Financial Reports

Arnoldo Mondadori Editore S.p.A. hereby informs that the Interim Management Statement at 30 September 2023 is now available at the Company’s registered office, at the authorized storage mechanism 1info (www.1info.it) and on the website www.gruppomondadori.it (Investors section).

Today, the meeting of the Board of Directors of Arnoldo Mondadori Editore S.p.A., chaired by Marina Berlusconi, reviewed and approved the Half-Year Report at 30 June 2023 presented by CEO Antonio Porro.

“The first six months of the current year show a general growth in revenues assisted by the excellent performance of our core businesses, which are outperforming estimates made at the beginning of the year”, underlined Antonio Porro, CEO of Mondadori Group. “Careful operational management has also allowed us to increase overall profitability and cash flow generation. The result is an improvement in financial performance and a strengthening of the Group’s capital which, together with the favourable trend in the prices of the main production factors, have created the conditions for an upward revision of the targets for the 2023 financial year”, concluded Porro.

PERFORMANCE AT 30 JUNE 2023

Consolidated net revenue for the first half of 2023 amounted to € 362.4 million, compared to € 355.1 million in the previous year, an increase of 2.1%. Like-for-like, organic revenue growth came to 2.7%.

Adjusted EBITDA for the first half of 2023 was € 38.2 million, an increase of almost € 11 million on the € 27.6 million recorded for the first half of 2022.

Netting the results for the two half-years in question of the reliefs and contributions paid, the growth recorded by Group’s EBITDA would exceed € 14 million.

All business areas contributed to the result, especially the Trade BOOKS Area, due in particular to the effect of the consolidation of the results of the recently acquired companies, among other factors, and the Educational BOOKS Area, which benefited from a favourable timing effect compared to last year. These results were achieved despite the increases in the cost of raw materials and the rates charged for printing and logistics services in the first part of the year compared to the previous year.

Group EBITDA for the first six months of 2023 amounted to € 40.3 million, compared to € 26.8 million in the corresponding period of 2022, an improvement of approximately € 14 million, attributable to the favourable dynamics of the aforementioned operations and the recognition in the current year, in the MEDIA Area, of the net capital gain resulting from the sale of the publications Grazia and Icon (and the related international network) amounting to approximately € 2.8 million.

Thanks to the positive performance of all business areas, the Mondadori Group’s EBIT for the first half of 2023, positive for € 14 million, showed an improvement of € 10.7 million compared to 2022, despite the booking of approximately € 3 million in depreciation/amortisation resulting from the greater investments made in the last 12 months, the consolidation of new companies and the accounting effects of the PPA (Purchase Price Allocation) process.

Neutralising the extraordinary components and the impact of the PPA process related to the companies acquired in the last 12 months (amounting to € 2.5 million in the half-year under review), Adjusted EBIT would amount to € 14.4 million, up by more than € 8 million compared to the same period of 2022.

Financial expense grew by approximately € 0.5 million as a result of the higher cost of debt.

The consolidated result before tax was positive at € 12.3 million, an improvement of about € 12 million compared to € 0.5 million in the first half of 2022. The € 1.7 million improvement in the profits of investee companies contributed to this performance, particularly as a result of the update in the fair value measurement of the investment in the company A.L.I. and the recognition of a capital gain, net of the negative result of the first four months, of € 0.4 million from the sale of the residual investment in SEE, the publishing company of Il Giornale, which took place in April 2023.

As at 30 June 2023, the Group’s net profit, after minority interests, came to € 12.2 million, a significant improvement of approximately € 9 million on the € 2.8 million recorded in the first half of 2022.

The tax burden for the period is positive by € 0.1 million (€ 1.8 million as at 30 June 2022) due to higher income, such as capital gains, taxed to a lesser extent.

The Net Financial Position excluding IFRS 16 as at 30 June 2023, which as usual reflects the seasonal nature of the school textbooks business, came to € -215.2 million (net debt), a slight increase compared with the € -205.7 million of 30 June 2022, due to the cash-out related to acquisitions made during the last twelve months and the € 29 million distribution of dividends to the shareholders.

The IFRS 16 Net Financial Position at 30 June 2023 stood at € -285.5 million from € -285.1 million at 30 June 2022, including an IFRS 16 component of € -70.3 million.

Cash flow from ordinary operations in the last 12 months, after cash-out for financial expenses and taxes, amounted to € 63.6 million, and allows the Group to continue strengthening its financial structure.

At 30 June 2023, the extraordinary cash flow of the previous 12 months was negative by € 48 million, mainly due to the effect of the net balance of acquisitions and divestments for approximately € 31 million and cash-out for approximately € 5 million for restructuring costs.

LTM Free Cash Flow at 30 June 2023 was positive for € 15.8 million, confirming the Group’s capacity to finance its growth policy by external lines.

PERFORMANCE OF BUSINESS AREAS

Trade BOOKS AREA

In the first half of 2023, after the consolidation experienced in 2022, there was a new growth phase in the book market, which increased in value by 2.7%, with a substantial stability in volume (source: GFK).

In this context, the Mondadori Group’s publishers recorded growth of 5.7% in the period under review, thanks in particular to the sales of new titles published at the beginning of the year. Thanks to these results, the Mondadori Group has consolidated its national leadership position, with a market share that in June 2023 was 27.4%, showing an improvement on June 2022 (26.6%).

The Trade component recorded revenues in the first half of 2023 of € 175.5 million, having grown by around 18% on the previous year (+4% on a like-for-like basis).

The Adjusted EBITDA of the Trade Books Area, amounted to € 26.2 million in the first half of 2023: net of reliefs relating to Electa’s museum activities, amounting to € 6.4 million, which had benefited the first half of 2022, the area recorded growth of 32% (€ 6.4 million), largely attributable to the contribution of the newly acquired companies.

Educational BOOKS AREA

School textbook publishing experiences a typical seasonal performance that sees sales squeezed in the second half of the year following the adoption campaign: as a result, the relating market shares for 2023 are unavailable at this time.

In the first six months of 2023, the school textbooks business recorded overall revenues of € 57.9 million (€ 49.6 million in the corresponding period of 2022), an increase of 16.8% which is not representative of the real performance as mostly due to an early supply to top accounts compared to last year.

Adjusted EBITDA of the Educational BOOKS Area in the first half of 2023 was positive and stood at € 2.3 million, a clear improvement compared to the € -2.4 million loss recorded in the first half of 2022, mainly due to the different timing of revenues linked to some supplies.

RETAIL AREA

In the first six months, the Retail Area posted revenue of € 83.9 million, up by € 6.3 million (+8.1%) versus the same period of the prior year.

Thanks to this overperformance driven by the excellent performance of physical stores, Mondadori Retail’s market share stood at 12.4% (up 0.7% compared to 30 June 2022) and almost reached the 20% threshold of the physical channel.

The ongoing development and renovation of existing stores and the focus on the core business of books have enabled the Mondadori Store network to consolidate its role in the market, as demonstrated by the solid growth in revenue from Books (€ +5.5 million, +9.1%) which is over 80% of the total.

An analysis of sales in the physical channel shows a further increase in revenues from directly-managed bookstores (+17.3% compared to the same period in the previous year) and franchisee bookstores (+6.1% compared to the first half of the previous year); and, at the same time, a decline in the Online and Bookclub channels.

The RETAIL Area has a positive and significantly growing Adjusted EBITDA of € 4.2 million, a value that has almost tripled compared to the figure for the first six months of 2022 (up by € 2.8 million).

MEDIA AREA

In the first half of 2023, the Mondadori Group retained its position as Italy’s top multimedia publisher:

• in print with 13 titles and 9 million readers;
• on the web with 12 brands and approximately 28.7 million average unique users per month;
• in social media with a fan base of over 86 million and around 100 profiles.

In the magazine segment, Mondadori Group’s market share (in terms of circulation) stood at 20.5%, up slightly – with a like-for-like portfolio of titles – versus the figure in the same period of 2022 (20.0% in May 2022), due to improved performance on that of the reference market.

In the first half of 2023, the MEDIA Area recorded revenue of € 68.7 million, a reduction of approximately 30% on the same period of the previous year. On a like-for-like basis (thus excluding the effect of the deconsolidation of the titles sold at the beginning of 2023 and of Press-di’s distribution activities), this reduction is smaller by around 8% and shows different trends in the two digital and print components. In particular, on a like-for-like basis, digital activities, which account for over a third of total revenues in the area, recorded a growth in advertising revenues of around 14%; traditional print activities were down by approximately 17%, in particular due to the significant contraction in joint sales recorded in the period.

Adjusted EBITDA for the MEDIA Area came to € 9 million, having grown by approximately 16% compared with the first half of 2022, mainly due to traditional businesses. In the print area in particular, the increase is mostly due to the recognition of a contribution to offset the costs incurred by the publisher for the distribution of periodicals (€ 2.8 million), which made it possible to offset the greater industrial costs, especially paper, and the contraction of the margin from the sale of add-ons; in the digital area, Adjusted EBITDA was substantially stable compared to the same half of the previous year, despite the higher costs incurred for the launch of new initiatives related to the influencer marketing segment, thanks to higher advertising revenues.

OUTLOOK FOR THE YEAR

As already announced to the market on 29 June 2023, given the more favourable evolution compared to previous estimates of both the business during the first half of the year and the prices of the main production factors – the Group has revised its forecasts for 2023 upwards.

Currently, the estimates predict:

• Income Statement
  • Single-digit revenue growth;
  • High single-digit/low double-digit growth in Adjusted EBITDA, with margins expected to range between 16% and 17%;
  • approximately 20% growth in the net result, despite the higher amortisation/depreciation deriving from both the increasing investment policy implemented by the Group and the effects of the Purchase Price Allocation process related to the recently-acquired companies, thanks to the operational improvement and the positive effects of the sale of the investment in Il Giornale.
• Cash Flow and Net Financial Position
  • Ordinary Cash Flow is expected to fall within a range of € 65 to 70 million, showing growth of up to 15% on the 2022 figure (which had come to approximately € 60 million net of the one-off impact of derivative instruments related to rate risk hedging).
  • the Group’s net financial debt (IFRS 16) is confirmed to come in, at end FY 2023, as 1.0x adjusted EBITDA, down from 1.3x at end 2022.

The solid financial and equity position that characterises the Mondadori Group allows it to continue to pursue the virtuous development path started some years ago, characterised by the constant recourse to M&As whereby the Mondadori Group seeks to seize opportunities for growth through external lines, mainly in the book and digital businesses.

The presentation of the results at 30 June 2023, approved today by the Board of Directors, is available on 1Info (www.1info.it), on www.borsaitaliana.it and on www.gruppomondadori.it (Investors section). A Q&A session will be held in conference call mode at 4.00 pm for the financial community, attended by the CEO of the Mondadori Group, Antonio Porro, and the CFO, Alessandro Franzosi. Journalists will be able to follow the meeting in listening mode only, by connecting to the following phone number +39.02.8020927 or via web at: https://hditalia.choruscall.com/?calltype=2&info=company.
The Financial Reporting Manager – Alessandro Franzosi – hereby declares, pursuant to Article 154 bis, paragraph 2, of the Consolidated Finance Law, that the accounting information contained herein corresponds to the Company’s records, books and accounting entries.

Annexes (in the complete pdf):

1. Consolidated Balance Sheet
2. Consolidated Income Statement
3. Consolidated Income Statement – II quarter
4. Group cash flow
5. Glossary of terms and alternative performance measures used.

Today, the meeting of the Board of Directors of Arnoldo Mondadori Editore S.p.A., chaired by Marina Berlusconi, reviewed and approved the draft financial statements and the consolidated financial statements at 31 December 2022 presented by CEO Antonio Porro.

2022 HIGHLIGHTS
The year 2022 saw the Group complete the strategic path of reshaping its business portfolio, which helped greatly ease its exposure to magazines while strengthening its foothold in book publishing, and will now continue with an exclusive focus on developing its core business.
During the year in fact, the Group completed a number of extraordinary transactions, the most noteworthy of which include:

• regarding the core business of Books, with a combined strategy of vertical integration in the supply chain and strengthening of its publishing leadership:
  • the acquisition of 50% of De Agostini Libri, active in Trade books with focus on the children’s and non-fiction segments, and the subsidiary Libromania, active in the promotion of third-party publishers;
  • the acquisition, with a view to strengthening the distribution of third-party publishers, of 50% of A.L.I. – Agenzia Libraria International, which will be fully consolidated as of 2023, following the acquisition of an additional 25% stake;
  • the acquisition of 51% of Star Comics, which makes the Group the Italian leader in the comic books segment.
• regarding the Print Media business, with a view to reducing exposure to the segment:
  • the disposal of a majority stake in Press-di, active in the nationwide distribution of magazines and newspapers;
  • the start of the disposal process of the business unit related to the Grazia and Icon brands, including the related international network, a transaction later completed in January 2023.

“In 2022 we achieved remarkable results, with double-digit growth in revenue and margins and the best net profit in the last 15 years. The performance as a whole – exceeding the guidance disclosed to the market – is clear proof of the success of the strategic repositioning of our businesses, the result of various acquisitions.
All this, combined with the many efficiency measures put in place by Management, has enabled us to further strengthen our operating-financial standing, despite a market and geopolitical scenario still dominated by uncertainty, marked among other things by a sharp increase in the cost of inputs”, stressed Antonio Porro, CEO of the Mondadori Group.

PERFORMANCE AT 31 DECEMBER 2022
Consolidated revenue amounted to € 903 million, growing by 11.8% versus 2021, despite the disposals in the Media area, thanks in particular to both the inclusion of D Scuola in the consolidation scope and the positive trend of the Books market, which benefited the Trade Books and Retail areas.

Adjusted EBITDA came to € 136.3 million, increasing by approximately € 31 million, or improving by 29%: one-third of this strong growth stems from the operating performance of the original scope, thanks to the increased efficiency achieved, and two-thirds from the consolidation of D Scuola.
Overall, profitability stood at 15.1%, up by 2 percentage points versus 2021.

EBITDA, which came to € 130.7 million versus € 91.1 million in 2021, improved even more (+43%), thanks to the operating trend and to the reduction in restructuring costs in the Media and Corporate areas versus the prior year.

EBIT, amounting to € 72.7 million, recorded a sharp improvement versus 2021 (+60.8%), despite the impact of higher amortization (€ 4.7 million) arising from the Purchase Price Allocation process of goodwill resulting from the concluded acquisitions (especially D Scuola).
EBIT in 2022 also includes a number of write-offs, totaling € 7.2 million (€ 7.4 million in 2021), resulting from the impairment process (relating in particular to the TV Sorrisi e Canzoni brand in the Media area, which was affected mainly by the increase in the discounting rates adopted).

Adjusted EBIT in 2022, net of extraordinary expense and all non-cash items related to Purchase Price Allocation and impairment processes, would amount to € 90.1 million, up by more than € 22 million versus the prior year.

Total financial expense for the period, amounting to € 5.7 million, increased by € 1 million, as a result of the Group’s higher average financial debt and the new evaluation of the earn-out from the acquisition of Hej! (€ 0.9 million).

The consolidated result before tax closed with a positive € 66.9 million versus € 38.6 million in 2021 (+73%).
Contributing to the strong increase of € 28.3 million was the improvement of € 1.3 million in the results of the associates resulting from the disposal on 1 January 2022 of the stake in Monradio and the start of the accounting of the share of profits of A.L.I., which more than offset the € 1.7 million write-down of the stake in Attica.

Net profit, after non-controlling interests, amounted to € 52.1 million, up by 18%, the best result achieved by the Group in the last 15 years; neutralizing the non-operating effects that impacted on 2021 and 2022, adjusted net profit would amount to € 64 million, up by more than 50%.

In addition to the buoyant performance of operations, the Group confirmed solid cash generation in the year, with Cash Flow from Ordinary Operations of € 70.2 million versus € 68.2 million in 2021.

The Net Financial Position (before IFRS 16) stood at € -106.1 million (€ -94.8 million in 2021); considering the effects of IFRS 16, the NFP stood at € -177.4 million, lower than € -179.1 million at December 2021, with a debt/Adjusted EBITDA ratio of 1.3x.
The minor change in the Net Financial Position between 2021 and 2022 shows – also looking ahead – the Group’s ability to self-finance, with its own cash generation, the active M&A policy implemented over the last year, preserving the ability to distribute dividends.

2022 saw, in fact, the return to a shareholder remuneration policy with the distribution of dividends totaling approximately € 22 million, equal to a pay-out of 50% of 2021 net profit.

At 31 December 2022, Group employees amounted to 1,900 units, up by 5% versus 1,810 units at 31 December 2021 (+90), due mainly to the inclusion of D Scuola staff (a total of 125 units).
Neutralizing the effect of all scope changes – namely, the acquisitions of D Scuola, De Agostini Libri and Star Comics, and the disposals of titles and assets in the Media area – the Group workforce would drop by approximately 1%, thanks to the continued efforts to increase the efficiency of individual corporate areas and functions.

BUSINESS OUTLOOK
The Group’s current setup, operating performance, and cash generation ability shown in 2022 allow us to estimate a further improvement in results for the new year, despite the continuing negative impacts of rising prices related to the purchase of raw materials and services.

From a strategic point of view, the Group intends to continue on the path of consolidating its core business and therefore its leadership in the Books area, from a publishing point of view, by strengthening the identity and specialization of the various publishing houses, and by pursuing the process of vertical integration of book chain activities. In the School textbooks segment, the Group will also complete the operational integration project of D Scuola.

In the Retail area, Mondadori will continue, on the one hand, the selective development of the network of stores functional to the completion of the widespread coverage of the Country, as well as the remodelling and downsizing of stores in order to optimize retail space and maximize network efficiency, and on the other, its efforts to focus on the book product in order to both increase the profitability of the area and to enhance its effectiveness in conveying the Group’s publishing proposition to the market.

In the Media area, the Mondadori Group will concurrently continue on the path of developing its digital skills and range of products, with particular regard to its presence on Social channels and influencer marketing.

Thanks to the financial and capital solidity achieved, the Group can continue on the virtuous path of development it embarked on a few years ago, pursued also through the continued use, especially in the books and digital businesses, of M&As, beneficial to the Group’s intention to continue to seize opportunities for inorganic growth.

Income Statement
The Group’s operating and financial targets that follow refer to a scope that includes only completed extraordinary transactions, therefore:

• in the Books area, full consolidation for the whole year of A.L.I. – Agenzia Libraria International, De Agostini Libri and Libromania (consolidated for 9 months in 2022), as well as Star Comics (consolidated for 6 months in 2022);
• in the Media area, deconsolidation for the whole year of Press-di and the print and digital operations referring to the Grazia and Icon

In light of the above and the relevant context, reasonable estimates for 2023 point to a:

• single-digit growth of revenue, in relation to which the above changes in the consolidation scope will have a neutral impact overall; the different business areas are in fact expected to show different trends: growth in the areas focused on the Book product, an increase in the Digital segment of the Media area, and, consistent with the structural downtrend of markets, a continued reduction in the Print Media business, which is expected at year-end to account for less than 10% of Group revenue;
• Single-digit growth of adjusted EBITDA. Even net of the recognition of relief to the museum business that benefited 2022 (approximately € 6.4 million), not planned however for 2023, adjusted EBITDA would grow high single-digit. Margins are likewise expected to grow – from 14% to 15% – thanks to:
  • targeted pricing policies,
  • careful cost containment policies,
  • completion of the operational integration of D Scuola,

and the Group is confident that it can more than offset the expected increase in costs for raw materials and services;

• the net result for 2023 is expected to grow by approximately 10% – despite higher amortization and depreciation resulting from both the Group’s policy of increasing investments and the effects of the Purchase Price Allocation process – due primarily to the absence of the write-down of certain balance sheet items, which is currently not expected to repeat in the new year.

Cash Flow and Net Financial Position
In 2023, the Group is expected to confirm the significant cash generation ability shown in recent years:

• Cash Flow from Ordinary Operations is expected to range from € 60 to € 65 million, up by as much as 10% versus 2022, net of the one-off impact of derivative instruments related to interest rate risk hedges;
• the Group’s net financial debt (IFRS 16) is expected to stand at 1.0x Adjusted EBITDA at end 2023, down versus 1.3x at end 2022.

Dividend Policy
Thanks to its solid financial and capital standing, the Group returns to a shareholder remuneration policy that will see the distribution of dividends in an annual amount equal to the greater of 40% of Cash Flow from Ordinary Operations and the dividend of the prior year.
Mention should be made that in 2024, from the result of 2023, the Board of Directors intends to propose the Shareholders’ Meeting to pay any dividend in two equal tranches (in May and November).
Each year, the Board of Directors, when proposing the distribution to the Shareholders’ Meeting, will in any case take account of the general macroeconomic scenario, as well as the expected cash flows that will affect the Group’s financial and capital structure.

AGREEMENT SIGNED ON DISPOSAL OF STAKE IN SOCIETA’ EUROPEA DI EDIZIONI
Today Arnoldo Mondadori Editore S.p.A. signed an agreement on the disposal to P.B.F. S.r.l. of the 18.45% stake held in Società Europea di Edizioni (SEE S.p.A.), publisher of the daily Il Giornale.
The provisional consideration for the transaction was set at € 3.7 million and includes an adjustment mechanism based on SEE’s net financial position and net working capital at the closing date, which is contractually scheduled by 30 June 2023. The accounting effects of the disposal will be defined and disclosed on completion of the transaction.
The disposal is consistent with the strategy of focusing on the books segment and on the divestment of non-strategic assets and investments.

PERFORMANCE OF BUSINESS AREAS

• BOOKS

Following the remarkable growth seen in 2021, 2022 witnessed a consolidation phase of the books market, which was basically steady in terms of value (+0.2%) and volume (-0.4%) versus 2021.
Breaking down this trend into the different segments that form the Trade publishing market, the stability seen is the result of a slight growth in the Trade segment in a narrow sense (+1.2%); a stronger increase by Comics (+7.5%), which continued to be the most dynamic segment even after the remarkable growth seen from 2019 to 2021; and a sharp decline in the Professional segment (-14.7%).

Against this backdrop, the publishing houses of the Mondadori Group recorded a growth in sell-out of 2.2% during the year, the result of a gradually improving performance.
Thanks to these results, the Mondadori Group was able to strengthen its domestic leadership with a growing market share, after as many as 5 years, reaching 27% at end 2022.

The School textbooks market (primary and secondary schools) in Italy in 2022 is estimated to increase by approximately 1% versus the prior year, settling at a total of approximately € 605 million; against this backdrop, the Group’s publishing houses recorded a basically steady sales/adoption ratio in secondary schools and achieved a 32.3% market share (including the share of D Scuola), down slightly versus the prior year: the decline is attributable to the primary school segment, marked by greater volatility and lower profitability, and to the reduction recorded by distributed publishers.

Revenue from the area in 2022 amounted to € 576.2 million, up by 23.9% (+7.4 excluding the contribution of D Scuola) versus the prior year, broken down as follows:

• +11.8% in the Trade area, driven by the positive performance of the publishing houses, with a contribution also from De Agostini Libri and Star Comics acquired during the year, along with the sharp upswing of Electa’s museum activities;
• +45.2% in the Education segment, thanks to the consolidation of D Scuola;
• +34.7% in service and distribution activities of third-party publishers, which benefited from the contribution of Libromania.

Despite higher paper purchase costs of over € 11 million, adjusted EBITDA in the Books area in 2022, including the contribution of D Scuola (€ 23.2 million), came to € 118.5 million, up by € 26 million versus 2021.
Profitability achieved by the Books area, amounting to approximately 21% in 2022, is higher than the figure recorded in 2021 (20%).

• RETAIL

The year 2022 saw the continued policy of developing and optimizing the physical network implemented in recent years. This transformation process resulted in improved operational and management performance.

During the year, the Retail area recorded revenue of € 189.2 million, an increase of € 15.3 million (+8.8%) versus 2021.

Ongoing store renovation and focus on the core business of books enabled the Mondadori Store network to consolidate its role on the market (with a 12.5% market share, up by 1.2% versus the prior year), thanks to the solid growth of Books revenue (€ +15.1 million).

Sales by channel show:

• further growth in revenue from directly-managed bookstores (+26.7% versus the prior year) and franchised bookstores (+4.3% versus the prior year);
• a decline in the online channel, after the growth in the previous two years, in line with the negative trend of the entire e-commerce market.

During the year, Mondadori Retail recorded significant growth in adjusted EBITDA, which stood at € 9.1 million (€ +4 million versus 2021).

• MEDIA

In 2022, the Mondadori Group completed the rationalization of its print portfolio, focusing on brands with the highest potential for multimedia development.

In 2022, the Media area revenue amounted to € 177.8 million, down by 13.9% versus 2021.

Excluding the effects of the deconsolidation of the titles sold at end 2021 and Press-di’s distribution business, revenue would have grown by +2%, broken down as follows:

• digital activities, which account for more than 27% of the area’s total revenue, rose sharply by 6% in 2022;
• traditional print activities were down by 4%.

The Media area’s adjusted EBITDA stood at € 14.1 million, growing by 14% versus the prior year, while margins improved by 2 percentage points (from 6% to 8%), attributable mainly to the curbing of operating costs as well as the recognition of a tax receivable of € 1.9 million.

PERFORMANCE OF ARNOLDO MONDADORI EDITORE S.P.A.
The Parent Company’s income statement at 31 December 2022 shows the same profit as in the consolidated financial statements of € 52.1 million (€ 44.2 million in 2021), due to the fact that the Company has chosen to use the equity method to measure its investments in the separate financial statements.
Revenue, which consists of the costs of central units charged back to subsidiaries, amounted to € 41.8 million, basically steady versus the prior year.
Adjusted EBITDA in 2022 came to € -5.7 million (€ -5.4 million in 2021), slightly deteriorating due to higher utility costs from the management of the Segrate HQ.
Reported EBITDA in 2022 stood at € -6.7 million, a sharp improvement versus 2021 (€ -11.4 million), thanks to lower provisions related to restructuring costs.

DIVIDEND DISTRIBUTION PROPOSAL OF € 0.11 PER ORDINARY SHARE
Based on 2022 results, the Board of Directors has proposed to the next Shareholders’ Meeting, convened on 27 April 2023, the distribution of a unit dividend of € 0.11 per ordinary share (net of treasury shares) outstanding at the record date.
Total dividends amounted to € 28.7 million, up by nearly 30% versus the prior year: this amount is equal to a pay-out of 55% of net profit in 2022 and a dividend yield of 6% (at 31 December 2022).
The dividend will be paid, in accordance with the provisions of the “Regulation of the markets organized and managed by Borsa Italiana S.p.A.”, from 24 May 2023 (payment date), with ex-dividend date (coupon no. 22) on 22 May 2023 (ex date) and with the date of entitlement to payment of the dividend, pursuant to Article 83-terdecies of the TUF (record date), on 23 May 2023.

SIGNIFICANT EVENTS AFTER YEAR-END 2022

On 10 January 2023, the Mondadori Group, through its subsidiary Mondadori Media S.p.A., executed the contract for the disposal to Reworld Media S.A. of the print and digital publishing operations of the Grazia and Icon titles, as well as the related international licensing network.
The execution of the transaction took place with the transfer of the business unit heading the operations disposed of to a newly-incorporated company and the concurrent disposal to Reworld Media of 100% of the share capital of the transferee.
On 13 January 2023, the Mondadori Group, through its subsidiary Mondadori Libri S.p.A., concluded the acquisition of a further 25% stake in A.L.I. S.r.l. – Agenzia Libraria International, operating in the distribution of books.
The transaction – which raised the Mondadori Group stake in A.L.I. to 75%, subject to full consolidation as of January 2023 – took place in execution of the agreements defined and disclosed on 11 May 2022 upon acquisition of an initial 50% stake, effective earlier than the date originally scheduled for 28 February 2023. The provisional price, paid entirely in cash, was approximately € 9.5 million and was determined, as already disclosed to the market, on the basis of an average 2021-2022 EBITDA and the positive net financial position (cash) of the scope covered by the transaction.
Additionally, the defined agreements gave the Mondadori Group the right to acquire the remaining 25% in A.L.I., at a price to be determined on the basis of an average 2023-2024 EBITDA, through put&call options exercisable by 30 July 2025.

PROPOSED RENEWAL OF THE AUTHORIZATION TO PURCHASE AND DISPOSE OF TREASURY SHARES
Following expiry of the previous authorization resolved upon by the Shareholders’ Meeting on 28 April 2022, with the approval of the financial statements at 31 December 2022, the Board of Directors will propose to the next Shareholders’ Meeting the renewal of the authorization to purchase and dispose of treasury shares with the aim of retaining the applicability of law provisions in the matter of any additional buyback plans and, consequently, of seizing any investment and operational opportunities involving treasury shares.

Below are the key elements of the Board of Directors’ proposal:

• Motivations
  The motivations underlying the request for the authorization to purchase and dispose of treasury shares refer to the expediency to grant the Board of Directors the power to:
  • use the Treasury Shares purchased or already in the Company portfolio as compensation for the acquisition of interests within the framework of the Company’s investments;
  • use the treasury shares purchased or already held in portfolio against the exercise of option rights, including conversion rights, deriving from financial instruments issued by the Company, its subsidiaries or third parties and to use the treasury shares for lending, exchange or transfer transactions or to support extraordinary transactions on the Company’s capital or financing transactions that imply the transfer or sale of treasury shares;
  • undertake any investments, directly or through intermediaries, including for the purpose of containing abnormal movements in share prices, stabilizing share trading and prices, supporting the liquidity of the share on the market, in order to foster the regular conduct of trading beyond normal fluctuations related to market performance, without prejudice in any case to compliance with applicable statutory provisions;
  • rely on investment or divestment opportunities, if considered strategic by the Board of Directors, also in relation to available liquidity;
  • dispose of treasury shares to service share-based incentive plans set up pursuant to Article 114-bis of the TUF, and plans for the free allocation of shares to employees or members of the governing bodies of the Company or to Shareholders.

• Duration
  The authorization to purchase treasury shares runs from the date of any resolution approving the proposal by the Shareholders’ Meeting, until the Shareholders’ Meeting called to approve the financial statements at 31 December 2023 and, in any case, for a period no more than 18 months after such date.
  The authorization to dispose of treasury shares is requested for an unlimited period, given the absence of time limits pursuant to current regulations and the opportunity to allow the Board of Directors to make use of the maximum flexibility, also in terms of time, to carry out any disposal of shares.

• Maximum number of purchasable treasury shares
  The authorization would allow the purchase, on one or more occasions and also in several tranches, of a maximum number of ordinary shares with a par value of € 0.26 per share, which – taking account of the treasury shares already held by the Company and any shares that may be acquired by subsidiaries – would not exceed a total of 10% of the share capital.
  In accordance with Article 2357, paragraph 1, of the Italian Civil Code, purchase transactions shall be carried out within the limits of the distributable profits and available reserves resulting from the last duly approved financial statements at the time each possible purchase transaction is carried out. The authorization would include the option to subsequently dispose of the treasury shares purchased, in whole or in part, on one or more occasions and even before having reached the maximum number of purchasable shares.

• Criteria for purchasing treasury shares and indication of the minimum and maximum purchasing cap
  The purchases would be made in compliance with Articles 132 of the TUF, 144-bis, paragraph 1, letters b) and d-ter) of the Issuer Regulation, and so:
  –  on regulated markets or multilateral trading systems, according to the operating criteria established in the organization and management regulations of the same markets, which do not allow the direct matching of buy orders against predetermined sell orders, and also in compliance with any other applicable law, including EU law.
  –  in the manner established by the market practices permitted by CONSOB, as per the combined provisions of Article 180, paragraph 1, lett. C) of the TUF, and Article 13 of Regulation (EU) no. 596 of 16 April 2014 (the “Permitted Market Practices”).
  Additionally, share purchase transactions may also be carried out in the manner envisaged in Article 3 of EU Delegated Regulation no. 2016/1052 in order to benefit, if the conditions are met, from the exemption under Article 5, paragraph 1, of EU Regulation no. 596/2014 on market abuse with regard to inside information and market manipulation.
  The disposal of treasury shares may be made, on one or more occasions and even before having reached the maximum number of purchasable treasury shares, either by selling them on regulated markets or according to other trading methods in compliance with the law, including EU law, in force and with the Admitted Market Practices, if applicable. The proposed authorization envisages that purchases shall be made at a unit price, in compliance with any regulatory requirements, including Community ones, or Admitted Market Practices pro tempore in force, if applicable, it being understood that the minimum and maximum purchase price shall be determined at a unit price no lower than the official Stock Exchange price of Mondadori shares on the day before the purchase transaction, reduced by 20%, and not higher than the official Stock Exchange price on the day before the purchase transaction, increased by 10%. In any event – except for any different price and volume determinations resulting from the application of the conditions set forth in the Admitted Market Practices as defined in Point 6 below – such price shall be identified in accordance with the trading conditions set forth in Delegated Regulation (EU) no. 1052 of 8 March 2016 and, in particular:
  • no shares may be purchased at a price higher than the higher between the price of the last independent trade and the price of the highest current independent bid on the trading venue where the purchase is carried out; and
  • in terms of volumes, daily purchase amounts shall not exceed 25% of the daily average volume of Mondadori shares recorded over the 20 trading days before the dates of purchase, or in the month prior to the month of the notice required by Article 2, paragraph 1, of Regulation (EU) no. 1052/2016.
  • In terms of consideration, sales transactions or other acts of disposition of treasury shares shall be carried out:
  • if executed in cash, at a price no lower than 10% of the reference price recorded on the MTA – Euronext Milan – organized and managed by Borsa Italiana S.p.A. in the trading session prior to each single transaction;
  • if executed as part of any extraordinary transactions in accordance with financial terms to be determined by the Board of Directors on the basis of the nature and characteristics of the transaction, also taking account of the market performance of Mondadori shares;
  • if executed to service the Performance Share Plans as referred to in point 1 above in compliance with the terms and conditions set out in the resolutions of the Shareholders’ Meeting that establish the Plans and the related regulations.

To date, Arnoldo Mondadori Editore S.p.A. holds a total of no. 1,147,991 treasury shares, equal to 0.440% of the share capital.
For further information on the proposed authorization for the purchase and disposal of treasury shares, reference should be made to the Directors’ Explanatory Report, which will be published within the time limits and in the manner prescribed by applicable regulations.

GRANTING OF SHARES UNDER THE 2020-2022 PERFORMANCE SHARE PLAN: INFORMATION PURSUANT TO ARTICLE 84-BIS, PARAGRAPH 5 CONSOB REGULATION NO. 11971/1999
The Board of Directors, based on the final assessment of the Performance Targets underlying the Plan, and having heard the Remuneration and Appointments Committee, resolved to allocate a total of no. 461,189 Arnoldo Mondadori Editore S.p.A. shares to 9 beneficiaries, in implementation of the provisions contained in the “2020-2022 Performance Share Plan” established by the Board of Directors on 17 March 2020 and subsequently adopted by the Shareholders’ Meeting on 22 April 2020 (the “2020-2022 Plan”).
Mention should be made that the 2020-2022 Plan takes the form of a share granting plan and grants its beneficiaries the right to receive, free of charge, shares in the Company provided that, at the end of a reference period of three financial years, the performance targets set in the same Plan have been achieved.
The 9 beneficiaries of the 2020-2022 Plan are the Chief Executive Officer, the CFO and 7 managers identified by name by the Chief Executive Officer, as delegated by the Board of Directors.
The characteristics of the 2020-2022 Plan are explained in detail in the Directors’ Report to the Shareholders’ Meeting of 22 April 2020 and in the information document contained therein, available on www.gruppomondadori.it, Governance section, to which reference should be made.
Attached is the information required by Schedule 7 of Annex 3A to CONSOB Regulation no. 11971/1999 to account for the granting of shares in the context of the 2020-2022 Performance Plan.

PROPOSED ADOPTION OF A 2023-2025 PERFORMANCE SHARE PLAN
The Board resolved, on a proposal from the Remuneration and Appointments Committee, and in keeping with the introduction of the performance share approved last year for the medium/long-term remuneration of executive directors and key management personnel, to submit to the approval of the Ordinary Shareholders’ Meeting, the adoption of a 2023-2025 Performance Share Plan, in accordance with Article 114-bis of Legislative Decree no. 58 of 24 February 1998, intended for the Chief Executive Officer, the CFO – Executive Director and a number of Company managers who have an employment and/or directorship relationship with the Company or with its subsidiaries on the granting date of the shares.
With the adoption of the Plan, the Company aims to encourage Management to improve medium to long-term performance, in terms of both industrial performance and growth in the value of the Company.
The Plan envisages the assignment to the beneficiaries of rights to the free allocation of company shares, subject to the achievement of specific performance targets set and measured at the end of the three-year performance period.
These targets are structured to include both shareholder remuneration indicators and management indicators functional to raising the share value, ensuring maximum alignment of Management remuneration and the creation of value for the Company, as well as indicators of a non-operating/financial nature.
For details on the proposed adoption of the 2023-2025 Performance Share Plan, the beneficiaries and the main characteristics of the Regulations of the Plan, reference should be made to the Information Document drawn up by the governing body, pursuant to Article 84-bis and annex 3A of the Issuer Regulation, and to the Explanatory Report, which will be published within the time limits and in the manner prescribed by applicable regulations.

CONSOLIDATED NON-FINANCIAL STATEMENT PURSUANT TO LEGISLATIVE DECREE 254/2016
Under Legislative Decree 254/2016, the Board of Directors’ 2022 Report on Operations of the Mondadori Group is also composed of the Consolidated Non-Financial Statement (NFS), a qualitative-quantitative description of the non-financial performance of the Company, associated with environmental, social, and staff-related issues, as well as those regarding respect for human rights, and the fight against corruption and bribery, which are relevant given the activities and characteristics of the Company. The NFS was prepared in accordance with GRI Standards: In accordance option, and includes benchmark KPIs related to GRI G4 “Media Sector Disclosure”.
With regard to 2022, the Mondadori Group has updated its materiality analysis, consistent with the principles set out by the GRI Sustainability Reporting Standards (GRI Standards) and the reporting scopes laid down by Legislative Decree 254/2016.
In order to continuously improve the process, stakeholder engagement activities were further expanded in 2022 with the engagement not only of employees, teachers, and bookstore customers, but also of suppliers, financial analysts and investors, with more than 9,500 total answers to the engagement questionnaire.
The document also contains relevant information in line with ESMA’s recommendations for the 2022 reporting year, and includes references required by Regulation (EU) 2020/852 related to the recent introduction of the EU Taxonomy.

In the reporting area, the following are the actions and initiatives taken:

• D&I: synergistic work with all corporate departments and implementation of the indicator system;
• training and development in digital and business innovation: > 40,000 hours;
• education and the school world: approximately 5,000 teachers involved in stakeholder engagement;
• COVID prevention and protection actions for employees and associates;
• energy efficiency actions, reducing gas consumption by 25.2%.

During the year no cases of corruption or bribery involving the Company or its employees were reported, and no legal action was initiated or concluded against the Group or its employees for cases of corruption or reports made within the whistleblowing system.
In 2022, the Mondadori Group once again paid special attention to environmental issues, the specific impacts associated with the life cycle of paper products, and the reduction of climate-changing emissions: this is an approach that guides the Company in the implementation of its activities, from the purchase of certified paper to the efficient management of points of sale and property.

SUSTAINABILITY PLAN GUIDELINES
The Mondadori Group launched its first three-year Sustainability Plan in 2022, which identifies strategic areas, quantitative and qualitative targets, and short- and medium-term actions for the ongoing improvement of performance in social, governance, and environmental terms. The Group’s identity, mission and role as a publisher are reflected in the 3 macro areas and respective guidelines identified, consistent with the global goals of the United Nations.
2022 was a year marked by the constant monitoring of the quantitative goals set, which helped, on the one hand, to accurately record the level of their achievement and, on the other, to identify new future actions for a continuous updating of the Plan.

The goals achieved are as follows:
Social: enhancing people, content and places for education and culture

1. Development and endorsement of a well-structured framework of KPIs for monitoring all D&I-related actions, with specific regard to the gender pay gap and gender balance;
2. Extension to 100% of the school proposition of content/insights in the areas of Sustainability, 2030 Agenda for Sustainable Development, diversity, equity and inclusion, and civic education (80% in 2022; 100% in 2023);
3. Development of the Hybrid working project for the shared definition of a new mixed working model;
4. Ad hoc training in D&I for all Group people;
5. Enhancement of the initiatives/services proposition for the promotion of reading, and ESG training for the Group’s school textbooks editorial offices and teachers.

Governance: promoting sustainable business success

1. Definition and measurement of quantitative and measurable LTI goals related to ESG issues for Top Management (Impact Inclusion Index in the 2022-2024 Performance Share plan).
2. Strengthening of the set of procedures and coverage of the areas of Privacy, Information Management and Cyber Security.
3. Strengthening of programs for protecting intellectual property/copyrights.
4. Enhancement of Stakeholder Engagement activities through the gradual expansion of engagement initiatives.

Environment: disseminating environmental culture and mitigating impacts on ecosystems

1. Extension to 100% of the school proposition of insights and fact sheets dedicated to the environmental culture of the entire school textbooks proposition, and promotion of such content within the Trade range (80% in 2022; 100% in 2023).
2. Fulfilment of ≈100% purchase of PEFC/FSC certified paper for Mondadori Group products.
3. Pursuit of energy efficiency actions, also as part of building/property and store renovation initiatives, and assessment of additional potential pilot activities to reduce greenhouse gas emissions.
4. Launch of the Book Environmental Footprint Life-Cycle Assessment project to measure environmental impacts and setting of “data-based” targets on the reduction of emissions into the atmosphere for ongoing improvement throughout the value chain.

The results for the year ended 31 December 2022, approved on today’s date by the Board of Directors, will be presented by the Mondadori Group Management to the financial community in a webcast presentation scheduled today at 3:30 PM.
The corresponding documentation will be available on 1Info (www.1info.it), www.borsaitaliana.it and www.gruppomondadori.it (Investors). Journalists will be able to follow the presentation in listening mode only, by connecting to the following telephone number +39028020911 and via web https://www.c-meeting.com/web3/join/M37DCPDPQUB3KL. At the end of the meeting, a dedicated session is scheduled where questions may be submitted to management.

The Financial Reporting Manager – Alessandro Franzosi – hereby declares, pursuant to Article 154 bis, paragraph 2, of the Consolidated Finance Law, that the accounting information contained herein corresponds to the Company’s records, books and accounting entries. 

Annexes (in the pdf complete):

1. Consolidated balance sheet;
2. Consolidated income statement;
3. Consolidated income statement – fourth quarter;
4. Group cash flow;
5. Arnoldo Mondadori Editore S.p.A. balance sheet;
6. Arnoldo Mondadori Editore S.p.A. income statement;
7. Arnoldo Mondadori Editore S.p.A. statement of cash flows;
8. Glossary of terms and alternative performance measures used;

Information pursuant to Schedule 7 of Annex 3a to CONSOB Regulation no. 11971/1999

Segrate, 10 November 2022 – Today, the meeting of the Board of Directors of Arnoldo Mondadori Editore S.p.A., chaired by Marina Berlusconi, reviewed and approved the Interim Management Statement at 30 September 2022 presented by CEO Antonio Porro.

HIGHLIGHTS

The current year has seen the Mondadori Group firmly pursue the strategic path of reshaping its business portfolio, on the one hand, by developing and strengthening its presence in book publishing and, on the other, by tapering its exposure to the magazines segment, with a focus on brands with greater multimedia potential.

“The results of these first nine months clearly show the positive impacts from our repositioning plan: the operating-financial metrics grow strongly, with a sharp improvement in revenue and margins across all business areas on a like-for-like basis”, said Antonio Porro, CEO of the Mondadori Group. “These elements, plus the positive performance of the books market, allow us, despite the higher costs of the main inputs, to further increase our estimates on the trend of revenue and margins at end 2022”, concluded Porro.

PERFORMANCE AT 30 SEPTEMBER 2022

Consolidated revenue in first nine months 2022 amounted to € 678.2 million, up by 15.2% versus € 588.9 million in the prior year.

Net of the consolidation of D Scuola, effective 1 January 2022, Group revenue grew by 3.8%, thanks to the performance of the Books and Retail areas and despite the additional asset disposals involving the Media area: net of the effects from the changed consolidation scope, Group revenue on a like-for-like basis in the first nine months of the current year would have grown by 5.8%.

Adjusted EBITDA came to a positive € 115.5 million; excluding the result of D Scuola in the period, adjusted EBITDA closes with a positive € 94.1 million.

As a result, the Group showed an overall improvement in profitability in excess of € 30 million versus € 85 million in 2021, growing by 35.8%, one third of which attributable to the positive performance across all business areas, Books and Retail in particular, and approximately two thirds from the contribution of D Scuola (€ 21.4 million).

Group EBITDA came to € 114.5 million (€ 93 million net of D Scuola), recording an even stronger improvement of € 34 million (+42.2% versus € 80.5 million at 30.09.2021), as a result of the abovementioned phenomena and dynamics and of the positive trend of non-ordinary items in the period.

EBIT closed at a positive € 78 million versus € 52 million at 30.09.2021, improving by € 26 million, or up by 50%, partly dampened by the effects of the Purchase Price Allocation process related to the acquisition of D Scuola.

Net of the amortization/depreciation resulting from this process, consolidated EBIT of the new scope would grow by approximately € 29 million (+55% versus 30.09.2021).

Excluding the contribution of D Scuola, the improvement would amount to € 11.3 million, attributable to the abovementioned operational dynamics.

Consolidated profit before tax came to € 75.8 million (€ 61.2 million excluding the contribution of D Scuola), increasing by almost 70% versus € 44.8 million in the same period of 2021. This growth benefits also from the improvement in the result of the associates, amounting to € 3.5 million, arising from the disposal of the investment in Monradio, from profit for the period of Attica, and from the accounting of the share of the result of A.L.I..

Total financial expense for the period, amounting to €2.8 million, improved by € 1.1 million, despite the higher average debt and the increase in ancillary expense from the outstanding pool loan, due to the accounting for IFRS 16 purposes of a non-recurring income of approximately € 1.5 million resulting from the early termination and renegotiation, as of July 2022, of the lease contract for the Segrate HQ.

Group net profit, after minority interests, amounted to € 58.3 million (€ 47.9 million excluding the net profit of D Scuola), up by 18% versus € 49.4 million in first nine months 2021, which had benefited however from a non-recurring income of € 18.7 million from the realignment of the tax amounts of trademarks and goodwill to their respective statutory amounts.

Neutralizing the one-off tax income of 2021, net profit in first nine months 2022 would be up by approximately 90% versus the prior year.

The net financial position before IFRS 16 stood at € -173.4 million and includes, in addition to the effects of the acquisition and consolidation of D Scuola, the debt arising from the acquisitions of A.L.I. and Star Comics, as well as the return to dividend distribution.

Including the IFRS 16 impact of € 62.3 million – down from 30.09.2021 due mainly to the renegotiation of the lease contract for the Segrate HQ – the NFP stood at € -235.7 million.

The LTM cash flow from ordinary operations (after cash out for financial expense and tax), amounting to € 71.4 million, allows the Group to continue to strengthen its financial structure.

D Scuola, consolidated as from January 2022, contributed a negative € 1.5 million to the cash flow for the period, consistent with the seasonal nature of the school publishing business.

Mention should be made that the generation of cash flow from ordinary operations benefited from the revaluation, amounting to € 10.1 million at 30 September 2022, of derivative instruments related to interest rate risk hedges applied to drawdowns of the pool loan taken out in May 2021.

The total Free Cash Flow in the past 12 months amounted to a positive € 9.5 million.

At 30.09.2022, Group employees amounted to 1,895 units, up by 4.5% versus 1,814 units at 30.09.2021 (+81 units), due primarily to the inclusion of D Scuola resources (totaling +127 units). Neutralizing the effect of all scope changes – namely, the acquisitions of D Scuola, De Agostini Libri and Star Comics, and the disposals of titles and assets in the Media area – the Group workforce would drop by approximately 1%, thanks to the continued efforts to increase the efficiency of individual business areas and functions.

PERFORMANCE IN THIRD QUARTER 2022

In the third quarter, consolidated revenue amounted to € 323.1 million, increasing by 20.3% versus € 268.5 million in the prior year; net of all the effects from changes in the scope, Group revenue would have recorded a like-for-like growth of +3.4% in the third quarter.

Adjusted EBITDA came to a positive € 88 million, up by over € 24 million (+38.5%) versus 2021.

Excluding the contribution of D Scuola, adjusted EBITDA came to € 65.7 million, increasing by
€2.1 million versus third quarter 2021, or by +3.4%. This improvement is attributable in particular to the positive performance of the Books segment, which benefited also from the consolidation of Star Comics as of third quarter 2022, and the Retail segment.

Group EBITDA came to € 87.7 million (€ 65.4 million without D Scuola), improving by € 26.2 million (+42.7%) versus the prior year, attributable to the business phenomena mentioned earlier, and to the positive trend in non-ordinary items, especially in the Corporate and Media areas.

EBIT came to a positive € 74.8 million, improving by approximately € 23 million versus third quarter 2021. The like-for-like comparison (excluding the contribution of approximately € 20 million from D Scuola) with 2021 shows an increase of € 3 million (+5.8%), despite higher amortization and depreciation resulting from increased expenditure made in the last 12 months.

Group net profit, after minority interests, amounted to € 55.5 million, up by 23.2% versus € 45 million in third quarter 2021; excluding the contribution of D Scuola and net of tax items, which in third quarter 2021 had benefited from a net non-recurring income of approximately € 9.8 million, net profit in third quarter 2022 would increase by 17% versus the third quarter last year.

BUSINESS OUTLOOK

In light of the positive operating-financial trend seen in the first nine months of the year, and despite the geopolitical uncertainty and the persisting problems arising from the increase in costs for raw materials, paper in particular, and for energy consumption, for the full year 2022 the Group believes:

• to be able to improve the estimate of:
  • Revenue, forecast to grow high single-digit (from mid single-digit);
  • Adjusted EBITDA, forecast to increase by 25% or more (from over 20%).

given the positive performance recorded by the Book product in the third quarter, as well as the consolidation of the Star Comics publishing house in the second half of the year;

• to be able to confirm at the consolidated level the other previously disclosed estimates.

Specifically:

• Double-digit growth of net profit, thanks also to significantly lower restructuring costs and to the improved results of associates versus 2021;
• Cash Flow from Ordinary Operations in line with 2021;
• Free Cash Flow in the region of € 10/15 million (before dividend);
• Group net financial debt (IFRS 16) at 1.3x adjusted EBITDA.

PERFORMANCE OF BUSINESS AREAS

• BOOKS

Following the remarkable growth seen in 2021, the year 2022 has witnessed a consolidation phase of the books market, which was basically steady in terms of both value (+0.1%) and volume (+0.1%) versus the same period last year[1].

Against this backdrop, Mondadori Group publishing houses posted a 2.4% growth in sell-out, the result of a gradually improving performance: in the third quarter in particular, the Group recorded a 14.6% increase in sell-out versus the market’s approximately +4% increase.

Thanks to these results, the Group was able to retain its domestic leadership, with its market share growing to 26.9%.

In the period under review, the Group retained a leadership position in the school textbooks segment, with a market share including D Scuola at 32.3%, a slight decline versus 32.9% in the prior year, fully attributable to the primary school segment, marked by greater volatility and lower profitability.

In first nine months 2022, revenue in the Books area stood at € 443.4 million, up by 27.2% versus € 348.7 million in first nine months 2021, driven by the positive performance of the Trade publishing houses and the consolidation of D Scuola.

Considering only the like-for-like scope of 2021, revenue in the Books area grew by 5.5%.

Specifically:

• revenue from Trade amounted to € 4 million, up by 11.2% versus € 200.9 million in the same period of 2021, driven by the positive performance recorded by all publishing houses, the upswing of Electa’s activities, and the consolidation of De Agostini Libri and Star Comics;
• total revenue from Education amounted to € 7 million, up by 48.2% versus first nine months 2021, due mainly to the changed consolidation scope related to the consolidation of the publishing house D Scuola, which contributed € 67.5 million to revenue for the period. On a like-for-like basis, revenue was up slightly (+1.4%) versus the same period of 2021 (€ 144.2 million), due to the early availability of a number of textbooks and the resulting accounting of the related revenue versus the prior year.

Adjusted EBITDA of the Books area in first nine months stood at € 107.9 million, up by more than
€ 28 million including the contribution of D Scuola (€ 21.4 million in the period under review).

Net of D Scuola, adjusted EBITDA on a like-for-like basis would come to € 86.4 million versus € 79.4 million in the same period of 2021, an improvement of over € 7 million (approximately +9%), thanks in particular to the positive trend of revenue and to the higher contribution of relief granted to museum activities, amounting to approximately € 3 million.

• RETAIL

In a basically steady domestic books market (+0.1%^[2]) versus 2021, the physical channel continued to grow versus the same period of the prior year, no longer burdened by the restrictions brought by the COVID-19 emergency.

Against this backdrop, in the first nine months, the market share of Mondadori Retail increased by 1.4% to reach 12.6%, driven by the outstanding performance of physical stores.

Revenue from the area totaled € 126 million, improving by € 11.6 million (+10.2%) versus € 114.3 million in the same period last year.

The ongoing development and renovation of existing stores and the focus on the core business of books have enabled the Mondadori Store network to consolidate its role on the market, as shown by the solid growth in revenue from the Book product (+13.6%), which is higher at the end of the third quarter even than in the pre-COVID period.

Specifically:

• directly-managed stores reported a sharp upswing in revenue (+35.3% versus the prior year), due to the abovementioned strategy of focusing on the book product and network development activities;
• the franchised channel continued its progression, increasing by +4.9% versus the same period of the prior year.

Adjusted EBITDA closed with a positive figure and up significantly to € 4.1 million (€ +2.4 million) versus € 1.7 million in first nine months 2021.

The structural actions put in place in recent years have brought a strong turnaround in the area’s operating and financial performance, as already seen by last year’s results. This target was achieved thanks to the deep transformation of the company, the ongoing renewal and development of the network of physical stores, as well as careful cost management and a thorough review of the organization and processes. All this complemented by constant work on product innovation and the expansion of the product range.

• MEDIA

The Media area recorded revenue of € 135.3 million in first nine months 2022, dropping by 9.8% versus € 150 million in the same period of the prior year, but increasing by 3.1% on a like-for-like basis (excluding the effect of the deconsolidation of the titles sold at end 2021 and the distribution activities of Press-di).

Specifically:

• digital activities, which now account for 24% of the area’s total revenue, rose sharply by +16% (+21.8% on a like-for-like basis of brands);
• traditional print activities on a like-for-like basis were down by approximately 3%.

Adjusted EBITDA in the Media area amounted to € 9.3 million, up versus € 7.8 million in first nine months 2021, the result of two opposing trends that marked the two segments of the area:

• the print area improved, thanks to higher income from FuoriSalone 2022, the accounting of a € 1.9 million tax receivable recognized on paper consumption, and the continued actions to curb operating costs launched in prior years;
• the digital area, instead, saw its result fall, attributable to one-off editorial and development costs incurred for the launch of The Wom and the lower performance of digital brand advertising sales, only partly offset by the strong trend recorded by the MarTech segment.

Significant events after 30 September 2022

As previously disclosed to the market, on 20 October the subsidiary Mondadori Media S.p.A. was granted by Reworld Media S.A. the option to sell to it the business unit related to the Grazia and Icon brands through a put option.

The scope of the option includes the print and digital publishing activities of the two titles, as well as the relating international network that ensures the brands’ overall presence in over 20 countries with licensed publications.

In 2021, these activities generated revenue of approximately € 18 million.

Based on the terms for exercising the option, the consideration for the scope in question is € 8.5 million, including € 2 million as earn-out conditional on the achievement of certain financial results in 2023 by the activities disposed of. The consideration was defined on the basis of an Enterprise Value of € 11 million (including earn-out), net of the difference between the average net working capital over the last 12 months and the net working capital at the closing date.

The Mondadori Group, pursuant to the provisions of law, will launch the consultation procedure with the trade unions, following which the option will become exercisable.

The decisions taken, as a result of the ongoing assessments, on the exercise of the option and any further phases, terms and conditions of the process underlying the transaction will be promptly disclosed to the market.

The transaction – the possible completion of which will also be subject to the outcome of the assessment procedure by the Offices of the Presidency of the Council of Ministers referred to in Law Decree 21/2012 – would be in line with the Mondadori Group’s strategic path of increasing focus on the core business of books and brands with greater potential for multimedia exploitation.

The presentation of the results at 30 September 2022, approved today by the Board of Directors, is available on 1Info (www.1info.it), on www.borsaitaliana.it and on www.gruppomondadori.it (Investors section). A Q&A session will be held in conference call mode at 4.30 pm for the financial community, attended by the CEO of the Mondadori Group, Antonio Porro, and the CFO, Alessandro Franzosi. Journalists will be able to follow the meeting in listening mode only, by connecting to the following  phone number +39.02.8020927 or via web at: https://hditalia.choruscall.com/?calltype=2&info=company 

The Interim Management Statement at 30 September 2022 is made publicly available by today through the authorized storage mechanism 1Info (www.1info.it), on www.gruppomondadori.it (Investors section) and at the registered office.

The Financial Reporting Manager – Alessandro Franzosi – hereby declares, pursuant to Article 154 bis, paragraph 2, of the Consolidated Finance Law, that the accounting information contained herein corresponds to the Company’s records, books and accounting entries.

Annexes:

1. Consolidated balance sheet;
2. Consolidated income statement;
3. Consolidated income statement – III quarter;
4. Group cash flow;
5. Glossary of terms and alternative performance measures used.

[1] GFK, September 2022 (Week 39)

^[2] GFK (in terms of value)

Arnoldo Mondadori Editore S.p.A. hereby informs that the Half-Year Financial Report at 30 June 2022, comprising the Independent Auditors’ report, is now available at the Company’s registered office, at the authorized storage mechanism 1info (www.1info.it) and on the website www.gruppomondadori.it (Investors section).

Today, the meeting of the Board of Directors of Arnoldo Mondadori Editore S.p.A., chaired by Marina Berlusconi, reviewed and approved the Half-Year Report at 30 June 2022 presented by CEO Antonio Porro.

“In the first half of the year, our performance was highly positive, and all the business areas contributed to the result, with revenue gaining momentum especially in the second quarter”, emphasized Antonio Porro, Chief Executive Officer of the Mondadori Group. “These results, as well as a continually meticulous management of operations, have allowed us to increase overall profitability and cash generation. Improved operating performance, coupled with the Group’s continued capital strengthening, have laid the groundwork for confirming the 2022 targets and continuing the path of strategic reshaping, despite the uncertain economic and political scenario on a domestic and international level”, concluded Porro.

PERFORMANCE AT 30 JUNE 2022
In first half 2022, consolidated revenue amounted to € 355.1 million, increasing by 10.8% versus € 320.4 million in the prior year; net of the consolidation of D Scuola, Group revenue recorded a like-for-like growth of 5.7%, thanks to the contribution of all business areas, of the Retail and Books areas in particular.

Adjusted EBITDA came to a positive € 27.6 million versus € 21.5 million in first half 2021; excluding the result for the period of D Scuola, adjusted EBITDA came to a positive € 28.4 million as the company, which operates in the school textbooks segment, recorded a loss in the first part of the year due to the seasonal nature of the business; on a like-for-like basis, the Group improved profitability by € 6.9 million versus first half 2021, driven by the positive performance of all business areas, by the Books and Media areas in particular.

Group EBITDA stood at € 26.8 million versus € 19 million in first half 2021; on a like-for-like basis, the figure of € 27.6 million shows a strong improvement, attributable to the abovementioned phenomena, as well as to the positive dynamics of non-ordinary components.

 EBIT came to a positive € 3.2 million (€ 8.5 million on a like-for-like basis). The comparison with 2021 shows:

• an improvement in the overall scope of € 3 million, impacted by the consolidation of D Scuola’s amortization/depreciation and the effects of the Purchase Price Allocation process;
• an improvement on a like-for-like basis of € 3 million.

Financial expense increased by € 1.3 million, due mainly to the recognition in 2021 of a one-off income from the application of IFRS 9 to the terms of the pool loan signed by the Group in May 2021.

Consolidated profit before tax amounted to € 0.5 million; on a like-for-like basis, the figure shows a profit of € 5.8 million, improving by € 10.9 million versus € -5.1 million in first half 2021.
Also contributing to this increase was the improvement of over € 3 million in the results of the investees attributable to the sale on 1 January 2022 of the investment in Monradio (which usually recorded losses), the improved results for the period of Attica, as well as the start of the accounting for the share of profits of A.L.I., of which the Group completed the acquisition of 50%.

Group net profit, after minority interests, amounted to € 2.8 million; on a like-for-like basis, it amounted to € 6.7 million, improving by € 2.3 million versus € 4.4 million in first half 2021, despite the fact that last year had benefited from net non-recurring positive tax components of approximately € 9 million, resulting from the realignment of the tax amounts of trademarks and goodwill to their respective statutory amounts.

The Net Financial Position before IFRS 16 stood at € -205.8 million (€ -285.1 million including IFRS 16). On a like-for-like basis, it stood at € -48.4 million, improving strongly by € 20 million versus the net debt of € 68.3 million recorded at 30 June 2021, despite the cash out from the payment of dividends and the acquisition of A.L.I.

On a like-for-like basis, the LTM cash flow from ordinary operations (after outlays for financial expense and tax) amounted to € 70.6 million, allowing the Group to continue to strengthen its financial structure through the continued and growing ability of the businesses to generate cash.
D Scuola reported a negative cash flow of € 25.2 million in the first half, reflecting the seasonal nature of the school business which, in the first half of the year, records the costs and expenditure for the development and publication of texts marketed in the second half.

LTM Free Cash Flow on a like-for-like basis came to € 41.9 million and includes mainly outlays for restructuring costs of € 10.6 million and approximately € 14 million for acquisitions.

At 30 June 2022, Group employees amounted to 1,917 units, up by 4.8% versus the 1,829 units at 30 June 2021, following the inclusion of the workforce of D Scuola and of De Agostini Libri. Excluding the contribution of companies consolidated from 2022 and the effects of the disposal of titles in the Media area that took place in December 2021, the decline would be approximately 1.7%.

BUSINESS OUTLOOK
In light of the positive operating-financial trend recorded in the first half of the year, and thanks also to the relief received by Electa for its museum activities^[1], the Group believes that it can confirm, for the full year 2022, the previously disclosed estimates at the consolidated level, despite the geopolitical uncertainty and the persisting problems arising from the increase in costs both in the procurement of raw materials, paper in particular, and for energy consumption.

The Group thus expects:

• Earnings: continued resilience of the business model
  – mid-single-digit growth of revenue
  – adjusted EBITDA up by more than 20%
  – double-digit growth of the net result, thanks also to significantly lower restructuring costs and to the improved results of investees versus 2021.

• Cash Flow/Net Financial Position: continued strong cash generation
  – Cash flow from ordinary operations in line with 2021;
  – Free Cash Flow in the region of € 10/15 million (including outlays for the announced acquisitions and before dividend payout);
  – Group net financial debt (IFRS 16) at 1.3x Adjusted EBITDA.

The Mondadori Group continues to prioritize sustainability issues and to pursue its efforts to achieve the ESG goals set.

PERFORMANCE OF BUSINESS AREAS

• BOOKS

Following the remarkable growth seen in 2021, first half 2022 witnessed a consolidation phase of the books market, with a slight drop in terms of value (-1.8%) and volume (-1.4%) versus the same period of 2021^[2].
Excluding from the scope of the books market the comic books segment – still untapped by the Group in the first half of the year and whose growth rate in the period stood at 27.1% – the decline versus first half 2021 is 3.4% (in terms of value).

Against this backdrop, the Mondadori Group’s performance steadily improved, thanks to a publishing plan that concentrated the publication of the most successful titles in the second quarter, and enabled the Group to retain its domestic leadership with a 24.3% market share (26.1% considering the consolidation of Edizioni Star Comics, whose acquisition was completed last 1 July)

Additionally, on 7 July, thanks to Einaudi, the Group won the 76th edition of the Strega Prize with Spatriati by Mario Desiati and placed three other titles from 2nd to 4th place: Quel maledetto Vronskij by Claudio Piersanti for Rizzoli; E poi saremo salvi by Alessandra Carati, a debut fiction writer for Mondadori; Niente di vero by Veronica Raimo for Einaudi.

In first six months 2022, revenue in the Books area stood at € 196 million, up by 16% versus           € 168.9 million in first six months 2021, driven by the positive performance of the trade publishers (+2.2%), which grew by 9% in the second quarter, the sharp increase of Rizzoli International Publications (+10.7%), the upswing in Electa’s activities, as well as the consolidation of D Scuola.
Considering the scope of the Books area on a like-for-like basis alone, excluding the contribution of D Scuola, revenue grew by 6.1%.

Revenue from the school textbooks business amounted to € 49.6 million, up by 38.5% versus € 35.8 million in first half 2021, due to the abovementioned change in the scope following the consolidation of the D Scuola publishing house.
On a like-for-like basis, revenue was down by € 3 million (-8.2%), as a result of the delay in supplies to a number of top accounts, whose recovery is expected in July.

Adjusted EBITDA in the Books area stood at € 23.8 million including the continued negative contribution of € 0.8 million at 30 June of D Scuola, owing to the seasonal nature of the school textbooks business: net of this effect, adjusted EBITDA on a like-for-like basis stood at € 24.7 million, an improvement of € 4.8 million versus € 19.8 million in first half 2021.
The result can be attributable to the abovementioned positive trend of Trade publishers and the performance of Electa, which benefited from the upswing in museum and concession-related activities and higher relief (€ 6.3 million versus approximately € 3 million in first half 2021), which more than offset lower revenue in the Education segment.

• RETAIL

In the first six months, the Retail area posted revenue of € 77.6 million, up by € 7.8 million (+11.2%) versus € 69.8 million in the same period of the prior year.
The ongoing development and renovation of existing stores and the focus on the core business of books have enabled the Mondadori network of bookstores to consolidate its role in the market, as shown by the solid growth in revenue from the Book product (€ +7.7 million), which is higher at the end of the first half even than in the pre-COVID period.

A breakdown of the main channels of Mondadori Retail shows the following:

• directly-managed stores reported a sharp increase in revenue (+45.7% versus the prior year), due to the abovementioned strategy of focusing on the book product and network development activities, and to the restrictions on activities in 1° half 2021 brought by the anti-COVID measures;
• the franchised channel, composed mainly of proximity stores located in small towns, continued its progression, increasing by +3.8% versus the same period of the prior year.

Thanks to the remarkable performance of physical stores, the market share of Mondadori Retail in the Italian books market grew to 11.8%.

In the first half of the year, adjusted EBITDA came to a positive € 1.4 million, up strongly versus approximately € 1 million in first six months 2021, as a result of revenue growth and continued cost containment, renovation and development of the physical network of stores, and despite higher rental and utility costs incurred by directly-managed stores in the six months under review.

• MEDIA

The Media area recorded revenue of € 98.2 million in first six months 2022, increasing by approximately 1% versus € 97.4 million in the same half of the prior year; on a like-for-like basis of portfolio of brands (excluding the effect of the deconsolidation of the titles sold at end 2021), the growth was 10%:

• digital activities, which now account for 22% of the area’s total revenue, rose sharply in the second quarter by 22% (+27.5% on a like-for-like basis of brands). Thanks to this growth, digital revenue as a percentage of total advertising revenue stood at 67% of the total (up from 63% in first half 2021);
• traditional print activities, excluding the titles sold at end 2021, grew by 5%.

The Group’s market share in terms of circulation, as a result of a performance – on a like-for-like basis of portfolio of titles – that outdid the relevant market, stood at 21.3%, up versus 20.5% in May of the prior year.

The Media area’s adjusted EBITDA stood at € 7.8 million, up strongly versus first six months 2021, thanks to the remarkable performance of the print area which, in the second quarter, in addition to benefiting from the continued cost-curbing measures, was able to account for both the margin from the FuoriSalone event (which in 2021 took place in the second half of the year) and for a tax credit recognized on paper consumption that allowed it to offset the increase in the related cost incurred in the period.

With regard to the Warning Notice to listed issuers published by CONSOB on 19 May 2022, concerning the effects on the operating and financial situation resulting from the Russia-Ukraine war, the Mondadori Group clarifies:

• to have no “direct” impacts, as it has no production sites in the affected area, nor does this area represent an outlet market for publishing production or services offered by the Group;
• to have “indirect” impacts, due to the increase in prices of raw materials, energy and transportation.

With regard to such increased costs, the Group has taken measures to alleviate their impact, and has put in place further remedies to achieve efficiencies, such as to achieve in the first half of the year in all business areas growing results versus the relevant forecast figures and to confirm the outlook for the entire year.

The presentation of the results at 30 June 2022, approved today by the Board of Directors is available, on 1Info (www.1info.it), on www.borsaitaliana.it and on www.gruppomondadori.it (Investors section). A Q&A session will be held in conference call mode at 4.30 pm for the financial community, attended by the CEO of the Mondadori Group, Antonio Porro, and the CFO, Alessandro Franzosi. Journalists will be able to follow the meeting in listening mode only, by connecting to the following  phone number +39.02.8020927 or via web at: https://hditalia.choruscall.com/?calltype=2&info=company.

The Financial Reporting Manager – Alessandro Franzosi – hereby declares, pursuant to Article 154 bis, paragraph 2, of the Consolidated Finance Law, that the accounting information contained herein corresponds to the Company’s records, books and accounting entries.

Annexes (in the complete pdf):

1. Consolidated balance sheet;
2. Consolidated income statement;
3. Consolidated income statement – II quarter;
4. Group cash flow;
5. Glossary of terms and alternative performance measures used.

 * The operating and financial figures at 30 June 2022 are also shown on a like-for-like basis excluding D Scuola for greater comparability versus the prior year. Additionally, as already seen for the first quarter, at 30 June 2022, the contribution of D Scuola, fully consolidated as from 16 December 2021, was heavily marked by the seasonal nature of the Education business which, in the first half of the year, records the costs of creating editorial content, as well as the expense from the promotional activities to support the adoption campaign, postponing the recognition of the most significant portion of revenue from the sale of school textbooks to the second half of the year. 

^[1] Emergency Fund for Enterprises and Cultural Institutions for the Relief of Art Exhibition Organizers, decree published on 27 May 2022 granting the subsidies provided by Ministerial Decree 428 no. 227 of June 2021.

^[2] GFK, June 2022

Today, the meeting of the Board of Directors of Arnoldo Mondadori Editore S.p.A., chaired by Marina Berlusconi, reviewed and approved the Interim Management Statement at 31 March 2022 presented by CEO Antonio Porro.

I° QUARTER 2022 HIGHLIGHTS
In first quarter 2022, the Group – excluding the contribution from the newly-consolidated D Scuola – continued its efforts to increase profitability, spurred by the positive trend in revenue across all business areas and careful management of operations implemented in the prior quarters, which led to greater structural efficiency. The Mondadori Group concurrently confirmed its ability to guarantee steady and solid cash flow generation.

“The performance we recorded in the first quarter, and the process of continued strengthening implemented so far, allow us to confirm for 2022 the estimates previously announced, despite the uncertain economic and geopolitical context”, emphasized Antonio Porro, CEO of the Mondadori Group. “The solidity of our business model and our continued ability to generate cash flow put us in a position to continue to focus on and grow in our core business of books: a target that we have successfully pursued to date also through a series of major acquisitions”, concluded Porro.

PERFORMANCE AT 31 MARCH 2022
In the first quarter of the current year, the contribution of D Scuola, fully consolidated as from 1 January 2022, is irrelevant owing to the seasonal nature of the Education business which, in the first half of the year, records only the costs of creating editorial content as well as the expense from the promotional activities to support the adoption campaign, postponing the recognition of revenue from the sale of school textbooks to the second half of the year.

In first quarter 2022, consolidated revenue amounted to € 153.1 million, increasing by 5.7% versus      € 144.8 million in the prior year; net of the consolidation of D Scuola, Group revenue would have recorded a like-for-like growth of 2.9%, thanks to the contribution of all business areas, of the Retail area in particular.

Adjusted EBITDA for the period under review amounted to € -1.1 million. Excluding the result for the period of D Scuola, adjusted EBITDA came to a positive € 2.4 million, as the company, which operates in the school textbooks segment, recognizes a loss in the first part of the year due to the seasonal nature of the business: on a like-for-like basis, the Group recorded an improvement in profitability of € 1.3 million versus first quarter 2021, driven by the positive performance of the Books and Retail segments.

Group EBITDA came to € -0.7 million, or on a like-for-like basis to € +2.8 million: a comparison with the results of the prior year (€ 0.2 million) shows a clear improvement, thanks to the abovementioned business performance, and to the positive contribution from non-recurring items.

EBIT at 31 March 2022 stood at € -12.2 million (€ -6.6 million on a like-for-like basis). The comparison with 2021 shows:

• an improvement of € 2.4 million on a like-for-like basis, due to the mentioned trends;
• a deterioration of € 3.3 million in the overall scope, due to the consolidation of amortization and depreciation and the effects of the Purchase Price Allocation process from the acquisition of D Scuola.

The consolidated loss before tax amounted to € -14.4 million; on a like-for-like basis, the figure amounted to € -8.8 million, improving by € 3 million versus € -12.1 million in the first three months of 2021.

Financial expense rose by € 0.3 million, due to the higher average gross debt recorded in the quarter following the acquisition of D Scuola.

The Group’s net result, after minority interests, amounted to € -11.4 million; on a like-for-like basis, the figure closes at € –7.1 million, a clear improvement versus € -10.2 million in the first three months of 2021. Mention should be made that in the first quarter of the year, the Group usually recognizes a net loss at a consolidated level, due to the seasonal nature of the Education business.

At 31 March 2022, the net financial position before IFRS 16 stood at € -135.8 million (€ -217.4 million including the IFRS 16 impact).

Excluding the effects of the acquisition of D Scuola, the net financial position before IFRS 16 stood at a positive € 9.6 million, improving significantly by over € 57.5 million versus the debt at 31 March 2021 (€ 47.9 million), attributable to the significant cash flow generation recorded in the last twelve months: including the impact of IFRS 16, the NFP stood at a negative € 69.9 million, due to the recognition of an additional financial payable of € 79.5 million.

The LTM cash flow from ordinary operations (after outlays for financial expense and tax), excluding D Scuola, amounted to € 68.9 million, allowing the Group to continue to strengthen its financial structure.

D Scuola, consolidated as from January 2022, reported a negative cash flow of € 13.3 million in the first quarter, in line with the seasonal nature of the school business which, in the first half of the year, records only the costs and expenditure for the development and publication of texts marketed in the second half.

The LTM Free Cash Flow at 31 March 2022 amounted to € 57.5 million, improving further versus the figure at 31 December 2021. Including the impact of the acquisition of D Scuola for approximately € 135 million, the Free Cash Flow of the overall scope recorded outlays of approximately € 88 million.

At 31 March 2022, Group employees amounted to 1,883 units, up by 2.4% versus 1,838 units at 31 March 2021 (+45 units), due primarily to the inclusion of D Scuola staff (totaling 127 units). On a like-for-like basis, therefore excluding both the contribution of the newly-consolidated company and the effects of the sale of the titles in the Media area in December 2021, the drop would come to approximately 2.3%, the result of the continued efforts to increase the efficiency of the individual business areas.

BUSINESS OUTLOOK
In light of the results achieved in the first few months and in the absence of any future material deterioration in the geopolitical context, for the full year 2022, the Group believes it can confirm the estimates previously disclosed, despite the critical issues arising from the increase in costs for the procurement of raw materials, primarily paper, and for energy consumption.

That said, the Group expects for:

• Earnings: continued resilience of the business model
  – mid-single-digit growth of revenue;
  – Adjusted EBITDA up by more than 20%;
  – double-digit growth of the net result, thanks also to significantly lower non-recurring expense than the figure recorded in 2021, despite the fact that net profit in 2021 had benefited from a significant tax component^[1] of approximately € 19 million.
• Cash Flow and Net Financial Position: continued strong cash generation:
  – Cash Flow from ordinary operations: in line with 2021, as a result of the positive contribution from D Scuola, offsetting the “one-off” increase in Group capital expenditure, arising:
     – in the school segment, from the project to integrate D Scuola and from a stronger and richer product range and publishing catalogue in the school segment;
  – in the Retail area, from the plan on the relocation and renovation of the flagship store in Piazza Duomo in Milan, which will see conclusion in the final part of the year;
• Free Cash Flow in the region of € 40/45 million (before payout of the dividend), which includes the expected cash outflows from extraordinary transactions announced;
• Group net financial debt (IFRS 16) less than 1.1x Adjusted EBITDA (0.6x before IFRS 16).

The financial solidity reached allows the Group to continue its path of development, especially in the books business, also through M&As: therefore, the Group will continue to pursue its unwavering commitment, also in the current year, to further growth opportunities through acquisitions.

PERFORMANCE OF BUSINESS AREAS

• BOOKS

In first quarter 2022, after the remarkable growth seen in 2021, the books market witnessed a consolidation phase marked by a slight decline in sales (-1.6% in terms of value and -0.6% in terms of volume)^[2] versus the same period last year.
Even if we exclude from the measurements those segments currently untapped by the Mondadori Group, i.e. professional and, most importantly, comics, which are continuing to see strong growth close to 50% this year, the market continued to remain moderately weak, dropping (in terms of value) by 2.3% versus 2021.

Group revenue in the Trade segment, which fell slightly, was affected, on the one hand, by this trend of the relevant market and, on the other, by the scheduling of the publishing plan, which envisages the release of the major titles in the second half of the year, closing at € 52.3 million, down by approximately 6% versus € 55.9 million in first quarter 2021, which had benefited from the extraordinary success of “Il sistema. Potere, politica, affari: storia segreta della magistratura italiana” by A. Sallusti and L. Palamara (Rizzoli).

Nonetheless, the Group confirmed its undisputed leadership with a market share of 23% in the Trade segment (including the share of De Agostini Libri, consolidated as from 1 April 2022).

With regard to the school textbooks segment, mention should be made that this is a highly seasonal business, so revenue generated in the first three months typically accounts for less than 5% of the annual figure. In first quarter 2022, the activities recorded total revenue of € 9 million: on a like-for-like basis net of D Scuola, revenue was basically steady versus the prior year (€ 4.9 million in first quarter 2021).

Overall, revenue in the Books area as a whole in the first three months of 2022 amounted to € 76.2 million, up by 6.5% versus € 71.6 million in the first three months of 2021, due mainly to the consolidation of D Scuola. On a like-for-like basis excluding the contribution of the recently-acquired company, growth stood at 0.7%, thanks in particular to the strong increase achieved by the publishing house, Rizzoli International Publications, and the upswing in Electa’s museum activities.

Adjusted EBITDA amounted to € -2.1 million, including the negative contribution of D Scuola, owing to the seasonal nature of the school textbooks business: net of these effects, adjusted EBITDA would stand at € 1.5 million versus € 0.6 million in first quarter 2021, improving by € 0.8 million, pushed by the positive performance of the publishing house Rizzoli International Publications and the upswing in Electa’s museum business.

• RETAIL

As indicated earlier, in the first three months of the year, the books market recorded a slight drop versus first quarter 2021 (-1.6%^[3]): this trend had no adverse effect on the performance of the physical channel which, due also to the pandemic-related restrictions that had restrained its activities in 2021, reported a growth versus the same period of the prior year.

Against this backdrop, the market share of Mondadori Retail reached 10.8%, driven by the remarkable performance of physical stores, which benefited from a positive comparison with the prior year.

In the first quarter, the Retail area posted revenue of € 37.2 million, up by € 3.8 million (approximately +11.5%) versus € 33.4 million in the same period of the prior year.

The ongoing development and renovation of existing stores and the focus on the core business of books have enabled the Mondadori Store network to further consolidate its role in the market, as shown by the strong improvement in Books revenue (€ +3.5 million), which is higher at the end of the first quarter even than in the pre-COVID period.

Specifically:

• directly-managed stores reported a sharp increase in revenue (+49.9% versus the prior year), due to the abovementioned strategy of focusing on the book product and network development activities;
• the franchised channel too, composed mainly of proximity stores located in small towns, continued its progression, increasing by +3.2% versus the same period of the prior year;
• the online channel declined, reflecting the market trend.

The Retail area recorded a positive and sharply growing adjusted EBITDA of € +0.3 million (€ +0.7 million versus the first three months of 2021). This target was achieved thanks to the strong growth in revenue, the deep transformation of the business unit as a whole, the ongoing renewal and development of the network of physical stores, as well as careful cost management and a thorough review of the organization and processes.

• MEDIA

In first quarter 2022, the Media area recorded revenue of € 47.1 million, basically steady versus € 46.8 million in the same quarter of the prior year, but up by 9.2% on a like-for-like basis of portfolio of brands (excluding the effect of the deconsolidation of the titles sold at end 2021).

Specifically:

• digital activities, which now account for 20% of the area’s total revenue, increased significantly by over 31% versus first quarter 2021 (+36.8% on a like-for-like basis of brands), driven by the strong performance of AdKaora.
  Digital advertising revenue as a percentage of total advertising revenue now represents 77% (up from 66% in first quarter 2021);
• traditional print activities, excluding the magazines sold at end 2021, improved by 3.4%, thanks to the positive circulation performance of television titles, which bucked the market trend.

 Adjusted EBITDA in the Media area stood at € 2 million, steady versus the first three months of 2021 as a result of:

• in the print area, the continuing measures to contain operating costs, which offset the increase in industrial costs;
• in the digital area, growth in activities in the MarTech segment, despite the higher editorial and development costs incurred for the launch of the new social magazine “The Wom”.

START OF SHARE BUYBACK PROGRAM TO SERVICE THE 2022-2024, 2021-2023 AND 2020-2022 SHARE PERFORMANCE PLANS
The Board of Directors of Arnoldo Mondadori Editore S.p.A. approved the start of a share buyback program, under Article 5 of Regulation (EU) no. 596/2014, to be executed in accordance with the terms and conditions, already disclosed to the public, resolved by the Ordinary Shareholders’ Meeting of 28 April 2022 which, among other things, authorized:

• the purchase and disposal of treasury shares for a maximum amount of up to 0.265% of the share capital, which is intended to provide the Company with the no. 693,878 shares required over the three-year period to meet the obligations under the 2022-2024 Performance Share Plan established by the same Shareholders’ Meeting, pursuant to Article 114-bis of the TUF;
• the continuation of the buyback program to service the 2020-2022 Performance Share Plan and the 2021-2023 Performance Share Plan in the manners and within the limits set out in the relevant Regulations.

Pursuant to Delegated Regulation (EU) 2016/1052, details of the buyback program are shown below:

Purpose of the plan
The sole purpose of the program is the buyback of Arnoldo Mondadori Editore S.p.A. treasury shares to service the 2022-2023 Performance Share Plan, the 2021-2023 Performance Share Plan and the 2020-2022 Performance Share Plan.

Maximum amount in cash allocated to the program
Buybacks will be made at a minimum unit price not lower than the official Stock Exchange price on the day before the purchase transaction, reduced by 20%, and at a maximum unit price not higher than the official Stock Exchange price on the day before the purchase transaction, increased by 10%. The volumes and unit purchase prices will, however, be defined in accordance with the conditions governed by Article 3 of EU Delegated Regulation 2016/1052. Specifically, no shares may be purchased at a price higher than the higher between the price of the last independent trade and the price of the highest current independent bid on the trading venue where the purchase is carried out. In terms of volumes, daily purchase amounts will not exceed 25% of the daily average volume of Mondadori shares traded over the 20 trading days before the dates of purchase.

Maximum number of shares to purchase
Purchases will regard a maximum of no. 410,000 ordinary shares (equal to 0.156%) of the share capital, taking account of the treasury shares already held in the Company’s portfolio, to service the 2022-2024 Performance Share Plan, the 2021-2023 Performance Share Plan and the 2020-2022 Performance Share Plan, in the manners and within the limits set out in the relevant Regulations.
The maximum total amount of shares under the program is therefore within the limits of 10% of the share capital indicated by the Shareholders’ Meeting of 28 April 2022, taking account also of the no. 1,049,838 treasury shares, equal to 0.402% of the share capital, already held by the Company.

Duration of the program
The buyback program runs from 12 May 2022 and will end by the Shareholders’ Meeting to approve the financial statements for the year ending 31 December 2022, which coincides with the expiration of the authorization to purchase treasury shares approved by the Shareholders’ Meeting on 28 April 2022.
The buyback program may be renewed upon further authorization by the shareholders.

Buyback procedures
The buyback program will be coordinated and executed by an authorized intermediary, who will make the purchases independently, with no influence from Arnoldo Mondadori Editore S.p.A. as regards the timing of the purchases.

Buybacks will be made pursuant to the combined provisions of Article 132 of Legislative Decree no. 58/1998 and of Article 5 of Regulation (EU) 596/2014, Article 144-bis of the Issuer Regulation, and the EU and national legislation on market abuse (including Delegated Regulation (EU) 2016/1052), in accordance with the resolutions of the above Shareholders’ Meeting of 28 April 2022.

Any subsequent changes to the buyback program will be promptly disclosed by the Company.
The transactions made will be disclosed to the market in the manners and within the time limits of applicable law.

For information on the above Performance Share Plans, reference should be made to the information documents prepared pursuant to Article 114-bis of Legislative Decree no. 58/1998 and to Article 84-bis of CONSOB Regulation no. 1197/1999 and available on the website www.gruppomondadori.it (Governance section) and at the authorized storage mechanism 1Info (www.1Info.it).

2022-2024 PERFORMANCE SHARE PLAN: ASSIGNMENT OF RIGHTS
The Board of Directors, having heard the Remuneration Committee, resolved on the assignments to the beneficiaries of the rights relating to the 2022-2024 Performance Share Plan, established by resolution of the Shareholders’ Meeting of 28 April 2022.
Information regarding the beneficiaries and the number of rights assigned are shown – by name, for the beneficiaries who are members of the Board of Directors, and in aggregate form for the other beneficiaries – in the table attached, prepared in compliance with Box 1, Schedule no. 7 of Annex 3A of the Issuer Regulation.
The terms and conditions of the Plan are set out in the Directors’ Explanatory Report to the Shareholders’ Meeting of 28 April 2022 and in the Information Document prepared pursuant to Article 84-bis, paragraph 1 of the Issuer Regulation, available on the website www.gruppomondadori.it Governance section and on the storage mechanism www.1info.it to the contents of which reference should be made.

PUBLICATION OF THE MINUTES OF THE SHAREHOLDERS’ MEETING

Arnoldo Mondadori Editore S.p.A. informs that the minutes of the Ordinary Shareholders’ Meeting held on 28 April 2022 are available on the authorized storage mechanism 1Info (www.1info.it), in the Governance section of the Company website www.gruppomondadori.it and at the Company’s registered office.

The Interim Management Statement at 31 March 2022 will be made available today on the authorized storage mechanism 1Info (www.1Info.it), in the Investors section of the Company website www.gruppomondadori.it and at the Company’s registered office.

The presentation of the results at 31 March 2022, approved today by the Board of Directors is available, on 1Info (www.1info.it), on www.borsaitaliana.it and on www.gruppomondadori.it (Investors section). A Q&A session will be held in conference call mode at 4.30 pm for the financial community, attended by the CEO of the Mondadori Group, Antonio Porro, and the CFO, Alessandro Franzosi. Journalists will be able to follow the meeting in listening mode only, by connecting to the following phone number +39.02.8020927 or via web at: https://hditalia.choruscall.com/?calltype=2.

 The Financial Reporting Manager – Alessandro Franzosi – hereby declares, pursuant to Article 154 bis, paragraph 2, of the Consolidated Finance Law, that the accounting information contained herein corresponds to the Company’s records, books and accounting entries.

Annexes (in the complete pdf):

1. Consolidated balance sheet;
2. Consolidated income statement;
3. Group cash flow;
4. Glossary of terms and alternative performance measures used;
5. Information pursuant to Schedule 7 of Annex 3a to CONSOB Regulation no. 11971/1999.

^[1] Derived from the tax realignment of intangible assets.

^[2] GFK, March 2022

^[3] GFK (in terms of value)

Mondadori Group hereby informs that the Interim Management Statement at 30 september 2021 is now available at the Company’s registered office, at the authorized storage mechanism 1info (www.1info.it) and on the website www.mondadorigroup.com (Investors section).

Today, the meeting of the Board of Directors of Arnoldo Mondadori Editore S.p.A., chaired by Marina Berlusconi, reviewed and approved the Interim Management Statement at 30 September 2021 presented by CEO Antonio Porro.

HIGHLIGHTS
In first nine months 2021, thanks also to the buoyancy of the books market, the Mondadori Group recorded a significant growth in revenue and EBITDA across all business areas, and a strong increase in profitability at a consolidated level.

The overall improvement in results puts the Company in a position to pursue further growth opportunities, with a view to increasing focus more and more on its core business of books.

“The good performance recorded also in the third quarter bears witness to the healthy conditions of our company and to our stronger operating and financial standing marked by growing profitability”, said Antonio Porro, CEO of the Mondadori Group.
“These results, together with the positive trend of our core markets, allow us to make an upward revision of the targets we had set for the end of the year.
We carry this momentum into 2022 with an even more solid presence in the books segment: on the one hand, with a consolidated leadership in the Trade area; on the other, with a stronger leading role in school textbooks publishing thanks to the acquisition of De Agostini Scuola.
A growth plan complemented today by the major investment in the books distribution of third-party publishers, thanks to the acquisition of 50% of A.L.I.- Agenzia Libraria International”, concluded Porro.

PERFORMANCE AT 30 SEPTEMBER 2021
In first nine months 2021, consolidated revenue amounted to € 588.9 million, up by 8.7% versus  € 541.9 million of the prior year, thanks to the positive performance of all the business areas and, in particular, of the Books and Retail areas, which benefited from the buoyancy of the Books market.

Adjusted EBITDA came to a positive € 85 million, increasing by € 14 million versus € 71 million in first nine months 2020.
This performance reflects, on the one hand, the positive trend in revenue recorded by all business areas and, on the other, the ongoing efforts to curb operating and structural costs implemented by management.
The reduction in the ratio of fixed costs (overheads and payroll costs) to consolidated revenue enabled the Group to achieve a significant improvement in its margins, which rose to 14.4% from 13.1% in 2020.

The Group’s performance in the first nine months is even more striking when compared with the same period of 2019: despite a € 70 million drop in revenue, adjusted EBITDA rose by more than € 1 million versus € 83.4 million in first nine months 2019.

Group EBITDA, amounting to € 80.5 million, improved versus the € 65.1 million recorded in the same period of 2020, as a result of the abovementioned trends and dynamics, and to lower non-ordinary expense of € 1.4 million versus € 3.2 million in the same period of the prior year, which recorded a provision for charges arising from a tax dispute.

EBIT amounted to € 52 million, up by more than € 23 million versus € 28.9 million in the same period of 2020, due to the dynamics of the abovementioned operating components, to lower amortization and depreciation totaling € 2.1 million, and to the presence, in the result at 30 September 2020, of write-downs of € 5.8 million relating to TV Sorrisi e Canzoni and the goodwill of a number of other titles in the Media area.

Consolidated profit before tax amounted to € 44.8 million versus € 19.6 million in first nine months 2020. On top of that, the following items also contributed to the significant improvement of approximately € 25 million:

• the reduction of approximately € 1 million in financial expense (down from € 3.2 million to € 2.2 million), due primarily to a lower average debt and a lower average interest rate;
• the improvement of approximately € 2 million in the results of associates (consolidated at equity), thanks in particular to the performance of the joint venture Mediamond.

The Group’s net profit, after minority interests, came to € 49.4 million, a sharp increase of € 31.4 million versus € 18 million recorded in first nine months 2020.
Despite the growth in profit before tax, the tax components for the period show a positive operating balance of € 4.6 million, due to the effect of net non-recurring income of approximately € 19 million, from the completion of the process of realigning the tax amounts of trademarks and goodwill to their respective statutory amounts.

The net financial position before IFRS16 at 30 September 2021 stands at € -27.3 million, a significant improvement of € 55 million versus € -82.3 million at 30 September 2020, as a result of the strong cash generation from ordinary operations recorded in the last 12 months (€ 70.7 million including outlays for financial expense and tax).
The IFRS 16 net financial position stands at € -111.6 million and reflects the recognition of the financial payable from the application of IFRS16.

At 30 September 2021, Group employees amounted to 1,814 units, down by 5.3% from 1,916 resources at 30 September 2020, despite the increase in headcount following the acquisition of Hej! (net of which the reduction would be -5.8%).

PERFORMANCE IN THIRD QUARTER 2021
In third quarter 2021, consolidated revenue amounted to € 268.5 million, up by 6.1% versus € 253 million of the prior year, thanks to the positive contribution of all business areas.

Adjusted EBITDA came to € 63.5 million, increasing by € 3.5 million versus € 60 million of third quarter 2020, which basically reflects the positive performance of consolidated revenue, especially in the Books area.

EBIT too, amounting to € 51.8 million, improved by approximately € 6 million, up by over 12% versus the same quarter of 2020, driven by the performance of the abovementioned components and by lower amortization and depreciation during the period.

The Group’s net profit, after minority interests, came to € 45 million versus € 43 million of third quarter 2020.
The comparison with the prior year is affected not only by the above trend in operating profit, but also by the following additional elements (which have an opposite effect):

• in third quarter 2020, the recognition of the write-up of the investment in Reworld Media (fully sold in February 2021), amounting to € 7.5 million;
• non-recurring tax income of € 9.8 million in third quarter 2021, from the completion of the tax realignment process.

AGREEMENT ON THE ACQUISITION OF 50% OF THE BOOKS DISTRIBUTION COMPANY OF THIRD-PARTY PUBLISHERS A.L.I. – AGENZIA LIBRARIA INTERNATIONAL
The Mondadori Group announced today that it has entered into an agreement on the acquisition of a 50% stake in the share capital of A.L.I. S.r.l. – Agenzia Libraria International, a group that has been operating in books distribution for over 50 years now, boasting a portfolio of more than 80 publishing houses.

Thanks to the deal, the Mondadori Group establishes a partnership that enables it to strengthen its position in the books distribution area: a constantly evolving market requiring ongoing improvement of customer service levels.
The founders of A.L.I., the Belloni family, who retain a 50% stake, will continue to manage operations, continuing the path of growth and success enjoyed by the company so far.

The price, which will be paid in cash at the closing date, has been set at € 10.8 million.
The deal also envisages the signing of put&call option agreements whereby the Mondadori Group has the option to acquire the additional 50% of A.L.I. in two different tranches by 30 July 2025.
In 2020, A.L.I. reported consolidated revenue of € 40 million, EBITDA of € 4.6 million and net profit of € 3 million (in accordance with Italian accounting standards).
At 31 December 2020, the net financial position (cash) stood at a positive € 5.9 million.

The scope of the transaction also includes a number of subsidiaries operating in the publishing fields.
Completion of the acquisition is subject to the authorizations of law from the competent Antitrust authority.

BUSINESS OUTLOOK

The positive performance recorded also in the third quarter of the year by all business areas, the continued strong cash flow generation, as well as the improved trend forecast for the books market throughout the year, allow the Group to look forward with increased optimism to its development in the coming months, and therefore to increase – based again on the current scope – the estimates previously disclosed for the current year.

 Performance targets:

• consolidated revenue is expected to grow single-digit (from low single-digit);
• adjusted EBITDA – in percentage terms – is forecast to be over 13% of consolidated revenue (compared with the previous estimate of an EBITDA margin of 12%), therefore to reach over € 100 million;
• the net result for 2021 is confirmed on a sharp rise, propelled by the improvement in operations and by the non-recurring benefits from the tax realignment of intangible assets already recorded.

 Cash Flow and Net Financial Position:
Additionally, with regard to the Group’s financial debt, one can reasonably estimate a further increase in cash flow from ordinary operations, bringing it to a range between € 60 and 65 million (from the previous forecast between € 50 and 55 million), a Free Cash Flow of approximately € 50 million and, therefore, the achievement – before the impacts from the adoption of IFRS 16 – of a positive consolidated net financial position at year end equal to approximately € 35 million.

As previously anticipated, the financial strength achieved by the Group has paved the way for a possible return to a shareholder remuneration policy from 2022 (applied to the net result of 2021).

The above forecasts, drawn up on the basis of the current scope, may be updated upon completion of the acquisition of De Agostini Scuola.

PERFORMANCE OF THE BUSINESS AREAS AT 30 SEPTEMBER 2021

• BOOKS

In the first nine months of the current year, the Trade books market recorded an overall growth of 3%[1] versus the same period of the prior year; in the third quarter, the increase was 7%, consolidating the positive trend that had started in second half 2020.
If the comparison with 2020 is affected by the lockdown, which impacted on the operation of almost all sales channels in the months of March and April 2020, the comparison with 2019 bears more significance to the extraordinary trend that the Books market is experiencing: growth in the first nine months of the year versus the same period of 2019 amounted, in fact, to 20.6%.

Against this backdrop, the Mondadori Group saw an increase in sell-out in terms of market value of approximately 19%, which allowed it to retain its undisputed leadership in the Trade segment with a 23.4% market share[2].

In the School textbooks segment, the Mondadori Group’s publishing houses kept their market share steady at 22.1%, in line with the prior year, thanks to the positive results of the 2021 adoption campaign.

In first nine months 2021, revenue in the Books area amounted to € 348.7 million, up by 10.3% versus € 316.1 million in the same period of 2020, driven in particular by the increase recorded by the Trade area (+14.5%), the positive performance of the school textbook publishers (+5%, due also to a different monthly schedule of revenue from 2020, which had seen a delayed return to school), and the significant growth of Rizzoli International Publications (+27.6%).

Revenue from the sale of e–books and audiobooks, which accounted for approximately 7.4% of total publishing revenue, fell by 3.5%, while sales of physical books were instead on the rise. Versus 2019, this revenue grew instead by approximately 25%.

Adjusted EBITDA in the Books area amounted to € 79.4 million versus € 67.5 million in the same period of 2020, an improvement of approximately € 12 million, thanks to the abovementioned positive trend of revenue in the Trade and Education segments and of Rizzoli International Publications, and to the relief received by Electa in the museum segment and booked in the first nine months (approximately € 3 million, net already of certain provisions).

The profitability achieved by the Books area, amounting to 22.8% at 30 September 2021 (versus 21.3% in the same period of 2020), is even more worthy of notice when compared to the profitability recorded in the first nine months of 2019, equal to 21.5%, since the current year is still impacted by the drastic drop in volumes and margins from museum activities.

• RETAIL

In the first nine months of the year, Mondadori Retail achieved revenue of € 114.3 million, up by 12.1% versus € 102 million in the same period of 2020.
Sales of books, which account for 84% of total revenue for the area, rose by 15.8%.

Performance in the opening months of 2021 was affected by the anti-COVID measures, which severely curtailed sales activities, especially of directly-managed stores located in large cities and shopping malls.
In the second half of the period under review, thanks to the gradual lifting of social distancing measures, directly-managed PoS reported a sharp recovery in revenue, enabling them to close the first nine months with an increase of approximately 9% versus the prior year.
The franchised channel, composed mainly of proximity stores located in small towns, showed greater resilience and responsiveness, enabling it to record a growth of approximately 26% versus the same period of the prior year.
The gradual reopening of bookstores led to a decline in the activities of the online channel, which posted a 24% drop in revenue during the period; versus 2019, revenue improved, instead, by 13.1%.

Mondadori Retail reported a strong increase in adjusted EBITDA, which came to € 1.7 million, up by € 2.2 million versus the same period of 2020, and an improvement versus the same period of 2019 (€ 0.8 million).
This result is attributable to the deep transformation of the Area, the ongoing renewal and development of its network of physical stores, as well as careful cost management and a thorough review of the organization and processes.

• MEDIA

In the first nine months of the year, the Media area posted revenue of € 150 million, up by 4.1% versus € 144.1 million in the same period of the prior year.

Advertising revenue grew by approximately 32% overall (+18% excluding Hej!), and grew even further in the third quarter by 39% (+23% on a like-for-like basis) versus the same period of 2020. Against this backdrop:

• advertising revenue on digital brands increased by 20% on a like-for-like basis (+44% including Hej!). A point worth mentioning is that digital revenue today accounts for 60% of total advertising revenue, confirming Mondadori Media’s leadership position in the digital field, in segments marked by high commercial value.

• advertising sales on print brands increased by approximately 16%, benefiting from the comparison with a period negatively affected by the pandemic.

Circulation revenue was down by 5.8%, with a more moderate drop (-4%) for television titles, which account for approximately 50% of revenue in this segment.
Against this backdrop, with results that outperformed the relevant market (-6.9%[3]), the Group’s market share rose to 23.9%1³.

Revenue from add-on products dropped by approximately 18% versus the first nine months of 2020, but with a reversal of the trend in the third quarter this year (+2.5%), thanks in particular to the presence of a number of successful initiatives in the music segment.

Other revenue, which includes revenue from distribution activities, increased by 9.5% versus the prior year, reflecting both the positive performance of international editions (Grazia in particular) and growth in newsstand distribution and subscriptions of third-party publishers.

Adjusted EBITDA in the Media area amounted to € 7.8 million, up sharply versus € 3.2 million in the first nine months of 2020, thanks in particular to the development of digital activities, the recovery of print advertising sales and the continued efforts to curb operating costs, which contributed to the increase in profitability: the overall EBITDA margin improved from 2% to approximately 5% in first nine months 2021.

SIGNIFICANT EVENTS AFTER FIRST NINE MONTHS 2021
On 8 November 2021, the Mondadori Group announced it had received notice from the Antitrust Authority of the authorization to acquire 100% of De Agostini Scuola S.p.A..
The provision envisages the adoption of appropriate behavioural measures, as indicated by the Authority and shared by the Mondadori Group, to safeguard the competitiveness of the school textbooks market, including, in particular, the commitment to continue to keep De Agostini Scuola separated until 31 December 2024.
These remedies confirm the rationale of the acquisition, the business development plan and the potential for value creation initially estimated by the Group.
The Authority’s go-ahead triggers the fulfilment of the suspensive condition attached to the agreement on the sale of the investment in De Agostini Scuola; the sale will therefore be fully executed on the closing date, scheduled to take place later this year.

§

The results at 30 September 2021, approved today by the Board of Directors, will be presented to the financial community by the Mondadori Group CEO Antonio Porro and CFO Alessandro Franzosi at a conference call scheduled today at 4:30 pm.
The relevant documentation will be concurrently available on the website www.gruppomondadori.it (Investors section) and on 1Info (www.1info.it).

Journalists will be able to follow the presentation, in listening mode only, by connecting to the dedicated number +39.028020927, and via the web in audio mode by registering at the link https://hditalia.choruscall.com/?calltype=2&info=company.

§

The Financial Reporting Manager – Alessandro Franzosi – hereby declares, pursuant to Article 154 bis, paragraph 2, of the Consolidated Finance Law, that the accounting information contained herein corresponds to the Company’s records, books and accounting entries.

 Annexes (in the complete pdf):

1. Consolidated balance sheet;
2. Consolidated income statement;
3. Consolidated income statement – III quarter;
4. Group cash flow;
5. Glossary of terms and alternative performance measures used.

[1] GFK, September 2021 (figures in terms of market value)

[2] GFK, September 2021 (figures in terms of value)

[3] Internal source: Press-di, August 2021, in terms of value

Today, the meeting of the Board of Directors of Arnoldo Mondadori Editore S.p.A., chaired by Marina Berlusconi, reviewed and approved the Half-Year Report at 30 June 2021, presented by the CEO of the Mondadori Group, Antonio Porro.

“In the first half of the year, the Mondadori Group achieved remarkable results on the revenue and profitability front. All our areas, from Books to Retail to Media, played their part in this performance and grew versus the prior year, the digital component in particular. The Books area improved significantly and increased its margins versus 2019,” stressed Antonio Porro, CEO of the Mondadori Group. “The greater operating efficiency and improved financial performance we achieved in the second quarter too – continued the CEO – together with highly reassuring signs from the books market, give us reasons to confirm our year-end estimates and to look forward with confidence to the evolution of the Group in future years. Against this backdrop, the acquisition of De Agostini Scuola is further proof of our will to focus on the core business of books, in line with the medium-term strategic guidelines set”, concluded Porro.

HIGHLIGHTS OF FIRST HALF 2021

With regard to the core markets of the Mondadori Group, in first half 2021 books witnessed a buoyant trend, growing by 36.8%[1] versus the same period of 2020.
This performance consolidates the positive trend that had started in the first quarter of the current year, driven again by a greater propensity to read and purchase.
The growth of the books market is even more extraordinary if compared to the first six months of 2019[2], still totally unaffected by the pandemic and increasing by 23% versus this period.

PERFORMANCE AT 30 JUNE 2021

At 30 June 2021, consolidated revenue of the Mondadori Group amounted to € 320.4 million, up by 10.9% versus € 288.9 million of the prior year, thanks in particular to the strong growth in the Books and Retail areas, driven by the buoyancy of the market.

Adjusted EBITDA in first half 2021 amounted to € 21.5 million, up by approximately € 10.6 million versus € 11 million in the first six months of 2020: this positive performance reflects, on the one hand, the good trend of revenue recorded in the period by all business areas and, on the other, the ongoing efforts to curb operating and structural costs that enabled the Group to achieve a significant improvement in its margins (from 3.8% to 6.7%).

Group EBITDA came to € 19 million, more than double the € 8.4 million recorded in the prior year, showing a clear improvement attributable to the abovementioned phenomena and trends. In the period under review, non-recurring expense amounted to € 2.5 million, in line with the figure for the same period of the prior year.

In first half 2021, EBIT came to operating breakeven (€ 0.2 million), an improvement of over € 17 million versus € -17.2 million in the same period of 2020, attributable to the trend of the above ordinary components, to lower amortization and depreciation for a total of € 1.3 million, and to the presence in the result at 30 June 2020 of write-downs of € 5.8 million, relating to certain publications in the Media area.

The consolidated result before tax amounted to € -5.1 million versus € -30.9 million in first half 2020.
The significant improvement is also explained by:

• the reduction of approximately € 2 million in financial expense, due to a lower average interest rate, in addition to the reduction in ancillary expense;
• the effects of the sale of the investment in Reworld Media, completed in February 2021, which resulted in the recognition of a capital loss of € 0.4 million[3] in first quarter 2021, with a positive change of € 6.2 million versus a capital loss of € 6.6 million recorded at 30 June 2020;
• the result for the period of associates (consolidated at equity), which closed at € -3.1 million.

Tax items for the period came to a positive € 9.4 million (€ 5.9 million at 30 June 2020), despite the increase in taxable income, due to net non-recurring income of € 9 million deriving from the start of the process of realigning the tax amounts of trademarks and goodwill to their respective statutory amounts.

The Group’s net profit, after minority interests, came to € 4.4 million, a significant recovery versus the loss of € -25 million in first half 2020 (and also versus the loss of € 1.9 million at 30 June 2019), following the operational improvement and the abovementioned positive tax components.

The net financial position before IFRS 16 at 30 June 2021 stood at € -68.3 million, down drastically by 47.5% versus € -130.1 million at 30 June 2020, as a result of the significant generation of cash flow from ordinary operations recorded in the last 12 months, amounting to € 68.5 million, which confirms the positive path taken to strengthen the Group’s financial structure.
The IFRS 16 net financial position amounted to € -155.1 million and includes the recognition of the financial payable from the application of IFRS 16 equal to approximately € 87 million.

Group employees at 30 June 2021 amounted to 1,829 units, down by 5.2% versus 30 June 2020, despite the workforce absorbed following the acquisition of Hej! (net of which the reduction in the workforce would be -5.8%), due primarily to the efficiency measures that continued across all the business areas.

BUSINESS OUTLOOK

The positive performance recorded in the first half of the year, driven in particular by the strong growth trend of the Books area, as well as the continued cash flow generation, allow the Group to be optimistic about its operating performance and to confirm at a consolidated level – and on the basis of the current scope of consolidation – the previously disclosed estimates.

Performance targets:

• consolidated revenue for 2021 is forecast to grow slightly (low single-digit);
• adjusted EBITDA – in percentage terms – is estimated at around 12% of revenue;
• the net result for 2021 is confirmed on a sharp rise, propelled by the improvement in operations as well as the tax realignment of intangible assets, which in the first half enabled the recognition of an initial non-recurring positive tax component; additionally, mention should be made that the result for 2020 was negatively impacted by the write-down of certain balance sheet items.

Cash Flow and Net Financial Position
Additionally, with regard to the Group’s financial debt, one can reasonably confirm the estimates of cash flow from ordinary operations ranging between € 50 and € 55 million, therefore the achievement – before the impacts from the adoption of IFRS 16 – of a positive consolidated net financial position at year end.
As previously anticipated, the financial strength achieved by the Group has paved the way for a possible return to a shareholder remuneration policy from 2022, applied to the net result of 2021.
The above forecasts, drawn up on the basis of the current scope, may be updated upon completion of the acquisition of De Agostini Scuola, subject to the authorizations of law from the Antitrust authority.

PERFORMANCE OF THE BUSINESS AREAS IN FIRST HALF 2021

• BOOKS

As previously indicated, in the first half of the year the Trade books market posted a sharp growth of 36.8%[4] versus the same period of 2020, strengthening the trend that had started in the second half of the prior year, driven also by limited access to other forms of entertainment.

Against this backdrop, the Books area saw an increase in sell-out in terms of market value of 30.7%, enabling the Mondadori Group to confirm its undisputed leadership in the Trade segment (market share of 23.7%).

As proof of the quality of the publishing plan, mention should be made that during the first six months of the year, the Group placed 4 titles in the top ten bestsellers in terms of value[5]: Il sistema. Potere, politica, affari: storia segreta della magistratura italiana by Alessandro Sallusti and Luca Palamara (Rizzoli), which was the chartbuster in the opening months of the year, ranking firmly at the top; La disciplina di Penelope by Gianrico Carofiglio (Mondadori); Io sono Giorgia by Giorgia Meloni (Rizzoli); Insieme in cucina. Divertirsi in cucina con le ricette di «Fatto in casa da Benedetta» by Benedetta Rossi (Mondadori Electa). Additionally, Donatella Di Pietrantonio’s Borgo Sud, published by Einaudi in 2020, came second in the Strega in 2021.

Revenue in the Books area in first half 2021 amounted to € 168.9 million, up by 15.8% versus € 145.9 million in first half 2020.

The Trade segment gave a strong push to the result, with revenue of € 109.5 million, a significant increase versus both first half 2020 (+21.7%) and first half 2019 (+2.5%), unaffected by the pandemic.

During the period, revenue from the sale of e-books and audiobooks amounted to approximately 7.3% of total Trade revenue, with a catalogue of over 28,300 digital titles.

In first half 2021, revenue in the Educational segment amounted to € 55.8 million, up by 5.7% versus the same period of 2020: the positive sales performance of Rizzoli International Publications (+39.3%) and the increased turnover from school products (up by 3.9% versus 30 June 2020) allowed a recovery from the effects of the contraction of Electa’s revenue, caused by the closure during the pandemic of exhibitions and archaeological sites.

Adjusted EBITDA in the Books area came to € 19.8 million versus € 10.9 million in first half 2020, an improvement of € 8.9 million thanks to the positive trend in revenue, as well as to the relief received by Electa in the museum segment (approximately € 3 million, net already of certain provisions).
Profitability was up also versus first half 2019 (€ 16.2 million), making the performance of the Books area even more remarkable.

• RETAIL

Overall, in the first six months of the year the Retail area was able to benefit from the strong growth trend in the books market, although overall performance was negatively impacted by the government measures that caused severe restrictions on sales activities at least until mid-May.
As a result of the easing of restrictions, the physical market witnessed a recovery, and consequently Mondadori Retail saw its revenue grow: specifically, June also saw an increase versus June 2019 (approximately +3%), with a positive performance of the Book product of over 11%, despite a reduction in the network of stores versus June 2019.

At 30 June 2021, the Retail area recorded revenue of € 69.8 million, up by € 10.8 million (+18.3%) versus € 59 million in the same period of the prior year, driven by the positive performance of Book product sales (approximately +22% versus the same period of 2020).
Revenue in second quarter 2021 alone increased by approximately +30% versus second quarter 2020.

A breakdown of the various business segments of Mondadori Retail shows the following:

• directly-managed stores experienced a more modest growth (+12%) versus the prior year, affected by their location mainly in large populated areas, which are particularly exposed to both competition from online sales and the reduction in tourist flows;
• on the other hand, the franchised channel, composed mainly of proximity stores located in small towns, grew strongly by approximately 42%, boosted again by the excellent performance of the book product;
• the online channel posted revenue of € 7.3 million versus € 10.4 million in first half 2020, down due to the easing of restrictions on the operation of the physical market.

Adjusted EBITDA of Mondadori Retail amounted to € 0.4 million, a strong improvement versus € -2.8 million in the same period of 2020.
This improvement is the result of the company’s strong efficiency measures, the ongoing renewal and development of its network of physical stores, as well as careful cost management and a thorough review of the organization and processes.

• MEDIA

In the first five months of 2021, the core markets of the Media area showed, versus the same period of the prior year:

• a significant increase in advertising investments in the digital segment, amounting to +27.2%, versus -2.9%[6] on the magazine front;
• an 8.1% drop[7] in the magazine circulation market;
• a 22.1% decline[8] of add-ons bundled with

Against this backdrop, the Mondadori Group’s circulation market share stood at 23.7%, up slightly versus May of the prior year,1³ due to a slightly better performance than the core market.

In the first six months of 2021, the Media area of the Mondadori Group, which confirmed its position as Italy’s leading multimedia publisher, generated revenue of € 97.4 million, up by 1.7% versus € 95.8 million in the same period of the prior year. Specifically:

• advertising revenue reached € 28.8 million, up by approximately 28% overall (+16% excluding the contribution of the acquisition of Hej!).
  Considering the second quarter alone, the increase is over 50% versus the same period of 2020 (+41% on a like-for-like basis):
  – digital activities grew by 25.7% on a like-for-like basis while, including the contribution of the newly-acquired Hej!, the increase stands at approximately 48% versus the first half of the prior year. A point worth mentioning is that digital revenue now accounts for 63% of total advertising revenue (from 54% in first half 2020).
  – print advertising sales increased by approximately 5%.

• circulation revenue was down by 4%, with television titles and the CasaFacile brand performing better.
• revenue from add-on products fell by approximately 27%, but with a more moderate decline in the second quarter (-16.6%), a trend due primarily to the success of musical initiatives last year and the reduced availability of film releases on DVD.
• other revenue, which includes revenue from distribution activities, rose by 1%.

Adjusted EBITDA in the Media area amounted to € 4.5 million, up sharply versus the first six months of 2020 (€ 2 million), thanks in particular to the development of digital activities and the continued efforts to curb operating costs, which contributed to the increase in profitability of print activities: the overall EBITDA margin stood at 5%, improving versus 2% in first half 2020.

2021-2023 PERFORMANCE SHARE PLAN: ASSIGNMENT OF RIGHTS
The Board of Directors, having heard the Remuneration Committee, resolved on the assignments to the beneficiaries of the rights relating to the 2021-2023 Performance Share Plan, established by resolution of the Shareholders’ Meeting of 27 April 2021.
Information regarding the beneficiaries and the number of rights assigned are shown – by name, for the beneficiaries who are members of the Board of Directors, and in aggregate form for the other beneficiaries – in the table attached, prepared in compliance with Box 1, Schedule no. 7 of Annex 3A of the Issuer Regulation.
The terms and conditions of the Plan are set out in the Directors’ Explanatory Report to the Shareholders’ Meeting of 27 April 2021 and in the Information Document prepared pursuant to Article 84-bis, paragraph 1 of the Issuer Regulation, available on the website www.gruppomondadori.it Governance section and on the storage mechanism www.1info.it to the contents of which reference should be made.

SIGNIFICANT EVENTS AFTER FIRST HALF 2021
On 12 July 2021, the Mondadori Group signed an agreement with De Agostini Editore S.p.A. – following the negotiations disclosed on 1 July – for the acquisition of 100% of De Agostini Scuola S.p.A., one of Italy’s top school textbook publishers.
The transaction is consistent with the strategy – repeatedly announced by Mondadori – of focusing on the core business of books, in which the Group boasts a longstanding leadership in Trade and is one of the top school textbook players.
The value of the transaction has been defined on the basis of an Enterprise Value of € 157.5 million, equal to 7.4 times the reported EBITDA recorded by De Agostini Scuola in 2020. The price will be defined on the basis of the average normalized net financial position over the 12 months before the closing date.
De Agostini Scuola posted in 2020 revenue of € 70.8 million, reported EBITDA of € 21.4 million, with a margin of 30%, and net profit of € 12.2 million. At 31 December 2020, the net financial position (net cash) stood at a positive € 20.8 million.
Completion of the transaction is subject to the authorizations of law from the competent Antitrust authority.

The results at 30 June 2021, approved today by the Board of Directors, will be presented to the financial community by the Mondadori Group CEO Antonio Porro and CFO Alessandro Franzosi at a conference call scheduled today, 29 July 2021, at 3pm.

The relevant documentation will be concurrently available on the website www.gruppomondadori.it (Investors section) and on 1Info(www.1info.it).

Journalists will be able to follow the presentation, in listening mode only, by connecting to the dedicated number +39.028020927, and via the web in audio mode by registering at the link https://hditalia.choruscall.com/?calltype=2&info=company.

The Financial Reporting Manager – Alessandro Franzosi – hereby declares, pursuant to Article 154 bis, paragraph 2, of the Consolidated Finance Law, that the accounting information contained herein corresponds to the Company’s records, books and accounting entries.

Annexes (in the complete pdf):

1. Consolidated balance sheet;
2. Consolidated income statement;
3. Consolidated income statement – II quarter;
4. Group cash flow;
5. Glossary of terms and alternative performance measures used.
6. Information pursuant to Schedule 7 of Annex 3a to CONSOB Regulation no. 11971/1999

[1] GFK, June 2021 (figures in terms of market value)

[2] The comparison with 2020 is affected by the closure enforced on all bookstores from March: from 12 March until the end of April, the government measures applied to contain the pandemic led in fact to the closure of bookstores across the Country; in the early stages, the online channel too had to apply restrictions on book deliveries due to the need to prioritize the distribution of staple goods.

[3] The monetization of this investment generated a total gain (2019-2021) of € 1.1 million versus the original subscription value.

[4] GFK, June 2021 (figures in terms of market value)

[5] GFK, June 2021 (ranking in terms of cover value)

[6] Nielsen, May 2021

[7] Internal source: Press di, May 2021, in terms of value

[8] Internal source: Press di, May 2021, in terms of value