than the euro, are indirectly offset by the income for “valuation of derivatives” as shown in note 7.7, regarding the change in fair value occurred in the year for the cross currency swap contracts aimed at hedging the same bonds as shown in note 8.19.
An increase of 2.9 million euro in the “other expenses”, mainly referred to greater expenses for the discounting of the system renovation provisions due to unfavourable interest rates.
7.9 - Income (charges) on equity investments
2012 2011 Other income/(charges) on equity investments (21) 30 TOTAL (21) 30
7.10 - Tax revenues (charges) 2012 2011 Current income taxes (47,021) (47,495) IRES (31,551) (31,844) IRAP (15,470) (15,651) Taxes of previous years 7,626 17 Net (prepaid) deferred income tax 22,787 24,209 TOTAL (16,608) (23,269)
It is noted that the Group tax consolidation agreement is in force between Gemina, ADR, ADR Tel, ADR Engineering, ADR Sviluppo, ADR Assistance, Leonardo Energia and Fiumicino Energia for the 2010-2012 period. For details on prepaid net taxes reference is made to note 8.4. The “taxes of previous years” include 7.7 million euro of the provisions of the amount that will be required as repayment by the Gemina Group companies for the tax periods 2007-2011, with the methods and terms stated by the Revenue Office in relation to the lower IRES due for the analytical deduction of IRAP paid on staff costs. The table below shows the reconciliation between the theoretical fiscal and real charges incurred for the IRES tax for the year.
2012 2012 2011 TAXABLE TAX EFFECT TAXABLE TAX EFFECT AMOUNT AMOUNT Pre-tax profit (loss) 10,011 5,867 Rate 27.5% 27.5% Theoretical IRES 2,753 1,613 Permanent differences 28,327 7,790 58,941 16,209 Temporary differences 76,393 21,008 50,988 14,022 IRES taxable amount 114,731 115,796 IRES pertaining to the year (*) 31,551 31,844
(*) including tax benefits from tax consolidation
119 Annual Report 2012 Consolidated Financial Statements and notes
7.11 - Net income from discontinued operations/assets held for sale
The item “Net income from discontinued operations/assets held for sale”, equal to 210,583 thousand euro in 2012 (4,032 thousand euro in 2011) includes the capital gain from the sale of the subsidiary ADR Retail which, net of the tax effect and the additional charges for sale (for a total of 13.9 million euro), amounts to 206.3 million euro. Given a value of the equity investment of about 8 million euro in the consolidated financial statements, the remuneration for the sale was 228.2 million euro, equal to the offered price of 229.4 million euro, net of the adjustment of 1.2 million euro made on the basis of the contractual agreements regarding the economic and financial position of the company on the effective date of the transfer (9/30/2012). This item also includes the result of the transfer of the vehicle maintenance branch and the economic results of the period, net of the tax effect, relating to the direct retail and vehicle maintenance businesses.
(THOUSANDS OF EURO) INCOME FROM DISCONTINUED OPERATIONS 2012 2011
Direct Retail economic result (net of the tax effect) 4,056 3,900 capital gains from disposal (net of the costs related to the 206,275 - sale and the tax effect) Vehicle maintenance: economic result (net of the tax effect) 477 132 capital losses from disposal (net of the costs related to the (225) - sale and the tax effect) total 210,583 4,032
The economic result for the period and the statements of financial position on the date of the transfer are reported below.
Direct retail
(THOUSANDS OF EURO) DIRECT RETAIL JAN.-SEPT. 2012 2011 Revenues 46,476 60,049 External operating costs (39,811) (52,888) Amortisation and depreciation of fixed assets (309) (906) Provisions for risks and charges (77) - EBIT 6,279 6,255 Financial income (expenses) 22 (33) Income taxes (2,245) (2,322) Profit (loss) for the period 4,056 3,900
120 Annual Report 2012 Consolidated Financial Statements and notes
(THOUSANDS OF EURO) 09/30/2012 ASSETS Intangible fixed assets 6,204 Tangible fixed assets 204 Total non-current assets 6,408 Inventories 10,684 Trade receivables 1,046 Other receivables 3,856 Cash and cash equivalents 7,803 Total current assets 23,389 TOTAL ASSETS 29,797 LIABILITIES Employee benefits 1,208 Tax provisions and provisions for risks and charges 1,608 Total non-current liabilities 2,816 Trade payables 14,889 Other current liabilities 4,132 Total current liabilities 19,021 TOTAL LIABILITIES 21,837
Vehicle maintenance
(THOUSANDS OF EURO) VEHICLE MAINTENANCE JAN-OCT. 2012 2011 Revenues 7,595 9,093 External operating costs (6,649) (8,602) Amortisation and depreciation of fixed assets (89) (107) EBIT 857 384 Financial income (expenses) - - Income taxes (380) (252) Profit (loss) for the period 477 132
(THOUSANDS OF EURO) 10/30/2012 ASSETS Tangible assets 202 Total non-current assets 202 Inventories 955 Cash and cash equivalents 331 Total current assets 1,286 TOTAL ASSETS 1,488 LIABILITIES Employee benefits 1,064 Total non-current liabilities 1,064 Other current liabilities 286 Total current liabilities 286 TOTAL LIABILITIES 1,350
121 Annual Report 2012 Consolidated Financial Statements and notes
7.12 - Net earnings per share
The basic net earnings per share, which coincide with the diluted net earnings per share, are calculated on the average number of shares in issue during the year, equal to 1,467,697,552, calculated by adjusting the number of shares in issue at the start of the year (1,472,960,320) to the number of treasury shares purchased in the year, after weighting these values based on time. All Gemina shares are subscribed.
Note 8 Information on the items of the consolidated statement of financial position
8.1 – Intangible fixed assets RECLASS. / CHANGE IN ADJUSTMENTS CONSOLIDATION 12/31/2011 INCREASES DECREASES AREA 12/31/2012 Airport management concession “acquired 2,829,266 - (87,006) - - 2,742,260 rights” Airport management concession 483,756 7,186 (12,709) (1,907) (6,187) 470,139 “investments in infrastructure” Other intangible fixed assets 4,210 1,759 (3,073) 850 (18) 3,728 TOTAL 3,317,232 8,945 (102,788) (1,057) (6,205) 3,216,127
The change in item “Airport management concession - acquired rights” with respect to December 31, 2011 can be attributed to the amortisation over the year already highlighted in Note 7.5. The item “Airport management concession - investments infrastructure”, pursuant to IFRIC 12, includes the value of the construction and improvement services rendered by the Group which are to be transferred to the grantor on conclusion of the concession. The following table sets forth the value of the systems and infrastructure under lease by the grantor in the Fiumicino and Ciampino airports, and the value of the construction services for works financed, realised and reported to the Italian Civil Aviation Authority. These assets received in concession are not recorded as “Assets” in the statement of financial position.
12/31/2012 12/31/2011 Fiumicino assets received in concession 119,812 119,812 Ciampino assets received in concession 29,293 29,293 Assets created on behalf of the State 692,023 689,369 TOTAL 841,128 838,474
122 Annual Report 2012 Consolidated Financial Statements and notes
8.2 – Tangible fixed assets
12/31/2011 CHANGES 12/31/2012 COST ACC. BOOK INCR. RECLASS. DEPR. CHANGE IN COST ACC. BOOK DEPR. VALUE CONSOLIDATIO DEPR. VALUE N AREA Plant and machinery 43,496 (35,399) 8,097 1,308 - (3,033) (64) 44,211 (37,903) 6,308 Fixtures and fittings 9,989 (8,581) 1,408 143 (59) (425) (33) 9,641 (8,607) 1,034 tools and other equipment Construction in progress 894 - 894 90 (900) - - 84 0 84 and advances Other assets 42,000 (39,859) 2,141 894 - (1,081) (107) 42,456 (40,609) 1,847 TOTAL 96,379 (83,839) 12,540 2,435 (959) (4,539) (204) 96,392 (87,119) 9,273
8.3 – Other equity investments 12/31/2012 12/31/2011 CHANGE Non-consolidated subsidiaries 10 10 - Domino S.r.l. 10 10 - Non-consolidated associated companies 13 10 3 Consorzio E.T.L. in liquidation 10 10 - Consorzio AGERE 3 0 3 Other companies 2,234 2,234 - Pentar 32 32 - Aeroporto di Genova S.p.A. 895 895 - S.A.Cal. S.p.A. 1,307 1,307 - TOTAL 2,257 2,254 3
The item “other equity investments” rose by 3 thousand euro due to ADR Engineering subscribing 33% of the consortium fund of Consorzio Agere. The equity investment in Pentar decreased to 16.38% following the changes in the share capital of the company (subsequent capital increases/decreases).
8.4 - Deferred tax assets
The item amounts to 136,357 thousand euro, compared to 116,110 thousand euro of December 31, 2011. A breakdown of the item and movements recorded over the year is reported below:
123 Annual Report 2012 Consolidated Financial Statements and notes
CHANGE IN 12/31/2011 INCREASE DECREASE CONS. AREA 12/31/2012 TAXABLE TAX TAXABLE TAX TAXABLE TAX TAX TAXABLE TAX INCOME INCOME INCOME INCOME (A) (B) (C) (D) (A+B-C+D)
Deferred taxes assets 384,503 118,166 86,120 25,581 21,563 6,424 1,435 453,273 138,758 Provisions for risks and charges 46,505 14,789 2,663 768 8,605 2,762 (33) 40,444 12,762 System renovation provisions and other 182,482 59,527 33,823 11,033 0 0 1,903 222,139 72,463 IFRIC 12 adjustments Provision for obsolete goods 292 81 982 270 82 23 (296) 116 32 Bad debt provision 42,447 11,675 19,248 5,293 1,232 339 0 60,463 16,629 Staff-related allocations 7,491 2,061 6,122 1,684 6,761 1,859 (59) 6,640 1,827 Prepaid amort./depreciation 720 201 0 0 129 37 0 591 164 Consolidation adjustments 18,652 6,085 2,410 786 1,893 617 (44) 19,035 6,210 Tax losses 1,100 302 0 0 1,100 302 0 0 0 Other 23,644 6,635 10,661 2,939 1,761 485 (36) 32,464 9,053 Derivatives 61,170 16,810 10,211 2,808 0 0 0 71,381 19,618 Deferred taxes that can be offset (7,466) (2,056) (1,291) (452) (7) (2) 105 (8,371) (2,401) Dividends 0 0 (296) (81) 0 0 0 (296) (81) Capital gains 0 0 (7) (2) (7) (2) 0 0 0 Other (7,466) (2,056) (988) (369) 0 0 105 (8,075) (2,320) TOTAL NET PREPAID TAXES 377,037 116,110 84,829 25,129 21,556 6,422 1,540 444,902 136,357
8.5 – Other non-current assets
The item amounted to 26,573 thousand euro, compared to 24,166 thousand euro as at December 31, 2011. The value includes for 26.1 million euro the amount paid (23.7 million euro as at December 31, 2011), in line with the instalment plan granted, to the Tax Collection Agency, as collection of the amounts provisionally assessed as owed within the litigation with the Customs Agency, described in Note 13.1 “Litigation”. These payments are a financial advance failing final judgement. On this point also see the indications in note 8.16.
8.6 – Other non-current financial assets
These equal 9,666 thousand euro and refer to medium/long term financial prepayments. The increase of 9.4 million euro refers to the additional charges (11.9 million euro) related to the “Term Loan” granted to ADR in May 2012, which can be used in February 2013 to repay Tranche A1 of the bond issue. For more information reference is made to note 8.18.
8.7 – Inventories 12/31/2012 12/31/2011 CHANGE Raw, ancillary and consumable materials 2,363 2,691 (328) Finished goods and merchandise 0 8,655 (8,655) TOTAL 2,363 11,346 (8,983)
124 Annual Report 2012 Consolidated Financial Statements and notes
Inventories, which refer entirely to the stocks of the ADR Group, decreased by a total of 9.0 million euro compared to the end of the previous year due to combined effect of: decrease in inventories of “raw, ancillary and consumable materials” for 328 thousand euro due to the sale of the vehicle maintenance company branch, including a vehicle spare parts warehouse of 955 thousand euro; this effect is partly offset by the increase in stocks of accident prevention material, chemical products and telephone material remained within the ADR Group; elimination of the stocks of "goods for resale" (directly managed duty-free and duty-paid shops) for 8,655 thousand euro following the transfer of the company branch to ADR Retail;
The guarantees supplied by the ADR Group to some financers regarding inventories are described in Note 9 of these Explanatory Notes.
8.8 - Contract work in progress 12/31/2012 12/31/2011 CHANGE Work in progress 49 170 (121) Receivables for accounts invoiced 310 327 (17) TOTAL 359 497 (138)
8.9 – Trade receivables 12/31/2012 12/31/2011 CHANGE Due from customers 221,109 230,778 (9,669) Receivables for construction services 13,007 11,669 1,338 Due from others 8,856 1,791 7,065 242,972 244,238 (1,266) Bad debt provision (63,367) (44,951) (18,416) Allowance for doubtful accounts (8,009) (8,111) 102 (71,376) (53,062) (18,314) TOTAL 171,596 191,176 (19,580)
“Trade receivables”, net of allowances for doubtful accounts, amount to 171.6 million euro in total, down by 19.6 million euro mainly due to the higher allowances for doubtful accounts in the face of greater risks on the recoverability of receivables deriving from the financial difficulties of numerous customers and disputes on some fees deriving from the uncertain legal framework prior to the approval of the Planning Agreement. The balance of receivables includes 20.3 million euro of receivables of the Group from the Alitalia group companies under extraordinary administration. In 2011, the guarantee of 6.3 million issued by Alitalia/CAI to guarantee the receivables of ADR from Alitalia S.p.A. under extraordinary administration (as well as the lessors who own the aircraft, jointly and severally obliged) was enforced to allow the aircraft owned by the lessors to come to Alitalia/CAI free of the requests for conservative seizure made by ADR. The amount collected was posted under payables.
The guarantees supplied by the ADR Group to some financers regarding receivables are described in Note 9 of these Explanatory Notes.
125 Annual Report 2012 Consolidated Financial Statements and notes
8.10 – Other receivables
12/31/2012 12/31/2011 CHANGE Due from associated companies 482 482 - Tax receivables 6,953 2,150 4,803 Due from others 6,224 6,174 50 TOTAL 13,659 8,806 4,853
The increase compared to December 31, 2011 is mainly attributable to VAT receivables.
8.11 – Current tax assets
These amount to 11,958 thousand euro (828 thousand euro as at December 31, 2011) and consist of IRAP credit of the Group companies for 2.5 million euro and IRES credit for 9.5 million euro. The latter include 7.7 million euro of the credit deriving from the allocation for the consolidated company of the recovery from 2007 to 2011 of the IRES corresponding to the failed deduction of IRAP on the staff cost.
8.12 - Other current financial assets
This item as at December 31, 2012 was equal to 45,704 thousand euro, compared to 60,427 thousand euro as at December 31, 2011. The figure includes the balance, equal to 43.2 million euro (55.7 million euro as at December 31, 2011), of the fixed-term deposit held by the “Security Agent” of the ADR loans, called the “Debt Services Reserve Account” (DSRA). In accordance with loan agreements, the DSRA is a fixed–term deposit held by the “Security Agent” on which the company is obliged to deposit an amount as security on the servicing of debt to be adjusted on a six-month basis (periods from March 20 to September 19 and from September 20 to March 19).
8.13 - Cash and cash equivalents 12/31/2012 12/31/2011 CHANGE Bank and post office deposits 397,384 179,332 218,052 Cash on hand 358 864 (506) TOTAL 397,742 180,196 217,546
Cash and cash equivalents of the Group increased by 217.6 million euro compared to December 31, 2011 mainly due to the collection of the sale of the equity investment in ADR Retail.
Concerning bank deposits, the following accounts are highlighted as stated in ADR’s loan agreements:
126 Annual Report 2012 Consolidated Financial Statements and notes
account called “Recoveries Account”, in which cash raised through extraordinary transactions and insurance indemnification must be deposited. As at December 31, 2012 the account had a residual balance of 0.7 million euro compared to 11.1 million euro of December 31, 2011 because, by virtue of a specific waiver granted by the lenders, the cash previously blocked on this account was released in favour of the contractual condition of price adjustment of the sale of ADR Handling; the account called "loan collateral", with a balance of 100.5 million euro on which, in relation to the retention regime in force in 2012, in the application dates of March and September, an additional 48.3 million euro were deposited, intended for the repayment of Line A1 of the Romulus Finance loan falling due; two new accounts with a total balance of 218.7 million euro, with similar purposes to the mentioned Recoveries Account. On these, the collection from the sale of ADR Retail (229.4 million euro) was deposited, partly used for the payment of the transaction costs incurred on the sale. This amount, net of additional transaction costs, price adjustment and related taxes, is subject to a constraint on the allocation for the repayment of Line A1. As at December 31, 2012, the amount of 25.3 million euro (43.4 million euro at December 31, 2011), coming from the “free” cash (i.e. which can be also destined, under ordinary conditions, to the payment of dividends) generated before 2008 was on the two current accounts of ADR.
The guarantees supplied by the Gemina Group to some financers regarding cash and cash equivalents are described in Note 9 of these Explanatory Notes.
8.14 – Shareholders’ equity
Group shareholders’ equity for the period as at December 31, 2012 amounts to 1,751,185 thousand euro, while shareholders’ equity pertaining to minority shareholders amounts to 43,426 thousand euro. The changes in the period are highlighted in the in the special statement inserted in the consolidated financial statements.
The fully paid-in share capital is made up of 1,469,197,552 ordinary shares and 3,762,768 savings shares. Gemina’s shareholders’ meeting, in the extraordinary session of March 1, 2012, resolved the elimination of the par value of the outstanding ordinary and savings shares, with consequent amendment of articles 5 (capital), 23 (financial statements, profits and prepaid dividends) and 24 (dissolution and liquidation) of the Articles of Association. Concerning the adoption of an incentive plan based on financial instruments (see the specific notice included in this note), the Shareholders’ meeting of Gemina that met on March 1, 2012 in ordinary session resolved as follows: the assignment to the Board of Directors, pursuant to art. 2443 of the Italian Civil Code, for a five-year period from the resolution date, of the right to increase the share capital by payment, in tranches, pursuant to art. 2439 of the Italian Civil Code, once or more times, up to a maximum nominal value of 40,000,000 euro through the issue of a maximum of 40,000,000 ordinary shares with regular dividend, to service exclusively and irrevocably incentive plans based on financial instruments;
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the authorisation to purchase and sale treasury shares up to maximum of 120,000,000 shares and in any case according to legal limits, subject to repeal of the resolution of April 19, 2011. In March 2012 Gemina, in implementing the abovementioned resolution of the Shareholders’ meeting, started a Programme for the purchase of treasury shares, for a maximum number not exceeding 2,000,000 shares; the programme was concluded on April 13, 2012. As at December 31, 2012 Gemina holds a total of 2,000,000 treasury shares equal to 0.136% of the ordinary capital, recorded in the financial statements in reduction of the shareholders’ equity for 1,278 thousand euro. During 2012, no treasury shares were sold.
Information on incentive plans based on financial instruments On March 1, 2012 the Gemina shareholders’ meeting approved the general lines and the rules of a stock incentive plan pursuant to art. 114-bis of Legislative Decree no. 58 of February 24, 1998 called “stock option plan 2012” (“Plan”). In compliance with the abovementioned guidelines, the Board of Directors’ meeting of March 1, 2012 approved a specific regulation that defines the terms and conditions of the Plan aimed at encouraging the beneficiaries in valorising the Gemina group while creating a loyalty instrument that promotes a value generating culture. The plan is reserved for employees, collaborators and directors in special positions in Gemina and its subsidiaries, identified by the Board of Directors at its unquestionable discretion on the proposal of the remuneration and human resources committee, among the subjects holding strategically important positions within the Gemina Group, having regard for the respective position covered. According to the Plan, a maximum number of 23,000,000 free options (“Options”), not transferable inter vivos will be attributed free of charge during the three annual cycles (2012, 2013 and 2014). Each Option will assign the beneficiaries, under the conditions set by the Regulation, the right, at Gemina’s discretion, to (i) purchase one treasury share of the Company (already in its portfolio or acquired subsequently), or (ii) subscribe a new share. The Options that may be attributed will accrue after a vesting period of thirty eight months and can be exercised on condition of attaining the performance objectives according to the terms and conditions specified in the Regulation. The number of Options that can be exercised will be in any case calculated according to the Regulation in application of a mathematical algorithm that, among other things, will account for the current value determined on the date of assigning the options and the price to exercise them, based on a limitation of the capital gain that can be realised. The exercise price of the Options will correspond to the arithmetic mean of the official price of the ordinary shares of the company on each day of listing on the Screen Traded Stock Market managed by Borsa Italiana S.p.A. in the period passing from the day before the offer date to the same day of the previous month (both included), which may be adjusted according to the Regulation. The characteristics of the plan were specified in a specific document pursuant to art. 84-bis of Consob Regulation no. 11971/1999 and subsequent amendments and additions. On March 1, 2012, with reference to the first tranche, the Board of Directors identified 22 beneficiaries to be assigned a total of 5,526,533 Options (of which 1,155,089 destined for Gemina directors and 4,371,444 for ADR executives/collaborators) at an exercise price of 0.631 euro. The beneficiaries adhered to the Plan in April 2012. The options will accrue after a vesting
128 Annual Report 2012 Consolidated Financial Statements and notes
period of 38 months (April 1, 2012- May 31, 2015) and can be exercised based on the achievement of the performance objectives. The unit fair price of the assigned rights equals 0.22 euro (for a total of 1.2 million euro) as determined by an independent expert using the Monte Carlo model and the following main assumptions: term set to exercise the options: 4.75 years, risk-free interest rate: 4.96%, expected volatility: 52%. Pursuant to IFRS 2, the value accrued in 2012, time-apportioned, of the fair value of the assigned options, equal to 276 thousand euro, was entered in the income statement under staff costs and operating costs, counterbalanced by an increase in the specific shareholders’ equity reserve, classified under “other reserves”.
8.15 - Employee benefits
Value as at 12/31/2011 20,596 Current service cost 5,525 Financial expenses for discounting the provisions 354 Change in consolidation area and sale of the company branch (2,296) Liquidation / use (6,448) VALUE AS AT 12/31/2012 17,731
Reported below are the main assumptions made for the process of actuarial estimation of the employee severance indemnity provision as of December 31, 2012:
Financial hypotheses discounting rate 2.9% inflation rate 2.0% annual rate of increase in employee severance indemnities 2.7% annual rate of pay increase 2.5% annual turnover rate 1.2% annual rate of disbursement of advances 1.4% Demographic hypotheses mortality ISTAT indexes reduced to 85% inability INPS tables reduced to 70% requirements General retirement Compulsory Insurance (after the 2011 reform)
129 Annual Report 2012 Consolidated Financial Statements and notes
8.16 – Provisions for risks and charges CHANGE OTHER ALLOCATIONS USE 12/31/2011 CHANGES 12/31/2012 309,067 (119) 2,751 (18,488) 293,211 of which: - beyond 12 months 285,460 268,420 - within 12 months 23,607 24,791 Provisions for risks and charges (within 12 months and beyond 12 months) as at December 31, 2012 amounted to 293,211 thousand euro, compared to 309,067 thousand euro as at December 31, 2011. In particular the item essentially includes: deferred taxes on the difference between price paid to Macquarie in July 2007 and ADR’s shareholders’ equity allocated to airport management concession; said value, equal to 224.7 million euro as at December 31, 2011, remains at 217.8 million euro as at December 31, 2012; the estimate of the expenses that are expected to be incurred in connection with the guarantees and disputes in place, for 73.7 million euro. With regard to the relationships with the Financial Administration in particular, the Group companies are involved in some disputes, the most important of which is the one with the Customs Agency for which the entire charge of a total of 26.1 million euro was allocated (taxes, interest and accessory charges). For additional details, please see note 13.1 “Litigation”.
8.17 – System renovation provisions CHANGE 01/01/11 PROVISION (+) FINANCIAL RE-ABSORPTION USE (-) EXPENSES (+) (-) 12/31/11 197,015 64,884 10,366 (2,334) (38,338) 231,593 CHANGE 12/31/12 01/01/12 PROVISION (+) FINANCIAL RE-ABSORPTION USE (-) EXPENSES (+) (-) 231,593 62,308 12,608 (2,359) (36,511) 267,639
The system renovation provisions, equal to 267,639 thousand euro (of which 170,584 classified under non-current liabilities and 97,055 thousand euro under current liabilities) include the current value of estimated costs payable against the contractual obligation of restoration and replacement of assets under concession, according to the airport concession signed by the Grantor.
8.18 – Financial indebtedness net of current share Financial indebtedness net of current share amounts to 139,793 thousand euro. The characteristics of the loans as of December 31, 2012, the amount used and the book value are summarised in the table below, which also reports the estimate of the fair value of the same liabilities. The values in the table include both non-current shares and the shares posted under current financial liabilities, excluding interest rates.
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NAME COMPANIES AMOUNT BOOK VALUE RECORDED IN THE FINANCIAL FINANCER DESCRIP. OF THE GEMINA GROUP GRANTED AMOUNT USED STATEMENTS INTEREST REDEMPTION DURATION MATURITY FAIR VALUE Pool of banks Term Loan ADR 236,000 (1) - 0 (*) at maturity 2 years Feb. 2015 - Facility Revolving ADR 100,000 - - (*) revolving 2.8 years Feb. 2015 - Facility
EIB EIB Loan ADR 80,000 80,000 79,768 (*) at maturity 10 years Feb. 2018 79,992
Banca BIIS BOPI Facility ADR 85,000 85,000 17,797 (*) 6-month inst. 12 years Mar. 2015 18,127 (form. Banca OPI) from 2010 to 2015
Pool of banks Tranche A Parent Company 42,100 42,100 41,558 (*) at maturity 3.3 years Dec. 2014 44,677
Tranche B Parent Company 18,000 - - (*) at maturity 3.3 years Dec. 2014 -
Unicredit Leasing Leasing Fiumicino Energia 18,022 18,022 11,188 (*) monthly 8 years Apr. 2017 11,188 instalments
Unicredit S.p.A Loan Fiumicino Energia 2,000 2,000 455 (*) 6-month 5 years Aug. 2013 455 instalments
Other short-term 996 996 loan Total 151,762 155,435
(*) Variable indexed to the Euribor + margin (1) granted in May 2012 and usable in February 2013
The overall value stated above, equal to 151,762 thousand euro is recorded for 11,969 thousand euro in current financial liabilities and 139,793 thousand euro in non-current financial liabilities. Concerning the loans granted to ADR, on August 22, 2011, a syndicate of seven banks had granted ADR a Revolving Facility for a total amount of 100 million euro falling due on February 20, 2013. The syndicate of banks comprised Banca Nazionale del Lavoro S.p.A., Barclays Bank Plc, Crédit Agricole Corporate & Investment Bank, Mediobanca – Banca di Credito Finanziario S.p.A. (Mediobanca), Natixis S.A., The Royal Bank of Scotland N.V. and UniCredit S.p.A. On May 31, 2012, with the stipulation of a new loan agreement granted by the same syndicate of banks – with the addition of Société Générale - Milan Branch,- for a total of 500 million euro, the Revolving Facility of 2011 was replaced with a facility of the same amount. ADR was also guaranteed up to 400 million euro on a facility (Term Loan) to be used in February 2013, with repayment, together with the available cash, of the Loan A1 Romulus Finance falling due on the same date. Both facilities will fall due in February 2015. Following the two partial cancellations requested by ADR in October and December 2012, the Term Loan line reduced by 164 million euro. Thus, the residual amount as at December 31, 2012 equals 236 million euro. In 2013, only 156 million euro were used of this amount and 50 million euro were converted to increase the Revolving Facility, which therefore rose, from February 2013, to 150 million euro; the residual amount of 30 million euro was cancelled.
The description of guarantees provided and the major covenants on such loans is given in Note 9 of these Explanatory Notes.
131 Annual Report 2012 Consolidated Financial Statements and notes
8.19 – Outstanding bonds
Value as at 12/31/2011 1,117,698 Application effect of amortised cost method 2,783 Exchange adjustment 5,943 VALUE AS AT 12/31/2012 1,126,424 of which: Non-current share 626,639 Current share 499,785
The value of bonds as at December 31, 2012, equal to 1,126,424 thousand euro, can be entirely attributed to bonds issued by Romulus Finance S.r.l. The increase of 8.7 million euro mainly derives from the adjustment of Tranche A4, issued in Pounds Sterling, at the exchange rate of December 31, 2012. Romulus Finance is the Special Purpose Entity (SPE) vehicle established pursuant to law no. 130 of April 30, 1999 on securitisation, through which, on February 14, 2003 the creditor banks of ADR securitised part of the previous loan granted to ADR on August 2, 2001 for a total of 1,725 million euro. The issue of bonds is arranged into four residual classes of which three are in euro (A1, A2 and A3) and one (A4) in GBP as stated below:
NAME AMOUNT (*) CURRENCY INTEREST COUPON REDEMPTION DURATION MATURITY A1 500,000,000 euro 4.94% annual at maturity 10 years Feb. 2013 A2 200,000,000 euro Euribor 3M + 0.90% quarterly at maturity 12 years Feb. 2015 A3 175,000,000 euro Euribor 3M + 0.90% quarterly at maturity 12 years Feb. 2015 A4 215,000,000 GBP 5.441% hallf-yearly at maturity 20 years Feb. 2023 (*) This is the par value of debt; the book value recorded in the financial statements (1,126 million euro) is adjusted on the amortised cost method, the exchange rate at year end of Class A4 in Pound Sterling, net of bonds A4 currently held by ADR, equal to 4 million Pound Sterling.
The bonds are guaranteed by Ambac Assurance UK Limited, monoline insurance; since April 2011 the insurance company is no longer subject to rating assessment. ADR’s rating level makes an impact on the amount of the premium paid to AMBAC for guaranteeing the bonds, but not on the interest margin applied on the single Classes of bonds. To guarantee the repayment of Class A1, on the application dates of March and September 2012, ADR collateralised, on the account called “loan collateral”, the overall amount of 48.3 million euro, which was added to the amounts collateralised during the past years for a total of 100.5 million euro as of December 31, 2012.
The estimated fair value of the bonds as at December 31, 2012 is approximately 1,235.2 million euro, net of interest accrual.
The description of guarantees supplied and the major covenants on such bonds is given in Note 9 of these Explanatory Notes.
132 Annual Report 2012 Consolidated Financial Statements and notes
8.20 – Trade payables
As at December 31, 2012 this item stands at 110,682 thousand euro (136,923 thousand euro as at December 31, 2011). The reduction can be attributed to the lower investment volume in the year and to ADR Retail leaving the consolidation area.
8.21 - Current tax liabilities
As of December 31, 2012 this item stood at 4,803 thousand euro compared to 12,874 thousand euro of December 31, 2011 and includes the amounts payable to the Tax Authorities for IRES for 3.0 million euro and the amounts due for IRAP for 1.8 thousand euro.
8.22 – Current financial liabilities
12/31/2012 12/31/2011 CHANGE Interest on bonds 13,869 14,020 (151) Interest on bank loans 866 1,214 (348) Bonds (current share) 499,785 - 499,785 Amounts payable to other financers 2,039 1,915 124 Due to banks 9,929 74,947 (65,018) TOTAL 526,488 92,096 434,392
For detailed information regarding the payables existing at year end to banks and other financers, reference is made to note 8.18 “Financial indebtedness net of current share”. For the current share of the bonds please see note 8.19. The main changes include: decrease in amounts due to banks due to the repayment, on the expiry date of February 20, 2012, of the residual amount of the Term Loan Facility (65.5 million euro) granted to ADR; reclassification to Financial liabilities of Tranche A1 of the bonds for 499.8 million euro, measured at amortised cost and expiring in February 2013.
8.23 – Financial derivatives
12/31/2012 12/31/2011 CHANGE Foreign currency hedging derivatives 61,571 67,627 (6,056) Interest rate hedging derivatives 71,382 61,169 10,213 Accrued interest 197 300 (103) TOTAL 133,150 129,096 4,054
133 Annual Report 2012 Consolidated Financial Statements and notes
The table in the next page summarises the outstanding derivative contracts of the Group.
Derivatives hedging foreign currency risk (ADR) The ADR Group uses hedging derivatives for exchange rate risks to mitigate any future increases in outgoing cash flows attributable to unfavourable changes in exchange rates. Specifically, one component of the cross currency swap allows the cash flows in euro regarding the payment of interest and the redemption of the A4 bond in Pounds Sterling to be stabilised.
Derivatives hedging interest rate risk (ADR) The Group uses interest rate swaps to hedge its exposure to unfavourable changes in market interest rates. The Group’s hedging policy, which is an integral part of ADR’s loan agreements, require that at least 50% of debt is secured against the risk of interest rate fluctuations. On February 20, 2012 two Interest Rate Collar Forward Start contracts expired, subscribed on May 16, 2006 by ADR with Barclays and Royal Bank of Scotland on a notional capital of 120 million euro each. As at December 31, 2012, 63.6% of ADR’s facilities is at fixed rate (at December 31, 2011: 60.1%) and no hedging contracts are active.
Derivatives hedging interest rate risk (Gemina) Gemina uses an interest rate swap to manage its exposure to unfavourable changes in the market interest rate. The hedging policy, which is an integral part of the current loan agreement, requires that at least 50% of Line A is protected from the risk of interest rate fluctuations. With regard to this contractual provision, on September 16, 2011 the Company entered into an interest rate swap agreement with Crédit Agricole for a notional total amount of 25.3 million euro, equal to 60% of Line A. The fair value of the aforesaid instrument has been calculated on the basis of the parameters in force as at December 31, 2012 on the reference market. The financial derivatives described are included in “Level 2” of the “Fair Value Hierarchy” defined by IFRS 7, meaning the fair value is measured based on valuation techniques which take as reference parameters that are observable on the market, different from the prices of the financial instrument.
134 Annual Report 2012 Consolidated Financial Statements and notes
FAIR VALUE OF DERIVATE CHANGE IN FAIR VALUE TYPE HEDGED RISK | | COMPANIES | | NOTIONAL AS AT TO OF THE GEMINA | | SUBSCRIPTION VALUE AS AT DECEMBER DECEMBER 31, INCOME TO SHAREHOLDERS’ GRANTOR GROUP INSTRUMENT | | DATE MATURITY HEDGED APPLIED RATE 31, 2012 2011 STATEMENT EQUITY (*) Mediobanca/ ADR Cross Currency Swap CF I Feb. 2003 Feb. 2023 325,019 receives a 5.441% fixed (70,750) (60 ,004) (312) (10,434) Unicredit Group rate and pays 3-month C euribor + 90 bps until (61,571) (67 ,627) 6,056 0 December 2009, then 6.4% fixed rate. (132,321) (127,631) 5,744 (10,434)
Barclays, ADR Interest Rate Collar Forward Start CF I May 2006 Feb. 2012 240,000 Receives a variable euribor 0 (986) 986 Royal Bank Group 3-month rate and pays a of Scotland variable 3-month euribor rate with a 5% cap and a 3.64% floor
Crédit Gemina IRS CF I Sept. 2011 Dec. 2014 25,260 pays a fixed rate of 1.65% (632) (179) (45 3) Agricole and receives - from 9/16/11 to 3/16/12 a fixed rate of 1.729%;
- from 3/16/12 to 9/1614 the 6-month euribor;
- from 9/16/14 to 12/30/14 the Euribor interpolated at 3-4 months;
Total (132,953) (128,796) 5,744 (9,901) Tax e ffect 2,723
Total net of the tax effect (**) (7,178)
of which: Foreign currency hedging derivatives (61,571) (67 ,627) Interest rate hedging derivatives (71,382) (61 ,169)
(132,953) (128,796)
(*) change in hedging reserve (**) the change in the hedging reserve posted in the "Statement of Changes in Consolidated Equity", equal to -6,898 thousand euro, is net of third party interests Key
CF Cash Flow Value Hedge
C Exchange rate I Interest
8.24 - Other current liabilities
These amount to 128,887 thousand euro as at December 31, 2012 and mainly consist of tax payables, amounts due to the staff, social security institutions and sundry trade payables. Specifically, they include: amounts due to the Tax Authorities for council surcharges on passenger boarding fees, totalling 38.9 million euro. This amount is paid in the following month for the portion collected by carriers and is offset in trade receivables for the amount still to be collected; payables of 51.1 million euro, of which the portion for the period is equal to 8.3 million euro; payables not yet settled while awaiting the outcome of pending cases on appeals lodged by several of the leading airport management companies; payables due to personnel and former employees for employee severance indemnities to be settled with social security institutions, in addition to minor payables.
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Note 9 Guarantees and major covenants on payables
Gemina The Loan that a syndicate of seven banks granted to the Parent Company on August 30, 2011 is backed by the following guarantees: a senior pledge on the ordinary shares of ADR representing at least 35% of the share capital comprising ordinary shares with voting right and destined to be supplemented if the guarantee margin drops below 4.0x. Gemina commits to ensuring a guarantee margin of at least 4.0x, to be calculated on a quarterly basis - applying the formula set in the contractual documents - as the ratio between the simple average of the unit value of ADR shares owned by Gemina in the last month of each quarter and the residual loan amount. As at December 31, 2012, 21,778,660 ADR shares – corresponding to 35% of the company’s share capital – were pledged to the lending banks, determined based on the book value of the equity investment, of 670 million euro; pledge of the current account Gemina holds at Mediobanca into which the flows derived from the disposal of equity investments, collection of dividends and other compensation will go mandatorily. The loan agreement provides for some rules and constraints to be complied with. The main one is the obligation to allocate 100% of the net income deriving, inter alia, from the transfer or provision of shares of ADR and other assets with Gemina, capital increases; the percentages is reduced to 50% for dividends received and profits deriving from other forms of distribution. Obtaining more financial debt is also prohibited until ADR’s rating maintains a sub-investment grade; this is allowed (though in compliance with the contractually defined financial parameter) if ADR’s rating returns to the investment grade for both Agencies. The Loan also requires that Gemina provides declarations and guarantees, obligations, proscriptions and commitments, and provides for events that cancel the benefits upon termination, resolution or withdrawal which are typical for loans with similar characteristics.
ADR Group Bank loans taken out by ADR, as detailed in note 8.18, and the bond issue – overturned to ADR by the vehicle Romulus Finance - under note 8.19, are guaranteed by: special privilege (having the characteristics of a property mortgage) on plants, machinery and instruments, as well as ADR and ADR Mobility’s stocks and any receivables deriving from the sale of these assets; assignment in guarantee of the receivables of ADR, ADR Tel, ADR Advertising, ADR Assistance, ADR Mobility and ADR Security and, more generally, any right deriving from contracts with customers and insurance policies; pledge on the bank current accounts of ADR, ADR Security and ADR Mobility; pledge on the shares held by ADR in ADR Tel, ADR Advertising and on the share of the capital of ADR Assistance, ADR Mobility and ADR Security; “ADR Deed of Charge”, (pledge provided for by the British legislation on receivables, hedging
136 Annual Report 2012 Consolidated Financial Statements and notes
agreements and insurance policies subject to British legislation, pursuant to loan agreements). These guarantees will remain valid until the related bank loans and the Romulus loan (and thus the outstanding bonds) are extinguished.
The management of ADR’s indebtedness implies several rules that govern both the cash flows and the free cash flow (the cash remaining after the debt service) generated by management. Amongst the main provisions the following can be noted: acquisitions of financial assets are possible only with the prior approval of creditors or through a vehicle company without recourse and in any case only through authorised indebtedness or available cash; profits from sale of financial assets can be used for investments or, if not used within 12 months from collection, they shall be destined to the repayment of the payable; payment of dividends is possible only if specific financial ratios are over the agreed thresholds and no event of default or a trigger event occurred; it is possible to arise a further loan only if the same financial ratios are over specified thresholds (higher with respect to those required for normal debt management) and if the rating granted to ADR is higher than the minimum preset levels; if a credit line due to expire is not repaid/re-financed at least 12 months before the expiration term, during this period the entire exceeding cash generated shall be primarily destined (based on predefined percentage) to the repayment of the debt, the so-called retention regime (nevertheless, if determined financial ratios are not fulfilled 24 months before the expiration term, the retention regime can be of 24 months); if financial covenants are lower than certain preset minimum thresholds or the rating is below the thresholds near the sub-investment grade or other critical situations occur, as defined in the agreement, stricter measures will be adopted for the management of cash flows in order to hedge credits against default risk of ADR.
ADR’s loan agreements also include the respect of financial covenants consisting of ratios, defined based on actual and forecasted data, that measure: (i) the ratio between cash flow available and debt service, (ii) the ratio between future discounted cash flows and net indebtedness, in addition to (iii) ratio between net indebtedness and EBITDA. The aforementioned ratios are verified twice a year, on the application dates of March 20 and September 20, by applying the calculation methods of the respective ratios to the reference dates as at December 31 and June 30. Compliance with certain thresholds, which are higher than the abovementioned ratios, allows distribution of dividends and recourse to further indebtedness; on the contrary, in the event in which these ratios fall below minimum levels, this may result in a trigger event or event of default. For more information on the covenants, reference is made to the Report on operations under paragraph “Risks associated with current loan agreements”.
The trigger event condition results in a series of management restrictions for ADR, principally: a) cash sweep with the obligation to use all available cash on the application dates (March 20 and September 20 of each year) for (i) interest payments, (ii) early capital repayment under pari passu regime, (iii) the guarantee of Romulus securities which cannot be repaid in advance
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through the creation of specific cash provisions in special current accounts as pledge in favour of AMBAC (so-called cash collateralization); b) blocking the payment of dividends and the proscription to use any provisions for dividends payments to make authorised investments (so-called authorised investments); c) through the Security Agent, creditors can obtain any information, which is deemed suited, and share a solution plan with related implementation schedule, by entrusting an independent expert to evaluate the corporate plan providing measures and solutions for the restatement of a compatible minimum rating. In the event the remedy plan is not implemented, AMBAC will have the faculty to increase the guarantee premium on Romulus bonds; d) no financial asset acquisitions and new loans will be allowed, even though they are destined to repay the existing indebtedness; e) transfer under warranty in favour of creditors of all monetary receivables of ADR with consequent notice to debtors transferred. In relation to the assigned rating, ADR is still subject to the Trigger Event and Cash Sweep restrictions previously implemented following the downgrading of the rating assigned by Standard & Poor’s on November 30, 2007 (from BBB stable to BBB- stable). The loan agreements also provide for events that cancel the benefits upon termination, resolution or withdrawal which are typical for loans with similar characteristics.
Fiumicino Energia To guarantee the payment of each amount due pursuant to the leasing contract, in 2009 Fiumicino Energia stipulated an assignment contract with recourse in favour of the financer deriving from the lease rental that Leonardo Energia must pay to Fiumicino Energia pursuant to the company branch leasing contract. Any surplus of the receivable compared to the monthly lease instalment shall be credited to Fiumicino Energia. In addition Gemina issued in the interest of Fiumicino Energia: guarantees of 4.0 million euro to guarantee the fulfilment of obligations deriving from the lease contract entered into with UniCredit Leasing; guarantees for a maximum of 2 million euro to guarantee the fulfilment of obligations deriving from the loan agreement entered into with UniCredit; subscription of a joint deed of pledge on 86.12% of the share capital, held in Fiumicino Energia as guarantee of all receivables deriving from the lease agreement entered into with UniCredit Leasing; commitment with respect to the Unicredit Group of maintaining the ratio of Net financial indebtedness/Shareholders’ equity at fair value at 3 or less in the Fiumicino Energia financial statements. This covenant was complied with.
138 Annual Report 2012 Consolidated Financial Statements and notes
Note 10 Categories of assets/liabilities IAS 39
12/31/2012 RECEIVABLES AND FIN. INSTR. PAYABLES AT DERIVATIVES LOANS AVAILABLE FOR AMORTISED SALE COST Book values as at 12/31/2012 Other equity investments 2,257 Other non-current financial assets 9,666 Trade receivables 171,596 Other current financial assets 45,704 Cash and cash equivalents 397,742 Total assets IAS 39 624,708 2,257 - - Financial indebtedness net of current 139,793 share Trade payables 110,682 Current financial liabilities 526,488 Financial instruments – derivatives 133,150 Total liabilities IAS 39 - - 776,963 133,150 Income (charges) recorded in the Income Statement: Interest income 2,054 Income on derivatives 5,748 Other income 1,975 Interest expense (73,672) Expenses on derivatives (4,404) Other expenses (14,988) 4,029 - (88,660) 1,344 12/31/2011 RECEIVABLES AND FIN. INSTR. PAYABLES AT DERIVATIVES LOANS AVAILABLE FOR AMORTISED SALE COST Book values as at 12/31/2011 Other equity investments 2,254 Other non-current financial assets 304 Trade receivables 191,176 Other current financial assets 60,427 Cash and cash equivalents 180,196 Total assets IAS 39 432,103 2,254 - - Financial indebtedness net of current 150,445 share Trade payables 136,923 Current financial liabilities 92,096 Financial instruments – derivatives 129,096 Total liabilities IAS 39 - - 379,464 129,096 Income (charges) recorded in the Income Statement: Interest income 2,880 Income on derivatives 7,555 Other income 1,583 Interest expense (71,047) Expenses on derivatives (9,590) Other expenses (12,056) 4,463 - (83,103) (2,035)
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Note 11 Information on financial risk
Credit risk
The maximum theoretical exposure to the credit risk for the Gemina Group, as at December 31, 2012, is represented by the book value of financial assets disclosed, in addition to the par value of guarantees granted on payables or third-party commitments. The greatest exposure to credit risk is that of the ADR Group for trade receivables due from customers. A special bad debt provision is recorded in the financial statements for the risk of customer default in paying. Its amount is periodically reviewed. The write-down process the ADR Group has adopted envisages that the trade positions are written down individually depending on the age of the receivable, the reliability of the single debtor, the status of the management file and debt recovery. The commercial policies that the Group has initiated aim at controlling investment in receivables as follows: Request of cash payments for commercial transactions made with end consumers (sales in the stores under direct management, long-term multi-level car parks, first aid, etc.), with occasional counterparts (e.g. for registration, baggage porterage, taxi access management activities, etc.); Request of cash or advance payments made to air carriers that are occasional or those without suitable creditworthiness or collateral guarantees; Granting of deferred payment to retained customers deemed reliable (carriers with medium-term flight scheduling and subcontractors) for which the credit rating and request of collateral is in any case monitored. The analysis of trade receivables and other receivables broken down by expiration term is shown below.
RECEIVABLES EXPIRED (NET OF THE BAD DEBT PROVISION) RECEIVABLES BEFORE 60 FROM 61 TO FROM 121 TO AFTER TOTAL (MILLIONS OF EURO) COMING DUE DAYS 120 DAYS 180 DAYS 181 DAYS RECEIVABLES Trade receivables Dec. 31, 2012 86.1 46.0 3.2 1.8 34.5 171.6 Dec. 31, 2011 92.2 49.8 5.9 3.9 39.4 191.2 Other receivables Dec. 31, 2012 13.7 - - - - 13.7 Dec. 31, 2011 7.4 - - - 1.4 8.8
Receivables not written down that have expired for more than 181 days mainly consist of amounts due from companies of the Alitalia Group under extraordinary administration. The ADR Group’s credit risk is highly concentrated in so far as about 67% (69% in 2011) of the credit not written down is due from ten customers.
Both economic and financial relations with the new Alitalia – Compagnia Aerea Italiana – are still particularly critical with regard to the credit risk and the subject of disputes, focused on the disavowal of the value of a series of services provided that are not being paid for or recognised.
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On this point, the credit position for invoices issued by ADR as of December 31, 2012 is specified below:
RECEIVABLE EXPIRING EXPIRED
€000 12/31/2012 12/31/2011 12/31/2012 12/31/2011 12/31/2012 12/31/2011 Alitalia - Compagnia Aerea 59,657 64,058 31,235 38,123 28,421 25,936 Italiana S.p.A. Air One S.p.A. 1,650 1,581 911 947 739 634 Alitalia / AirOne 61,307 65,639 32,146 39,069 29,160 26,570 EAS S.p.A. - current (*) 308 308 0 0 308 308 Alitalia/CAI-AirOne-Eas Group 61,615 65,947 32,146 39,069 29,469 26,878
(*) excluding receivables for the use of common use assets
This exposure includes the receivables for the handling system of transit baggage (NET 6000) which at the end of 2012 amounted to 9.9 million euro; Alitalia is the main user of the plant, generating approximately 90% of the activity. For information on the circumstances that led to the failed payment of this amount, reference is made to the section dedicated to “Information regarding disputes”. Furthermore, as of December 31, 2012, the following are accrued: receivables for the sub-concession of the Technical Area equal to 4.0 million euro, - plus local property taxes/new property tax for 2.1 million euro. Regarding this service, ADR deems a legitimate review of the economic terms of the sub-concession agreement applicable, which based on preliminary understandings, subsequently disregarded by Alitalia, would lead to a credit equal to 23.5 million euro; receivables ascertained for the use of common use assets for the period from 2009 to 2012 equal to 6.2 million euro, also being challenged by Alitalia-CAI. In any case ADR started lawsuits with the other handlers that had challenged this charge (mainly towards EAS – now Alitalia – and Aviapartner) whose outcome is excepted shortly.
Liquidity risk
Liquidity risk may occur when it is impossible to obtain, at fair conditions, the financial resources necessary to the Group’s business. The main factor determining the Group’s liquidity position consists of the resources generated or absorbed by the operating and investment activities. Breakdown of payables by expiry terms is shown hereunder (in millions of euro).
12/31/2012 12/31/2011 WITHIN THE BETWEEN 1 AFTER 5 TOTAL WITHIN THE BETWEEN 1 AFTER 5 TOTAL FOLLOWING AND 5 YEARS FOLLOWING AND 5 YEARS YEAR YEARS YEAR YEARS Financial indebtedness net of - 60.0 79.8 139.8 - 70.7 79.8 150.5 current share Outstanding bonds - 373.0 253.6 626.6 - 870.3 247.4 1.117.7 Trade payables 108.0 2.7 - 110.7 130.9 6 - 136.9 Current financial liabilities 526.5 - - 526.5 92.1 - - 92.1 Other current liabilities 128.9 - - 128.9 126.6 - - 126.6
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Interest rate risk
The Gemina Group uses derivative instruments, with the purpose of mitigating, at economically acceptable terms, the potential impact of interest rate fluctuations on the economic result. The Groups’ hedging policy is illustrated in note 8.23 above, to which reference is made.
Sensitivity analysis In order to evaluate the potential impact resulting from the fluctuation of interest rates applied, the variable-rate financial debts are analysed, for which the impact in the income statement and to shareholders’ equity due to fluctuations of cash flows are assessed. The potential impacts are shown gross of the tax effect. The sensitivity analysis was carried out on the basis of the conditions of the loans and hedges in place as of December 31, 2012. With reference to the variable-rate debts and their hedging derivatives, a hypothetical, immediate increased change of 50 bps of the market interest rate level would generate a positive effect on the cash flow hedge reserve equal to 5.0 million euro and increased financial expenses for the year totalling 2.5 million euro for the portion of unhedged debt. To the contrary, a hypothetical, immediate decreased change of 50 bps of the market interest rate level would generate a negative impact on the cash flow hedge reserve equal to 5.0 million euro and a reduction of financial expenses equal to 2.5 million euro. Lastly, it should be emphasized that the interest rate applied to the Gemina Loan and to some of ADR’s credit facilities is the same as Euribor plus a margin proportionate to the rating ADR has been given. The financial expenses Gemina and ADR pay their financers therefore depend not only on the fluctuation of interest rates, but on ADR’s rating as well.
Exchange risk
As for the financial indebtedness, Tranche A4 of the bond issue made by Romulus, equal to 215 million Pound Sterling, was hedged with a currency swap in Euro for the entire duration (year 2023). The characteristics of this derivative instrument are described in Note 8.23.
Sensitivity analysis A hypothetical immediate increase of 10% in the exchange rates of the Euro compared to the Pound Sterling would have generated a positive impact on the cash flow hedge reserve of 9.8 million euro, whereas a hypothetical immediate decrease of 10% of the exchange rates of the Pound Sterling compared to the Euro would have generated a negative impact on the cash flow hedge reserve equal to 8.0 million euro. Lastly, appreciable effects on the income statement due to Euro/Pound Sterling exchange rate changes would not be noticed.
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Note 12 Guarantees and commitments
As at December 31, 2012 the Group had the following guarantees: guarantees issued for the loan agreements mentioned in Note 9; guarantees issued by the ADR Group to customers and third parties, for 0.4 million euro.
As regards the Group commitments, it should be noted that ADR holds purchase commitments amounting to 73.5 million euro.
Within the context of purchase commitments, mention is given to ADR’s commitment, as airport infrastructure operator, to draw up and implement plans for containing and abating noise, as provided by the Framework Law on noise pollution (Law no. 447/1995) and by Ministerial Decree 11/29/2000 for the airports of Fiumicino and Ciampino. To this end, ADR is effecting a survey to establish whether and to what extent limits are actually exceeded and, should they not be respected, it will draw up plans for containing and abating noise. These commitments prove difficult to quantify and in any case must be determined in an interpretative manner as there are no specific indications as to the activities to be considered in the “maintenance” and “upgrading” of the infrastructures that constitute the basis for calculation pursuant to Law no. 447/1995 (framework law on noise pollution). In consideration of the above, and on the basis of estimates available based on the investments made on the date of this report, ADR deems that its total liability in relation to the progress of the investment plan does not exceed about 38.6 million euro. This figure relates to extension activities only, and does not include maintenance. The figure may be calculated with more certainty depending on the interpretation which will be given pursuant to current legislation and once the specific projects have been carried out on the types of interventions to be done. Hence the amount is conditional on subsequent events and will be defined in relation to the actual programme of the measures to be taken. Future measures will most likely be entered as investment costs subject to capitalisation. The 11/3/2006 agreements covering sale of the equity investment held in Flightcare Italia S.p.A. (formerly ADR Handling S.p.A.) contemplate a price adjustment condition for a maximum value of 12.5 million euro. Of this, the portion considered to probably occur was entered in the income statement under extraordinary items in the years 2006-2012 with provisions for risks and charges counter-item for a total of about 4.5 million euro as at December 31, 2012, whereas the remaining portion – presently considered improbable – will undergo updated valuation during future financial years.
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Note 13 Other information
13.1 - Litigation
As regards litigation in progress, the Group carried out a thorough assessment of existing risks in order to identify the litigation for which the risk of negative outcome is likely, in order to make a reasonable assessment of provisions to be allocated. Provisions have not been made for litigation for which, given the different legal interpretations, a negative outcome is merely possible, in accordance with the principles and procedures governing the preparation of financial statements. Furthermore, there are a limited number of civil proceedings underway, for which no provisions were made, as the impact of any negative outcome for the Group, although negligible, could not be measured. We do not believe that current litigation and potential litigation can give rise to liabilities greater than the amounts already allocated to the relevant provisions.
Customs Agency In 2007, the main Customs Office of Rome charged ADR with some irregularities in sales made at the Duty Free Shops over the period January 1, 1993 – January 31, 1998 to passengers with destinations within the EU Community, exceeding the limits of quantities and value, notifying an order to pay VAT, manufacture tax and duties on tobacco, due according to assessments made for a total of 22.3 million euro. ADR appealed to the Provincial Tax Commission, which rejected the appeal with a ruling of the Commission in April 2009. The Customs Agency subsequently initiated the procedure for collection of the amounts assessed as owed, equal to 26.1 million euro (including interest and expenses), which ADR is paying by instalment. ADR lodged an appeal against the first instance judgement, rejected with judgement of May 2010 of the Regional Tax Commission of Rome. This further unfavourable evolution increased the risk of a negative outcome, independently from the unchanged position, in Court, of the Company and its tax experts on the lack of grounds of the tax claim and the substantial and formal correctness of the company’s actions. In preparing the financial statements as at December 31, 2010, also the amounts of the taxes assessed on a statistical-deductive basis were allocated, thus matching the provisions with the entire amount of the tax payment, including interest and additional charges. While deeming the Company’s position, in Court, unchanged as regards the groundless of the tax claim and the substantial and formal correctness of its actions, the Company proposed an appeal in the Court of Cassation. On March 5, 2013 the hearing to discuss the appeal in the Court of Cassation was held; downstream of the debate, the Company is waiting for the sentence to be filed.
Application of rights to Swiss carriers ADR contested the Italian Civil Aviation Authority’s letter of April 13, 2010 and the Ministry of Transport’s note of May 13, 2010 before the Lazio TAR. These notes indicate that ADR must apply EU fee charges to Swiss carriers, or better, to flights to and from Swiss Confederation
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territory; ADR applies extra-EU fees for these flights). The Italian Civil Aviation Authority’s affirmation is based on the fact that the EU-Swiss Confederation agreement of January 21, 1999 (which entered into force on June 1, 2002) gave equal rights to Swiss and EU carriers and, therefore, ADR is discriminating Swiss carriers. However, the company retains that it has not discriminated, given that the application of airport fees, and their amounts, are regulated in Italy by Ministerial Decree dated November 14, 2000 which is based on the territory (within or outside of the European Union) of the flight and not on the subjectivity of the carrier that provides it. With sentence of June 2012 the Lazio Regional Administrative Court declared the appeal inadmissible “having to exclude that the notes being appealed against express orders taken”, excluding from its sphere the determination on the measure of the airport fees due to Switzerland, ascertaining, on this point, the jurisdiction of the Ordinary Judge. The overall maximum amount for the potential request to return is estimated at about 11 million euro (figure updated to December 2012), plus interest; the right that would be obtained from these carriers shall in turn be assessed in Court. On this issue, in July 2011 ADR was served the complaint of Swiss International Airlines Ltd (“Swiss”) for the repayment of 5.2 million euro (including interest, subsequently reduced to 1.6 million euro due to a material error committed in the initial quantification) equal to the amount paid in excess by Swiss from 2002 to 2009 for take-off and landing fees. In August 2011 ADR was notified a similar appeal once again by Swiss with a claim for 3.5 million euro (including interest) as passenger boarding fees.
Compensation for the baggage handling system In July 2011 ADR was notified, in its capacity as party involved, the appeal lodged before the Lazio Regional Administrative Court by IBAR and ten carriers for the repeal of the letter of May 11, 2011 with which the Civil Aviation Authority declared that, with reference to the fee to use the automatic handling system of transit baggage “NET6000”, the cost connection limit just for 2011 is “equal to 1.87 euro per piece of baggage”. The appellants did not formulate any plea for suspension, and the parties are awaiting the setting of the merit hearing. In relation to the failed payment from January 2011 for the use of the NET6000 system by the numerous carriers, at the end of 2011, ADR filed the relevant appeals for injunctions to recover its credit expired at the end of September 2011, equal to 3.8 million euro, of which 3.6 million towards Alitalia. In June 2012 Alitalia was notified a second injunction for 1.8 million euro regarding the invoices issued until January 2012, only partially paid by Alitalia, which arbitrarily reduced the remuneration from 1.87 euro to 0.30 euro per passenger. All the carriers proposed an objection to the injunctions obtained and notified to them by ADR and the relevant first hearings are scheduled from the end of September. On November 6, 2012 ADR filed a third injunction against Alitalia for 1.9 million euro regarding the invoices issued until September 2012, net of the payments made by Alitalia for a value of 0.38 euro per passenger. On November 27, 2012 the Judge rejected the injunction and ADR is now assessing the alternative of protecting the receivable of that injunction, by ordinary civil action with summons.
“Avio” service station risk IBAR (Italian Board Airlines Representatives) and six carriers filed an appeal with the Lazio Regional Administrative Court against the Civil Aviation Authority’s memorandum of September 15, 2006 with which the Civil Aviation Authority communicated the results of the controls carried out at airports managed by full-service operators “in order to analyse the correlation between
145 Annual Report 2012 Consolidated Financial Statements and notes
costs and the flat rates charged by airport operators to oil companies". The date of the hearing has yet to be announced. AirOne summoned in the Civil Court of Rome, both Tamoil, its supplier of avio fuels, and some airport operators, including ADR, with the request to assess any illegal payments for the use airport infrastructures required by the operators to the oil companies which, in their turn, charged these amounts to the carriers. The claim also includes the request that Tamoil – jointly with summoned airport operators – be bound to refund 2.9 million euro paid by Airone since 2003. With non definitive sentence in 2012, the Judge provided an expert to examine the case which is set to be heard on September 25, 2013.
Admittance of liabilities of the Alitalia Group under extraordinary administration Following the rulings of the Bankruptcy Section of the Court of Rome declaring the state of insolvency of Alitalia S.p.A. under extraordinary administration, Volare S.p.A. under extraordinary administration, Alitalia Express S.p.A. under extraordinary administration, Alitalia Servizi S.p.A. under extraordinary administration, and Alitalia Airport S.p.A. under extraordinary administration; between the end of 2011 and the first few months of 2012 the insolvencies were filed. ADR proposed a denial of insolvency for Alitalia under extraordinary administration and Alitalia Airport under extraordinary administration.
Revocatory actions: Volare Group In 2009 Volare Airlines S.p.A. under extraordinary administration and Air Europe S.p.A. under extraordinary administration instituted a civil lawsuit to obtain the revocation of the payments made to ADR over the year prior to the carrier’s admission to insolvency proceedings and the sentencing of ADR to return the amount of 6.7 million euro and 1.8 million euro, respectively. With rulings of June 2011 the court ordered ADR to pay the amount requested; the Company has proposed an appeal. With reference to the ruling of Volare Airlines under extraordinary administration, with decision of July 2012, the Court of Appeal of Milan rejected the appeal put forward by ADR, which, to avoid the executive procedure, paid 7.4 million euro (including interest and expenses). The Air Europe hearing is adjourned until March 6, 2014 to pronounce the final judgment.
Ligabue Gate Gourmet S.p.A. bankruptcy A group of 16 plaintiffs has served a writ of summons against ADR and Fallimento Ligabue Gourmet (Ligabue Gourmet Bankruptcy), whereby they are contesting the validity of the sale of the company branch of the Ovest catering company by ADR to Ligabue, with a consequent request for compensation for damages for 9.8 million euro. With ruling of June 2010, ADR won the dispute. 14 plaintiffs filed an appeal, with respect to which ADR has made its entry of appearance. The next hearing is scheduled for December 2, 2014.
Contract works With reference to the evolution of the negotiations with ATI Cimolai, which was awarded the construction works at departure area F (formerly Pier C), although it is not a litigation case, it is noted that, with the signature of the Planning Agreement, the main assumption is met to entirely restart all the works previously slowed down in connection with the failed finalisation of the tariff agreement. However it is still necessary to define the methods to restart the works as an assumption for the definitive waiving of the claims by the ATI.
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ATI NECSO Entrecanales – Lamaro Appalti have appealed to the Supreme Court against the sentence of the Appeal Court which in 2011 fully rejected the claim for damages for 9.8 million euro, plus interest, revaluation and costs, for the claims posted in the accounts relating to the contract for work on the extension and restructuring of Satellite Ovest (Satellite West) at Fiumicino airport. A hearing to discuss the case has not been scheduled yet.
Damage claims In 2011 ADR received damage claims for 27 million dollars for direct damages (the indirect ones are still being defined) from AXA Assicurazioni, who insures Ryanair, for the damage suffered by aircraft B737-800 E-IDYG as a consequence of the emergency landing due to a bird strike taking place on November 10, 2008 at Ciampino airport. ADR declines any responsibility for the event. Should the survey being conducted by the competent authorities reveal ADR's clear responsibility, the compensation would be covered by the third-party liability insurance policy of the Airport Operator.
Surety on the Customs Agency litigation In 2002, having received the consent of IRI to sell 44.74% of ADR to the Macquarie Group, Gemina, Impregilo S.p.A. and Falck S.p.A. took the place of IRI, directly assuming the commitment to indemnify ADR, with a share of 50.0%, 13.10% and 36.90%, respectively. This commitment was issued by IRI upon the privatisation of ADR for the purpose of covering 51.166% of capital losses the company may incur due to tax claims for deeds and declarations relating to periods prior to the privatisation, which took place in July 2000. The dispute between ADR and the Customs Agency regards the period 1993-1998, and is covered by the aforementioned guarantee, which will be enforceable following the final judgment ruling against ADR. Impregilo S.p.A. and Falck S.p.A. do not recognise the guarantee as valid. ADR has instituted action against these companies for the purpose of sentencing them to pay the amounts owed, on condition that the final judgment ruling against ADR is passed. With ruling of October 2012, the Court of Rome accepted ADR's claim. In the consolidated financial statements, provisions have been allocated against the risk relating to the litigation with the Customs Agency. In Gemina’s financial statements, provisions were allocated in the event of a total negative outcome for ADR and ADR’s activation of the guarantee.
Rizzoli litigation In 2010 Gemina was served, on request of RCS MediaGroup S.p.A. (“RCS”), with a writ of summons for a third party in the proceedings instigated by Mr. Angelo Rizzoli against RCS, Intesa San Paolo S.p.A., Mittel S.p.A., Edison S.p.A. and Giovanni Arvedi. Mr. Rizzoli formulated a series of claims aimed at compensating for the economic damages he incurred as a result of the sale of Rizzoli Editore S.p.A., which owns Corriere della Sera, to group of entrepreneurs. The events date back to 1974-1986. RCS, in addition to fully rejecting the plaintiff’s claims, stating they were completely without grounds and considerably subject to the statute of limitations and, as a final alternative, requested that Gemina be summoned to court, as the party from which the current RCS derives, due to the known spin-off stipulated in 1997. Gemina still deems Mr. Rizzoli’s claims, as well as RCS’s request to summon Gemina to court, to be groundless. With ruling of January 2012, the Court of Milan rejected all the plaintiff’s claims, condemning the losing party to fully pay the legal expenses (1.0 million euro in favour of Gemina). In February 2012 Mr. Angelo Rizzoli proposed an appeal, requesting the suspension
147 Annual Report 2012 Consolidated Financial Statements and notes
of the executive effectiveness of the appealed ruling. At the hearing held on June 26, 2012, the Appeal Court confirmed the provisional enforceability of the condition to fully pay the legal expenses and adjourned the proceedings for pronouncement of the sentence final to the hearing of October 21, 2014. Gemina’s right to pay legal expenses as shown above was recorded under the receivables while the residual amount to be paid for the professional services supplied by Gemina lawyers is recorded under trade receivables.
Green certificates Pursuant to art. 4, subsection 2 of Ministerial Decree of October 24, 2005 and consequently to resolution of GSE S.p.A. of October 22, 2008, the co-generation power plant for the district heating of the subsidiary company Fiumicino Energia was qualified as thermo-electrical plant in co-generation and the right to the issue of green certificates only for the portion of energy actually used for the district heating of the airport network. In compliance with art. 14 of Legislative Decree no. 20 of February 8, 2007, which subordinates the right to the issue of green certificates to obtaining the EMAS registration within two years from the plant being commissioned, Fiumicino Energia presented the EMAS registration petition on August 4, 2010. The registration process was suspended by the committee for Ecolabel and Ecoaudit “ …for the special organisational configuration existing between Fiumicino Energia and Leonardo Energia”. Consequently, the Energy Services Operator (GSE) arranged for the issue of green certificates to be blocked. During 2011 Fiumicino Energia and Leonardo Energia filed two appeals to the TAR against the provisions by proposing different ground for illegality. With rulings no. 4419 and no. 4420 of May 5, 2012 the Lazio Regional Administrative Court accepted the appeals and in particular ascertained that Fiumicino Energia meets the organisational requirements to obtain the EMAS registration. On May 24, 2012, Leonardo Energia and Fiumicino Energia asked the committee for Ecolabel and Ecoaudit to adopt the EMAS registration. Due to the inactivity of the Committee, on September 27, 2012 the two companies lodged an appeal for compliance with the Regional Administrative Court. In the meeting of October 22, 2012 the EMAS Italia section of the committee for Ecolabel and Ecoaudit finally resolved the registration of the Organizzazione Fiumicino Energia S.r.l., starting from September 29, 2010 until September 27, 2013. This allowed the resumption of the procedure with the Energy Services Operator (GSE) for the issue of the Green Certificates.
13.2 - Transactions with related parties
In implementing the provisions of article 2391-bis of the Italian Civil Code and the Consob Regulation adopted with resolution no. 17221 of March 12, 2010, later modified with Resolution no. 17389 of June 23, 2010 (Consob Regulation), the Gemina Board of Directors adopted a procedure pursuant to Article 4 of the Consob Regulation in its meeting of November 12, 2010, after having received the favourable opinion of a specially established committee made up solely independent Directors to ensure the transparency and substantially and procedural correctness of the transactions with related parties carried out directly or via subsidiaries.
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The Procedure entered into force on January 1, 2011 and regulates the approval processes for transactions carried out through subsidiaries and the disclosure that should be provided regarding transactions with related parties. In “Intercompany relations and transactions with related parties” of the Report on operations to which reference is made, the main transactions with related parties are analysed, which had a significant effect on the financial situation or result of the Group. Furthermore, the accounts in this statement show for each item the amount referred to the transactions with related parties. Transactions with related parties do not include atypical or unusual transactions carried out in 2012. According to IAS 24, with reference to the Directors and Executives with strategic responsibilities of the Gemina Group, in 2012 the remuneration, employment compensation, non-monetary benefits, bonuses, incentives and other payments, also for possible assignments in subsidiary companies, amount to a total of 4.5 million euro. Pursuant to art. 123-ter of Legislative Decree 58/98, the Report on remuneration was prepared, which shows the consideration due to the members of the administration and control bodies, the General Manager and other executives with strategic responsibilities of Gemina and the Group. This Report is available at Borsa Italiana S.p.A. and on the website www.gemina.it within the limits of the law.
13.4 - Information pursuant to art. 149-duodecies of Consob Issuers’ Regulation
The following statement, drawn up pursuant to Art. 149-duodecies of the Consob Issuers’ Regulation, highlights the remunerations pertaining to the 2012 financial year for audit services and other services rendered by the same Independent Auditors.
REMUNERATIONS COMPANY THAT RENDERED PERTAINING TO (IN THOUSANDS OF EURO) THE SERVICE TARGET COMPANY THE YEAR 2012 Audit Deloitte & Touche S.p.A. Gemina parent company 144 Deloitte & Touche S.p.A. Subsidiary companies 405 Certification services Deloitte & Touche S.p.A. (1) Gemina parent company 3 Deloitte & Touche S.p.A. Subsidiary companies 70 Other services Deloitte & Touche S.p.A. (2) Gemina parent company 11 Deloitte Financial Advisory (3) Subsidiary companies 295 Services S.p.A. Deloitte ERS S.r.l. (4) Subsidiary companies 35
(1) Subscription of Income Tax Return and 770 forms. (2) Review of request from shareholder Changi Ltd. (3) Vendor Due Diligence activity relating to ADR Retail and ADR Mobility sale procedures (4) methodological support to the company ADR to verify the compliance of the existing corporate procedures
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List of equity investments
EQUITY INVESTMENT NAME FORM REGISTERED BUSINESS CURRENCY CAPITAL SHARE %: CONSOLIDATI CONSOLIDATION BOOK OFFICE ON SHARE METHOD VALUE
* ** *** PARENT COMPANY GEMINA L Fiumicino Holding of equity euro 1,472,960,320 n/a n/a 100.00 Line-by-line (Rome) investments AIRPORT ACTIVITY ADR UL Fiumicino Airport euro 62,224,743 95.90 Direct 100.00 Line-by-line (Rome) management ADR Engineering UL Fiumicino Airport euro 774,690 100.00 Aeroporti di 100.00 Line-by-line (Rome) engineering Roma S.p.A. ADR Tel UL Fiumicino Telecommunicati euro 600,000 99.00 Aeroporti di 100.00 Line-by-line (Rome) ons Roma S.p.A. 1.00 ADR Sviluppo
ADR Advertising (1) UL Fiumicino Advertising euro 1,000,000 51.00 Aeroporti di 100.00 Line-by-line (Rome) Roma S.p.A. ADR Assistance S.r.l. Fiumicino Assistance to euro 6,000,000 100.00 Aeroporti di 100.00 Line-by-line (Rome) passengers with Roma S.p.A. reduced mobility ADR Sviluppo S.r.l. Fiumicino Real estate euro 100,000 100.00 Aeroporti di 100.00 Line-by-line (Rome) Roma S.p.A. ADR Mobility S.r.l. Fiumicino Management of euro 1,500,000 100.00 Aeroporti di 100.00 Line-by-line (Rome) parking and car Roma S.p.A. parks ADR Retail (2) S.r.l. Fiumicino Commercial outlet euro 480,000 100.00 Aeroporti di 100.00 Line-by-line (Rome) management Roma S.p.A. ADR Security S.r.l. Fiumicino Security and euro 400,000 100.00 Aeroporti di 100.00 Line-by-line (Rome) control services Roma S.p.A. Romulus Finance S.r.l. Conegliano Credit euro 10,000 - n/a - Line-by-line (Treviso) securitisation Ligabue Gate UL Tessera Airport catering euro 103,200 20.00 Aeroporti di 20.00 Valued at cost Gourmet Rome in (Venice) Roma S.p.A. bankruptcy Fiumicino Energia S.r.l. Fiumicino Electricity euro 741,795 87.14 Direct 100 Line-by-line (Rome) Production Leonardo Energia S.C.a Fiumicino Electricity euro 10,000 90.00 Fiumicino 100 Line-by-line r.l. (Rome) Production Energia S.r.l. 10.00 Aeroporti di Roma S.p.A. S.A.CAL. UL Lamezia Airport euro 7,755,000 16.57 Aeroporti di 16.57 Valued at cost 1,307 Terme management Roma S.p.A. (Catanzaro) Aeroporto di UL Genova Sestri Airport euro 7,746,900 15.00 Aeroporti di 15.00 Valued at cost 895 Genova management Roma S.p.A. Consorzio E.T.L. in Cons. Rome Study of euro 82,633 25.00 Aeroporti di 25.00 Valued at cost 10 liquidation European Roma S.p.A. transport rules
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EQUITY INVESTMENT NAME FORM REGISTERED BUSINESS CURRENCY CAPITAL SHARE %: CONSOLIDATION CONSOLIDATION BOOK OFFICE SHARE METHOD VALUE
* ** *** OTHER
Pentar UL Naples Holding company euro 2,475,911 16.38 Direct 16.38 Valued at cost 32
Domino S.r.l. Fiumicino Internet services euro 10,000 100.00 Direct 100.00 Valued at cost 10 (Rome) Directional Capital N.V. Channel Financial euro 6,249 5.00 Direct 5.00 Valued at cost 1 euro Holdings in Islands cent liquidation (3) Gemina Fiduciary S.A. Luxembourg Trust company euro 150,000 99.99 Direct 99.99 Valued at cost 1 euro Services cent Telefin in liquidation UL Milan Financial Lire 20,000,000,000 42.50 Direct 42.50 Valued at cost 1 euro (former Tempo cent Libero) (4) * The consolidated share refers to consolidation within the specific group belonging to the Gemina Group. ** The consolidation method of indirect equity investments is attributable to sub-consolidation and not directly to Gemina. *** Book value for equity investments posted at cost, with the shareholders’ equity method, in thousands of euro. (1) Equity investment held in the ordinary share capital of the company (500,000 euro). The stake held in the overall share capital (1,000,000 euro) is 25.5%. (2) Only the income statement was consolidated until September 30, 2012, when the company was transferred to third parties. (3) As from March 31, 2008, the company is in liquidation. (4) On April 29, 1999, the Court of Milan declared its bankruptcy.
L Listed joint stock company. UL Unlisted joint stock company. S.r.l. Limited liability company. Cons. Consortium. S.c. a r.l. Limited liability consortium company.
151 Annual Report 2012 Consolidated Financial Statements and notes
Certification of the Consolidated Financial Statements in accordance with art. 81-ter of Consob Regulation no. 11971 of May 14, 1999 and subsequent amendments and additions
We, the undersigned, Carlo Bertazzo, in my position of Managing Director, and Sandro Capparucci in my position of Manager in charge of preparing the corporate accounting documents of Gemina S.p.A., taking also account of provisions set forth by Art. 154-bis, subsections 3 and 4 of Italian Legislative Decree no. 58 of February 24, 1998, hereby declare: the consistency with regard to the characteristics of the company and of the correct application of administration and accounting procedures for the drafting of the consolidated financial statements over 2012.
It is also stated that: the consolidated financial statements as at December 31, 2012: were drawn up pursuant to the applicable International Accounting Standards adopted by the European Union pursuant to regulation (EC) no. 1606/2002 of the European Parliament and Council of July 19, 2002; correspond to figures disclosed in the accounting books and records; supply a true and fair disclosure of the equity, economic and financial situation of the issuer and of the companies included in the consolidation area; the Report on Operations includes a reliable analysis of the performance and management result, as well as the situation of the issuer and of the companies included in the consolidation, together with the description of the major risks and uncertainties to which they are exposed.
Fiumicino, March 8, 2013
The Managing The Manager Director in charge of preparing (Carlo Bertazzo) the corporate accounting documents (Sandro Capparucci)
152 Report of the independent auditors Annual Report 2012 Consolidated Financial Statements and notes
154 Annual Report 2012 Consolidated Financial Statements and notes
155 GemInA S.P.A. SePARAte fInAncIAl StAtementS Annual Report 2012 Gemina S.p.A. Separate Financial Statements and notes
157 Annual Report 2012 Gemina S.p.A. Separate Financial Statements and notes
GEMINA S.P.A. SEPARATE FINANCIAL STATEMENTS
SEPARATE FINANCIAL STATEMENTS 159 NOTES TO SEPARATE FINANCIAL STATEMENTS 165 Note 1 General information 166 Note 2 Form and content of the financial statements 166 Note 3 Accounting standards applied 167 Note 4 Information on the items in the income statement 174 Note 5 Information on the items of the statement of financial position 178 Note 6 Other financial information 193 Note 7 Other information 197 Certification of the Financial Statements in accordance with art. 81 ter of Consob Regulation no. 11971 of May 14, 1999 and subsequent amendments and additions 200 REPORT OF THE INDEPENDENT AUDITORS 201 REPORT OF THE BOARD OF STATUTORY AUDITORS 204
158 Separate balance sheet and income statement Annual Report 2012 Gemina S.p.A. Separate Financial Statements and notes
Income statement
OF WHICH DUE OF WHICH DUE TO RELATED TO RELATED (THOUSANDS OF EURO) NOTES 2012 PARTIES 2011 PARTIES
Income (charges) on equity investments Other income (charges) on equity investments (11) (11) 30 Total income (charges) on equity investments 4.1 (11) 30
Net financial income (expenses) Financial income: Interest income 103 86 249 100 Financial expenses: Interest expense (2,392) (608) (2,923) (2,434) Other expenses (265) (107) (169) (100) Total net financial income (expense) 4.2 (2,554) (2,843)
Staff costs 4.3 (526) (12) (2,159) (25) Other operating costs 4.4 (2,999) (937) (4,413) (623) Net provisions - (112) Amortisation/ depreciation (1) (12) Revenues 4.5 767 767 1,004 797 Total net operating costs (2,759) (5,692)
Pre-tax profit (loss) (5,324) (8,505)
Tax revenues (charges) 4.6 1,072 1,889 Profit (loss) for the year (4,252) (6,616)
Statement of comprehensive income
(THOUSANDS OF EURO) 2012 2011
Profit (loss) for the year (4,252) (6,616) Profit (loss) from fair value measurement of derivative (453) (179) instruments (cash flow hedge) Tax effect 125 49 Reclassifications of the components in the Statement of Comprehensive Income to the Income Statement: Profit (loss) from fair value measurement of derivative 556 instruments (cash flow hedge) Tax effect (153) TOTAL COMPREHENSIVE INCOME (LOSS) FOR THE YEAR (4,580) (6,343)
160 Annual Report 2012 Gemina S.p.A. Separate Financial Statements and notes
Statement of financial position
Assets OF WHICH DUE OF WHICH DUE TO RELATED TO RELATED (THOUSANDS OF EURO) NOTES 12/31/2012 PARTIES 12/31/2011 PARTIES
Non-current assets Tangible fixed assets Other tangible fixed assets 1 2 Total tangible fixed assets 5.1 1 2 Equity investments in subsidiaries 5.2 1,843,535 1,843,283 Other equity investments 5.2 32 32 Deferred tax assets 5.3 306 125 Other non-current financial assets 5.4 110 32 221 63 Total non-current assets 1,843,984 1,843,663
Current assets Trade receivables 5.5 380 380 432 432 Other receivables 5.6 3,162 1,020 18,817 16,864 Current tax assets 5.7 9,155 828 Other current financial assets 5.8 2,743 2,664 3,346 3,266 Cash and cash equivalents 5.9 3,179 96 5,340 14 Total current assets 18,619 28,763 TOTAL ASSETS 1,862,603 1,872,426
161 Annual Report 2012 Gemina S.p.A. Separate Financial Statements and notes
Shareholders’ equity and liabilities
OF WHICH DUE OF WHICH DUE TO RELATED TO RELATED (THOUSANDS OF EURO) NOTES 12/31/2012 PARTIES 12/31/2011 PARTIES
Shareholders’ equity Share capital 1,472,960 1,472,960 - Treasury shares (1,278) - Capital reserves 199,707 199,707 Hedging reserve (458) (130) Other reserves 83,381 83,106 Profit (loss) from previous years 48,977 55,593 Profit (loss) for the year (4,252) (6,616) Total Shareholders’ Equity 5.10 1,799,037 1,804,620
Non-current liabilities Employee benefits 5.11 89 107 Provisions for risks and charges 5.12 9,128 6,700 9,100 6,700 Financial indebtedness net of current share 5.13 41,558 11,874 41,295 11,799 Total non-current liabilities 50,775 50,502
Current liabilities Trade payables 5.14 1,489 425 1,799 320 Current financial liabilities 5.15 452 130 605 173 Provisions for risks and charges 5.12 169 2,037
Financial instruments – derivatives 5.16 718 174 Current tax liabilities 5.17 - 10,929 Other current liabilities 5.18 9,963 9,009 1,760 531
Total current liabilities 12,791 17,304
TOTAL SHAREHOLDERS' EQUITY 1,862,603 1,872,426 AND LIABILITIES
162 Annual Report 2012 Gemina S.p.A. Separate Financial Statements and notes
Statement of cash flows
(THOUSANDS OF EURO) 2012 2011
Profit (loss) for the year (4,252) (6,616) Amortisation and depreciation of tangible and intangible fixed assets 1 12 Increase (decrease) of employee benefits and other funds (1,859) (22) (Increase) decrease in deferred tax assets (181) 904 (Revaluation) write-down of equity investments - - Operating profit (loss) before changes in working capital (A) (6,291) (5,722) (Increase) decrease in trade receivables 54 146 (Increase) decrease in other current assets and current tax assets 7,328 (6,633) Increase (decrease) in trade payables (309) 1,088 Increase (decrease) in other current liabilities and tax payables for current taxes (2,728) 6,131 Changes in working capital (B) 4,345 732 Total cash and cash equivalents generated (absorbed) by operations (C = A+B) (1,946) (4,990) Statement of cash flows from investment activities Other changes in equity investments (252) (9) (Increase) decrease in tangible and intangible fixed assets - 22 Total cash and cash equivalents generated (absorbed) by investment activities (D) (252) 13 Statement of cash flows from financing activities (Increase) decrease in financial receivables 714 (633) Raising of new loans - 41,200 Repayments of financial indebtedness - (41,660) Net change in other current and non-current financial liabilities 653 - Other changes in shareholders’ equity (1,330) 273 Total cash and cash equivalents generated (absorbed) by financing activities (E) 37 (820) Net increase (decrease) in cash and cash equivalents (F = C + D + E) (2,161) (5,797) Cash and cash equivalents at the beginning of the year (G) 5,340 11,137 Cash and cash equivalents at the end of the year (F + G) 3,179 5,340
Additional information to the statement of cash flows
Income taxes paid - - Tax recovery from tax consolidation 5,868 3,100 Interest income and other financial income collected 99 243 Interest payable and other financial expense paid 1,748 1,529
163 Annual Report 2012 Gemina S.p.A. Separate Financial Statements and notes
Statement of changes in shareholders’ equity
PROFIT (LOSS) FROM SHARE OWN CAPITAL HEDGING OTHER PREVIOUS PROFIT (LOSS) SHAREHOLD (THOUSANDS OF EURO) CAPITAL SHARES RESERVES RESERVE RESERVES YEARS FOR THE YEAR ERS’ EQUITY
Balances as at 12/31/2010 1,472,960 0 199,707 (403) 83,106 64,279 (8,686) 1,810,963 Transactions with shareholders Allocation of results (8,686) 8,686 - as at December 31, 2010 Total comprehensive 273 (6,616) (6,343) income for the period Balances as at 12/31/2011 1,472,960 0 199,707 (130) 83,106 55,593 (6,616) 1,804,620 Transactions with shareholders Allocation of results as at (6,616) 6,616 - December 31, 2011 Purchase of treasury (1,278) (1,278) shares Valuation of stock 275 275 option plans and other movements Total comprehensive income (328) (4,252) (4,580) for the period Balances as at 12/31/2012 1,472,960 (1,278) 199,707 (458) 83,381 48,977 (4,252) 1,799,037
164 notes to separate financial statements Annual Report 2012 Gemina S.p.A. Separate Financial Statements and notes
Note 1 General information
Generale Mobiliare Interessenze Azionarie S.p.A. (“Gemina” or “Company”), whose shares are listed on the Milan Stock Exchange, operates as an investment holding company with the mission of developing financial and growth strategies in the airport infrastructure sector, and does not play a direct operating role. The Company has its registered office in Fiumicino, Via dell’Aeroporto di Fiumicino, 320 and has no secondary offices. On the date of preparing these financial statements Sintonia S.p.A. is the shareholder that, directly and/or indirectly, holds the majority regarding Gemina shares, and adheres to a shareholders’ agreement with other shareholders; Sintonia S.p.A., which is in turn a subsidiary company of Edizione S.r.l., does not exercise management and coordination activities with respect to Gemina. These financial statements were approved by the Board of Directors of the Company in the meeting of March 8, 2013. By holding significant majority equity investments in other companies, the company also prepares the consolidated financial statements of the Group, published together with these financial statements. These financial statements were prepared on an on-going concern. Indeed, the Company deemed that, despite the persisting difficult economic and financial situation, there are no significant uncertainties as to the on-going concern. The financial statements have been translated into English from the original version in Italian.
Note 2 Form and content of the financial statements
The financial statements for the year ended December 31, 2012 were prepared pursuant to articles 2 and 4 of Italian Legislative Decree 38/2005, in compliance with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board and approved by the European Commission, in effect on the date of the financial statements, which include the interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC), as well as the previous International Accounting Standards (IAS) and the interpretations of the Standard Interpretations Committee (SIC) still in force on the same date. For simplicity reasons, the set of all the standards and interpretations listed above is defined below as “IFRS”. Furthermore, reference was made to the provisions issued by Consob (Commissione Nazionale per le Società e la Borsa) implementing subsection 3 of article 9 of Italian Legislative Decree 38/2005. The financial statements comprise the accounting statements (income statement, statement of comprehensive income, statement of financial position, statement of cash flows, statement of changes in Shareholders’ equity) and these explanatory notes, applying the provisions of IAS 1 “Presentation of Financial Statements” and the general criterion of the historical cost, with the
166 Annual Report 2012 Gemina S.p.A. Separate Financial Statements and notes
exception of the financial statement items that according to IFRS are recognised at their fair value, as stated in the valuation criteria of the individual items. The statement of financial position is presented on the basis of the framework that envisages a distinction of assets and liabilities into current and non-current, while in the income statement the costs are classified based on their nature; the statement of cash flows is presented by using the indirect method. IFRS were applied consistently with the indications of the “Framework for the Preparation and Presentation of Financial Statements” and no issues emerged that required derogations pursuant to IAS 1. It is highlighted that during 2012 no significant non-recurring, atypical or unusual transactions were carried out with third parties or with related parties that are such to require the inclusion in the accounting statements of sub-items in addition to those required by IAS 1 and the other international accounting standards, according to Consob Resolution no. 15519 of July 27, 2006. All the values are expressed in thousands of euro, unless otherwise stated. Euro is both the Company’s functional currency and the currency of presentation of the financial statements. For each item in the financial statements, the corresponding value of the previous year is reported for comparison purposes. These comparative values were not subject to significant recalculation and/or reclassification compared to those already in the financial statements for the year ended December 31, 2011, since no notable events or amendments to the accounting principles applied took place. However, for the purposes of better representation, some income statement and balance sheet values were reclassified for negligible amounts; of these worth mentioning is the reclassification of receivables for current taxes from the item Other receivables to the item Current tax assets.
Note 3 Accounting standards applied
Described below are the most important accounting standards and valuation criteria applied in preparing the financial statements for the year ended December 31, 2012, which comply with those used to prepare the financial statements of the previous year, since no new accounting standards, interpretations and amendments to the accounting standards and the interpretations already in force came into force during 2012, which have a significant effect on the financial statements of Gemina.
Revenues Revenues are measured to the extent to which it is possible to reliably determine their fair value and that the related economic benefits are likely to be enjoyed. In particular: a) the revenues from the sale of assets are recorded when the significant risks and benefits of the ownership of the same are transferred to the purchaser; b) the revenues from service provisions are recorded based on the stage of completion of the activities. If the value of revenues cannot be reliably determined, the revenues are recorded until reaching the costs incurred that are deemed as recoverable. Dividends are measured when the right of the Company to receive their payment arises.
167 Annual Report 2012 Gemina S.p.A. Separate Financial Statements and notes
Costs Costs are valued at the fair value of the amount paid or to be paid, and are recognised in the income statement on an accrual basis and in correlation with any related revenues. Any expense related to transactions of share capital increase is recorded as reduction in the shareholders’ equity.
Financial income and expenses Financial income and expenses are recorded in the income statement on an accrual basis, and calculated on the value of the respective financial assets and liabilities using the actual interest rate.
Share-based payments The cost of the services rendered from employees and/or directors of the Company, remunerated through stock option plans, is measured based on the fair value of the rights granted, assessed by independent actuaries on the concession date of the plan. This fair value is entered in the income statement, counterbalanced by an equity reserve, in the accrual period stated in the plan. In case of stock options attributed to employees and collaborators of the subsidiaries, the cost of the service is recorded as an increase in the value of the equity investments in the subsidiary, counterbalanced with the equity reserve.
Income taxes The tax on the income of the year is calculated based on the tax expenses to be paid, in compliance with current legislation. Prepaid and deferred taxes resulting from temporary differences between the financial statement value of assets and liabilities, and their tax value, deriving from the application of current legislation, are recorded: a) the former, only if sufficient taxable income is likely to allow the recovery; b) the latter, if any, in any case. Prepaid and deferred taxes are recorded in the income statement or charged to shareholders’ equity if relating to items that are directly recorded in shareholders’ equity. For the years 2010-2012 Gemina has decided to adopt the national consolidated financial statements based on Italian Legislative Decree 344/2003, with the adherence of its subsidiary companies Aeroporti di Roma S.p.A. (“ADR”), ADR Engineering S.p.A. (“ADR Engineering”), ADR Tel S.p.A. (“ADR Tel”), ADR Sviluppo S.r.l. (“ADR Sviluppo”), ADR Assistance S.r.l. (“ADR Assistance”), Fiumicino Energia S.r.l. (“Fiumicino Energia”) and Leonardo Energia S.c.ar.l. (“Leonardo Energia”). Therefore, the payables and receivables for current IRES taxes of these companies, are shown as payables and receivables for current taxes, with corresponding recording of a payable to or receivable from the subsidiary related to the transfers of funds to be performed for the tax consolidation.
Tangible fixed assets Tangible fixed assets are recorded at historical cost, inclusive of any directly attributable accessory charges. The cost of tangible fixed assets whose use is limited over time is
168 Annual Report 2012 Gemina S.p.A. Separate Financial Statements and notes
systematically amortised on a straight-line basis in each year based on the estimated economic- technical life. If significant parts of these tangible fixed assets have different useful lives, these components are recorded separately. Depreciation is recorded from the time the fixed asset is available for use, or is potentially capable of providing the economic benefits associated therewith. The annual depreciation rates applied are: Other assets: from 12% to 20%. Tangible assets are no longer shown in the financial statements after their transfer or if no future economic benefit exists expected from the use; any deriving profit or loss (calculated as the difference between the transfer value, net of sale costs, and the book value) is recorded in the income statement of the year of sale. Any ordinary maintenance costs are charged to the income statement.
Equity investments in subsidiaries, associates and joint ventures Equity investments in subsidiaries, associates and joint ventures are recorded and valued at purchase cost, inclusive of directly attributable accessory charges, rectified in the presence of any losses in value identified as described in the section regarding “Impairment of assets”, which are recorded in the income statement. The same are restored if the reason for the write- downs made cease to apply. The term subsidiaries means all companies over which Gemina has the power to determine, either directly or indirectly, the financial and operating policies in order to obtain benefits from their activities. Investments in Associates are those in which Gemina is capable of exercising a significant influence, but not control or joint control, by contributing to the financial and operating decision- making policies of the investee. Any equity investments in other companies, which can be classified in the category of financial assets held for sale as defined in IAS 39, are initially recorded at cost, as determined on the settlement date, as it represents the fair value, inclusive of the directly attributable transaction costs. After the initial recording, these equity investments are valued at fair value with recognition of the effects being attributed to the comprehensive income statement and thus in a specific shareholders’ equity reserve. At the time of a loss of value from impairment occurring or being recognised, the profits and losses in this reserve are posted in the income statement. If the fair value cannot be determined in a reliable manner, the equity investments which can be classified under financial assets held for resale are valued at cost, adjusted by the impairment losses; in this case the losses in value are not subject to reinstatement. The risk deriving from possible losses that exceed the book value of the equity investment is recorded in a specific liability fund proportionally to the Company’s commitment to fulfilling the legal or implicit obligations towards the investee or in any case covering its losses. The equity investments held for sale or in liquidation are recorded under current assets at the lower between the book value and the fair value, net of possible sale costs.
Payables and receivables Receivables are initially recognised at fair value and then valued at the amortised cost by using the effective interest rate method, net of any impairment related to the sum considered non- performing and recorded in the specific bad debt provisions. The amounts considered non-performing are estimated on the basis of the value of the expected cash flows which consider: expected recovery terms, the likely salvage value, any guarantees
169 Annual Report 2012 Gemina S.p.A. Separate Financial Statements and notes
and the costs that are estimated to be incurred for the recovery. The original value of the receivables is reinstated in the next years as the reasons for its adjustment cease to apply. In this case the value reinstatement is recorded in the income statement cannot exceed the amortised costs that the credit would have had in the absence of previous adjustments. Payables are initially recorded at cost, corresponding to the fair value of the liability, net of the directly attributable transaction costs. Subsequently, payables are valued with the amortised cost criterion by using the effective interest rate method. Trade receivables and payables whose expiration falls within the normal commercial terms are not discounted.
Cash and cash equivalents Cash and cash equivalents are recorded at par value and include the values that meet the requirements of high liquidity, availability on demand or in a very short term, good outcome and negligible risks of change in their value.
Treasury shares Treasury shares are entered as a reduction in the shareholders’ equity. The economic effects deriving from any subsequent sales are recorded in the shareholders’ equity.
Financial derivatives All financial derivatives are recorded at their fair value, determined on the date when the period ends. Derivatives are classified as hedging instruments when the relationship between the derivative and the subject of the hedge is formally documented and the hedge has a high hedge ranging between 80% and 125%, as initially and periodically checked. For the instruments hedging against the risk of change in the cash flows of the assets and/or liabilities being hedged (cash flow hedge), the changes in fair value are recorded in the income statement in consideration of the relevant deferred tax effect; the ineffective part of the hedge is recorded in the income statement. The changes in the fair value of derivatives that do not meet the conditions for qualification pursuant to IAS 39, as hedging financial instruments are recorded in the income statement.
170 Annual Report 2012 Gemina S.p.A. Separate Financial Statements and notes
Hierarchical levels to assess the fair value of financial instruments As regards the financial instruments valued at fair value and recorded in the statement of financial position, IFRS 7 “Financial Instruments: Disclosures” provides for these to be classified hierarchically on the basis of the relevance of the inputs of values used to determine the fair value. a) level 1 – quoted prices in active markets; b) level 2 – when the values, other than the quoted prices above, can be observed directly (prices) or indirectly (deriving from prices) in the market; c) level 3 – inputs not based on observable market data. In 2012 there were no transfers between the various hierarchical levels for fair value. Furthermore, no financial instruments can be classified as level 3 in terms of fair value.
Employee benefits The liabilities relating to short term benefits granted to employees, disbursed during the employment relationship, are recorded for the amount accrued at year end. The liabilities related to benefits granted to employees and paid during or after the termination of the employment relationship through defined contribution plans and/or defined benefits (consisting of the employee severance indemnities), are recorded for the amount accrued at year end, net of any advances paid, in compliance with the current legislation and the payroll agreements.
Provisions for risks and charges Provisions for risks and charges include the allocations arising from current obligations of a legal or implicit nature, deriving from past events, and the fulfilment of which will probably require the employment of resources, of which the amount cannot be reliably estimated. Provisions are allocated based on a best estimate of the costs required for fulfilling the obligation at the year- end date or to transfer it to third parties. If discounting produces a significant effect, allocations are determined by discounting the financial flows expected in the future at a discount rate that reflects the current market change of the current value of cost of money, and the specific risks related to the liability. When discounting, the increase in the allocation due to time passing is recorded as financial expense.
Impairment of assets (impairment test) At year-end, the book value of tangible, intangible and financial assets and of equity investments is tested to find any indication of impairment of these assets. If these indications exist, the recoverable amount of these assets is estimated to determine the amount of any write-down to be recorded. If the recoverable value of an asset cannot be estimated individually, the estimate of the recoverable value is included within the framework of the unit generating financial flows the assets belong to. This test estimates the recoverable value of the asset (represented by the greater of the likely market value, net of sale costs, and the value in use) and compares it with
171 Annual Report 2012 Gemina S.p.A. Separate Financial Statements and notes
the relevant net book value. If the latter is higher, the asset is written down until reaching the recoverable value. In determining the value in use, the financial flows expected in the future after taxation are discounted by using a discount rate, after taxation, which reflects the current market estimate referred to the cost of capital in connection with the time and specific risks of the asset. Losses of value are recorded in the income statement and classified differently depending on the nature of written down asset. These losses in value are reinstated, within the limits of the write-down made, if the reasons that generated them ceased to apply, except for goodwill.
Estimates and valuations According to IFRS, the preparation of the Financial Statements requires estimates and valuations to be made, which affect the determination of the book value of assets and liabilities as well as the information provided in the Explanatory Notes, also with reference to the assets and liabilities potentially existing at the end of the year. These estimates and hypotheses are used, in particular, to determine the cash flows used as basis for the impairment tests of the assets (including the valuation of receivables), provisions for risks and charges, benefits for the employees, the fair value of financial assets and liabilities, deferred and prepaid taxes. Therefore, the actual results recorded may differ from these estimates; furthermore, the estimates and valuations are reviewed and updated periodically and the effects deriving from any variation are immediately reflected in the Financial Statements.
Earnings per Share Since Gemina draws up the Consolidated Financial Statements, in addition to the financial statements, the information requested by IAS 33 is presented only based on the consolidated data.
Accounting standards and newly issued interpretations, revisions and amendments to existing standards not yet in force or not yet endorsed by the European Union
No new accounting standards or interpretations came into force in 2012, or amendments to the accounting standards and interpretations already in force, which significantly affected the financial statements of Gemina. As requested by IAS 8, stated below are the new accounting standards and interpretations, in addition to the amendments to the already applicable standards and interpretations not yet in force or not yet endorsed by the European Union (EU), which may be applied in the future to the financial statements of the Company.
IFRS 9 – Financial Instruments On November 12, 2009, IASB published standard IFRS 9 – Financial instruments: the same standard was then amended on October 28, 2010. The standard, applicable from January 1, 2015 retrospectively, represents the first part of a process in phases that has the purpose of fully replacing IAS 39 and introducing new criteria for the recognition and measurement of financial
172 Annual Report 2012 Gemina S.p.A. Separate Financial Statements and notes
assets and liabilities. For financial assets in particular the new standard adopts a unique approach based on the methods of managing financial instruments and on the characteristics of the contractual cash flows of the same financial assets in order to determine their assessment criterion, replacing the different rules envisaged by IAS 39. Instead, for financial liabilities, the main amendment concerns the accounting treatment of the changes in fair value of a financial liability designated as financial liability valued at fair value through the Income Statement, in case these are due to the changed credit worthiness of the same liability. According to the new standard these changes must be recorded in the Statement of the “Other total profits and losses” and will no longer be posted in the Income Statement. Phase two and three of the project on the financial instruments relating to the impairment of financial assets and the hedge accounting, respectively, are still underway. Furthermore, IASB is assessing limited improvements to IFRS 9 for the part relating to the recognition and measurement of financial assets.
IFRS 10 – Consolidated Financial Statements, IAS 27 – Separate Financial Statements and IFRS 12 – Disclosure of Interests in Other Entities On May 12, 2011 IASB issued the new accounting standard IFRS 10, completing the project associated with redefining the concept of control and overcoming the discrepancies found in applying this concept; while IAS 27 – Consolidated and Separate Financial Statements, defines the control on an entity as the power to make certain financial and managerial choices of an entity while obtaining the relevant benefits, SIC 12 – Consolidation - Special Purpose Entities places more emphasis on the risks and benefits. The new standard, which was issued at the same time as IAS 27 – Separate Financial Statements, replaces the old IAS 27 and SIC 12 and contains a new definition of control as well as the methodologies to be used to prepare the financial statements according to IFRS, already contained in the old IAS 27 and which were not amended. Finally, IFRS 10 refers to the new IFRS 12 – Disclosure of Interests in Other Entities (issued at the time of the other new standards stated), regarding information to be provided in the statements for each type of equity investment, including those in subsidiaries, joint venture agreements, associated companies, purposefully established companies and other unconsolidated vehicle companies. Instead, the new IAS 27 – Separate Financial Statements – is an extract of part of the old standard as it only governs the methods of reporting and information for investments in subsidiaries as well as the requirements for the preparation by an entity of the financial statements for the year; the new standard did not introduce any changes with regard to these aspects. The new standards IFRS 10, IFRS 12 and IAS 27 are applicable retrospectively from January 1, 2014.
IFRS 13 – Fair Value Measurement IFRS 13, issued on May 12, 2011, clarifies the determination of the fair value for the purpose of valuation and information in the financial statements, and applies to all IFRS requiring or allowing the measurement of fair value or presentation of information based on the fair value. The standard is applicable prospectively from January 1, 2013.
173 Annual Report 2012 Gemina S.p.A. Separate Financial Statements and notes
IAS 1 – Presentation of Financial Statements On June 16, 2011 IASB published an amendment to IAS 1 to request companies to group the elements included in the statement of comprehensive income according to whether these may be reclassified subsequently in the statement of income or not. The amendment is applicable for the years starting after or from July 1, 2012.
The Company is in the process of assessing any impact deriving from the future application of all of these newly issued standards and interpretations, as well as the revisions or amendments to the existing standards.
Note 4 Information on the items in the income statement
4.1 – Income (charges) on equity investments
Other income (charges) on equity investments
2012 2011 CHANGE
Loss settlement Domino (1) (4) 3 Other income (charges) (10) 34 (44) Total (11) 30 (41)
The charges of 10 thousand euro refer to the payment to the grant in favour of Gemina Fiduciary Services. In 2012 no events and/or circumstances occurred that required the writing down of the equity investments held. Reference is made to note 5.2 for a detailed list of the equity investments held at December 31, 2012 and the related changes during the year, as well as for the impairment tests carried out at December 31, 2012 on the value of the portfolio equity investments.
174 Annual Report 2012 Gemina S.p.A. Separate Financial Statements and notes
4.2 – Net financial income (expenses)
Financial income 2012 2011 CHANGE
Interest income Current financial assets 86 100 (14) Subsidiaries: Fiumicino Energia – Interest income on reciprocal c/a 86 100 (14) Interest income on c/a and bank deposits 13 143 (130) Income on derivatives 4 6 (2) Total 103 249 (146)
Financial expenses 2012 2011 CHANGE
Interest expense 2,392 2,923 (531) Interest payable on bank loans 2,131 2,403 (272) of which from related parties: Mediobanca 304 957 (653) UniCredit 304 957 (653) Expenses on derivatives 147 520 (373) of which from related parties: Mediobanca - 270 (270) UniCredit - 250 (250) Other interest payable 114 - 114 Other expenses 265 169 96 Commissions for unused loans 220 123 97 of which from related parties: Mediobanca 31 27 4 UniCredit 31 27 4 Commissions on loans 45 46 (1) of which from related parties: Mediobanca 45 46 (1) Total 2,657 3,092 (435)
The Interest payable on bank loans relates to the loan stipulated on August 30, 2011 illustrated in note 5.13 to which reference is made. It also includes the pro-rata of the year value of the commissions incurred for raising this loan, equal to 374 thousand euro. The Expenses on derivatives, equal to 147 thousand euro, comprise the negative differential paid in relation to the interest rate swap contract in force and described in note 5.16 to which reference is made. Other expenses comprise 220 thousand euro of commissions for unused loans relating to revolving Line B of the loan granted in 2011.
175 Annual Report 2012 Gemina S.p.A. Separate Financial Statements and notes
4.3 – Staff costs
2012 2011 CHANGE
Salaries and wages 384 1,854 (1,470) Social security charges 102 233 (131) Post-employment benefits 28 47 (19) Other costs 12 25 (13) Total 526 2,159 (1,633)
Salaries and wages decreased by 1,470 thousand euro compared to 2011, which included 1,108 thousand euro of costs for incentives to leave, deriving from the voluntary labour termination agreements following the transfer of the company offices from Milan to Rome. Below is the average number of employees and the breakdown by category:
12/31/2011 RECRUITS LEAVERS 12/31/2012 AVERAGE
Executives 1 - - 1 1 Managers 1 - (1) - - Total 2 - (1) 1 1
The work relation with the Manager in place as at December 31, 2011 was terminated at the beginning of 2012.
4.4 - Other operating costs
2012 2011 CHANGE
Service charges 2,503 3,405 (902) of which from related parties: UniCredit - 1 (1) ADR Tel - 2 (2) ADR 807 490 317 Assicurazioni Generali 130 130 - Rentals 6 270 (264) Other operating expenses 490 738 (248) TOTAL 2,999 4,413 (1,414)
Service charges They amount to 2,503 thousand euro, down by 902 thousand euro, mainly due to the lower operating costs and the removal of a series of charges incurred during 2011 in relation to the transfer of the office from Milan to Rome. The full service agreement with ADR came into force in July 2011 to provide Gemina with all the services necessary to carry out its corporate functions.
Other operating expenses These essentially include company costs, totalling 351 thousand euro, borne for publishing mandatory company notices and for organising the Shareholders’ Meeting for approval of the
176 Annual Report 2012 Gemina S.p.A. Separate Financial Statements and notes
financial statements and fiscal charges for non-deductible VAT and other taxes amounting to 107 thousand euro.
4.5 – Revenues
Revenues reached 767 thousand euro (1,004 thousand euro in 2011) and derive from the re- debiting of staff costs and other costs to subsidiaries for 747 thousand euro and other recoveries for the residual amount. All revenues were attained in Italy.
4.6 – Income taxes
The item is positive for 1,072 thousand euro (1,889 thousand euro in 2011), and mainly comprises: the income from IRES tax losses generated over the year, amounting to 718 thousand euro, recovered by Gemina within the agreements of the tax consolidation; the income, equal to 335 thousand euro, deriving from the transfer, as part of the tax consolidation, of deductible ROL. The table below shows the reconciliation between the theoretical fiscal and real charges incurred for the IRES tax for the year.
2012 2011
TAXABLE TAX EFFECT TAXABLE TAX EFFECT AMOUNT AMOUNT Pre-tax profit (loss) (5,324) (8,505) Rate 27.50% 27.50% theoretical IRES 1,464 2,339 Permanent differences 2,472 (680) 3,059 (841) Temporary differences: increase 623 (171) 390 (107) decrease (380) 105 (3,299) 907 IRES taxable amount (2,609) (8,355) IRES pertaining to the year 718 2,298
177 Annual Report 2012 Gemina S.p.A. Separate Financial Statements and notes
Note 5 Information on the items of the statement of financial position
5.1 – Tangible fixed assets
12/31/2011 CHANGES IN THE YEAR 12/31/2012
REVAL. REVAL. COST ACC. BOOK ACQUISIT. DISPOSALS DEPR. COST ACC. BOOK (WRITE- DEPR. VALUE (WRITE- DEPR. VALUE DOWN) DOWN) Other tangible fixed 4 - (2) 2 - - (1) 4 - (3) 1 assets TOTAL 4 - (2) 2 - - (1) 4 - (3) 1
These consist of assets owned by the Company. The changes taking place in the year are represented essentially by the depreciation over the period.
5.2 – Equity investments
Below is the breakdown of the individual items as well as the changes taking place in 2012; this information is also summarised in the table at the end of this note.
Equity investments in subsidiaries The value at year end refers to equity investments owned in: ADR, owner of the concession for the creation, management and maintenance in the original condition of the “Leonardo da Vinci” Airport of Fiumicino and “G.B. Pastine” Airport of Ciampino; Fiumicino Energia is the owner of the co-generation power plant built in the area of Fiumicino Airport. It supplies electric and thermal power to the Leonardo da Vinci Airport, through the company Leonardo Energia. Domino S.r.l., company not operational.
The value of the equity investment held in ADR consists of the historical cost incurred for its acquisition, which incorporates both the company’s equity consistency and the expected profitability. In 2012 the value of the equity investment rose by 252 thousand euro in relation to: purchase of 2,340 shares from minority shareholders for a total of 36 thousand euro; recognition of the fair value accrued in the year regarding the stock options attributed to the employees of the ADR Group (for more information please see note 5.10) for 216 thousand euro. Of the shares held, 21,778,660 (corresponding to 35% of ADR’s share capital) were pledged by the pool of banks that during 2011 disbursed the “Loan” shown in note no. 5.13.
178 Annual Report 2012 Gemina S.p.A. Separate Financial Statements and notes
Considerable discontinuity was recorded 2012 compared to the previous years: the new Planning Agreement effective from December 28, 2012 outlines a new regulatory and tariff framework, which is substantially consistent with the previous pro tempore schemes submitted to the Board of Directors for examination, with sound and transparent rules valid until the end of the concession. The impairment test ran on the basis of the financial flows of the company estimated with reference to the business plan prepared in consideration of the new Planning Agreement, showed that the recoverability of the book value of the equity investment at December 31, 2012 is already ensured with a discounting rate higher than the average consensus rate expressed by the market, equal to about 7.67%. The two main ADR’s business areas, aviation and non aviation, were considered as one single Cash Generating Unit for both their strict interconnection and the fact that one single value was assigned to the concession. Forecasts are based on the following assumptions: conduction of investments for about 12 billion euro by 2044, of which about 2.8 billion euro by 2021, aimed at increasing the accommodation capacity of Fiumicino Sud (for about 4.4 billion euro), building the new airport area of Fiumicino Nord for about 7.2 billion euro and requalifying Ciampino as a “city airport”, with the exclusion of Viterbo, no longer included in the National airport development plan; passenger traffic forecast up to 50 million at the end of the first regulatory period (2021) to reach up to 98 million by 2044; definition of a tariff structure based on the “price cap” (RAB based) method with clear correlation between the costs and the maximum admitted revenues, in “dual till” regime and determination of the value of the initial Rab at 1.8 billion euro at January 1, 2013; identification, for the first regulatory period (2012/2016), of a remuneration (real pre-tax wacc) of 11.91%, with clear indication of the methods of calculation of the variables in the subsequent periods. The market capitalization of the Gemina security, subsequently to the approval of the new Planning Agreement, also confirms the lack of indicators as to the possible impairment of the equity investment.
With reference to Fiumicino Energia, the owner of the co-generation power plant built in the area of Fiumicino Airport, worth noting is that, based on the 2005 industrial co-operation agreement signed by Fiumicino Energia and ADR, in December 2023 (that is upon the expiry of the sub- concession agreement stipulated between these companies) the co-generation power plant will be purchased free of charge by ADR, in good state of repair and in full operation. Also with reference to this equity investment, an impairment test was carried out, with the aim of checking the recoverability of the book value at year end. The test in question, performed through the estimate of the value in use, confirmed the recoverability of the value recorded, and was prepared based on the industrial plan 2012-2023 drafted by the management of the company; since this period encompasses the entire residual duration of the sub concession Fiumicino Energia is the owner of, no terminal value was considered in the estimate of the value in use.
The subsidiary Domino is dormant.
179 Annual Report 2012 Gemina S.p.A. Separate Financial Statements and notes
Other equity investments The equity investment in Pentar S.p.A., a company which holds equity investments in various sectors, equals 32 thousand euro since the historical cost of the equity investment, equal to 2,232 thousand euro, was subject to write-down in 2010 for 2,200 thousand euro in relation to the estimate of the recoverable value of this company. During 2012 a share capital increase was finalised, which Gemina did not participate in. Thus, the equity investment held in this company was reduced from 18.54% to 16.38%. On January 29, 2013, the meeting approved the economic and financial position of the company as at November 30, 2012, which recorded an overall loss of 9,769 thousand euro. The meeting resolved to cover this loss – subject to and with effect from the capital increase below – by using the Other reserves entirely (equal to 4,511 thousand euro) and zeroing the share capital (equal to 2,476 thousand euro) with the consequent cancellation of all of the 10,764,830 shares. The same meeting also resolved to restore, by March 31, 2013 and effective from the effective date of its zeroing, the share capital (by increasing it up to 2,476 thousand euro and issuing 10,764,830 new shares) and the share premium reserve to use the latter to cover the residual loss. Gemina Fiduciary Services S.A. (“GFS”) is a company that attends to the collection of credit from Banca Centrale Argentina through a lawsuit. Any recovered amount will be repaid to the bond subscribers, net of operating costs, which will be held by GFS. Operating costs are currently paid by Gemina for around 10 thousand euro per year.
180 Annual Report 2012 Gemina S.p.A. Separate Financial Statements and notes
Equity investments and financial assets held for sale
STOCK AS AT 12/31/2011 INCREASES DECREASES STOCK AS AT 12/31/2012 NAME SHARES OR UNIT EQUITY PRICE SHARES VALUE SHARES VALUE VALUE SHARES OR UNIT PRICE EQUITY INV. STAKES VALUE INV. % OR OR ADJUSTMENTS STAKES VALUE % STAKES STAKES
Equity investments in subsidiaries (***) Aeroporti di Roma 59,671,885 30.76 95.90 1,835,600 2,340 252,033 - - - 59,674,225 30.76 1,835,852 95.90 Fiumicino Energia S.r.l. 1 - 87.14 7,673 - - - - - 1 - 7,673 87.14 Domino S.r.l 1 - 100.00 10 - - - - - 1 - 10 100.00 1,843,283 1,843,535 Other equity investments Pentar S.p.A. 5,000,000 0.01 18.54 32 - - - - - 1,763,665 0.01 32 16.38 Directional Capital Holding NV 1 - 5.00 ------1 - - 5.00 Gemina Fiduciary Services S.A. 17,646 - 99.99 ------17,646 - - 99.99 Telefin S.p.A. in liquidation (formerly 85,000 - 42.50 - 85,000 - - 42.50 Tempo Libero) 32 32
GRAND TOTAL 1,843,315 1,843,567
181 Annual Report 2012 Gemina S.p.A. Separate Financial Statements and notes
Information concerning the equity investments
(THOUSANDS OF EURO)
SHAREHOLDERS’ PROFIT (LOSS) PORTION OF REGISTERED SHARE CAPITAL EQUITY INCLUDING % OF DIRECT BOOK NAME ACTIVITY PROFIT (LOSS) FOR THE YEAR SHAREHOLDERS’ OFFICE VALUE IN EURO 2012 EQUITY HELD OWNERSHIP VALUE AS AT 12/31/2012 Aeroporti. di Roma S.p.A. Fiumicino Airport services euro 62,224,743 1,084,745 259,174 1,040,271 95.90 1,835,852
Fiumicino Energia S.r.l. Fiumicino Production and sale of energy euro 741,795 3,304 2,512 2,879 87.14 7,673 Domino S.r.l. Fiumicino IT services euro 10,000 9 (1) 9 100.00 10 Gemina Fiduciary Services S.A. Luxembourg Trust company euro 150,000 16 10 16 99.99 - Pentar S.p.A. (1) Naples Holding company euro 2,475,911 (2,783) (9,769) (456) 16.38 32 Telefin S.p.A. in liquidation Milan Report Lire 20,000,000,000 - - - 42.50 - (formerly Tempo Libero S.p.A.) (2)
(1) Data referring to the economic and financial position for the year ended November 30, 2012. (2) On April 29, 1999 the Court of Milan declared its bankruptcy.
182 Annual Report 2012 Gemina S.p.A. Separate Financial Statements and notes
5.3 - Deferred tax assets
These mainly refer to: 106 thousand euro for the tax effect of the remuneration, not yet paid, regarding the board of directors; 174 thousand euro for the tax effect related to the fair value of the derivative financial instruments subscribed to hedge against the financial flows of the bank payables. During 2012 deferred tax assets incurred a net increase of 181 thousand euro, essentially due to the increase in the cash flow hedge reserve (124 thousand euro).
5.4 – Other non-current financial assets
Equal to 110 thousand euro (of which 16 thousand euro towards Mediobanca and 16 thousand euro towards UniCredit), these entirely relate to prepayments pertaining to the non-current portion of the costs incurred by the company to activate the revolving credit line of an amount equal to 18.0 million euro, described in note 5.13, to which reference is made.
5.5 – Trade receivables
12/31/2012 12/31/2011 CHANGE
Due from customers 11 14 (3) Due from customers 11 14 (3) of which due to related parties 11 14 (3) Bad debt provision - - - Receivables due from subsidiaries 369 418 (49) ADR 353 412 (59) Fiumicino Energia 16 - 16 Leonardo Energia - 6 (6) TOTAL 380 432 (52)
Receivables due from subsidiaries refer to charge backs of costs.
183 Annual Report 2012 Gemina S.p.A. Separate Financial Statements and notes
5.6 – Other receivables
12/31/2012 12/31/2011 CHANGE Receivables due from subsidiaries 961 16,864 (15,903) Due from companies of the Group for consolidated IRES 961 16,864 (15,903) Due from others 2,055 1,828 227 Due from the tax authority 974 695 279 Other tax receivables - 5 (5) Other receivables 1,081 1,128 (47) Prepayments 146 125 21 of which due to related parties: Assicurazioni Generali 59 - - Total 3,162 18,817 (15,655)
The receivables due from subsidiaries refer to the taxes of the companies of the ADR Group and Fiumicino Energia that adhered to the tax consolidation. The negative change of 15.9 million euro is mainly attributable to the position towards ADR, which shows a debt balance of 0.7 million compared to the receivable of 13.7 million euro of the reference period.
Due from others - other receivables include the receivable of 1,081 thousand euro deriving from the ruling issued during 2011 in relation to the Rizzoli dispute, as illustrated in note 7.1 below, to which reference is made, to recover expenses for the lawyers that assisted Gemina in the same litigation, whose services are allocated under the amounts due to suppliers.
5.7 – Current tax assets
The item Current tax assets amounts to 9,155 thousand euro (828 thousand euro as at December 31, 2011) and includes 7.7 million euro of the receivable deriving from the allocation for the consolidated companies of the IRES recovered from 2007 to 2011 corresponding to the failed deduction of IRAP on staff cost and 0.5 million euro of the IRES credit relating to the Group companies included in the tax consolidation.
184 Annual Report 2012 Gemina S.p.A. Separate Financial Statements and notes
5.8 – Other current financial assets
12/31/2012 12/31/2011 CHANGE Receivables due from subsidiaries 2,600 3,203 (603) For the giro account: Fiumicino Energia 2,600 3,203 (603) Due from others 143 143 - Prepayments for commissions on loans 143 143 - of which due to related parties Mediobanca 48 47 1 UniCredit 16 16 - Total 2,743 3,346 (603)
The amounts due from Fiumicino Energia regard two loans granted in the form of a giro account, granted at market terms in view of optimizing the Group’s treasury management. These loans have a 3-month Euribor rate plus a margin of 200 bps. The prepayments for commissions on loans refer to the share expiring within the following year, of the costs incurred for the subscription of Line B of the revolving loan of an amount equal to 18 million euro, shown in note 5.13.
5.9 – Cash and cash equivalents
12/31/2012 12/31/2011 CHANGE
Bank and post office deposits 3,178 5,340 (2,162) of which due to related parties Mediobanca 20 2 18 UniCredit 76 12 64 Cash on hand 1 - 1 Total 3,179 5,340 (2,161)
The values at year end represent liquidity at the bank accounts. Pursuant to the loan agreement in place, the pledged account held with Mediobanca has a balance equal to zero.
5.10 – Shareholders’ equity
The shareholder’s equity amounts to 1,799,037 thousand euro (1,804,620 thousand euro at December 31, 2011) and is a decrease of 5,583 thousand euro compared to December 31, 2011, in relation to the following effects: total negative economic result for the year of 4,580 thousand euro; purchase of treasury shares for 1,278 thousand euro; increase in Other reserves for 275 thousand euro, due to the creation of the Stock Option revaluation reserve.
185 Annual Report 2012 Gemina S.p.A. Separate Financial Statements and notes
The changes occurred over 2011 and 2012 are highlighted in the special statement presented among the financial statements. The fully paid-in share capital is made up of 1,469,197,552 ordinary shares and 3,762,768 savings shares. Gemina’s shareholders’ meeting, in the extraordinary session of March 1, 2012, resolved the elimination of the par value of the outstanding ordinary and savings shares, with consequent amendment of articles 5 (Capital), 23 (Financial statements, profits and prepaid dividends) and 24 (Dissolution and liquidation) of the Articles of Association. Concerning the adoption of an incentive plan based on financial instruments (see the specific notice included in this note), the Shareholders’ meeting of Gemina that met on March 1, 2012 in ordinary session resolved as follows: the assignment to the Board of Directors, pursuant to art. 2443 of the Italian Civil Code, for a five-year period from the resolution date, of the right to increase the share capital by payment, in tranches, pursuant to art. 2439 of the Italian Civil Code, once or more times, up to a maximum nominal value of 40,000,000 euro through the issue of a maximum of 40,000,000 ordinary shares with regular dividend, to service exclusively and irrevocably incentive plans based on financial instruments; the authorisation to purchase and sale treasury shares up to maximum of 120,000,000 shares and in any case according to legal limits, subject to repeal of the resolution of April 19, 2011. In March 2012 Gemina, in implementing the abovementioned resolution of the Shareholders’ meeting, started a Programme for the purchase of treasury shares, for a maximum number not exceeding 2,000,000 shares; the programme was concluded on April 13, 2012. As at December 31, 2012 Gemina holds a total of 2,000,000 treasury shares equal to 0.136% of the ordinary capital, recorded in the financial statements in reduction of the shareholders’ equity for 1,278 thousand euro. During 2012, no treasury shares were sold. Below is the statement analyzing the capital and the net Shareholders’ equity reserves with indication of the related possibility of use, in compliance with the provisions of art. 2427 of the Italian Civil Code and IAS 1 paragraph 76.
186 Annual Report 2012 Gemina S.p.A. Separate Financial Statements and notes
TYPE/DESCRIPTION TOTAL AMOUNT POSSIBLE SUMMARY OF USES MADE IN THE USE PAST THREE YEARS
TO HEDGE FOR OTHER
LOSSES REASONS Share capital 1,472,960 - Treasury shares in portfolio (1,278) Capital reserves: 199,707 Share premium reserve net of share capital 79,707 A-B increase costs Reserve for purchase of treasury shares 118,722 Reserve for treasury shares in portfolio 1,278 Hedging reserve (458) Other reserves: 83,381 Merger surplus reserve and sale of treasury shares 7,747 A-B-C Stock option reserve 275 A-B-C Sale of unexercised rights 350 A-B-C Legal reserve 75,009 B Profit (loss) from previous years 48,977 A-B-C Non-distributable portion 274,258 Residual distributable portion 57,349
Key: A: to increase capital; B: to cover losses, C: for distribution to shareholders
Information on incentive plans based on financial instruments On March 1, 2012 the Gemina shareholders’ meeting approved the general lines and the rules of a stock incentive plan pursuant to art. 114-bis of Legislative Decree no. 58 of February 24, 1998 called “stock option plan 2012” (“Plan”). In compliance with the abovementioned guidelines, the Board of Directors’ meeting of March 1, 2012 approved a specific regulation that defines the terms and conditions of the Plan aimed at encouraging the beneficiaries in valorising the Gemina group while creating a loyalty instrument that promotes a value generating culture. The plan is reserved for employees, collaborators and directors in special positions in Gemina and its subsidiaries, identified by the Board of Directors at its unquestionable discretion on the proposal of the remuneration and human resources committee, among the subjects holding strategically important positions within the Gemina Group, having regard for the respective position covered. According to the Plan, a maximum number of 23,000,000 free options (“Options”), not transferable inter vivos will be attributed free of charge during the three annual cycles (2012, 2013 and 2014). Each Option will assign the beneficiaries, under the conditions set by the Regulation, the right, at Gemina’s discretion, to (i) purchase one treasury share of the Company (already in its portfolio or acquired subsequently), or (ii) subscribe a new share.
The Options that may be attributed will accrue after a vesting period of thirty eight months and can be exercised on condition of attaining the performance objectives according to the terms and conditions specified in the Regulation. The number of Options that can be exercised will be in any case calculated according to the Regulation in application of a mathematical algorithm that, among other things, will account for the current value determined on the date of assigning the options and the price to exercise them, based on a limitation of the capital gain that can be realised. The exercise price of the Options will correspond to the arithmetic mean of the official price of the ordinary shares of the company on each day of listing on the Screen Traded Stock Market
187 Annual Report 2012 Gemina S.p.A. Separate Financial Statements and notes
managed by Borsa Italiana S.p.A. in the period passing from the day before the offer date to the same day of the previous month (both included), which may be adjusted according to the Regulation. The characteristics of the plan were specified in a specific document pursuant to art. 84-bis of Consob Regulation no. 11971/1999 and subsequent amendments and additions. On March 1, 2012, with reference to the first tranche, the Board of Directors identified 22 beneficiaries to be assigned a total of 5,526,533 Options (of which 1,155,089 destined for Gemina directors and 4,371,444 for ADR executives/collaborators) at an exercise price of 0.631 euro. The beneficiaries adhered to the Plan in April 2012. The options will accrue after a vesting period of thirty eight months (April 1, 2012- May 31, 2015) and can be exercised based on the achievement of the performance objectives. The unit fair price of the assigned rights equals 0.22 euro (for a total of 1.2 million euro) as determined by an independent expert using the Monte Carlo model and the following main assumptions: term set to exercise the options: 4.75 years, risk-free interest rate: 4.96%, expected volatility: 52%. Pursuant to IFRS 2, the value accrued in the first half of 2012, time-apportioned, of the fair value of the assigned options, equal to 95 thousand euro, was entered in the income statement under remuneration for Directors for the portion relating to Gemina directors (60 thousand euro) and as an increase in the equity investment in ADR for the portion relating to the employees of the ADR Group (215 thousand euro), counterbalanced by an increase in the specific shareholders’ equity reserve, classified under “other reserves”.
5.11 – Employee benefits
12/31/2011 ALLOCATIONS AMOUNTS PAID 12/31/2012 107 28 (46) 89
The amount entered relates to the benefits accrued by the employee as at December 31, 2012, according to labour regulations and agreements.
188 Annual Report 2012 Gemina S.p.A. Separate Financial Statements and notes
5.12 – Provisions for risks and charges
12/31/2012 12/31/2011 CHANGE Non-current share 9,128 9,100 28
Current share 169 2,037 (1,868)
Total 9,297 11,137 (1,840)
The change taking place in 2012 arises from the use of the fund for 1.8 million euro in connection with the payment made after the Assessment Report issued by the Revenue Office for a tax audit on the year 2006 was notified on October 4, 2012. At December 31, 2012 the provisions for risks and charges mainly include: the residual amount of the provision for risks allocated in relation to the guarantees granted to the purchaser for the equity investment in Elilario, equal to 1.2 million euro; the allocations made for the guarantee granted to ADR in 2002, in the event of a negative outcome for the subsidiary of the litigation with the Customs Agency amounting to 6.7 million euro; At December 31, 2012 no additional significant potential liabilities and obligations are recorded for which it is necessary to allocate provisions for risks and charges.
5.13 – Financial indebtedness net of current share
12/31/2012 12/31/2011 CHANGE Due to banks 42,100 42,100 -
of which from related parties:
Mediobanca 6,014 6,014 - UniCredit 6,014 6,014 - Effect of “amortised cost method” (542) (805) 263 Total 41,558 41,295 263
On August 30, 2011 the company signed a loan agreement for a maximum amount of 60.1 million euro with expiry in December 2014 (“Loan 2011”). The loan 2011 was destined for 42.1 million euro (“Line A”) to the full redemption of the remaining amount of the loan taken out in December 2008, occurred in September 16, 2011, and for 18.0 million euro (“Revolving Line B”) to hedge the future cash requirement regarding corporate operations. The Loan 2011 was signed in quote equally by a pool of seven banks consisting of Banca Nazionale del Lavoro S.p.A. (BNL), Barclays Bank Plc (Barclays), Crédit Agricole Corporate & Investment Bank (Crédit Agricole), Mediobanca – Banca di Credito Finanziario S.p.A. (Mediobanca), Natixis S.A. (Natixis), The Royal Bank of Scotland N.V. (RBS) and UniCredit S.p.A. (UniCredit), and organised by Mediobanca in its capacity as Agent Bank. The Loan 2011 is backed by a senior pledge on the shares of ADR representing at least 35% of the share capital, and will be adjusted according to a formula defined in the contractual documents, linked mainly to the performance of the Gemina share. As at December 31, 2012, ADR shares used as guarantee numbered 21,778,660, equal to 35% of share capital.
189 Annual Report 2012 Gemina S.p.A. Separate Financial Statements and notes
The interest rate is the Euribor plus a margin tied to the rating assigned to ADR; the maximum margin established contractually, equal to 300 basis points, corresponds to the one applied currently, which cannot therefore be subject to increase. The fair value of the Loan is estimated at 44.7 million euro.
FINANCER NAME AMOUNT OF AMOUNT BOOK INTER REDEMPTIO DURATION MATURITY DESCRIP. LOAN GRANTED USED VALUE EST N RECORDED Mediobanca and Line A 42,100 42,100 41,991 (*) (**) at maturity 3.3 years Dec. 2014 UniCredit in pool with another 5 Line B 18,000 - - (*) (**) at maturity 3.3 years Dec. 2014 banks Total 60,100 42,100 41,991
(*) Total value recorded at the amortised cost, including the current share and the accrual matured at year end (**) Variable, indexed to the Euribor plus a spread based on the rating attributed to ADR.
5.14 – Trade payables
12/31/2012 12/31/2011 CHANGE Due to suppliers 1,064 1,587 (523) Payables due to subsidiaries 425 212 213 ADR 425 211 214 ADR Tel - 1 (1) Total 1,489 1,799 (310)
The item, equal to 1,489 thousand euro, consists of the amounts due to suppliers (1,064 thousand euro), mainly originating from professional services, and the amounts due to group companies (425 thousand euro). The book value of the trade amounts due approximates its fair value, since the discounting effect is not significant.
5.15 – Current financial liabilities
12/31/2012 12/31/2011 CHANGE Accrued liabilities for interest on amounts due to banks 452 605 (153) of which due to related parties: Mediobanca 65 84 (19) UniCredit 65 84 (19) Total 452 605 (153)
190 Annual Report 2012 Gemina S.p.A. Separate Financial Statements and notes
5.16 – Financial derivatives 12/31/2012 12/31/2011 CHANGE Derivatives hedging interest rate risks 718 174 544 Total 718 174 544
With regard to the commitment undertaken concerning the Loan agreement 2011, on September 16, 2011 Gemina entered into an interest rate swap agreement. Pursuant to the loan agreement under note 5.13, Gemina is obliged to hedge against the interest rate risk to the tune of at least 50% of the amount, disbursed and not repaid, due to Line A (therefore currently at least 21.1 million euro). To fulfil this obligation on September 16, 2011 the company signed an interest rate swap agreement with Crédit Agricole, for a total amount of 25.3 million euro, equal to 60% of Line A. The main characteristics of the agreement are summarised below:
COUNTERPART CRÉDIT AGRICOLE Instrument IRS Type Cash Flow Hedge Hedged risk interest Subscription date September 16, 2011 Expiration December 30, 2014 Hedged notional value 25,260 Applied rate Gemina pays a fixed rate of 1.65% and receives: From 09/16/2011 to 03/16/2012 a fixed rate of 1.729%; From 03/16/2012 to 09/16/2014 the Euribor 6 months; From 09/16/2014 to 12/30/2014 the Euribor interpolated at 3-4 months
12/31/2012 12/31/2011 Fair value of derivative (632) (179) Change in fair value: (453) (179) to Income Statement - - to Shareholders’ Equity (453) (179) Tax effect 125 49 Total net change (328) (130)
The financial derivatives described are included in “Level 2” of the “Fair Value Hierarchy” defined by IFRS 7, meaning the fair value is measured based on valuation techniques which take as reference parameters that are observable on the market, different from the prices of the financial instrument.
5.17 - Current tax liabilities
As at December 31, 2012 these equal zero compared to a balance of 10.9 million euro at the end of the previous year, since the tax consolidation revealed a credit position (please see note 5.7).
191 Annual Report 2012 Gemina S.p.A. Separate Financial Statements and notes
5.18 - Other current liabilities
12/31/2012 12/31/2011 CHANGE Payables due to board of statutory auditors 82 151 (69) Payables due to directors 554 487 67 Payables due to personnel 56 275 (219) Payables to subsidiaries for tax refund 8,166 435 7,731 applications ADR 7,508 426 7,082 ADR Tel 72 4 68 ADR Engineering 163 5 158 ADR Assistance 415 - 415 Fiumicino Energia 8 - 8 Payables for consolidated taxation 748 - 748 Other payables 357 412 (55) Total 9,963 1,760 8,203
The item other payables mainly includes payables to social security for 37 thousand euro, other tax payables for 24 thousand euro and deferred income for 95 thousand euro.
192 Annual Report 2012 Gemina S.p.A. Separate Financial Statements and notes
Note 6 Other financial information
6.1 - Categories of assets/liabilities IAS 39
12/31/2012
RECEIVABLES AND FIN. INSTR. PAYABLES AT DERIVATIVE AVAILABLE FOR AMORTISED LOANS SALE COST INSTRUMENTS Other equity investments 32 Other non-current financial assets 110 Trade receivables 380 Other current financial assets 2,743 Cash and cash equivalents 3,179 Total assets IAS 39 6,412 32 - - Non-current financial liabilities 41,558 Trade payables 1,489 Current financial liabilities 452 Financial instruments – derivatives 718 Total liabilities IAS 39 - - 43,499 718
Income (charges) recorded in the Income Statement: Interest income 99 4 Interest expense (2,245) (147) Other expenses (265) 99 - (2,510) (143)
12/31/2011 RECEIVABLES AND FIN. INSTR. PAYABLES AT DERIVATIVE AVAILABLE FOR AMORTISED LOANS SALE COST INSTRUMENTS Other equity investments 32 Other non-current financial assets 221 Trade receivables 432 Other current financial assets 3,346 Cash and cash equivalents 5,340 Total assets IAS 39 9,339 32 - - Non-current financial liabilities 41,295 Trade payables 1,799 Current financial liabilities 605 Financial instruments – derivatives 174 Total liabilities IAS 39 - - 43,699 174 Income (charges) recorded in the Income Statement: Interest income 243 6 Interest expense (2,403) (520) Other expenses (169) 243 - (2,572) (514)
193 Annual Report 2012 Gemina S.p.A. Separate Financial Statements and notes
6.2 – Financial risk management
Market risk The strategy followed for this type of risk aims to mitigate the rate risk and optimise the cost of borrowing. These risks are managed in compliance with the principles of prudence and in line with the “best practices” of the market. The company’s derivative portfolio transactions at December 31, 2012 are recorded as cash flow hedge in compliance with IAS 39. The fair value of the derivative financial instruments is determined by discounting the expected cash flows and using the market interest rate curve at the reference date. The residual average duration of the overall financial indebtedness equals about 2 years. The monitoring activities also aim to assess, on a continuous basis, the credit worthiness of the counterparts and the risk concentration level. The Company is not exposed to an exchange rate fluctuation risk. In consideration of Gemina’s specific economic and financial position, the rate risk is connected to the uncertainty induced by interest rate performance, and may be presented in the form of cash flow risk, connected to the financial assets or liabilities with indexed flows at a market interest rate. With the aim of reducing the amount of financial indebtedness at a variable rate, an interest rate swap (IRS) derivative agreement was signed, classified as “cash flow hedge”. The expiry of the hedge derivative and the underlying liability loan is the same. The effectiveness of the hedging is checked retrospectively and with a view to the future every quarter. The effectiveness of the hedge is confirmed by the effectiveness test calculated at the time of stipulating the agreement. The changes in fair value of the derivative contracts are recorded in the comprehensive income statement, while no ineffective share is recorded in the income statement. The income statement is credited (debited) simultaneously upon the occurrence of the interest flows of the hedged instruments. With reference to the type of interest rate, the financial indebtedness at December 31, 2012 is expressed at 60% at fixed rate.
Sensitivity analysis The sensitivity analysis highlights the impacts that would occur on the income statement and the shareholders’ equity during the year in case of changes in interest rates the company is exposed to. With regard to the particular sensitivity of the Company’s results to the interest rate trend, it has been decided to go forward with a sensitivity analysis with a range of +/- 50 bps on the interest rate. The potential effects, shown gross of the tax effect, are summarised below: A change of +50 bps in the interest rates creates a 0.1 million euro increase in financial expenses and a 0.2 million euro positive change of the cash flow hedge reserve. a change of -50 bps in the interest rates determines a reduction of equal amount and opposite sign for the two components. It is finally pointed out that the interest rate applied to the outstanding Loan is equal to the Euribor rate plus a margin proportionate to the rating given ADR. The financial expenses Gemina pays to its Financers therefore depend on not only the fluctuation of the interest rates, but on ADR’s rating as well. The maximum margin contractually established, equal to 300 basis points, corresponds to the one currently applied, which therefore will not be subject to increases.
194 Annual Report 2012 Gemina S.p.A. Separate Financial Statements and notes
Credit risk The Company’s higher exposure to credit risk concerns the “Other Receivables”, and in particular the amounts due from the ADR Group for consolidated taxation. The analysis of trade receivables and other receivables broken down by expiration term is shown below.
RECEIVA RECEIVABLES EXPIRED NOT WRITTEN DOWN TOTAL BLES RECEIVABLES COMING FROM 61 TO FROM 121 TO AFTER (MILLIONS OF EURO) DUE BEFORE 60 DAYS 120 DAYS 180 DAYS 181 DAYS Trade receivables Dec. 31, 2012 0.4 - - - - 0.4 Dec. 31, 2011 0.5 - - - - 0.5 Other receivables Dec. 31, 2012 3.2 - - - - 3.2 Dec. 31, 2011 18.8 - - - - 18.8
Liquidity risk The liquidity risk is the risk that the financial resources available may be insufficient to cover the expiring obligations. In consideration of the company’s ability to generate cash flows and the availability of uncommitted lines of credit, the Company believes to have access to sufficient sources of finance to meet the planned financial requirements. The table below illustrates a breakdown of the expiries for the financial liabilities at December 31, 2012 and the comparative figures at December 31, 2011.
12/31/2012 12/31/2011
WITHIN THE BETWEEN AFTER 3 WITHIN THE BETWEEN AFTER 3 IN MILLIONS OF EURO FOLLOWING 1 AND 3 YEARS TOTAL FOLLOWING 1 AND 3 YEARS TOTAL YEAR YEARS YEAR YEARS Financial indebtedness net of - 41.6 - 41.6 - 41.3 - 41.3 current share Trade payables 1.5 - - 1.5 1.8 - - 1.8 Current financial liabilities 0.5 - - 0.5 0.6 - - 0.6 Financial instruments – derivatives - 0.7 - 0.7 - 0.2 - 0.2 Other current liabilities 10.0 - - 10.0 12.7 - - 12.7
As at December 31, 2012, based on the signed loan agreements mentioned in note 5.13, the company has a revolving line for an amount equal to 18.0 million euro allocated to cover future cash needs.
6.3 – Guarantees and major covenants on payables
The Loan 2011 is backed by a senior pledge on a number of ADR shares representing at least 35% of the share capital. The number of shares to be pledged is in any case calculated, and possibly adjusted, each quarter depending on the trend of the Gemina share. As at December 31, 2012, ADR shares used as guarantee numbered 21,778,660, equal to 35% of share capital. Pursuant to the Loan 2011, Gemina is obliged to hedge against the interest rate risk to the tune of at least 50% of the amount, disbursed and not repaid, due to Line A (therefore currently at least 21.5 million euro). By virtue of this obligation the Company signed with the counterpart Crédit Agricole an interest rate swap agreement whose main characteristics are reported in note 5.16 to which reference is made. A current account held with Mediobanca was also pledged. Gemina has also issued:
195 Annual Report 2012 Gemina S.p.A. Separate Financial Statements and notes
guarantees of 4.0 million euro in the interest of subsidiary Fiumicino Energia to guarantee the fulfilment of obligations deriving from the lease contract entered into with UniCredit Leasing; guarantees for a maximum of 2 million euro in the interest of subsidiary Fiumicino Energia to guarantee the fulfilment of obligations deriving from the loan agreement entered into with UniCredit; subscription of a joint deed of pledge on 86.12% of the share capital, held in Fiumicino Energia as guarantee of all receivables deriving from the lease agreement entered into with UniCredit Leasing; commitment with respect to the UniCredit Group of maintaining the ratio of Net financial indebtedness/Shareholders’ equity at fair value at 3 or less in the Fiumicino Energia financial statements. This covenant was complied with.
196 Annual Report 2012 Gemina S.p.A. Separate Financial Statements and notes
Note 7 Other information
7.1 - Litigation
Surety on the Customs Agency litigation In 2002, having received the consent of IRI to sell 44.74% of ADR to the Macquarie Group, Gemina, Impregilo S.p.A. and Falck S.p.A. took the place of IRI, directly assuming the commitment to indemnify ADR, with a share of 50.0%, 13.10% and 36.90%, respectively. This commitment was issued by IRI upon the privatisation of ADR for the purpose of covering 51.166% of capital losses the company may incur due to tax claims for deeds and declarations relating to periods prior to the privatisation, which took place in July 2000. The dispute between ADR and the Customs Agency regards the period 1993-1998, and is covered by the aforementioned guarantee, which will be enforceable following the final judgment ruling against ADR. Impregilo S.p.A. and Falck S.p.A. do not recognise the guarantee as valid. ADR has instituted action against these companies for the purpose of sentencing them to pay the amounts owed, on condition that the final judgment ruling against ADR is passed. With ruling of October 2012, the Court of Rome accepted ADR's claim. In the consolidated financial statements, provisions have been allocated against the risk relating to the litigation with the Customs Agency. In Gemina’s financial statements, provisions were allocated in the event of a total negative outcome for ADR and ADR’s activation of the guarantee.
Rizzoli litigation In 2010 Gemina was served, on request of RCS MediaGroup S.p.A. (“RCS”), with a writ of summons for a third party in the proceedings instigated by Mr. Angelo Rizzoli against RCS, Intesa San Paolo S.p.A., Mittel S.p.A., Edison S.p.A. and Giovanni Arvedi. Mr. Rizzoli formulated a series of claims aimed at compensating for the economic damages he incurred as a result of the sale of Rizzoli Editore S.p.A., which owns Corriere della Sera, to group of entrepreneurs. The events date back to 1974-1986. RCS, in addition to fully rejecting the plaintiff’s claims, stating they were completely without grounds and considerably subject to the statute of limitations and, as a final alternative, requested that Gemina be summoned to court, as the party from which the current RCS derives, due to the known spin-off stipulated in 1997. Gemina still deems Mr. Rizzoli’s claims, as well as RCS’s request to summon Gemina to court, to be groundless. With ruling of January 2012, the Court of Milan rejected all the plaintiff’s claims, condemning the losing party to fully pay the legal expenses (1.0 million euro in favour of Gemina). In February 2012 Mr. Angelo Rizzoli proposed an appeal, requesting the suspension of the executive effectiveness of the appealed ruling. At the hearing held on June 26, 2012, the Appeal Court confirmed the provisional enforceability of the condition to fully pay the legal expenses and adjourned the proceedings for pronouncement of the sentence final to the hearing of October 21, 2014. Gemina’s right to pay legal expenses as shown above was recorded under the receivables while the residual amount to be paid for the professional services supplied by Gemina lawyers is recorded under trade receivables.
197 Annual Report 2012 Gemina S.p.A. Separate Financial Statements and notes
7.2 – Information on related parties
A) EFFECTS OF THE TRANSACTIONS OR POSITIONS WITH RELATED PARTIES ON THE BALANCE SHEET ITEMS
ITEM TOTAL RELATED PARTIES
ABSOLUTE VALUE %
Other non-current financial assets 110 32 29.1% Trade receivables 380 380 100.0% Other receivables 3,162 1,020 32.3% Current tax assets 9,155 - - Other current financial assets 2,743 2,664 97.1% Cash and cash equivalents 3,179 96 3.0% Provisions for risks and charges 9,297 6,700 72.1% Financial indebtedness net of current share 41,558 11,874 28.6% Trade payables 1,489 425 28.5% Current financial liabilities 452 130 28.5% Other current liabilities 9,963 9,009 90.4%
B) EFFECTS OF THE TRANSACTIONS OR POSITIONS WITH RELATED PARTIES ON THE INCOME STATEMENT ITEMS ITEM TOTAL RELATED PARTIES
ABSOLUTE VALUE %
Financial income 103 86 83.5% Financial expenses (2,657) (715) 26.9% Staff costs (526) (12) 2.3% Other operating costs (2,999) (937) 31.2% Revenues 767 767 100.0%
C) EFFECTS OF THE TRANSACTIONS OR POSITIONS WITH RELATED PARTIES ON THE CASH FLOWS
DESCRIPTION TOTAL RELATED PARTIES
ABSOLUTE VALUE %
Cash flows from changes in the Net Working Capital 4,345 24,481 > 100% Cash flows from investing activities (252) - - Cash flows from financing activities 37 666 > 100%
As required by IAS 24 it is highlighted that for 2012, for assignments in Gemina and in other Group companies, the remunerations, non-monetary benefits, bonuses, incentives and other payments due to the Chairman (Mr. Fabrizio Palenzona) and the Managing Director (Mr. Carlo Bertazzo) amount to a total of 796 thousand euro.
Worth noting is that pursuant to art. 123-ter of Legislative Decree 58/98, the Report on remuneration was prepared, which shows the consideration due to the members of the administration and control bodies, the General Manager and other executives with strategic responsibilities of Gemina and the Group. This Report is available at Borsa Italiana S.p.A. and on the website www.gemina.it within the limits of the law.
198 Annual Report 2012 Gemina S.p.A. Separate Financial Statements and notes
7.3 - Information pursuant to art. 149-duodecies of Consob Issuers’ Regulation
The following statement, drawn up pursuant to Art. 149-duodecies of the Consob Issuers’ Regulation, highlights the remunerations pertaining to the 2012 financial year for audit services and other services rendered by the same Independent Auditors.
(THOUSANDS OF EURO) COMPANY THAT RENDERED REMUNERATIONS PERTAINING TO THE THE SERVICE YEAR 2012 Audit Deloitte & Touche S.p.A. 144 Other services Deloitte & Touche S.p.A. (1) 11 Certification Deloitte & Touche S.p.A. (2) 3 (1) Review of request from shareholder Changi Ltd. (2) Subscription of Income Tax Return and 770 forms.
for the Board of Directors The Chairman (Fabrizio Palenzona)
199 Annual Report 2012 Gemina S.p.A. Separate Financial Statements and notes
Certification of the Financial Statements in accordance with art. 81 ter of Consob Regulation no. 11971 of May 14, 1999 and subsequent amendments and additions
We, the undersigned, Carlo Bertazzo, in my position of Managing Director, and Sandro Capparucci in my position of Manager in charge of preparing the corporate accounting documents of Gemina S.p.A., taking also account of provisions set forth by Art. 154-bis, subsections 3 and 4 of Italian Legislative Decree no. 58 of February 24, 1998, hereby declare: the consistency with regard to the characteristics of the company and the actual application of the administration and accounting procedures for the drafting of the financial statements over 2012.
It is also stated that: the financial statements as at December 31, 2012: . were drawn up pursuant to the applicable International Accounting Standards adopted by the European Union pursuant to regulation (EC) no. 1606/2002 of the European Parliament and Council of July 19, 2002; . correspond to figures disclosed in the accounting books and records; . supply a true and fair disclosure of the economic, financial and equity situation of the issuer; the Report on Operations includes a reliable analysis of the performance and management result, as well as the situation of the issuer, together with the description of the major risks and uncertainties to which they are exposed.
Fiumicino, March 8, 2013
The Managing The Manager Director in charge of preparing (Carlo Bertazzo) the corporate accounting documents (Sandro Capparucci)
200 Report of the Independent Auditors Annual Report 2012 Gemina S.p.A. Separate Financial Statements and notes
202 Annual Report 2012 Gemina S.p.A. Separate Financial Statements and notes
203 Report of the Board of Statutory Auditors Annual Report 2012 Gemina S.p.A. Separate Financial Statements and notes
Report of the Board of Statutory Auditors to the Shareholders’ meeting of Gemina S.p.A. (pursuant to art. 153 of Legislative Decree no. 58/98)
Dear Shareholders,
during the year ended December 31, 2012, we performed the supervisory activity laid down by the law (Legislative Decree no. 58 of 2/24/1998 – “Consolidation act of the previsions concerning financial intermediation”), carrying out our operations in a manner consistent with the principles of conduct of the Board of Statutory Auditors of joint-stock companies with shares listed in regulated markets recommended by the Italian National Councils of Professional and Certified Public Accountants and CONSOB communications regarding corporate controls and controls on the activities of the Board of Statutory Auditors. We remind you that, according to the provisions of Legislative Decree 58/1998, the task of auditing the financial statements was assigned to the independent auditors Deloitte & Touche S.p.A., whose report should be consulted for the relevant information. The Board of Statutory Auditors currently in office was appointed by the meeting held on April 19, 2012 based on the indications in the Articles of Association. Also in observance of the instructions provided by CONSOB with Communication DEM/1025564 of April 6, 2001 and subsequent updates, we refer the following: We supervised observance of the law and the articles of association. We attended the meetings of the Board of Directors and the other specific meetings to prepare on the topics on the agenda as well as the meetings of the Risk Control and Corporate Governance Committee and the Remuneration and Human Resources Committee and obtained from the Directors periodic information on the general business performance and outlook as well as the most important economic, financial and equity-related transactions performed by the Company, making sure that the resolutions taken and implemented were compliant with the Law and the Articles of Association and were not manifestly careless, risky, in potential conflict of interest, in contrast with the shareholders’ resolutions or such as to jeopardise the integrity of the corporate assets. In the meeting of March 8, 2013 the Board of Directors, with the favourable opinion of the Remuneration and Human Resources Committee, approved the “Report on the policy for the remuneration of directors and executives with strategic responsibilities”, drawn up pursuant to article 123-ter of Legislative Decree 58/1998 and in compliance with the provisions of the Borsa Italiana Code of Conduct. In the meeting of December 12, 2012 the Board of Directors adopted a new Code of Conduct aimed at implementing the updates made to the Borsa Italiana Code of Conduct in November 2011. In the same meeting of December 12, 2012, the Board of Directors of Gemina amended the Articles of Association to adjust them to Law 120/2011 reporting “Modifications to the consolidation act of the previsions concerning financial intermediation, under Legislative Decree 58/1998, regarding the parity of access to the administration and control bodies of the companies listed in regulated markets”.
205 Annual Report 2012 Gemina S.p.A. Separate Financial Statements and notes
The Board of Statutory Auditors supervised the fulfilment of the obligations related to the “Market abuse” and “Protection of savings” regulations with respect to corporate disclosures and “Internal Dealing”, with special reference to the treatment of privileged information and the procedure for the distribution of releases and information to the public. The Board of Statutory Auditors in particular monitored the compliance with art. 115-bis of TUF and the Regulation regarding the update of the Register of people with access to privileged information. In the chapter “Related party disclosures” included in the Explanatory Notes to the financial statements, and in the chapter “Intercompany relations and transactions with related parties” included in the Report on operations, the directors highlight the main transactions with related parties, identified on the basis of international accounting standards and the instructions provided by CONSOB on the matter. Reference is made to these chapters to identify the type of transactions and the relevant economic, financial and equity-related effects. As regards transactions with related parties, it is highlighted that the Board of Directors of the Company, following the start of contacts with Atlantia S.p.A. management to analyse the existence of the industrial, financial, economic and legal assumptions for a possible corporate integration operation with the same Atlantia, we established the Independent Director Committee set under art. 4.2. of the “Transactions with Related Parties Procedure” adopted by the Board of Directors of Gemina on November 12, 2010. On March 8, 2013 the Independent Director Committee issued the opinion in accordance with art. 4.2 of the procedure on transactions with related parties and art. 8 of Consob Regulation no. 17221, as subsequently amended with resolution no. 17389 of June 23, 2010 concerning Gemina’s interest in performing the transaction and the substantial benefit and correctness of the relevant conditions. The Board of Directors took part in all of the seven meetings held by the Independent Director Committee. On that occasion it was able to verify the respect of the procedure adopted with resolution of the Board of Directors of November 12, 2010. The financial statements of the Company for the year ended December 31, 2012 were drawn up in compliance with the International Financial Reporting Standards (IAS/IFRS), as was the case for the previous year 2011. The Explanatory Notes report the accounting standards and the valuation criteria adopted. The Financial Statements 2012 of Gemina S.p.A. (Gemina) were submitted to the opinion of the independent auditors Deloitte & Touche S.p.A., which issued their audit report on March 25, 2013 without any finding or reference to any matters. The significant events occurred in 2012 include the approval, with Council of Ministers Presidential Decree (DPCM) of December 21, 2012, of the new Planning Agreement signed by the subsidiary Aeroporti di Roma S.p.A. and ENAC on October 25, 2012, following which the subsidiary and the Gemina Group as a whole will be able to start the set investment plan; the new tariff plan will come into force in the first half of 2013. Extraordinary disposal transactions were finalised always during 2012, which led to significant gains as reported in the financial statements. The process was finalised to sell the “Duty Free Core Categories” business to the company Aelia, from the Lagardère Group, for a total price of about 230 million euro. The consolidated financial statements of the Gemina Group for the year ended December 31, 2012 were drawn up in compliance with the International Financial Reporting Standards (IAS/IFRS), as was the case for the previous year. The Consolidated Financial Statements of the Gemina Group were submitted to the opinion of the independent auditors Deloitte & Touche S.p.A., which issued their audit report on March 25, 2013 without any finding or reference to any matters. The same independent auditors audited the financial statements of the subsidiary ADR without any finding or reference to any matters.
206 Annual Report 2012 Gemina S.p.A. Separate Financial Statements and notes
In the Report on Operations, the directors correctly fulfilled the disclosure obligations laid down by art. 154-ter of Legislative Decree 58/98, introduced by Legislative Decree 195/2007 (so- called “Transparency Decree”), highlighting the main risks and uncertainties the Company and Group are exposed to. We gathered information on and supervised, within our competence, the adequacy of the organisational structure of the Company, the respect of the principles of correct administration and the adequacy of the instructions given by the Company to the subsidiaries pursuant to art. 114, subsection 2, of Legislative Decree 58/98, through the acquisition of information from the managers of the competent corporate functions, meetings with the independent auditors and the control bodies of the main subsidiaries, for the purpose of exchanging important data and information. We assessed and supervised the adequacy of the administration-accounting system as well as its reliability to fairly represent the operations; this was done by obtaining information from the head of the department, examining the corporate documentation and analysing the results of the work carried out by the independent auditors Deloitte & Touche S.p.A. The Board of Directors appointed the Manager in charge of “preparing the corporate accounting documents”, making sure that the same manager satisfied the suitable professional requirements. The Managing Director and the Manager in charge of preparing the corporate accounting documents certified, with a suitable Report (attached to the Financial Statements 2012 of the Company), a) the adequacy and actual application of the administrative accounting procedures; b) the compliance of the content of the accounting documents to IFRS/IAS international accounting standards endorsed by the European Community as well as the measures issued by Consob in implementing Legislative Decree no. 38/2005; c) the correspondence of the same documents with the figures disclosed in the accounting books and records and their suitability to correctly represent the economic and financial position of the Company. A similar certifying Report is attached to the Consolidated Financial Statements of the Gemina Group. On this point, the Board of Statutory Auditors examined the updates proposed to the Model pursuant to Law 262/2005, the risk assessment and the results of the testing activities, acknowledging the outcome of the testing activities on the controls carried out and the plan of the scheduled activities. No particular critical situations and obstacles emerged that hinder the issue of the certification by the Manager in charge of preparing of corporate accounting documents and the Managing Director concerning the adequacy of the administrative and accounting procedures for the preparation of the Financial Statements of Gemina SpA and the consolidated Financial Statements for the year ended December 31, 2012. The adequacy of the administrative- accounting system was also assessed through the acquisition of information from the heads of the respective departments and the analysis of the results of the work carried out by the independent auditors. The Board of Statutory Auditors supervised the observance of the regulations concerning the formation and publication of the Half-Year Report and the Interim Reports on Operations as well as on their structure and the correct application of the accounting standards, also using the information obtained by the independent auditors.
207 Annual Report 2012 Gemina S.p.A. Separate Financial Statements and notes
We assessed and supervised the adequacy of the internal control system through a) the examination of the Report of the Internal Control Officer on Gemina’s internal control system; b) the examination of the Internal Audit reports as well as the information on the outcome of the monitoring activities; c) the information obtained from the heads of the Internal Audit department of the subsidiary ADR; d) the relations with the control bodies of the subsidiaries pursuant to subsections 1 and 2 of art. 151 of Legislative Decree 58/98; e) the participation in all the meetings of the Risk Control and Corporate Governance Committee and the acquisition of the related documentation. Participation in this Committee also allowed the Board of Statutory Auditors to coordinate the performance of its functions of “Internal control and auditing committee” with the activities of the same Committee, assumed pursuant to art. 19 of Legislative Decree 39/2010 and in particular supervise i) the financial disclosure process ii) the effectiveness of the internal control systems, auditing and risk management iii) the auditing of annual and consolidated accounts iv) the aspects relating to the independence of the Independent Auditors. Following the activity carried out, the Board of Statutory Auditors expresses the adequacy of the Internal Control System of Gemina as a whole and acknowledges, in its capacity as Internal control and auditing committee, that there are no findings to be reported to the Shareholders’ Meeting. In relation to the provision of subsection 1 of art. 19 of Legislative Decree 39/2010 the independent auditors communicated the hours taken and the amounts invoiced overall for auditing the separate and consolidated financial statements of Gemina S.p.A. for the year ended December 31, 2012 as well as for the limited audit of the half-year report and for performing the activities to control the regular keeping of the company’s accounts. In addition it communicated that, based on the best information available, considering the regulatory and professional requirements that govern auditing activities, in the reference period it maintained its position of independence and objectivity toward Gemina S.p.A. and that no variations took place relating to the absence of any cause of incompatibility about the situations and the subjects indicated in art. 17 of Legislative Decree 39/2010 and the articles under account I-bis (Incompatibility) of Title VI of the Issuers’ Regulation. We held periodic meetings with the members of the independent auditors Deloitte & Touche S.p.A., pursuant to art. 150, subsection 3, Legislative Decree 58/98, and no significant data or information emerged that are worthy of being reported. It is also acknowledged that on March 25, 2013 the independent auditors presented the report under the third subsection of art. 19 of Legislative Decree 39/2010, stating that no fundamental issues emerged during the audit or significant deficiencies in the internal control system with reference to the financial disclosure process. The assignment granted to Deloitte & Touche S.p.A. for the audit of the separate financial statements and the consolidated financial statements of Gemina S.p.A. expires in 2012. Since this assignment lasted for nine years overall, it is no longer renewable and must be granted to a new entity other than Deloitte & Touche S.p.A. Pursuant to art. 13 of Legislative Decree 39/2010 “the meeting, upon the motivated proposal of the control body, grants the assignment to audit the accounts and determines the remuneration due to the independent auditor or auditors for the entire duration of the assignment and any criteria to adjust this remuneration during the assignment”; the Board of Statutory Auditors thus selected the entity to be proposed to the Meeting to be granted the auditing assignment for the years 2013 – 2021. The activity carried out, the criteria and the decisions adopted are illustrated in the report containing the motivated proposal submitted to the examination of the Shareholders’ Meeting.
208 Annual Report 2012 Gemina S.p.A. Separate Financial Statements and notes
We supervised the methods of actual implementation of the corporate governance rules laid down by the Code of Conduct that the Company declared to adopt, without finding any criticalities. In addition, with reference to the recommendations dictated by the Code of Conduct, under the Board of Statutory Auditors’ competence, it is communicated that: we checked the correct application of the independence assessment criteria and procedures adopted by the Board of Directors, without any related findings; concerning the so-called “self-assessment” of the independency requirement of its members, the Board checked the compliance during the meeting of February 7, 2013 with methods complying to those adopted by the directors; we respected the provisions of the regulation for the management and treatment of the confidential and reserved corporate information; Finally the independent auditors expressed an opinion of consistency of the information under subsection 1, letters c), d), f), l), m) and subsection 2, letter b), of art. 123-bis of Legislative Decree 58/98 in accordance with the amendments introduced by art. 5, subsection 4, of Legislative Decree 173/2008. With reference to Legislative Decree no. 231/2001, the Company adopted an organisational, management and control model with a content that is in line with international best practices. During the year, we met the Supervisory Body for the mutual exchange of information. During the year, no reports were made pursuant to art. 2408 of the Italian Civil Code. We do not know of other facts or episodes worth mentioning at the Meeting. We verified the compliance with the legal provisions concerning the preparation of the draft financial statements and consolidated financial statements of the group, their supplementary notes and the accompanying directors’ report on operations directly and with the assistance of the heads of departments and through information obtained by the independent auditors and have no observations to make on this point. We issued three opinions pursuant to art. 2386 of the Italian Civil Code concerning the cooptation of three Board Members and an opinion pursuant to art. 2389, third subsection of the Italian Civil Code. In performing the supervisory activities described above, during 2012 the Board of Statutory Auditors met five times, participated in ten meetings of the Board of Directors and in six meetings of the Risk Control and Corporate Governance Committee and six meetings of the Remuneration and Human Resources Committee.
During this activity and also on the basis of the information periodically exchanged with the independent auditors Deloitte & Touche S.p.A., no important omissions and/or reprehensible actions or irregularities emerged, or in any case significant facts that are such to need to be reported to the control bodies or to be mentioned in this report. Consequently to the supervisory activity performed, the Board of Statutory Auditors invites you to approve the financial statements for the year ended December 31, 2012 in compliance with the proposal of the Board of Directors. Rome, March 26, 2013 The Board of Statutory Auditors
Luca A. Guarna Lelio Fornabaio Mario Tonucci
209 Annual Report 2012 Gemina S.p.A. Separate Financial Statements and notes
210 Annual Report 2012 Gemina S.p.A. Separate Financial Statements and notes
GEMINA Generale Mobiliare Interessenze Azionarie S.p.A. Fully paid-in share capital 1,472,960,320 euro of which no. 1,469,197,552 ordinary shares and no. 3,762,768 non-convertible savings shares Registered office: Via dell’Aeroporto di Fiumicino 320 - 00054 Fiumicino (Rome) VAT number, Tax code and Rome Companies' Register no. 01668340159
211 www.gemina.it