The Board of Directors of IFI – Istituto Finanziario Industriale, which met today in Turin under the chairmanship of Gianluigi Gabetti, approved the consolidated financial statements and the draft statutory financial statements for the year ended December 31, 2005, which will be submitted to the Shareholders’ Meeting convened for May 25, 2005 in first call and May 26, 2005 in second call. The IFI Group ended 2005 with a consolidated profit of € 676 million and a sharp increase over the profit reported for 2004 of € 120 million. The increase of € 556 million originates from a considerable improvement in the result of the IFIL Group which, in turn, benefited from the very positive results of the Fiat group and the Sequana Capital group, as well as nonrecurring transactions.
Consolidated equity of the Group also grew (from € 2,123 million at the end of 2004 to € 3,084 million at the year of 2005). The increase of € 961 million is due to the consolidated profit and other net positive changes. The statutory financial statements show a slight improvement in the result: IFI S.p.A., in fact, ended the year 2005 with a profit of € 38.5 million, an increase of € 0.8 million compared to the profit of € 37.7 million reported last year.
The net financial position of IFI S.p.A. at December 31, 2005 is a borrowings position of € 279.5 million, € 15.7 million higher than at the end of 2004 (-€ 263.8 million). The Board of Directors voted to put forward a motion to the Stockholders’ Meeting to appropriate the profit to the extraordinary reserve for € 38.5 million and not to distribute dividends.
The Board also voted to put forward a motion to the Stockholders’ Meeting to renew the authorization for the purchase and disposition of treasury stock. In particular, the authorization vests the Board with the right to purchase on the market, for 18 months from the date of the stockholders’ resolution, up to a maximum of 16 million ordinary and/or preferred shares for a maximum outlay of € 150 million, at a price of not less and not more than 15% of the market price of the stock in the trading session on the day before each single transaction.
The request for the authorization to buyback treasury stock will allow the Company to take action, if necessary, in the event of share price fluctuations outside normal variations connected with stock market performance and in conformity with market practice and use the treasury stock as a source of investment for an efficient utilization of company cash resources and also for share exchanges. IFI currently holds 5,360,300 preferred treasury shares, equal to 6.98% of the class of stock and 3.28% of capital stock.
The Board, lastly, voted to sell the investment in Exor Group (3,418,242 ordinary shares, equal to 29.3% of capital stock) to the same Exor Group, which indicated its willingness to purchase the shares. The sale will bring IFI proceeds of about € 207 million (at a sales price of € 60.5 per share) and a gain in the statutory financial statements of € 104 million. IFI’s net debt will decrease considerably (from € 305 to about € 100 million). After concluding the sale, scheduled for April, Exor Group will proceed to cancel the treasury stock that was purchased and will consequently reduce its capital stock. The sale is principally motivated by IFI’s desire to substantially reduce its debt and the fact that the Exor Group investment, after the main holdings were sold, now consists of 85% liquidity. IFI and Exor Group are related parties, given that they are parties under the common control of Giovanni Agnelli e C. Società in Accomandita per Azioni. There are no risks in connection with potential conflicts of interest as a result of the transaction that was concluded among the related parties. Citigroup Global Markets Limited, acting as financial advisor, has released an opinion to the IFI Board of Directors, as to the fairness to IFI, from a financial point of view, of the consideration agreed with Exor Group in the sale of IFI’s investment in Exor Group. The transaction had no effect on the compensation paid to the directors of IFI.
Performance of the holdings and subsequent events
The IFIL Group closed the year 2005 with a consolidated profit of € 1,090 million, the highest in its history. Compared to the prior year, which ended with a consolidated profit of € 124 million, the increase is € 966 million and is due to the net improvement in the results of the Fiat group and the Sequana Capital group, and also nonrecurring transactions.
Exor Group also made a contribution to the IFI Group’s result, reporting a consolidated net profit of € 36 million, although lower than that of 2004 (€ 93 million).
In March and April 2005, IFI had purchased on the market 16,708,441 IFIL ordinary shares (1.61% of the class of stock) for € 55.5 million and 1,866,420 IFIL savings shares (4.99% of the class of stock) for € 6.4 million.
Significant subsequent events
In February and March 2006, IFI purchased on market 4,368,876 IFIL ordinary shares (0.42% of the class of stock) for an investment of € 18.4 million. IFI currently holds 664,860,716 IFIL ordinary shares, equal to approximately 64% of the class of stock, and 1,886,420 IFIL savings shares, equal to 4.99% of the class of stock. The entire holding represents 61.96% of capital stock. After this investment, IFI’s net debt increased by approximately € 305 million.
On February 21, 2006, Virgilio Marrone (General Manager of IFI S.p.A.), as an individual with power of attorney in Giovanni Agnelli e C. S.a.p.az., was notified by Consob of its objections under art. 187-septies of Legislative Decree 58/1998 in relation to the content of the press release issued by that company on August 24 of last year.
Taking into account the motion for the distribution of dividends from 2005 profits formulated by the IFIL Board of Directors and the operating and financial effects of the sale of the investment in Exor Group, 2006 forecasts for IFI S.p.A. are for a considerably higher profit and a significant reduction in net debt. On the basis of the indications formulated by the IFIL Group, the IFI Group is expected to show a profit for 2006, although lower than that of 2005.