Price sensitive

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

PERFORMANCE OF BUSINESS AREAS

• BOOKS

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

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

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

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

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

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

• RETAIL

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

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

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

Sales by channel show:

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

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

• MEDIA

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

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

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

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

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

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

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

SIGNIFICANT EVENTS AFTER YEAR-END 2022

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Governance: promoting sustainable business success

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

Environment: disseminating environmental culture and mitigating impacts on ecosystems

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

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

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

Annexes (in the pdf complete):

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

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

The Mondadori Group announces the conclusion today, through its subsidiary Mondadori Libri S.p.A., of the acquisition of a further 25% stake in A.L.I. S.r.l. – Agenzia Libraria International, operating in the distribution of books.

The transaction – which raises the Mondadori Group stake in A.L.I. to 75%, which will be subject to full consolidation as of 1 January 2023 – takes place in execution of the agreements defined and disclosed last 11 May 2022 upon acquisition of an initial 50% stake, effective earlier than the date originally scheduled for 28 February 2023.

The provisional price, paid entirely in cash, is approximately € 9.5 million and was determined, as already disclosed to the market, on the basis of an average 2021-2022 EBITDA and the positive net financial position (cash) of the scope covered by the transaction, which at 31 December 2022 amounted to € 17.8 million (preliminary figure).

Additionally, the defined agreements give the Mondadori Group the right to acquire the remaining 25% in A.L.I., at a price to be determined on the basis of an average 2023-2024 EBITDA, through put&call options exercisable by 30 July 2025.

The transaction is consistent with the path of vertical integration in the books market, with a view to the gradual strengthening in the promotion and distribution activities of third-party publishers.

 

 

The Mondadori Group announces the execution today by the subsidiary Mondadori Media S.p.A. of the contract for the disposal to Reworld Media S.A. – signed last 22 November and disclosed to the market on the same date – of the print and digital publishing operations of the Grazia and Icon brands, as well as the related international licensing network.

 The execution of the transaction took place with the transfer of the business unit heading the operations disposed of to a newly-incorporated company and the concurrent disposal to Reworld Media of 100% of the share capital of the transferee.

 

The Mondadori Group announces that it has received notification today from the Offices of the Presidency of the Council of Ministers of the resolution not to exercise the special powers under Law Decree 21/2012 regarding the disposal to Reworld Media S.A. of the operations under the Grazia and Icon brands, as disclosed last 22 November.

The measure, which in essence authorizes the disposal of the above operations, triggers the fulfilment of the suspensive condition attached to the sale agreement, which will therefore be fully executed on the closing date.

The completion of the transaction will be promptly disclosed to the market.

The Mondadori Group announces that, on today’s date, the subsidiary Mondadori Media S.p.A. exercised the put option, previously disclosed to the market last 20 October, and, as a result of it, signed the agreement that regulates the disposal to Reworld Media S.A. of the print and digital publishing operations of Grazia and Icon as well as the related international network.

The consideration for the transaction, as previously disclosed, is € 8.5 million, including € 2 million as earn-out conditional on the achievement of certain financial results in 2023 by the operations disposed of. The price – to be paid in cash at the closing date – was defined on the basis of an Enterprise Value of € 11 million (including earn-out), net of the difference between the average net working capital over the last 12 months and the net working capital at the closing date.

In 2021, the above-mentioned activities generated revenue of approximately € 18 million.

Completion of the transaction – subject to the outcome of the assessment procedure under Law Decree 21/2012 by the Offices of the Presidency of the Council of Ministers – will take place through the transfer by Mondadori Media of the business operations to be disposed of to a newly-incorporated company and the subsequent disposal to Reworld Media of 100% of the share capital of the transferee.

In accordance with the provisions of law, the procedure with the trade unions was accomplished.

The Mondadori Group announces that on today’s date, Reworld Media S.A. has granted a put option through which its subsidiary Mondadori Media S.p.A. is entitled with the right to sell its Grazia and Icon business operations.

The perimeter underlying the option includes the print and digital operations of the two brands, as well as the relating international network comprising over 20 geographies with licensed publications.
In 2021, the perimeter recorded revenue of approximately € 18 million.

Under the terms of the put option, the Purchase Price has been set at €8,5 million, of which € 2 million as earn-out subject to the achievement of certain financial results in 2023, and is based on an Enterprise Value of the perimeter equal to € 11 million (including earn-out), net of the difference between the average net working capital of the last 12 months and the net working capital at closing date.

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

Following the ongoing assessments, Mondadori Group will promptly disclose to the market any decision made relating to the exercise of the option and any further steps, terms and conditions of the process underlying the transaction.

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

The Mondadori Group announces the completion today, through its subsidiary Mondadori Libri S.p.A., of the acquisition of 51% of Edizioni Star Comics S.r.l., Italy’s leading comic books publisher.
The transaction, which takes place in execution of the agreement signed and disclosed to the market last 6 June, will be effective as of 1 July, the date from which Mondadori will also fully consolidate the company.

As a result of the acquisition – consistent with the strategy of increasing focus on the core business of books – the Mondadori Group gains a leadership position in the domestic comic books segment, with an approximately 30% market share (GfK, in terms of value, June 2022).
Under the agreement, Simone Bovini and Claudia Bovini retain their management positions in Edizioni Star Comics, continuing to serve as Managing Directors.

The price for the acquisition of 51% of the share capital of Edizioni Star Comics – paid fully in cash today – is € 14.28 million, defined on the basis of an Enterprise Value (for 100% of the company) of € 28 million and an estimated net financial position at closing of zero.
The price will be adjusted based on the final net financial position at 30 June 2022.

The transaction, including the impact of the put&call options giving the Mondadori Group the right to increase its stake up to 100% in Edizioni Star Comics, changes the Group’s guidance for 2022 as follows:

• free cash flow is expected to be € 10-15 million versus the previous estimate of € 40-45 million;
• the Adjusted NFP/EBITDA ratio (IFRS16) stands at a level below 1.3x versus the previous forecast (below 1.1x).

The Mondadori Group announces that it has signed an agreement today on the acquisition of a 51% stake in Edizioni Star Comics S.r.l., Italy’s leading comic books publisher, specialized in the publication on the domestic market of the major international productions including, in particular, Japanese manga.

The acquisition, fully consistent with the repeatedly-announced strategy to strengthen the core business of books, allows the Mondadori Group to secure a leadership position in the domestic comic books segment, the most thriving area in the publishing industry, boasting a 175% growth over the three-year period 2019-2021 and 30% in the first 4 months of 2022 (figures in terms of value, source AIE Research Office on Nielsen Bookscan data).

“Over the past few years, the Comics segment has become an important lever of development for the entire books chain, thanks also to the high innovation rate of the publishing offer and the extraordinary ability it has to attract new readers: Star Comics stands as the undisputed leader in this segment” – said Antonio Porro, CEO of the Mondadori Group.
“The exchange of expertise between our group and a publisher such as Star Comics, whose people have been able to build a recognized and consolidated leadership over time, enhanced by a strong relationship with its audience, will be interesting and fruitful”, ended Porro.

The activities of Edizioni Star Comics can find further opportunities for growth within the Mondadori Group, thanks to the synergies generated by the deal, including, in particular, access to the most extensive network of bookstores in Italy, where Mondadori Retail is developing spaces specifically dedicated to the comics product.

The acquisition of a 51% stake in the share capital of Edizioni Star Comics was defined on the basis of an Enterprise Value (for 100% of the company) of € 28 million: the price, which will be paid in full in cash at closing, will be subject to final adjustment based on the net financial position at the closing date.

The defined agreements also envisage the underwriting of call option contracts, which give the Mondadori Group the right to acquire the remaining 49% stake in Edizioni Star Comics, exercisable in two equal tranches starting from the approval of the 2024 and 2027 financial statements, respectively, at a price to be set on the basis of the average EBITDA of the relevant previous three years. Should Mondadori fail to exercise the call options, the agreements govern put options in favour of the sellers exercisable under the same price conditions.

In 2021, Edizioni Star Comics recorded strong growth in results versus the prior year: revenue of        € 21.6 million, EBITDA of € 7.2 million, net profit of € 5.1 million and a positive net financial position (cash) of € 4,3 million.

Under the deal, Simone Bovini and Claudia Bovini – who founded and have so far successfully managed Edizioni Star Comics, bringing it to its leading role in the Italian comic books market – will retain management responsibilities and continue to serve as managing directors of the company.
The scope of the transaction also includes the acquisition of 100% of Grafiche Bovini S.r.l., a company controlled by the same family of founders, specialized in printing activities exclusively of products published by Edizioni Star Comics.

The transaction is expected to close by 30 June 2022, and is conditional, inter alia, upon the spin-off of the property component as well as the consent of the Japanese and Korean licensors who own the rights to some of the company’s publications.
Any impact on guidance for the current year, which has already been disclosed to the market, will be announced on completion of the transaction.

The Mondadori Group announces the conclusion today, through its subsidiary Mondadori Libri S.p.A., of the acquisition of 50% of A.L.I. S.r.l. – Agenzia Libraria International, a company operating in the distribution of books and boasting a client portfolio of over 80 publishers. The transaction takes place in execution of the agreement signed and disclosed to the market last 11 November 2021.

Thanks to this acquisition, the Mondadori Group takes a further step along the path of increasing focus on the books market, through a process of vertical integration that allows the Group to strengthen its position in the promotion and distribution of third-party publishers, with a view to continually improving the service level and expanding the customer portfolio.

As already disclosed, the scope of the transaction includes a number of subsidiaries operating in the publishing field.
The acquisition price, paid in cash on today’s date, is € 10.8 million.

The 50% stake in A.L.I. will be consolidated at equity effective as from 1 May 2022.

The final agreements envisage the acquisition by the Mondadori Group of a further 25% stake in A.L.I., effective as from 28 February 2023, at a price to be set based on average EBITDA 2021-2022. As from 1 March 2023, the company will be then fully consolidated.

The deal also governs the subscription of put&call options, which give Mondadori the right to acquire the remaining 25% of A.L.I. by 30 July 2025 at a price to be set based on average EBITDA 2023-2024.

The members of the Belloni family, the founders of A.L.I., will keep their roles of responsibility in the operational management of the company.

The closing of the acquisition follows the authorization by the competent Antitrust Authority, disclosed on 7 March 2022.

Mention should be made that the 2022 guidance (in particular the estimated Free Cash Flow), disclosed on 16 March, included the financial effects of the above transaction.

 

 

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

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

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

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

Adjusted EBITDA in 2021 came to € 105.7 million, up by € 7.7 million versus 2020 (€ 98.1 million); this performance reflects, on the one hand, the positive trend in revenue recorded by all business areas and, on the other, the ongoing efforts to curb operating and structural costs implemented by Management.
The reduction versus 2020 in the ratio of fixed costs (overheads and payrolls) on consolidated revenue enabled the Group to confirm its margins to over 13%: net of the relief received to aid museum activities in both years, the Group’s margin would have increased to 12.7% from 12.1%.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

PERFORMANCE OF BUSINESS AREAS

• BOOKS

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

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

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

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

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

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

• RETAIL

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

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

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

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

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

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

• MEDIA

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

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

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

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

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

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

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

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

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

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

PROPOSED RENEWAL OF THE AUTHORIZATION TO PURCHASE AND DISPOSE OF TREASURY SHARES
Following expiry of the previous authorization resolved upon by the Shareholders’ Meeting on 27 April 2021, with the approval of the financial statements at 31 December 2021, the Board of Directors will propose to the next Shareholders’ Meeting the renewal of the authorization to purchase and dispose of treasury shares with the aim of retaining the applicability of law provisions in the matter of any additional buyback plans and, consequently, of seizing any investment and operational opportunities involving treasury shares.
Below are the key elements of the Board of Directors’ proposal:

• Motivations
  The motivations underlying the request for the authorization to purchase and sell treasury shares refer to the opportunity to attribute to the Board of Directors the power to:
  – use the Treasury Shares purchased or already in the Company portfolio as compensation for the acquisition of interests within the framework of the Company’s investments;
  – use the treasury shares purchased or already held in portfolio against the exercise of option rights, including conversion rights, deriving from financial instruments issued by the Company, its subsidiaries or third parties and to use the treasury shares for lending, exchange or transfer transactions or to support extraordinary transactions on the Company’s capital or financing transactions that imply the transfer or sale of treasury shares;
  – undertake any investments, directly or through intermediaries, including for the purpose of containing abnormal movements in share prices, stabilizing share trading and prices, supporting the liquidity of the share on the market, in order to foster the regular conduct of trading beyond normal fluctuations related to market performance, without prejudice in any case to compliance with applicable statutory provisions;
  – rely on investment or divestment opportunities, if considered strategic by the Board of Directors, also in relation to available liquidity;
  – dispose of treasury shares to service share-based incentive plans set up pursuant to Article 114-bis of the TUF, and plans for the free allocation of shares to employees or members of the governing bodies of the Company or to Shareholders.
• Duration
  The authorization to purchase treasury shares runs from the date of any resolution approving the proposal by the Shareholders’ Meeting, until the Shareholders’ Meeting called to approve the financial statements at 31 December 2022 and, in any case, for a period no more than 18 months.
  The authorization to dispose of treasury shares is requested for an unlimited period, given the absence of time limits pursuant to current regulations and the opportunity to allow the Board of Directors to make use of the maximum flexibility, also in terms of time, to carry out any disposal of shares.

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

• Criteria for purchasing treasury shares and indication of the minimum and maximum purchasing cap
  Purchases shall be made in compliance with Article 132 of the TUF, 144-bis, paragraph 1 letter b) of the Issuer Regulation, and on regulated markets or multilateral trading systems, according to the operating criteria established in the organization and management regulations of the same markets, which do not allow the direct matching of buy orders against predetermined sell orders, and also in compliance with any other applicable law, including EU law. Additionally, share purchase transactions may also be carried out in the manner envisaged in Article 3 of EU Delegated Regulation no. 2016/1052 in order to benefit, if the conditions are met, from the exemption under Article 5, paragraph 1, of EU Regulation no. 596/2014 on market abuse with regard to inside information and market manipulation.
  Regarding the disposal of treasury shares, disposals may be made, on one or more occasions and even before having terminated the maximum number of purchasable treasury shares, either by selling them on regulated markets or according to other trading methods in compliance with the law, including EU law, in force and with the Admitted Market Practices, if applicable.

  Under the proposed authorization, the minimum and maximum purchase price shall be determined at a unit price not lower than the official Stock Exchange price of Mondadori shares on the day preceding the purchase transaction, reduced by 20%, and not higher than the official Stock Exchange price on the day preceding the purchase transaction, increased by 10%.
  In any event – except for any different price and volume determinations resulting from the application of the conditions set forth in the Admitted Market Practices – such price shall be identified in accordance with the trading conditions set forth in Delegated Regulation (EU) no. 1052 of 8 March 2016.

  In terms of consideration, sales transactions or other acts of disposition of treasury shares shall be carried out:
  – if executed in cash, at a price no lower than 10% of the reference price recorded on the MTA – Euronext Milan – organized and managed by Borsa Italiana S.p.A. in the trading session prior to each single transaction;
  – if executed as part of any extraordinary transactions in accordance with financial terms to be determined by the Board of Directors on the basis of the nature and characteristics of the transaction, also taking account of the market performance of Mondadori shares;
  – if executed to service the Performance Share Plans adopted by the Company in compliance with the terms and conditions set out in the resolutions of the Shareholders’ Meeting that establish the Plans and the related regulations.

To date, Arnoldo Mondadori Editore S.p.A. holds a total of no. 1,049,838 treasury shares, equal to 0.402% of the share capital.

For further information on the proposed authorization for the purchase and disposal of treasury shares, reference should be made to the Directors’ Explanatory Report, which will be published within the time limits and in the manner prescribed by applicable regulations.

GRANTING OF SHARES UNDER THE 2019-2021 PERFORMANCE SHARE PLAN: INFORMATION PURSUANT TO ART. 84-BIS, PARAGRAPH 5 CONSOB REGULATION NO. 11971/1999
The Board of Directors, based on the final assessment of the Performance Targets underlying the Plan, and having heard the Remuneration and Appointments Committee, resolved to allocate a total of no. 311,848 Arnoldo Mondadori Editore S.p.A. shares to 8 beneficiaries, in implementation of the provisions contained in the “2019-2021 Performance Share Plan” established by the Board of Directors on 14 March 2019 and subsequently adopted by the Shareholders’ Meeting on 17 April 2019 (the “2019-2021 Plan”).
Mention should be made that the 2019-2021 Plan takes the form of a share granting plan and grants its beneficiaries the right to receive, free of charge, shares in the Company provided that, at the end of a reference period of three financial years, the performance targets set in the same Plan have been achieved.
The 8 beneficiaries of the 2019-2021 Plan are the Chief Executive Officer and 7 managers identified by name by the Chief Executive Officer, as delegated by the Board of Directors.
The characteristics of the 2019-2021 Plan are explained in detail in the Directors’ Report to the Shareholders’ Meeting of 17 April 2019 and in the information document contained therein, available on www.gruppomondadori.it, Governance section, to which reference should be made.
Attached is the information required by Schedule 7 of Annex 3A to CONSOB Regulation no. 11971/1999 to account for the granting of shares in the context of the 2019-2021 Performance Plan.

 

PROPOSED ADOPTION OF A 2022-2024 PERFORMANCE SHARE PLAN
The Board resolved, on a proposal from the Remuneration and Appointments Committee, and in keeping with the introduction of the performance share approved last year for the medium/long-term remuneration of executive directors and key management personnel, to submit to the approval of the Ordinary Shareholders’ Meeting, the adoption of a 2022-2024 Performance Share Plan, in accordance with Article 114-bis of Legislative Decree no. 58 of 24 February 1998, intended for the Chief Executive Officer, the CFO – Executive Director and a number of Company managers who have an employment and/or directorship relationship with the Company or with its subsidiaries on the granting date of the shares.

With the adoption of the Plan, the Company aims to encourage Management to improve medium to long-term performance, in terms of both industrial performance and growth in the value of the Company.
The Plan envisages the assignment to the beneficiaries of rights to the free allocation of company shares, subject to the achievement of specific performance targets set and measured at the end of the three-year performance period.
These targets are structured to include both shareholder remuneration indicators and management indicators functional to raising the share value, ensuring maximum alignment of Management remuneration and the creation of value for the Company, as well as indicators of a non-operating/financial nature.
For details on the proposed adoption of the 2022-2024 Performance Share Plan, the beneficiaries and the main characteristics of the Regulations of the Plan, reference should be made to the Information Document drawn up by the governing body, pursuant to Article 84-bis and annex 3A of the Issuer Regulation, and to the Explanatory Report, which will be published within the time limits and in the manner prescribed by applicable regulations.

CONSOLIDATED NON-FINANCIAL STATEMENT PURSUANT TO LEGISLATIVE DECREE 254/2016
Under Legislative Decree 254/2016, the Board of Directors’ 2021 Report on Operations of the Mondadori Group is also composed of the Consolidated Non-Financial Statement (NFS), a qualitative-quantitative description of the non-financial performance of the Company, associated with environmental, social, and staff-related issues, as well as those regarding respect for human rights, and the fight against corruption and bribery, which are relevant given the activities and characteristics of the Company. The NFS was prepared in accordance with GRI Standards: Core option, and includes benchmark KPIs related to GRI G4 “Media Sector Disclosure”.
With regard to 2021, the Mondadori Group has updated its materiality analysis, consistent with the principles set out by the GRI Sustainability Reporting Standards (GRI Standards) and the reporting scopes laid down by Legislative Decree 254/2016.
With a view to continuous improvement of the process, in 2021 the stakeholder engagement activity was expanded by involving employees and teachers, who were given a specific online questionnaire on sustainability issues.
The document also contains relevant information in line with ESMA’s recommendations for the 2021 reporting year, and includes references required by Regulation (EU) 2020/852 related to the recent introduction of the EU Taxonomy.

The findings from the reporting include a number of tangible actions regarding social, governance and environmental issues. These include: the creation of the position of Chief Diversity Officer for the implementation of strategies and projects aimed at promoting diversity, equity and inclusion; in keeping with the measures adopted to combat the spread of COVID-19, the possibility offered to employees and associates to carry out and repeat diagnostic screenings free of charge; access, as part of the New Competencies Fund (NCF), to a training and professional development path intended as a strategic lever to encourage and strengthen internal skills and competencies and the attraction of young talents.
During the year no cases of corruption or bribery involving the Company or its employees were reported, and no legal action was initiated or concluded against the Group or its employees for cases of corruption or reports made within the whistleblowing system.
In 2021, the Mondadori Group once again paid special attention to environmental issues and the specific impacts associated with the life cycle of paper products, energy efficiency measures and the reduction of climate-changing emissions: an approach that guides the Company in the implementation of its business activities, from the purchase of certified paper to the efficient management of points of sale. As for the sourcing of raw materials for the printing of publishing products, the Group opts for the use of paper certified under the two main schemes applied worldwide, PEFC and FSC, whose percentage reached 99.9% of the total during the year.

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

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

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

Governance: promoting sustainable business success

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

Environment: disseminating environmental culture and mitigating impacts on ecosystems

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

The results for the year ended 31 December 2021, approved on today’s date by the Board of Directors, will be presented by the Mondadori Group Management to the financial community in a webcast presentation scheduled today at 3:30 PM.

The corresponding documentation will be available on 1Info (www.1info.it), www.borsaitaliana.it and www.gruppomondadori.it (Investors). Journalists will be able to follow the presentation in listening mode only, by connecting to the following telephone number +39028020911 and via web https://www.c-meeting.com/web3/join/M37DCPDPQUB3KL. At the end of the meeting, a dedicated session is scheduled where questions may be submitted to management.

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

Annexes (in the complete pdf):

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

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

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

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

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

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

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

^[7] GFK (in terms of value)

^[8] Product revenue excluding Club revenue

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