185000000 IT Holding Finance SA

IT HOLDING S.p.A. Notes to the consolidated financial statements for the year ended December 31, 2004
Financial income and charges
Financial income
Financial income comprises interest receivable on funds invested, dividend income and foreign exchange gains
and gains on derivative financial instruments unless off-set in a hedging relationship. Interest income is recognized
in the income statement as it accrues, taking into account the effective yield on the asset. Dividend income is
recognized in the income statement on the date that the dividend is declared.
Financial charges
Financial charges comprise interest payable on borrowings calculated using the effective interest method, expenses
related to the securitization programme, foreign exchange losses and losses on derivative financial instruments
unless off-set in a hedging relationship.
The interest expense component of finance leases is recognized in the income statement using the effective interest
rate method.
Earnings per share
Basic earnings per share are calculated by dividing the profit or loss for the period attributable to shareholders of
the company by the weighted average number of ordinary shares outstanding during the period. Diluted earnings
per share are calculated by dividing the profit or loss for the period attributable to shareholders of the company by
the weighted average number of ordinary shares outstanding during the period adjusted for the effects of all
potentially dilutive shares (e.g. employee stock options).
Cash flow statement
The cash flow statement has been prepared applying the indirect method. Cash and cash equivalents in the cash
flow statement comprise the balance sheet item cash and cash equivalents . Cash flows in foreign currencies have
been translated at average exchange rates for the year. Income and expenses in respect of interest, dividends
received and taxation on profits are included in cash flows from operating activities.
Going concern
The Group, once again incurred a loss for the year ended December 31, 2004, even though significantly lower than
the loss incurred in the year ended December 31, 2003. The financial statements have been prepared on a going
concern basis as Management believes that the measures taken in the course of the year to ensure the Group’s
ability to repay debt maturing in the year 2005 and to focus the Group on its core profitable operations in order to
strengthen its market position and facilitate the planned growth for the next few years, will return the Group to
profitability in the medium term.
The refinancing project commenced during 2004, included the partial repurchase, and subsequent cancellation, of
the Ferré Finance 7% 05/05 notes for a nominal value of Euro 25 million. The repurchase was made using the
proceeds on the sale of the fragrance companies. It also involved the placing of new Senior 2012 Notes for Euro
150 million, with an eight-year duration, and the taking out of a new five-year loan of Euro 85 million, granted by
a pool of banks led by Sanpaolo IMI S.p.A.. This loan was used to repay in advance the original loan of the same
amount (original due date: December 2005).
In early 2005 the Group:
a. finalized the tender offer made by IT HOLDING FINANCE S.A. for the purchase of the Ferré Finance 7%
05/05 notes for a nominal value of Euro 80.4 million;
b. placed another bond issue (Additional Senior Notes 2012) for Euro 35 million. The funds obtained with this
placing will be used to repurchase or reimburse the Ferré Finance 7% 05/05 notes which expire in May 2005.
The Directors have called an extraordinary meeting of the Holding Company’s shareholders in April 2005 to
approve a proposal to change article 5 of the bylaws and to grant the Board , pursuant to article 2443 of the Italian
Civil Code, the power to increase the share capital, with the exclusion of the option in accordance with paragraph 5
of article 2441 of the Italian Civil Code.
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