Annual report - Viscofan

At 31 December 2006 the Group comprises the following business segments:• Casings: manufacture and sale of all types of artificial casings for meat products and other uses.• Preserves: production and marketing of food products.The Group also produces and sells electrical energy through a cogeneration plant located at its Parent Company installations. Theseactivities do not comprise segments which are deemed reportable.Inter-segment pricing is determined on an arm’s length basis.The casings segment is managed on a worldwide basis, although the Group mainly operates in three geographical areas, comprisingEurope, North America and South America.In presenting information on the basis of geographical segments, segment revenue, expense, assets and liabilities are based on thegeographical location of production and of assets.Details of financial information by business and geographical segments for 2005 and 2004 are included in Appendix 2, which formsan integral part of these notes.6. Business Combinations6.1. Acquisition of Koteks Viscofan, d.o.o.The public share offer through which the Company acquired the majority of voting rights in Koteksprodukt AD ended on 19 July2005. The Company subsequently acquired 100% of the share capital in this company. In 2006 this company changed its nameto Koteks Viscofan, d.o.o. The registered offices of the company Koteks Viscofan, are in Serbia and its principal activity is themanufacture and marketing of artifical casings. The Group incurred consolidated losses of Euros 480 thousand on this businesscombination from its date of acquisition to year end.If the acquisition had taken place on 1 January 2005, ordinary income of the Group and consolidated losses for the year ended31 December 2005 would have amounted to Euros 4,227 thousand and Euros 3,951 thousand, respectively.The cost of acquisition of this investment amounted to Euros 3,889 thousand, which was settled in cash. Net assets acquiredamount to Euros 975 thousand, according to this company’s accounting records.No relevant intangible assets were identified. The only balance sheet item identified for which fair value differs from thecarrying amount is property, plant and equipment valued by an independent appraiser.Consequently, the Group recognised property, plant and equipment at fair value, taking into account its tax effect.6.2. Acquisition of Tripasin ABOn 30 September 2005 the Group sold 40% of its investment in Tripasin AB for one Euro while at the same time acquiring themachinery and all intangible assets of this company. Effectively, the business was acquired for Euros 4,500 thousand, withTripasin AB subsequently ceasing its activities.Intangible assets identified and measured at fair value comprise the trademark and customer portfolio, amounting to Euros2,672 thousand (see note 8). The excess paid over the carrying amount of the machinery and customer portfolio, increased bythe effect of the sale of the share capital of Tripasin AB was recognised initially as goodwill of Euros 2,301 thousand.In 2006 the Group has confirmed that this goodwill has been impaired and the impairment losses have been recognised in fullin the accompanying consolidated income statement.95