1H

The Board of Directors of Arnoldo Mondadori S.p.A. met today, to examine and approve the management report for the first half of the year to 30th June 2009, as presented by the Group’s deputy chairman and chief executive, Maurizio Costa.

The market scenario

Recent macroeconomic figures appear to reject the danger that the current recessionary phase will become even worse, but in terms of national markets there is still no sign of a turnaround in consumer spending or investments.

In the markets of reference, the trends that became evident in the first months of the year have continued.

In particular (volume figures to May):

– Magazine circulations continued to fall by about 9% in Italy; while, in France, the drop was 8%, with essential stability in subscriptions;

– There was no sign of a recovery in advertising investments and levels remained significantly lower than those of 2008, with falls of 29% in Italy (in terms of value) and 18% in France;

– Italy also saw the continuing decline in the market for add-on sales, with a drop of 19% in copies and 23% in value;

– Following essential stability in the first months of the year, the Italian book market saw a fall, starting in April, of 2.6% in the large-scale retail and non-chain bookstores.

Group performance in the period to 30 June 2009

During the second quarter actions aimed at containing costs allowed the Mondadori Group to mitigate the negative impact on profitability of a fall in revenues – especially those from advertising; if the printing business (sold at the end of 2008) is excluded, non-recurring items and investments in development, the Group’s businesses generated gross operating profits in the second quarter of €33.6 million (8.9% of revenues), €18 million less (-34.9%) than in the same period of 2008.

Consolidated revenues to 30 June 2009 came to €730.7 million, a fall of 21.4% on the €930.1 million of the same period of 2008 (-14.9% on a like-for-like basis, excluding the activities of Mondadori Printing).

Consolidated gross operating profit amounted to €40.2 million, a fall of 61.5% compared with the €104.5 million in the first six months of the previous year; as a proportion of revenues, the figure went from 11.2% in 2008 to 5.5% this time.

Excluding the activities of Mondadori Printing the variation in operating profit was down by €50.8 million (-55.7%), essentially due to lower business profits (-€40.1 million of which €5,8 for add-ons); increased investments in developing businesses (-€1.6 million); non-recurring items (extraordinary elements and restructuring costs): -€9.1 million.

Consolidated operating profit to 30 June 2009 came to €27.9 million, a fall of 66.7% compared with the €83.8 million in the first half of 2008, with amortizations and writedowns on tangible and intangible assets of €12.3 million (€20.7 million in 2008).

As a proportion of revenues, a fall from the 9% of 2008 to 3,8%.

Consolidated pre-tax profit came to €17.6 million, a fall of 72.6% on the €64.2 million of the same period of 2008, with a fall of €9.3 million in net financial charges, due to a lower level of debt and, above all, a significant reduction in the cost of borrowing.

Consolidated net profit for the period to 30 June 2009 amounted to €7.3 million, compared with the €36.7 million of the previous year (-80.1%), and a first quarter 2009 that recorded a loss of €1.8 million.

Gross cash flow came to €19.6 million compared with the €57.4 million of the first half of 2008.

The net financial position went from -€490.3 million at the end of 2008 to – €473.9 million on 30 June 2009.

As of 30 June 2009 the personnel employed, on indefinite and fixed-term contracts, by the companies controlled by the Group totalled 3,861.

Compared with the first half of the previous year, on a like-for-like basis, in other words excluding Mondadori Printing, there was a fall in the number of personnel of 194.

Personnel costs, which amounted to €143.1 million, were down by 24.1% from the €188.6 million to 30 June 2008; net of Mondadori Printing the fall would be of 6.8%.

BUSINESS AREA RESULTS [1]

• Books

In the first half of 2009 the Book Division generated revenues of €182.6 million, a fall of 5.2% compared with the €192.7 million of the same period of the previous year.

During the period the market was characterised by a general trend that, from March, was down compared with the first six months of 2008, both in terms of new titles and reprints.

In this context the Mondadori Group confirmed its leadership in trade books, with a market share, in just the medium to large-scale bookstores, of 27.8% (source: Nielsen Bookscan – period P6), markedly ahead of its main competitors. There was also an increase in the market share of Sperling & Kupfer and Einaudi, while there was a slight fall for Edizioni Mondadori and Piemme.

As regards the performance of the individual publishing houses, Edizioni Mondadori generated first half 2009 revenues of €65.2 million, a fall of 4.5% compared with the previous year. Significant titles during the period included three new titles published between the end of May and the beginning of June, both for the importance of the authors and their commercial appeal: Marina, an unpublished novel by Carlos Ruiz Zafón; La bellezza e l’inferno by Roberto Saviano; and Il ricatto, the new legal thriller by John Grisham, which benefited from the author’s presence in Italy for the launch.

In the paperback sector, sales were up by 6% compared with the previous year, with particular growth in the bookstore chains, also thanks to the Oscar Mondadori promotional campaign in the months of March and April.

Net revenues for the first six months at Einaudi amounted to €24.5 million, a fall of 7.2% compared with the same period of last year: there was a 5.9% drop in revenues from the bookstore channel, while instalment revenues were down by 10.3% and the sale of rights down by 20.4%.

Revenues from Mondadori Electa totalled €18.5 million, an 8.4% fall on the same period of the previous year, mainly due to the marked fall in add-on sales (-31%), in the context of a rapidly declining market, and an inconstant performance in higher margin businesses.

Sperling & Kupfer ended the first half of 2009 with revenues of €15 million, an increase of 15.4% compared with the first half of 2008. This result reflects good sales both through bookshops and organised distribution.

Net sales to 30 June 2009 at Mondadori Education amounted to €14.2 million, a fall of 6% compared with the first six months of the previous year.

Edizioni Piemme generated revenues in the period of €22.3 million, a fall of 17,4% on the first half of 2008, mainly due to a substantial drop in the supply of titles by Khaled Hosseini and a significant overall rise in returns.

• Magazines Italy

The publishing business, both in Italy and around the world, has been significantly affected by the crisis that began in the second half of 2008. In Italy, following an extremely difficult first quarter, the second quarter proved to be equally problematic and, above all, without, for the moment, providing any indication of a turnaround in the trend. The fall in consumer spending has impacted also on the purchase of newspapers and magazines and, in a more marked way, of add-on sales products that often involve a significant investment over time because of the nature and duration of the offers.

In the same way, the financial crisis, which has evolved in to a full-blown recession, has led companies to drastically reduce their investments in communications, which a consequent slump in advertising expenditure.

In Italy, Magazine revenues in the first half of the year amounted to €253.2 million, a fall of 20.9% compared with the €320 million of the same period of the previous year.

This downturn was determined by a series of specific phenomena:

– in a market in which circulation volumes were down by around 10%, Mondadori saw its circulation revenues fall by less than the reference market and with an overall market share of more than 35%;

– Mondadori ended the first half with a fall in add-on sales of 32.8% – despite revenue levels remaining significant and higher than other magazine publishers -, in a market that recorded a generalised fall in all segments, with the exception of music;

– a substantial resizing of advertising revenues (-30.6%) that affected all sectors: especially fashion, cosmetics and furnishings.

The action taken by Mondadori to react to this context has included efforts to sustain and develop the titles and an increased control of costs.

International activities

During the period the effects were felt of the international crisis both on the revenues of the individual editions and the relative royalties, which were, however, compensated by the increase in the number of active licences and licensing revenues (+23%).

Moreover, by the end of the year, the existing 12 editions of Grazia will be joined by three new editions in France, Indonesia and Thailand. To the success of the Grazia Network, should also be added the positive performance of the licences for Casaviva, Flair, Sale&Pepe and Interni.

The joint-ventures in Russia and China performed well: in particular the Chinese edition of Grazia, launched in February, which has outperformed expectations in terms of circulation, while advertising revenues have been affected by the international economic situation.

The Attica subsidiary in Greece recorded results in line with expectations, thanks to a detailed cost control policy.

· Magazines France

Magazines in France generated total first half 2009 revenues of €170.5 million, a fall of 12.3% compared with the €194.4 million of the same period of the previous year. On a like-for-like basis, in other words net of the titles sold in 2008, the downturn was of 8.6%.

On the circulation side, newsstand sales in France were characterised in the first half by a 7.8% fall in copies (source: NMPP/TP).

In this context, the circulation revenues of Mondadori France, which account for 70% of the total, saw a fall of 6% – which was lower than the fall in the market – (on a like-for-like basis the fall was 3.1%), helped also by a slight increase in subscriptions (+1% net of the titles sold), that represent a stable source of revenues also in this difficult economic phase.

In terms of advertising sales, the market remained depressed during the whole of the period (-17.8% in terms of volume in the first 5 months; source: TNS-MI).

The advertising revenues generated by Mondadori France totalled €40 million, a fall of 25.3% compared with the first half of 2008 (-19.2% on a like-for-like basis).

During the period Mondadori France began negociations with Axel Springer for the sale of Auto-Journal and Sport Auto to EMAS, the 50-50 joint-venture with the German publisher created in 1988 which already publishes Auto Plus, the leading weekly in the auto segment. The grouping of all of the auto titles in a single company, that has in the past recorded excellent performances, will allow EMAS to become France’s leading publisher of car magazines. A sector that has been particularly hard hit by the current market downturn.

Moreover, the launch on the French market of Grazia, a strategic female magazine for Mondadori, is now imminent and will allow the Group to strengthen its position in the up-market segment with a brand that in just a few years has become firmly established internationally as the most authoritative interpreter of Italian style and fashion.

· Advertising

Total advertising revenues generated by Mondadori Pubblicità in the first six months of the year were essentially in line with the negative trend in the market and amounted to €126.4 million, a fall of 29.1% compared with the €178.2 million of the same period of last year, and following a first quarter 2009 that ended with a fall of 34.5%.

Magazine advertising, that constitutes the largest part of the portfolio, was, in fact, marked by a second quarter in gradual recovery, thanks to detailed and specific commercial policies.

Also other media recorded lower falls than the reference markets. For the Internet, Donnamoderna.com web site further consolidated its growth, while in Radio, the acquisition, in March, of the contract for sales for Radio Kiss Kiss has made it possible to expand the offer in this sector, combining the new broadcaster with the Group’s radio station, R101, which has become a leading player in Italian commercial radio.

• Direct Marketing

The Direct Marketing, in the period to May 2009, saw a fall of 17.7% (Nielsen figures in terms of value) largely as a result of a general slump in investments in communication.

In the first six months of the year Cemit generated revenues of €10.5 million, a 12.5% fall on the €12 million of the same period of the previous year: this performance, which was better than the reference market, is even more worthy of note if note is taken of the fact that it was produced despite the lack of income deriving from the elections of 2008.

• Retail

Turnover by the Retail area in the first half amounted to €83.1 million, a fall of 3.6% compared with the €86.2 million of the same period of 2008.

The general downturn in consumer spending that characterised the first quarter of the year continued also in the second, with some slight signals of a recovery in the month of June. In this scenario, efforts were continued to reduce management costs and working capital and tighten the control of stocks.

Mondadori Retail, in its 29 directly-controlled stores, recorded revenues of €52.1 million, a 10.1% fall on the €58 million in the first half of 2008; a breakdown of revenues shows a 5% fall in the sale of editorial products; a 17% drop in the sale of IT products; a 11% fall in audiovideo; while there was a 20% increase in stationery.

Mondadori Franchising recorded revenues of €31 million, an increase of 9.6% on the €28.3 million of the first six months of last year.

The company continued with its development programme, confirming the position of the chain as Italy’s most extensive with 410 outlets (including the Edicolè format).

• Radio

In the first half of the year, the radio advertising market saw a continuation of its negative trend (-18.6% to May. Source: FCP Assoradio).

In this context R101 recorded net revenues of €7 million, a fall of 14.6% compared with the €8.2 million of the first half of last year.

According to the new metric introduced by Audiradio, in the first six months of 2009 R101 reached around 9 million listeners per month, reducing considerably the gap with the top five commercial radio stations.

It should also be noted that, from June, the new www.r101.it web site is online, which has been developed on a new technological platform aimed at strengthening the online editorial offer, achieving greater access to users/listeners and encouraging a higher level of interaction with web radio users.

SIGNIFICANT EVENTS AFTER THE CLOSE OF THE PERIOD

In July, the Group’s Human Resources Department presented to national and company trade union representatives a proposal for the reorganisation of the Magazine and Central Staff areas, with the aim of achieving significant cost reductions through the structural downsizing of journalistic and design staff.

The negotiation, which is continuing, foresees the evaluation of a range of instruments, including the use of early retirement.

Joint-venture between Mondadori Pubblicità S.p.A. and Publitalia ’80 S.p.A. for the sale of online advertising

As previously announced to the market, in July Mondadori Pubblicità and Publitalia ‘80, the advertising sales companies of the Mondadori Group and the Mediaset Group, have reached an agreement for the creation of a joint initiative for online advertising sales, through the establishment of a 50-50 new company. The new company will have the concession, or sub-concessions, to sell the advertising (with the exception of video) for the sites produced by the Mondadori Group, by RTI and by third-party publishers that are currently in the portfolios of either Mondadori Pubblicità or Digitalia 08. The joint venture will also target the online advertising investments of third-party publishers with a view to aggregating and maximising the value of the advertising opportunities on offer and to reach, in the short term, a leading position in the Italian online advertising.

EXPECTATIONS FOR THE CURRENT YEAR

In considering the evolution of the business, we think it is useful to distinguish between the short-term prospects and longer-term view.

In the short term:

– the planning of advertising investments by leading companies will largely remain inhibited by the situation of uncertainty and, despite no clear indications about the second half of the year, initial signals do not suggest a significant change in current trends;

– a recovery in magazine sales cannot be expected, neither is there likely to be a slowdown in the decline in add-on sales, that in all probability will stabilise broadly around current levels;

– the book sector will continue to be less affected than others and the publication of new bestsellers in the closing months of the year are expected to lead to satisfactory end of year results.

The company’s response to the certain reduction in revenues involves a range of actions, and over the coming months these will include:

– the continuation of efforts to simplify processes and structure, also through the introduction of an incisive restructuring plan;

– investments in the support and valorisation of company assets and the defence of positions of market leadership;

– increased investments in developing businesses and markets (digital, international network);

– the launch of the weekly women’s title Grazia in France, a fundamental step in the reinforcement of Mondadori France in the up-market segment.

2009 continues to prove to be a difficult and demanding year, both from a financial and a business perspective, with profitability levels being sacrificed, also in a bid to defend and develop the elements that underpin the entire business, a factor that is important for the success of a medium term vision. The future competitive scenario in the publishing sector has fundamentally changed and will reward those companies that are best equipped, in terms of both structures and products, to seize new market opportunities resulting from technological changes and new emerging business models.

§

The executive responsible for the preparation of the company’s accounts, Carlo Maria Vismara, declares that, as per art. 2, 154 bis of the Single Finance Text, the accounting information contained in this release corresponds to that contained in the company’s formal accounts.

§

The interim report for the period to 30 June 2009 will be made available at the company’s corporate offices, at Borsa Italiana S.p.A. and on the web site www.gruppomondadori.it (News&Media and Investor Relations section) by 30 July 2009.

 

The report of the external auditors will be published, in the same way, as soon as possible and within the terms of current legislation.

[1] It should be noted that from 1 January 2009, replacing IAS 14, the IFRS 8 accounting principle, that regulates the information that must be disclosed for each relevant business in which the group operates, came into effect.

The application of this new principle has involved the publication of figures relating to the activities managed by the Mondadori France subsidiary separately from the entire Magazine Division, of which it is in any case a part. Consequently, in order to make a correct comparison, it has been necessary to also include the figures for the first half of 2008.

Moreover, following the sale of 80% of Mondadori Printing in November 2008, the section that included the figures relating to the group’s printing activities is no longer significant as per the terms of IFRS 8 and, consequently, such figures have been incorporated under the item “Corporate and other business”. The same attribution has been made for the figures for 2008.

The Board of Directors of Arnoldo Mondadori S.p.A. met today to examine and approve the management report for the first six months of the year to 30th June 2008, as presented by the Group’s Deputy Chairman and Chief Executive, Maurizio Costa.

The market scenario

The first six months of 2008 saw a sharpening of the uncertainties in the short and medium term and an acceleration in price increases for fast moving consumer goods, with a negative impact on consumer and investor confidence.

Over the last two months, in the reference market for the Mondadori Group in Italy, the downturn in magazine circulation was accompanied by a slowdown in advertising expenditure; at the same time, there was a continuation of the decline in add-on sales during the period, while the book market displayed encouraging signs of growth.

In France, magazine circulation remained essentially stable, while advertising investments were down compared to the same period of 2007.

Group performance in the period to 30 June 2008

When comparing the results for the period with those at 30 June 2007 the same considerations made at the end of the first quarter apply: the essential stability in business profitability and the growing performance of Radio R101 have made it possible to amply compensate for the investments made in development (digital and international activities), while the impact of the decline in add-on sales has been marked the effects are expected to be less significant in the second half of the year, given that at 30 June 2007 Mondadori had already generated 65% of the result for the entire year.

Consolidated revenues for the first half of 2008 came to €930.1 million, a fall of 3.2% compared with the €960.6 million in the first half of 2007. Net of add-on sales, revenues were up by 1.1%.

Consolidated gross operating profit at 30 June 2008 came to €104.5 million, compared with the €119.6 million of the same period of the previous year a fall of 12.6%. As a proportion of revenues a fall to 11.2% from the 12.4% of 2007.

Net of add-on sales (-€15.6 million compared with 30 June 2007) and discontinuous non-recurring factors (higher capital gains of €0.6 million; lower personnel costs of -€2.9 million due to the application of new regulations governing leaving entitlements in 2007 and other extraordinary charges) the difference in the operating margin at 30 June 2008 would be +€2.8 million, due to improved business performance business (+€6.8 million) and increased investments in businesses under development (-€4 million).

Consolidated operating profit at 30 June 2008 came to €83.8 million, a fall of 14.4% on the €97.9 million of the same period of 2007, with amortizations and depreciations of tangible and intangible assets for a total of €20.7 million (€21.7 million in 2007); as a proportion of revenues, a fall from the 10.2% of 2007 to 9% this time.

Consolidated profit before taxation amounted to €64.2 million, a fall of 25.3% on the €85.9 million of 2007, with an increase of €7.6 million in net financial charges, essentially due to the increased cost of borrowing (around €4.5 million) and lower returns from financial investments (around €2.7 million).

Consolidated net profit at 30 June 2008 came to €36.7 million, a fall of 20.6% on the €46.2 million for the same period of the previous year.

Gross cash flow in the first half of 2008 amounted to €57.4 million compared with €67.9 million in the first six months of 2007.

The Group’s net financial position at 30 June 2008 showed a deficit of €680.1 million compared to a deficit of €535.3 million at the end of 2007. During the period income taxes of €54 million and dividends of €83.8 million were paid out.

Results of the business areas
• Books

During the first half of 2008 the Book Division generated revenues of €192.7 million, in line with the €192.8 million of the same period of 2007. Net of add-on sales, revenues were up by 1.7%.

During the first six months of the year the Mondadori Group confirmed its leadership in the trade segment, increasing its share to 28%[1], with a marked advantage over its main competitors; in the large-scale retail channel the estimated share is more than 35%[2].

Among the various publishing houses in the Group, there were positive results for the first half for Edizioni Mondadori, which recorded revenues of €68.3 million, (+0.4%) and Mondadori Education which recorded sales of €15.1 million, (+4.9%). Einaudi confirmed net revenues for the first six months of 2008 of €26,4 million, in line with those of the same period of 2007.

• Magazines

During the period the Magazine Division generated revenues of €514.4 million, a 6.3% fall on the €549 million of the same period of 2007.

Italy

The first half of the year has seen a generalised downturn in the market in which the Division operates. A marked fall in consumer spending has consequently also affected the magazine sector, and most particularly and in a predominant manner, the add-on sales phenomenon, which is clearly well on the way to being progressively downsized. To a lesser extent, circulations in almost all segments have continued to display a certain weakness. Advertising, after an initially promising first quarter, was subject to a sharp downturn.

Revenues generated by the Magazine Division in Italy in the first half of 2008 amounted to €319.9 million, a 9.9% fall compared to the €355 million of the same period of last year.

This result was determined by the following factors:

– A sharp reduction in revenues from add-on sales (-24.4%) in a market that in the first five months of the year fell by 26%, and whose overall value has halved compared with the record levels of 2005;

– A fall in circulation revenues of 5.1%, essential due to a reduction in volumes sold (-3.3% on comparable basis);

– A growth in advertising revenues of 1.3% thanks to the performance of leader titles, in an already falling market (-0.7% to May with further falls expected in June).

During the period Mondadori has put in place a number of actions in key segments. The most important include:

– the relaunch of Panorama, in February, with good results in terms of circulation and, in particular, advertising;

– strong support, in a highly competitive market, for TV guides, the results of which have so far been satisfactory;

– the relaunch of Donna Moderna, to mark the weekly’s 20th anniversary, which has achieved wide consent from both readers and advertisers;

– the relaunch of Grazia, completed in June with very satisfactory results, aimed at focusing and further strengthening the magazine’s elements of quality in the fashion area;

– the development of internet activities that have involved a number of titles, in particular Donna Moderna, with the web launch at the end of June of a new hub dedicated to women;

– a strong and sharper control of costs in all areas, which has made it possible to reduce the impact of the fall in revenues.

As already mentioned, in the context of a general slowdown, Mondadori recorded a fall in circulation revenues of 5.1% (-3.3% on a comparable basis, considering the closure of Star+TV, Per Me and Creare). There was an improvement, however, compared with the same period of last year, of the competitive position of Grazia, Chi, Tv Sorrisi e Canzoni, Donna Moderna (with a circulation more than double that of its competitors) and Panorama, which confirmed its leadership in its segment, both in terms of circulation and, to a marked degree, in advertising sales. The positive performance of Flair, Casaviva, Casabella and Interni should also be noted.

France

In the first half of 2008 the activities of the Magazine Division in France generated consolidated revenues of €194.5 million, an increase of 0.3% on the €194 million of the same period of 2007.

In general, in a context in which circulations remained essentially in line with the previous year and advertising was affected by a period of difficulty, Mondadori France nevertheless managed to hold on to its market share.

On the circulation side, the Group’s titles acheived good results thanks to redesigns and relaunches completed during the period. Of particular note was the exceptional performance of Closer, which confirmed its leadership position in the segment.

There was a fall in the sale of advertising space in consumer magazines in France of 2.1% in terms of volume at the end of May 2008 (source: TNS-MI), while the reference market for Mondadori France saw a fall of -3.9%. Bucking this trend was the upscale segment (+5.1%), in which Mondadori is not yet present.

The advertising revenues of Mondadori France in the first six months of the year came to €53.5 million, compared with the €57.2 million of the same period of last year (-6.5%).

In particular, television titles have been affected by a reduction in investments by large-scale retailers and direct marketing. There were also difficulties for women’s titles, while those in the car segment showed signs of improvement compared to the first quarter of the year, with a result in line with the same period of 2007.

As already announced, June 30 saw the closing of an agreement for the sale to Motor Presse France, of six specialised titles published by the Mondadori France Group. This operation is part of the plan for the rationalisation of the Mondadori France portfolio, with a focus on the development of segments with high potential also in terms of advertising, such as the upscale (and activities have continued for the launch of a magazine in this segment) and the mass-market segments.

International activities

During the period there was a further improvement in the already notable performance of international activities. In particular Grazia UK confirmed its position as the publishing phenomenon of the moment, marking itself out even more in a market showing clear signs of a downturn.

Advertising planning for the first issues of Grazia Australia, launched on July 21, was way beyond expectations; while there were also excellent initial results for Grazia India (where a contract has also been signed for the launch of Casaviva, the Group’s leading interiors title) and the now consolidated joint venture with Sanoma, which publishes Grazia and Interni in Russia; excellent performances were also recorded by Flair Austria and Casaviva Greece.

• Advertising

In the first half of 2008 Mondadori Pubblicità recorded revenues of €178.2 million (+1% on the €176.4 million of the first half of 2007), with a performance above the market average, despite the significant slowdown of the second quarter.

Advertising sales for magazines were sustained by a good performance for weeklies, with significant increases being recorded above all by Grazia (up more than 10%) and Tv Sorrisi e Canzoni (+10%); Panorama performed well (+1.6%); while Donna Moderna and Chi remained stable; among the monthlies, there were stand out performances by Flair (+5%) and the specialised titles in the upscale Design and Interiors segment, which were up by around 10%.

In other media, in a difficult half year for il Giornale (-18%), there was a particularly positive performance on the internet (+15%), with an absolutely stand out performance by the new Donna Moderna site. There was also a significant increase in radio, with R101 which, with a growing audience, saw its advertising grow by 43.9% compared with the first half of 2007, and well above the market trend.

• Printing

In the first six months of 2008 the Printing Division generated revenues of €196.1 million, a 11.8% fall against the €222.4 million of the same period of the previous year. On a comparable basis, excluding the printing activities for Mondadori Education, no longer managed in 2008, the fall would be 7.4%.

The fall in like-for-like revenues was the result of a marked downturn in printing contracts for add-on sales initiatives for both the Group and third parties and the exceptional increase in the value of the euro against the dollar and the pound, while in terms of volume, the foreign market for catalogues and commercial products remained essentially stable.

During the period the cost of paper increased by between 1 and 2%, while energy costs (gas and electricity) continued to increase substantially.

The level of plant use was satisfactory and in line with the budget, having significantly reduced outsourcing activities; this was made possible also by the full use of recent investments which are now fully operational.

• Direct marketing

In the first half of 2008 Cemit Interactive Media generated revenues of €12 million, a 9.1% fall compared with the €13.2 million of the previous year. The sales mix has improved, in favour of activities with greater added value.

Continuing cost controls, along with a organisational structure review, has made it possible to safeguard levels of profitability in a difficult market context.

• Retail

Revenues from the Retail Division in the first half of 2008 rose to €86.2 million from the €77.8 million of 2007, an increase of 10.8% compared with the same period of the previous year.

Mondadori Franchising recorded first half revenues of €28.3 million (+18.7% compared with the €23.8 million in the first half of 2007). The network development programme continued during the period which, with 209 bookstores (compared with 191 on 30 June 2007) and the 152 Edicolè outlets (compared with 104 at the same point of the previous year), is now the most extensive in Italy for editorial products.

Mondadori Retail generated first half revenues in 2008 of €58 million, an increase of 7.6% on the €53.9 million of 2007, despite a difficult context for consumer spending in the non-food sector.

Following the opening of the new Multicenter store in Marcianise (CE), the company now has 29 outlets and has focused on the integration of the former Messaggerie Musicali (Mondadori Shop) stores and the rationalisation of the chain.

• Radio

During the first half of 2008 gross advertising revenues for Radio R101 amounted to €11.8 million, which corresponds to a net figure of €8.2 million, and increase of 54.7% on the €5.3 million of the same period of the previous year.

In an essentially stable market in terms of audience, in the first half of 2008 R101 reached a daily average of 2.1 million listeners, a 7% increase compared with the first half of 2007. Over the seven-day period, Radio R101 confirmed its position among the top six Italian commercial radio stations with more than 8.8 million listeners.

Expectations for the full year

In the second quarter of the year the market saw an intensification of the same critical elements that characterised the first. Of particular relevance was the negative effect of the real and perceived situation in terms of consumer spending and investment.

In this context the Mondadori Group has set in motion actions to safeguard the profitability of its core business, establishing further and significant efficiency objectives, and has continued with growing commitment, its development policy for new activities both in Italy and abroad.

Mondadori’s demonstrable managerial competence and leadership position in its reference markets are expected to allow the company, despite the difficult situation, to confirm its management results, net of the downturn ion add-on sales, a decline which shows no sign of ending in the short term.

§

As per article IA.2.9.3 n.4 of Rules for the Regulation of Markets, it should be noted that the following bonded loans are due to expire in the eighteen months subsequent to 30 June 2008:

Date of issue: 20/10/2003;

Amount: €109,900,000 corresponding to n°. 1,099 bonds of a value of €100,000 each, convertible in ordinary shares of Arnoldo Mondadori Editore S.p.A.;

Issuer: Mondadori International S.A., wholly owned by Arnoldo Mondadori Editore S.p.A.;

Guarantor: Arnoldo Mondadori Editore S.p.A.;

Date of expiry: 20/10/2008.

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The executive responsible for the preparation of the company’s accounts, Carlo Maria Vismara, declares that, as per art. 2, 154 bis of the Single Finance Text, the accounting information contained in this release corresponds to that contained in the company’s formal accounts.