Press releases

The Board of Directors of Arnoldo Mondadori S.p.A. met today, under the chairmanship of Marina Berlusconi, to examine and approve the interim report for the first half of the year to 30th June 2012, as presented by the Group’s Deputy Chairman and Chief Executive, Maurizio Costa.

THE MARKET SCENARIO
As is well known, the current market scenario continues to be difficult with all of the main indicators showing markedly negative trends. Prospects for a recovery are increasingly uncertain and remote. Meanwhile, there was a marked decline in the sectors of reference for the Mondadori Group, especially in Italy.

GROUP PERFORAMCE IN THE PERIOD TO 30th JUNE 2012
The Mondadori Group’s figures for the first six months of 2012 substantially confirm the trend highlighted in the first quarter. In particular, revenues were down by 8.5% compared with the previous year, with a consequent impact on operating margins (-39%), a third of which was due, however, to the lower contribution of extraordinary items and higher organisational restructuring costs.
The first half ended with a net profit of €7.5 million and a negative net financial position of -€370 million, Actions will continue in the second half to reduce costs, in line with new guidelines drawn up in recent months to raise previously indicated targets and with a view to dealing with difficult market conditions that are likely to last beyond expectations.

Consolidated revenues amounted to €676.2 million, a fall on the €738.7 million in 2011.

Consolidated gross operating profit (EBITDA) came to €36 million, a reduction compared with €59 million in the same period of the previous year. The difference is due to lower capital gains and higher restructuring costs.

Consolidated operating profit amounted to €23.8 million, compared with €47.9 million in the first half of last year, with amortizations and depreciations of tangible and intangible assets of €12.2 million (€11.1 million in 1H 2011).

Consolidated profit before taxation came to €15.6 million, compared with €37.5 million in the same period of last year. During the period financial charges amounted to €8.2 million, an improvement of €2.2 million compared with 2011.

Consolidated net profit for the period totalled €7.5 million (following the attribution of minority interest of €1.6 million), compared with €22.7 million in the same period of the previous year.

Gross cash flow in the first six months of 2012 amounted to €19.7 million, compared with €33.8 million in 1H 2011.

The Group’s net financial position went from -€335.4 million at the end of 2011 to -€370 million at 30 June 2012 (-€399.2 million at 30 June 2011).

Information regarding personnel
As of 30 June 2012, the personnel employed by companies of the Group (both on temporary and permanent contracts) amounted to 3,745, a reduction on a comparable basis both with respect to the figure at the end of the year and at 30 June 2011 (-51, or -1.3%).
Obviously the difference takes account of changes during 2011 following the consolidation, in January 2012, of the French company Mondadori Axel Springer Snc and the Italian start-up Glaming Srl.
There was no change, meanwhile, in the scope since the figures for the first quarter of 2012 (3,764), with the reduction being entire attributable to gains in organisational efficiency.
Consequently, the company confirms the ongoing efficiency policy for contract staff, following the restructuring processes undertaken over the last two years, aimed at prolonging the positive effects of the structural containment of labour costs (-3% on a like-for-like basis).

RESULTS OF THE BUSINESS AREAS

• BOOKS

The market for trade books in the first half of 2012 has confirmed the decline in both copies (-7.6%, Source: Nielsen) and value (-9.1%, Source: Nielsen) compared with the first half of 2011, with only a slight improvement compared with the figures reported for the first quarter of this year. The decrease affects all of the channels surveyed: bookshops, large-scale retail and online.

During the first half of 2012 the Mondadori Group, confirmed its leadership in the trade segment with a market share, in value terms, of 26.1% (Source: Nielsen), an increase compared with the first half of 2011.
Revenues in the books area amounted to €144.6 million, down 13.4% on the €166.9 million of the previous year; EBITDA and operating profit also showed a decline, with a significant improvement in the second quarter thanks to the containment of costs and extraordinary income.

Compared to the first quarter of the year trade book revenues saw a slowdown in the decline, thanks also to the Fifty Shades phenomenon, the EL James trilogy the first two volumes of which have over 30 million copies in just four months; in just three weeks, sales in Italy exceeded, 200,000 copies, immediately putting both titles at the top of the best-sellers list. There are also positive expectations for the final volume of the trilogy, published on 13 July 13, with an initial print run of 350,000 copies.
Also of note in the period are the excellent results of the new novels by John Grisham, Sveva Casati Modignani, Luciano Ligabue and Alessandro Del Piero.

In the second half, in addition to a strong publishing programme, that includes the publication of new titles by important authors, including Ken Follett and Paolo Giordano, the company expects to see the full effects of the Fifty Shades phenomenon, and sales of the new novel by Alessandro Piperno, winner of the 2012 Premio Strega.

In the e-book market, which still in its infancy, the second quarter of 2012 saw a further increase in the sales trend and the number of daily downloads, thanks to titles that have also been successful in the traditional format, including, in particular, the Fifty Shades trilogy.
Strong growth is also expected as a result of the spread of devices and, of note here, is the agreement signed in July by Mondadori with Kobo for the launch in Italy of the Kobo Touch eReader.

• MAGAZINES ITALY

In Italy the continuing economic crisis has led advertisers to cut back, postpone and reallocate their advertising investments as a result of the contraction of sales and the general climate of uncertainty. In the first five months of 2012, such behaviour has resulted in a decline in advertising spending in magazines of 14.6% (Source: Nielsen), a fall in newsstand circulation of 9.4% (-12% on a like-for-like basis; in terms of value, internal estimate) and a fall in revenues form add-on sales of 25.2% (in terms of value, internal estimate).

In such a difficult market environment, the Magazines Italy area reported revenues that were down 15.3% from €247.8 million to €209.9 million, with a consequent impact the final results, while confirming its market leadership (31.9%).
It should be noted that the figures for 2011 included a capital gain of €10.1 million, due to the sales of the company’s stake in Hearst Mondadori Publishing Srl.

In particular, revenue trends were as follows:

• circulation (-9.9%) was penalised by the decline in subscriptions, a fall in the average number of copies sold at newsstands and a drop in average prices;
• add-on sales (-23.6%) were down mainly because of differences in the scheduling of collectibles and books and a downturn in unit sales of home video products and prices that were higher than the market average;
• advertising fell (-17.6%) as a result of a number of inconsistencies – such as the temporary suspension of publication of Flair (the new version is expected to be launched in September) and the closure of Economy – and the composition of the product portfolio, which is more exposed to a slump in investments in the interiors and FMCG sectors.

Properties
During the first half of 2012 the web sites of Mondadori’s main magazine titles saw a marked improvement in traffic, along with a substantial increase in advertising revenues (+29% compared with the first half of 2011).
In particular, there were good performances in terms of traffic and advertising (as outlined below) by Donnamoderna.com, Grazia.it, Panorama.it and Panoramauto.it.

• ADVERTISING

As already mentioned, in Italy, market trends in advertising spending in the first five months of the year saw an overall decline of 9.5% compared with the corresponding period of 2011, in a context of continuing uncertainty due to the economic and financial crisis and levels of confidence that remain at a minimum. With the exception of the internet, all media were in decline: television (-10%), radio (-5.5%), newspapers (-13.5%) and magazines (-14.6%).
In the first half of 2012 Mondadori Pubblicità S.p.A. recorded total revenues of €96 million compared with €117.5 million in the same period of 2011, a fall of 18.3%.
Mondadori Magazines saw a slump in revenues of 18.3%, mainly due to the negative trends in the FMCG and interiors sectors. If account is taken of the JV titles and third party revenues the fall would have been of 23.4%, on a like-for-like basis, i.e. taking into account the closure of Economy, the temporary suspension of publication of Flair and the sale of Cosmopolitan, the decline would be about 20%.
Weeklies and monthlies have contributed in equal measure to the shortfall in revenues, in a particularly complex and competitive environment with a strong sensitivity on the part of advertisers to the price factor.
Revenues for radio advertising were down by 2.9% compared with the first half of 2011, with a similar trend for both the stations represented by the company.

On the internet the excellent recent performance of Mediamond continued, with an overall growth in revenues of 65% ​​compared with 2011, based on sales for 32 vertical sites with a total of 12 million unique users.
In particular, we would underline the positive trends for Donnamoderna.com (+14%), Grazia.it (+54.4%) and Panorama.it (+48%); the RTI Group, optimal growth for TGcom (+18%) and Sport Mediaset (+45.2%).
Particularly positive were sales for the site www.video.mediaset.it, which was added to the portfolio in January 2012.

• MAGAZINES FRANCE

In a difficult environment for the magazine market, Mondadori France performed well in the first half of 2012 with consolidated revenues which reached €193.6 million, an increase of 12.3% compared with €172.4 million in the same period of 2011.
On a comparable basis (excluding the effects of a change in the consolidation method for the joint-venture Editions Mondadori Axel Springer Snc) revenues were in line with the previous year.
The continuous improvement of the products and good results in advertising, combined with the constant monitoring of costs, have resulted in a 7.3% increase in gross operating profit, which amounted to €20 million (10.3% of revenues).

Advertising revenues: for the third consecutive year, Mondadori France, up 2.9% on the previous year, achieved a better performance than the market of reference on a like-for-like basis (-0.5% in terms of value in the first five months: Source Kantar Media). This excellent result is mainly due to the trend in upscale women’s titles, including the weekly Grazia (+11.1%) and the monthly Biba (+14.4%), but also titles such as L’Auto Journal (+9.8%), Sport Auto (+7.7%) and Mode & Travaux (+9.8%).

Circulation revenues, which include both newsstand sales and subscriptions (70% of total revenues), saw a slight fall at the consolidated level, (-1.5% on a like-for-like basis). In particular:
– Newsstand sales, although down by 4.4% compared with the first half of last year, fell less than the market of reference (-5.3%, internal estimate);
– Subscriptions continued to grow (+1.5% compared with the same period of 2011) and, with a portfolio of more than three million subscribers, accounting for 33.6% of the revenues of Mondadori France.
Among the titles growing in terms of circulation, we would underline that Grazia, launched in 2009, confirmed its success in the first half of 2012, reaching sales of 187,000 copies (+ 3.3%).

During the period new versions of Biba, Modes & Travaux and Auto Journal were launched and the brand extension policy was continued with the launch of the quarterly AutoPlus Classiques and two weekly supplements to Closer: Closer C’est leur histoire and Closer Plage.

Investments in the digital sector continued in the first half of the year, with the result that all of the Group’s French sites now share the same platform and while the dedicated structures have been reinforced.
Regarding the performance of the websites and digital versions of the titles, we would underline in particular the overall growth in both advertising revenues (+25%) and the Nielsen audience, which reached 4.8 million unique users in May 2012.
Finally, in terms of diversification, the AutoReflex portal consolidated its position in the market for small ads with a significant growth of its business customers, becoming a major player in the market.

International activities
Mondadori’s International Activities confirmed the positive trend of 2011 with further expansion of the network during the first half of the year: the volume of business generated by the Group’s international titles was around €80 million, a significant increase compared with 30 June 2011.
There was strong growth in licensing activities: in particular the editions of Grazia around the world reached twenty following the launch of the magazine in South Africa, in May.
On the advertising side, with continued growth in the fashion and interiors sectors in the Italian market, sales reached €3.1 million (+27% compared with the same period of 2011). There was an excellent performance by Grazia in France, Great Britain, Germany and, in particular, the Russian edition of the magazine, which saw sales rise by 66% compared with 2011.

Regarding its international investments, Mondadori is present in:
– Greece, Bulgaria and Serbia through its stake in Attica Publications, which, despite the continuing crisis in the Greek market, reported results in line with expectations, thanks to the effect of the restructuring plan put in place in 2011 and early 2012;
– China, with a 50% stake in Mondadori Seec Advertising Co. Ltd, the exclusive advertising sales company for the local edition of Grazia which confirmed the excellent performance recorded last year, ending the first half of 2012 with revenues of €4.8 million (+58% compared with the same period of 2011);
– Russia, with an edition of Grazia that, five years after its launch, recorded first half revenues in 2012 that were up 22% on the same period of 2011.

• DIGITAL

Digital activities in the first half can be summarised as follows:
– publishing activities, e-books, properties, subscriptions and online advertising, in the businesses of reference: Books, Magazines Italy and Magazines France;
– e-commerce activities, conducted through the site www.bol.it, and online Bookclubs, Direct;
– diversification and investment activities in support of the business, gambling, apps and CRM, Other Business.
At 30 June 2012, all of the above-mentioned activities generated total revenues of €21.4 million and an EBITDA loss of €11.5 million.

• DIRECT

Against the backdrop of an economic recession, there was a continuation of the activities begun in the first quarter designed to restore profitability and uncover new sources of revenue.
In particular, efforts continued on the streamlining of the network of bookshops while the range of products sold under the Emporio Mondadori and BoxForYou brands was expanded.

Total Direct revenues in the first half of the year amounted to €113.1 million, a fall of 11.6% on the €128 million at 30 June 2011 (it should be noted that the main economic indicators of the previous year have been restated to include, from the current year, the figures related to the activities of the website www.bol.it).

All areas were in decline, in particular:
• retail and other revenues, due to, in addition to general market conditions, the closure of some stores, in the second half 2011 and first half of 2012, and the introduction of a new commercial policy;
• direct marketing, as a result of the containment policies adopted by companies, a significant reduction consumer spending and the process of changing buying habits to the benefit of retailers;
• e-commerce activities (www.bol.it) were conditioned by the current situation in the market, a change in the competitive framework.

• RADIO

The Italian radio advertising market in the first five months of 2012 recorded a downturn of 5.5%, with a particular slump of 12.6% in May (Source: Assoradio FCP).
R101 booked first half 2012 advertising revenues of €7.6 million, a fall of 7.3% compared with the €8.2 million in the same period of last year.
Of special note was the significant reduction of operating costs recorded in the first half of the year.

From an editorial point of view, the first half was characterised by a continuous process of renewal, with new programmes, new presenters and the strengthening of the schedule, especially at weekends. With regard to marketing activities, of special note was the organisation and sponsorship of major national events.

CORPORATE RATIONALIZATION
During today’s meeting of the board of directors a proposed corporate restructuring plan – already discussed in general terms by the board at its meeting of 14 May 14 – was also approved, aimed at defining the process for the merger by incorporation with Arnoldo Mondadori Editore S.p.A. of 100% of the subsidiary Mondadori International S.p.A..

The project is part of the overall rationalisation of the various activities currently overseen by Mondadori International S.p.A., through the allocation of such activities to comparable business areas.
In particular, Mondadori International currently oversees the Group’s foreign publishing holdings in Mondadori France (100%), Mondadori Independent Media (50%) and Attica Publications (41.9%) – as part of the International Activities of Magazines – participation in the joint venture with the Bertelsmann Group, Random House Mondadori, which is active in the book markets in Spain and Latin America, as well as financial assets, in particular, 4,517,486 shares of Mondadori itself.
The project foresees in a preliminary measure – in line with the stated aim of asset allocation by areas of business – the concentration in a single corporate vehicle of all the Group’s international activities in the magazine area, with the transfer to a new company, 100% owned by Arnoldo Mondadori Editore S.p.A., of the investments held by Mondadori International S.p.A. International in companies included in the International Activities of the Magazine Area, as mentioned above, based on the carrying value on the balance sheet as at 30 June 2012.
Consistently with this approach, the new company would also absorb the business unit for the management of licensing agreements and advertising sales for international editions of Mondadori titles, currently overseen by a business unit of the parent company.
Subsequently, there would be an intercompany transfer from the subsidiary Mondadori Pubblicità S.p.A. to the new company of the 50% stake, held by Mondadori SEEC (Beijing) Advertising Co. Ltd, a joint venture under Chinese law, aimed at developing advertising sales in the magazine sector in China.

As a result of these operations and upon completion of the project, within the first half of 2013, acts relating to the merger by incorporation with Arnoldo Mondadori Editore S.p.A. of will be defined Mondadori International S.p.A. will be defined, with the consequent effects in terms of a reduction in corporate and operating costs.

EXPECTATIONS FOR THE FULL YEAR
In the last months of the period Europe in general, but particularly Italy, saw a progressive deterioration of economic figures on all fronts: consumer spending, investments and, consequently, production.
Projections by leading research institutions and the Bank of Italy on changes in GDP have recently been revised down and currently foresee an overall fall of more than 2% for 2012. Moreover, the recession is expected to continue at least for the entire second half of the year with unemployment stable at around 10%, with even further decline in 2013.
Across the Eurozone great underlying uncertainty remains, with medium term prospects closely related to developments in the sovereign debt crisis and its effects on bank lending, consumer and business confidence, domestic demand, and the economies of both the U.S. and developing countries.
Mondadori’s priorities are focused on actions to: consolidate its international activities, also through partnerships; develop digital activities; control quality and innovation in its editorial offer; reorganise processes and restructuring, in line with new guidelines identified to further increase the targets for reductions in operating costs.
Given this, an in the face of a market in ongoing difficulty, the company does not expect changes in the coming months that will make it possible to achieve the levels of operating profitability of last year.

§

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 documentation relating to the analysts’ presentation of the results for the first half of the year to 30 June 2012 is available in the Investor Relations section of the company’s website (http://www.mondadorigroup.com/Investor-relations/Presentations).

The Board of Directors of Arnoldo Mondadori SpA met today, under the chairmanship of Marina Berlusconi, to examine and approve the interim report for the first three months of the year to 31st March 2012, as presented by the Group’s Deputy Chairman and Chief Executive, Maurizio Costa.

THE MARKET SCENARIO
In the first quarter of 2012 saw the full confirmation of the elements of structural crisis in the economy, especially in Europe: falling GDP, rising unemployment and the decline in consumer spending have unfortunately worsened compared with the latter part of 2011; the markets a sectors of reference for Mondadori, particularly in Italy, felt the impact of this situation, and were significantly in decline during the period.

GROUP PERFORAMCE IN THE PERIOD TO 31 MARZO 2012
Against this background, in the first three months of 2012 the Mondadori Group’s consolidated revenues were down by 7.4% compared with the same period of last year, in line with the final quarter of 2011.

In terms of profitability, despite a marked fall in consolidated operating profit due to the decline in revenues, Q1 ended with a positive net profit thanks to the lower impact of financial charges and taxation.

Over the coming months, development will continue in digital activities more closely related to the Group’s publishing identity – products, brands, communities – and the process of restructuring carried out in recent years will be extended to face a market situation in which, at present, there are no signs of recovery.

Consolidated revenues amounted to €328.1 million, compared with €354.3 million in the first quarter of 2011.

Consolidated gross operating profit (EBITDA) came to €15 million, compared with €21.8 million in the same period of the previous year.

Consolidated operating profit amounted to €8.9 million, compared with €16.3 million in the first quarter of last year, with amortizations and depreciations of tangible and intangible assets of €6.1 million (€5.5 million in Q1 2011).

Consolidated profit before taxation came to €4.5 million, compared with €10.9 million in the same period of last year. During the quarter financial charges amounted to €4.4 million, an improvement of €1 million compared with 2011.

Consolidated net profit for the period totalled €2.4 million, compared with €5 million in the same period of the previous year.

Gross cash flow in the first three months of 2012 amounted to €8.5 million, compared with €10.5 million in Q1 2011.

The Group’s net financial position at 31 March 2012 stood at -€301.8 million, an improvement of €33.6 million on the -€335.4 million at the end of 2011.

Information regarding personnel
As of 31 March 2012, the personnel employed by companies of the Group (both on temporary and permanent contracts) amounted to 3,764, compared with 3,674 in March 2011. On a comparable basis, considering that the first quarter of last year did not include the 120 employees of the companies AME Editoriale Wellness, Glaming and Emas (France), now consolidated, the overall figure would show a reduction of 30.

This, in general, confirms the ongoing efficiency policy aimed at the structural containment of labour costs, the effects of which will extend even beyond the formal end of the Restructuring Plan in 2011.

RESULTS OF THE BUSINESS AREAS

· BOOKS

For the first time, the trade book market saw a marked fall both in the number of copies sold (-10.8%, source: Nielsen) and in terms of overall value (-11.8%, source: Nielsen) in the first quarter of 2012 compared with the same period of 2011, with decline recorded in all channels: bookshops, large-scale retail and online.
Moreover, this trend is even more marked in an analysis of the bestsellers: during the period, the top ten bestsellers recorded a fall of 7.8% in terms of copies and more that double that (-16%) in terms of value; figures that confirm, among other things, the fall in the average price of the biggest selling books.
There are many reason for this situation, some of which were outlined in the Annual Report, including the current recession and the Levi Law on book pricing (which was enacted in September 2011 and places limits on discounting and the number and timing of promotional campaigns).

During the first three months of 2012, despite difficult market conditions, the Mondadori Group nevertheless confirmed its leadership in the trade book sector with a market share of 25.7% in terms of value (source: Nielsen).
During the period, revenues from book sales amounted to €64.2 million, a fall compared with the €78 million of the first quarter of 2011.

The trade books area expects to see an improvement in revenues starting in the second quarter of the year, thanks to a rich publication programme that over the coming months will include new titles by important authors such as Ken Follet, John Grisham, Luciana Littizzetto, Niccolò Ammaniti and Stephen King.

Among the Group’s publishing houses, Edizioni Mondadori maintained its leadership in the trade books sector during period leadership with a market share of 13%. Among the significant initiatives in the first quarter was the launch of the new series Libellule, high quality, short literary fiction by successful authors, sold at a standard price of €10.
Einaudi ended the first quarter of 2012 with a market share of 4.8%, down by about one percentage point compared with 31 March 2011, a period in which the company benefited from the publication of important new titles, including Libertà by Jonathan Franzen, and a longer paperback promotional campaign.
Despite tough trading conditions, Sperling & Kupfer recorded a positive result in bookshops that raised its market share from 2.3% in terms of value in 2011 to 2.9% this year, with the Sperling & Kupfer, Frassinelli and Mondadori Informatica imprints.
Piemme confirmed a total market share of 3.9%, up by 0.3% compared with the first quarter of 2011.
Revenues generated by Mondadori Electa, which were down compared with the first three months of the previous year, were affected by the general trend in most of the segments of the market in which the company operates, in particular in the cultural heritage area.
Compared with the first quarter of 2011, revenues generated by Mondadori Education were stable, in a period that, as usual, has a minimal impact on the company’s yearly sales.

In ebooks, the first quarter was extremely positive for Mondadori’s trade books publishers: the number of downloads in Q1 2012 was higher than the whole of 2011, thanks to an offer of over 3,000 catalogue titles, also including new products and not just digital versions of print editions.

· MAGAZINES ITALY

The difficult macro-economic situation continued to have a big impact on the magazine market in Italy, with a consequently negative effect on advertising revenues (-11% source: Nielsen to February), circulation (-9.1% in terms of copies, -12.5% on a like-for-like basis; internal figures) and add-on sales (-24.8% in terms of value; internal figures).

Mondadori saw an overall decline in revenues in the area, from €121.9 million in the first quarter of 2011 to €104.3 million this time.

In particular revenue trends during the period showed that:
– circulation (-9.1%), was penalised by a sharp fall in copies sold with add-ons and subscriptions, and buy a slowdown in investments in support of some titles, which had a particular impact on overall performance in the first three months;
– revenues from add-on sales (-25,8%), mainly due to a different scheduling of initiatives for collections and books, and a fall in volumes in home video;
– advertising (-11.2%), due, in particular, to a negative performance negative in weekly family and news titles, while advertising sales in the international sector and online was up by 50%.

Sales of Mondadori titles were down by 12.5%, a figure that is in line with the dynamics of the like-for-like market, i.e. excluding new titles published since the first quarter of 2011.
The particularly poor sales performance in the first quarter is explained by a series of factors, including the economic crisis, the launch of new low-cost titles, the new system for ADS certification (circulation audit) which has modified the monthly planning of publishers’ marketing investments, and the increase in postal charges.

Regarding the companies efforts to support its titles and in response to the ongoing trends, Chi was re-launched at the end of March with a new editorial formula and layout, and accompanied by a significant investment in advertising and a cut-price offer. Similar activities have also begun for Panorama, the result of which will be launched on 31 May, TV Sorrisi e Canzoni, Starbene and Grazia. By the end of 2012 the programme, begun at the end of 2010, for the complete review of Mondadori’s portfolio of titles will be completed.

Properties
During the first quarter of 2012, the web sites of the company’s main titles performed particularly well, both in terms of traffic and advertising sales (+30% compared with March 2011), in a market that grew by 12.3% first two months, compared with the same period of 2011 (Nielsen: source Fcp-Assointernet including Display, performance and classified/directories).
Of particular note was the performance of Grazia.it with revenues up by 79.1%, Panorama.it (+56.5%) and Donnamoderna.com (+16.3%).

· ADVERTISING

The advertising market in the first two months of the year fell by 5.7% (source: Nielsen) compared with 2011, confirming the downward trend of investments in all media, with the exception of the Internet, albeit at a slower rate lower than in 2011: television showed a significant decrease (-6.9%), newspapers were down by -5.3%, while for magazines the fall was even more significant (-11%) among other media, radio was down by -5.1%.

As in 2011, the reduction in space is continuing in areas such as interiors, FMCGs and cars, with an impact also being felt in fashion (-7%) and cosmetics (-8%), which in 2011 performed well, while, in contrast were the pharmaceutical, media/publishing and finance sectors, whose weighting is limited.

Mondadori Pubblicità ended the first quarter with total revenues of €42.4 million, down compared with the €49.5 million in the same period of 2011.

Mondadori magazines have closed the first quarter with a fall of 12.7%, in a very complicated and competitive environment and a strong sensitivity on the part of advertisers to the price factor.

In particular:
– weeklies were affected by the economic crisis and the high level of uncertainty in the advertising market, even in the early part of 2012, family and news titles were the most severely affected;
– monthlies saw a smaller fall, thanks to the success of Panorama Icon; Interni also had good performance despite the negative trend in the interiors segment in the first quarter of 2012.
It should be noticed that the difficulties faced by Mondadori monthly titles is mainly due to a not significant presence in women’s fashion, which, as well as being the segment by far of most value, in terms of the total market performed positively in the period.

Also in recent months Mondadori Pubblicità is attempting to maintain average prices compared with 2011, especially for Panorama, Grazia and Chi.

Advertising revenue for radio rose by 3.4%, despite a poor start to February, down by 5.1% (source: Nielsen), sales were particularly strong for Radio Kiss Kiss.

With regard to the activities by the company in the first quarter, there was great success for the first 2012 edition of Milan Fashion Design, which saw the involvement of 17 fashion brands and 12 main partners and sponsors, the initiative enabled Mondadori Pubblicità to consolidate such activities on the territory.
During 2012, the company will organise other events to attract new clients, ensuring a positive return for the initiatives.

The Internet market saw an excellent performance by the joint venture Mediamond, with overall growth of 40% compared with 2011 due to the already mentioned positive trends of Grazia.it, Panorama.it, and Donnamoderna.com, the steady growth of TgCom (+27.3%) and Sport Mediaset (+19.5%). Overall, the scope of the sites sold by Mediamond was enhanced in 2012 with the addition of RTI’s Videomediaset and Skuola.net.

· MAGAZINES FRANCE

Mondadori France ended the first quarter of 2012 with consolidated revenues of €94.3 million, an increase on the €82.6 million of the same period of the previous year (€93.3 million at 31 March 2011 on a comparable basis, taking account of the consolidation of the joint-venture EMAS).

At a consolidated level, circulation revenues, that include both newsstand sales and subscriptions, were more or less in line with those of the first quarter of 2011 (-0.6% on a like-for-like basis) and account for 71% of total revenues.
In particular, subscriptions – that are an important asset (34.3% of total revenues) – were up by 3.1% on the same period of 2011, while newsstand sales were down by 4.2%, in line with the market of reference (-4.4%).

Innovation and editorial quality continue to be the key factors in the positive performance of the magazines published by Mondadori France; in the first quarter of the year significant re-designs were completed for Biba, Modes & Travaux and Auto Journal and the brand extension policy for the titles was continued with the launch of the quarterly AutoPlus Classiques, a change in the frequency of AutoPlus Occasion, and the magazines in the Science&Vie system.

On a comparable basis, advertising sales during the period were up by 2.7% on the same period of the previous year, with a better-than-market performance (0.7%).

This excellent result is explained above all by the positive performance of “haut de gamme” women’s titles: the weekly Grazia (+14.7%) and the monthly Biba (+21.3).
Among the various initiatives of Mondadori France in the digital sector during the period, the most significant included the creation of a shared technological platform for all of the sites, the launch of an iPad version of AutoPlus and the inclusion of the company’s titles in the offer of the various digital newsstands present in the market (Relay.fr, Lekiosque.fr, Zinio.com).

International activities
Total revenues in the first three months showed a marked increase (+8%) on the same period of last year, in particular in:
– advertising, thanks to a dedicated team focused on the fashion and interiors segments, sales in Italy for the editions of Grazia published in France, the UK, Germany and Russia were up by around 20%;
– licensing, with the continuing international development of Grazia: following the launch in Slovenia (March 2012), May will see the launch of the twentieth edition (including Italy), in South Africa by Media 24, the country’s leading publisher.
During the first three months of the year revenues amounted to around €40 million, an increase of 12% on the first quarter of 2011, with forecasts for the whole of 2012 of more than €170 million.

With regard to the joint-ventures, Mondadori is present in:
– China with Mondadori Seec Advertising Co. Ltd, the exclusive licensee for advertising sales for the local edition of Grazia. The magazine, launched in February 2009, continued the excellent performance recorded in 2011 ending the first quarter of 2012 with a 55% increase in revenues compared with the same period of 2011. Given this rapid growth and the potential of the Chinese market, Mondadori is now studying new projects, the first of which should see the light of day in the coming months;
– Russia with an edition of Grazia that has just celebrated its fifth anniversary and increased its revenues in the first quarter of 2012 by 30% compared with the same period of last year;
– Greece, Bulgaria and Serbia with Attica Publications, which, despite the ongoing crisis in the Greek market, recorded a performance in line with expectations, thanks also to benefits deriving from the restructuring plan implemented in 2011.

· DIGITAL

Digital activities during the quarter can be summarised as follows:
– editorial activities, ebooks, properties, subscriptions and online advertising, within the businesses of reference Books, Magazines Italy and Magazines France;
– e-commerce activities, through the web site www.bol.it, and online bookclubs, for Direct;
– diversification and business support activities, gambling, applications and CRM, with Other Businesses.
In the first quarter of 2012 all of the above activities generated total revenues of €10.9 million.

· DIRECT

Total revenues generated by the Direct area in the first three months of 2012 amounted to €58.4 million, on the €64.1 million of the same period of 2011, adjusted to include within the scope or reference the e-commerce activities of Bol.it.

In the context of the economic recession, amplified in the book market by a generalised fall in average prices and a reduction in promotional activities, action was taken to recovery profitability and generate new sources of revenue. These included he rationalisation of the bookshop chain, the expansion of the range of products to include the Emporio Mondadori and BoxForYou brands, and the development of “corners” in partnership at large-scale retail outlets.

The proprietary bookshops generated revenues in the period that were down by more than 13%; of these, the multicenter formula held back the slide to 2.5%, on a like-for-like basis.
The franchise network, meanwhile, saw a fall of revenues of around 7%.
In the Club bookshops chain, the conversion of directly-owned sales outlets into the franchising formula continued; which explains a fall in revenues in this area of 23%.
Bookclub activities recorded revenues that were in line with those of 2011; Cemit generated first quarter revenues of 5 million, a 3.8% fall, in a market that was down by -5% (source: Nielsen).

• RADIO

In the first three months of 2012, revenues in the Italian radio market were down by 5.1% (source: Nielsen); in this context R101 performed better than the market with Q1 2012 revenues of €3.2 million, a slight fall on the €3.3 million of the first quarter of 2011.
In terms of output, the first quarter of 2012 was characterised for R101 by the ongoing process of renewal at the station with the launch of new shows, the expansion of the team of presenters and the strengthening of the schedule, particularly at weekends.

EXPECTATIONS FOR THE FULL YEAR
Unfortunately, the first three months of the year confirmed the most pessimistic forecasts on the scale of the current economic crisis and the effects of economic and financial policy measures introduced by a number of countries, particularly in Europe on production, investment, employment and consumer spending.

The time required for a market recovery is currently impossible to predict: and with regard to the businesses of the Mondadori Group, there has been a further general decline in business volumes, compared with the already markedly negative levels in the final quarter of 2011.

Regarding the activities in which the Group will be engaged in the coming months, the priorities remain those outlined in the Annual Report: to defend the leadership in Italy, consolidation in France and international growth for the brands; the development of digital activities related to the core business; actions to reduce operating costs, with even greater impact than that achieved in the previous three years.

Also in terms of the results expected for the current year, as stated during the presentation of the 2011 Annual Report, in the absence of any short term reversal in market trends, the Group does not expect to achieve the same levels of profitability as last year.

§

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 report for the first quarter of 2012 will be available at the company’s corporate headquarters, Borsa Italiana SpA and on the web site www.gruppomondadori.it (Investor relations section) from today

The Board of Directors of Arnoldo Mondadori S.p.A. met today, under the Chairmanship of Marina Berlusconi, to examine and approve the consolidated balance sheet and management report for the year to 31st December 2011 as presented by the Group’s Deputy Chairman and Chief Executive, Maurizio Costa.

MARKET SCENARIO

In the second half of 2011 the global economic situation, and in particular in the countries in the euro zone, continued to shown strong signs of difficulty. In Italy the economy outlook deteriorated significantly during the autumn, marking the beginning of recession. This has had a negative impact on industrial production and investment, resulting in a consequent decline in consumer spending. Also in France the main macroeconomic indicators in 2011 showed a negative trend compared with the previous year.
The macroeconomic performance in the markets of reference for the Mondadori Group, in Italy and France, was affected by these negative trends, with a significant deterioration in the final quarter.

GROUP PERFORMANCE FOR THE YEAR ENDED 31 DECEMBER 2011

In this context, the Mondadori Group ended 2011 with consolidated net revenues of €1,509.8 million, a fall of 3,1% on the €1,558.3 million of 2010.

Consolidated gross operating profit came to €130.4 million, a fall of 7% compared with the €140.2 million of the previous year, as a proportion of revenues 8,6% compared with 9% in 2010. Excluding non-recurring positive items and investments in the development of the digital business, the reduction in gross operating profit was 3.3%.

Consolidated operating profit amounted to €103.8 million, down 9.1% from the €114.2 million in 2010, with depreciation and amortization of tangible and intangible assets of €26.6 million (€26 million in 2010).

Consolidated pre-tax profit came to €82.7 million, down 8.4% on the €90.3 million in 2010, with lower borrowing costs of €3.4 million and higher investment charges of €0.6 million.

Consolidated net profit came to €49.6 million, up 17.8% compared with the €42.1 million for the previous year, during which, however, there was an additional tax charge for previous years’ taxes of €8.7 million.

Gross cash flow for 2011 amounted to €76.2 million, compared with €68.1 million in 2010.

The Group’s net financial position showed a deficit of €335.4 million, an improvement of €7 million from the end of 2010, after dividend payments of €40.3 million during the year.

Information concerning personnel
On 31 December 2011 employees, permanent and determined, pursuant to the Group companies, consists of 3,664 units compared to 3,649 at the end of 2010.
2011 saw the conclusion of early retirement plans authorised by the government, which have seen the exit over two years of 233 employees, including both publishing and journalistic staff. There was a similar situation in France where the implementation of the so-called “social plan” has resulted, over two years, in the departure of 74 employees.
Overall, the restructuring plan announced in 2009, of which the above-mentioned ministerial programme was an important but not exclusive part, has been successfully completed.

THE BUSINESS AREAS

• BOOKS

In 2011, the trade book market in Italy has remained stable in terms of copies sold, while there was a decline of 1.4% in terms of value (source: Nielsen).
As regards the distribution channels, the slowdown of large-scale retailers was particularly critical, where the shortfall over the year was -7.9%, with a peak -20.3% in December. This figure is even more striking when one considers the performance of the ten best-selling titles: in terms of value in 2011 saw a decline of 48% in the top ten compared with the same figure as recorded in 2007.

In this context, Mondadori confirmed its leadership in the trade book market with a market share of 26.5% in terms of value (source: Nielsen).
In particular, 43 titles featured among the top 100 bestsellers of the year. Among these, Le prime luci del mattino by Fabio Volo, Nessuno si salva da solo by Margaret Mazzantini, the Steve Jobs biography by Walter Isaacson, published by Mondadori, and Tre atti e due tempi by Giorgio Faletti, published by Einaudi, respectively, were first, fourth, eighth and tenth in the overall rankings of the year.

Revenues generated by the Books area amounted to €389.1 million, a fall of 6% compared with the €413.9 million in the previous year.
Gross operating profit, despite the lower revenues cited above, was substantially in line with the high level of 2010, thanks to a focused policy of costs controls and the positive contribution of subsidiaries.
In the Paperback sector the most significant initiative was the launch of new series called NumeriPrimi °, which involved all the publishing houses of the Group – Edizioni Mondadori, Einaudi, Piemme, Sperling & Kupfer – and the publication of the most successful titles in large format and quality paperbacks.
In the first ten months, NumeriPrimi° achieved sales of two million copies, with particularly success in the large-scale retail channel.

2011 was undoubtedly important for Books in terms of digital publishing, with the normal operation of Mondadori’s digital distribution platform and, in the second half of the year, the arrival in the Italian market of the major international e-book retailers. During 2011 Mondadori introduced over 3,000 e-books, recording quarter of sales from the Mondadori platform.
The Christmas period saw the highest average sales of the year with peaks of more than 4,000 downloads per day. Among the best sellers, also in the digital format, were new titles by Walter Isaacson, Fabio Volo, Giorgio Faletti and Margaret Mazzantini, as well as backlist titles such as Miglio 81 by Stephen king.
The objective is to digitise the entire catalogue of the group, around 15,000 titles by 2014.
In the school textbooks segment, the digitization programme of the catalogue is already 90% complete, with about 1,300 titles already available in e-book format.

• MAGAZINES ITALY

The current challenging macroeconomic environment continues to have a strong impact on the consumer magazine market in Italy, adversely affecting advertising revenues (-3.7% magazines; source: Nielsen), circulation (- 5% in terms of copies and -7.2% on a comparable basis; internal figures) and add-on sales (-0.5% in terms of value; internal figures). In addition to the effects of the economic situation are the structural changes, related to the digital evolution that is underway, which is having a negative impact on print products, to which especially younger readers are showing less and less interest.
Mondadori has acted to address the situation and has to achieved a performance that is better than the competition and strengthened its position as market leader (33.3%), as can be seen from the continued growth of the number of readers of the Group’s weekly and monthly titles that total some 35 million, or 82% of the total (Audipress 2011/III). In particular, the latest Audipress survey shows that Mondadori’s “audience” was up by 1.6% on the previous period.
In a markedly recessive context, the performance of the Magazines Italy area saw a fall in total revenues of 2.7%, from €471.40 million to €458.8 million.
In particular, Mondadori titles suffered most from the recessive phase in the market and ended the year with a shortfall in revenues of around 5%, due to a reduction in:
– circulation revenues (-4.7%), the effect of a sharp decline in subscriptions (-15%) and fewer copies sold with add-ons (-11%);
– revenues from sales of add-ons (-2.4%), mainly because of a decline in sales of music products. However, the Group’s leadership in the segment (35%) was maintained, with continued high level of profitability and in line with the previous year;
– advertising revenues were down by 3.8%, with a particularly poor performance in the weekly family titles and newsmagazines.This was partly offset by a positive trend in women’s magazines.
The results show, however, a significant increase that is also attributable to the capital gain realized on the sale of the stake in Hearst Mondadori Editoriale Srl. Even excluding the aforementioned non-recurring items, there was still growth in gross operating profit.

Properties
During 2011, Mondadori took a series of important steps with the Group’s web properties associated with the main magazine titles, achieving significant results, both in terms of advertising sales and traffic.
The results for 2011 should therefore be considered positive, with an improvement in all indicators at rates higher than the market, in particular advertising (+47.7% compared with +12.3% for the market as a whole; Nielsen) and growth in the number of unique users, over 6.6 million, an increase of 23.5% on the previous year. This trend benefited from positive performances by www.grazia.it (+73%), www.panorama.it (+63%) and www.donnamoderna.com (+27%). Also of note was the rapid growth of www.panoramauto.it, which was launched in the second half of the year.

• ADVERTISING

Market trends in advertising spending in Italy in 2011 saw an overall fall of 3.8% (source: Nielsen), confirming that the global financial crisis and the downturn in GDP have had a noticeable effect on all media with the sole exception of the internet.
Television was down by 3.1%. There was a significant decline in Radio (-7.8%) and newspapers (-7.7%), while magazines saw a smaller decline of -3.7%, with a particularly bad performance in the final quarter (-8.2%).
The slowdown in advertising has involved all the main sectors of the magazine advertising market except cosmetics and fashion.

In 2011 Mondadori Pubblicità recorded an overall fall in sales compared with 2010, ending the year with revenues of €219.9 million, compared with €233.9 million in 2010.
In terms of the magazine advertising, the fall in sales was due to the particularly negative performance in certain sectors such as FMCGs and interiors. In particular, the weeklies were hit hard, despite the good performance of Grazia (+3.2%) and Tu Style (+11.1%) and the substantial stability of Donna Moderna, the other weeklies of the Group were down on the previous year.
For monthlies meanwhile, the decline was less marked (-1.2%), thanks to the resilience of interiors and cooking titles and to the success of Panorama Icon, which was launched in April 2011 and enabled the Group to strengthen its position in the male fashion segment and Mondadori Pubblicità to offer a product which meets the needs of companies operating at the high-end of the market.
During 2011 Mondadori Pubblicità maintained a continuous focus on the trend in average prices compared to 2010, with stability for Donna Moderna, Grazia and Tu Style among the weeklies, and growth in the interiors and cooking monthlies, sometimes at the expense of volume.

Radio advertising revenues (R101 and Radio Kiss Kiss) grew by 0.7% due largely to the performance of the new organisational model of Mondadori Pubblicità from May 2011; there was a particularly positive trend for R101 in a market that saw a fall in spending of 7.8% (source: Nielsen).

In the Internet market the excellent results achieved by Mediamond, with overall growth of 56% compared to 2010, was the result of a positive performance by the main sites of the Group and the considerable success of TgCom (+59%) and Sport Mediaset (+30.2%) of the RTI Group.
Overall, the Mediamond portfolio was enhanced in 2011 with the addition of www.ilgiornale.it with sales that were above expectations.
After just two years Mediamond now sells advertising for vertical 30 sites, with 11.5 million unique users per month, as well as a considerable number of case studies with leading companies in its sectors of reference.

• MAGAZINES FRANCE

The magazine market in France, both in terms of circulation and advertising revenues, suffered a marked slowdown in the last part of the year, although less significant than in Italy. During the year, advertising, in terms of value was, essentially unchanged compared with the previous year while circulation saw a fall of 4.2%.
In this contexts, Mondadori France recorded growth in earnings thanks to positive performances by all of its titles.

The consolidated revenues for the year came to €348.1 million, up 1.1% on the €344.2 million of the previous year.
Gross operating profit was up by 16.8% on the previous year, thanks to a good performance in magazines and, in particular, the improvement of Grazia, as well as lower manufacturing costs and overheads.

Advertising revenues were up 3.3% to €85.4 million. This excellent performance is due mainly to strong growth in the upscale women’s titles, in particular the weekly Grazia (+34%) and the monthly Biba (+10%), which now account for 33.6% of total advertising revenues (27.2% in 2010).
It should also be noted that Grazia is now the second largest magazine in the market in terms of advertising pages (2,495 pages, up 39%). Even in terms of circulation, Grazia confirmed its success since the launch, growing by 3.1% to 184,000 copies.

In terms of circulation, which accounts for 69% of the total, revenues increased by 1.3%, to €239.5 million,, of particular relevance was the subscription channel, which accounted for 32.5% of total sales.
During the year a number of activities were launched focused on innovation and quality, key factors in the positive performance achieved in terms of circulation: in particular the launch of new formats for seven titles and the launch of the quarterly Guerres & Histoire.
The most successful titles include Modes & Travaux, which has become the leading title in its segment; among women’s magazines, Top Santé and Closer, which have strengthened their positions; in the popular science segment, Science & Vie and Science & Vie Junior continue to grow.
Mondadori France is the leader in the car sector with the weekly magazine Auto Plus and the bimonthly Auto-Journal.
Biba recorded the strongest growth among all of its competitors, with 326,000 copies (+4.5% compared with 2010).

International Activities
Despite some signs of a slowdown due to the ongoing global economic situation, the International Activities area confirmed the positive trend of previous years. Despite difficulties in terms of both consumer and advertising spending, the Group has responded with continuous expansion and geographic diversification and consolidating its position in major emerging markets such as China, Russia and the Asian market. The annual turnover of International Activities was over €160 million. Spearheading this growth is Grazia, a brand with a strong international success that now forms a network of twenty editions with editions in four continents.

Licensing: the end of 2011, there was a total of 27 international editions: seventeen of Grazia, seven of Casaviva, one of Flair, one of Interni, and one of Sale&Pepe. The different editions of Grazia generated a combined revenues of €107 million (+20% compared with 2010) with expectations of further growth for 2012, also thanks to the launch of new editions.

Advertising: thanks to a dedicated team focused on the fashion and interiors segments, in 2011 on the Italian market Mondadori generated advertising revenues of €6.8 million (+49% compared with 2010).

With regard to investments, Mondadori in active in China with its joint venture Mondadori SEEC Advertising Co Ltd: Grazia China, launched in February 2009, has already proved a great success (with revenues of €7.1 million, +87% compared with 2010). Given the rapid growth and potential of the Chinese market, Mondadori has several new projects currently under consideration, the first of which should be announced in the coming months.
Grazia Russia, which celebrated its fifth anniversary in March, during 2011 recorded revenues of €4.1 million, up 20% on an already positive 2010.
Despite the dramatic economic crisis in Greece, Attica Publications expects to be able to derive competitive advantages over its competitors.

• DIRECT

The Direct Area, which manages the retail and direct marketing businesses, conducts its activities through:
– a network of outlets across the country, comprising at the end of 2011 of 628 outlets (22 directly operated and 307 franchised book shops; 9 Multicenters; 213 Edicolè franchises, 18 directly managed Book club and 59 franchised stores):
– Cemit, the market leader in diversified strategies for the design and development of one- to-one communication and CRM.

Revenues in 2011 came to €265.5 million, a fall of 1.4% compared with the €269.2 million of 2010. The figures are not comparable due to changes in the scope, including the acquisition of the whole of Mondolibri SpA. On a like-for-like basis, the shortfall would be around 5% compared with the previous year.

The Multicenter outlets and bookshops, clubs and directly managed outlets, were all penalised by marked downturns that were as high as 12%, only the franchises and Edicolè outlets maintained a positive trend in revenues.
Also Cemit, which suffered significantly from the overall decline in investments in direct marketing, ended the year with a fall in revenues of 24%.
Faced with these difficulties, the company has increased its focus on costs, which explains the merger of Mondadori Franchising S.p.A. and Mondolibri S.p.A. with Mondadori Retail S.p.A., which changed its name to Mondadori Direct SpA, in the middle of the year.

• RADIO

R101, the Group’s radio station, generated revenues of €16.3 million, up by 12.4% compared with the €14.5 million of 2010, thanks to the performance of the car, food, media/publishing and telecommunications sectors, which account for approximately 50% of total turnover.
The market figures for total Radio advertising in 2011 however showed a fall of 7.8% compared with 2010 (source: Nielsen).

The increase in revenues for R101, as well as the alignment of the publisher’s share with other businesses of the Group, is also attributable to the performance of the sales network, which passed from a dedicated network to the more general representation of the entire sales force of Mondadori Pubblicità, which facilitated the entry of many new clients.

• DIGITAL

Revenues generated by the Digital Area came to €17.2 million, an increase of 63.8% compared with the €10.5 million of 2010. The turnover from digital publishing, e-commerce, diversified activities and IT infrastructure development and databases, amounted to €44.2 million, an increase of 23.5% on 2010.
The digital publishing activities primarily refer to e-books, self-publishing, online bool clubs, properties and digital advertising.

In e-commerce in 2011, the business was mainly through www.bol.it sites, which are focused on the sale of books, CDs, DVDs and e-books, which recorded growth in the number of orders (+23%) and the number of unique users (+42%), and www.abbonamenti.it, which manages both print and digital subscriptions.
CRM activities in 2011 saw the creation of the Mondadori Customer Data Base, a single structure which brings together all of the customers of the different business units and the development of information processes for the reconciliation of customers of the different companies of the Group.

RESULTS OF THE PARENT COMPANY ARNOLDO MONDADORI EDITORE S.P.A.
The Annual Report of the parent company, Arnoldo Mondadori Editore SpA, for the year to 31 December 2011 shows a net profit of €55.3 million (€51.7 million on 31 December 2010), while gross operating profit came to €48.5 million (€70.8 million in 2010).
These economic indicators show a contrasting trend; gross operating profit was affected by the significant decline in sales in both books and magazines, where both revenue from sales of copies and from advertising was down compared with 2010.
Also of significance, in absolute terms, was the total investments in digital activities that are still in the start-up phase.
Net profit, meanwhile, benefited from higher returns from the management of investments that, in 2011, included a capital gain of around €10 million from the sale of the company’s stake in Hearst Mondadori Editoriale Srl and a reduction in taxes including, in 2010, a non-recurring charge of €8.7 million, resulting from the adherence to the definition of pending tax disputes, established by Law N° 73 of 22 May 2010, and regarding a dispute with the tax authorities in Milan for the year 1991.

PROPOSAL FOR THE DESTINATION OF NET PROFIT FOR THE YEAR ENDED 31.12.2011
The Board of Directors agreed to propose to the Annual General Meeting of the Shareholders, called for 19 April 2012 (or 20 April on second calling), to devolve to the extraordinary reserve the full amount of the net profit for the year ended 31 December 2011, which amounted to €55,342,667.63
Given the current market scenario and despite the increase in net profit for 2011 compared with that for 2010, the proposal of the Board of Directors not to distribute a dividend for 2011 is aimed at strengthening the financial structure.

FORECAST FOR THE FULL YEAR
In the first two months of the year trends related to consumer spending in general, and in particular in the markets of interest to Mondadori, remain significantly negative, in line with the closing months of 2011.
There are currently no signals of a turnaround that could significantly alter the trend, at least in the first half of the year. Similarly, there is also reduced visibility, also in the short term, with regard to the advertising market.
During 2012 the company’s priorities will be to maintain a firm hold on the Group’s leadership in magazines and books in Italy, the consolidation of the successes in France, the development of digital activities, both in books (e-books) and other areas, the expansion and diversification of the international activities, and the continuation of efforts to reduce operating costs in order to contain the negative impact of rising production costs.
In such a problematic scenario, and despite the abovementioned actions, it is currently difficult for the Group to achieve the same levels of profitability as in 2011.

The Board of Directors of Arnoldo Mondadori S.p.A. met today, under the chairmanship of Marina Berlusconi, to examine and approve the interim report for the first nine months of the year to 30th September 2011, as presented by the Group’s deputy chairman and chief executive, Maurizio Costa.

THE MARKET SCENARIO
As is well known, the third quarter of the year saw a significant deterioration in markets, particularly in the eurozone. Concerns of an economic nature were heightened also by fears of a financial crisis even worse than that of the recent past.
The lack, at a European level, of an immediate and common response to market problems has resulted in an even more negative perception of the situation and a high level of pessimism about prospects for growth, employment and stability.
The magazine market in Italy saw a continuation of the decline in circulation and a was sharp downturn in advertising. The book sector remained essentially stable, despite the absence of bestsellers and falling cover prices. There was a particularly marked fall in retail sales, both in directly managed stores and the large-scale retail channel.
In France, there were no particular changes in the annual trend in the magazine sector while advertising, which remained buoyant until September, saw a downturn from the beginning of October.

GROUP PERFORMANCE FOR THE PERIOD TO 30 SEPTEMBER 2011
In the context of the situation described above, in the first nine months of the year the Mondadori Group recorded:
– revenues that were slightly down against the same period of 2010, with a growing contribution for digital activities;
– another improvement in operating profitability, thanks to essential stability in the traditional businesses while positive non-recurring elements have made it possible to compensate most of the development costs of the digital business;
– a marked increase in net profit, also due to the absence of extraordinary tax charges paid in 2010 relating to previous years.

Consolidated revenues came to €1,114.7 million, a slight fall (-1.4%) on the €1,130.2 million for the same period of 2010.

Consolidated gross operating profit amounted to €104.6 million (+1.5% on the €103.1 million for the first nine months of last year): on a like-for-like basis, excluding non-recurring items and investments for digital development, gross operating profit increased by del 3.2% compared with the same period of 2010.

Consolidated operating profit came to €87.8 million, an increase of 2.6% on the €85.6 million for the same period of 2010, with amortizations and depreciations on tangible assets of €16.8 million (€17.5 million in 2010).

Consolidated pre-tax profit amounted to €71.3 million, an increase of 5,6% on the €67.5 million of the same period of last year, with interest of €16.5 million, compared with €18.1 in 2010.

Consolidated net profit came to €44.1 million, an increase of 43.6% compared with the €30.7 million of the same period of the previous year, which was impacted by non-recurring tax charges related to previous years (net of which the increase would still have been of 11.9%).

Gross cash flow for the first nine months of 2011 amounted to €60.9 million, compared with €48.2 million for the same period of 2010.

The Group’s net financial position went from -€342.4 million at the end of 2010 to -€380.6 million on 30 September 2011 (-€369 million on 30 September 2010); and in May the company paid dividends of €40.3 million.

Information concerning personnel
On 30 September 2011 permanent and temporary contract staff employed by the companies of the Group amounted to 3,720, essentially in line with the figure for the same period of last year (3,717).

The headcount figure includes also the development activities of the new Digital Area, the start-up of a new web company (Glaming), the hiring on fixed-term contracts of a number of staff at museum bookshops and the consolidation of AME Editoriale Wellness.
Given these changes, the current headcount is in fact 52 units lower than the same period of 2010 (-1.4%).
Account should also be taken of the fact that the figure for September traditionally rises for the hiring of temporary seasonal staff related to the school textbook sector until the end of the year.

THE BUSINESS AREAS
BOOKS
Nielsen figures for the first nine months of 2011 show that the summer was characterised by a general uncertainty and weakness in consumer spending that resulted in a slowdown in sales. In this context, the Mondadori Group nevertheless confirmed its leadership in trade books with a market share of 26.1%.

Revenues generated by the Books area amounted to €280.5 million, a 4.8% fall compared with the €294.5 million of the same period of the previous year.

The editorial programme for the closing months of the year is expected to allow for a positive result in terms of market positioning, thanks to strong titles that include new novels by Fabio Volo (Le prime luci del mattino), Giorgio Faletti (Tre atti, due tempi), John Grisham (I contendenti) and Alessandro D’Avenia (Cose che nessuno sa), as well as the considerable interest generated by the only official biography of Jobs.
The quarter also saw the consolidation of growth for the new NumeriPrimi° series, which with sales of 1.6 million copies is at the top of the paperback bestsellers lists.

On the e-book front, on 30 September 2011 the Mondadori catalogue contained 2,700 trade titles, including apps. Thanks to the opening in Italy of Apple’s iBookstore, which has contributed to an increase of more than 100% in the sale of digital titles, growth forecasts for the year can be confirmed.

MAGAZINES ITALY
In a market context of generalised decline in Italian and international magazine publishing, the revenues of Magazines, Italy, which include, in addition to circulation and advertising revenues from Mondadori titles, also revenues from the distribution of titles published by third parties, amounted to €351.1 million, in fall of 3% compared with the €362 million for the first nine months of 2010.

This was the result of:
– a 4.8% fall in circulation revenues (above all due to a reduction in investments in the subscription channel) and a 5.2% slide in add-on sales, which nevertheless retained a high level of profitability in line with the previous year;
– as light reduction in advertising for Mondadori titles compared with 2010 (-0.7%), but with a better than the market trend (-1.8%; Source: Nielsen to August); a marked increase in sales for the internet and the titles of the international network, taking the overall figure to +0.8%.

Work continued in the third quarter on the re-launch and repositioning of titles, of particular note was Donna Moderna Wellness, a new title dedicated to the ecology of body and mind, and the redesign of Sale&Pepe and di Panorama Travel. Initial indications show excellent levels of appreciation prime by both readers and advertisers.
Regarding the Mondadori web sites, in the period from January to September advertising sales grew by 37%, after a particularly brilliant third quarter (+50%), and well ahead of the market (Source: Nielsen to August +13.5%), thanks to the performance of www.donnamoderna.com (+31%), www.grazia.it (+54%) and www.panorama.it (+84%).

MAGAZINES FRANCE
Mondadori France ended the first nine months of the year with revenues of € 259.6 million, a 2.8% increase on the €252.6 million of the same period of 2010.

Circulation revenues, which account for 69% of the total, rose by 2.4%; a particularly significant result given the difficult situation facing the magazine market in recent years which, also in France, has been marked by a constant decline (-4.2%; internal data, in terms of newsstand sales in September).

The total advertising market in the first nine months of the year recorded an increase, in terms of value, of 0.5% (Source: Kantar Media) before a downturn that began from October.
In the same period, Mondadori France out-performed the market with an increase of 5.7% in revenues compared with the same period of the previous year, reaching €62.7 million. This result was mainly due to the excellent performance in revenues from the women’s weekly Grazia (+52%) and the monthly Biba (+11%).
In the last 12 months (October 2010-September 2011) Grazia sold 2,436 advertising pages, an increase of 63%, putting it in second place for total pages among French magazines. The company’s upscale women’s titles now account for 33.5% of total advertising revenues (25.9% in the same period of 2010).

International activities
The positive revenues trend for the company’s international activities continued (+30% compared with the first nine months of 2010), driven by a marked increase in revenues from advertising (+60%). There was also a positive contribution from licensing revenues (+26%), in particular for Grazia Germany, Holland and China.
The number of editions of Mondadori titles published under licence also continued to grow, with three new editions in the period.
There was a decided improvement in the results of the 50-50 joint ventures in Russia and China, in particular thanks to a rise in advertising sales.
The Greek subsidiary Attica saw a fall in revenues due to the worsening financial crisis that has had a negative impact especially on advertising. Nevertheless – thanks to a good performance by the radio stations and a number of add-on initiatives, the reorganisation of the company and the renegotiation of procurement, the final result showed an improvement compared with the same period of last year.

ADVERTISING
Advertising trends in Italy in the first nine months of 2011 have largely confirmed the negative trend that characterised the first six months of the year (Source: Nielsen to August: -4%).
In particular, for the first time since the beginning of the crisis in 2008, there was a slowdown in newspapers (-8.3%), in particular the free press (-49.7%), radio (-5.5%) and television (-4.7%).
Magazines showed a limited downturn (1.8%) on the back of a good performance in the fashion, cosmetics and pharma sectors, and ongoing difficulties in other sectors. Bucking the trend was the internet (+13.5%), making it the healthiest medium at the present time.

With regard to the Group’s activities, Mondadori Magazines saw a slight fall (-0.7%), with continuing positive trends for trend Grazia, Donna Moderna and Tu Style. Monthlies were in line with 2010, with a resilient performance by titles in the interiors sector.

Efforts continued, along with the publisher, for the organisation of fashion events, including Pitti and Milano Fashion & Design, which this year involved Grazia, Interni and R101, as testimonials for an event that was notably successful with both sponsors and the public.

For radio, the new organisation of Mondadori Pubblicità, launched in May and focused on exploiting the sales potential of the company’s entire network, has made it possible to achieve greater results than in 2010, compared with a market that was down by 5.5%.

Advertising sales generated by Mediamond were very positive (+65.9%), thanks to the brilliant results of sites www.donnamoderna.com and www.grazia.it and news sites www.tg.com and www.sportmediaset.it.

The company closed the first nine months of the year with total sales of €165 million, a slight fall (-3.1%) compared with the €170.2 million of the same period of 2010. The difference was largely determined by a downturn in business for third party publishers.

DIRECT and RETAIL
In the first nine months of 2011 total revenues generated by the Direct and Retail area amounted to €182 million, a 3.8% increase on the €175.4 million of the same period of 2010 (for last year’s figures, Mondolibri S.p.A. was consolidated from 1 May 2010).

Direct
Business levels were affected by the negative economic climate and particularly by the fall in direct marketing activities by a number of operators in the large-scale retail sector, traditionally a substantial part of Cemit’s business: faced with a fall in revenues of over 20%, the company was nevertheless able to mitigate the impact on its results.

Retail
Total revenues from stores were in line with the same period of last year, thanks to new affiliations in the franchising network, which compensated for a fall in turnover at the company’s directly owned stores, the result of the closure of a number of significant locations in the centre of Rome and Turin.
The number of outlets in the network rose to 608 (compared with 570 at the end of September 2010).

Revenues generated by the franchise bookshop chain in the first nine months of 2011 rose by 12.8% compared with the same period of the previous year, thanks to new affiliations that increased the number of outlets to 499, compared with 463 in September 2010. On a like-for-like basis, revenues were in line with those of last year.

The directly owned shops saw a fall in turnover of 11.5% compared with the previous year, mainly due to the aforementioned closures. On a like-for-like basis, there was a 3.3% fall in sales.

RADIO
The Italian radio market to 30 September 2011 recorded an overall downturn of 5.5% on the previous year, with a more marked slide in the first half of the year (-8.4%), compensated by a clear recovery in the summer months (+11%), but followed by a decline in September (-6% – Source: FCP Assoradio).

Advertising sales for R101, which markedly outperformed the market, generated revenues in the first nine months of €11.7 million, a 14.7% increase on the €10.2 million of the same period of last year, with a more limited increase in the first half (+7.9%) and a more marked upswing in the last three months (+27%).

DIGITAL
Revenues in the first nine months of 2011 from direct activities amounted to €13.1 million, compared with €5.8 million in the same period of 2010, while the development of indirect digital activities, in the context of other business sectors (e-books, online book clubs, web sites, subscriptions and advertising), achieved a turnover of €19.9 million, up from the €16.4 million of the first nine months of last year. Overall, the Digital area Digital recorded total revenues of €33 million, compared with €22.2 million in the first nine months of 2010.

Among the direct activities, of note were:
– e-commerce, represented by the sale of books, editorial products and sundry goods by Bol.it, which saw a steady improvement (+50% year on year) in the number of monthly visitors (over 1 million users) and a growth in orders of 30% compared with the same period of 2010;
– the development of the applications and services for mobile phones area continued with the creation of apps that have reached the top of the iTunes best sellers list in their category. The last quarter also saw the launch of the first game for the iPad and iPhone produced by Mondadori;
– the Mondadori project for the development of a CRM (Customer Relationship Management) system, aimed at bringing together all of the Group’s various client databases is continuing in line with the forecasted plan;
– on 28 September, the company was awarded a public gaming licence by the AAMS which will enable Glaming, a company owned jointly by Arnoldo Mondadori Editore S.p.A. (70%) and Fun Gaming S.r.l. (30%), to progressively launch a series of online games by the end of November.

FORECAST FOR THE FULL YEAR
The third quarter of the year saw a sharp increase in concerns about the health of the economy, above all in the eurozone, and the resilience of the public finances of member states.
This, combined with consequent pressures on the credit system, has worsened an already difficult situation in manufacturing, consumer spending and investments; while also unemployment, especially among the young, has reached very high levels.

The markets of reference for Mondadori have not been exempt from the general economic crisis, even if the company has so far been able to deal with the situation by placing even more attention on product quality and process efficiency, also with a view to containing costs.

With regard to the prospects for the full year, we can only repeat, with even greater conviction, what we said after the first half report, about the difficulty of making any forecasts, even in the short term.
It should also be noted that the figures for October show a generalised worsening of market indicators; consequently, the evolution of markets in the closing months of the year will be fundamental in determining a level of operating profitability in line with last year.

§
The interim report for the period to 30 September 2011, as approved by the board of directors, will be available from today at the company’s headquarters, Borsa italiana S.p.A. and on the corporate web site www.gruppomondadori.it (in the Investor Relations section).
§
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 Board of Directors of Arnoldo Mondadori S.p.A. met today, under the chairmanship of Marina Berlusconi, to examine and approve the interim report for the first half of the year to 30th June 2011, as presented by the Group’s deputy chairman and chief executive, Maurizio Costa.

THE MARKET SCENARIO
The latter months of the period saw a confirmation of economic instability in Italy resulting from a further slowdown in industrial production and consumer spending, as well as an increase in unemployment.
With regard to the sectors of reference for the Mondadori Group:
– the book market in Italy was characterised by the absence of bestsellers but nevertheless remained essentially stable compared with the previous year;
– the economic crisis had a clear impact on magazine circulation which in the first six months, both in Italy and France, was down;
– a climate of great uncertainty in both countries; with marked volatility in the Italian advertising market, with some months going well and others less so, while in France the growth trend that had persisted for some time was interrupted in the month of May.

GROUP PERFORMANCE FOR THE PERIOD TO 30 JUNE 2011
The first half results of the Mondadori Group in particular show:
– a slight increase in revenues, thanks to the resilience of all the businesses and the contribution of the digital activities under development;
– an improvement in operating profitability, essentially due to the improved performance of the core business: profitability was up both for magazines and books thanks to sustained revenues and the positive effects of cost cutting measures;
– an acceleration in the development of digital activities, for the web sites of the main titles, applications, the development and loyalty building of communities, online book sales (both print and digital) and the launch of new businesses;
– a capital gain from the sale to the Hearst Group of the company’s 50% stake in the company that publishes Cosmopolitan.

Consolidated revenues came to €741.4 million, an increase of 2% on the €726.8 million for the first half of 2010. A substantial part of the increase in revenues (+€14.6 million) was the result of an increase in digital activities.

Consolidated gross operating profit amounted to €59 million, up by 8.1% on the €54.6 million of the corresponding period of last year: excluding extraordinary items and investments for digital activities, gross operating profit would have been up by 8.6% on the same period of 2010.

Consolidated operating profit came to €47.9 million, a rise of 11.9% on the €42.8 million to 30 June 2010, with amortizations and depreciations on tangible assets of €11.1 million (€11.8 million in 1H 2010).

Consolidated pre-tax profit amounted to €37.5 million, a 21.8% increase on the €30.8 million for the same period of last year, thanks to a reduction of tax charges resulting from efforts made in the last 12 months on the company’s debt structure.

Consolidated net profit came to €22.7 million, an increase of 50.3% compared with the €15.1 million for the same period of the previous year.

In the first six months of 2011 gross cash flow amounted to €33.8 million, compared with €26.9 million in 1H 2010.

The Group’s net financial position was essentially in line with the first half of last year (-€399.2 million on 30 June 2011 compared with -€393 million on 30 June 2010) despite the payment of €40.3 million in dividends for the 2010 financial year.

Information concerning personnel
On 30 June 2011 permanent and temporary contract staff employed by the companies of the Group amounted to 3,701, a reduction of 56 compared with the same period of last year.
On a like-for-like basis, excluding development activities, the reduction compared with the first half of 2010 would be 110. Of particular note:
– the consolidation of AME Wellness Editoriale S.r.l. (ex Mondadori Rodale S.r.l.) from 30 June 2011;
– the development of new activities in the digital area and the creation of Glaming S.r.l., as well as the activation, inside other companies of the Group, of seasonal activities in the educational publishing area and the management of museum sites.
The organisational impact of these elements, to which the efficiency gains made by Mondadori France should be added, show that rationalisation efforts and the use of early retirement incentives are proceeding in line with the company’s plans and the agreements reached.

Personnel costs to 30 June 2011 amounted to €137.7 million, compared with €134.3 million for the first half of 2010. On a comparable basis – i.e. excluding the staffing costs for the digital area and eliminating the contribution of Mondolibri S.p.A., consolidated for only two months of 2010 – the overall cost would be down by 1.3% compared with 30 June 2010. On a like-for-like basis, compared with the first half of 2009 there was a reduction of 8.7%.

THE BUSINESS AREAS
· BOOKS
Book revenues in the first half of 2011 amounted to €166.9 million, -0.6% on the €168 million of the same period of last year. This was the result in a fall in revenues from third-party distribution, with sales in the art, exhibitions and educational sectors essentially stable.

Trade book sales, the area’s main source of revenues. Were up by 1.6%, confirming the Mondadori Group’s leadership in the sector with a market share of 26.4% (source: Nielsen, first half).
Edizioni Mondadori recorded first half revenues of €60.1 million, an increase of 8.3% compared with the same period of 2010. The validity of the Mondadori offer was also confirmed by the titles that were nominated for the most prestigious Italian literary prizes, including Di Fama e di sventura by Federica Manzon, a finalist for the Campiello prize; Ternitti by Mario Desiati, short-listed for the Strega prize; and La fine del mondo storto by Mauro Corona winner of the Bancarella prize.
In Italian fiction, there was continued success for Nessuno si salva da solo by Margaret Mazzantini which has sold some 300,000 copies in the last three months. In foreign fiction the outstanding titles in the period have been Le luci di settembre by Carlos Ruiz Zafón (190,000 copies) and Autopsia virtuale, the new thriller by Patricia Cornwell (135,000 copies).
The launch in March of the new brand NumeriPrimi°, an imprint offering quality paperbacks, resulted in sales of over a million copies in just four months.
Among the Group’s other publishing houses, of particular note was the performance of Einaudi that ended the first half with revenues of €25.7 million, an increase of 8%.

In the digital market, since the beginning of the year the Group has published 2,300 trade e-book titles at the same time as the printed versions (600 more than in the first half of 2010), including a variety of products published as applications.

There are also high expectations for the editorial programme for the second half with the publication of new titles by Fabio Volo, John Grisham, Sophie Kinsella and Alessandro D’Avenia.

· MAGAZINES ITALY
In a market that in the first six months showed none of the expected signs of recovery in the Italian and international publishing sector, the revenues of Mondadori’s Magazine Italy area amounted to €247.8 million, essentially in line (-0.9%) with the €250 million of the same period of 2010.

This result is largely attributable to the fall in circulation revenues (-4.3%), while advertising was up by 1.8%, in a market that recorded a fall of 1.4%, sustained by the good performance of Mondadori titles (+0.5%), strong efforts by the sales network and numerous and innovative initiatives. On the internet front, there was an excellent performance in sales by the non-consolidated arm Mediamond (+30%).

In terms of circulation, Mondadori titles performed better than the market, which lost 5.6% in copies – despite the progressive decline in subscription copies (-14%), following the big increase in postal charges. Revenues for add-on sales in the period were stable.

Over the coming months the programme of re-launches of certain titles in the portfolio will continue, taking the total number to 10 during the year, following the launch of Panorama Icon, the re-design of Donna Moderna Panoramauto, Casaviva and Ciak, in the first half of 2011.

During the period, the web sites of Mondadori titles saw an increase in revenues of 18%, in particular Donnamoderna.com (+30%), which was re-launched with a new version in May, Panorama.it (+57%) and Grazia.it (+22%), completely renovated in April.
In terms of traffic, Donnamoderna.com recorded an excellent performance with 70 million page views (+80% on the first half of 2010) and 4 million unique users (+35% compared with the same period of last year).

· MAGAZINES FRANCE
The revenues of Mondadori France in the first half of 2011 amounted to €172.4 million, an increase of 2.4% on the €168.4 million for the same period of the previous year.

On the advertising side, Mondadori France recorded growth of 4.7% compared with the same period of last year, in a market that was up by 2.5% (source: Kantar Media, in terms of value).
This result is large attributable to the performance of Grazia, which saw advertising revenues grow by 53%, and the positive performance of the titles in the “Sciences” area.
In particular Grazia, with an average circulation of 180,000 copies in the period, confirmed its position as the most successful weekly in its segment and in second place in terms of the total number of advertising pages in the entire French market.
In fact, upscale women’s titles now account for 32.9% of the company’s total advertising revenues, up from 26% in the first half of 2010.

In terms of circulation revenues (69% of the total), Mondadori France recorded growth of 2.1% thanks to the focus on a portfolio of mass-circulation titles and constant attention to product quality and innovation. Of not during the period was the launch of the pocket version of Grazia and the growth, compared with the first half of 2010, of women’s titles, in particular Top Santé (+10.2%), Biba (+8.8%) Modes & Travaux (+7.3%), as well as Science & Vie (+2.9%).

International activities
Thanks to a recovery in the advertising market, in the first half of 2011 the positive trend first recorded in the first quarter continued, resulting in an increase of 45% in licensing revenues.
Compared with the first quarter, there was a confirmation of the performance of all editions, especially weeklies, that drive the revenues from advertising services for Italian clients for all the titles in the network.
In June, a new edition of Casaviva was launched in Ukraine, while in the second half a new edition of Interni will be published in Russia.
There was also a marked improvement in the contribution of the joint ventures in Russia and China compared with last year, and significantly better than the forecast, in particular as a result of a hike in advertising sales.
The Attica subsidiary continued to feel the impact of the ongoing financial crisis in Greece and saw its advertising revenues fall by 25% in Greece and 15% in the Balkans. Serbia meanwhile bucked the trend, with an increase of 8%. Thanks to the restructuring of the company, the detailed re-negotiation of all supply contracts and the excellent performance of the Group’s two radio stations, the final result was in line with last year.

· ADVERTISING
Total advertising investments in the first half of 2011 were affected by a slowdown of 2.8% in the first five months of the year (source: Nielsen, May).
This is mainly due to a decline in two fundamental sectors, food and telecoms, which were both down by 9.4%. There was substantial growth in the internet (+15.6%); a slight improvement compared with recent months for TV (-2.3%) and magazines (-1.4%), while newspapers continued to fall (-4%) and radio saw a sudden and marked slump (-8.4%).

Mondadori Pubblicità ended the first six months with total revenues of €117.5 million, a slight fall (-2%) compared with the €119.9 million of the first half of 2010; this result was due to the positive performance of sale fro Mondadori titles (+0.5%) and R101, while sales for third-party publishers were in decline.
Regarding the performance in the Mondadori area:
– there was a slight increase for weeklies compared with the first half of 2010, thanks to the positive performance of Grazia, Tu Style and Donna Moderna; and a slight fall for monthlies (-1.4%), despite a good performance in the interiors/furniture sector;
– despite the difficult market, R101 recorded a positive performance following the reorganisation of the network, with an increase in sales of 2.7% in May and 6.9% in June;
– in the internet, where sales are managed by the joint venture Mediamond, there was significant growth in the first half, thanks to the positive performance of Mondadori’s women’s portals and the news area of Mediaset with Tg.com and Sportmediaset.it. There was alos an expansion of the area with the acquisition of advertising sales contracts for Meteo.it and Giornale.it.

· DIRECT and RETAIL
Total first half 2011 revenues in the Direct and Retail areas came to €123.1 million, an increase of 13% on the €108.9 million in the first half of last year, thanks to the contribution of Mondolibri, consolidated in May 2010, and the performance of the franchise network.

Revenues from the Direct area, which include the activities of Cemit Interactive Media and the mail order sales of Mondolibri, saw growth of more than 26%, also due to the change in the area of consolidation.

In Retail, in the first half of the year the Mondadori chain of stores saw sales rise by 6.8% compared with the same period of the previous year, thanks to the contribution of the Mondolibri outlets (€10.5 million in 1H 2011, compared with €1.9 million in the two months of 2010) and new affiliations in the Mondadori Franchising network (+8% compared with the same period of 2010) which offset the fall in revenues from Mondadori Retail’s own stores, due to the closure of two shops in Rome, as already announced, in the second half of 2010.

· RADIO
As mentioned, there was a sharp downturn in revenues in the radio market in the first five months of 2011 (-8.4%), and a fall of 12% in the last three months (source: FCP Assoradio).
In this difficult context, the performance of R101 clearly bucked the trend, with net revenues of €8.2 million, an increase of 7.9% on the €7.6 million from the same period of last year.

This result was due to the excellent performance, following the reorganisation of the sales network and the alignment of the share of radio by the advertising sales company compared with the Group’s other businesses, made possible by a reduction in the cost of advertising sales for the radio itself.

· DIGITAL
In the first half of 2011 the Digital area of the Mondadori Group generated from direct activities total revenues of €8.8 million, while the development of indirect digital activities for other business sectors (e-books, online book clubs, internet sites, subscriptions and digital advertising) generated revenues of €14.2 million; consequently, the new Digital area generated a total of €23 million, compared with €13 million in the first six months of 2010, despite the delay in the launch of gaming activities.

Of particular not among such activities were:
– www.bol.it, which had 900,000 unique users, up by 70% compared with the same period of last year and 17% compared with the month of May 2011, and the web site www.easyshop.it, with more than 100,000 unique users;
– applications and services for mobile phones, that continue to make an important contribution to revenue and margin growth. In the apps area, after the launch of Virtual History Roma, a series of other cultural apps were developed (The Last Supper and others in collaboration with the Books area including Diabolik and Alexandros) and news (Epoca/il Papa Santo, La Patria bene o male).
With regard to Value Added Services, there was an increase in revenues of over 10% compared with 2010, thanks to the expansion of the offer and services launched with the leading telecoms operators;
– the CRM project, which aims to aggregate the Group’s various customer databases with a view to making increasingly targeted offers to customers, is in line with the programme which will enable the company to make its first moves and to develop an adequate process of innovation in the area of customer relations during the last quarter of 2011;
– during the second quarter the company also created Glaming, a company owned 70% by Arnoldo Mondadori Editore SpA and 30% by Fun Gaming, for the management of distance public gaming (an activity that is regulated by a government authority, in Italy the Amministrazione Autonoma dei Monopoli di Stato, or AAMS). Mondadori, which at the end of June was included in a provisional list of applicants, expects to be awarded a licence in July and to begin activities by the end of the year.

FORECAST FOR THE FULL YEAR
In terms of economic growth and employment, the situation in Italy, and more generally in Europe, shows little sign of improvement. There have recently been great concerns about public finances in the whole of the Eurozone, with inevitable effects on social security and fiscal policies and, as a result, on savings and household expenditure.
The climate of great socio-economic uncertainty has also had a direct impact on investments.

Given the prevailing context, with reference markets in decline, the Mondadori Group’s results for the first half of 2011 are particularly significant; where resilience in the core business and the ongoing attention to cost reductions have enabled the company to record an improved level of operating profit for the sixth consecutive quarter.

Over the coming months the commitment to the more traditional businesses will be accompanied by a greater commitment to the digital sector, with the acceleration of the offer of products and digital services and the building of customer loyalty related to the Group’s brands and communities.

Conditioned by exogenous and transnational factors, it has never been more difficult than now to make forecasts about growth.
But in spite of all these considerations, the determined and focused management of the core business and the development of new opportunities is expected to enable the Mondadori Group, in the absence of unexpected phenomena, to record an improvement in profitability also for the full year, despite ongoing investments for the development of its new digital activities.

§

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 Board of Directors of Arnoldo Mondadori S.p.A. met today, under the chairmanship of Marina Berlusconi, to examine and approve the interim report for the first three months of the year to 31st March 2011, as presented by the Group’s Deputy Chairman and Chief Executive, Maurizio Costa.

The market scenario
At the macro-economic level, there were no particular signs in the first three months of 2011 of a change in the underlying trends seen in the closing months of last year. Production gains were modest, there was still no real signs of a recovery in consumer spending and unemployment levels remained high.

GROUP PERFORAMCE IN THE FIRST QUARTER OF 2011
In this market context, the Mondadori Group produced results that were up on the figures for the first quarter of last year, with an increase in revenues of 3.2%, thanks to business performances that were generally above the respective markets of reference, as well as the consolidation of Mondolibri.
In terms of profitability, there was a 2.8% increase in gross operating profit, achieved despite increase investments for the development of the international magazine network and in new digital activities. A significant contribution was also made in the period by the plan for the reduction of operating costs, which, three quarters ahead of schedule, has already reach its target saving of €170 million, on a like-for-like basis, for the three-year period 2009-2011.

Consolidated revenues in the first quarter of 2011 amounted to €355.6 million, a rise of 3.2% on the €344.7 million of the first three months of 2010.

Consolidated gross operating profit came to €21.8 million, an increase of 2.8% on the €21.2 million of the previous year, despite, as indicated, increased investments for development.

Consolidated operating profit amounted to €16.3 million, up by 3.8% on the €15.7 million of the first quarter of 2010, in both quarters amortizations and depreciations of tangible and intangible assets amounted to €5.5 million.

Consolidated profit before taxation came to €10.9 million, a 26.7% rise on the €8.6 million of Q1 2010, thanks to a reduction in financial charges resulting form a lower cost of money following the debt restructuring completed at the end of 2010, and a lower level of average indebtedness.

Consolidated net profit came to €5 million, more than double the €2.4 million of the same period of the previous year.

Gross cash flow in the first three months amounted to €10.5 million, compared with €7.9 million in 2010.

The Group’s net financial position at 31 March 2011 stood at -€320.7 million, compared with -€342.4 million at the end of 2010, an improvement over the quarter of €21.7 million.
In the period from March 2008 to March 2011, the total reductions has been of around €250 million.

Information regarding personnel
As of 31 March 2011, the personnel employed by companies of the Group (both on temporary and permanent contracts) amounted to 3,674, compared with 3,852 in March 2010 (3,649 in December 2010).

The trend in workforce numbers clearly shows the results achieved over the last 12 months following the completion of most of the restructuring plan launched in 2010 which has resulted, as of today and also considering the consolidation of Mondolibri last year, an overall reduction in the headcount of 178 (or 4.6% of the total workforce).
Compared with 31.12.2010 the change in the headcount (+0.6%) is the result, on the one hand, of reductions deriving from the reorganisation and restructuring of traditional businesses, which is still ongoing, and, on the other, an increase for the Group’s development in the web and digital areas.

In France a reorganisation plan for TV guides was recently presented that will result in a reduction of the headcount of 37, a response to the sharp fall in revenues from this sector.
In Italy, meanwhile, it should be noted that the figures presented in the report do not include the effects of the renewal of national labour contracts in the publishing and trade and services sectors. The former is still being negotiated and the latter was redefined at the beginning of April.

RESULTS OF THE BUSINESS AREAS
· BOOKS
Revenues in the Books area in the first quarter amounted to €78 million, compared with €79.8 million in the same period of last year (-2.3%).
Trade books revenues, the area’s main revenue stream (accounting for around 78% of the total), grew by 0.5%. While total revenues were affected by shortfalls in the art and exhibitions segments (-16.9%) and distribution for third-party publishers (-9%), the education area was stable.

Of note during the period was the launch of “Numeri Primi”, a new brand in the quality paperback segment, the first 13 titles of which recorded sales of almost 800,000 copies through the bookshop and large-scale retail channels.
In the still embryonic ebook market, Mondadori expanded its offer with a catalogue that, as of 30 March 2011, included around 1,700 titles (compared with 1,500 at the end of 2010).

Nielsen figures for the first three months of 2011 confirm the Group’s leadership in the Trade books segment, with a market share of around 26.1%. Compared with 2010, the single publishing houses d Edizioni Mondadori, Sperling & Kupfer and Piemme were slightly down, while Einaudi grew.

· MAGAZINES ITALY
In the first quarter of the year Magazines Italy generated revenues of €122 million, a slight fall (-1.1%) compared with the €123.4 million of the first quarter of 2010.
The trend in revenues was the combined result of a fall in circulation (-5.8%) and an increase in advertising (+4.8%), supported, as well as by the efforts of the sales network and numerous new initiatives, also by an excellent performance by the international network and sales in the digital area. Meanwhile, revenues from add-ons were stable compared with the first quarter of 2010, with an improvement in margins.

Regarding circulation, Mondadori performed better than its market of reference performance (-7.5% to February, internal figures), containing the fall in the first quarter at 6.4% in terms of volume, mainly the result of the reduction of promotional copies and the planned downsizing of the subscription channel (-11%), which was begun last year to counteract significant increase in postal charges.
Among the most significant features of the first quarter were the relaunch of Casaviva and the redesign of Ciak.

Regarding the web sites of Mondadori titles, advertising sales in the first quarter increased by more than 20% compared with the same period of 2010: particularly encouraging was www.donnamoderna.com; while also www.grazia.it and www.panorama.it performed well.
Online metrics for the titles were also very positive during the period, with donnamoderna.com and the sites of its network once again standing out with an increase in unique visitors of more than 26% (around 4 million), while there was a 25% increase in page views (around 52 million) and a 57% jump in the unique visitors for the new Grazia site.

· MAGAZINES FRANCE
Mondadori France ended the first quarter of 2011 with revenues of €82.6 million, an increase of 1.9% on the €81.1 million of the corresponding period of 2010.

The advertising market for French consumer magazines showed a volume increase in the first quarter of 2011 of 4% (Source: Kantar Media): in the same period Mondadori France recorded an excellent performance with an increase of 13% in terms of volume, raising its market share by 0.8%.

In terms of value, the advertising sales of Mondadori France saw a sharp upturn compared with the same period of the previous year (+10.2%).
This excellent result was due – in addition to the generally favourable performance of women’s “haut de gamme” titles in the portfolio, which account for 32.5% of total advertising revenues (24.6% in the first quarter of 2010) – also to a significant increase in advertising in Grazia (+68%), which with 539 pages in the first quarter is now in second place in the consumer magazine market. Also performing well in the period were Sciences, Closer and l’Ami des Jardins.

Circulation revenues, which combine newsstand sales and subscriptions, make up 71% of the total and were essentially stable at the consolidated level (+0.5%): this performance is even more positive if account is taken of the ongoing decline in the market of reference.
During the first quarter Mondadori France launched three new formulas for Science & Vie, Auto Plus and Le Film Français and a new quarterly, Guerre & Histoire. Since the end of March Grazia has also been available in a pocket-sized version at a price of €1.50, while the price of the traditional format has risen to €1.70.

International activities
In the first quarter of 2011 a recovery in the advertising market in the countries of the Group’s international network led to an increase of over 50% in licensing revenues.
The positive performance of all editions, in particular of weeklies, also helped to drive revenues from advertising sales to Italian clients for all of the titles. There was also further growth in the number of Mondadori Group editions published under licence and June will see the publication of Casaviva Ukraine; while in October, the Russian edition of Interni will be published with a new partner, Artcom Media.
There was also a decided improvement compared with last year in the results of the 50-50 joint ventures in Russia and China, thanks to a marked increase in advertising sales, while the Attica subsidiary continued in the period to be affected by the ongoing financial crisis that has resulted in a marked downturn in advertising revenues.

· ADVERTISING
Indications in Italy in the first quarter of 2001 show a slight fall in advertising investments (Nielsen figures on total ad spending show a fall of 2%). In particular, the biggest slide came, somewhat unexpectedly, from newspapers (-8.7%), which had a negative knock-on effect on magazines (-4.3%), which felt the impact of a slump in specialised titles.
Also of note was the essential stability of radio and TV, the latter showing a slight decline (-0.5%), while in the first months of the year the internet was the only medium that showed a significantly different trend (+15.5%).

Mondadori Pubblicità ended the first quarter with total revenues of €49.5 million, a slight improvement (+0.2%) on the €49.4 million of Q1 2010.
For magazines, the titles published by Mondadori saw an increase of 3%, attributable mainly to weeklies (+5.6%), in particular positive performances by Grazia (+18%), Donna Moderna (+4%), Tu Style (+46.4%) and Panorama (including supplements: +3.2%).
Among the monthlies, which in general continued to suffer in the early months of the year, there was however an excellent performance by Starbene (+23.4%) while also Flair (+4.7%) performed well.
Gross advertising revenues for R101 were in line with Q1 2010.

· DIGITAL
As is well known, at the end of 2010 the company created a business area for Digital, focused on the development of a range of activities in the area of new technology. From this quarter account will also be given in business and economic terms of a digital segment which, as a result of the matrix organisation adopted by the Mondadori Group at the beginning of 2011, also operates in support of other business units.
Consequently, while the digital segment records the performance of directly managed activities (a total of €4.4 million in the period), such as e-commerce (bol.it and easyshop.it), gaming, applications and CRM, other activities (e-books, online book clubs, web sites, subscriptions and digital advertising) are booked to the Magazines Italy and Books business areas (for a further €7.6 million), for a total of €12 million.
Direct revenues generated by the Digital area are largely from the www.bol.it site which recorded excellent results, also in terms of traffic, compared with the first quarter of 2010, with 835,000 unique visitors (+14%) and more than 6.3 million page views; the remainder of revenues derive from services and applications linked to mobile phones and services for the management of internet sites.
In addition, from the second half of the year, it is expected that a contribution will be made by the e-commerce activities of the website www.easyshop.it – with which, at the end of March, Mondadori began sales of products from leading brands in fashion, furniture, design and technology – and online games, for which the company has applied for a government licence.
Another important activity in the digital area is the elaboration and implementation of an adequate system of customer relationship management (CRM), aimed at sharing the Group’s client databases in such a ways as to make them even more exploitable.

· DIRECT and RETAIL
Total revenues generated by the Direct and Retail area in the first quarter of 2011 amounted to €61.5 million, an increase of 24.2% on the €49.5 million to 30 March 2011, also as a result of the consolidation of Mondolibri SpA from May 2010, net of which there would have been a fall, mainly due to the closure of two shops in the second half of last year.
In the network of sales outlets there was a further expansion in the number of franchise outlets, which now total 487, recording an increase in sales of around 5%. The Multicenter channel saw agreements reached with leading producers for the development of the so-called corner shop (in-store concessions).
It should also be noted that the board of directors of Mondadori Retail, Mondadori Franchising and Mondolibri approved a project to merge the companies that will, from 1 July 2011, trade under one name with the aim of pursuing greater management efficiency and facilitating the development of internal synergies.

· RADIO
R101 generated net revenues of €3.3 million (€3.1 million in Q1 2010) on gross advertising revenues of €4.4 million, in line with the previous year.
The radio market in the first quarter of 2011 saw a fall in revenues of 5% compared with the same period of the previous year (Source: FCP Assoradio).
On the ratings front, the publication of national Audiradio figures remains suspended.

EXPECTATIONS FOR THE FULL YEAR
The first three months of the year provided no clear signals of any possible short-term changes in the general economic scenario or in the markets of reference for the Mondadori Group, where there continues to be a generalised decline in business volumes.
Mondadori has, nevertheless, and for the fifth consecutive quarter, presented improved results, thanks to the close attention paid to product quality, the defence of the brands and the ongoing optimisation of the operational structure.
To all of this, the Mondadori Group has added an growing commitment to the development of its digital activities, with a view to exploiting the potential of its product portfolio and communities and to respond to new demands from consumers, also deriving from technological changes.
Assuming no particular or unexpected changes in the markets of reference, over the coming quarters Mondadori expects to confirm the improvements recorded from the beginning of 2010, which will allow the Group to maintain levels of operating profitability, despite continued investments for the development of new digital activities.

§

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 report for the first quarter of 2011 will be available at the company’s corporate headquarters, Borsa Italiana SpA and on the web site www.gruppomondadori.it (Investor relations section) from today

Also available from today, at the company’s corporate headquarters, Borsa Italiana SpA and on the web site www.gruppomondadori.it (Corporate section), will be the minutes of the Ordinary and Extraordinary Meeting of the Shareholders held on 21 April 2011.

The Board of Directors of Arnoldo Mondadori S.p.A. met today, under the Chairmanship of Marina Berlusconi, to examine and approve the consolidated balance sheet and management report for the year to 31st December 2010 as presented by the Group’s Deputy Chairman and Chief Executive, Maurizio Costa.

GROUP PERFORMANCE FOR THE YEAR ENDED 31 DECEMBER 2010

In terms of profitability, 2010 showed a substantial improvement on the previous year. In addition to an increase in revenues, all of the objectives for the year relating to reorganisation and the reduction of staff and operating costs were achieved.
In particular, the personnel rationalisation plan and reorganisation activities led to a reduction of 347 people in 2010, taking to around 700 the number for the three-year period (excluding the effects of the sale of the Printing division and the consolidation of Mondolibri). Further improvements are foreseen during 2011.
There was also a reduction in personnel costs for the year of 10.3%.
The year also saw the attainment of 93% of the plan to contain operating costs, which foresaw a saving of €170 million for the three-year period 2009/2011.

Consolidated revenues came to €1,558.3 million, an increase of 1.2% on the €1,540.1 million of 2009.

Consolidated gross operating profit totalled €140.2 million, up 32% from the €106.2 million of the previous year. While benefitting from lower restructuring costs than in 2009, this item was negatively impacted, for an analogous amount, by higher postal charges and, above all, by extraordinary charges from writedowns and the results of joint ventures in countries severely affected by the recession.
As a proportion of revenues, this represented a rise from 6.9% in 2009 to 9%.

Consolidated operating profit came to €114.2 million, a jump of 59.1% compared with the €71.8 million of 2009, with amortizations and depreciations on tangible assets of €26 million (€34.4 million in 2009).
As a proportion of revenues, this represented a rise from 4.7% in 2009 to 7.3%.

Consolidated pre-tax profit came to €90.3 million, an increase of 41.3% on the €63.9 million of 2009, with higher financial charges of €16 million due largely to a capital gain in 2009 of €14.5 million following the closure of a private placement and related derivatives.

Consolidated net profit amounted to €42.1 million, a 22.7% increase on the €34.3 million of the previous year: the result was affected by the payment of €8.7 million in line with new norms regarding the definition of pending tax litigation.

Consolidated net profit for 2010, adjusted to take account of the aforementioned extraordinary item (tax charges for previous years) would amount to €50.8 million, more than double the €23.8 million net profit recorded in 2009, adjusted for capital gains.

With regard to the company’s assets, net assets as of 31 December 2010 amounted to €581 million, compared with €546.3 million at the end of 2009.
The Group’s net financial position went from -€372.9 million at the end of 2009 to -€342.4 million on 31.12.2010, an improvement of €30.5 million.
During the period 2008-2010, the level of indebtedness has been reduced by around € 200 million.

Information concerning personnel
On 31 December 2010 permanent and temporary contract staff employed by the companies of the Group amounted to 3,649.
An analysis of this figure, compared with the figure on 31.12.2009 and excluding the effects of the consolidation in April of Mondolibri (246 employees last year), clearly shows the benefits of the cost containment actions carried out.
As already indicated, there was total reduction of staff in 2010 of 347, which corresponds to 8.7% of the whole, when account is also taken of the reduction during the period at Mondolibri. Of this figure, 80% is related to the realisation of programmed reductions for the year foreseen by the restructuring plan and involving the Italian companies Arnoldo Mondadori Editore S.p.A. and Mondadori Pubblicità S.p.A., as well as the foreign subsidiary Mondadori France SA.
Significant rationalisation efforts have also involved the Direct area where, following reorganisation and a strategic review of sales outlets, a reduction of 7% in headcount was achieved.

THE BUSINESS AREAS
· BOOKS
Total revenues generated by the Books area to 31 December 2010 amounted to €413.9 million, a slight fall (-2.2%) on the €423.1 million of 2009, with the second half of the year showing an improvement compared with the same period of the previous year.

Also in 2010 the Group confirmed its leadership in the sector with a market share of 27.1% and a high level editorial offer. Special note during 2010 were the prestigious successes of the novel Canale Mussolini by Antonio Pennacchi, winner of the Premio Strega 2010, and runner-up also in the Premio Campiello 2010; and Accabadora by Michela Murgia, winner of the Premio Campiello. Also of note was the award of the Nobel Prize for Literature to Mario Vargas Llosa.
The fall in revenues recorded by the school textbooks sector is the result of recently introduced educational reforms.
Operating profit was affected by losses suffered by the Random House Mondadori joint venture in markets severely affected by the international financial crisis. Adjusted to take account of non-recurring items, operating profit for 2010 was in line with that of the previous year.
October saw the launch of e-book sales, with a catalogue that by the end of the year had reached a total of 1,500 titles, available from the principal Italian e-commerce stores, including Bol.it. Prices are, on average, 40% lower than print editions for new titles and 25% lower for backlist titles. The biggest selling titles were La caduta dei giganti by Ken Follett, Io e te by Niccolò Ammaniti and La solitudine dei numeri primi by Paolo Giordano.

· MAGAZINES ITALY
The Italian consumer magazine market in 2010 was again characterised by the recessionary trend that has affected the world’s leading economies since the second half of 2008, with a decline in circulation, advertising investments and add-on sales.
The actions which have allowed Mondadori to successfully contrast this still problematic scenario – with a performance above that of the reference market – can be identified along tow distinct lines: the first aimed at exploiting the benefits of the multi-year reorganisation plan, and the second focused on sustaining the development of the product portfolio.

Magazine revenues in Italy in 2010 amounted to €471.4 million, a fall of 4.1% on the €491.8 million of the previous year.

After the marked slump in 2009, this result was achieved, in particular with regard to Mondadori titles, the main component of the area’s business, by a series of phenomena:

• a 4% fall in circulation revenues, in line with the market of reference and the consequent maintenance of leadership and market share (34.2%);
• a fall of 8.7% in revenues from add-on sales, a markedly better performance than the market as a whole (-23.6%, in terms of value);
• a moderate slide in advertising revenues (-1.9%), which was better than the market (-5.4%, Source: Nielsen, in terms of value) and decidedly more resistant than the most qualified competitors in the magazine market;
• the particularly positive overall turnover of the Magazines area was the result of a good performance by weeklies. Meanwhile, with some significant exceptions for products involved in specific re-launches, the performance of monthlies was markedly weaker.

· DIGITAL
With the overall advertising market in 2010 showing growth (+3.8%, Source: Nielsen) compared with 2009, a very difficult year for advertising, the most dynamic medium in the year was the Internet, which grew by 20.1%.
Mondadori web sites, for which advertising is sold by Mediamond, saw a 40% increase in gross revenues, above all thanks to the performance of sites for women, in first place Donnamoderna.com, followed by Graziamagazine.it.

· ADVERTISING
The Italian advertising market ended 2010 with total growth of 3.8%, confirming the progressive improvement – compared with 2009, a particularly bad year for advertising (Nielsen -13.4%) – in line with the positive signals that were first seen in the middle of the year, above all for certain media.
Mondadori Pubblicità closed the year with revenues of €233.9 million, a fall of 6.6% on the €250.4 million of 2009. On a comparable basis in terms of media, the fall was of just 1.9%.
Among the changes that characterised the year was the interruption of sales for il Giornale from November 2009, for the internet (passed to Mediamond) and the addition to the portfolio of Radio Kiss Kiss.

In magazines, after a positive final quarter, the titles published by Mondadori ended 2010 essentially in line (-0.8%), on a like-for-like basis, with the previous year, and distinguishing themselves, in a competitive context particularly affected by uncertain forecasts and a high level of volatility in advertising investments. There was a positive performance by weeklies (+1%), which benefitted from the strength of the entire women’s segment.
With regard to radio, where there was overall growth of 16.5%, R101 sales were up (+5.1%) and sales for Radio Kiss Kiss, which began in March, were also positive.

· MAGAZINES FRANCE
Revenues generated in 2010 by Magazines in France amounted to €344.2 million, an increase of 0.2% on the €343.5 million of 2009 (+6.2% net of titles sold and the effect of the launch of Grazia).
In a magazine market in which there was a healthy recovery in advertising pages and a slight fall in circulation, the results of Mondadori France demonstrate the wisdom of focusing on the portfolio of high-circulation titles and the success of the launch of Grazia, with figures clearly better than the market.
Mondadori France recorded a increase in circulation volumes of 1.7% (Diffusion France Payée), compared with a – 2.1% by competitors.
Circulation revenues (69% of the total) – which include both newsstand sales and subscriptions – were down by 1.3% at the consolidated level.
Excluding the titles sold or closed, there was an increase of 3.9%, mainly due to the positive sales of Grazia (51 issues compared with 18 in 2009) and a marked growth in subscription revenues, which, being less exposed to economic cycles, constitute an important asset (32.5% of magazine revenues in the period).

With regard to advertising, there was an 8% increase in consolidated revenues compared with the previous year. If the titles sold or closed are excluded, the increase was of 19.1%. These excellent results are above all due to a marked increase in advertising revenues for the Mondadori France “haut de gamme” women’s titles, which now account for 27% of total advertising sales (13% in 2009).
Volume sales in the magazine advertising market in France in 2010 was up by 9.5% (Source: Kantar Media). In the same period Mondadori France recorded an excellent performance (+24.9% in terms of volume), increasing its market share by 1.2%.

· INTERNATIONAL ACTIVITIES
In the period to 31 December 2010 the international activities of Mondadori Magazines generated total revenues of €142 million.
The 50-50 joint ventures in Russia and China performed decidedly better than the previous year and budget expectations, in particular with regard to advertising sales.
The Attica subsidiary was affected by the financial crisis in Greece and the Balkans, with a reduction in advertising revenues of around 27% (-21% on a like-for-like basis). Decisive ongoing efforts to reduce costs had a big impact on containing the loss of revenues in 2010 and are aimed at further contributing to re-balancing the results of 2011.
Other figures for the period show that licensing revenues were up by 36.4%, thanks to the positive performance of Grazia UK and Grazia Holland, as well as the German and French editions of the title, that had still to be launched in the first part of the previous year.
There was also an increase in revenues from advertising services in Italy for the network, both thanks to the new editions and the positive performance of existing titles (Grazia UK +14%, Grazia Russia +67%).

· DIRECT & RETAIL
Total revenues generated by Direct and Retail at year-end came to €279.7 million, an increase of 30.2% compared with the €214.8 million of 2009, also thanks to the consolidation of Mondolibri S.p.A. from April 2010.
On a like-for-like basis, the increase would be of 6.5%, mainly thanks to new affiliations in the franchising network.

Direct
There was a slight recovery in the market for direct communications in 2010 was characterised and, in this context, Cemit Interactive Media S.p.A. identified both new clients and new operations that resulted in a 14.3% increase in revenues compared with 2009, while also maintaining high value added activities.
In the e-commerce (Bol.it) area, the company recorded strong growth (+28%) compared with the previous year. This increase, the highest in the sector among the relevant operators in the book sector, was achieved also thanks to improvements in customer service and the adoption of a more aggressive commercial policy.

Retail
During 2010 the expansion of the network in Italy continued, resulting in the generation of combined revenues of around € 202.7 million. By normalising franchising revenues (i.e. converting them from the disposal value to the retail price), the total reaches around €250 million and gives the area in a highly significant position in Italian bookselling and a predominant position in terms of the number of outlets (with a combined total of 517 outlets under the Edicolè, Librerie Mondadori, Gulliver and Mondadori Multicenter fascia).

· RADIO
In 2010 the radio market saw revenues increase by 7.7% compared with the previous year, once again making it one of the best performing media.
The trend was markedly different between the first (+14.7% compared with 2009) and second halves of the year, which while remaining positive, was markedly less so, (+0.8%; Source: FCP Assoradio).

Advertising sales for R101 generated net revenues of €14.5 million, an increase of 5.1% on the €13.8 million of 2009. Such revenues are essentially the company’s share of total gross advertising sales of around €20.5 million.
There was also a big difference in the sales for R101 between the first and second halves of the year, due to a lower number of special initiatives and a performance that was decidedly better than the market average in the latter part of the year.
With regard to ratings, publication of the Audiradio national figures has been suspended: the last published figures refer to the first quarter of 2010 where R101 notched up a daily average of 2.5 million listeners and around 7 million over 21 days).

RESULTS OF THE PARENT COMPANY ARNOLDO MONDADORI EDITORE S.P.A.
The Annual Report of the parent company, Arnoldo Mondadori Editore SpA, for the year to 31 December 2010, shows a net profit of €51.7 million (€53.2 million on 31 December 2009), while gross operating profit came to €68.1 million (€42.3 million in 2009).
The improvement in the latter was due to the positive performance recorded by the Magazines area and the effects of staff reductions resulting from the implementation of the restructuring plan introduced in 2009.
The net profit figure was impacted by the payment of extraordinary tax charges of €8.7 million, resulting from new norms for the definition of pending tax litigation introduced by law N° 73 of 22 May 2010. This operation is related to an ongoing dispute with the Milan tax office regarding the year 1991.

DIVIDEND PROPOSAL
The Board of Directors agreed to propose to the Annual General Meeting of the Shareholders, called Thursday 21 April 2010 (or Friday 22 April on second calling), the distribution of a gross dividend of €0.17 per for each ordinary share (net of treasury stock) in circulation on the ex-dividend date.
In line with the dispositions of the “Regulations for organised markets managed by Borsa Italiana SpA” dividends will be paid as follows: coupon detachment 23 May 2011, payable from 26 May 2011.

FORECAST FOR THE FULL YEAR
With the absence of any changes in the trend and with no improvements in the forecasts, figures for consumer spending in the markets of relevance to the Mondadori Group for the first two months of 2011 do not show any significant signs of improvement in the short term or for the year as a whole.

Regarding the main areas of business:
– in Magazines, some slight signs of a recovery in advertising allow for reasonable optimism in terms of a recovery in revenues, thanks to the strength of the portfolio of titles both in Italy and in France and the ongoing commitment to the quality of the offer;
– the trade books area may be able to count on an important editorial programme, while Mondadori’s commitment to the development of e-books will continue to be strong;
– over the whole year, the maximum focus will be on digital activities, both in terms of the interaction with all of the other activities of the Group and in the development of new businesses, also linked to editorial content, the brands and the Mondadori communities.

Over the year, the reorganisation plan will continue, along with ongoing efforts to contain operating costs which have so far allowed the Group to recover profitability, also in extremely difficult trading conditions.

As a result of the above, Mondadori could improve both revenues and operating profitability in 2011, with a determined commitment to the development of digital activities. Caution is, however, necessary in a period of such economic instability, heightened, as it is, by international tensions that could have a negative impact on the already weak recovery underway.

PROPOSAL TO CANCEL PART OF THE TREASURY STOCK HELD AND CORRESPONDING TO 5% OF THE SHARE CAPITAL
Arnoldo Mondadori Editore S.p.A. directly holds 17,850,101 company shares, equivalent to 6.88% of the share capital and acquired at an average price of around €6.1697 per share. With an additional 4,517,486 Mondadori shares held by the subsidiary Mondadori International S.p.A., the total number of shares held, directly or indirectly, amounts to 22,367,587, or 8.62% of the share capital.

The board of directors will propose to an extraordinary meeting of the Shareholders the cancellation of 12,971,492 shares, with a nominal value of €0.26 per share, and corresponding to 5% of the share capital, while keeping in the portfolio, also to service stock option plans, 4,878,610 shares, in addition to the 4,517,486 held by Mondadori International.
The proposal to cancel a part of the shares held as treasury stock is explained by the fact that, in recent years, there have not been opportunities to use such stock as foreseen by the authorisations made by the shareholders, such as share swaps or conversions in financial instruments.Cancellation, and the consequent reduction in the number of shares making up the share capital, would – while maintaining the necessary solidity to support future growth objectives – result in the optimisation of the company’s capital structure and have a positive impact in terms of increasing both earnings per share and dividend per share.
In terms of the impact on the company’s accounts, the “treasury stock”, in compliance with international accounting principles, as a reduction in net assets would be reduced by around €80,030,000, against a reduction in the share capital of a nominal €3,372,587.92 – corresponding to 12,971,492 shares with a cancelled nominal value of €0.26 – and a reduction of the “share premium reserve” of around €76,658,000.
If approved by the Shareholders, the reduction in the share capital would become effective, subject to no objections being submitted, only after a period of ninety days from the registration of the resolution, as foreseen by article 2445 of the Italian Civil Code.

RENEWAL OF AUTHORISATION TO BUY BACK AND UTILISE COMPANY SHARES
Following the expiry, with the approval of the annual report for 2010, of the authorisation given by the Shareholders at the AGM of 27 April 2010, and with the aim of maintaining the legal conditions for eventual buy-backs and, in consequence, the possibility of pursuing eventual investment opportunities or other treasury stock operations, the board of directors will propose to the forthcoming Annual General Meeting the renewal of authorisation to buy back company shares.
The AGM of 27 April 2010 provided authorisation to effect share buy-backs up to a limit, considering the shares already held in the portfolio, of 15% of the share capital, or 38,914,474 ordinary shares.
Given the total of 22,367,587 shares (8.62% of the share capital) already directly or indirectly held at the date of the AGM, the authorisation thereby awarded the board the faculty to acquire a maximum number of 16,546,887 additional shares. No buy backs were made on the basis of the authorisation of 27 April 2010.

The Annual General Meeting of the Shareholders will also be asked to authorise the use of shares involved in such buy back operations or already in the company’s portfolio, as per Art. 2357 of the Civil Code.
The highlights of the board of directors’ proposal are as follows:

• Underlying motivation

The underlying reason for the request for authorisation to effect buy-backs and make use of company shares is that it will allow the Board of Directors to:
– use company shares for the exercise of options for the purchase of shares assigned to participants in the stock option plans put in place by the Shareholders;
– use company shares, either bought or in the portfolio, for the exercise of rights, also conversion rights, deriving from financial instruments issued by the company, its subsidiaries or third parties;
– use company shares, either bought or in the portfolio, as part or whole payment in any eventual acquisitions or equity investments that fall within the company’s stated investment policy;
– take advantage, where and when considered strategic for the company, of investment opportunities, also in relation to available liquidity

• Duration

Until the approval of the Anuual Report for 2011.

• Cap on the number of shares that may be bought

In line with the expiring authorisation, the new authorisation would allow for the possible purchase of a maximum of 16,546,887 additional shares, given the number already directly or indirectly held by the company, as outlined above, an overall maximum of 15% of the current share capital.
If the proposed operation for the cancellation of 12,971,492 shares held in treasury stock is approved, with the consequent reduction in the share capital as outlined above, the authorisation would allow for the buy back of up to 10.52% of the share capital.

• Method of acquisition and the price range

Buy-backs would be effected on regulated markets as per art. 132 of the legislative decree of 24 February 1998 n. 58 and art. 144 bis, para. 1, B of Consob regulation 11971/99 according to operating procedures established by the regulations for the organisation and management of the markets themselves, which, does not permit the direct combination of offers to buy with predetermined offers to sell.
Consequently, the corresponding minimum and maximum price of sale will be determined at the same conditions that applied to previous authorisations agreed by the Shareholders, i.e. at a unit price not less than the official market price on the day prior to any operation, less 20%, and not more than the official market price on the day prior to any operation, plus 10%.
In terms of price and daily volumes, acquisition operations will in any case be conducted in line with the norms foreseen by the EU regulation 2273/2003.

Today at 3pm, at the company’s headquarters in Segrate, the deputy chairman and chief executive, Maurizio Costa, and the CFO, and Carlo Maria Vismara, will present the results for 2010 approved today by the board of directors, to the financial community.

During the presentation management will also provide information regarding current activities and mid-term plans relative to the business in which the Group operates.

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 Annual Report for the year ended 31 December 2010, containing the management report and the reports of the statutory auditors and the external auditors, along with all other legally required documentation, will be made publicly available by 31 March at the company’s corporate offices, at the Borsa Italiana S.p.A., as well as on the corporate web site www.gruppomondadori.it (in the Investor Relations section).

The Board of Directors of Arnoldo Mondadori S.p.A. met today to examine and approve the interim report for the first nine months of the year to 30th September 2010, as presented by the Group’s Deputy Chairman and Chief Executive, Maurizio Costa.

THE MARKET SCENARIO IN THE THIRD QUARTER

There were no significant changes in the economic trends in the sectors of reference for Mondadori in the third quarter of the year. In particular, both circulation figures and advertising investments remained at lower levels than the previous year. Despite this unfavourable context, the company has been able to achieve in the third quarter a level of gross operating profit 73.2% higher than the same period of last year, bringing the increase for the first nine months of 2010 to 51.2%

A SUMMARY OF BUSINESS PERFORMANCE

The elements that have determined such a conspicuous improvement in profitability, with just a slight increase in revenues (+1.4%), are further confirmation of what was already stated in the report for the first six months, ie:

– a good level of stability in terms of magazine circulation, with a performance clearly ahead of the market average both in Italy and in France;

– a further increase in profitability in the book business, where revenues in the third quarter were also up on 2009;

– a constant improvement of the results from the international network and the ongoing success of Grazia France, both in terms of circulation and advertising sales;

– the increasing contribution of the plan for the reduction of operating costs – which has already realised 85% of the target savings of €170 million over the three-year period 2009-2011 – and which will continue for the whole of next year.

Activities related to digital content have continued with even greater impulse with the stipulation of agreements with operators in production, telecoms and retail; since the beginning of September the digital area has also taken on a locomotive role, both for its own activities and in support for other business sectors, above all magazines and books.

Thanks to the introduction of a new business model and the redefinition of the organisational structure – which will become fully operational from the beginning of next year – will encourage and stimulate the involvement and cooperation of all of the business areas in response to new market opportunities.

GROUP PERFORMANCE IN THE PERIOD TO 30 SEPTEMBER 2010

Il Consolidated revenues came to €1,130.2 million, an improvement of 1.4% on the €1,114.3 million of the first nine months of 2009.

Consolidated gross operating profit amounted to €103.1 million, an increase of 51.2% compared with the €68.2 million of last year, despite higher costs due to increased postal charges of €5.5 million.

This is equal to a figure of 9.1% as a proportion of revenues, compared with 6.1% for the same period of 2009.

Consolidated operating profit reached €85.6 million, a 71.2% increase on the €50 million of 30 September 2009, with amortizations and depreciations of tangible and intangible assets for a total of €17.5 million (€18.2 million in 2009). As a proportion of revenues, an increase from 4.5% in 2009 to 7.6%.

Consolidated profit before taxation amounted to €67.5 million, an increase of 35% on the €50 million of the first nine months of 2009, with net financial charges of €18.1 million. For an appropriate comparison with the previous year, account should be taken of a capital gain of €14.5 million in the third quarter resulting from the closure of a private placement and relative derivatives.

Consolidated net profit came to €30.7 million, a 13.3% increase on the €27.1 million of 30 September 2009: this result was affected by the payment of €8.7 million to clear a pending fiscal suit.

Consolidated adjusted net profit, which takes account of the net impact of the extraordinary elements outlined above (financial capital gains in 2009 and tax charges for previous years paid in 2010), was more than double that of the same period of 2009.

Gross cash flow in the first nine months of 2010 amounted to €48.2 million, compared with €45.3 million in 2009.

The Group’s net financial position went from -€372.9 million on 31 December 2009 to -€369 million. The improvement compared with 30 September 2009 was of €47.9 million and €275.5 million compared with 30 September 2008.

Personnel

On 30 September 2010 staff employed by the companies of the group, on both permanent and temporary contracts, totalled, a tempo 3,717.

On a comparable basis, in other words excluding the impact of the recent consolidation of Mondolibri S.p.A., there was a reduction of 260 (-7%) compared with 31 December 2009. This is mainly attributable to the ongoing restructuring process at the parent company, as well as constant efforts to improve efficiencies at all of the companies in the group.

There was a reduction in staff numbers of 688, which corresponds to 89% of the plan 2008/2011.

The action taken to date has been conducted in full compliance with the approved restructuring plan and has made it possible, in nine months and on a comparable basis, to reduce staff by 8% in Italy and almost 5% in France.

As a consequence, the cost of contract staff, which amounted to €198.2 million (€217,9 million on 30 September 2009) was down by 9%.

Finally, it should be noted that the national contract for printing and publishing employees, which expired in March 2010, has, to date, still not been renewed.

RESULTS OF THE BUSINESS AREAS

• BOOKS

Market data for the first nine months of 2010 (source: Nielsen) confirm the leadership of the Mondadori Group in trade books, with an overall market share of 26.7%, with Edizioni Mondadori and Einaudi in the top two places on the list of publishers.

Revenues in the Books area at 30 September 2010 totalled €294.5 million, a fall of 3.8% on the €306 million of the same period of the previous year.

Sales in the third quarter, especially in September, showed signs of a recovery in market share. Of note during the period were the awards of the Premio Strega 2010 to Antonio Pennacchi for Canale Mussolini (Mondadori), the Premio Campiello for the novel Accabadora by Michela Murgia (Einaudi), and the Nobel Prize for Literature to Mario Vargas Llosa, a historic author of Einaudi, as well as the success of the new novel by Ken Follett, and a series of other important new title that augur well for the Christmas season for all of the group’s publishing houses.

To 30 September 2010 Edizioni Mondadori generated revenues of €85.9 million, a 2.8% fall compared with the previous year.

The autumn season was characterised by the simultaneous world publication of the new novel by Ken Follett, La caduta dei giganti, which immediately entered the bestsellers list with an initial print run of 500,000 copies. Among the successful titles in foreign fiction were Sophie Kinsella’s, I love mini shopping, with sales of more than 160,000 copies and first-time author Maria Dueñas with La notte ha cambiato rumore che, that began with sales of 40,000 copies, confirming a great interest among readers for Spanish fiction.

In Italian fiction, Canale Mussolini by Antonio Pennacchi continued to perform well, selling 200,000 copies (making a total of 265,000) and the new novel by Andrea Camilleri, L’intermittenza (already in its fourth printing) has sold more than 150,000 copies.

In non-fiction there was a confirmation of the success of I segreti del Vaticano by Corrado Augias (160,000 copies), while in the unclassified segment the Fabio Volo phenomenon continued (with sales of over 160,000 copies of Il tempo che vorrei two years after it was first published, making a total of 750,000 copies). There were excellent results form the Oscar Mondadori campaign with an increase in sales of around 8% compared with the previous year. The protagonist during the summer months was the Oscar Grandi Bestsellers paperback edition of Paolo Giordano’s La solitudine dei numeri primi, which sold 280,000 copies in just three months, returning to the top of the bestsellers list with the release of the film based on the novel.

In the third quarter of 2010 Einaudi imporved its performance compared with the situation at 30 June 2010, with total net revenues of €33.8 million (-2% compared with the first nine months of 2009).

Among the best performing titles were: Accabadora by Michela Murgia (120,000 copies in 2010); Tre secondi by Roslund-Hellstrom (51,000); Per l’alto mare aperto by Eugenio Scalfari (51,000); Il giovane Holden by J.D. Salinger (77,000) and the recent Mia suocera beve by Diego De Silva with sales of more than 40s000 copies, La vendetta by Anne Holt (35,000). There was confirmed success for La parola contro la camorra by Roberto Saviano and Prima di morire addio by Fred Vargas. It should also be noted that the editorial plan of Einaudi foresees the publication of numerous titles in the last quarter of the year.

In the first nine months of 2010, Sperling & Kupfer recorded revenues of €18.4 million, a fall of 3.7% compared with the first nine months of 2009, mainly due to a fall in revenues from the sale of rights for add-on initiatives. Of particular note was the great success of Sveva Casati Modignani’s Mister Gregory, published at the end of the first half, which has sold almost 190,000 copies.

Cumulative revenues at Piemme to 30 September 2010 amounted to €34.9 million, an increase of 3.6% compared with the same period of last year.

Fiction and non-fiction lines saw an overall fall of 5.1% compared with 2009, mainly due to a different editorial programme for new titles.

The Junior sector continued its positive trend, in the Stilton line the most significant new titles were Sesto viaggio nel Regno della Fantasia (126,000 copies) and Viaggio nel tempo 3 (79,000 copies). Also of significance during the period was the publication of a celebrative volume to mark the tenth anniversary of Stilton, Caccia al libro d’oro (45,000 copies).

Total revenues by Mondadori Electa were down by 17.6% on the same period of 2009, this was due to the effects of a slowdown in all of the segments in which the company operates. The fall of revenues in the bookshop channel (-29.7%) and the substantial disappearance of add-on sales were not, unlike other years, compensated by revenues on the Cultural Heritage area (-12% compared with 2009) mainly due to the loss of certain museum bookstore concessions (Brera and Cenacolo in Milan, and the Musei Civici in Venice) and Sponsorship sales (-16%). There was, however, a recovery in co-editions (sales of foreign rights), penalised by the strength of the euro against the dollar and the pound.

During the first nine months 2010 Mondadori Education generated revenues of €66.8 million, a fall of 1.8% on the same period of the previous year, essentially confirming its share of the textbook adoptions market. The primary school segment confirmed the results of the previous year, thanks to the five-year rule on adoptions. The first level secondary segment saw an overall fall, despite good results for new titles and new editions.

The second level secondary segment saw a slight fall but confirmed excellent results in the subjects in which Mondadori Education is the market leader. There were good results in the scientific subjects affected by the reforms in high schools. Note should also be made of trend for price reductions in both secondary levels.

• MAGAZINES ITALY

Magazine sales during the summer months, traditionally positive for the magazine market, were positive and resulted in a recovery in terms of circulation.

In this context Mondadori performed better than the market, both in terms of advertising sales and single copy sales through the different channels.

The revenues of Magazines Italy in the first nine months of the year came to €362 million, a slight fall (-1.2%) on the €366.5 million of the same period of the previous year.

Even more significant with respect to the market of reference was the increase in profitability, despite the impact of the cancellation of postal subsidies.

This encouraging performance was based on the following factors:

– a 2.9% fall in circulation revenues, markedly better than the performance of the competitors in a market that lost around 5% (around 9% in terms of copies);

– essential stability in revenues from add-on sales (+1.4%), in absolute contrast to a market that slumped by 22%;

– a moderate re-balancing in advertising revenues (-2.4%), even more contained on a like-for-like basis.

Among the most significant factors during the period were:

– the re-launch at the end of July of Tu Style, supported throughout August by a big advertising campaign and promotional initiatives: to date the weekly has achieved notable results (with sales of over 200.000 copies);

– strong support for weeklies, that made it possible in the summer season to grow newsstand revenues close to the levels of 2009;

– the launch of an intensive campaign of launches of add-on sales, some of which are achieving much better than expected results;

– the ongoing programme of reorganisation in editorial and management structures;

– the reinforcement of the activities of Press-Di, the wholly-owned Mondadori subsidiary operating in distribution and subscription management for the group’s titles and third-party publishers. In addition to the numerous contracts for the distribution of newspapers and magazines acquired in recent years, since 1 October the company will also distribute the products of Sergio Bonelli Editore, leader in comic books;

– the conclusion, at the end of July, of the negotiation between Fieg and the Italian postal for an agreement on postal charges, following the cancellation from 1 April of subsidies which for many years compensated publishers for the inefficiencies of the service. The agreement will make it possible to reduce by around 50%, from 1 September, the charges resulting from the application of the new conditions for the delivery of subscription products.

Circulation

As already mentioned, the market saw an overall drop in newsstand circulation of 9% in terms of copies and around 5% in terms of value, compared with the above indicated -2.9% by Mondadori.

Among the group’s weekly titles, there was a marked improvement in the performance of Tu Style; TV guides held up well, as did Chi, Grazia and Donna Moderna. For monthlies, there was an increase in circulation revenues for the titles in the interiors and cooking segments.

Add-on sales

The add-on sales market, which saw a big slump (-22%), was characterised during the period by some particular phenomena, including an increase in the number of initiatives, the maintenance of relatively high prices and a strong downturn in average sales.

In this context Mondadori confirmed also in the third quarter a performance in marked contrast to the market that is expected to continue for the rest of the year.

The various initiatives in the home video segment and collectables were markedly up on 2009; those in music and editorial products, while less brilliant, were nevertheless satisfactory. In a portfolio of articulated activities, the operations linked to the major titles, including TV Sorrisi e Canzoni and Panorama, remain fundamental

International activities

The international activities of Mondadori Magazines generated excellent result to 30 September 2010, with licensing revenues up by 46%, following the good performance of Grazia UK, Grazia Olanda and the contribution of Grazia Germania and Grazia Francia launched during the period.

Revenues for the sale of advertising in Italy for the international network more than doubled, both on account of new editions and for growth in revenues for existing titles (Grazia UK +10%, Grazia Russia +67%).

The performance of 50-50 joint ventures in Russia and China was decidedly better than last year and markedly better than the budget, particularly in terms of advertising sales.

The Attica subsidiary has felt the effects of the financial crisis in Greece and the Balkans with a fall in advertising revenues of around 22% (-20% on a like-for-like basis). A strong cost reduction programme is already being implemented in order to at least partially compensate for the fall in revenues by the end of the year.

Digital

The online advertising market grew significantly, with, in particular, an increase in display advertising of 17.7% compared with the same period of the previous year (source: Nielsen in terms of value, August 2010).

Advertising sales for Mondadori sites, managed by Mediamond, in the first nine months of 2010 saw an increase of 36%, thanks to a significant push by DonnaModerna.com, the positive results of which confirm the validity of the group’s decision to focus on the women’s market.

• MAGAZINES FRANCE

Mondadori France ended the first nine months of the year with total revenues of €252.6 million (-0.9% on the €254.8 million of the same period of last year). Excluding the operations that have affected the consolidation area (the sale of titles to the joint venture Editions Mondadori Axel Springer S.n.c., the launch of Grazia and the restructuring of the magazine portfolio), revenues would be up by 6.7% compared with 2009.

Circulation

Circulation revenues totalled €175.8 million, a 2.1% fall (+4,5% on a like-for-like basis, compared with the same period of last year, thanks mainly to the launch of Grazia and a significant increase in subscriptions). Being less exposed to economic cycles, the subscription channel, which makes up around 33% of circulation revenues, is an important asset for the group.

This positive performance demonstrates the appropriateness of the strategy of repositioning the portfolio of titles towards the “grand public” market that the group has been pursuing since 2007 and has been accompanies by a constant improvement in the editorial quality of the titles. These results are even more remarkable given the current situation in the magazine sector and have been recognised by the market which has, over the last two years, awarded ten prizes for editorial excellence to our products.

In terms of copies Mondadori France recorded an increase of 3% in circulation, while the market as a whole saw a fall of 1.8%. In addition to the effect of Grazia, the excellent performance of other titles in the portfolio should be underlined, in particular Modes et Travaux (+6.2%), Science et Vie Découverte (+5.7%), Biba (+5.1%), Science et Vie Junior (+4.8%), L’Ami des Jardins et de la Maison (+2.5%), Science et Vie (+2.4%) and Closer (+1.7%).

Advertising

Advertising sales were up 5.5% on the previous year, an improvement that was even more significant on a like-for-like basis (+19.1%).

This excellent performance is above all explained by the growth in advertising sales for the up market (haut de gamme) women’s titles (the weekly Grazia and the monthly Biba) that now account for 26% of total advertising revenues.

The magazine advertising market to the end of September recorded an increase of 8.8% in page numbers (source: Kantar Media). In the same period Mondadori France recorded a very positive performance with an increase of 25.8% in pages and a 1.2 percentage point increase in market share.

Activities during the period

The strategic decisions taken in 2009, the launch of Grazia, the concentration in the joint venture with Axel Springer of the auto sector titles and the closure of marginal titles, have had a positive impact of the accounts in 2010.

Despite strong competition from two new titles (Be and Envy, which, however, interrupted publication at the end of September) the positive performance of Grazia continued with an average of 30 advertising pages in 2010 and newsstand circulation of 177,000 copies.

The activities of the joint venture Editions Mondadori Axel Sprinter, following the concentration of the auto sector titles, continued to show positive results, increasing newsstand sales; the editorial structure is evaluating new formulas for Sport Auto and Auto Plus and working on the development of digital activities.

The policy of cost reduction, began in recent years, continued, with particular attention on industrial costs and general expenses.

• ADVERTISING

Advertising investments in the first nine months of 2010 continued the generally positive trend noted in the first half of the year (+4.8% to August, source: Nielsen) showing, on the one hand, a progressive recovery in “healthy” media, including internet, radio and television, while on the other, ongoing difficulties for print media, within which newspapers (with the exception of the free press) and national commercial advertising remained essentially stable.

Magazine advertising, meanwhile, saw a fall of 8.4%, with the positive changes recorded in certain sectors, FMCGs, fashion, cosmetics and lately even furniture, only partially compensating the downturn in other segments. Despite positive August sales, a general uncertainty continues to hang over the medium in the latter part of the year characterised by different client behaviour on different titles, some of which have bucked the general trend in the market.

Mondadori Pubblicità ended the first nine months of the year with total revenues of €170.2 million, essentially in line, on a comparable basis, with 30 September 2009 (€181.6 million).

Marked changes in the revenue breakdown, such as the termination in November 2008 of the contract with Società Europea di Edizioni S.p.A. and the shift of online advertising sales, from January, to Mediamond, have had a negative impact on 2010 of around 7 percentage points.

After a third quarter in slight decline, the Mondadori titles have remained essentially in line with the first nine months of 2009 (-1.2%): on a like-for-like basis -2.4%.

Weeklies have held up well (+1.2%), thanks mostly to the performance of women’s titles, particularly Donna Moderna, Chi and Tu Style, that was supported by a targeted sales campaign that resulted in a total increase in sales of 35%, coinciding with the re-launch in July (+50% in the third quarter alone). The monthlies remained below the levels of 2009.

In concert with the publisher, activities have continued in the development of digital projects, including the launch of iPad versions of Panorama and Grazia, and the realisation of new events with innovative promotional formats. These include “Fashion & Design 2.0”, organised by Grazia and Interni during the Milan Fashion Week and “Milano Design Weekend”, an event dedicated to the interiors sector that took place in October.

In radio, the positive trend of R101 continued, up 6.2% in the first nine months of the year, and progressively recovering compared with the trend in the market in recent months. The figure is even more significant when account is taken of the comparison with an excellent first quarter in 2009, 7 percentage points ahead of the market. Sales were also good for Radio KissKiss, which began in March of last year.

• DIRECT and RETAIL

The Direct and Retail area generated revenues in the first nine months of 2010 of €181.2 million, a 29.2% increase on the €140.2 million of the same period of 2009.

It should be pointed out that the figures for last year did not include Mondolibri S.p.A., which has only been consolidated since April 2010; on a comparable basis, the increase was of around 7%.

Direct

Cemit saw a 25% increase in revenues, in a market that grew by just 2%.

Since May 2010, Cemit has been joined by Mondolibri, which with its seven thematic book clubs operates in mail-order sales with around 800,000 members.

The revenues of the book clubs were down by 6% compared with 2009; though this was compensated by growth in the e-commerce channel through the Bol.it web site (+34%).

Retail

Retail sales which, from May also include sales from the Mondolibri book shops, grew by 12.1% (5% on a like-for-like basis) compared with the same period of last year.

This increase in turnover was largely due to the expansion of the network, which now totals 570 book shops and multicenters, including both directly owned and franchised stores and Edicolè outlets

• RADIO

Advertising for R101 generated total net revenues in the period of €10.2 million (+5.2% on the €9.7 million in the first nine months of 2009). These are essentially the company’s share of the gross advertising revenues of around €14.7 million, up by 6.2% on the same period of last year.

In particular, in September, R101 recorded growth in advertising sales of 5.3% compared with 2009, in a market of reference that was down (-0.5%; +11.2% cumulative to the end of September: source FCP Assoradio).

The figure, overall lower than the market average, is however positive when account is taken of the fact that in the period display advertising on R101 (which makes up 91% of the radio station’s advertising) grew by 10% on 2009. The fall is therefore entirely attributable to a lower number of special initiatives compared with the first nine months of last year.

R101 is currently examining new projects to be introduced in the early part of next year aimed at further improving the station’s positioning in its targets, revamping the schedule and continuing to build the audience.

EXPECTATIONS FOR THE FULL YEAR

The third quarter saw a confirmation of the indications outlined in the half yearly report: all of the businesses achieved better revenue performance than the market benchmarks and, at the same time, continued to pursue the development of new activities.

Reorganisation objectives were also achieved, both in terms of simplifying processes and reducing operating costs.

These have resulted in a substantial recovery of profitability, which, failing any particular changes in market trends, we expect to continue during the last months of the year, allowing the company to significantly increase its operating profit for 2010, despite higher costs resulting from increased postal charges.

Also the estimate for net profit for the year, the improved operating performance should compensate for the impact of extraordinary items (positive in 2009 and negative in 2010) making it possible to post a significantly better final result than last year.

§

SHAREHOLDERS MEETING: APPROVAL OF THE APPOINTMENT OF THREE NEW DIRECTORS

A Shareholders’ Meeting, held prior to the board of directors meeting, approved the enlargement of the board from 11 to 14 members, appointing as directors Roberto Briglia, as an executive director given his role as Group Editorial Director, and Angelo Renoldi, professor of economics and business administration at the University of Bergamo and Carlo Sangalli, chairman of Confcommercio (the Italian association of retailers) as independent non-executive directors.

The board of directors verified the requisites of independence, foreseen by the Code of Conduct for listed companies, of both Renoldi and Sangalli. The other independent non-executive directors already in office are Martina Mondadori, Marco Spadacini, Mario Resca and Umberto Veronesi.

The appointments, approved by the Shareholders, therefore will result in the enlargement of the independent component of the board, in line with the progressive reinforcement of the role of the same, as defined, in particular, by soon to be introduced Consob regulations regarding operations with related parties. These appointments will also further consolidate and support respect for the functions and activities of the board of directors’ internal committees.

The board of directors itself has consequently redefined the composition of the Internal Control Committee and the Remuneration Committee. In particular, the Internal Control Committee is entirely made up of independent non-executive directors, Marco Spadacini, Angelo Renoldi and Mario Resca; and the Remuneration Committee by the independent directors Marco Spadacini and Carlo Sangalli and the non-executive director Bruno Ermolli.

§

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 report for the period to 30 September 2010 is made available, as per current legislation, at the company’s corporate headquarters, Borsa Italiana S.p.A. and on the web site www.gruppomondadori.it

The Board of Directors of Arnoldo Mondadori S.p.A. met today, under the chairmanship of Marina Berlusconi, to examine and approve the interim report for the first six months of the year to 30 June 2010, as presented by the Group’s deputy chairman and chief executive, Maurizio Costa.

THE MARKET SCENARIO

In the current economic climate signals of a recovery in investments and industrial production have yet to be matched by a turnaround in consumer spending. Figures for the sectors in which Mondadori operates do, however, show that the slight recovery, which began in the first quarter, is continuing.

A BRIEF OVERVIEW OF THE PERFORMANCE OF THE MONDADORI GROUP

Mondadori’s results at the end of the first half of the year show consolidated revenues in line with the first six months of 2009. The figures also show that the company outperformed the market in almost all sectors of reference and generated a marked improvement in profitability.

These results have been achieved thanks to a series of factors that reflect the Group’s business approach:

• the sharp focus on the product and on readers’ needs that has always been a distinctive characteristic of Mondadori.
  Magazine circulation figures, once again better than the market, underline the importance of Mondadori’s constant commitment to a portfolio of titles that are points of reference in their respective sectors, both in Italy and in France;

• a capacity to maintain, at the highest international benchmark levels, the profitability of the Book Division.
  Despite a fall in revenues, due to a publishing schedule more focused on the second half of the year, the Division remains a pillar of the Group’s business portfolio;

• determination in the development of the Group’s leading brands, through its international network.
  Since first hitting the newsstands, almost one year ago, the success of Grazia in France is a demonstration of how the market can respond to products that stand out in terms of quality and content;

• a commitment to the pursuit of simplification in processes and structures aimed at ensuring a recovery of profitability from existing businesses and freeing up resources for new projects.
  In line with the declared objectives, the restructuring plan and various cost containment actions have generated significant results.

The technological changes currently affecting the media sector, with the explosion of different platforms for the distribution of and access to digital content, are changing consumer expectations, needs and models. Publishers consequently need to provide a concrete response to such changes, both in qualitative terms and with sustainable business models.

This is why, in the first half of the year, Mondadori has been engaged in intensive efforts:

• in books, to create the basis for agreements with different operators in order to make a vast selection of the books published by the Group, both new and backlist titles, available in digital formats;
• in magazines, to develop digital versions of the titles which make the most of the characteristics and potential of the new electronic devices and to provide a fresh impulse for the sale of advertising in the digital sector.

GROUP PERFORMANCE IN THE PERIOD TO 30 JUNE 2010

The highlights of the Group’s business results for the first half of the year are provided without reclassification, even if the figures for 2010 have been impacted by higher levels of development costs (mainly for Grazia France) and increased postal charges, imposed at the beginning of April.

Consolidated revenues to 30 June 2010 came to €726.8 million, essentially in line (-0.5%) with the €730.7 million recorded for the first half of 2009.

Consolidated gross operating profit to 30 June 2010 amounted to €54.6 million, an increase of 35.8% on €40.2 million in the previous year, despite taking account of, as indicated above, increased development costs and higher postal charges.

As a proportion of revenues this corresponds to 7.5%, compared with 5.5% for the same period of 2009.

Consolidated operating profit to 30 June 2010 totalled €42.8 million, an increase of 53.4% on €27.9 million in the first six months of 2009, with amortizations and depreciations of tangible and intangible assets for a total of €11.8 million (€12.3 million in 2009).

As a proportion of revenues, a rise from 3.8% in 2009 to 5.9%.

Consolidated pre-tax profit came to €30.8 million (+75% on €17.6 million in 2009), with increased financial charges of €1.7 million.

Consolidated net profit to 30 June 2010 amounted to €15.1 million, more than double the figure of €7.3 million for the same period of last year.

Gross cash flow in the first six months of 2010 totalled €26.9 million, compared with €19.6 million in 2009.

The net financial position went from -€372.9 million at the end of 2009 to -€393 million at 30 June 2010; compared with the same period of the previous year, this represents an improvement of €80.9 million.

Information regarding personnel

As of 30 June 2010 the number of people employed by companies of the Group (both on temporary and permanent contracts) totalled 3,757. On a like-for-like basis, the figure would be 3,525, excluding the staff of Mondolibri, consolidated since May (with a headcount of 232).

Compared with 31 December 2009 (3,750) there is clear evidence of the effects of the Restructuring Plan, above all in Magazines, with a reduction, on a comparable basis, of 225 people (55 of whom are journalists in Italy or France).

The implementation of the Plan will continue for the whole of 2010 and will be completed in the second half of 2011.

Finally, it should be noted that the CCNL labour contract for employees of printing and publishing companies has expired and has not yet been renewed.

RESULTS OF THE BUSINESS AREAS

• BOOKS

The Book Division recorded revenues for the first half of 2010 of €168 million, a fall of 8% on the €186.2 million of the same period of the previous year.

This was principally the result of changes to the publishing schedule for the most important titles, including the new novel by Ken Follett, La caduta dei giganti, which should be published in September.

Nielsen figures for the first six months of 2010 confirm the Group’s leadership in trade books, with a 26.3% share. The single publishing houses in the Division also confirmed their positions among the top ten in Italy: with Mondadori at the top of the list, with a market share of 13%; Einaudi with 5.4%, Piemme with 4.2% and Sperling&Kupfer with 2.2%.

During the first half of 2010 Edizioni Mondadori generated revenues of €55.5 million (-14.9%). Successful new titles published in the period included: Canale Mussolini by Antonio Pennacchi, which was published in March and went on to win the prestigious Strega prize; Il palazzo della mezzanotte by Carlos Ruiz Zafón (with sales of over 250,000 copies), consolidating his position among our key authors in the foreign fiction area; Il fattore Scarpetta by Patricia Cornwell, which sold more than 130,000 copies; La compagna di scuola (80,000 copies) by Madeleine Wickham, better known by her pseudonym Sophie Kinsella.

Of particular note were the results achieved by first-time author Alessandro D’Avenia with Bianca come il latte, rossa come il sangue which, in nine editions, has sold more than 100,000 copies, and La Malapianta by Nicola Gratteri and Antonio Nicaso, which has reached almost 100,000 copies. Also of note was the launch of the new Strade Blu Dark series, with the first two volumes of La Trilogia di Stoccolma by Jens Lapidus.

Mention should also be made, in general books, of the enormous success of the novel by Fabio Volo Il tempo che vorrei (which sold over 120,000 copies in 2010 alone, bringing total sales to 710,000 copies), and the Oscar editions of Gomorra by Roberto Saviano and La solitudine dei numeri primi by Paolo Giordano, both already among the bestselling paperbacks. In Children’s books there was a very positive response to the launch of the new Oscar Junior series, with sales of more than 300,000 copies for the first 35 titles.

Einaudi generated revenues of €23.8 million, a fall of 2.9% compared with the first half of 2009. This was the result of promotional initiatives carried out in 2009, but not repeated this year, that particularly benefited Stile Libero, in the bookshop channel, and the Meridiani and Valla series, in the instalments channel.

Stand out new titles in the first half of 2010 included La parola contro la camorra by Roberto Saviano (with sales of 105,000 copies) and Prima di morire addio by Fred Vargas (78,000).

Mondadori Electa generated revenues during the period of €16.3 million, down 11.9% on the same period of last year. There was a marked fall in book sales (-21%), which, net of the impact of add-on sales, translates as essentially in line with the first half of 2009. In general, given the ongoing difficulties facing illustrated books and art publishing, production levels continued to be strongly contained, with another sharp fall in the number of copies distributed.

There was also a fall in revenues in the Cultural Assets sector (-9%) due to lower sales from museum bookshops resulting from the termination of concessions at the Brera Museum and the Cenacolo in Milan and the Musei Civici in Venice.

However, during the period, two important acquisitions were made: the new Museum of the Twentieth Century in Milan (due to open in November 2010) and the Maxxi Museum in Rome, which opened to the public in May. Thanks also to an increase in the number of tourists visiting the country’s principal museums and monuments, in the organisation of exhibitions area in which the company is active, Mondadori Electa saw an increase in revenues compared with June 2009.

Sperling & Kupfer recorded revenues for the period of €13.9 million (-7.3%). This fall was mainly due to a reduction in the sale of rights for add-on sales initiatives. A total of 164 new titles were published during the period, compared with 187 in 2009, in line with the ongoing focus on the selection of titles for publication. Of particular note was the publication at the end of June of the new book by Sveva Casati Modignani, Mister Gregory, which immediately entered the Italian fiction bestsellers list and the first novels by two interesting new authors, Anne Fortier and Kate Morton.

Mondadori Education generated revenues during the period of €14.3 million (+0.7%). In the primary school area almost all of the adopted texts of last year have been confirmed, integrated with digital content for teachers, and there has been an increase in the range of extra-curricular materials, from which the company expects positive results. Catalogue sales continued to suffer in the first level secondary segment, while new titles achieved reassuring results, which augurs well for the future. Finally, the company confirmed its strong positioning in a series of subjects in the humanities in the second level secondary segment.

Edizioni Piemme ended the first half of 2010 with revenues of €24.2 million, an increase of 8.5% on 2009, thanks to the success of a series of commercial initiatives in the various sales channels and across all product lines.

In the fiction and non-fiction area new titles included Il sussurro della montagna proibita by Siba Shakib (47,000 copies sold). There was a slight fall in fiction sales compared with 2009, due to a reduction in supplies of titles by Khaled Hosseini, now available in paperback; while in Religion there was an excellent performance by A un passo dal baratro by Paolo Brosio (with sales of 60,000 copies since the beginning of 2010).

The Junior area saw an increase in sales compared with 2009 with varying trends: the brand Il Battello a Vapore saw revenues in line with last year, thanks to a range of well-established series, while the Stilton line saw a rise in revenues thanks to the publication of successful new titles.

• MAGAZINES ITALY

In the first half of the year the Italian magazine market was once again conditioned by the tail end of the crisis that affected both national and international publishers in the two-year period 2008 – 2009.

The impact was felt on the advertising front – with magazines struggling more than other media to turnaround a negative trend that has now lasted for almost two years – as well as circulation – where ongoing difficulties persisted in the first half of the year – and, finally, in add-on sales – where there was a further marked downturn.

All of which makes Mondadori’s performance in the first six months quite significant, both in terms of business performance (despite the negative impact of unexpected costs resulting from the cancellation of postal subsidies for subscriptions), and revenues.

The revenues generated by the Magazine Division in Italy in the first half of 2010 amounted to €250 million (-1% on €252.4 million in the same period of the previous year).

These results, after the sharp downturn recorded in 2009, were generated by Mondadori titles thanks to a series of factors:

• circulation revenues (-4%) that clearly outperformed the market, with a strengthening of the Division’s market share;
• an increase in revenues from add-on sales (+2.8%), in marked contrast to the market trend, where there was a fall of more than 30% (in terms of value to May). Underpinning this higher level of stability compared with the competition was the organisation of the business across different product types, the strength of certain brands and a careful selection of the initiatives;
• there was also a further moderate stabilisation in advertising revenues, decidedly more resistant (-1.7%) than the most qualified competitors, in a market that was down by 9.3%;
• revenues – particularly positive in the second quarter, almost in line with 2009 – benefited from a good performance by the weekly titles, while monthlies were decidedly weaker, with the exception of those titles currently being re-launched, including Grazia Casa, Interni, Casa Facile, Cucina Moderna and Panorama Travel.

The action taken by Mondadori in response to a still difficult market was organised along two main lines: the first aimed at reaping the benefits of the restructuring plan, and the second focused on sustaining the development of the product portfolio.

In terms of circulation, in a market which saw a downturn of 9.3% (in terms of volume to May), Mondadori confirmed and strengthened its leadership, with a market share of 35.8% at the newsstands; there was a slight upturn for Tu Style, with a stable circulation of around 200,000 copies, making it one of the best-selling women’s weeklies; both Chi and Donna Moderna performed well in their markets of reference; there was significant growth for Grazia; the new editorial formulas of Casa Facile and Interni; and satisfactory results for the monthlies Salute!, Oroscopo and Giochi, all of which are supplements to TV Sorrisi e Canzoni.

International activities

Thanks to the positive performance of the UK, Dutch and German editions of Grazia, licensing revenues increased in the first half of 2010 by 42%, while advertising sales in Italy for the network doubled, both thanks to the inclusion of new editions and an increase in revenues for existing titles, in particular in Russia, China and Great Britain.

The Attica subsidiary was affected by the financial crisis in Greece and the Balkans and saw a fall in advertising revenues of around 18% (-11% on a like-for-like basis). Energetic action is currently underway on the cost side, the results of which will be seen from the second half, with a positive effect on the company’s results.

• DIGITAL

There was a marked increase in online advertising and, in particular, display advertising was up by 11.6% compared with the same period of the previous year (source: Nielsen in terms of value, to May 2010).

Mondadori has created a new sales company, Mediamond, with a sales force dedicated to online advertising in order to improve the effectiveness of the offer. The decision to focus on the women’s market has already generated encouraging results and the new site of GraziaMagazine.it and the positive performance of DonnaModerna.com have given a new impulse to the sale of advertising on Mondadori sites.

• MAGAZINES FRANCE

The strategic decisions taken in France in 2009 – the launch of Grazia, the extension of the Editions Mondadori Axel Springer joint venture, and the review of the portfolio of titles – have had a favourable impact on the first half of 2010.

Mondadori France generated revenues of €168.4 million, a slight fall (-1.2%) on €170.5 million in the same period of 2009; excluding the titles sold and the contribution of Grazia France revenues were up by 6.6%.

Circulation revenues, which account for 70% of the total, were up by 2% on a like-for-like basis. The change is due to, on the one hand, a slight fall in newsstand sales, in a market that was down by 3% in May (internal figures, in terms of volume), and, on the other, to an increase in subscriptions, which make up an increasingly significant part of circulation revenues, which are less exposed to economic cycles. These results were obtained thanks to careful portfolio management, along with an ongoing focus on product quality.

The contribution of Grazia was of particular importance, raising the rate of growth, net of titles sold or transferred, to +5.3%

There was a marked improvement in advertising sales in the first half of the year compared with 2009. Mondadori France saw advertising sales increase by 21.2%, excluding the titles no longer consolidated, and by a total of 5.8%, thanks to the contribution of Grazia.

In a market that grew by 3.1% (Source: Kantar Media, in terms of volume, to May), thanks to the contribution of important new launches in the women’s weekly segment, Mondadori recorded growth of 22.7%, with a significant increase in the company’s market share, taking it close to the level of its direct competitor.

These results are even more positive if we remember that growth was generated in the high-margin upmarket segment, which now accounts for 22.4% of the advertising revenues of Mondadori France (6.5% in 2009).

The policy of cost reductions carried out over recent years continues also this year and, in addition to the restructuring, the project for the transfer of the company’s offices to new premises has taken on increasing importance. The move, to Montrouge, in the Paris metropolitan area, will take place in January 2011 and will have a positive impact in terms of costs, organisation and efficiency.

The extension of the Editions Mondadori Axel Springer joint venture, with the contribution of all of the company’s titles in the car sector, is already producing positive results, above all with the new formula of L’Auto-Journal, which, in the first five months saw 21.4% increase in circulation and interesting further developments are in the pipeline, particularly for the digital versions of the car titles.

The results of Grazia continue to be excellent – even after the launch of two competing titles (Envy and Be) – with an average of 29.5 advertising pages per issue and newsstand sales of 177,000 copies from the launch to the present.

• ADVERTISING

Advertising investments in Italy in the first five months of 2010 (Source: Nielsen – in terms of value) were up (+3.8%), but continued to show a varied capacity to react, both in terms of the speed and scale of recovery, by the different media as they emerge from different levels of crisis during 2009.

After the second quarter, the improved state of health of online and radio advertising was underlined, there was a progressive recovery in television, while in print media, magazines continued to suffer significantly (-9.3%) while newspapers remained essentially stable. There were however cautious signals of an improvement in investments in FMCGs and cosmetics, and, to a lesser extent in fashion and interiors.

Mondadori Pubblicità ended the first half with total revenues of €119.9 million, in line with 2009 on a like-for-like basis in terms of media (i.e. excluding online and newspapers, no longer in the portfolio in 2010). The marked changes in the breakdown of revenues, including the termination of the contract with Società Europea di Edizione S.p.A. in November, and the switch of online advertising sales from January to the new sales company, Mediamond, have had a negative impact in 2010 of around 5 percentage points.

During the first six months of 2010 sales for Mondadori magazines – characterised by an intense and focused policy of re-launches and an innovative range of technologically enriching activities – recorded a marked advantage compared with the main competitors, thanks to improved sales in the second quarter, with a slight fall compared with the first half of 2009 (-1.6%).

After a clear upturn (over 4.5%) in the second quarter, Mondadori weeklies recorded growth of 2.7%. There was a convincing and progressive consolidation in the women’s segment (particularly with Donna Moderna, Chi and Tu Style); a big success in terms of advertising for the re-launch of Panorama; and a performance that was below that of 2009 for monthly titles, in a market that remained somewhat “unconvinced” by this type of product.

In the radio segment, it should be underlined that R101 closed the first six months of 2010 with growth of 8.6%, compared with the same period of last year, thanks to a second quarter that was up by more than 12%. Meanwhile, sales for Radio Kiss Kiss, which began in March 2009, continued with constant success.

• DIRECT and RETAIL

Mondadori’s Direct & Retail Division generated total first half revenues in 2010 of €111.3 million, an increase of 18.9% on the €93.6 million on the first half of 2009.

It is worth remembering that the figures for last year did not include Mondolibri. Consequently, on a like-for-like basis, growth during the period was around 4%.

Investments in direct marketing in Italy were up by 5.8% in the first five months of the year (Source: Nielsen, in terms of value). In this context Cemit grew in line with the market, developing new opportunities in all of the sectors in which it has operated for years in the role of integrating processes for direct marketing and by expanding its market through a process of internationalisation.

In May 2010 Cemit was joined in the direct sales business by Mondolibri, which, with its six thematic book clubs, has around 800,000 members. Revenues from this business were down by around 6% compared with the first half of 2009, a period when the business was not consolidated.

Mondolibri is also one of the leading national operators in e-book sales, conducted through the web site Bol.it, where revenues were up by 43%, well above the trend in the market as a whole.

The revenues of the Retail Division, which since May include those generated by the outlets of Mondolibri S.p.A., were up by 6.4% (4.1% on a like-for-like basis) compared with the same period of the previous year. This increase was, however, substantially attributable to the development of the network, which now has a total of 564 outlets.

Mondadori Retail (33 own stores, bookstores and Multicenters) towards the end of the first half placed a special emphasis on redefining the offer of the Multicenter formula, making changes to the product mix and reviewing the lay out of the stores in order to make them more accessible.

Sales (+2.5% compared with the first half of 2009) grew sharply in stationery (+19.3%), performed very well for editorial products (+6.4%) and were stable for digital goods (-0.3%). Despite the opening of three new stores in Palermo, Rome and Turin, in the second half of 2009, there was an increase in staff of just 12, in line with the rationalisation policy implemented last year.

Mondadori Franchising generated revenues in the first half of €33.1 million, an increase of 6.8%, thanks to the expansion of the number of affiliates in the chain of book shops and the Edicolè formula (250 and 206 respectively).

Mondolibri, which operates 23 book shops directly and has 52 in franchising, generated May and June revenues (the period of consolidation) of €1.9 million.

• RADIO

In the first five months of the year the radio market grew by 14.6% compared with 2009, highlighting a trend of continuous growth and distinguishing itself as one of the best-performing media (Source: Nielsen, in terms of value).

Advertising sales for R101 during the first half of 2010 came to €7.6 million (+8.6%), with fewer special initiatives than in the same period of the previous year.

In terms of ratings, the new Audiradio survey rewarded R101, which in the first quarter of 2010 had a daily average of some 2.5 million listeners and 7 million over 21 days, an important breakthrough that confirms the Mondadori Group’s radio station as one of the leading national networks.

EXPECTATIONS FOR THE FULL YEAR

In the first six months of the year the volume of the Mondadori Group’s business was in line with that of the previous year, while, at the same time, there was a significant improvement in profitability, despite ongoing investments for the development of both the products in the international network and digital content, in the book and magazine sectors.

In addition to the positive revenue performance by the businesses, the company’s was also able to count on the increasingly effective containment of operating and structural costs. The only negative impact came from higher postal charges, after exceptional increases, from the beginning of April, resulting from the cancellation of state subsidies on the cost of postage for subscriptions.

It is therefore reasonable to suppose that, net of unforeseen circumstances and with ongoing stability in the trends in the company’s markets of reference, Mondadori will be able, for the full year, to further improve the already positive levels of operating profitability recorded in the first half.

§

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.

Comlpete text (PDF) with enclosures

The Board of Directors of Arnoldo Mondadori S.p.A. met today, under the chairmanship of Marina Berlusconi, to examine and approve the interim report for the first three months of the year to 31st March 2010, as presented by the Group’s Deputy Chairman and Chief Executive, Maurizio Costa.

The market scenario

After a protracted period of decline, in the first quarter there were still no clear signals of a turnaround. In many sectors, however, there was a slowdown in the fall in consumer spending and, in some cases, some encouraging indications of a recovery.

A brief overview of the performance of the Mondadori Group

In this context, in terms of profitability, Mondadori’s operating results continued the improvement that was recorded towards the end of 2009.

A significant part of the Group’s operating profit derived from cost reduction efforts – to which there is an ongoing commitment – making it possible to defend and, in some areas, improve the level of profitability of the businesses.

There was a slight downturn in revenues, but much less marked than in the previous year.

In terms of advertising spending, there was a sharp slowdown in the rate of decline and in some sectors there were important signs of recovery.

GROUP PERFORMANCE IN THE PERIOD TO 31 MARCH 2010

Consolidated revenues in the first quarter of 2010 amounted to €344.7 million, a fall of 2.8% on the €354.5 million of the first three months of 2009.

Consolidated gross operating profit came to €21.2 million, an increase of 49.3% on the €14.2 million of the previous year, despite increased investments for development.

Consolidated operating profit amounted to €15.7 million, up by 96.2% on the €8 million of the first quarter of 2009, with amortizations and depreciations of tangible and intangible assets for a total of €5.5 million (€6.2 million in 2009).

Consolidated profit before taxation amounted to €8.6 million, more than three times the €2.6 million of 2009 despite an increase of €1.7 million in financial charges deriving from the debt restructuring.

Consolidated net profit came to €2.4 million, compared with the loss of €1.8 million recorded in the first three months of last year.

Gross cash flow in the first three months amounted to €7.9 million, compared with €4.4 million in 2009.

In the art books segment Mondadori Electa recorded total revenues of €7.6 million, an 8.4% fall on the first three months of 2009; on a like-for-like basis, in other words net of revenues for the sale of rights for add-on sales operations, there would have been a slight increase (+0.4%) in total revenues.

There was a further improvement in the Group’s net financial position which went from -€372.9 million at the end of 2009 to -€357.2 million at the end of the first quarter of 2010. A positive balance, compared with the first quarter of last year, of €97 million.

Information regarding personnel

As of 31st March 2010, the personnel employed by companies of the Group (both on temporary and permanent contracts) amounted to 3,618 (3,750 in December 2009): a fall of 132 people, 70% of which resulting from the Restructuring and Early Retirement Plan, which is currently underway at the parent company and at Mondadori Pubblicità, and the remainder to the ongoing block on turnover and cost containment.

Compared with the first quarter of 2009 there was a reduction of 308 in the headcount.

RESULTS OF THE BUSINESS AREAS

• Books

The Book Division recorded revenues for the first quarter of 2010 of €80.1 million, a 10% fall on the €89 million of the same period of the previous year.

This shortfall was largely due to changes in the publishing schedule which, compared with 2009, foresees the publication of important titles after the end of the first quarter. These include the new book by Carlos Ruiz Zafón Il palazzo della mezzanotte, which was published in April and has already met with a good response.

During the first quarter of 2010, the Trade Books department announced a programme for the publication of more than 1,000 e-books for Christmas 2010.

Concerning the individual publishing houses, Edizioni Mondadori generated first quarter revenues of €28.7 million (-22.4%): a figure that was affected by a change in the publishing schedule which, compared with the previous year, is more concentrated in the second half.

Of note among the particularly successful titles was the new novel by Fabio Volo Il tempo che vorrei, published last year, which continued to sell extremely well in the first quarter, reaching total sales of 690,000 copies. New titles included: John Grisham’s Ritorno a Ford County (100,000 copies), Madeleine Wickham (alias Sophie Kinsella) with La compagna di scuola (75,000 copies) and the first novel by Alessandro D’Avenia, Bianca come il latte e rossa come il sangue (over 70,000 copies).

During the period the net revenues generated by Einaudi saw an increase of 7.4% compared with the previous year, reaching €13 million, despite a fall of almost 15% in the instalments channel.

Sperling & Kupfer generated revenues of €6.8 million, a fall of 17.1% compared with the first three months of 2009 which benefited from the good sales of Il gioco delle verità by Sveva Casati Modignani.

In the first three months of 2010 the revenues of Piemme amounted to €12.5 million, an increase of 4.2% compared with last year.

Mondadori Education generated in the first quarter 2010 revenues of €2.5 million, a slight improvement on the €2.3 million of the same period of the previous year, in a period of the year, which as usual has a minimal impact o annual revenues.

• Magazines Italy

In the first quarter of 2010, the Italian and international publishing world, while still conditioned by the crisis seen in 2009, began to show some pale signs of stabilising. This was mostly evident in the advertising area overall, while on the circulation front the first months of the year continued to be characterised by persistent weakness, heightened by a further marked downturn in add-on sales.

In terms of advertising sales, consumer magazines appears to be the segment that is finding it most difficult to regain growth: This was particularly true in January and February, while March and April have provided more encouraging signals.

In this context, the Magazine Division in Italy generated revenues of €123.4 million essentially in line (-0.7%) with the €124.3 million of the first three months of last year.

Performance during the period was determined by the following:

• a fall in circulation revenues (-4.3%) in a market that was down by 10.6% (in terms of copies);

• growth in revenues from add-on sales (+3.7%), in marked contrast to the market of reference (in terms of value, -32.5%);

• a limited fall (-4.1%) in advertising revenues, held up by sustained efforts by the sales staff that has added new clients to the portfolio and a range of innovative initiatives that have driven planning across integrated communication platforms including print, web and others (QR Code, Video In Print, Augmented Reality).

Of particular note during the period:

• the re-launch of Interni, Casa Facile, Panorama Travel and Grazia Casa, monthlies that have seen a positive reaction, above all on the circulation side;

• promotional support activities for a number of weeklies that contributed to stabilising circulation and advertising revenues;

• editorial revisions conceived for the re-launch of some core titles (Panorama, Tu Style and Chi), planned for the coming months.

It should be noted that at the end of March the government suspended the long-standing practice – common also in many other European countries – of allowing publishers to take advantage of reduced postal rates for subscriptions. If new measures, that all publishers are pressing for, are not introduced in the short term, this will lead to a 100% increase in postal tariffs , putting additional pressure on the subscription channel.

International activities

In the first three months of the year licensing revenues were up by 24%, thanks to the good performance of the UK and Dutch editions of Grazia and the launch of the magazine in Germany. During the period there was also a doubling of advertising revenues, thanks to new international editions and due to the very negative first quarter of 2009.

With regard to the joint ventures, the activities in Russia and China performed decidedly better than last year, particularly in terms of advertising sales.

The subsidiary Attica began to feel the effects of the financial crisis in Greece with a fall in advertising revenues of around 9% (-2.5% on a like-for-like basis); and the performance in the Balkans continued to be very negative, compared with the first quarter of 2009 in which the negative impact of the crisis had still not been felt.

Digital

In the first quarter of the year, the online advertising market expanded by 3% (in terms of value, source Nielsen). In this context, the organisation of a dedicated sales force with the new sales company Mediamond, and the launch of Graziamagazine.it have given a particular push to online ad sales (+30%); the Group’s web sites for women are also outperforming the market, in particular Donnamoderna.com and Cosmopolitan.it.

Efforts to concentrate resources specialised in digital ad sales have led to an increase in the share attributable to the sales company. This reduces net advertising revenues attributable to the publisher to +13%.

• Magazines France

Mondadori France generated first quarter 2010 revenues of €81.1 million, a 3% fall on the same period of the previous year. A correct evaluation needs to take account of changes in the business in France due to the closure and sale of some titles (some contributed to the EMAS joint venture) and the launch of Grazia, at the end of August 2009. On a like-for-like basis (excluding the titles sold or closed and the launch of Grazia France) revenues would be essentially in line with last year.

Circulation revenues, which account for around 75% of the total, were up by 1.2% (+4.5% on a like-for-like basis), thanks to good results by the magazines, including Biba, Modes&Travaux, Sciences&Vie. In addition to stable newsstand sales there was also a positive result from subscriptions, an increasingly important component of circulation revenues, which is also less exposed to economic volatility.

Revenue growth was the result of the strategic decision by the company to concentrate the portfolio on core titles, as well as a policy of continuous improvement of editorial quality. Of particular importance was the contribution of Grazia, which would up the increase, net of the titles no longer part of the portfolio, to +7.8%.

During the first quarter there was a marked upturn in advertising sales for Mondadori France titles compared with 2009: revenues were up by +4.2%, net of the titles no longer in the consolidation area and with the contribution of Grazia, also thanks to growth in the up-scale segment, which now accounts for 21% of total advertising sales (7% in 2009); total revenues were down by 9.3%.

Compared with the market of reference, which recorded growth of 3% in the first quarter, Mondadori France saw an increase in volumes of 6% (source: reclassified data from Kantar Media).

The cost reduction policy introduced by Mondadori France in recent years, continues also in the current year and, in addition to reorganisation, further savings will accrue from other actions. Among these is an important project for the transfer of all the company’s headquarters to Montrouge in the Paris metropolitan area at the beginning of 2011. This will not only lead to cost savings, but also to other organisational and operational efficiencies.

The expansion of the joint venture with Axel Springer, to which all of the titles in the auto sector have been contributed, has already brought positive results, above all for the new formula of L’Auto-Journal which, from the first issues, has seen a rise in circulation. Further interesting developments are planned in the short term, particularly for the online versions of car magazines

The results of Grazia, even after the launch of two competing titles (Envy and Be), continue to be excellent, with an average over the quarter of 27 advertising pages and newsstand sales of 175,000 copies.

• Advertising

During the first quarter of 2010, felt the weight of significant changes, including the loss, from November 2009, of the titles published by Società Europea di Edizioni (Il Giornale and its supplements) and the transfer, in January 2010, of online sales to the new joint venture Mediamond.

In this context, the revenues of the company in the first three months of 2010 amounted to €49.4 million, a fall of 4.4% on the €51.7 million of the same period of the previous year.

In the context of magazines, sales for Mondadori titles alone were down by 2.9% on the first quarter of 2009, with the weeklies proving stable thanks to the positive performance of the women’s titles.

In radio, ad sales for R101 were slightly up on those of the first quarter of 2009 and activities on behalf of Radio Kiss Kiss, begun in the first months of 2009, continued successfully.

• Direct Marketing

During the first quarter of 2010 Cemit generated revenues of €5.1 million, an increase of 6.3% on the €4.8 million of the same period of 2009, despite a market for direct mail investments that is continuing to decline. During the period the company continued its development and diversification activities for direct communication projects, also with an opening up of foreign activities, and improvements in the quality of processes.

• Retail

Total revenues from the Retail Division amounted to €44.4 million, a 6.2% increase on the €41.8 million of the first quarter of 2009, thanks to a stable performance by the network and partly due to new openings. During the period action continue to contain management costs in order to minimise the impact of a prolonged crisis in consumer spending that shows no sign of coming to an end.

The 32 stores directly managed by Mondadori Retail recorded sales in the first quarter of €27.1 million (+1.1% on the first three months of 2009).

Mondadori Franchising generated revenues of €17.3 million, a 15.3% increase on 31st March 2009, thanks to the development of the bookstore and Edicolè chain, which in the period rose to 456 outlets.

• Radio

R101 generated first quarter 2010 net revenues of €3.1 million, an increase of 3.3% on the €3 million of the same period of the previous year. In the first two months, advertising sales were up by 11.2%, in line with the market; the downturn in March was entirely due to the absence, of a significant special initiative that was a feature of 2009.

EXPECTATIONS FOR THE FULL YEAR

The situation in the markets of reference for the Mondadori Group in the first quarter of the year appear better compared with the end of 2009. In particular, advertising investments have seen improvement in the negative trend and, in some sectors, there has even been a turnaround.

Nevertheless, short-term visibility remains unclear, making it impossible to predict when a solid recovery will get underway. In any case the company is continuing with its organisational restructuring and qualitative investments on products, aimed at improving profitability and defending volumes, maintaining levels that are above the benchmarks.

As regards forecasts for the full year, in the light of the results of the first months, it is possible to restate that, provided there are no unforeseen circumstances, the company expects that the confidence already expressed during the presentation of the 2009 Annual Report, concerning the ability of Mondadori to improve its level of profitability compared with last year, to continue.

§

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 report for the first quarter of 2010 will be available, as per current legislation, at the company’s corporate headquarters, Borsa Italiana S.p.A. and on the web site www.gruppomondadori.it from today