Press releases

Today, the meeting of the Board of Directors of Arnoldo Mondadori Editore S.p.A., chaired by Marina Berlusconi, reviewed and approved the draft Parent Company and Group consolidated financial statements at 31 December 2023 presented by CEO Antonio Porro.

“In the financial year just ended, the Mondadori Group continued to develop its core business, focused on strengthening its presence in book publishing as well as on promotion and distribution for third-party publishers. The Group achieved excellent consolidated earnings, significantly higher than the previous year. The Group’s current configuration, also in light of the economic and financial results achieved in 2023, allows us to predict further improvement for 2024 of results even with the same consolidation scope”, underlined Antonio Porro, CEO of the Mondadori Group.

PERFORMANCE AT 31 DECEMBER 2023

Consolidated revenues for 2023 amounted to € 904.7 million, a slight increase (+0.2%) on the € 903 million recorded in 2022. Net of the changes in consolidation scope between the two financial years, the organic growth in revenues rose to 1.1%.

The Adjusted EBITDA for 2023 of € 152.1 million (compared to € 136.3 million in 2022) shows an increase of almost € 16 million (+11.5% and consistent with the guidance, which estimated a high single/low double-digit increase) to which all business areas contribute.

Netting the results for the two periods in question of the reliefs and contributions respectively paid, the growth recorded by Group’s Adjusted EBITDA would exceed € 19 million (+14.2%). Two thirds of this result is derived from the operating performance of the original consolidation scope (thanks, in particular, to the Education and Retail Books areas) and the remaining part is mainly attributable to the consolidation of the new companies acquired in the Trade Books area.

Overall, profitability stood at 16.8%, up by almost 2 percentage points from around 15% in the 2022 financial year and in the upper part of the target range previously communicated to the market.

The Group EBITDA for the 2023 financial year was € 148.9 million, compared to € 130.7 million in 2022, highlighting an € 18.2 million improvement (+13.9%) attributable to the favourable trend in some operating components and the recognition in the 2023 financial year, in the Media area, of the net capital gain resulting from the sale of the Grazia and Icon magazines (and the related international network).

The 2023 EBIT was positive in the amount of € 84.2 million, showing an improvement of € 11.5 million compared to 2022 (+15.8%). Neutralising the extraordinary items and the impacts of the PPA and impairment processes, the Adjusted EBIT would stand at € 102 million, up by approximately € 12 million (+13.1%) compared to the previous year.

Financial charges recorded an overall increase of over € 2 million, with approximately € 0.5 million resulting from the higher cost of debt – despite a reduction in average exposure – and the remaining € 1.6 million resulting from higher costs arising from the accounting effects of IFRS 16 which, in the 2022 financial year, had allowed non-recurring income (approximately € 1.4 million) linked to the early closure of the old rental contract for the Segrate headquarters to be recognised.

Consolidated result before tax were positive at € 80.5 million, up by about € 14 million (+20.4%) from € 66.9 million in 2022. Also contributing to this performance was an improvement of over € 4 million in the earnings of associates, resulting in particular from: the updated fair value measurement of the investments in A.L.I. and Adgage for a total of approximately € 2 million; the recognition of a capital gain – net of the negative result for the first four months – of € 0.4 million relating to the sale in April 2023 of the residual investment in SEE, the publishing company of Il Giornale, which reported a loss of approximately € 1.8 million in the previous year; the absence of the write-down of the equity investment in Attica, which had a € 1.7 million impact on the 2022 financial year.

The Mondadori Group’s net profit for the year to 31 December 2023, after minority interests, amounted to € 62.4 million, a significant improvement of about 20%, in line with expectations and despite the impairment, equivalent to € 10.3 million, compared to € 52.1 million in 2022. The net profit for 2023 triples the value of the 2019 financial year.

Tax costs in the period totalled € 17.9 million versus € 15.3 million in 2022 due to the higher pre-tax result.

Adjusted net profit for the 2023 financial year, neutralising all non-recurring items previously mentioned, would amount to about € 71 million, up by around 11% on the previous year (€ 63.9 million).

The Net Financial Position excluding IFRS 16 as of 31 December 2023 was € -86.1 million (net debt), an improvement of € 20 million compared to € -106 million in 2022, due to significant cash generation by the business and despite the dividend distribution cash-out. In the financial year 2023, the Group distributed dividends totalling approximately € 29 million, equivalent to a pay-out of 55% of the 2022 net profit.

The IFRS 16 Net Financial Position as of 31 December 2023 amounted to € -158.6 million (net debt), from € -177.4 million in 2022, due to an IFRS 16 debt component of € -72.5 million. The Adjusted NFP/EBITDA ratio is 1.0x, exactly in line with the target communicated to the market and down from 1.3x at the end of 2022.

At € 68.7 million, cash flow from ordinary activities (after cash-outs due to financial expenses and taxes) for the financial year 2023 is 15.1% higher than the figure for 2022 and is at the high end of the guidance (EUR 65-70 million).

As of 31 December 2023, the extraordinary cash flow was negative by € 15.3 million, mainly due to net cash-outs related to merger & acquisition activities of around € 5 million and restructuring costs of around € 5 million.

Free Cash Flow as of 31 December 2023 was positive at € 53.5 million and confirms the Group’s ability to finance its inorganic growth policy and the distribution of significant dividends to shareholders.

As of 31 December 2023, the Mondadori Group employed 1,945 people, an increase of 2.4% compared to the 1,900 employed at 31 December 2022 (+45 people).

PERFORMANCE OF BUSINESS AREAS

Trade BOOKS AREA

Following the consolidation phase in 2022, in 2023 the book market showed further growth in value of 3.4% and a substantial stability in volume. In the fourth quarter, the value increased by 5.7% thanks to the excellent earnings recorded during the Christmas season.

In this context, the Mondadori Group’s publishing houses grew by 3.7% across 2023, outperforming the market of reference – particularly thanks to the excellent earnings achieved in the first and fourth quarters from the publication of titles such as Spare – Il minore (“Spare”). by Prince Harry, Le armi della luce (“The Weapons of Light”) by Ken Follett, published by Mondadori, and La vita intima by Nicolò Ammaniti, published by Einaudi -, and consolidate their leadership nationally with a market share of 27.6% at the end of 2023.

Revenues for 2023 amounted to € 374.3 million, having grown by around 10.4% compared to the previous year, also due to the consolidation of the recently acquired companies (A.L.I. and Star Comics).

Adjusted EBITDA was € 59.2 million: net of the reliefs relating to Electa’s museum activities, amounting to € 6.4 million, from which the 2022 financial year had benefited, the area recorded an increase in its margin of around 22% (+ € 10.5 million), largely attributable to the contribution of the new companies consolidated from 2023, despite the negative impact of the higher cost of paper compared to the previous period. The profitability achieved by the Trade Books area was 15.8% in 2023, showing improvement on 2022, excluding the contribution of the reliefs (14.4%).

Education BOOKS AREA

The Schools market (primary and secondary schools) in Italy in 2023 is estimated to have grown by around 3.5% on the previous year to approximately € 618 million.

In the 2023 financial year, the Mondadori Group’s publishing houses confirmed their leadership at national level, with a 32% share of the set texts market, substantially stable compared to 2022, due to growth in the secondary school segment (middle and high schools) and a decline in primary schools.

Revenues in the area were € 237.5 million (€ 237.3 million in 2022), stable compared to the previous year. In particular, lower and upper secondary school revenues, which account for over 80% of the area’s revenues, grew by around 5%, versus a fall in primary school revenues (-6.5% compared to 2022). In addition to the above, there was a decline of approximately 6% in the distribution and sale of third-party products by Rizzoli Education (dedicated to the teaching of foreign languages) and a contraction in sales of non-set text products.

The area’s Adjusted EBITDA in 2023 was € 67.7 million, a distinct improvement on the € 63.5 million recorded in 2022 (+6.7%), thanks to the contribution of all publishing houses and the full completion of the synergies resulting from the integration of D Scuola.

The 28.5% profitability in 2023 was higher than that recorded in 2022 (26.7%) thanks to the lower incidence of industrial costs – as a result of the lower cost of paper purchases, down by around € 4 million – and promotional costs.

RETAIL AREA

In a context of growth in the Italian market, there was an improvement in the physical channel (+4.3%) and a recovery in the online channel, which saw a gradual recovery in the fourth quarter, closing the year with an increase of 2%.

In 2023, Mondadori Retail grew by 5.6%, outperforming the market of reference for the third consecutive year. Thanks to this result, which was due to the excellent performance of physical shops, Mondadori Retail’s market share grew to 12.8% (+0.3% compared with 31 December 2022) of the total market and was close to 20% of the physical market. The ongoing development and renovation of existing stores and the focus on the core business of books enabled the Mondadori bookshop network to consolidate its role in the market.

The transformation process launched over the past years has made for an improvement in operating and management performance, as shown in the income statement for 2023, which highlights strong growth in revenue and margins of the Retail area.

Revenues amounted to € 199.5 million, up 5.4% (+ € 10.3 million) on the previous year, the highest value recorded since the pre-pandemic year 2019.

An analysis of sales by channel shows further growth in revenues from direct bookshops (+10.3% compared with the previous year), franchised bookshops (+4.5% compared with 2022) and the online channel (+3.1% compared with the previous year).

Books, the Mondadori Group’s core business, provided the greatest revenues (over 80% of the total), having grown overall by 6.1% compared with 2022, driven by the excellent performance of physical stores; the non-book turnover recorded a positive trend (+14.4% compared with 2022), thanks to growth in the impulse sector (stationery and gifts).

The area shows a positive Adjusted EBITDA of € 14 million, up by more than 50% compared to 2022 (+ € 4.9 million), confirming a gradual improvement in performance (in 2019, Adjusted EBITDA was € 5 million).

It is important to note that the area’s 2023 income statement returned to profit after more than a decade, closing with a positive net profit of € 1.5 million, an improvement of € 3 million compared to the loss of € -1.4 million in 2022.

MEDIA AREA

In 2023, the Mondadori Group confirmed its position as Italy’s leading multimedia publisher: in print, with 13 magazines and 9 million readers and a market share (in terms of circulation) of 20.3%, slightly up – on a like-for-like portfolio of titles – compared with December 2022 (19.8%); online, with 12 brands and an average of around 28 million unique users/month; in social media, with more than 110 profiles and a fanbase of around 103 million as of 31 December 2023.

In the financial year 2023, revenues in the Media area amounted to € 141 million, down by 20.6% compared to the previous year. On a like-for-like basis, this contraction was reduced to 2.7% by the positive performance achieved in the fourth quarter of the year (+7% approximately) and highlights different trends in the two components: digital and print.

Digital activities, which account for around 40% of total turnover for the area, recorded an increase in advertising revenues of around 23%, mainly due to the positive performance of the MarTech segment; print activities fell by 14.8%, mainly due to the decline in add-on sales for the entire year caused by the decision to reduce releases in low-margin products such as music and home video.

Adjusted EBITDA amounted to € 16.4 million, about +16% year-on-year, attributable to both business segments. The EBITDA margin recorded an increase of almost 4 percentage points, from 7.9% to 11.7%. Specifically: in the print area, the increase was due to the rationalisation of the portfolio of activities with more stable profitability, the constant attention being paid to the development and rationalisation of costs, as well as the recognition of a tax credit to partially offset the costs incurred by the publisher for magazine distribution activities; in the digital area, adjusted EBITDA increased by approximately € 1 million compared to the previous year, thanks to higher revenues and the contribution of new initiatives, despite the earnings from the digital activities of the magazines sold being removed from the consolidation scope.

OUTLOOK FOR THE YEAR

The Group’s current configuration, economic performance and cash generation capacity, also demonstrated in 2023, point to a further improvement in results for 2024, even on a like-for-like basis.

From a strategic point of view, the Group intends to continue the process of strengthening its core business in the Trade Books area, both in publishing, by emphasising the identity and specialisation of the various publishing houses, and by continuing the process of vertical integration in the various stages of the book chain, particularly in the comics segment, by taking full advantage of the distribution synergies arising from the acquisition of Star Shop.

In the Education Books area, it will continue to focus on the most profitable segments of the textbook market and consolidating its domestic leadership, strengthening and renewing its editorial offer and taking full advantage of the digital convergence process (through the development of a new single digital platform for all three publishing houses).

In the Retail area, the Mondadori Group will continue with the selective development of its network of shops, both direct – by opening around ten new outlets – and franchised, as well as with improving the sales surface area, maximising the efficiency of the network and enriching its range of publications, which is essential both to increase the profitability of the area and to improve its effectiveness in conveying the Group’s editorial offer to the market.

In the Media area, the Mondadori Group will at the same time continue to strengthen its competitive positioning by developing its skills and offer in the digital area, in particular through initiatives in the content creator, Food and MarTech segments.

Income Statement

The following are the Group’s economic and financial targets for the financial year 2024, based on a consolidation scope that includes only completed extraordinary transactions (Star Shop):

• low single-digit revenue growth;
• mid single-digit growth in the Adjusted EBITDA, with margins expected to remain stable at around 17%, thanks to targeted pricing policies and the further reduction of paper and printing costs.

At the end of the next three-year period, i.e. in the financial year 2026, with the consolidation scope described above and therefore with the only organic growth, the Group estimates that it will be able to achieve consolidated revenues in the region of € 1 billion and a proportional growth in margins that will enable it to confirm profitability approximately at 17%.

Cash Flow and Net Financial Position

In the three-year period 2024-2026, the Group is expected to confirm the significant cash generation capacity shown in 2023 and therefore cash flow from ordinary operations of no less than € 70 million.

DIVIDEND POLICY

The Group’s significant cash generation over the next three years will be allocated to maximising the company’s value creation, through an active investment policy in its core and adjacent businesses aimed at seizing opportunities to strengthen its leadership, expand geographically and/or expand its presence within the book value chain. This development strategy will be accompanied by an increasing shareholder remuneration policy, through a more consistent Dividend Policy that provides for, each year of the three-year-period, the distribution of 50% of the Ordinary Cash Flow per share (from the previous 40%) or the Dividend per Share of the previous year increased by 10%, whichever is the greater.

Each year, the Board of Directors, when proposing the distribution to the Shareholders’ Meeting, will take account of the general macroeconomic scenario, as well as the expected cash flows and the Group’s equity and financial structure.

PERFORMANCE OF ARNOLDO MONDADORI EDITORE S.P.A.

The Parent Company’s income statement at 31 December 2023 shows the same profit as in the consolidated financial statements of € 62.4 million (€ 52.1 million in 2022), due to the fact that the Company has chosen to use the equity method to measure its investments in the separate financial statements.

Revenues, which consist of the costs of central structures charged back to the subsidiaries, amounting to € 43.1 million, increased by about 3% compared to the previous year, due to higher charges (related to IT services and occupied space) resulting from the expansion of the Group’s consolidation scope and the respective offices.

Adjusted EBITDA in 2023 was € -5.6 million, essentially stable compared to 2022 (€ -5.7 million in 2022).

Reported EBITDA for 2023 was € -7.5 million, down from 2022 (€ -6.7 million), mainly due to higher allocations related to restructuring costs.

DIVIDEND DISTRIBUTION PROPOSAL OF € 0.12 PER ORDINARY SHARE

Based on the results of the 2023 financial year, the Board of Directors will submit a proposal to the next Shareholders’ Meeting, convened on 24 April 2024, for the distribution of a dividend per share of € 0.12, gross of withholding taxes, for each ordinary share (net of treasury shares) outstanding at the record date.
The total dividend amounted to approximately € 31 million, up by 9% compared to the previous year: this amount corresponds to a pay-out of 50% of the net profit for 2023 and a dividend yield of almost 6% (as of 31 December 2023). The amount will be paid by drawing on the distributable portion of the extraordinary reserve (included in the equity item “Other reserves profit/loss carried forward”).
In compliance with the provisions of the “Regulations for markets organised and managed by Borsa Italiana S.p.A.” and as already announced, the dividend will be paid in two equal tranches:

• unit amount of € 0.06 for each ordinary share (net of treasury shares) outstanding at the record date stated below, from 22 May 2024 (payment date), with ex-dividend date no. 23 on 20 May 2024 (ex date) and with the date of entitlement to payment of the dividend, pursuant to Article 83-terdecies of the TUF (record date), on 21 May 2024;
• unit amount of € 0.06 for each ordinary share (net of treasury shares) outstanding on the record date stated below, from 20 November 2024 (payment date), with ex-dividend date no. 24 on 18 November 2024 (ex date) and with the date of entitlement to payment of the dividend, pursuant to Article 83-terdecies of the TUF (record date), on 19 November 2024.

SIGNIFICANT EVENTS AFTER YEAR-END 2023

On 1 February 2024, through its subsidiary Mondadori Libri S.p.A., the Mondadori Group finalised the acquisition of 51% of the share capital of Star Shop Distribuzione S.r.l., which operates in the comic book and gadget segment and is particularly active in the distribution of third-party publishers in the comic book shop channel and in the management of sales outlets – direct and affiliated – in the same segment. As communicated to the market on 29 June 2023, following authorisation by the Italian Antitrust Authority pursuant to Law 287/1990 – as previously announced on 3 November 2023 -, the transaction is effective from 1 February 2024, as of which Mondadori will also proceed with the line-by-line consolidation of the company.

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 27 April 2023, with the approval of the financial statements at 31 December 2023, the Board of Directors will propose to the next Shareholders’ Meeting, called for 24 April 2024, 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 main elements of the Board of Directors’ proposal, which are consistent with those of the expired authorization:

• Motivations

The motivations underlying the request for the authorization to purchase and sell treasury shares refer to the opportunity to attribute to 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 2024 and, in any case, for a period no more than 18 months after that 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 authorisation would allow the purchase, on one or more occasions and in one or more tranches, of a maximum number of ordinary shares with a nominal unitary value of € 0.26, which – considering the treasury shares already held by the Company and the shares that may possibly be acquired by subsidiaries – shall not exceed a total of 10% of the share capital.
Pursuant to article 2357(1) of the Italian Civil Code, the purchase transactions will be carried out within the limits of the distributable profits and available reserves resulting from the last regularly approved financial statements at the time of each potential purchase transaction. The authorisation would include the right to subsequently dispose of the treasury shares acquired, in whole or in part, on one or more occasions and even before having exhausted the maximum number of purchasable shares.

• Criteria for purchasing treasury shares and indication of the minimum and maximum purchasing cap

Purchases would be made in accordance with articles 132 of the TUF, 144-bis(1)(b) and d-ter) of the Issuers’ Regulation, and thus:
(i) on regulated markets or multilateral trading systems, according to the operating criteria established in the organisation and management regulations of the same markets, which do not allow the direct matching of purchase trading proposals with predetermined sales trading proposals, as well as in compliance with any other legislation in force, including European ones.
(ii) by the methods established by the market practices permitted by Consob, pursuant to the combined provisions of article 180(1)(c) of the TUF and article 13 of Regulation (EU) no. 596 of 16 April 2014 (“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 terminated 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 authorisation proposal provides that purchases are made at a unit price, compliant with any regulatory requirements, including European ones, or permitted market practices in force at the time, where applicable, without prejudice to the fact that the minimum and maximum purchase price will be set at a unit price no lower than the official stock market price of the Mondadori stock on the day prior to the day on which the purchase transaction is carried out, decreased by 20%, and no higher than the official stock market price on the day before the day on which the purchase transaction will be carried out, 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 – such price shall be identified in accordance with the trading conditions set forth in Delegated Regulation (EU) no. 1052 of 8 March 2016 and, 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; and
• in terms of volumes, daily purchase amounts will not exceed 25% of the daily average volume of Mondadori shares traded as recorded in the 20 trading days before the dates of purchase or in the month prior to the month of the disclosure required by Art. 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 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. 1,277,802 treasury shares, equal to 0.488% 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 2021-2023 PERFORMANCE SHARE PLAN: INFORMATION PURSUANT TO ART. 84-BIS, PARAGRAPH 5 CONSOB REGULATION NO. 11971/1999

The Board of Directors, based on the final assessment of the achievement of the Performance Targets underlying the Plan, and having heard the Remuneration and Appointments Committee, resolved to allocate a total of no. 729,331 Arnoldo Mondadori Editore S.p.A. shares to a total of 13 beneficiaries, implementing the provisions of the “2021-2023 Performance Share Plan” adopted by the Shareholders’ Meeting on 27 April 2021 (the “2021-2023 Plan”).

Mention should be made that the 2021-2023 Plan takes the form of a share granting plan and grants its beneficiaries the right to receive, free of charge, shares in the Company held as treasury shares 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 beneficiaries of the 2021-2023 Plan are the Chief Executive Officer, the CFO and 11 managers identified by name by the Chief Executive Officer, as delegated by the Board of Directors.

The characteristics of the Plan are explained in detail in the Directors’ Report to the Shareholders’ Meeting of 27 April 2021 and in the information document drawn up pursuant to article 84-bis of CONSOB Regulation no. 11971/1999 available at 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 allocation of shares in the context of the 2021-2023 Performance Plan.

PROPOSED ADOPTION OF A PERFORMANCE SHARE PLAN COVERING THE THREE-YEAR PERIOD 2024-2026

The Board resolved, on a proposal from the Remuneration and Appointments Committee, and continuing to apply the performance share instrument for the medium-long term remuneration of executive directors and strategic executives, as per Legislative Decree 58 of 24 February 1998, art. 114-bis, to submit for approval by the Shareholders’ Meeting, convened for 24 April 2024, the establishment of a Performance Share Plan for the three-year period 2024-2026, reserved 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 linked to ESG issues.
For details on the proposed adoption of the 2024-2026 Performance Share Plan, the beneficiaries and the characteristics of said Plan, reference should be made to the Information Document approved by the Board of Directors, 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.

PROPOSAL TO THE SHAREHOLDERS’ MEETING TO ADOPT A SHORT-TERM INCENTIVE PLAN (MBO) 2024

On a proposal from the Remuneration and Appointments Committee, the Board resolved to submit the adoption of a Short Term Incentive Plan (MBO) for the year 2024 to the Ordinary Shareholders’ Meeting for approval, pursuant to Article 114-bis of Legislative Decree no. 58 of 24 February 1998. The Plan, which is reserved for the same beneficiaries as the 2024-2026 Performance Share Plan, governs the determination, subject to the achievement of specific individual and Group performance objectives, of the annual Variable Remuneration (MBO) for the year 2024. In particular, the Plan envisages a voluntary mechanism for the conversion into Mondadori shares of a percentage component equal to 15% or 30% of the Variable Remuneration itself, as well as the disbursement of an additional “bonus” component in shares, equal to the number of shares resulting from the conversion.

Any allocation of the total component in shares would take place at the end of a 24-month deferral period with respect to the MBO vesting date.

For details on the proposed adoption of the 2024 Short-term Incentive Plan (MBO), the beneficiaries and the characteristics of said Plan, reference should be made to the Information Document approved by the Board of Directors, 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.

PROPOSAL TO RENEW THE POWERS OF THE BOARD OF DIRECTORS PURSUANT TO ARTICLES 2443 AND 2420-TER OF THE ITALIAN CIVIL CODE

The Board of Directors will propose the Shareholders’ Meeting, called on 24 April 2024, also in extraordinary session, to adopt the resolutions referred to in articles 2443 and 2420 ter of the Italian Civil Code, relating to the renewal of the Board’s powers to increase the share capital and issue convertible bonds.
Specifically, the Board will propose to the Shareholders’ Meeting:

– the renewal of the proxies already granted to the Board of Directors by the Extraordinary Shareholders’ Meeting of 17 April 2019 and terminating due to expiry of the related five-year term, which, pursuant to Articles 2443 and 2420-ter of the Italian Civil Code, grant the Board of Directors the power to increase the share capital, reserved as an option to those entitled thereto, by a maximum nominal amount of € 75,000,000 and to issue convertible bonds for a maximum nominal amount of € 250,000,000.

– the renewal of the proxy already granted to the Board of Directors by the Extraordinary Shareholders’ Meeting of 17 April 2019 and also terminating, granting the Board of Directors, for the same period of five years, the power to increase the share capital within the limit of 10% of the pre-existing share capital and in any case within the limit of a nominal amount of € 20,000,000, with the exclusion of option rights pursuant to Articles 2443 and 2441(4) of the Italian Civil Code.

The renewals are proposed under the same conditions of the terminating proxies unused by the Board and for a further period of five years corresponding to the maximum term allowed by the law.

The proposals for the renewal of proxies are motivated by the advisability of maintaining the general power of the Board of Directors to implement any capital transactions through faster and more streamlined procedures than the resolutions adopted by the Extraordinary Shareholders’ Meeting.

CONSOLIDATED NON-FINANCIAL STATEMENT PURSUANT TO LEGISLATIVE DECREE 254/2016

Under Legislative Decree 254/2016, the Board of Directors’ 2023 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 2023, 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 2023, stakeholder engagement was pursued through the involvement of employees, teachers, bookshop customers, suppliers and financial analysts and investors, with more than 4,500 responses to the engagement questionnaire.

The document also includes the references required by Regulation (EU) 2020/852 related to the introduction of the European Taxonomy.

SUSTAINABILITY PLAN

Actions and initiatives in the ESG area are highlighted as part of the reporting activity. In 2023, constant monitoring of the goals set in the Sustainability Plan was carried out, which made it possible to provide a timely image of the degree to which they were achieved and to identify new future actions for the 2024-2026 Plan.
Below are the objectives achieved and reported for 2023.

Social

1. Preparation of the documentation for the Gender Equality Certification (UNI PDR 125/2022), with Audit scheduled for 2024.
2. Development and implementation of a training plan specifically for D&I with half-yearly seminars for all Mondadori Group people.
3. Launch of the “Care” project for all Group employees and families, with particular focus on the “Parenthood” project to promote more inclusive models of access to maternity/paternity leave, eliminate existing biases and facilitate the return to work, enhancing acquired skills.
4. Review of internal procedures governing selection with the introduction of blind CVs.
5. Review of the internal procedures governing recruitment and career development, with particular attention to D&I matters.
6. Extension of training in digitalisation/new forms of work to all Group employees.
7. Implementation of a training plan accessible to all Group personnel regarding sustainability issues.
8. Establishment of a new Group Charter of Values.
9. Extension to 100% of the school offer of contents/insights relating to Sustainability, the 2030 Agenda for Sustainable Development, diversity, equity and inclusion and civic education.
10. Expansion of ESG training activities for the Group’s school publications departments and for teachers.
11. A growing number of initiatives/services to promote reading.

Governance

1. Setting and measurement of quantitative and measurable ESG-related LTI objectives for top management (Impact Inclusion Index in the 2023-2025 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 the programmes aiming to protect intellectual property/copyright.
4. Strengthening of stakeholder engagement activities through the gradual expansion of engagement initiatives.

Environment

1. Extension of the electricity supply from renewable sources to sites (Segrate) and stores (Mondadori Duomo and Turin).
2. Energy efficiency actions through improved management of electrical and mechanical systems at the Segrate site.
3. Energy efficiency actions as part of direct book store renovation/opening initiatives and obtaining LEED certification (gold) for Mondadori Duomo.
4. Finalisation of the “Book environmental footprint” project study: Life-Cycle Assessment (LCA) study for measuring environmental impacts and establishing data-based objectives for reducing atmospheric emissions and achieving continuous improvement along the entire value chain.
5. Maintenance of the commitment to purchase ≈100% of paper from certified PEFC/FSC sources for Mondadori Group products with extension to newly acquired companies.
6. Extension to 100% of the School proposition of insights and fact sheets dedicated to environmental culture of the entire school offer and promotion of such content in the Trade proposition.

No legal action was initiated or concluded against the Group or its employees for cases of corruption during the year, nor were any reports made within the whistleblowing system.

The results for the year ended 31 December 2023, approved on today’s date by the Board of Directors, will be presented by the Mondadori Group Management to the financial community at a presentation scheduled for 3:30 p.m. today in person and via webcast. The corresponding documentation will be available on 1Info (www.1info.it), at www.borsaitaliana.it and at www.gruppomondadori.it (Investors section). Journalists will be able to follow the proceedings of the presentation via webcast, by dialling +39 02 802 09 27 and via web https://www.c-meeting.com/web3/join/MKRA9NDNUBPJNA.

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 Statements of Financial Position
2. Consolidated Income Statement
3. Consolidated income statement – fourth quarter
4. Group cash flow
5. Arnoldo Mondadori Editore S.p.A. Statements of financial position
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
9. Information pursuant to Schedule 7 of Annex 3a to CONSOB Regulation no. 11971/1999.

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 2023 presented by Chief Executive Officer Antonio Porro.

“The Mondadori Group has recorded excellent results and a sharp increase in profitability in the first nine months of 2023, attributable to the pursuit of a meticulous management of operations, the contribution of recent acquisitions and the synergy arising from their integration, which allowed for an improvement in the performance of all business areas and a capital strengthening of the Group. We can therefore confirm what was announced on 29 June in terms of expected results for the ongoing year, namely an economic and financial improvement”, said Antonio Porro, CEO of the Mondadori Group.

Performance at 30 September 2023

Consolidated revenue for the first nine months of 2023 amounted to € 679.9 million versus € 678.2 million in the first nine months of 2022, growing by 0.3%. Like-for-like, organic revenue growth came to 1.1%.

Adjusted EBITDA for the first nine months of 2023 was € 129.3 million, an increase of around € 14 million on the € 115.5 million recorded for the same period in 2022.

Netting the results for the respective periods in question of the reliefs and contributions respectively paid, the growth recorded by Group’s EBITDA would exceed € 17 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, the Education BOOKS Area and the RETAIL Area.

Group EBITDA for the first nine months of the current year amounted to € 131.5 million, compared to € 114.5 million at 30 September 2022, an improvement of approximately € 17 million attributable to the operating dynamics and the recognition in the current year, in the MEDIA Area, of the net capital gain resulting from the sale of the titles Grazia and Icon (and the related international network).

Thanks to the positive performance of all business areas, the Mondadori Group’s EBIT for the first nine months of 2023, positive for € 90.5 million, showed an improvement of € 12.5 million compared to 2022. The result was achieved despite the booking of approximately € 4 million in higher depreciation/amortisation resulting from the greater investments made in the last 12 months, the consolidation of new companies (€ +1.0 million) and the accounting effects of the PPA (Purchase Price Allocation) process (€ +1.2 million compared to the first nine months of 2022).

Neutralising extraordinary items and the impact of the PPA process related to the companies acquired in the last 24 months, Adjusted EBIT would amount to € 92.1 million, up by more than € 10 million (+12.9%) compared to the same period of the previous year.

Financial expense grew by over € 3 million, of which around € 2 million as a result of the higher cost of debt.

The consolidated result before tax was positive at € 87.1 million, an improvement of about € 11 million compared to € 75.8 million in the first nine months of 2022. The over € 2 million improvement in the profits of associates, in addition to the information already noted, 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 of € 0.4 million from the sale of the residual investment in SEE, the publishing company of Il Giornale.

The Group’s net profit at 30 September 2023, after minority interests, was positive for € 66.3 million and showed a significant improvement of € 8 million (around 14%) versus € 58.3 million recorded in first nine months of 2022.

Tax costs in the period totalled € 20.5 million versus € 17.6 million at 30 September 2022 due to the higher pre-tax result.

The Group’s capital structure grew stronger still: the Net Financial Position excluding IFRS 16 at 30 September 2023 amounted to € -152.3 million (net debt), an improvement of over € 20 million versus € -173.4 million at 30 September 2022, as a result of the relevant cash generation of the business and despite the cash-out relating to acquisitions made during the last 12 months and the distribution of dividends in May 2023 for around € 29 million.

The IFRS 16 Net Financial Position came to € -223.9 million, from € -235.7 million recorded at 30 September 2022, including an IFRS 16 component of € -71.6 million.

At 30 September 2023, cash flow from ordinary operations in the last 12 months came to € 64.6 million, while cash flow from extraordinary operations was negative for € 13.2 million.

Consequently, LTM Free Cash Flow at 30 September 2023 was positive for € 51.4 million, confirming the Group’s capacity to finance its growth policy by external lines.

Performance of Business Areas

Trade Books Area

Following the consolidation phase of 2022, 2023 showed further growth in the book market for 2.3% (in terms of value) and a substantial stability in terms of volume compared to 2022. The third quarter in particular showed a 1.6% increase in terms of value (source: GFK, September 2023).

In this context, the Mondadori Group’s publishers recorded growth of 2.2% in the first nine months, which is in line with the reference market, despite the third quarter of 2022 having benefited from a strong publishing plan. Thanks to this performance, Mondadori has consolidated its national leadership position, with a market share which, in September 2023, remained stable at 27.3%.

Revenue in the first nine months of 2023 in the Trade BOOKS Area stood at € 268 million, increasing by 14% compared to the same period in 2022.

Adjusted EBITDA in the first nine months of 2023 amounted to € 41 million: net of reliefs relating to Electa’s museum activities (€ 6.4 million), which had benefited in 2022, the area recorded growth of 23% (€ 7.6 million), largely attributable to the contribution of the newly acquired companies in the current year.

The profitability at 30 September 2023 achieved by the Trade BOOKS Area was approximately 15%, showing improvement on the same period in 2022, excluding the contribution of the reliefs (14%).

Education Books Area

The Mondadori Group’s publishing houses in the context of school textbooks achieved a market share (adoption) of 32%, substantially stable compared to the figure reported in the previous year, with growth in the secondary school segment (upper and lower secondary schools) and a decrease in primary, characterised by higher volatility and lower profitability.

In the first nine months of 2023, the school textbooks business reported overall revenue of € 215.5 million (€ 213.7 million in the corresponding period of 2022), increasing by 0.8% despite a partial delay in the distribution activities.

In particular, an analysis of the trend by school level shows how revenue from first- and second-level secondary school – accounting for 80% of the area’s revenue – has grown by around 3%, with a trend offset by the decrease recorded by primary school (-7.9% compared to the same period in 2022), in line with the adoption trend reported. As expected, the sales of third-party publishers distributed by Rizzoli Education fell by 7%.

Adjusted EBITDA of the Education BOOKS Area in the first nine months of the year stood at € 73.9 million, a clear improvement compared to € 68.1 million in the corresponding period of financial year 2022 (+8.5%), mainly due to a different and more favourable mix of revenue and a lower percentage of product cost and promotional costs.

Retail Area

As already mentioned, the book market in Italy in the first nine months reported a 2.3% growth compared to the same period in 2022; in this context, the physical channel grew by +4.8% while the online channel declined (estimated at -1.6%), even if gradually recovering in the third quarter of 2023 compared to the figure from the corresponding period of 2022.

In the first nine months of 2023, Mondadori Retail recorded a 5.7% increase in book sell-out in stores; thanks to this overperformance, driven by excellent performance reported by physical stores, Mondadori Retail’s market share stood at 13% of the total market, +0.4% on 30 September 2022, and almost came to 20% of the physical market.

In the first nine months of the year, the RETAIL Area reported revenue of € 133.4 million, up by € 7.4 million (+5.9%) versus 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 consolidate its role in the market, as demonstrated by the solid growth in revenue from the book product.

An analysis of sales by channel shows a further increase in revenue from directly-managed bookstores (+12.8% compared to the same period in the previous year) and franchisee bookstores (+4.0% compared to 30 September 2022) and, at the same time, a decline in the Online and Bookclub channels.

As far as the product categories are concerned:

• the book area was the main component of revenue (more than 80% of the total), up comprehensively by +6.6% compared to 2022, driven by the excellent performance of physical stores;
• Extra-Book sales were on a positive trend (+14.7% versus the first nine months of 2022) confirming the excellent signs arising in the last year, due to the growth in the stationery, games, gifts and music.

The RETAIL Area had a positive Adjusted EBITDA of € 8.3 million, a value that has doubled compared to the figure for the first nine months of 2022 (€ +4.2 million).

Media Area

In the first nine months of 2023, the MEDIA Area recorded revenue of € 101.5 million, a reduction of approximately 25% 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 6% thanks to the performance of near stability achieved in the third quarter of the year and shows different trends in the two digital and print components.

The Digital Area, which accounts for over 37% of the area’s overall revenue, showed an increase in advertising revenue of around 20%, deriving in particular from the positive performance of MarTech; the Print Area fell by around 16%, mainly due to the significant drop in add-on sales in the period.

In the first nine months 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 27.7 million average unique users per month; on social media with 100 profiles and a fanbase of around 100 million.

In the magazine segment, the Group’s market share (in terms of circulation) stood at 20.3%, up slightly – with a like-for-like portfolio of titles – versus the figure in the same period of 2022 (19.8%), due to improved performance on that of the reference market.

Adjusted EBITDA in the MEDIA Area amounted to € 10.3 million, up by around 10% compared to the first nine months of 2022, mainly attributable to the traditional activities – which benefited from a contribution to offset the costs incurred by the publisher for the distribution of periodicals (€ 2.8 million) – which more than offset the decrease in the margin on sales of collateral items; in the Digital Area, Adjusted EBITDA is essentially stable on the same period in 2022 thanks to higher advertising revenue, despite the higher costs incurred for launching new initiatives tied to the influencer marketing segment and the deconsolidation of the result related to the digital activities of the titles sold.

Performance in Third Quarter 2023

Consolidated revenue for the third quarter of 2023 amounted to € 317.6 million (versus € 323.1 million the prior year), showing a slight decline compared with the same period of 2022 (-1.7%). Like-for-like, organic revenue performance recorded -1.2%.

Adjusted EBITDA for the third quarter of 2023 was € 91.1 million, an increase of almost € 3 million on the € 87.9 million recorded for the third quarter of 2022.

In the third quarter of 2023, EBIT closed with a positive € 76.5 million, showing an improvement of € 1.8 million.

Neutralising extraordinary items and the impact of the PPA process, Adjusted EBIT would stand at € 77.8 million, up by around € 2 million from € 75.9 million in the third quarter of 2022.

Outlook for the year

The forecasts previously communicated to the market on 29 June 2023 are confirmed, and reported in full below.

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 net profit.

Cash Flow and Net Financial Position

• ordinary cash flow is expected to range between € 65 and 70 million, showing an increase of up to 15% compared to the figure from 2022;
• 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 presentation of the results at 30 September 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 Statements of Financial Position
2. Consolidated Income Statement
3. Consolidated income statement – III quarter
4. Group cash flow
5. Glossary of terms and alternative performance measures used

Arnoldo Mondadori Editore S.p.A. hereby informs that the Half-Year Financial Report at 30 June 2023, 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).

Arnoldo Mondadori Editore S.p.A. announces receipt of the following statement:
“Further to the reading of Silvio Berlusconi’s last will and testament, Marina Berlusconi, chairman of the board, and Pier Silvio Berlusconi, director, inform that no shareholder will exercise overall individual indirect control of Fininvest S.p.A., previously exercised by their father himself.

The notary who read out the will is implementing the related legal requirements in the coming hours.”

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 2023 presented by CEO Antonio Porro.

1ST QUARTER 2023 HIGHLIGHTS

The first quarter of the current year was characterised by a positive trend in the book market which, following a consolidation phase experienced in 2022, recorded renewed growth with an increase in both value (+3%) and volume (+0.8%)[1].

“During this first quarter of 2023, the Mondadori Group recorded a significant improvement in profitability-  taking into account the seasonal nature of the schoolbook business – thanks to the positive performance of revenues and an increasingly careful approach to operative management. The excellent start to the year for the book market, the slight fall in the prices of raw materials and services, and the company’s performance allow us to confirm our estimates for the year, with revenues and Adjusted EBITDA growing by a single-digit and margins expected to be around 15%,” emphasised Antonio Porro, Chief Executive Officer of the Mondadori Group.

PERFORMANCE AT 31 MARCH 2023

Consolidated revenue in the first quarter of 2023 amounted to € 160 million, up by approximately 4.5% compared to € 153.1 million in the previous year. Net of changes in scope occurring between the two periods, the organic change in growth amounted to +3.6%.

Adjusted EBITDA came to € 4.4 million, showing a significant increase on the € -1.1 million of the first quarter 2022: both the growth in revenues, in particular of the Trade Books and Retail areas, and the consolidation of the results of the companies only recently acquired, contributed to the Group’s positive results.

The Group’s EBITDA came to € 4.7 million compared to € -0.7 million in the first quarter of 2022, an improvement of almost € 5.5 million, traceable to the favourable dynamics of the above management components.

EBIT is negative for € 8.2 million, showing an improvement of € 4 million on 2022, thanks to the positive operating performance of the businesses, despite the booking of € 1 million for greater amortisation/depreciation deriving from investments, from the consolidation of newly-acquired companies and the accounting effects of the Purchase Price Allocation process (PPA).

Excluding the extraordinary components and the impacts deriving from the PPA process relative to the companies acquired in the last 2 years (€ 1.2 million), Adjusted EBIT came to € -7.2 million, up € 4.5 million on the same quarter of the previous year.

The consolidated result before tax is negative for € 8.8 million, an improvement of approximately € 5.6 million on the € -14.4 million in first quarter 2022, thanks to:

• a reduction in finance expenses (€ 1.2 million as at 31 March 2022) despite a higher average cost of debt, thanks to the reduced expenses deriving from the application of IFRS 16, as a result of the new rental contract for the Segrate head office;
• an improvement in the result of the subsidiaries for € 1.4 million, deriving in particular from the update of the fair value measurement of the equity investment in the company A.L.I..

It is recalled that after the end of the first quarter, the 18.45% equity investment held in the share capital of Società Europea di Edizioni, publisher of Il Giornale, was sold.

At 31 March 2023, the Group’s net loss, after minority interests, came to € 5.2 million, showing a sharp increase of approximately € 6 million versus the € -11.4 million recorded in Q1 2022.
Mention should be made that in the first quarter of the year, a net loss is recorded at a consolidated level, due to the seasonal nature of the school textbooks business.

The IFRS 16 Net Financial Position came to € -220.8 million, essentially stable on the € -217.4 million recorded at 31 March 2022, including an IFRS 16 component of € -70.1 million.
The Pre-IFRS 16 Net Financial Position came to approximately € -150.7 million, slightly up on the € -135.8 million of 31 March 2022 due to the cash-out relative to acquisitions made during the last twelve months and the distribution of dividends.

Cash flow from ordinary operations (after outlays for financial expense and tax) in the last 12 months, amounted to € 63 million and allows the Group to continue to strengthen its financial structure. Note that ordinary cash generation was impacted as follows:

• the improvement in the business income management, partly temporarily offset by the dynamics of working capital;
• the lower tax payments for approximately € 3 million, mainly deriving from realignments and tax redemption applied during previous years.

At 31 March 2023, cash flow from extraordinary operations of the previous 12 months came to a negative € 61.5 million, mostly due to cash out for restructuring costs of € 7.2 million and for the net balance of acquisitions and disposals of approximately € 47 million.
Consequently, the LTM Free Cash Flow as at 31.03.2023 was positive by € 1.5 million, demonstrating the Group’s ability to finance its inorganic growth policy and to remunerate its shareholders.

Group employees at 31 March 2023 amounted to 1,911 units, up by approximately 1.5% versus 1,883 resources at 31 March 2022 (+28). Neutralising the effects of all the changes in scope applied, namely the acquisitions of De Agostini Libri, Star Comics and A.L.I. and the disposals of newspapers and business in the Media area, the Group’s workforce would show an increase of 0.9%.

OUTLOOK FOR THE YEAR

In light of the results achieved during the first quarter and a more favourable scenario in respect of the outlook for raw materials and service prices, with reference to the current scope, the Group believes it can now confirm the forecasts released previously for FY 2023.

Income Statement:

• Single-digit growth in revenues and adjusted EBITDA with margins expected to be in the region of 15%;
• approximately 10% growth in the net result, despite the greater amortisation/depreciation deriving from both the increasing investment policy implemented by the Group and the effects of the Purchase Price Allocation process relative to the recently-acquired companies.

Cash Flow and Net Financial Position:

• Ordinary Cash Flow is expected to fall within a range of € 60 to 65 million, showing growth of up to 10% 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 expected to come in, at end FY 2023, as 0xAdjusted EBITDA, down from 1.3x at end 2022.

The solid financial and equity position that characterises the Group allows it to continue to pursue the virtuous development path started some years ago, characterised by the progressive use of M&As whereby the Group seeks to continue to the make the most of inorganic growth opportunities, mainly in the book and digital businesses.

PERFORMANCE OF BUSINESS AREAS

• TRADE BOOKS

The first quarter of the current year was characterised by a positive trend seen on the book market that, following a consolidation experienced in 2022, recorded renewed growth with an increase in both value (+3%) and volume (+0.8%)[2].

In this context, the publishing houses in the Trade area recorded double-digit sell-out growth (+12.3%), of which 6.7% due to an increase in the volume component, thanks in particular to the performance in January and February by the new titles published at the start of the year.
Thanks to these results, the Mondadori Group has consolidated its national leadership position, with a market share which rose to 27.4% in March 2023, compared to 25.2% in March 2022.

This year, as witness to the quality of the Group’s publishing plan, two titles from the Group’s publishing houses ranked in the top two places of the ten best-selling books by value[3]: Prince Harry’s biography ‘Spare. Il minore‘, published by Mondadori, and ‘La vita intima’ by Niccolò Ammaniti, published by Einaudi.

Q1 2023 revenues came to € 88.3 million, showing growth of 29.5% on last year, structured as follows:

• +25% in the publishing houses, also due to the companies acquired, which contributed approximately € 8 million in the period; net of discontinuities, the improvement comes to 10% thanks to the concentration, in the quarter’s publishing plan, also of particularly successful titles;
• significant recovery of the museum business of Electa (+27%) and the positive international sales performance of Rizzoli International Publications (+12.5%);
• marked growth in third-party publishers distribution and services activities, which benefited from the contribution made by the consolidation of A.L.I. (whose revenues are booked as a fee[4]) and Libromania.

Adjusted EBITDA of the Trade Books area comes to € 13.2 million, up € 3.5 million, of which approximately one third comes from the positive trend of like-for-like revenues and two thirds from the contribution made by newly-acquired companies. ​
The profitability achieved by the Trade Books area is approximately 15% in the first quarter of 2023, showing improvement on the same period of 2022.

• EDUCATION BOOKS

School textbooks experience a typical seasonal performance that sees sales concentrated in the second half of the year following the adoption campaign: revenues from the first three months of the year typically account for less than 5% of the annual figure.

In this context, in the first quarter of 2023, the Group’s Education area recorded total revenues of € 8.5 million (€ 9 million in the same period of 2022) with a negative change that does not represent actual performance insofar as the result of different timing, compared to 2022, in the supply and invoicing of certain supplies.

Adjusted EBITDA comes to € -11.7 million, in line with FY 2022, due to the specified seasonality, which sees the booking during the first quarter of the operational structure costs and the costs for developing the text books marketed during the adoption campaign, which then draws to a close at the end of May.

• RETAIL

As already mentioned, at the end of March, Italy’s book market had grown by 3% compared to 2022, with +10.6% increase in the physical channel and a decline (estimated at -6%) in e-commerce.

In this context, the revenues of Mondadori Retail in the first quarter of 2023 amounted to € 41.6 million, an improvement of around 12% compared to the same period of the previous year: this was the result, in particular, of sustained growth in revenues from books (+€ 3.7 million, up by 12.8% compared to the first quarter of 2022).
Thanks to this overperformance, deriving from the excellent performance of physical shops, Mondadori Retail’s market share came to 11.7% (+0.9% compared to 31 March 2022).

An analysis of sales in the physical channel shows a further increase in revenues from directly-managed bookstores (+21.1% compared to the same period in the previous year) and franchisee bookstores (+9.5% compared to the first quarter of the previous year);

Adjusted EBITDA in the Retail area was positive, amounting to € 1.7 million, and showed a significant increase (+€ 1.4 million compared to the first three months of 2022), thanks to the continuous development and renovation work on existing shops and focus on the core business of books.

• MEDIA

In Q1 2023, the Media area recorded revenue of approximately € 32.3 million, dropping by approximately 31% versus the same period of the prior year, which reduced to approximately 8.5% on a like-for-like basis (excluding the effect of the deconsolidation of the titles sold at the start of 2023 and the distribution activities of Press-di).

In particular, the two area components showed different trends. On a like-for-like basis:

• digital activities, which account for more than a third of the area’s total revenue, showed growth in advertising revenue of 7%;
• traditional print activities were down by approximately 15%.

Adjusted EBITDA for the Media area came to € 2.9 million, showing growth of approximately 42% compared with the previous year, mainly due to traditional businesses. Specifically:

• in the print area, the increase stems from the booking of a tax credit by way of relief on costs incurred by the publisher for the distribution of magazines (€ 2.8 million), which more than offset the higher input costs for the period and the lower margin from the sales of collateral items;
• in the digital area, adjusted EBITDA is essentially stable on the same quarter of the previous year, thanks to higher advertising revenue and despite the higher costs incurred for launching new initiatives tied to the influencer marketing segment.

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 27 April 2023 which, among other things, authorized:

• the purchase and disposal of treasury shares for a maximum amount of up to 0.357% of the share capital, which is intended to provide the Company with the no. 933,548 shares required over the three-year period to meet the obligations under the 2023-2025 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 2021-2023 Performance Share Plan and the 2022-2024 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 2023-2025 Performance Share Plan, the 2022-2024 Performance Share Plan and the 2021-2023 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. 591,000 ordinary shares (equal to 0.22%) of the share capital, taking account of the treasury shares already held in the Company’s portfolio, to service the 2023-2025 Performance Share Plan, the 2022-2024 Performance Share Plan and the 2021-2023 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. 1,147,991 treasury shares, equal to 0.440% of the share capital, already held by the Company to date.
• Duration of the program
  The buyback program may start on 5 June 2023. The conclusion of the program, in any case by the Shareholders’ Meeting convened to approve the financial statements at 31 December 2023, the date on which authorisation to purchase treasury shares resolved by the Shareholders’ Meeting of 27 April 2023, expires, will be disclosed to the market.
  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.mondadorigroup.com ( Governance section) and at the authorized storage mechanism 1Info (www.1Info.it).

2023-2025 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 2023-2025 Performance Share Plan, established by resolution of the Shareholders’ Meeting of 27 April 2023.
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 2023 and in the Information Document prepared pursuant to Article 84-bis, paragraph 1 of the Issuer Regulation, available on the website www.mondadorigroup.com 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 27 April 2023 are available on the authorised storage mechanism 1Info (www.1info.it), in the Governance section of the Company website www.mondadorigroup.com and at the Company’s registered office.

The Interim Management Statement at 31 March 2023 is made available by today through the authorised storage mechanism 1Info (www.1Info.it), on www.mondadorigroup.com (Investors section) and at the registered office.

The presentation of the results at 31 March 2023, approved today by the Board of Directors, is available on 1Info ( www.1info.it), on www.borsaitaliana.it and on www.mondadorigroup.com (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, 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.

[1]Source: GFK, March 2023 (Week 13)

[2] GFK, March 2023 (Week 13)

[3] GFK, March 2023 (ranking in terms of cover value)

[4] In accordance with IFRS15

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.

Information pursuant to Schedule 7 of Annex 3a to CONSOB Regulation no. 11971/199

Today, the meeting of the Board of Directors of Arnoldo Mondadori Editore S.p.A., chaired by Marina Berlusconi, reviewed and approved the draft Parent Company and Group consolidated financial statements at 31 December 2021 presented by CEO Antonio Porro.

2021 HIGHLIGHTS
In 2021, the Group was able to open a new chapter in its growth path, while achieving a stronger operating and financial standing.
As proof of its ability to pursue development opportunities, in 2021 Mondadori completed the acquisition of D Scuola – together with Rizzoli Libri the biggest investment in the last 15 years -, which has enabled the Group to gain a leadership position also in the school textbook publishing market and to give substance to its strategy of increasing focus on the core business of books.
This strategic approach also includes further transactions announced during the year: the acquisition of 50% of A.L.I. – Agenzia Libraria International – and DeA Planeta Libri, as well as a further reduction in the exposure to print magazines.

“In 2021 the soundness of our choices rewarded the Mondadori Group with consolidated results above guidance, even though already revised upwards during the year”, pointed out Antonio Porro, Chief Executive Officer of the Mondadori Group. “The buoyant trend of the relevant markets has in fact allowed us to seize an important growth opportunity and, together with greater operating efficiency, has led to a strong increase in both profitability and cash generation. This has brought us the best net result of the last 10 years and a net financial position that has returned to positive again after more than 15 years. The favourable economic backdrop and the financial strength of our Group have therefore paved the way for a return, after 10 years, to a shareholder remuneration policy”, concludes Porro.

PERFORMANCE AT 31 DECEMBER 2021
In 2021, consolidated revenue amounted to € 807.3 million, up by 8.5% versus € 744 million in the prior year, driven by the positive trend that permeated all areas of business, the Books and Retail areas specifically, which benefited in particular from the buoyancy of the Books market.

Adjusted EBITDA in 2021 came to € 105.7 million, up by € 7.7 million versus 2020 (€ 98.1 million); 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 versus 2020 in the ratio of fixed costs (overheads and payrolls) on consolidated revenue enabled the Group to confirm its margins to over 13%: net of the relief received to aid museum activities in both years, the Group’s margin would have increased to 12.7% from 12.1%.

EBITDA, amounting to € 91.1 million versus € 84.6 million in 2020, improved by € 6.5 million, despite higher non-recurring expense of € 1.1 million, attributable mainly to restructuring costs recognized in the Media and Corporate & Shared Services areas.

In 2021, EBIT amounted to € 45.2 million, improving strongly – by over € 30 million – versus 2020, thanks to the mentioned operating dynamics, but mostly to the presence in the result at 31 December 2020, of higher write-downs for a total of approximately € 22 million.

Consolidated profit before tax came to € 38.6 million versus € 1.6 million in 2020.
On top of that, the following items also contributed to the significant improvement of approximately € 37 million:

• the reduction of approximately € 1.6 million in financial expense, due mainly to lower average debt and a lower average interest rate as a result of the renegotiation of the lines of credit completed in May 2021, as well as the recognition of certain impairments of receivables at 31 December 2020;
• the strong improvement in the results of associates (consolidated at equity).

The Group’s net profit, after minority interests, came to € 44.2 million, a sharp increase of approximately € 40 million versus € 4.5 million recorded in 2020.

Despite the sharp increase in taxable income, tax components for the year close at a positive € 5.6 million: this is attributable to net non-recurring tax income – deriving from the process of realigning the tax amounts of trademarks and goodwill to their respective statutory amounts – of approximately € 19 million.

The Mondadori Group’s net financial position (before IFRS 16) at 31 December 2021, before outlays for the acquisition of D Scuola, after more than 15 years has returned to positive territory and is equal to € 37.4 million, a strong improvement – by over € 50 million – versus € -14.8 million at 31 December 2020.

Considering the effects of the extraordinary transaction – completed on 16 December 2021 – and the equity and financial consolidation of the acquiree, the Group’s net financial position (before IFRS 16) stood at € -94.8 million, beating expectations that had estimated net financial debt at year end at approximately € 100 million.
IFRS 16 NFP stood at € -179.1 million (IFRS16 impact € -84.3 million) versus € -97.6 million at 31 December 2020.

At 31 December 2021, the cash flow from operations for the last twelve months came to a positive € 79.3 million; the cash flow from ordinary operations (after outlays for financial expense and tax), equal to € 68.2 million (+33.3% versus 2020), allows the Group to continue on the path of strengthening its financial structure, confirming the business’s continued and growing ability to generate cash.
The total free cash flow generated by the Mondadori Group in 2021 exceeded € 52 million, up by 28% versus € 40.7 million in 2020.

At 31 December 2021, Group employees^[1] amounted to 1,810 units, down by approximately -2% versus 1,847 units at December 2020, despite the increase in the workforce following the acquisition of Hej! (net of which the reduction would be -2.5%); this decrease is the result of continued efforts to increase the efficiency of the individual business areas.

BUSINESS OUTLOOK
The positive results, the good business outlook and the further improvement in operating performance and cash generation capacity, paint a picture of a very solid Group, allowing it to look forward with greater confidence to the results achievable in the new year, despite the recent challenges posed by the increase in energy prices and the purchase of raw materials, paper first and foremost.

From a strategic point of view, the Company will continue to strengthen its core business and therefore its leadership in the Books area, increasing its relevance and impact on the overall business.

This path will see the Mondadori Group both expand horizontally through entry into new segments of book publishing, including contiguous areas, and continue and consolidate the process of vertical integration launched through the recent acquisitions in the field of book promotion and distribution.

The Group will concurrently continue to develop its digital skills and range of products, and to rationalize its non-strategic activities.

From an operating point of view, the Group’s business-financial targets that follow refer to a scope that includes the transactions concluded in 2021, therefore the consolidation of D Scuola^[2] and the deconsolidation of the activities referring to the titles sold; these forecasts, instead, do not include any negative impact from the current context of geo-political instability, and are based on the absence of significant changes in the developments of the health emergency and resulting further discontinuities and slowdowns in economic activities and consumption at a global level.

Income Statement
Against this backdrop, reasonable estimates point to a mid-single digit increase in revenue in 2022
and adjusted EBITDA up by more than 20%.
On a like-for-like basis, these estimates would translate into a top-line and low single-digit margin growth, confirming the ongoing cost containment actions aimed also at offsetting in 2022 the negative impact of the increase in costs relating to raw materials and energy consumption.

Net profit in 2022 is expected to grow double-digit, despite the absence of the significant tax component^[3], amounting to approximately € 19 million, which had benefited net profit in 2021, thanks also to non-recurring expense much lower than the figure recorded in 2021.

Cash Flow and Net Financial Position
In 2022, the Group is expected to confirm the significant cash generation capacity shown in recent years:

• Cash Flow from ordinary operations is reasonably expected to be basically in line with the 2021 figure due, on the one hand, to the positive contribution of D Scuola, and, on the other, to a “one-off” increase in the Group’s capital expenditure deriving:
  – in the school segment, from a stronger and richer product range and publishing catalogue;
  – in the Retail area, from the project on the renovation of the flagship store in Piazza Duomo, Milan, which will see the light in the second half of the year;
• this points to an estimate of a Free Cash Flow for 2022 – before payout of the dividend but net of the forecasts on cash outflows from the extraordinary transactions announced – in the region of € 40/45 million and a Group net debt (IFRS16) of less than 1.1x Adjusted EBITDA (0.6x before IFRS16).

The financial solidity reached allows the Group to continue its path of virtuous development, especially in the book business, also through M&As: therefore, the Group will continue, also in the current year, to pursue further growth opportunities through acquisitions, in a resolute and active way.

After more than 10 years, the Group has seen a return to solid conditions for a renewed shareholder remuneration policy with the intent – for the next three years – of distributing 40% of Cash Flow from Ordinary Operations per year, maintaining a minimum floor equal to the Dividend Per Share of 2021. During this period, the Board of Directors, when proposing the distribution to the Shareholders’ Meeting, will in any case take account of the general macroeconomic scenario, any business plans and investment requirements, as well as the expected cash flows that will affect the Group’s equity and financial structure.

PERFORMANCE OF BUSINESS AREAS

• BOOKS

2021 showed a book market growth of 14.7%^[4] versus 2020 and 18.5% versus 2019, a year still unscathed by the distorting effects of the pandemic.

The Group was able to benefit from this market buoyancy: the Trade Books area saw an increase in sell-out in terms of value of approximately 10% versus 2020, and was once again able to retain its leadership at national level, with a market share of 23.7%^[5], also confirmed by the presence of 5 titles in the list of the 10 bestselling books of the year.

In the school textbooks segment, the Group achieved a steady adoption market share (22.1%^[6]), proof of the excellent results achieved and the quality of the editorial offering of the Mondadori Education and Rizzoli Education publishing houses. Including the acquisition of D Scuola, the pro forma 2021 market share would stand at 32.9%, giving the Group a leadership position also in the school textbooks publishing market.

In 2021, revenue from the Books area amounted to € 465 million, up by approximately 10% versus € 422.9 million in the prior year, broken down as follows:

• +10.6% in the Trade area, which published 2,495 titles in the period (versus 2,193 in 2020), returning production to pre-pandemic levels.
• +9.4% in the Educational segment, which benefited from increased revenue from both the school textbooks segment (+4.2%) and Rizzoli International Publications (+24.1%).
• +5.2% in the distribution of third-party publishers.

Adjusted EBITDA in the Books area came to € 92.6 million in 2021, improving by approximately € 5 million versus € 87.5 million in 2020, thanks to the strong revenue growth that more than offset the lower relief paid to Electa (approximately € 5 million) in the museum segment versus the prior year.
Profitability achieved by the Books area in 2021 was approximately 20%.

• RETAIL

As mentioned earlier, the books market grew by 14.7%^[7] in 2021 versus 2020, driven mainly by the physical channel. Against this backdrop, Mondadori Retail’s market share stood at 11.4%, propelled by the outstanding performance of the physical network of directly-managed stores and franchises.

The 2021 income statement figures show a strong growth in revenue and margins in the area, thanks to the renewal and development process launched in recent years, which improved operating and management performance.

Revenue amounted to € 173.9 million, up by € 20.2 million (+13.1%) versus € 153.7 million in the prior year, as a result of the positive performance of the book product (+16.7%), which now accounts for more than 80% of revenue^[8] in the area. Specifically:

• directly-managed stores saw a strong recovery in revenue (+20.2% versus the prior year), thanks to the strategy of focusing on the core business of books and the abovementioned network development and maintenance activities;
• the franchised channel, composed mainly of proximity stores located in small towns, continued its progression, increasing by +9% versus the prior year;
• revenue from the Bookclub returned to growth (+5.3%), while revenue from the online channel settled at € 15.6 million, down versus the prior year but improving by approximately 12% versus 2019.

In 2021, the area recorded significant growth in adjusted EBITDA, which stood at € 5.1 million (€ +3.9 million versus 2020 and up also versus 2019).

This improvement is attributable to the strong ongoing renewal and development of the network of physical stores, to careful cost management and a thorough review of the organization and processes, as well as the constant work on product innovation and enrichment of the editorial offer, accompanied by new services and communication formats for customers and partners.
The structural actions adopted over the past few years have brought a strong turnaround in the company’s operating and financial performance, with results that are on the rise also versus 2019.

• MEDIA

The Media area reported revenue of € 206.6 million in 2021, up by 4.5% versus € 197.6 million in the prior year.
Specifically:

• circulation revenue was down by 7.1%, showing a performance in line with the relevant market, with a market share of 1%, steady versus 2020 (approximately 20% net of the two titles sold at end 2021) ²¹;
• revenue from add-on products was down by 15.8% versus 2020, hit by the negative impact of the lower availability of DVD titles due to the absence of significant film releases caused by the ongoing pandemic;
• advertising revenue grew by approximately 27% overall (+15% excluding the contribution of the acquisition of Hej!):
  – digital activities grew by 40%, thanks also to the contribution of AdKaora and the consolidation of Hej! (+18% excluding this acquisition);
  – advertising sales on print magazines rose by approximately 10%, thanks also to the rebound in advertising investments.
  Mention should be made that the percentage of digital revenue on total advertising revenue is over 62% (from 57% in 2020), confirming Mondadori Media’s leadership position in digital and social media and the decreasing dependence of the business unit’s revenue on print advertising sales.
• Other revenue, which includes revenue deriving from distribution activities, posted a 10% increase versus the prior year, reflecting growth in the distribution activities of third-party publishers in the newsstand channel.

Adjusted EBITDA in the Media area amounted to € 12.4 million, up by more than 50% versus 2020 (€ 7.9 million), and also higher than the € 11.3 million recorded in 2019, driven by the development of digital activities and, in the print area, the recovery of advertising sales and the continued measures to contain operating costs, which brought an increase in profitability: in fact, the overall EBITDA margin improved by two percentage points, rising from 4% in 2020 to approximately 6%.
Specifically, digital activities, including Hej!, contributed approximately € 10 million to the overall result, also as a result of a percentage margin of over 20%.

PERFORMANCE OF ARNOLDO MONDADORI EDITORE S.P.A.
The Parent Company’s income statement for the year ended 31 December 2021 shows the same profit as the consolidated financial statements, amounting to € 44.2 million (€ 4.5 million in 2020), due to the adoption of the equity method to measure the Company’s investments in the separate financial statements.

Revenue, amounting to € 41.1 million, was down by approximately € 4 million versus the prior year, due primarily to a changed scope of the costs of the central units charged back to subsidiaries.

Adjusted EBITDA deteriorated from € -0.9 million to € -5.4 million, attributable mainly to the abovementioned reduction in chargebacks to subsidiaries.
2021 includes negative non-ordinary items totaling € 6 million, attributable mainly to provisions for restructuring costs.
Amortization and depreciation in 2021, amounting to € 9.5 million, was basically steady versus 2020 (€ 9.9 million).
2021 includes lower net financial expense for a total of € 0.7 million.

The positive contribution from the equity measurement of investments amounted to € 65.3 million, a sharp increase versus € 13.2 million in the prior year, due mainly to the write-back of the subsidiaries Mondadori Libri S.p.A. and Mondadori Media S.p.A..

The Parent Company’s net profit, amounting to € 44.2 million (versus € 4.5 million in 2020), benefited from the tax income of € 3.2 million recognized in 2021 (€ 8.6 million in 2020 following recognition of the “Patent box” relief for € 5.2 million).

DIVIDEND DISTRIBUTION PROPOSAL OF € 0.085 PER ORDINARY SHARE
As repeatedly mentioned, the favourable economic backdrop and the financial solidity achieved by the Group have paved the way for a return to a shareholder remuneration policy: based on the results of 2021, the Board of Directors has proposed to the next Shareholders’ Meeting, convened on 28 April 2022, the distribution of a unit dividend of € 0.085 for each ordinary share (net of treasury shares) outstanding at the record date, for a total of approximately € 22.1 million^[9], equal to a pay-out of 50% of the consolidated net profit and a dividend yield of 4.2% (at 31 December 2021).
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 25 May 2022 (payment date), with ex-coupon (no. 21) date on 23 May 2022 (ex date) and with the date of entitlement to payment of the dividend, pursuant to Article 83-terdecies of the TUF (record date), on 24 May 2022.

SIGNIFICANT EVENTS AFTER YEAR-END 2021
On 25 February 2022, the Mondadori Group announced that it had received notice from the Antitrust Authority of the authorization to acquire from De Agostini Editore S.p.A. a 50% stake in the share capital of DeA Planeta Libri S.r.l..
The Authority’s go-ahead triggered the fulfilment of the suspensive condition of the agreement on the sale of the stake; the sale will therefore be fully implemented on the closing date, scheduled by March, as from which the company will be known as De Agostini Libri S.r.l..
On 7 March 2022, the Mondadori Group announced that it had received notice from the Antitrust Authority of the authorization to acquire a 50% stake in A.L.I. S.r.l. – Agenzia Libraria International, specialized in the distribution of books.
Following authorization from the above Authority, the transaction will be fully implemented on the closing date, which is scheduled to take place by April.

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 27 April 2021, with the approval of the financial statements at 31 December 2021, 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 sell treasury shares refer to the opportunity to attribute to 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 2022 and, in any case, for a period no more than 18 months.
  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, including in more than one tranche, of ordinary shares of Arnoldo Mondadori Editore S.p.A., with a par value of € 0.26 each, in one or more tranches in an amount freely determinable by the Board of Directors – up to a maximum number of shares – also taking into account of the ordinary shares held, directly and indirectly, in the portfolio from time to time – of no more than 10% overall of the share capital, in accordance with Article 2357, paragraph 3, of the Italian Civil Code.

• Criteria for purchasing treasury shares and indication of the minimum and maximum purchasing cap
  Purchases shall be made in compliance with Article 132 of the TUF, 144-bis, paragraph 1 letter b) of the Issuer Regulation, and 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. 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.
  Regarding the disposal of treasury shares, disposals may be made, on one or more occasions and even before having terminated 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.

  Under the proposed authorization, the minimum and maximum purchase price shall be determined at a unit price not lower than the official Stock Exchange price of Mondadori shares on the day preceding the purchase transaction, reduced by 20%, and not higher than the official Stock Exchange price on the day preceding 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 – such price shall be identified in accordance with the trading conditions set forth in Delegated Regulation (EU) no. 1052 of 8 March 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 adopted by the Company 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. 1,049,838 treasury shares, equal to 0.402% 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 2019-2021 PERFORMANCE SHARE PLAN: INFORMATION PURSUANT TO ART. 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. 311,848 Arnoldo Mondadori Editore S.p.A. shares to 8 beneficiaries, in implementation of the provisions contained in the “2019-2021 Performance Share Plan” established by the Board of Directors on 14 March 2019 and subsequently adopted by the Shareholders’ Meeting on 17 April 2019 (the “2019-2021 Plan”).
Mention should be made that the 2019-2021 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 8 beneficiaries of the 2019-2021 Plan are the Chief Executive Officer and 7 managers identified by name by the Chief Executive Officer, as delegated by the Board of Directors.
The characteristics of the 2019-2021 Plan are explained in detail in the Directors’ Report to the Shareholders’ Meeting of 17 April 2019 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 2019-2021 Performance Plan.

PROPOSED ADOPTION OF A 2022-2024 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 2022-2024 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 2022-2024 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’ 2021 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: Core option, and includes benchmark KPIs related to GRI G4 “Media Sector Disclosure”.
With regard to 2021, 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.
With a view to continuous improvement of the process, in 2021 the stakeholder engagement activity was expanded by involving employees and teachers, who were given a specific online questionnaire on sustainability issues.
The document also contains relevant information in line with ESMA’s recommendations for the 2021 reporting year, and includes references required by Regulation (EU) 2020/852 related to the recent introduction of the EU Taxonomy.

The findings from the reporting include a number of tangible actions regarding social, governance and environmental issues. These include: the creation of the position of Chief Diversity Officer for the implementation of strategies and projects aimed at promoting diversity, equity and inclusion; in keeping with the measures adopted to combat the spread of COVID-19, the possibility offered to employees and associates to carry out and repeat diagnostic screenings free of charge; access, as part of the New Competencies Fund (NCF), to a training and professional development path intended as a strategic lever to encourage and strengthen internal skills and competencies and the attraction of young talents.
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 2021, the Mondadori Group once again paid special attention to environmental issues and the specific impacts associated with the life cycle of paper products, energy efficiency measures and the reduction of climate-changing emissions: an approach that guides the Company in the implementation of its business activities, from the purchase of certified paper to the efficient management of points of sale. As for the sourcing of raw materials for the printing of publishing products, the Group opts for the use of paper certified under the two main schemes applied worldwide, PEFC and FSC, whose percentage reached 99.9% of the total during the year.

SUSTAINABILITY PLAN GUIDELINES
The Mondadori Group has launched its first-ever Sustainability Plan, which identifies short, medium and long-term targets and actions to improve performance in social, governance and environmental terms.
The reflection process led to the identification of the areas and strategic lines of sustainability on which the Group intends to work in the future through the achievement of targets set on an annual basis and periodically updated.
The 3 relevant macro areas – defined below – and the respective guidelines identified for 2022, reflect the Group’s identity, its mission and its role as a publisher:

Social: enhancing people, content and places for education and culture

• To become a role model in the field of diversity, equity and inclusion, enhancing and contributing to the well-being of our people, through welfare tools and skills development.
• To promote culture and quality, equitable, and inclusive education that fosters pathways to lifelong learning.
• To create, conceive and develop valuable content and affordable, ESG-friendly products.
• To support cultural outposts for social development through the enhancement of bookstores, schools, museums, social channels, events and partnerships.

Governance: promoting sustainable business success

• To pursue sustainable business success by promoting the integration of ESG issues in governance, business plans and the operating model, also by strengthening the mechanisms for listening to stakeholders to develop paths of ongoing improvement.
• To maintain the highest standards for protecting and managing risks and opportunities along the value chain.

Environment: disseminating environmental culture and mitigating impacts on ecosystems

• To spread environmental culture, also through education aimed at an increasingly sustainable development and lifestyle.
• To mitigate environmental impacts throughout the product life cycle, by fostering the protection of biodiversity and reducing climate-changing emissions.

The results for the year ended 31 December 2021, 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 complete pdf):

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

[1] The workforce at 31 December 2021 does not include D Scuola’s headcount, but does include employees from the two titles, the sale of which became effective on 1 January 2022.

[2] Excluded are the transactions that were under Antitrust scrutiny at 31 December 2021 (acquisition of 50% of A.L.I. and 50% of DeA Planeta, sale of 51% of Press-di).

[3] Derived from the tax realignment of intangible assets.

[4] GfK, December 2021 (figures in terms of market value; 52-week survey in 2021 vs. 53 weeks in 2020)

[5] GfK, December 2021 (figures in terms of market value)

[6] ESAIE, 2021 (number of adopted sections)

^[7] GFK (in terms of value)

^[8] Product revenue excluding Club revenue

[9] Rough estimate based on the number of shares outstanding at the date of this Report.

The Mondadori Group announces the signing of an agreement on the acquisition from De Agostini Editore S.p.A. – owner of the entire share capital – of a 50% stake in DeA Planeta Libri S.r.l., to be renamed De Agostini Libri S.r.l., specialized in trade books with focus on the children’s and non-fiction segments.

The corporate governance structure entitles the Mondadori Group to fully consolidate the company.

The scope of the deal includes Libromania S.r.l., wholly-owned by De Agostini Libri and active in the promotion of third-party publishers: the agreements between the parties include put&call options, exercisable in second half 2022, which entitle the Mondadori Group to acquire 100% of Libromania.

In 2021, De Agostini Libri is expected to record consolidated revenue of approximately € 12.6 million, while EBITDA is forecast at break even.

The total maximum value of the transaction, taking account of the 100% valuation of Libromania, has been set at € 4.5 million.

Thanks to the acquisition, the Mondadori Group, – consistent with its strategy of increasing focus on the core business of books – forms a partnership with a publishing house that boasts a rich history and tradition, as well as solid know-how.

While the transaction in itself is irrelevant for the purposes of Antitrust reporting obligations, in accordance with the relevant legislation, it is subject to the Authority’s authorization, given the involvement of the same parties (the Mondadori Group and De Agostini Editore) in the De Agostini Scuola deal.

Today, the meeting of the Board of Directors of Arnoldo Mondadori Editore S.p.A., chaired by Marina Berlusconi, reviewed and approved the draft Parent Company and Group consolidated financial statements at 31 December 2020 presented by CEO Ernesto Mauri.

2020 HIGHLIGHTS
2020 was marked by the effects of the COVID-19 health emergency and the resulting application from March of containment measures that greatly curtailed economic activities and the businesses in which Mondadori operates and is a leader^[1], leading to a severe economic crisis.

Against this backdrop, the Mondadori Group was able, on the one hand, to benefit from the resilience shown by the Books market – today the major business component, contributing 92% to the Group’s profitability – and, on the other, to take a series of targeted actions in a timely and effective manner.

These actions were aimed both at guaranteeing its employees safe working conditions – also by encouraging smart working – and at allowing business continuity.

In order to protect Group profitability, an effective plan was launched to contain operating and structural costs of approximately € 48 million, which enabled the company to increase efficiency and sustain profitability even in a severely deteriorated context.

The measures adopted by Management included social shock absorbers, further actions to contain payroll costs – such as a freeze on pay policies, the use of holidays, a hiring freeze -, significant savings on discretionary spending, such as marketing and advertising, as well as the renegotiation of lease agreements on the network of bookstores.

More specifically, mention should be made that the books market in 2020 showed an extraordinary resilience: following the gradual reopening of bookstores after the first lockdown, the segment witnessed a steady recovery, peaking in an approximately 17% growth in the fourth quarter (versus the same period of 2019); with regard to the full year, the market increased by 3.3%.

A strong contribution to the buoyancy of the books market came from the development of the e-commerce channel, which saw double-digit growth in 2020, and from the increased penetration of digital books (e-books and audio-books), which made for 7.4% of total segment revenue.

PERFORMANCE AT 31 DECEMBER 2020
Taking account of the situation of general crisis surrounding the Group, the results achieved in 2020 are far higher than those initially indicated and forecast and are truly outstanding, in the face of the restrictions imposed by the emergency situation.

Consolidated revenue amounted to € 744 million, down by 15.9% versus € 884.9 million in 2019. Net of the change in the scope of consolidation of the Media area from the disposal of the five titles at end 2019, revenue fell by approximately 14%, due mostly to the effects of COVID-19.

Adjusted EBITDA amounted to € 98.1 million, down by € 12.3 million versus 2019 (€ 110.4 million). This performance reflects both the significant effects of the quick response and countermeasures implemented by the Group to tackle the consequences of COVID-19 – which enabled it to curb operating and structural costs by approximately € 48 million – and the grants acknowledged for the exhibitions suspended, cancelled or postponed due to the pandemic.

With regard to the Group as a whole, special mention should be made of the profitability percentage, amounting to 13.2% versus 12.5% recorded in 2019, proof of the effectiveness of the operational efforts made.

EBITDA amounted to € 84.6 million, down by approximately € 18 million versus € 102.9 million in the prior year, due to the above trends and higher non-recurring negative items totaling € 6 million.

EBIT amounted to € 14.8 million, down by approximately € 48 million versus 2019, due to higher amortization, depreciation and write-downs for a total of approximately € 30 million: mention should be made of the write-down of TV Sorrisi e Canzoni, other brands and goodwill for a total of € 26.5 million, in addition to the start of the amortization process of TV Sorrisi e Canzoni (€ 3.5 million). The write-off, resulting from the impairment test, is attributable mainly to the strong discontinuity in the relevant markets of the magazines business, which accelerated the downward trend in advertising sales, relating in particular to traditional print activities, and to circulation trends in the newsstands and subscriptions channels.

Consolidated profit before tax came to € 1.5 million versus € 50.6 million in 2019. In addition to the above, the drop was affected also by the greater financial expense (from € 2.2 million to € 4.1 million) from the recognition of two positive components in 2019: income related to the adjustment of amortized cost under IFRS 9 and a substitute tax refund.

The adjustment of the amount of the remaining investment in Reworld Media to the stock market price at 31 December 2020 (€ 3.17 versus € 2.75 at 31 December 2019), together with the sale of the company’s shares in the fourth quarter of the year, resulted in the recognition of a capital gain of € 0.6 million.

The result of the associates (consolidated at equity) came to a negative € 7.3 million, improving however versus 2019, thanks also to the halved investment in the company that publishes Il Giornale (SEE), although largely offset by the further deterioration in the result of the other investments in the Media area (Attica Publications, SEEC) and of Mediamond, due to the economic trend.

The Group’s net profit, after minority interests, came to € 4.5 million^[2] versus € 28.2 million in 2019 (which included € -2.6 million from the discontinued operations of Mondadori France).

The net financial position before IFRS 16 at 31 December 2020 stood at € -14.8 million, a sharp improvement versus € -55.4 million at end 2019, due to the significant cash generation recorded in the year.

The IFRS 16 net financial position stood at € -97.6 million and includes the financial payable from the application of IFRS 16, totaling € 82.8 million.

Cash flow from ordinary operations amounted to € 51.2 million, up versus € 48.4 million in 2019 (continuing operations), due also to the grants^[3] received, confirming the ability of the business to steadily generate cash, even in a highly deteriorated context.

Group employees amounted to 1,845 units, down by approximately 9% versus 2,018 units at 31 December 2019, as a result of the continued efforts to increase the efficiency of the individual business areas.

BUSINESS OUTLOOK
The ability demonstrated by the Mondadori Group in 2020 to react promptly to a strongly deteriorated context, as well as the financial solidity shown by the capital position at year end, give reasons, from an operational point of view, to be optimistic all in all on the future development of the business and the results that the Group can achieve in the new year.

From a strategic point of view, the Group has all the managerial and financial resources required to continue along the path of strengthening its core businesses, of expanding into new segments in or adjacent to publishing, and of rationalizing, if possible, non-strategic activities consistently pursued in recent years, including through M&A operations.

More specifically, in 2021 the Mondadori Group intends to continue to consolidate its leadership in the Books area – both in the school textbooks and Trade publishing segments, increasing its relevance and impact on the Group’s overall activities – and to complete its skills and solutions in the digital area.

As for the Group’s operating-financial targets, referring to a business scope unchanged from today’s:

• Revenue and EBITDA

In line with the outlined strategy and in light of the relevant context, the operating targets for 2021 envisage estimates pointing to a slight growth in revenue (low single-digit) and an adjusted EBITDA that reflects margins between 11% and 12%, in a context – in the absence of the grants received in 2020 – that shows a substantial stability of the Group’s operating profit.

This is the result of a renewed effort to contain costs aimed at countering the lack of temporary measures, relating primarily to payroll costs, which brought benefits to the Group last year.

• Net profit

The net result in 2021 is expected to grow strongly due also to two “one-off” effects:

• the impact on the 2020 results of the write-down of certain balance sheet items, which is currently not expected to repeat in the new year;
• the likely resort by the Group to tax redemption on part of the intangible asset, which would give rise to recognition of a positive tax component.
• Business Units

The outlook for the individual Business Units is as follows:

• Trade books: the area is expected to operate in a low growing market with a competitive publishing plan that should enable it to achieve higher growth rates than the market and, therefore, to increase its market share. The increase in operating costs attributable, as mentioned, mainly to the lack of social shock absorbers, cannot be totally neutralized by the efficiency measures planned by Management, consequently, eating away, albeit moderately, the operating profit generated by the business unit;
• School textbooks: the forecast of greater changes in book adoptions authorizes expectations on market and revenue growth for the business unit. The more subdued growth (versus the Trade area) in operating costs is neutralized by the cost-cutting policies implemented by Management, allowing the area to keep profitability basically steady;
• Museums: the easing of COVID-19 restrictions on the management of museum activities gives reasons to suggest a modest “restart” and a moderate improvement in revenue and profitability, net of compensation and grants received in 2020;
• Retail: the deep organizational and process review, the rationalization strategy on the portfolio of stores, the continued focus on the book product as part of a broader streamlined offering are expected to bring a sharp increase in profitability;
• Media: recovery of both the print and digital advertising market versus 2020; with overall revenue of the area in slight decline, percentage profitability basically steady thanks to the continued optimization of the structures, and the continued strengthening of the digital area.
• Cash Flow and Net Financial Position

In 2021, the Group is expected to confirm the cash-generating capacity shown in recent years, in a 2020 year marked by adverse events. Specifically, forecasts on the new year indicate that cash flow from ordinary operations will range between € 40 million and € 45 million.

These forecasts suggest, in the absence of transformational acquisitions and excluding the impacts of the adoption of the accounting standards under IFRS 16, a positive consolidated net financial position at year end.

Conversely, taking account of the impact of IFRS 16, indications point to a Group financial debt no greater than 0.8x adjusted EBITDA.

As already mentioned, financial strength gives reasons to believe that during the year the Group will be able to firmly and actively pursue any acquisition opportunities that may arise, as well as to pave the way for a return to a shareholder remuneration policy from 2022, applied to the net result of 2021.

PERFORMANCE OF BUSINESS AREAS

• BOOKS

Owing to the COVID-19 emergency and the relating health measures adopted, at the end of the first half, the Trade Books market had lost 10.1% in terms of value versus 2019, the result of a reduction generated mainly in March (-29.2%) and April (-45.8%).

The strong growth witnessed in the third quarter (+8.4% versus 2019) and especially in the fourth quarter (+16.8% versus 2019) helped the market make a strong recovery, materializing at the end of the year in a 3.3% increase in terms of value^[4], driven mainly by the double-digit growth of the e-commerce channel.

Against this backdrop, the Mondadori Group retained its leadership position with a 24.8% market share.

In 2020, 4 titles from the Group’s publishing houses ranked among the top ten bestselling books in terms of value of the year, and 10 titles among the top twenty^[5].

In particular: “Fu sera e fu mattina” by K. Follett (Mondadori) in first position overall, “Insieme in cucina” by B. Rossi (Mondadori Electa), sixth, “Come un respiro” by F. Ozpetek and “La misura del tempo” by G. Carofiglio (Einaudi), ninth and tenth respectively.

In the school textbooks segment, whose market suffered an estimated 7% decline due to the pandemic^[6], the Mondadori’s Group publishing houses achieved a market share of 22.1%, higher than in 2019, thanks to the positive results of the 2020 adoption campaign.

Revenue in the area in 2020 amounted to € 422.9 million, down by 11.6% versus € 478.4 million of the prior year. Specifically:

• the Trade area fell by 5.6%;
• the Educational area dropped by 16.7%, due to the interruption of museum activities: owing to the restrictions to contain the pandemic, the area saw its operations severely impacted by the closure of sites and exhibitions, and by the virtual collapse of tourist travel also throughout the summer season.

In the last quarter of the year, however, museum activities were able to benefit from grants which partly offset, at the margin level, the effects of the closures of archaeological sites and the suspension of exhibitions, and other measures to contain the contagion.

Revenue from the sale of e-books and audiobooks, which accounted for 7.8% of total publishing revenue in 2020, rose sharply (+27.1%), driven by the lockdown period (March-May) which curtailed operations of the physical channel. Listening hours of the audiobook catalogue jumped by over 87% versus 2019, while downloads of e-books increased by 21.9%.

Adjusted EBITDA in the Books area stood at € 87.5 million versus € 94.5 million in 2019, down mainly as a result of the negative trend of revenue from the Trade area and museum activities, only partly offset by the grants received which, net of the related provisions made, amounted to approximately € 8 million.

Reported EBITDA amounted to € 84.8 million versus € 94 million in 2019, with a trend consistent with the above dynamics.

EBIT amounted to € 69.4 million versus € 81.4 million in 2019, dropping more due partly to higher amortization and depreciation recognized in 2020 resulting from higher investments related to the creation of school textbooks in the Educational area.

• RETAIL

As previously mentioned, the books market (which generates over 80% of revenue^[7] in the area) showed significant growth in 2020 versus 2019 (+3.3%^[8]), driven mainly by the double-digit increase in sales in the e-commerce channel, which benefited from the restrictions imposed on the physical channels by the COVID-19 emergency: during the year, the authorities imposed the closure from 12 March 2020 until early May (first lockdown) of physical bookstores throughout the Country, as well as the points of sale located in shopping centres, for several public holidays and pre-holidays and on weekends in the last quarter of the year (second lockdown).

In 2020, as a result of the above government measures, the Retail area reported revenue of

€ 153.7 million, down by € 33.2 million (approximately -18%) versus € 186.9 million in 2019, of which approximately half related to products other than Books.

If in the first six months of the year, sales were 27.5% lower than in the same period of 2019, in the second half of the year, Mondadori Retail saw its performance improve (-10.2% versus 2019), due in particular to the strong rebound of the Book product. This rebound was achieved mostly in the third quarter, which recorded basically steady revenue versus the prior year, while the final months of the year were affected by the introduction of new restrictions.

With regard to the trend of revenue by channel, mention should be made of the improved performance of franchised stores versus the network of directly-managed stores, whose operations were impacted more by the restrictive measures imposed by the authorities, and the significant growth of online operations (+47.7% versus 2019).

Despite the sharp decline in revenue, Mondadori Retail’s adjusted EBITDA in 2020 came to a positive € 1.3 million, down only by € 3.8 million versus 2019.

A result achieved thanks to heightened maintenance and renewal of the network of physical stores (opening of 18 franchised stores and 2 directly-managed stores), careful cost management and a deep organizational and process revision carried out in the second half of 2019 and continued even during the harshest period of the health emergency.

Reported EBITDA amounted to € –2.7 million (versus € +2.9 million in 2019), due to extraordinary items, which mainly include restructuring costs and closure of a dispute related to IMU tax for 2013 – 2019.

EBIT (which includes, under IFRS 16, among the cost components, imputed depreciation relating to directly-managed stores) amounted to € -13 million (versus € -7.7 million in 2019) and was equally impacted by the above extraordinary components.

• MEDIA

In 2020, the advertising market posted an overall 15.3% decline, heavily affected by the impact of the COVID-19 health emergency. All channels fell during the period, including digital -0.8% and magazines -36.6%^[9].

The digital advertising segment alone showed a clear reversal from third quarter 2020, growing by approximately 12% in the fourth quarter versus the same period of the prior year.

In 2020, the magazines circulation market the in newsstands and subscriptions channels, dropped by 11.8%^[10]. The add-on segment reported a negative -17.5% for add-ons bundled with magazines^[11].

Against this backdrop, the Mondadori Group retained its position as Italy’s leading multimedia publisher: in print, with a circulation market share of 24.2%^[12] and 10.2 million readers (6.8 million of whom women)^[13]; on the web, with a reach in December of 83.5% and approximately 34 million unique users in December 2020^[14]; in social media, with an aggregate fan base of 36.5 million people and 106 profiles^[15].

In 2020, the Media area recorded revenue of € 197.6 million (-23% versus € 256.6 million in 2019; -17.5% net of the titles sold at end 2019).

In the fourth quarter of the year, the drop was 18.2% (approximately -12.8% on a like-for-like basis), with a strong upswing in digital operations which grew by 17.3% (+20.8% on a like-for-like basis) versus fourth quarter 2019.

Specifically, in 2020:

• advertising revenue was down by a total of approximately 28%; this is the form of revenue most affected by the ongoing health emergency, which led to the cancellation in 2020 of an important event such as the Salone del Mobile. Net of scope discontinuities, the reduction would be 23%, with the print segment down -41% and digital advertising sales basically steady (+0.3% versus 2019).

In the last quarter of the year, against the persisting decline, albeit mitigated, in revenue from print media (down by approximately -22% on a like-for-like basis), revenue from digital advertising grew by approximately 21%, as already mentioned.

• circulation revenue (newsstands and subscriptions) was down by approximately 24%, due both to the disposal of the above five titles and the impact of COVID-19; on a like-for-like basis, the fall would be approximately 14%.
• revenue from add-on products fell by approximately 26% versus 2019 (down by approximately -24% net of the disposal of the five titles).

In 2020, digital revenue as a percentage of the business unit’s total advertising revenue amounted to 57% (from 42% in 2019).

Adjusted EBITDA in the Media area amounted to € 7.9 million in 2020, down by approximately € 3.3 million versus € 11.3 million in 2019.

The sharp drop in revenue was alleviated by the effective measures to contain operating costs, which curbed their negative impact on profitability, and by the excellent result of digital operations, which generated higher margins than in 2019.

Against slightly declining revenue, digital operations in fact recorded a growth in adjusted EBITDA, up from € 7 million to € 7.2 million, with a margin of over 20%.

In the last quarter of 2020, Mondadori Media recorded adjusted EBITDA of € 4.7 million, down by € 1.1 million versus the same period of the prior year, but recovering versus the trend seen in the first nine months of the year due to the combined effect of:

• the positive performance of digital advertising, which contributed in the quarter under review to an increase in margins of approximately € 1 million versus fourth quarter 2019
• the abovementioned continued cost containment actions, which partly offset the decline in profitability of print operations versus fourth quarter 2019.

Reported EBITDA amounted to € 3.7 million versus € 9.4 million in 2019.

EBIT came to € –30.6 million versus € 1.1 million, due to the start of amortization of TV Sorrisi e Canzoni (for a total annual amount of € 3.5 million) and the concurrent non-recurring write-downs of the title, other brands and goodwill for a total of € 26.5 million, which impacted only on this area.

PERFORMANCE OF ARNOLDO MONDADORI EDITORE S.P.A.
As from 1 January 2020, all the activities referring to the print and digital magazines, as well as the investments in the Magazines Italy area, were transferred to Mondadori Media S.p.A. (100% owned by Arnoldo Mondadori Editore S.p.A.). For a clearer understanding and comparison of results, the Company’s income statement at 31 December 2020 is also compared with the income statement of the prior year, which is presented pro forma to take account of the changed scope due to the contribution of assets and the disposal of titles in December 2019.

The Parent Company’s income statement at 31 December 2020 shows the same profit as in the consolidated financial statements of € 4.5 million (€ 29.6 million in 2019), due to the fact that the Company has chosen to use the equity method to measure its investments in the separate financial statements.

Revenue, amounting to € 45.1 million, was up versus € 38.5 million of the prior year, due mainly to the accounting of revenue recognized for services provided to the company set up in 2020, Mondadori Media S.p.A. (the Corporate and Shared Services business area and the Magazines area were included in the same company, Arnoldo Mondadori Editore S.p.A. in 2019).

Adjusted like-for-like EBITDA dropped slightly from € -0.4 million to € -0.9 million, resulting mainly from higher costs related to labour management during the COVID-19 pandemic.

The year 2020 includes net negative extraordinary items of € 3.3 million, attributable mainly to M&A costs versus € 3 million in 2019.

The Company’s net profit, after tax income of € 8.6 million recognized in 2020, which includes the tax receivable arising from the use of the “Patent box” facility of € 5.2 million, amounted to € 4.5 million (versus € 29.6 million in pro forma 2019).

The Board of Directors of Arnoldo Mondadori Editore S.p.A. has convened the Ordinary Shareholders’ Meeting on Tuesday 27 April 2021 in first call to approve the financial statements for the year ended 31 December 2020 and, if required, in second call for Wednesday 28 April 2021.

PROPOSED ALLOCATION OF THE PARENT COMPANY’S NET PROFIT TO THE EXTRAORDINARY RESERVE
The Board of Directors will propose to the Shareholders’ Meeting, called on Tuesday 27 April 2021 in first call (in second call on Wednesday 28 April 2021), to fully allocate to the extraordinary reserve the net profit resulting from the financial statements for the year ended 31 December 2020 of Arnoldo Mondadori Editore S.p.A., equal to € 4,502,600.02.

SIGNIFICANT EVENTS AFTER YEAR-END
On 29 January 2021, with a view to further strengthening its foothold in the digital world, the Group completed the acquisition of Hej!, a company that specializes in tech advertising, a sector where Mondadori already operates successfully through AdKaora, a leading media agency in the field of mobile advertising and proximity marketing.

On 15 February 2021, the Group completed the sale of its investment in Reworld Media (from the original 16.3% stake to 3.2% at 31 December 2020), realizing an overall gain of approximately € 1.1 million.

PROPOSED RENEWAL OF THE AUTHORIZATION TO PURCHASE AND DISPOSE OF TREASURY SHARES
Following the expiry of the previous authorization resolved upon by the Shareholders’ Meeting on 22 April 2020, with the approval of the financial statements at 31 December 2020, 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 sell treasury shares refer to the opportunity to attribute to the Board of Directors the power to:

• to use the treasury shares purchased as consideration in the acquisition of interests as part of the Company’s investment policy;
• to use the treasury shares purchased 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;
• to 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;
• to rely on investment or divestment opportunities, if considered strategic by the Company, also in relation to available liquidity;
• to dispose of treasury shares as part of share-based incentive plans pursuant to Article 114-bis of the TUF, and of plans for the free allocation of shares to employees or members of the governing or supervisory bodies of the Company or of an associate or to Shareholders.
• Duration

The authorization to purchase treasury shares is set to last until the approval of the financial statements for the year ending 31 December 2021, while the authorization to sell is requested to last for an unlimited period, given the absence of provisions in this regard pursuant to the provisions in force and the opportunity to allow the Board of Directors to make use of the maximum flexibility, also in terms of time, to carry out the acts of disposal of the shares.

• Maximum number of purchasable treasury shares

The new authorization would allow the purchase, including in more than one tranche, of ordinary shares of Arnoldo Mondadori Editore S.p.A., with a par value of € 0.26 each, in one or more tranches in an amount freely determinable by the Board of Directors – up to a maximum number of shares – also taking into account the ordinary shares held, directly and indirectly, in the portfolio from time to time – of no more than 10% overall of the share capital, in accordance with Article 2357, paragraph 3, of the Italian Civil Code.

• Criteria for purchasing treasury shares and indication of the minimum and maximum purchasing cap

The purchases would be made in compliance with the principle of equal treatment of shareholders under Article 132 of the TUF, in accordance with any of the procedures set out in Article 144-bis of the Issuer Regulation, to be identified from time to time, and any other applicable regulations, as well as, where applicable, the market practices allowed from time to time in force.

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.

As far as disposal transactions are concerned, the authorization would allow the adoption of any appropriate method to fulfill the purposes pursued – including the use of treasury shares to service stock incentive plans and/or the transfer of real and/or personal rights and/or stock lending – to be carried out either directly or through intermediaries, in compliance with the relevant laws and regulations in force.

Without prejudice to the fact that purchases of treasury shares would be made in accordance with the time limits, conditions and requirements established by the applicable Community legislation and by the Admitted Market Practices, the minimum and maximum purchase price would be determined for a unit price not lower than the official Stock Exchange price of Arnoldo Mondadori Editore S.p.A. shares on the day preceding the purchase transaction, reduced by 20%, and not higher than the official Stock Exchange price on the day preceding the purchase transaction, increased by 10%.

However, in terms of purchase prices, the additional conditions set forth in Article 3 of the above EU Delegated Regulation 2016/1052 would apply.

With regard to the provisions of Article 2357, paragraph 1, of the Italian Civil Code, purchases would in any case be made within the limits of the available “extraordinary reserve” as shown in the last duly approved financial statements.

In any case, purchases would be made, in terms of definition of volumes and unit prices, in accordance with the conditions governed by Article 3 of EU Delegated Regulation 2016/1052, and in particular:

• no shares shall 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, no more than 25% of the average daily trading volume of Arnoldo Mondadori Editore S.p.A. shares shall be purchased in the 20 trading days prior to the dates of purchase.

Purchases instrumental in the support to market liquidity shall also be made in accordance with the conditions provided by the admitted market practices.

To date, Arnoldo Mondadori Editore S.p.A. holds a total of no. 1,838,326 treasury shares, equal to 0.703% 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 2018-2020 PERFORMANCE SHARE PLAN: DISCLOSURE PURSUANT TO ARTICLE 84-BIS, PARAGRAPH 5 OF CONSOB REGULATION NO. 11971/1999
The Board of Directors, on the proposal of the Remuneration and Appointments Committee, resolved to grant, effective from 14.5.2021, a total of no. 878,347 Arnoldo Mondadori Editore S.p.A. shares to 8 beneficiaries, in implementation of the provisions contained in the “2018-2020 Performance Share Plan” established by the Board of Directors on 13 March 2018 and subsequently approved by the Shareholders’ Meeting on 26 April 2018 (the “2018-2020 Plan”).

Mention should be made that the 2018-2020 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 2018-2020 Plan have been achieved.

The 8 beneficiaries of the 2018-2020 Plan are the Chief Executive Officer and 7 managers identified by name by the Chief Executive Officer, as delegated by the Board of Directors.

The characteristics of the 2018-2020 Plan are explained in detail in the Directors’ Report to the Shareholders’ Meeting of 26 April 2018 and in the information document contained therein, available on mondadori.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 2017-2019 Performance Plan.

The Board of Directors, on the favourable opinion of the Remuneration Committee, approved the granting of an accelerated vesting schedule on the 2019-2021 Performance Share Plan to the Chief Executive Officer, who has decided to end office, as a more favourable condition in line with the provisions of the relevant Regulation in the event of good leaving for the specific case. Accordingly, the Chief Executive Officer will be granted no. 770,142 shares effective 14.5.2021. A return condition applies in the event that the overall results of the Plan, upon approval of the 2021 financial statements, are not in line with the targets set out in the Plan.

With regard to the prior notice of 10 November on Ernesto Mauri’s decision to end his experience as Chief Executive Officer of the Mondadori Group, the Board of Directors resolved to integrate, in terms of duration and territorial scope of application, a non-compete agreement already established during his office, in reason of the protection of Group interests, also on an international level, taking account of the priority and confidentiality needs regarding the revision of strategic priorities also following the impact of the pandemic on the relevant markets.

A supplementary agreement was finalized on a gross consideration of € 800,000, with a non-compete clause extended to the territory of the European Union and until April 2023, approved by the Board of Directors on the favourable opinions of the Remuneration Committee and the Related Party Committee.

The above agreement complies also with the parameters and limits payable of consideration for the assumption of non-compete obligations governed by the Remuneration Policy for 2021 approved by the Board of Directors.

In accordance with the above, the effectiveness of the agreement is subject to approval, pursuant to Article 123 ter of the TUF, of Section One of the Remuneration Policy by the Shareholders’ Meeting called on 27 April.

PROPOSED ADOPTION OF A 2021-2023 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 2021-2023 Performance Share Plan, in accordance with Article 114-bis of Legislative Decree no. 58 of 24 February 1998, intended for the Chief Executive Officer who will be appointed by the Board of Directors after the Shareholders’ Meeting, 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 grant 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 right for beneficiaries to receive a bonus in the form of Company shares, subject to the achievement of specific targets set and measured at the end of the three-year performance period from 2021 to 2023.

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.

For details on the proposed adoption of the 2021-2023 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.

COMPLIANCE WITH THE CORPORATE GOVERNANCE CODE
The Board of Directors resolved to comply with the Corporate Governance Code for Listed Companies published by the Corporate Governance Committee in line with the best practices of listed issuers.

The Board also resolved to transpose the Code by the end of the current year and will provide disclosure to the market in the corporate governance report to be published during 2022.

The Board of Directors also approved on today’s date the Guidelines on the qualitative and quantitative composition deemed optimal of the Board of Directors (hereinafter the “Guidelines”), as well as the Policy on the criteria for assessing the independence requirements of directors, including the quantitative and qualitative criteria for assessing the relevance of the relationships indicated in Recommendation 7 letters c) and d) of the Corporate Governance Code.

The above documentation is made publicly available on the website www.mondadori.it Governance section. The Guidelines are also made publicly available on the authorized storage mechanism 1info (www.1info.it).

REGULATION ON INCREASED VOTING RIGHTS
Notice is given that the Regulation on increased voting rights, as amended by the Board of Directors’ meeting held today, in order to bring the Regulation in line with the amendments to the Bylaws adopted by the company on 4 March 2021, as well as with the legislative and regulatory changes regarding Post Trading, is publicly available on the website www.gruppomondadori.it Governance section.

PUBLICATION OF DOCUMENTS
Arnoldo Mondadori Editore S.p.A. hereby announces that the notice of call of the Annual General Meeting, to be held on Tuesday 27 April 2021 in first call and, if required, in second call on Wednesday 28 April 2021, will be made publicly available at the registered office, at the authorized storage mechanism 1info (www.1info.it) and on the website www.gruppomondadori.it (Governance section), together with the Directors’ explanatory reports, in accordance with Article 125-ter of the TUF, on the following items on the agenda to be discussed in ordinary session: financial statements at 31 December 2020 and resolutions relating to the allocation of the result for 2020 of Arnoldo Mondadori Editore S.p.A.; authorization to purchase and dispose of treasury shares pursuant to the combined provisions of articles 2357 and 2357-ter of the Italian Civil Code; appointment of the Board of Directors; appointment of the Board of Statutory Auditors; resolutions, pursuant to Article 114-bis of the TUF on the granting of financial instruments

Also made available, in the above manners, the Information Document on the 2021-2023 Performance Share Plan, prepared in accordance with Annex 3A, under the provisions of art. 84-bis of the Issuer Regulation.

The notice of call of the AGM was published today also in the daily newspaper indicated in the notice.

The additional AGM documentation will be made available, in the manners above, within the time limits of current laws.

CONSOLIDATED NON-FINANCIAL STATEMENT PURSUANT TO LEGISLATIVE DECREE 254/2016
Under Legislative Decree 254/2016, the Board of Directors’ 2020 Report on Operations of the Mondadori Group is also composed of the Consolidated Non-Financial Statement, 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 active and passive corruption, which are relevant given the activities and characteristics of the Company.

With regard to 2020, the Mondadori Group has updated its materiality analysis, in accordance with the principles set out by the GRI Sustainability Reporting Standards (GRI Standards), including the “Media Sector Disclosures”, defined in 2016 and 2014 respectively by the Global Reporting Initiative (GRI).

With a view to continuous improvement of the process, in 2020 the stakeholder engagement activity was expanded by involving the customers of Mondadori Store bookstores, who were given an online questionnaire.

In accordance with the recommendations of ESMA and CONSOB, the document presents an analytical description of the actions readily taken by the Mondadori Group for the necessary prevention to protect the health of its employees and associates, to guarantee its customers access to products and services during the lockdown period and to support the bookstores and newsstands chains.

The results for the year ended 31 December 2020, 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).

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):

• Consolidated balance sheet;
• Consolidated income statement;
• Consolidated income statement – fourth quarter;
• Group cash flow;
• Arnoldo Mondadori Editore S.p.A. balance sheet;
• Arnoldo Mondadori Editore S.p.A. income statement;
• Arnoldo Mondadori Editore S.p.A. statement of cash flows;
• Glossary of terms and alternative performance measures used;
• Information pursuant to Schedule 7 of Annex 3a to CONSOB Regulation no. 11971/1999

[1] From 12 March up to the end of April, the adoption of government measures to contain the pandemic led to the closure of bookstores throughout Italy, with the resulting suspension of most of the activities related to the Group’s Retail business.
[2] It should be noted that the 2020 result benefited from the recognition of tax income of € 5.5 million related to the tax receivable from the “Patent box” facility.
[3] Pursuant to Decree M.D. 521 16/11/2020 “further allocation of a portion of the emergency fund for companies and cultural institutions”, intended to provide grants to art exhibition operators.
[4] GFK, December 2020 – sell-out figures in terms of market value (53 Weeks in 2020 vs. 52 Weeks in 2019)
[5] GFK, December 2020 (ranking in terms of cover value)
[6] Databank, June 2020 (revenue in terms of value net of channel discount)
[7] Product revenue excluding Club revenue
[8] GFK (in terms of value)
[9] Nielsen, December 2020, net of search, social, classified and OTT
[10] Internal source: Press-di, December 2020 (in terms of value)
[11] Internal source: Press-di, December 2020 (in terms of value)
[12] Internal source: Press-di, December 2020 (newsstands + subscriptions channel) in terms of value
[13] Press-di, December 2020 (newsstands + subscriptions channel) in terms of value; Audipress 2020/III
[14] Comscore, December 2020
[15] Shareablee, December 2020 + internal processing on Pinterest and TikTok figures

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 2020 presented by CEO Ernesto Mauri.

HIGHLIGHTS
The year 2020 was inevitably marked by the effects of the health emergency brought by the spread of COVID-19.
In the first half of the year, in fact, the gradual and increasingly widespread application from March of restrictive measures to social and economic activities significantly curtailed most of the activities related to the businesses where the Mondadori Group operates as a leader.

In order to address this situation, the Group has implemented a series of actions aimed at ensuring working conditions in total safety for its employees, encouraging smart working, allowing the continuation of activities and the containment of operating costs, with the aim of offsetting the operating and financial impact from the measures adopted by the authorities.
Against this backdrop, the book market has shown solid resilience and a strong recovery:

• in the Trade segment, following the gradual reopening of bookstores in May, the segment has witnessed a steady recovery, growing by 8.4%[1] in the third quarter versus the same period of 2019, reducing the loss to -3.8%[2] versus the prior year.
• as far as school textbooks are concerned, the segment managed to come out almost unharmed from the lockdown, since the period in which the restrictive measures were in force was concurrent to the promotional phase of the texts to be adopted and subsequently marketed during the summer period.

PERFORMANCE IN THIRD QUARTER 2020
In light of the outlined context, the Group’s operating and financial profile in the third quarter of the year is as follows:

• revenue amounted to € 253 million, down by 9.3% versus € 279 million in the same period of 2019 (-7.9% on a like-for-like basis), recovering strongly versus the first half of the year, despite the failed restart of the activities that gravitate around the management of museums, exhibitions and cultural assets.
  Specifically:
  – revenue in the Books Area was down by 7%, but recovering sharply from the -21% drop in first half 2020, as the recovery in the Trade segment, whose revenue grew by 13% in the third quarter, and the positive performance of the adoption campaign for school textbooks only partly offset the negative trend in museum activities;
  – revenue in the Retail Area decreased by approximately 5%, improving however from -27.5% in the first half of the year, a period impacted by the closure of bookstores for roughly two months, thanks to the recovery recorded by the book market from May.
  – revenue in the Media Area posted a 20% loss (approximately -14% on a like-for-like basis in terms of titles), with digital activities in particular on the rise, up on a like-for-like basis by approximately 7% during the quarter.

• adjusted EBITDA (including the IFRS 16 effect), amounting to € 60 million versus € 61.6 million in the prior year, was basically steady, thanks to the targeted measures to support activities and contain costs implemented by the Group across all the business areas.
  Mention should be made in this regard of the strong improvement in margins in the third quarter under review, which rose to 23.7%.
  More specifically:
  – the Books Area posted a result in the period that was € 5.8 million lower than the same quarter of the prior year, due largely to the difficulties reported by the museum business;
  – the Retail Area, on the other hand, saw its performance increase by € 0.8 million versus third quarter 2019, thanks to the cost saving plan and the rationalization of the store and product portfolio;
  – the Media Area equally recorded a significant improvement in margins (from € -1.4 million to € +2.1 million), thanks to the careful cost containment policy.

• the Group’s Net Result ended with a positive € 43 million, up by 72.2% versus € 25 million in the prior year, due partly to the write-back of Reworld Media shares held (€ 7.5 million) and the tax contribution from a tax receivable relating to the use of the “Patent box” (€ 5.5 million).

Cash flow from ordinary operations in the context of continuing operations over the last 12 months amounted to € 40.8 million versus € 36.7 million at 30 June, confirming the Group’s quick response and the ability of the business to steadily generate cash, even in a highly deteriorated context;

Net debt (no IFRS 16) stood at € -82.3 million at 30 September 2020, improving sharply versus € -110.4 million in the same period of 2019 (€ +28.1 million). Including the effects of the application of IFRS 16, net debt stands at € -170.4 million.

The gradual recovery of the business and the financial situation at the end of the third quarter, together with the Group’s medium-term outlook, provide reasons to maintain a positive attitude towards future developments, albeit in an economic scenario that is marked by the health emergency, and to be confident in the Group’s ability to continue to strengthen its capital and financial position.

CONSOLIDATED RESULTS AT 30.09.2020
In first nine months 2020, the Group’s consolidated revenue amounted to € 541.9 million, down by 17.8% versus € 658.9 million in the prior year (net of the changed scope of consolidation of the Media Area from the disposal of the five titles, the decrease would be approximately -16%, due basically to the effects of COVID-19).

Adjusted EBITDA in the period amounted to € 71 million, down by € 12.4 million versus first nine months 2019 (€ 83.4 million); this positive performance, the result of a trend in the third quarter basically in line with the prior year, reflects the significant effects of the quick response and countermeasures taken by the Group to tackle the consequences of COVID-19, which curbed the drop in revenue and reduced operating costs by approximately € 45 million.
Special mention should be made of profitability, equal to 13.1%, higher than the prior year and proof of the effectiveness of the operational efforts made by the Group.

EBITDA amounted to € 65.1 million versus € 78.4 million in the prior year, in line with the mentioned dynamics.

EBIT at 30 September 2020 amounted to € 28.9 million, down by € 21.2 million versus 30 September 2019, due mainly to the trend of the abovementioned components and to the extraordinary write-down and amortization of a number of titles for a total of € 7.8 million.

Consolidated profit before tax amounted to € 19.6 million versus € 41.5 million in first nine months 2019.

The Group’s net profit, after minority interests, came to € 18 million versus € 23.1 million in first nine months 2019 (which also included € 1.1 million from the discontinued operations of Mondadori France), a sharp upswing versus the first half of the year.

 Group employees at 30 September 2020 amounted to 1,913 units, down by approximately 9% versus 2,092 units at 30 September 2019.

BUSINESS OUTLOOK
The positive performance recorded in the third quarter by all the Group’s businesses, despite the caution inevitably brought by the scenario of uncertainty arising from the pandemic and the potential impact on the Christmas season, increases confidence on exceeding the targets set by the Group when it had approved the half-year results.

Revenue and EBITDA
With revenue confirmed to fall as expected between 16% and 18% in the year in progress versus 2019 – current estimates on adjusted EBITDA show margins in the upper part of the previously forecast range, therefore equal to 12%, the result of the following trends that are expected to mark the business units:

• Trade Books: market on the upswing and profitability holding ground;
• School Textbooks: steady market and profitability basically steady;
• Museums: the business model and the cost-cutting measures aim at a substantial operating breakeven, despite the drastic drop in revenue;
• Retail: book market and physical channels on the upswing; the deep organizational and process review and the rationalization strategy on the portfolio of stores are expected to help profitability recover;
• Media: digital advertising market on the upswing and a positive, albeit declining, profitability.

Cash Flow and Net Financial Position
Additionally, with regard to the Group’s financial debt, one can reasonably expect the positive cash generation of the business to continue over the final months of the current year which, together with a lower estimate of restructuring requirements, will allow the Group to significantly reduce the net financial position at end 2020 versus the prior year.

PERFORMANCE OF BUSINESS AREAS

• BOOKS

In the third quarter, the strong growth recorded by the Trade books market (+8.4% versus the same period of the prior year) produced a strong recovery, which reduced the overall decline to 3.8% at 30 September 2020 versus the prior year.

In the first nine months of the year, the Group placed 3 titles in the top ten bestsellers in terms of value^[3], retaining its leadership with a 24.6% market share.
Subsequently, the Group strengthened the relevance of its publishing plan with the publication in September and October of titles by a number of bestselling authors, including the new novel by Ken Follett, ranking first in the top twenty bestsellers[4], where the Group holds seven positions.

In first nine months 2020, revenue in the Books Area amounted to € 316.1 million versus € 366 million in the same period of the prior year (-13.6%).
Specifically:

• revenue in the Trade Books segment totaled € 144.1 million, down by -6.8% versus € 154.6 million in 2019, due to the effects of the COVID-19 health emergency. Mention should be made of the 13% increase in the third quarter versus the same period of 2019, confirming the post lockdown recovery, due partly to the shift in the launch of a number of new titles following the reprogramming and revision of the publishing plan.
  Revenue from e‐book and audiobook sales (approximately 8.6% of total publishing revenue) was up sharply in the lockdown period, closing the first nine months with a 29% increase versus the prior year, bucking the trend of sales of physical books.

• revenue in the Educational Books segment, amounting to € 167.4 million, was down by 18.6% versus € 205.7 million recorded in the same period of 2019, on a like-for-like basis net of the transfer of Electa’s trade books BU to Mondadori Libri S.p.A. in December 2019. The drop is attributable mainly to the museum segment, which had its operations severely impacted by the closure of sites and exhibitions owing to the measures to contain the pandemic, and by the virtual collapse of tourist travel also throughout the summer season.
  In the school textbooks segment, mostly unscathed by the effects of the pandemic, the Mondadori Group’s publishing houses achieved a market share of 22.1%, up versus the prior year, confirming the positive results of the adoption campaign in 2020.

In first nine months 2020, adjusted EBITDA of the Books Area amounted to € 67.5 million versus € 78.6 million in 2019, down due mainly to the above negative trend in revenue from the museum activities.

EBIT amounted to € 55.8 million versus € 68.5 million in nine months 2019.

• RETAIL

As mentioned, the Book market (over 80% of revenue^[5] in the Retail Area) recorded a minor fall in the first nine months (-3.8%^[6]) versus the same period of the prior year, due to the urgent measures that led to the closure of physical bookstores throughout the country from 12 March 2020 until the beginning of May.
The months following the reopening were particularly vibrant for the book market, which grew by 9.6% in the period from June to September.
Against this backdrop, Mondadori Retail’s market share stood at 11.7%.

In the first nine months, revenue in the Retail Area amounted to € 102 million versus € 126.6 million in the same period of the prior year (-19.4%), due to the abovementioned anti-COVID-19 measures.
In the third quarter, Mondadori Retail recorded an excellent performance: the decline in revenue versus the same period of the prior year amounted to -4.8% (-27.5% in first half), driven by the strong recovery in book sales, which were basically equal to the same period of 2019 (-0.6%).

In terms of sales channel performance, the third quarter saw strong results come from franchised bookstores and an improvement in the figures of directly-managed stores.
The online channel (15% of total revenue in the area) continued to grow, up by +48.8% at 30 September 2020.

Despite the steep drop in revenue, Mondadori Retail in the first nine months managed to curb the reduction in IFRS 16 adjusted EBITDA, which amounted to € -0.5 million versus € +0.8 million in the same period of 2019.
A result achieved thanks to careful cost management and a deep organizational and process revision carried out in the second half of 2019 and continued even during the harshest period of the health emergency.
With the exception of the lockdown months, Mondadori Retail showed a steady improvement in profitability throughout the year: in the months before lockdown, adjusted EBITDA was € 0.3 million higher than in the same period of 2019, while in the following months (June-September) the improvement amounted to € 1.6 million.
In the third quarter in particular, adjusted EBITDA increased by € 0.9 million versus the prior year to € 2.3 million.

IFRS 16 EBIT amounted to € -9.4 million (versus € -7.3 million at 30 September 2019).

• MEDIA

In the August surveys, the advertising market recorded an overall drop of -22%, suffering heavily in all channels from the negative effects of the health emergency: magazines lost -40.1% and digital -9.2%[7]. The digital channel alone recorded a remarkable turnaround in July and August, up by approximately 24% versus the same two-month period of 2019;

In terms of circulation, the Italian magazine market fell by -12.8%. In this context, the Mondadori Group’s market share stood at 24%[8].

At 30 September 2020, revenue in the Media Area amounted to € 144.1 million versus € 191.2 million in 2019 (-24.7%); net of the disposal in December 2019 of the five titles, the drop would be -19.1%.
In the third quarter alone, the drop in revenue was -19.9% (-14% on a like-for-like basis), with digital activities on a strong upswing, up on a like-for-like basis by approximately 7% in the quarter.

Specifically, in first nine months 2020:

• circulation revenue was down by -25%, due to both the disposal of the five titles and the COVID-19 impact (-15% net of discontinuity);
• revenue from add-on products fell by approximately -22% versus 2019, due partly to a different scheduling of planned releases (-20% net of the disposal of the five titles);
• advertising revenue fell by a total of approximately -37%; this is the form of revenue most affected by the ongoing health emergency, which has, among other things, led to the cancellation of an important event such as the Salone del Mobile and a reduction in proximity marketing solutions (AdKaora); net of the discontinuity of the scope, the fall would be -32%.
  In the third quarter alone, against the persisting decline in sales linked to print media, revenue from digital advertising sales grew by over 7%, with this component now making for 56% of total advertising revenue. 

  In terms of digital activities, mention should be made that in the period under review, the Mondadori Group retained its position as the leading multimedia publisher in Italy, on the web with an 81% reach (32.4 million unique users in August)[9] and in social media with an aggregate fan base of 34.5 million spread across 105 social profiles[10].

Adjusted EBITDA in the Media Area amounted to € 3.2 million, down by approximately € 2 million versus first nine months 2019 (€ 5.5 million).
The sharp drop in revenue was alleviated by the effective measures to contain operating costs, which curbed their negative impact on profitability.
In third quarter alone, Mondadori Media recorded adjusted EBITDA of € +1.2 million, improving significantly versus the result in the same period of 2019 (€ -1.4 million) thanks to the positive trend of digital advertising, the partial recovery of add-on sales, and the abovementioned cost containment measures.

EBIT amounted to € -9.5 million versus € -1.4 million, due mainly to the trend of the abovementioned components and to the extraordinary write-down and amortization of a number of titles for a total of € 7.8 million.

*

Additionally, the Board of Directors took note with regret of Ernesto Mauri’s decision to end his experience as CEO of the Mondadori Group by completing his term with the natural expiry of the company’s governing bodies and the approval of the financial statements scheduled in April 2021.

Mr. Mauri provided the reasons for his decision by explaining to the Board that he believes he has fulfilled the strong path of strategic re-launch and repositioning, marked by the financial recovery and solid results achieved, laying the foundations for the current Management – in total continuity – to push the Mondadori Group into a new phase of development.

In line with the strategic transformation that the Company has undergone in recent years, which has witnessed a gradual focus on its core business – Books – the Board of Directors, on the proposal of Chairman Marina Berlusconi, resolved to appoint Antonio Porro, current CEO of Mondadori Libri, as the future CEO of the Mondadori Group.
Mr. Porro’s nomination, in accordance with the outcome of the succession plan adopted by the Board of Directors, will be submitted to the Shareholders, who will submit the lists for the appointment of the new Board to the Shareholders’ Meeting next April.

*

SIGNIFICANT EVENTS AFTER FIRST NINE MONTHS 2020
On 14 October 2020, the Mondadori Group sold 8.5% of the share capital of Reworld Media. As a result of the transaction, the stake held in the French company is now 7.8%.
On 20 October 2020, the Mondadori Group completed the disposal of 25% of the share capital of Stile Italia Edizioni S.r.l. to La Verità, which already held the remaining 75%.

The documentation relating to the presentation of the results at 30 September 2020, is made available through the authorized storage mechanism 1Info (www.1info.it) and in the Investors section of the Company website www.gruppomondadori.it.

 The Interim Management Statement at 30 September 2020 approved by the Board will be available at the Company’s registered office, on the authorized storage mechanism 1Info (www.1info.it) and on www.gruppomondadori.it (Investors section) on 11 November 2020.

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 file):

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, figures in terms of value, September 2020
[2] GFK, figures in terms of value, September 2020
[3]GFK, September 2020 (ranking in terms of cover value)
[4] GFK, Week 40-42 2020 (ranking in terms of cover value)
^[5] Product revenue excluding Club revenue
^[6] GFK, September 2020 (in terms of value)
[7] Nielsen, cumulative figures at August 2020
[8] Internal source: Press-di, figures at August 2020 (newsstands + subscriptions channel) in terms of value
[9] Comscore (August 2020)
[10] Shareablee and internal processing (September 2020)