Pre-Annual General Meeting Information • Apr 29, 2020
Pre-Annual General Meeting Information
Open in ViewerOpens in native device viewer
REPORT OF THE BOARD OF DIRECTORS OF ATLANTIA SPA ON ITEM 2) ON THE AGENDA FOR THE ANNUAL GENERAL MEETING TO BE HELD IN SINGLE CALL ON 29 MAY 2020: "ENGAGEMENT OF THE INDEPENDENT AUDITOR FOR THE FINANCIAL YEARS 2021-2029. RELATED AND RESULTING RESOLUTIONS."
The engagement of Deloitte & Touche SpA as the Independent Auditor for the nine-year period 2012-2020, as approved by the Annual General Meeting of 24 April 2012, expires with approval of the financial statements for the year ended 31 December 2019.
In this regard, it should be noted that the contract for the statutory audit of the accounts may not be awarded to the outgoing audit firm, once it has completed, at the end of 2020, the nine-year term provided for in art. 17 of Legislative Decree 39 of 27 January 2010. This legislation establishes that the engagement must have a term of nine years and may not be renewed or the same audit firm reappointed until at least four financial years have passed since termination of the previous engagement.
The Company thus agreed with the Board of Statutory Auditors that, in 2019, it would begin the process of selecting the Group's Independent Auditor for the nine-year period 2021-2029. This process was initiated in advance, as this will:
The Board of Directors is, therefore, submitting the reasoned recommendation on the engagement of the Independent Auditor to conduct the statutory audit of Atlantia SpA's accounts for the period from 2021 to 2029 and on the related fees, as drawn up by the Board of Statutory Auditors in its role as the "Audit Committee", for approval by the Annual General Meeting. The recommendation, prepared pursuant to art. 13, paragraph 1, and art. 17, paragraph 1 of Legislative Decree 39 of 27 January 2010, as amended, articles 16 and 18 of Legislative Decree 135 of 17 July 2016 and art. 16 of Regulation (EU) 537/2014 of the European Parliament and Council dated 16 April 2014, is attached to this report.
Given the above, the Board of Directors invites the Annual General Meeting to approve the following resolution:
"The Annual General Meeting of Atlantia SpA's shareholders, having taken into account the Recommendation drawn up by the Board of Statutory Auditors, in its role as the Audit Committee, regarding the engagement of the Independent Auditor to conduct the statutory audit of Atlantia SpA's accounts for the financial years from 2021 to 2029, and agreeing with the related reasoning
In keeping with the Board of Statutory Auditors' proposal, the above fees will be adjusted annually, to the contractually agreed extent, based on the performance of the cost-of-living index and may vary as a result of changes in the scope of the audit firm's engagement or following exceptional events and/or events that are unforeseeable at the time of executing the contract. This is without prejudice to the Board of Statutory Auditors' assessment and review of the independence and activities of the Independent Auditor in the Board's role as the Audit Committee.
Rome, 29 April 2020
Atlantia SpA for the Board of Directors The Chairman
Fabio Cerchiai
Recommendation of Atlantia SpA's Board of Statutory Auditors regarding the engagement of the Independent Auditor to conduct the statutory audit of the accounts – prepared pursuant to art. 13, paragraph 1, and art. 17, paragraph 1 of Legislative Decree 39 of 27 January 2010, as amended, articles 16 and 18 of Legislative Decree 135 of 17 July 2016 and art. 16 of Regulation (EU) 537/2014 of the European Parliament and Council dated 16 April 2014 – for the period 2021-2029 and approval of the related fees
The engagement of Deloitte & Touche SpA (the "Outgoing Audit Firm") as the Independent Auditor to conduct the statutory audit of the accounts of Atlantia SpA ("Atlantia" or the "Company") for the nine-year period 2012-2020 expires with approval of the financial statements for the year ended 31 December 2020.
As a result, Atlantia began the process of selecting a new audit firm to conduct the statutory audit for the financial years from 2021 to 2029, in compliance with the legislation in force. This process is described in greater detail below.
The Board of Statutory Auditors, in its role as the "Internal Audit Committee", has prepared the following recommendation to the Board of Directors (the "Recommendation") for the purposes provided for in the legislation in force and as required by the Articles of Association.
The legislative framework for the statutory audit of accounts consists of the following legislation:
In particular, the purpose of the EU legislation is to further harmonise the original rules introduced by Directive 2006/43/EC at EU level. This will allow for greater transparency and predictability of the requirements for persons that carry out statutory audits and enhance their independence and objectivity in the performance of their tasks. This also has the aim of reinforcing the public's confidence in the separate and consolidated financial statements of the above entities.
As a means to enhancing the quality of audits, the Regulation has reinforced the role of the Audit Committee, which, in companies that use a traditional governance system, is carried out by the Board of Statutory Auditors (art. 19 of the Decree). The Regulation assigns this Committee the task of presenting the management body (i.e. the Board of Directors in companies that use a traditional governance system) with a reasoned Recommendation in order to enable the Annual General Meeting of shareholders to take a sufficiently balanced decision.
The Recommendation was drawn up following a specific selection process prepared by the Company and for which the Board of Statutory Auditors was responsible for conducting in accordance with art. 16, paragraph 3 of the Regulation.
In compliance with the provisions of the above art. 16 of the Regulation, given that the engagement relates to the audit of a public-interest entity, such as Atlantia, this Recommendation provides two potential alternatives for the engagement and indicates a duly justified preference for one of the two.
It should be noted that the engagement may not be awarded to the Outgoing Audit Firm, as it will have completed, at the end of 2020, the nine-year term provided for in art. 17 of the Decree, which, in its amended form, establishes that the engagement must have a term of nine years and may not be renewed or the same audit firm reappointed until at least four financial years have passed since termination of the previous engagement.
In addition, for the purposes of the selection process, the Board of Statutory Auditors availed itself of the support provided by a working group set up by Atlantia, consisting of 5 of the Company's managers (the "Working Group") and the Procurement and Logistics department of Autostrade per l'Italia SpA ("ASPI"), which carries out these activities under a service agreement with Atlantia.
The Company, in agreement with the Board of Statutory Auditors, conducted an assessment with a view to identifying the audit firms to be invited to take part in the selection.
The assessment took into account the requirements introduced by the reform, which are contained in art. 10-quinquies of Legislative Decree 39 of 27 January 2010. This article clarifies that: "In the case of the statutory audit of the consolidated financial statements of a group of undertakings, the group auditor bears full responsibility for the audit report referred to in article 14 or, where applicable, for the audit report referred to in article 10 of the EU Regulation and for the additional report for the Audit Committee referred to in article 11 of the EU Regulation".
These requirements confirm the approach already adopted in Italian law, under which the group auditor has overall responsibility for its audit opinion on the consolidated financial statements as a whole, even where certain companies belonging to the group are audited separately by other auditors. As a result, for reasons of efficiency and cost, the invitation to tender regarded the engagement of an Independent Auditor for Atlantia and its Italian and overseas subsidiaries (the "Atlantia Group" or "Group").
The following criteria formed the basis for the selection of the audit firm to be invited to tender: (i) the proportion of the total fees declared by potential tenderers in the last year represented by the fees payable to potential tenderers in the countries in which the Atlantia Group's subsidiaries classified as public-sector entities are resident; (ii) the audit firms currently engaged by issuers included in the FTSE-MIB, IBEX-35 and CAC-40 indexes or among Atlantia's peers, as selected by analysts.
Given this, on 20 June 2019, the Company sent EY SpA ("EY"), KPMG SpA ("KPMG") and PricewaterhouseCoopers SpA ("PwC" and, together, the "Tendering Firms") a letter of invitation (the "Letter of Invitation") to tender (the "Tender" and, together, the "Tenders") for a contract to provide the Company with the services described in the Letter of Invitation in the nine-year period 2021-2029.
The engagement to be assigned through the selection process was defined on the basis of Atlantia's specific needs as a listed company. These are:
The Letter of Invitation set out the procedure for submitting the Tender solely via the "BRAVO" platform (web address: https//autostrade.bravosolution.com/web/login.html) by no later than the date indicated on the Highway to Procurement tender portal (the "Portal"), attaching the following:
■ the financial offer, as required by point 4.3 of the Letter of Invitation.
Before beginning the selection process, by identifying the information required in order to submit a Tender, the Company, in agreement with the Board of Statutory Auditors, established clear, predetermined selection criteria using ASPI's "BRAVO" platform. This was done to ensure that the process was transparent and the activities carried out and the decisions taken were fully traceable.
The selection criteria described below are based on both qualitative and quantitative elements and have been established bearing in mind the Group's geographical footprint around the world and the specific nature of the sector in which it operates.
The identified qualitative and quantitative elements were then used to create a rating model, drawn up with the aim of measuring key aspects of the tenders received, by assigning each of them an overall score based on an assessment of the above elements.
Assessment of the identified selection criteria was preceded by an assessment of the thoroughness and formal accuracy of the administrative information requested in the Letter of Invitation.
At the end of this preliminary examination of the Tenders submitted, the assessment took place in three consecutive phases, implemented in the following order:
It was an essential requirement for the Tenders to pass this stage in order to qualify for the next one, based on the procedures and considerations set out below.
This is information needed to assess and confirm that the tenderers meet the necessary requirements for fulfilment of the engagement and identify the existence of potential conflicts of interest with regard to the engagement. This information includes:
In addition, as required by the Letter of Invitation:
Checks on any inconsistencies in tenders were carried on the basis of the number of "hours" (not taking into account the overall price).
Where the minimum number of chargeable hours, calculated on the basis of the actual number of hours worked by the current audit firms and of the hours included in each of the three tenders received, is exceeded (total hours in each tender < minimum number of hours), Atlantia asked the relevant audit firm to justify its tender, evaluating the basis for its exclusion at its sole discretion.
All the tenders passed the checks on inconsistency.
Atlantia's Working Group, with the support of ASPI's Procurement and Logistics department and with one or more members of the Board of Statutory Auditors in attendance, thus proceeded to examine each technical offer, evaluating the following elements:
provide a clear, detailed explanation of how they intend to organise their operations and the flow of information in relation to the Atlantia Group's organisational structure and processes, above all with regard to the operational tools used in reviewing and assessing operational and support processes and the related controls; (ii) to indicate the operational tools used in reviewing and assessing business and support processes, providing evidence of the related controls, also indicating the use of any new technologies (robotics, data analytics, continuous auditing, collaboration) used for the audit; (iii) to indicate the percentage for the stable involvement of partners and/or audit managers from the professional practice/technical department of the national affiliate concerned as part of the professional mix of the audit team;
All the Tenderers who passed the checks on inconsistency and the technical phase were admitted to the financial phase.
The hourly rates applicable to effort-based services:
The hourly rates applicable to fixed-price services are understood to include any costs incurred for the support provided by capital market experts in relation to procedures requested in connection with the issue of financial instruments.
Finally, the audit firms were requested to provide estimates of the daily rates charged for the categories of personnel involved in providing optional services relating to mergers & acquisitions (vendor/acquisition due diligence) in countries of interest to the Atlantia Group.
The selection included the following steps.
As previously stated, on 20 June 2019, the Company sent EY, KPMG and PwC the Letter of Invitation to submit a Tender for a contract to provide the Company with the services described in the Letter of Invitation in the nine-year period 2021-2029.
The Letter of Invitation granted the Tenderers the possibility to submit requests for clarification until 4.00pm on 18 July 2019.
Within this deadline, the Company received requests for clarification from the Tenderers with regard to the Letter of Invitation, to which the Company then replied, as before using the above Portal.
On 24 July 2019, i.e. within the deadline indicated on the Portal, the Company received tenders from EY, KPMG and PwC, accompanied by the information and documents requested.
On 29 July 2019, the envelopes containing the administrative information were opened in the presence of the Board of Statutory Auditors.
On 1 August 2019, the envelopes containing the technical offers were opened in the presence of the Board of Statutory Auditors.
On 6 August 2019 and 5 September 2019, requests for clarification from the Tenderers regarding the technical offers, including chargeable hours, were prepared.
On 20 September 2019, meetings attended by the Board of Statutory Auditors, Company departments and the Tenderers took place with a view to obtaining more detailed information and to enable the Tenderers to present their tenders. Following this meeting, requests for further documents were made on 23 September 2019.
Based on the documentation received, and taking into account the evaluation criteria, the Board of Statutory Auditors met with the above Company departments to conduct a detailed collective assessment of the technical offers, based on the results of the in-depth assessments carried out. Details of the technical offers were collectively assessed in respect of each evaluation criterion and the key aspects of each offer.
In conducting the selection:
The assessments conducted also took into account supervisory authorities' requirements and/or recommendations in respect of the statutory audit of accounts.
The assessments of the Tenders showed that, among other things:
Following this process, on 10 October 2019, the technical offers were awarded points in the presence of the Board of Statutory Auditors. This was followed by the opening of the envelopes containing the financial offers.
On 15 October 2019, further information was requested via the Portal regarding the financial offers submitted by the Tenderers in preparation for an accurate evaluation of the offers.
The answers were received by the pre-determined date of 17 October 2019, thus enabling the Working Group to complete its computation of the Agreed Prices, as shown below, and the scores for each Tenderer.
As stated above and set out in the Letter of Invitation, for the purposes of this Recommendation, both qualitative and quantitative aspects were examined.
The maximum possible scores set out in the Letter of Invitation for each evaluation criterion are summarised below.
A. Technical phase: 100 points, broken down as follows:
The score for the technical phase was assigned by the five members of the Working Group when scrutinising and scoring the offers, with the exception of the scores for the macro-categories "The results of EU oversight of Tenderers' affiliates" and "The total number of chargeable hours for the statutory audit of companies within the mandatory scope", calculated applying, to the pertinent information in the respective technical offers, the pre-established formulae set out in the operational-methodological notes agreed with the Board of Statutory Auditors and attached to the Letter of Invitation.
The minimum technical score required to qualify for the financial phase was 80 points.
B. Financial phase: the financial phase takes into account the estimated cost (based on effort or fixed prices) of the statutory, recurring and optional services.
The formula used to determine the Final Score (P) involves weighting the Agreed Price (Pc), as described in greater detail in paragraph 5.2 below, with the quality factor (F = {1-[0,02*(Pt-80)]}):
$$
P = Pc^{}{1-[0.02^{}(Pt-80)]}
$$
where:
The lower the score (P), the higher the ranking.
In terms of the quantitative criteria, the related scores were assigned to each Tenderer on the basis shown in the Letter of Invitation.
The Board of Statutory Auditors adopted the above evaluation procedure, conscious of the important role we play in the process of appointing the Independent Auditor, so as to individually assess and evaluate every single key aspect and, afterwards, also relate and evaluate it within the overall framework. We therefore sought to weigh up all the various factors involved in the evaluation process so as to arrive at final scores accurately reflecting the Company's specific requirements.
Having considered all of the above, the Board of Statutory Auditors carried out the evaluation of the Tenders described below.
The documentation received confirmed that all of the Tenderers share the fact that they belong to leading international networks of affiliates, providing high-quality, professional services. Proof of this is provided by the high scores assigned to all three Tenderers.
To begin with, it should be noted that the macro-categories, "The results of EU oversight of Tenderers' affiliates" (3 points) and "The total number of chargeable hours for the statutory audit of companies within the mandatory scope" (20 points), were not evaluated by members of the Working Group, as the scores were assigned to each Tender by applying, to the pertinent information in the respective technical offers, the pre-established formulae set out in the operational-methodological notes.
The members of the Working Group carried out an independent calculation of the related scores for the above macro‐categories for each tenderer, reaching similar conclusions.
A number of considerations on the quantitative macro-categories are included below.
Networks of affiliates (7 points): as part of the evaluation of this area, particular attention was paid to the degree of integration in the model used. Despite certain differences identified by the Working Group, the evaluations reached for the three tenderers were broadly in line.
The methodological and operational approach (30 points): as part of the evaluation of this area, particular attention was paid to the level of standardisation, or personalisation, of the approach used.
The professional qualities of the audit team presented (40 points): in its individual evaluations, the Working Group paid particular attention to the level of knowledge of the relevant sector and the degree of rotation among partners.
In terms of the financial evaluation, attention was paid to determining the related agreed prices for the various categories of service, using the procedure described below.
The Agreed Price (Pc) offered by each audit firm was the sum of the prices quoted for the nine-year period for the companies within the mandatory scope and for the different categories of service requested, weighted by the probability of their occurrence (weightings of 1 for statutory and recurring services, and of 0.15 for optional services, including those connected with mergers & acquisitions). The following formula was used:
Pc = ∑ statutory services + ∑ recurring services + (∑optional services * 0.15)
On 25 October 2019, scores were assigned to the Tenders in the presence of the Board of Statutory Auditors, based on the activities carried out and described above. The three tenderers were then ranked, as shown below:
| EY | KPMG | PwC | |
|---|---|---|---|
| Networks of affiliates | 7 | 7 | 7 |
| Results of EU oversight of Tenderers' affiliates | 3 | 1 | 0 |
| Methodological and operational approach to the engagement | 26 | 30 | 29 |
| Professional qualities of the audit team presented | 36 | 40 | 39 |
| Total number of chargeable hours for the statutory audit of companies within the mandatory scope |
19 | 20 | 16 |
| Technical score (Pt) | 91 | 98 | 91 |
| Quality correction factor (F) = {1- [0.02*(Pt – 80)]} | 0.78 | 0.64 | 0.78 |
| Statutory services (€) | 24,401,719 | 28,237,950 | 34,026,408 |
| Recurring services (€) | 5,261,437 | 4,685,396 | 5,079,404 |
| Optional services weighted by 0,15 (€) | 3,377,647 | 3,571,123 | 3,907,902 |
| Agreed Price (Pc) | 33,040,803 | 36,494,469 | 43,013,714 |
| Final score (P) = (Pc)*(F) | 25,771,827 | 23,356,460 | 33,550,697 |
| Ranking | 2 | 1 | 3 |
It should be remembered that the lower the score (P), the higher the ranking.
The overall Tender from the winning bidder (KPMG), whilst not being the most competitive from a merely financial viewpoint, will result in the service being more cost-efficient. On a like-forlike basis in terms of the companies and services covered, this can be measured in terms of a saving of approximately 15% compared with the fees paid annually to the current auditor:
| Total annual hours | Rate (€) | Price (€) | |
|---|---|---|---|
| Current auditor | 70,218 | 51.29 | 3,601,500 |
| KPMG (1 ) |
57,546 | 53.00 | 3,049,913 |
| Comparison with the current auditor | |||
| in % | -18% | 3% | -15% |
The members of the Working Group:
have agreed unanimously not to proceed with a second round of bidding (potentially provided for in the methodological and operational note governing the competitive procedure) and to thus provide final confirmation of the provisional rankings examined, selecting KPMG as the best Tenderer and EY as the second-best Tenderer.
The Board of Statutory Auditors:
that the Board of Directors propose that the Annual general Meeting of shareholders award the contract to conduct the statutory audit of Atlantia SpA's accounts for the financial years 2021- 2029 to KPMG SpA or EY SpA.
The financial terms relating to the above audit firms are shown in annex 1 (financial conditions) to this Recommendation, whilst the contract terms, identical for all the audit firms
( 1 ) To make the hours, rates and total fees charged by the current auditor comparable with those of KPMG, the figures refer solely to the statutory services rendered during 2018 and covered by the bid.
participating in the selection, are those shown in the facsimile of the Framework Agreement attached to the Letter of Invitation.
Finally, of the two
for KPMG SpA, as, following the evaluation of the Tenders, it was the audit firm with the highest ranking and is, therefore, deemed to most suited to undertake the engagement, and most able to meet the Company's identified requirements.
The Letter of Invitation, with the related annexes, and the tender documents received are held on record at the Company and are available to the Board of Directors.
The Board of Statutory Auditors, pursuant to art. 16, paragraph 2 of the Regulation, states that this Recommendation is free from influence by a third party and that no provision of the kind referred to in paragraph 6 has been imposed upon it.
Rome, 8 November 2019
The Board of Statutory Auditors
Corrado Gatti (Chairman)
Alberto De Nigro
Sonia Ferrero
Lelio Fornabaio
Livia Salvini
Registered office: Via Vittor Pisani, 25 - 20124 Milan (MI) Tax Code and Companies' Register no. 00709600159 REA no. 512867 (Milan) VAT no. 00709600159 Register of Statutory Auditors no.: 70623
| Chargeable hours, hourly rates and fees for statutory services |
Hours in nine-year period 2021-2029 |
€ per hour | Fees |
|---|---|---|---|
| Italian companies | 185,958 | 49.43 | 9,191,904 |
| Overseas companies | 343,107 | 55.51 | 19,046,046 |
| Total Atlantia Group | 529,065 | 53.37 | 28,237,950 |
| Fees for recurring services | Effort-based services (€) | Fixed-price services (€) |
Total |
|---|---|---|---|
| Italian companies | 325,200 | 828,000 | 1,153,200 |
| Overseas companies | 1,007,696 | 2,524,500 | 3,532,196 |
| Total Atlantia Group | 1,332,896 | 3,352,500 | 4,685,396 |
| Fees for optional services | Effort-based services (€) | Fixed-price services (€) |
Total |
|---|---|---|---|
| Services over nine-year period | 2,309,221 | 16,299,450 | 18,608,671 |
| M&A services | 5,058,817 | - | 5,058,817 |
| Optional services for Telepass | - | 140,000 | 140,000 |
| Total Atlantia Group for optional services (€) |
7,368,038 | 16,439,450 | 23,807,488 |
| Total Atlantia Group for optional services with 0.15 weighting (€) |
1,105,206 | 2,465,918 | 3,571,123 |
| KPMG | |||
|---|---|---|---|
| Services for Atlantia SpA | Effort (hours) 2021-2029 |
Fees 2021-2029 | |
| Statutory audit of the consolidated financial statements | 8,919 | 440,866 | |
| Review of the consolidated half-year report | 4,473 | 221,100 | |
| Statutory audit of the separate financial statements (2 ) |
3,483 | 172,165 | |
| Non-financial statement | 4,167 | 205,975 | |
| Total Atlantia SpA for statutory services | 21,042 | 1,040,106 |
( 2 ) Including checks on the regular keeping of the Company's books and the preparation of tax returns.
Registered office: Via Po, 32 - 00198 Rome Tax Code and Companies' Register no. 00434000584 REA no. 250904 (Rome) VAT no. 00891231003 Register of Statutory Auditors no.: 70945
| Chargeable hours, hourly rates and fees for statutory services |
Hours in nine-year period 2021-2029 |
€ per hour | Fees |
|---|---|---|---|
| Italian companies | 203,737 | 39.00 | 7,945,725 |
| Overseas companies | 335,402 | 49.06 | 16,455,994 |
| Total Atlantia Group | 539,139 | 45.26 | 24,401,719 |
| Fees for recurring services | Effort-based services (€) | Fixed-price services (€) |
Total |
|---|---|---|---|
| Italian companies | 669,181 | 1,864,410 | 2,533,591 |
| Overseas companies | 859,201 | 1,868,645 | 2,727,846 |
| Total Atlantia Group | 1,528,382 | 3,733,055 | 5,261,437 |
| Fees for optional services | Effort-based services (€) | Fixed-price services (€) |
Total |
|---|---|---|---|
| Services over nine-year period | 3,643,651 | 7,518,420 | 11,162,071 |
| M&A services | 11,355,574 | - | 11,355,574 |
| Optional services for Telepass | - | 0 | 0 |
| Total Atlantia Group for optional services (€) |
14,999,225 | 7,518,420 | 22,517,645 |
| Total Atlantia Group for optional services with 0.15 weighting (€) |
2,249,884 | 1,127,763 | 3,377,647 |
| EY | |||
|---|---|---|---|
| Services for Atlantia SpA | Effort (hours) 2021-2029 |
Fees 2021-2029 | |
| Statutory audit of the consolidated financial statements | 9,789 | 381,771 | |
| Review of the consolidated half-year report | 4,911 | 191,537 | |
| Statutory audit of the separate financial statements (3 ) |
3,817 | 148,853 | |
| Non-financial statement | 4,578 | 178,551 | |
| Total Atlantia SpA for statutory services | 23,095 | 900,712 |
( 3 ) Including checks on the regular keeping of the Company's books and the preparation of tax returns.
Building tools?
Free accounts include 100 API calls/year for testing.
Have a question? We'll get back to you promptly.