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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The Group thus expects:

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

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

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

PERFORMANCE OF BUSINESS AREAS

• BOOKS

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

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

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

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

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

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

• RETAIL

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

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

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

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

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

• MEDIA

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

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

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

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

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

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

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

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

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

Annexes (in the complete pdf):

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

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

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

^[2] GFK, June 2022

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

That said, the Group expects for:

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

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

PERFORMANCE OF BUSINESS AREAS

• BOOKS

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

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

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

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

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

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

• RETAIL

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

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

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

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

Specifically:

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

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

• MEDIA

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

Specifically:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

PUBLICATION OF THE MINUTES OF THE SHAREHOLDERS’ MEETING

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

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

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

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

Annexes (in the complete pdf):

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

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

^[2] GFK, March 2022

^[3] GFK (in terms of value)

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 Half-Year Report at 30 June 2021, presented by the CEO of the Mondadori Group, Antonio Porro.

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

HIGHLIGHTS OF FIRST HALF 2021

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

PERFORMANCE AT 30 JUNE 2021

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

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

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

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

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

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

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

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

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

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

BUSINESS OUTLOOK

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

Performance targets:

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

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

PERFORMANCE OF THE BUSINESS AREAS IN FIRST HALF 2021

• BOOKS

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

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

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

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

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

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

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

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

• RETAIL

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

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

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

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

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

• MEDIA

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

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

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

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

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

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

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

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

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

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

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

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

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

Annexes (in the complete pdf):

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

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

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

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

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

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

[6] Nielsen, May 2021

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

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

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)

Today, the meeting of the Board of Directors of Arnoldo Mondadori Editore S.p.A., chaired by Marina Berlusconi, reviewed and approved the Half-Year Report at 30 June 2020, presented by CEO Ernesto Mauri.

Highlights of first half 2020
The first half of 2020 was inevitably marked by the effects of the COVID-19 emergency.

Starting from the first ten days of March, in fact, the gradual and increasingly widespread application of restrictive measures has significantly curtailed most of the activities related to the businesses where the Group operates as a leader.

From 12 March up to the end of April, the government measures to contain the pandemic led to the closure of bookstores throughout Italy, with the resulting suspension of the activities related to the Group’s Retail business.

Parallel to that and over the same period, the Trade Books business had to tackle the shutdown of the physical channel for the marketing of its products and, consequently, could only rely on the online channel.

The emergency measures concurrently led to the closure of museum sites, archaeological parks and relating bookstores across all Italian regions, with the resulting interruption of the Group’s activities in managing services for museums and cultural heritage.

Lastly, the Media business[1] too recorded declines following closure of part of the newsstands in Italy and the reduction of advertising investments.

In order to tackle this situation, the Mondadori Group has set up and implemented a series of actions and measures aimed, first and foremost, at guaranteeing the safety of its people, enabling them, where possible, to perform their work remotely (smart working), and at alleviating the impacts of the measures adopted by the authorities, in order to safeguard the company’s operating and financial profile.

To this end, the Group has:

• taken steps to contain and cut operating costs also by renegotiating contracts and reviewing rates, with total savings estimated at € 13 million for the entire year;
• implemented actions to reduce the cost of personnel, estimated at approximately € 15 million for the entire year, by using outstanding holidays and resorting to social safety nets, as well as resolving to reduce the variable remuneration of the Group’s Management for 2020 and, lastly, suspending remuneration and hiring policies;
• placed particular emphasis on the Group’s working capital (with specific actions on customers and suppliers);
• implemented a policy of deferred payments in favour of the book chains, independent and franchised bookstores of the Retail Area, aimed at safeguarding the strength of the distribution channels and supporting the production chain in the Group’s area of operation.

For the different business activities:

• in the Trade Area, the editorial plans have been reshaped and rescheduled;
• in the Educational Area, school textbooks were affected only to a small extent, while actions have been taken to curb or eliminate the costs related to the stoppage and canceling of museum and archaeological park activities;
• in the Media Area, a different scheduling of magazines at newsstands and a strict policy has been adopted to reduce production costs;
• in the Retail Area, a plan has been implemented to streamline the units of the area and the points of sale.

Performance at 30 June 2020
Starting from May, with the lifting of lockdown restrictions, the Trade Books market has shown stronger and stronger signs of recovery with double-digit growth rates that marked the last six weeks of the half-year period and still in progress.

The recovery has propelled the growth of the Trade and Retail businesses, allowing them to partly regain the revenue lost in the March-April period.

As a result of the outlined context, the Group’s operating and financial profile at 30 June 2020 is as follows:

• consolidated revenue amounted to € 288.9 million, down by -24% versus € 380 million in the same period of 2019. Net of the changed scope of consolidation of the Media Area in 2019, the drop stands at -22.2% and is attributable mainly to the effects of COVID-19;

• IFRS 16 adjusted EBITDA amounted to € 11 million versus € 21.8 million in the prior year (down by approximately € 10.9 million versus the same period of 2019).

Also at the adjusted EBITDA level, the decline basically reflects the consequences of COVID-19 as well as the first positive effects of the countermeasures adopted by the Group.

The cost reduction measures for € 31.8 million have contained the impacts from the contraction in revenue and margins caused by the COVID-19 emergency;

• IFRS 16 EBITDA amounted to € 8.4 million versus € 20.6 million at 30 June 2019;

• IFRS 16 EBIT amounted to € -17.2 million, down by € -19.3 million versus 30 June 2019, due mainly to the trend of the abovementioned components and the write-down and start of the amortization process of a number of titles;

• The consolidated result before tax amounted to € -30.9 million versus € -1.6 million in first half 2019, due also to financial expense (€ 4 million), the adjustment of the investment in Reworld Media (€ -6.6 million) and the loss of the associates consolidated at equity (€ -3.4 million);

• The result from continuing operations amounted to € -25 million versus € -4.6 million at 30 June 2019 (€ -20.4 million). The decline was strongly affected by the above non-operating and extraordinary cost components, which total approximately € 22 million, only partly offset by tax income of approximately € 5.9 million recorded by the Group during the year;

• The Group’s net result amounted to € -25 million versus € -1.9 million in first half 2019 (which had also included € 2.7 million from discontinued operations);

• Net debt (before IFRS 16) amounted to € -130.1 million, improving strongly versus € -204.2 million at 30 June 2019 (€ +74.1 million), due also to the proceeds (€ 62.8 million) from the disposal completed in July 2019 of Mondadori France and the positive cash generation from ordinary operations in the last 12 months (€ 36.7 million net of discontinued operations), despite the highly deteriorated context.

The IFRS 16 Net Financial Position stood at € -219.5 million and includes the IFRS 16 impact of
€ -89.4 million.

At 30 June 2020, the number of employees in the context of the Mondadori Group’s continuing operations amounted to 1,928 units, down by approximately -9% versus 2,117 units at 30 June 2019, as a result of the disposal of a number of titles in the Media Area (in December 2019) and activities aimed at increasing the efficiency of the individual business areas.

Despite the significant stress put on the global economic system at this moment in time, the Group’s financial situation and medium-term prospects allow it to maintain a positive attitude towards business developments, even in an economic framework inevitably affected by the COVID-19 emergency.

Business outlook
To date, Group forecasts reflect, on the one hand, the encouraging signs coming from the market, particularly in the Group’s main business areas of operation and, on the other, do not include any effects from a fresh outbreak of the pandemic, such as new lockdown measures on a national scale.

Based on the current scenario, the Group estimates a drop in revenue by between 16% and 18% versus 2019, due also to the trend of the various businesses; a solid double-digit (adjusted) EBITDA margin (approximately 11%-12%) and positive cash generation, albeit down versus the past.

The trend of the Group’s financial debt at the end of the period will depend on the amount of restructuring costs that will be financed through the cash flow from ordinary operations, with an estimate of the Group’s net financial position in any case no higher than € -55.4 million at 31 December 2019.

Performance of business areas

• BOOKS

At the beginning of May, the gradual reopening of independent bookstores and book chains allowed the Trade Books market to make a strong recovery: in the last six weeks of the half-year period, book sales grew double-digit, reaching +13.5% in June alone versus the same period of the prior year.

This upswing allowed the market to mitigate and make up for the fall recorded in March (-29.2%) and April (-45.8%), bringing the overall contraction in terms of value at 30 June 2020 to -10.1%.

Against this backdrop, the Mondadori Group retained its leadership position with an overall market share of 24.8%[2] in Trade, outstripping the market performance by more than six percentage points in the last six weeks of the half-year period.

Revenue in the Books Area amounted to € 145.9 million at 30 June 2020, down by 20.6% versus € 183.8 million in first half 2019. Specifically:

In the Trade Area, revenue amounted to € 90 million, down by -15.8% versus € 106.8 million at 30 June 2019, due to the abovementioned COVID-19 effects.

To cope with the closure of the distribution channel, the Group has revised its publishing schedule, pushing back the launch of new works by some of the most prestigious and successful authors to the second half of the year.

E-books and audiobooks (9% of total publishing revenue) bucked the trend versus physical books, with revenue up sharply during the lockdown period (+37%) versus the prior year.

Listening hours of the audiobook catalogue jumped by over 75% versus 2019, while downloads of e-books increased by 45%.

Revenue in the Educational Area amounted to € 52.8 million, down by -27.1% versus € 72.4 million in the same period of 2019.

School textbooks suffered a low impact from the pandemic, given the typical seasonal performance of the business that sees sales squeezed in the second half of the year following the adoption campaign.

The decrease in revenue in the Educational Area is attributable mainly to the closure of museums and archaeological sites under concession due to the health emergency, which prevented the museum business from achieving the expected results.

IFRS 16 adjusted EBITDA in the Books Area amounted to € 10.9 million versus € 16.2 million in 2019, a deterioration attributable to the negative trend in revenue, only partly mitigated by the cost containment actions implemented by Management.

IFRS 16 EBIT amounted to € 3.9 million versus € 9.7 million in 2019.

• RETAIL

As mentioned, in the first six months of 2020 the Trade Books market (which accounts for over 80% of Retail revenue^[3]) fell sharply versus the same period of the prior year (-10.1%^[4]) as a result of the COVID-19 emergency.

The gradual reopening of bookstores has allowed the market to rebound strongly, with an increase in June alone of +13.5%.

Revenue in the Retail Area in the first six months of the year amounted to € 59 million, down by 27.5% versus € 81.4 million in the same period of the prior year, due to the government measures to tackle COVID-19.

The market share stood at 10.9% in the first half of the year, as the Group’s performance was hindered by the fact of being able to operate only through its online channel during the lockdown period.

In June, the Group followed the same strong trend of the market: revenue in the Area, versus the same month of the prior year, dropped by only -4.1%, and the market share – in the month – stood at 12.1%, thanks, in particular, to the positive performance of the franchised stores.

Mention should particularly be made of the performance of the online channel, whose sales in the first 6 months grew by +71.6% versus first half 2019, and by as much as approximately 190% during the lockdown period.

IFRS 16 adjusted EBITDA amounted to € -2.8 million versus € -0.6 million in the same period of 2019.

Despite the drastic drop in revenue, the impact in terms of EBITDA was contained thanks to careful cost management and a deep organizational and process revision, involving both the central units and the points of sale, carried out in the second half of 2019 and continued even during the harshest period of COVID-19.

Excluding the lockdown months, Mondadori Retail improved margins both in the first two months of the year (€ +0.3 million versus the same period of the prior year) and in June alone (€ +0.7 million versus the same period of the prior year).

IFRS 16 EBIT amounted to € -8.2 million (versus € -6 million in first quarter 2019).

• MEDIA

The May surveys show that the advertising market was heavily impacted by COVID-19, with declines reported across all channels, including digital down by -17.2% and magazines by -41.5%[5].

In terms of circulation, the Italian magazines market fell by 11.3% during the period[6].

Against this backdrop, the Mondadori Group retained its position as market leader with a share in terms of value of 23.7%[7] and as the leading multimedia publisher in Italy on the web, with a reach of 84% (approximately 33 million unique users in May)[8], and in social media with an aggregate fan base of 33.5 million spread across 100 social profiles[9].

At 30 June 2020, revenue in the Media Area amounted to € 95.8 million (-26.8% versus € 130.9 million in 2019). Net of the disposal of a number of titles, the decrease came to -21.5%.

Specifically:

• circulation revenue fell by approximately -23%, a performance affected by both the COVID-19 impact and the disposal of a number of titles in 2019; net of these discontinuities, the decline is estimated at approximately -9%.
• advertising revenue, of which the digital component accounts for over 50%, was down by approximately -42% overall.

This is the class of revenue most affected by COVID-19 and the lockdown, which led to the cancellation of such a significant event as the Salone del Mobile, and a decrease in proximity marketing solutions (AdKaora). On a like-for-like basis and net of COVID-19 impacts, the change in advertising revenue would be approximately -4, -5%.

• other revenue, which includes distribution activities, fell by -9.6% versus the prior year, reflecting both the performance of the circulation market and the drop in royalties generated by the international editions of Grazia.

Adjusted EBITDA stood at € 2 million, down by approximately € -5 million only versus first half 2019, as the marked slippage in revenue was offset by effective measures to contain operating costs.

IFRS 16 EBIT, which reflects the write-down and the start of the amortization process of a number of titles (for a total value of € 7.3 million), amounted to € -7.9 million versus € 3.7 million in first half 2019.

The documentation relating to the presentation of the results at 30 June 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 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 – II quarter
• Group cash flow
• Glossary of terms and alternative performance measures used

[1] As from 1 January 2020, the activities referring to Mondadori Group magazines and websites, as well as the investments in the Magazines Italy Area, were transferred to the wholly-owned subsidiary Mondadori Media S.p.A.

[2] GFK (in terms of value at June)

^[3] Product revenue excluding Club revenue

^[4] GFK (in terms of value at June)

[5] Nielsen, cumulative figures at May 2020

[6] Internal source: Press-di, figures at May 2020 (newsstands + subscriptions channel) in terms of value

[7] Internal source: Press-di, figures at May 2020 (newsstands + subscriptions channel) in terms of value

[8] Comscore (May 2020)

[9] Shareablee (June 2020)