Price sensitive

Following today’s meeting of the Board of Directors of Arnoldo Mondadori Editore S.p.A., chaired by Marina Berlusconi, the Chief Executive Officer of the Mondadori Group, Ernesto Mauri, signed a put option, whereby Arnoldo Mondadori Editore S.p.A. has guaranteed itself the right to sell its subsidiary Mondadori France S.A.S. to Reworld Media S.A..

The disposal plan is part of the Mondadori Group’s repositioning strategy to place greater focus on the Books Area, and involves 100% of the stake held by Arnoldo Mondadori Editore S.p.A. in Mondadori France S.a.S. and the relating investments (revenue of € 330 million and EBITDA of € 18.4 million recorded in 2017).

The value for Mondadori France has been set at € 70 million (cash free/debt free), plus an earn-out of € 5 million.

Under the terms for exercising the put option:

• 86% of the value of the investment – € 60 million – will be paid in cash, € 50 million of which at the closing date and € 10 million 24 months from the closing date; the deferred payment is not subject to any condition;
• the remaining 14% of the value of Mondadori France S.A.S., for a nominal value of € 10 million, will be paid through issue of new Reworld Media S.A. shares, to be subscribed by Arnoldo Mondadori Editore S.p.A. at a price equal to 112.5% of the average stock market price over the 20 days before the signing and, in any case, ranging from a floor of € 2.2 to a cap of € 2.9.

Following the subscription, Arnoldo Mondadori Editore S.p.A. would hold from an 8% to a 10% interest in the share capital of Reworld Media S.A..

The transaction envisages a price adjustment mechanism linked to the achievement of pre-established targets relating to 2018 adjusted EBITDA and normalized net working capital at the closing date.

The earn-out to Arnoldo Mondadori Editore S.p.A. will be subject to the achievement in 2020, by Reworld Media S.A. in the new set-up, of certain financial results.

Under the terms for exercising the put option, Arnoldo Mondadori Editore S.p.A. is also required to provide the buyer with the usual representations and warranties.

If the deal is finalized, the Mondadori Group’s net financial position is expected to improve by approximately € 58 million at the closing date, considering: financial payables to third parties in Mondadori France (approximately € 7 million); fair value adjustment of Reworld Media shares subscribed by Arnoldo Mondadori Editore S.p.A. at closing (approximately € 3 million calculated to date); transaction costs of € 2 million.

In the financial statements for the year ended 31.12.2018, the result from discontinued operations, including impairment, is expected to be basically in line with the amount recorded in the Interim Management Statement at 30.09.2018.

Pursuant to the provisions of law, Mondadori France S.a.S. will start negotiations with its union representatives.

If the put option is exercised, the parties will sign a purchase and sale agreement envisaging completion of the transaction if the following conditions precedent are met:

• authorization issued by the Autorité de la Concurrence;
• approval of a reserved capital increase by the shareholders of Reworld Media;
• disbursement of a bank loan to Reworld Media.

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 2017[1] presented by CEO Ernesto Mauri.

2017 HIGHLIGHTS
2017 was a year in which the Mondadori Group consolidated the goals achieved in the preceding three-year period, on the path of strategic redefinition of its activities and of further operating and financial improvement, while continuing to push strongly on efficiency measures consistent with the relevant market trends and strengthening its leadership across all business areas.

The results achieved were in line with the expectations disclosed to the market:

• revenue was basically steady versus 2016 (-0.9% on a pro-forma basis);
• adjusted EBITDA grew by 3% (versus 100 million euro pro-forma in 2016), with margins on revenue of 8.4%, up from 7.8% and with a higher contribution of Books to Group profitability (approximately 70% of total);
• net profit increased by 35% versus 2016;
• cash flow from ordinary operations stood at 7 million euro, producing an approximately 28% reduction in net debt and a debt/adjusted EBITDA ratio of 1.8x (versus 2.4x in 2016).

Additionally, at year end, a new (five-year) loan agreement was concluded for a total of 450 million euro, setting better financial conditions in terms of lower average debt cost and a new duration.

PERFORMANCE AT 31 DECEMBER 2017
In 2017, consolidated net revenue amounted to 1,268.3 million euro, up by 0.4% versus 1,263.3 million euro in 2016, but down by 0.9% versus the pro-forma figure of 2016.

The Group’s areas showed a different revenue pattern: a +10% increase by Books (due also to the different consolidation period), outperforming the relevant markets; an overall 7% drop by Magazines, attributable to the downturn of the circulation and advertising markets.

In 2017, consolidated adjusted EBITDA was up by 6.3% (on a pro-forma basis), reaching 106.3 million euro.

The Books Area contributed approximately 70% to Group EBITDA, with margins on revenue of 14% and a 12% increase on a like-for-like consolidation basis with Rizzoli Libri.

Magazines Italy continued its upswing in profit, with adjusted EBITDA of 15.4 million euro, up by 47.3% versus the prior year.

Magazines France, instead, saw its profit margins drop from 10% to 8.5%, managing to only partly alleviate the effects of the sharp decline of the markets.

EBITDA, on a pro-forma basis, grew for the fourth consecutive year, increasing margins to reach 8.4% of consolidated revenue, a growth that confirms the improvement in operating efficiency, benefiting also from the integration synergies of the companies acquired in 2016.

On a like-for-like consolidation scope, the impact on revenue of the cost of goods sold, variable costs and structural costs, decreased as a result of the ongoing cost-curbing measures adopted across all business areas; even stronger benefits came from the cost of personnel, which amounted to 3.7% versus the prior year (approximately -2% on a like-for-like basis[2]).

Employees at 31 December 2017 were 3,026, down by 7.2% versus 31 December 2016 (approximately -4% on a like-for-like basis), as a result of the ongoing reorganization process implemented both in Italy and in France.

EBITDA grew by 7.5% to reach 101.1 million euro from 94 million euro in 2016 (+16.8% on a pro-forma basis). 2017 benefited from net positive not ordinary items of 8.3 million euro related to the gains from the disposal of certain assets in the second quarter of the year, while recording restructuring costs of 12.3 million euro.

Consolidated EBIT in the year amounted to 61.5 million euro, improving by approximately 2% versus 60 million euro in 2016, as a result of the abovementioned increased EBITDA, despite the increase in amortization, depreciation and impairment.

Consolidated profit before tax came to a positive 47.5 million euro, up by approximately 12% versus 42.3 million euro in 2016; financial costs in 2017 amounted to 14 million euro versus 17 million euro in 2016, down by 21% as a result of the reduction in the average interest rate of over 60 bps and of a lower average net debt.

Overall tax costs in the period under review amounted to 14.3 million euro, down versus 18 million euro in 2016, benefiting from the positive adjustment of deferred tax of Mondadori France of 6.3 million euro.

Group profit at 31 December 2017 amounted to 30.4 million euro, up by 35% versus 22.5 million euro in 2016.

The Group’s net financial position at 31 December 2017 stood at -189.2 million euro, down by approximately 28% versus -263.6 million euro at 31 December 2016, as a result of the Group’s positive cash generation from ordinary operations of 68.7 million euro.

Not ordinary cash flow came to a positive 5.6 million euro, and includes disposals of 12.6 million euro, restructuring costs of approximately 14 million euro, and cash-ins from prior-years’ tax of 6.8 million euro.

CONSOLIDATED FINANCIAL HIGHLIGHTS IN 4Q17

Consolidated revenue in 4Q17 amounted to 343.5 million euro, up by 4.7% versus 328.1 million euro in 4Q16, driven by the growth of Books; Retail too posted a positive 4Q17, with revenue from the Book product rising by +8.2%, thanks to the market performance (sell-out of the bestseller titles published in the third quarter) of Books (+11.9%). Magazines continued the downward revenue trend, in line with the relevant markets, but with a more modest decline in Italy, thanks to the over 10% growth in the digital revenue of the properties.

Adjusted EBITDA fell slightly in the last quarter of the year, closing at 31.1 million euro versus 32.3 million Euro in 4Q16, due mainly to the Books Area, as a result of the benefits in 4Q16 from the adjustment of the provision for bad debts (approximately 3.5 million euro) regarding the positions of a number of clients whose receivables had been cashed in, and to an adverse product mix of revenue. The Magazines areas, instead, reported a strong upswing in Italy, which more than offset the downward trend seen in France.

Consolidated EBITDA amounted to 21.8 million euro, down versus 23.8 million euro in 4Q16, as a result also of extraordinary/restructuring costs incurred by Magazines France in 4Q16, which include the remediation costs for the current offices, allocated on an accrual basis in 2017.

Amortization, depreciation and impairment increased versus 4Q16, as a result mainly of the write-down of 2.9 million euro of the investment in the associate publisher of Il Giornale.

Financial costs, as in prior quarters, benefited from lower debt costs and lower average debt versus the prior year.

The weight of tax in the last quarter was affected by the impact of the write-downs of non-fiscally deductible investments.

Accordingly, the net result came to -0.8 million euro (versus +4.7 million in 4Q16).

OUTLOOK

The Group will continue on the path of strategic repositioning and focus on its core businesses, specifically on consolidating its leadership in the Books Area, on developing the digital area of Magazines Italy, and on expanding the franchised channel in the Retail Area.

In line with the above strategy and in light of the current relevant context, the plan sets operational targets which, based on the current scope, allow the Group to estimate a slight decrease in consolidated revenue in 2018 and a basically steady adjusted EBITDA versus 2017.

Net profit for the year 2018 is expected to drop versus the prior year, which had included non-recurring positive items of approximately 7 million euro (net of tax).

Cash flow from ordinary operations in 2018 is forecast at around 50 million euro.

On a like-for-like basis, forecasts for 2019 indicate the same trend in revenue seen in 2018, a growth in adjusted EBITDA to reach approximately 110 million euro, a net profit above 30 million euro, ordinary cash flow above 50 million euro, and a net financial position lower than -150 million euro (with a net debt/adjusted EBITDA ratio of approximately 1.3x).
The forecast for 2019 updates the estimates disclosed to the market on the approval of the 2016 results.
Due to the sharp reduction in net debt and to the expected cash flows, the Group is well-positioned to consider development opportunities in its core strategic businesses, also through external growth.

PERFORMANCE OF BUSINESS AREAS

• BOOKS

In the trade books market, which grew by 5.4% in 2017 versus 2016, the Mondadori Group retained its leadership position with a 28.7%[3] market share, and with 8 of its books appearing in the top 10 bestselling titles of the year (in terms of value): Origin, by Dan Brown (Mondadori); Storie della buonanotte per bambine ribelli, by Francesca Cavallo and Elena Favilli (Mondadori); La colonna di Fuoco, by Ken Follett (Mondadori); Quando tutto inizia, by Fabio Volo (Mondadori); Le otto montagne, by Paolo Cognetti (Einaudi), winner of the 2017 Strega Prize; L’arte di essere fragili, by Alessandro D’Avenia (Mondadori); Dentro l’acqua, by Paula Hawkins (Piemme); L’arminuta, by Donatella Di Pietrantonio (Einaudi), winner of the Campiello Prize.

Additionally in the year under review, the 2017 Nobel Prize in Literature went to Kazuo Ishiguro, whose works are translated and published in Italy by Einaudi.

In 2017, the Mondadori Group also retained its leadership position in the school textbooks market, with a 23.7% share, adoptions-wise.[4]

Revenue from the Books Area amounted to 523.9 million euro, up by 10.3% versus 475.1 million euro in 2016, due also to the different consolidation period of Rizzoli Libri versus the prior year.

All areas grew: +12.3% Trade, due also to the effects of the different consolidation scope versus 2016 and to the publication of a number of bestsellers in the second half of the year; +10.4% Educational, which did not include the first quarter of Rizzoli Libri in 2016 and as a result of the good performance of school textbooks and Mondadori Electa (+16.8%); +2.2% distribution activities.

Adjusted EBITDA of the Books Area amounted to 74.3 million euro which, on a like-for-like consolidation basis with Rizzoli Libri, would be up by approximately 12% versus 2016, despite a more negative contribution from the associate Mach2 Libri in 2017 (down by -1.8 million euro versus 2016).

2017 saw efforts continue on implementing the management policy focused on a targeted editorial planning in the Trade segment and on the ongoing optimization of operating processes, which allowed the Group to keep profitability above 14%.

The Area’s EBITDA amounted to 74.5 million euro, up by 3% versus 72.3 million euro in 2016, which included certain non-recurring charges amounting to approximately 2.3 million euro from the acquisition of Rizzoli Libri.

• RETAIL

In the Retail Area, the Group continued to implement its strategy to align the organization and all the sales channels to the developments of the market; the Books segment continued to grow in 2017, with actions aimed at gradually reviewing the network and the sales proposition: in Books (80% of store revenue), the Mondadori Retail market share stood at 15%[5], up versus 14.9% in 2016.

In 2017, the Retail Area achieved revenue of 198.5 million euro, basically in line (-0.5%) with 199.6 million euro reported in the prior year, despite the upward trend of the Book product, offset by the targeted reduction in revenue from consumer electronics products implemented from the first half of the year.

In the fourth quarter, revenue grew by 2% versus the prior year, driven by the promotional activities launched, with a sharp increase by 8.2% reported by Books.

The analysis by channel shows the following:

• a 1.3% increase by directly-managed bookstores (+2.5% on a like-for-like basis in terms of stores);
• the positive trend (+0.9%) of franchised bookstores (-1.5% on a like-for-like basis in terms of stores);
• the drop by Megastores (-8.3%), due to the shrinking sales in consumer electronics and to the closure of the store in Palermo; Books performed well (+1.2%);
• an over 36% increase in the online segment, driven by the positive performance of sales related to the government’s “Culture Bonus” for 18 year olds (“18app”);
• a lower drop by the Bookclub than in prior years.

In 2017, Mondadori Retail achieved adjusted EBITDA of 0.7 million euro, deteriorating versus 1.8 million euro in 2016, as a result of the temporary decline in margins from the franchised channel, affected by a number of promotional campaigns whose benefits are expected to be felt starting from next year, of the structural decline in sales volumes in the book club channel, and of the costs associated with the targeted reduction in the sales of consumer electronics products.

EBITDA stood at 0.6 million euro (1.4 million euro in 2016) and includes higher restructuring costs (1.5 million euro) and a number of not recurrent positive items (including key money from the closure of two stores).

• MAGAZINES ITALY

In 2017, Magazines Italy’s revenue amounted to 290.7 million, down by 6.4% versus 310.6 million euro in 2016.

Specifically:

• Circulation revenue (newsstands + subscriptions) lost 4.2%, but outperformed the relevant market[6], thanks mainly to the performance of the TV magazine Tv Sorrisi e Canzoni and to the launch of the magazines GialloZafferano and Spy

The Mondadori Group retained its market leadership position in the period, with a share, in terms of value, increasing to 31.8%, up versus 30.8% in 2016.

• total advertising revenue (print + web) grew by 1.8%; gross advertising sales in Italy increased by 7.5% versus 2016, driven by the contribution of Banzai Media activities: the trend of print advertising sales, on a like-for-like basis of titles and barter deals for goods, was basically in line (-5.8%) with the relevant market[7], while digital revenue grew by 27%, accounting for 27% of the total;
• revenue from add-on products dropped sharply (-24.4%) versus 2016, in line with the market trend throughout the year[8];
• distribution and revenue towards third publishers dropped by 2.8% versus the prior year, outperforming by far the relevant market trend[9] thanks to the ongoing commitment to developing third-publisher portfolios distributed both in the channel and through subscriptions.

In 2017, Mondadori retained its position as Italy’s top digital publisher, reaching a total unique audience of 16.2 million/month[10], a position corroborated by comScore surveys, which reported in December 2017 an audience of 24.2 million unique users/month.

Digital revenue reached an overall 38 million euro, up by approximately 16% versus the prior year.

Adjusted EBITDA in the Magazines Italy Area improved sharply by 47.3%, rising from 10.5 million euro in 2016 to 15.4 million euro, driven not only by the benefits of the digital business achieved with the combination of Banzai Media’s teams and products, but also by the print activities, which offset the drop triggered by the trend of the markets, with ongoing process optimization actions and containment of editorial and overhead costs.

The Area’s EBITDA improved further, closing at 12.8 million euro (3.6 million euro in 2016), thanks also to lower restructuring costs.

• MAGAZINES FRANCE

In a shrinking market (advertising and circulation-wise), Mondadori France achieved revenue of 297.4 million euro, down by 7.5% (-7% on a like-for-like basis[11]) versus 321.7 million euro in 2016. Specifically:

• circulation revenue (74% of the total) dropped by 4.9%, losing less than the market thanks to the performance of the subscriptions channel.[12] Revenue from the sale of digital copies doubled versus 2016, driven by the new partnerships with the main French telco players, to offer Mondadori France brands to their subscriber base.
• advertising revenue (print+web) dropped by 17.1%. Print advertising revenue (90% of the total) fell by 11.8% versus the prior year, in line with the relevant market trend[13].

Against this backdrop, Mondadori France retained its position as second top player in the magazine advertising market, with its share steady at 11.1% versus the prior year; digital advertising revenue saw a bigger decline versus the prior year, as a result of the discontinuity from the internalization of mobile/video advertising sales.

The digital readers of Mondadori France were over 12.1 million unique users[14], with six brands topping the one million mark of unique users.

Adjusted EBITDA in 2017 came to 26 million euro versus 33.2 million euro in the prior year. The drop is mainly attributable to the downturn in print and digital advertising revenue, affected also by the increase in circulation expenses. Adjusted EBITDA was also affected by the increase in rental costs for the offices (1.4 million euro) and by the deconsolidation of Naturabuy (1.1 million euro).

EBITDA amounted to 18.4 million euro, down from 30.8 million euro in 2016, as a result of higher restructuring costs in 2017 (7.1 million euro versus 2.3 million euro in 2016) from the new voluntary staff departure plan announced in December – whose benefits will be felt in 2018 – and of extraordinary costs for the remediation of the current offices, allocated on an accrual basis in 2017 and amounting to 3.1 million euro, despite the gain of 4.3 million euro from the disposal of NaturaBuy in May 2017 (3.3 million euro net of relating charges).

PERFORMANCE OF ARNOLDO MONDADORI EDITORE S.P.A.
In the current year, given the significant differences between cost and equity of investments as a result of retained earnings, the Board of Directors deemed it appropriate to change the measurement method of investments in subsidiaries and associates.

Following this change in the accounting standard,[15] consolidated and Parent Company equity are now in line and amount to 315.8 million euro at 31 December 2017; the Parent Company income statement shows the same net result as the consolidated side of 30.4 million euro, up versus the figure on a like-for-like basis in 2016 (22.5 million euro).

The Board of Directors of Arnoldo Mondadori Editore S.p.A. has called the Annual General Meeting on Tuesday 24 April 2018 in first call.

PROPOSED RENEWAL OF THE AUTHORIZATION TO PURCHASE AND SELL TREASURY SHARES
Following the expiry of the preceding authorization resolved upon by the Shareholders’ Meeting on 27 April 2017, with the approval of the financial statements at 31 December 2017, the Board of Directors will propose to the next Shareholders’ Meeting the renewal of the authorization to purchase and sell treasury shares with the aim of retaining the applicability of law provisions in the matter of any additional re-purchase plans and, consequently, of seizing any investment and operational opportunities involving treasury shares.

Here below are the main elements of the proposal made by the Board of Directors:

• Motivations

The motivations underlying the request for the authorization to purchase and sell treasury shares refer to the opportunity to attribute to the Board of Directors the power to:

• to use the treasury shares purchased as consideration in the acquisition of interests as part of the Company’s investment policy;
• to use the treasury shares purchased in 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 implying the allocation or sale of treasury shares;
• to undertake any investments, directly or through intermediaries, including for the purpose of containing abnormal movements in share prices, stabilizing share trading and prices, supporting the liquidity of the share on the market, in order to foster the regular conduct of trading beyond normal fluctuations related to market performance, without prejudice in any case to compliance with applicable statutory provisions;
• to rely on investment or divestment opportunities, if considered strategic by the Company, also in relation to available liquidity;
• to sell treasury shares as part of share-based incentive plans pursuant to art. 114-bis of the TUF, and of plans for the free allocation of shares to Shareholders.
• Duration

The authorization to purchase treasury shares is requested to last until the approval of the financial statements for the year ending 31 December 2018, while the authorization to sell is requested to last for an unlimited period.

• Maximum number of purchasable treasury shares

The renewed authorization will enable the Company to reach the cap of 10% of its share capital, also considering the shares held directly and indirectly from time to time, in line with the previous authorization.

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

Purchases shall be made on regulated markets pursuant to the combined provisions of art. 132 of Legislative Decree no. 58/1998, of art. 5 of Regulation (EU) 596/2014, (ii) of art. 144-bis of the Issuer Regulation, (iii) of the EU and national legislation on market abuse, and (iv) of Accepted Practices.

Specifically, purchases shall be made on regulated markets, according to operating criteria which do not allow the direct combination of the purchase negotiation proposals with pre-determined sale negotiation proposals.

The minimum and maximum purchase price would be determined under the same conditions established by the preceding Shareholders’ Meeting authorizations, i.e. at a minimum unit price not lower than the official Stock Exchange price of the day preceding the purchase transaction, reduced by 20%, and a maximum not higher than the official Stock Exchange price of the day preceding the purchase transaction, increased by 10%.

In terms of daily prices and volumes, the purchase transactions would be completed in compliance with the conditions established in art. 3 of the Delegated Regulation (EU) 2016/1052.

Purchases instrumental in (a) the support to market liquidity and (b) the purchase of treasury shares to build a so-called “treasury shares” portfolio, shall also be made in accordance with the conditions provided by market practices, under the combined provisions of art. 180, par. 1, lett. C) of the TUF and of art. 13 of (EU) Regulation 596/2014.

With regard to the sale of treasury shares, the Board of Directors resolved to propose to the Shareholders’ Meeting to sell the shares in any appropriate manner in the interest of the Company, for purposes which include the sale on regulated markets, the exercise of option rights, including conversion rights, deriving from financial instruments issued by the Company or third parties, support to incentive plans approved by the Shareholders’ Meeting, and as consideration for the acquisition of equity interests as part of the Company’s investment policy.

To date, Arnoldo Mondadori Editore S.p.A. holds a total of no. 920,000 treasury shares, equal to 0.352% of the share capital.

For further information on the proposed authorization for the purchase and sale 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 current laws and regulations.

PROPOSED ADOPTION OF A 2018-2020 PERFORMANCE SHARE PLAN
The Board resolved, on a proposal from the Remuneration and Appointments Committee, and consistent with the introduction of the performance share plan 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 2018-2020 Performance Share Plan, in accordance with art. 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 managers chosen by the Company who have an employment and/or directorship relationship with the Company or with its Subsidiaries on the date of the Granting of the Shares.

With the adoption of the Plan, the Company aims to encourage Management to improve medium to long-term performance, in terms of both industrial performance and growth in the value of the Company.

The Plan envisages the right for beneficiaries to receive a bonus in the form of Company shares, subject to the achievement of specific targets set and measured at the end of the three-year performance period from 2018 to 2020.

These targets are structured to include both shareholder remuneration indicators and management indicators functional to raising the share value, ensuring maximum alignment of Management remuneration and the creation of value for the Company.

For details on the proposed adoption of the 2018-2020 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 art. 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 current laws and regulations.

CONSOLIDATED NON-FINANCIAL STATEMENT PURSUANT TO LEGISLATIVE DECREE 254/2016
Under Legislative Decree 254/2016, the Board of Directors’ 2017 Report on Operations of the Mondadori Group is also composed of the Consolidated Non-Financial Statement, a qualitative-quantitative description of the non-financial performance of the Company, associated with environmental, social, and staff-related issues, as well as those regarding respect for human rights, and the fight against active and passive corruption, which are relevant given the activities and characteristics of the Company.

The 2017 results, approved on today’s date by the Board of Directors, will be presented by the Mondadori Group Management to the financial community today, 3:30 PM, at the Mondadori Megastore in piazza Duomo, Milan.

The corresponding documentation will be made available on 1Info atwww.1info.it, www.borsaitaliana.it and www.gruppomondadori.it (Investors).

The Executive Manager responsible for the drafting of the corporate accounting documentation – Oddone Pozzi – hereby declares, pursuant to Art. 154 bis, par. 2, of the Finance Consolidation Act, that the accounting documentation contained in this press release corresponds to the Company’s accounting entries, books and results.

CHANGE IN THE 2018 CORPORATE EVENTS CALENDAR
The meeting of the Board of Directors called to approve the Interim Report on Operations at 31 March 2018, previously scheduled on 10 May 2018, has been put back to Tuesday 15 May 2018. The presentation of the results to analysts will be held on the same day.

Annexes (see attached pdf):
Consolidated balance sheet;
Consolidated income statement;
Consolidated income statement – fourth quarter;
Group cash flow;
Arnoldo Mondadori Editore S.p.A. balance sheet;
Arnoldo Mondadori Editore S.p.A. income statement;
Arnoldo Mondadori Editore S.p.A. cash flow statement
Glossary of terms and alternative performance measures used.

[1] 2017 at Group level includes the contribution as from 1 January of  Rizzoli Libri (outside the scope of consolidation in 1Q16) and Banzai Media activities (consolidated as from 1 June 2016 and merged by incorporation into the Parent Company, with accounting effects as from 1 January 2017).
[2] Net of the effects of the outsourcing of logistics activities.
[3] Source GFK, December 2017
[4] Source: AIE, 2017 (adopted sections)
[5] Source GFK, December 2017
[6] -10.6% Internal source Press-di, December 2017
[7] -6.2% Source Nielsen, December 2017
[8] -21.9% Source Nielsen, December 2017
[9] Source ADS, December 2017
[10] Source Audiweb, December 2017
[11] Net of NaturaBuy, sold in May 2017
[12] – 6.1%; Source Kantar Media, January-December 2017
[13] -10.8%; Source Kantar Media, January-December 2017
[14] Source Nielsen, October 2017
[15] The publication of the amendment to IAS 27 (Equity Method in Separate Financial Statements), has, in fact, introduced the option of adopting the equity method for measuring investments in separate financial statements

The Mondadori Group announces that it has concluded today a new five-year loan agreement for a total of 450 million euro (expiring on 31 December 2022).
The new agreement, concluded with a pool of three banks (Banca Popolare di Milano S.p.A., Intesa Sanpaolo S.p.A. and UniCredit S.p.A.), replaces the current lines of credit (2015-2020) and offers better financial conditions than those under the agreement concluded on 18 December 2015, in terms of lower interest rates and ancillary charges.

The initial spread of the new credit lines – added to the Euribor reference rate with zero floor – is 120 bps, approximately 130 bps lower than the current 250 bps. The rate may vary, on an annual basis, depending on consolidated debt/EBITDA movements, from a low of 95 bps to a high of 200 bps.
At 30 September 2017, the Mondadori Group’s net financial position stood at -256 million euro; the Group expects to close 2017 with a debt/adjusted EBITDA ratio below 2.0x.

The consolidated debt/EBITDA covenant is the same as today’s, equal to 3.5x in 2018 and 3.25x thereafter, while the net debt covenant cannot exceed the maximum of 450 million euro at 30 June 2018, of 435 million euro at 30 June 2019, of 412.5 million euro at 30 June 2020, of 385 million euro at 30 June 2021, and of 350 million euro at 30 June 2022.

Regarding the new loan, Banca Popolare di Milano S.p.A., Banca IMI S.p.A. and UniCredit S.p.A. act as Arrangers, Mandated Lead Arrangers and Bookrunners, Banca Popolare di Milano S.p.A., Intesa Sanpaolo S.p.A. and UniCredit S.p.A. as Lenders, and UniCredit Bank AG, Milan Branch, as Agent.
Concurrent to the granting of the new loan, the Mondadori Group will fully pay, by end 2017, the debt totaling 276.2 million euro arising from the agreement concluded in December 2015.

Today, the meeting of the Board of Directors of Arnoldo Mondadori Editore S.p.A., chaired by Marina Berlusconi, reviewed and approved the Half-Year Financial Report at 30 June 2017[1], presented by CEO Ernesto Mauri.

HIGHLIGHTS IN 1H17

In 1H17, on a like-for-like consolidation basis with Rizzoli Libri versus 2016[2], the Group continued on its path of operational improvement, delivering a 9% increase in adjusted EBITDA and paving the way to accomplishing the targets set for the whole 2017.

The LTM cash flow from ordinary operations – the first time it includes Rizzoli Libri for the previous 12 months – amounted to approximately 63 million euro, continuing the positive performance of cash generated by the Group’s businesses which, along with the extraordinary transactions involving the strategic rationalization of the portfolio of activities, improve forecasts on net financial position at year end.

Adjusted EBITDA has little bearing on the performance of the entire year since the negative contribution of Rizzoli Libri (outside the scope in 1Q16) is attributable to the seasonal nature of the Education business, which includes in the first quarter expenses to promote the campaign on school textbooks adoption, while revenue is typically recorded in the second half of the year.

Net profit in the reporting period, amounting to +4.4 million euro, improved by over 8 million euro versus 30 June 2016, due also to the contribution of a number of positive extraordinary items.

GROUP PERFORMANCE AT 30 JUNE 2017

Consolidated revenue in 1H17 amounted to 553 million euro, down slightly (-1.7%) versus 562.5 million euro in the prior year, due mainly to the performance of the Magazines areas, to the temporary effect (recovered in July) of the shift forward of revenue from supplies to a number of clients in the Educational Area, and to the targeted reduction in revenue from consumer electronics products in the Retail Area.

On a like-for-like consolidation basis with Rizzoli Libri (in the second quarter only), adjusted EBITDA grew by 9% (from 26.7 million euro to 29.1 million euro) with a percentage on revenue increasing from 4.7% to 5.3% – especially in the Books (from 9.5 million euro to 13.2 million euro net of Rizzoli Libri’s first quarter) and Magazines Italy areas (+13%).

Including the result of Rizzoli Libri as from 1 January, adjusted EBITDA amounted to 21.6 million euro, as a result of the negative contribution of -7.5 million euro in 1Q17, attributable to the seasonal nature of the education business.

Consolidated EBITDA improved by 21.2% (from 22.5 million euro to 27.3 million euro), driven by the gains from the disposal of certain assets in the second quarter of the year (4.2 million euro from the disposal of a property in Corporate & Shared Services, and 4.3 million euro from the disposal of NaturaBuy in Magazines France).

Consolidated EBIT in 1H17 amounted to 11.2 million euro, up by approximately 33% versus 30 June 2016, and includes amortization, depreciation and impairment of 16 million euro, up versus 14 million euro in 1H16 from the impact of the amortization of Banzai Media intangible assets (1.2 million euro) and the capitalized expenses of the Rizzoli Libri school business (2 million euro, 1.1 million euro of which in the first quarter).

Consolidated profit before taxes came to 4.1 million euro and includes financial costs of 7.1 million euro, down versus the prior year (7.9 million euro) on a like-for-like basis of average net debt, due to the reduction in the average interest rate of approximately 40 bps.

The overall tax burden in the period amounted to +1.6 million euro (-3.1 million euro in 2016), benefiting from the adjustment of 3.8 million euro of deferred taxes of Mondadori France.

At 30 June 2017, Group employees with a fixed-term or permanent labour contract amounted to 3,112 units, down by 8.6% versus 3,404 units at June 2016, as a result of the outsourcing of logistics activities in May, as well as the ongoing restructuring and efficiency improvement measures involving each of the Group’s business areas.

The Group’s net financial position at 30 June 2017 stood at -284.4 million euro, improving by approximately 90 million euro versus -374.8 million euro at 30 June 2016, as a result of the positive cash generation from ordinary operations of 63.2 million euro, the first time it includes the contribution of Rizzoli Libri for 12 months, and extraordinary operations in the last twelve months, which generated 27.3 million euro.

CONSOLIDATED FINANCIAL HIGHLIGHTS IN 2Q17

In 2Q17, consolidated revenue amounted to 291.9 million euro, down by 5.2% versus 2Q16.

Despite discontinuity from the shift forward of revenue from the Educational Area, Books – on a like-for-like basis for the first time – were basically stable versus 2Q16 (+0.8%).

Adjusted EBITDA grew by 9.5% in the quarter, especially in Books (from 5.4 million euro to 8.6 million euro) and Magazines Italy (+27.8%), confirming the Group’s continued efficiency recovery.

Consolidated EBITDA, including extraordinary items, improved significantly by over 10 million euro (from 14.0 million euro to 25.5 million euro), driven by the positive contribution of the abovementioned gains.

Consolidated net profit, after minority shareholders’ result, came to 13.5 million euro versus a loss of 2 million euro at 30 June 2016.

OUTLOOK FOR THE YEAR

In light of the Group’s performance in the first half of the year, it is reasonable to confirm the previously disclosed estimates for 2017 versus the 2016 pro-forma figures[3] that indicate steady revenue and a “high single-digit” growth of adjusted EBITDA, with a resulting improvement in profit margins and a sharp increase of approximately 30% in net profit.

Also as a result of the extraordinary transaction involving the disposal of an asset in the first six months, net debt at end 2017 is estimated to further reduce versus 31 December 2016, with a net debt/adjusted EBITDA ratio below 2.0x (from the previous forecast between 2.2/2x).

PERFORMANCE OF GROUP BUSINESS AREAS AT 30 JUNE 2017

• BOOKS

In 1H17, the Trade Books market grew by +1.3% versus 1H16[4]. Against this backdrop, Mondadori Libri retained its market leadership position with an overall 28.1% share.

In 1H17, the Group held a total of 5 positions in the ranking of the ten best-selling titles in terms of value, with Storie della buonanotte per bambine ribelli. 100 vite di donne straordinarie by F. Cavallo and E. Favilli, in first place, L’arte di essere fragili. Come Leopardi può salvarti la vita by A. D’Avenia (3°), Dentro l’acqua and La ragazza del treno by P. Hawkins (5° and 6°), and Tredici by J. Asher (7°).

Additionally, in July the publisher Einaudi won the 71st edition of the Strega Prize with Le otto montagne by Paolo Cognetti, a remarkable success translated in over 30 countries.

Revenue from the Books Area amounted to 187.9 million euro, up by 10.4% versus 1H16 (170.1 million euro), also as a result of the consolidation of Rizzoli Libri (present only in the second quarter of 2016), despite the publishing plan to schedule the release of best-selling titles mostly in the second half of the year:

• trade revenue grew by 4.3% versus 1H16; the increase is explained by the consolidation of Rizzoli Libri, which contributed 18.2 million euro to revenue in the first half of the year;
• educational revenue improved by 16.3% versus 1H16, driven also by Electa’s performance in museum and publishing activities;
• revenue from distribution activities was up by 27.2% versus 1H16, due to the different consolidation period of Rizzoli Libri.

Adjusted EBITDA of the Books Area came to 5.7 million euro; net of the loss reported in the first quarter by Rizzoli Libri, explained by the typical seasonal nature of the school textbooks business, adjusted EBITDA would amount to 13.2 million euro, up by approximately 39% versus 1H16 (9.5 million euro), as a result of the progress in the integration process and resulting synergies, as well as the positive performance of Electa.

EBITDA amounted to 5.6 million euro (9.1 million euro at 30 June 2016).

• RETAIL

In 1H17, the Retail Area achieved revenue of 84.7 million euro, down by 4% versus 88.2 million euro in 1H16, due also to the targeted reduction in revenue from consumer electronics products.

Books were the predominant product category, making for 80% of total revenue of the Area[5]: in 1H17, the product grew by 3.4%, outperforming the relevant market trend.

The result benefited from the directly-managed network and confirms the effectiveness of the actions undertaken in terms of product penetration and assortment.

In the period under review, Mondadori Retail’s market share in books rose to 14.7% from 14.3%.

Non-book revenue was basically steady in the impulse (stationery and toys) and media categories, while, as mentioned, Consumer Electronics continued to fall as targeted (approximately -22% versus 2016).

Adjusted EBITDA came to -3.7 million euro, deteriorating versus -3.1 million euro reported in 1H16, as a result of the structural decline in sales volumes in the book club channel, despite the positive performance of other channels.

EBITDA came to -5 million euro (-3.1 million euro in 1H16), as a result of higher restructuring costs (1.5 million euro).

• MAGAZINES ITALY

In Italy, in a continually adverse market in terms of magazine circulation, the Mondadori Group retained its leadership, increasing its share to reach 31.6%.[6]

In 2Q17, in line with the selective strategy on the development of the product portfolio to sustain revenue and optimize editorial costs, Mondadori launched two new publications, both receiving a warm welcome from the public: the monthly Giallo Zafferano, with an average circulation of approximately 200,000 copies, and the weekly SPY, with average sales of approximately 300,000 copies for the first four issues.

Revenue from the Area amounted to 148.1 million euro, down by 7.9% versus 160.9 million euro in 1H16, due also to the sharp drop in add-on sales. Specifically:

• circulation revenue (newsstands + subscriptions) fell by 8.2%, less than the relevant market trend in both the newsstand and subscription channels;
• advertising revenue (print + web) increased by approximately 7%, driven by the contribution of the consolidation of Banzai Media activities, bringing the percentage of digital revenue on the total to approximately 28%. Gross advertising sales grew by 14.5% in the reporting period; considering print alone, on a like-for-like basis of titles and barter deals, sales fell by -3.9%, outperforming, however, the relevant market trend (-6.1% at May);
• revenue from add-on products, as mentioned, dropped sharply versus 1H16, in line with the market trend (-29.7%[7]);
• distribution and revenue towards third publishers managed by Press-Di dropped at a more moderate pace (-2.2%) than the relevant market[8], thanks to the ongoing commitment to developing third-publisher portfolios.

In the digital area, the Mondadori Group reached a unique audience of 16.6 million users/month[9] in the first six months of the year versus 8 million/month of May 2016 (+3.5% versus December 2016), retaining its position as Italy’s top traditional publisher also in the digital business, boasting a supremacy in key vertical segments such as women, food, health & wellness.

A position corroborated by comScore surveys, which reported a Group audience of 23.6 million unique users/month at May 2017, steady versus December.

Adjusted EBITDA in the Magazines Italy Area improved by approximately 12.8%, rising from 10.6 million euro to 11.9 million euro, driven mainly by the benefits of the digital business achieved with the combination of Banzai Media and Mondadori’s teams and digital products; print activities reported a steady margin, offsetting the drop triggered by the trend of the markets, as a result of the ongoing optimization actions and containment of editorial and overhead costs.

Digital activities in the period achieved an overall positive adjusted EBITDA (negative in 1H16).

The Area’s reported EBITDA confirmed the growth trend, closing at 11.7 million euro (10 million euro).

• MAGAZINES FRANCE

In 1H17, revenue from Mondadori France amounted to 148.1 million euro, down by 7.6% versus 160.4 million euro in 1H16. Specifically:

• circulation revenue (approximately 74% of the total) lost 4.5% versus 1H16: -7% subscriptions (representing the strongest and steadiest contribution to revenue of the Area with 54%); -5.1% the newsstand channel, outperforming the relevant market trend (-8.1%)[10].

Revenue from the sale of digital copies grew sharply in the first half versus 2016, driven by the new partnerships with a number of French telco players to offer Mondadori France brands to their subscriber base.

• advertising revenue (print + web) fell by an overall 17.4% versus 1H16; print (-13.3%), basically in line with the relevant market, accounted for approximately 86% of total advertising revenue, while digital advertising accounted for the remaining approximately 14%.

In the reporting period, Mondadori France held a 10.6% market share[11], basically steady versus the prior year, retaining its position as second top player on the magazine advertising market.

The digital readers (web, mobile & tablet) of Mondadori France magazines reached 11.4 million unique users[12], up by approximately +16% versus the average figure in 1H16.

Adjusted EBITDA came to 12.5 million euro versus 15.5 million euro in 1H16. The drop is mainly attributable to the downturn in advertising revenue generated by the Digital Area, to the increase in rental costs for the offices and deconsolidation since 1 May of NaturaBuy: net of the latter two effects, the decline in business would amount to approximately 1.9 million euro in the first half of the year, mitigating the drop in revenue brought by the lingering weakness of the relevant markets, as a result of the constant attention placed on editorial and overhead cost containment.

Reported EBITDA amounted to 15.7 million euro, up by approximately 10% versus 1H16, driven by the positive contribution of the gain of 4.3 million euro from the disposal of NaturaBuy in May.

SIGNIFICANT EVENTS AFTER THE REPORTING PERIOD

On 26 June, Arnoldo Mondadori Editore launched a share buyback plan, under art. 5 of Regulation (EU) No. 596/2014, in execution of the resolution adopted by the Shareholders’ Meeting held on 27 April 2017, authorizing the purchase and disposal of treasury shares for a maximum amount of up to 0.96% of the share capital, which is intended to provide the Company with the 2.49 million shares needed in the three-year period to meet the obligations under the 2017-2019 Performance Share Plan approved by the Meeting.

On 3 July, the Company announced the purchase, in the period from 26 to 30 June, of 198,098 ordinary shares (equal to 0.076% of the share capital) at an average unit price of Euro 1.6283, for a total amount of Euro 332,566.59.

On 10 July, the Company announced the purchase, in the period from 3 to 7 July, of a further 38,902 ordinary shares (equal to 0.015% of the share capital) at an average unit price of Euro 1.5906, for a total amount of Euro 61,876.25.

On 17 July, the Company announced the purchase, in the period from 10 to 14 July, of a further 25,000 ordinary shares (equal to 0.010% of the share capital) at an average unit price of Euro 1.6694, for a total amount of Euro 41,734.50.

On 24 July, the Company announced the purchase, in the period from 17 to 21 July, of a further 29,500 ordinary shares (equal to 0.0113% of the share capital) at an average unit price of Euro 1.7062, for a total amount of Euro 50,331.45.

Following the purchases made so far, Arnoldo Mondadori Editore S.p.A. holds 371,500 treasury shares, equal to 0.1421% of the share capital (including the approximately 80,000 shares purchased in the period from 30 November to 2 December 2016, as disclosed to the market on 6 December 2016).

* * *

Definition with RCS MediaGroup S.p.A. of the relations regarding the purchase agreement of RCS Libri S.p.A. and the price adjustment

Regarding the agreement on the acquisition of RCS Libri S.p.A., completed on 14 April 2016, Arnoldo Mondadori Editore S.p.A. announces that it has reached an agreement with RCS MediaGroup S.p.A. on a price adjustment, contained in the purchase agreement, based on the achievement of RCS Libri S.p.A.’s financial targets for 2015, amounting to approximately 2 million euro in favour of Arnoldo Mondadori Editore S.p.A.. As a result, given the above price adjustment, the overall purchase price for RCS Libri S.p.A. amounts to 125.1 million euro. The agreement still provides for an earn-out of up to 2.5 million euro in favour of RCS MediaGroup S.p.A., based on the achievement in 2017 of specific results in the Books Area of the Mondadori Group, as previously disclosed. As part of these understandings, the parties have also defined all the mutual relations under the above purchase agreement.

* * *

The documentation relating to the presentation of the results at 30 June 2017, will be made available through the authorized storage mechanism 1Info (www.1info.it) and in the Investors section of the Company’s website  www.gruppomondadori.it.

* * *

The Executive Manager responsible for the drafting of the corporate accounting documentation – Oddone Pozzi – hereby declares, pursuant to Art. 154 bis, par. 2, of the Finance Consolidation Act, that the accounting documentation contained in this press release corresponds to the Company’s accounting entries, books and results.

Annexes (see attached pdf):

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

[1] The results at 30 June 2017 include the contribution of Rizzoli Libri, which was outside the scope of consolidation in 1Q16, and Banzai Media activities, consolidated as from 1 June 2016 and merged by incorporation into the parent company, with accounting effects as from 1 January 2017.

[2]  Net of Rizzoli Libri in 1Q17

[3] Pro-forma figures: consolidation of the companies acquired (Rizzoli Libri and Banzai Media) assumed as from 1 January 2016; revenue of approximately 1,280 million euro and adjusted EBITDA of approximately 100 million euro.

[4] Source: GFK, June 2017 (figures in terms of market value).

[5] Store revenue.

[6] Internal source: Press-Di, cumulative figures at May 2017 (newsstands + subscriptions in terms of value).

[7] Internal source, figure at May 2017.

[8] Drop in copies sold in the Newsstand/Large Retailer channel, 8% for dailies and 7% for magazines (source: ADS, figures in terms of copies, May).

[9] Source: Audiweb, at May 2017.

[10] Internal source Mondadori France, figure at April 2017.

[11] Source: Kantar Media, cumulative figures in terms of volume at May 2017

[12] Source: Nielsen, average figure January-April 2017

Arnoldo Mondadori Editore S.p.A. announces that it has finalized the acquisition today of Banzai Media Holding S.r.l. (vertical content division of the Banzai Group)¹, in execution of the agreement previously disclosed to the market on 10 May 2016.

The transaction has a value of 24.6 million euro, based on an enterprise value (fixed component) of 41 million euro, and a net normalized financial debt of 16.4 million euro (including financial payables to the parent Banzai S.p.A. and 3.3 million euro for deferred price components related to previous acquisitions).
The price was settled in cash today through a dedicated credit line made available to the Group.
An earn-out of 4 million euro will be paid to Banzai S.p.A. if certain established results for the 2016-2018 three-year period are met.

In 2015, the acquired scope, which will be consolidated as from 1 June 2016, posted revenue of 24 million euro and EBITDA (before non-recurring items) of 4 million euro, and counted 17.1 million unique users.
In 1Q16, revenue grew by approximately 20% (6 million euro versus 5 million euro at 31 March 2015, also as a result of the consolidation of AdKaora, the mobile advertising platform acquired by Banzai in October 2015), while EBITDA before non-recurring items came to 0.7 million euro (0.5 million euro at 31 March 2015).

The transaction allows the Mondadori Group to become the top Italian digital publisher, boasting a strong leadership in key areas – women, food, health&wellness – that are complementary and synergistic with the brands held in its portfolio.
The combination of the innovative platform and skills of Banzai Media with Mondadori’s outstanding content, will enable the Group to develop the positioning of its brands in the digital segment, based on a business model capable, on the one hand, of intercepting new users and audiences and, on the other, of expanding its range of digital marketing services, also leveraging on product innovation and brand extension initiatives.

¹ The acquired scope does not include the news segment, composed of Banzai’s investment in Il Post S.r.l. and of the Giornalettismo website BU.

Today, the meeting of the Board of Directors of Arnoldo Mondadori Editore S.p.A., chaired by Marina Berlusconi, reviewed and approved the Interim Report at 31 March 2016 presented by CEO Ernesto Mauri.

GROUP PERFORMANCE AT 31 MARCH 2016
Mondadori Group enjoyed a rather positive start to the year, even more rewarding if considering the persisting volatile macroeconomic environment.

Specifically, after almost four years, revenue grew versus the prior year (before the foregoing acquisitions), a performance which confirmed, along with the improvement in EBITDA for the ninth consecutive quarter, the success of the measures adopted over the past two years, paving the way to accomplishing the targets set for the full year and to the new phase of the Group’s development.

In 1Q16, consolidated net revenue amounted to 254.8 million euro, up by 2.2% versus 249.2 million euro in 1Q15, rebounding strongly versus previous quarters (+0.8% on a like-for-like basis, including revenue from the Mondadori Scienza magazines[1]).

EBITDA before non-recurring items rose by 15.3% to 10.1 million euro from 8.8 million euro in 1Q15, with a percentage on revenue up from 3.5% to 4%. The consolidation of Mondadori Scienza as of 1 July 2015 resulted in a negative contribution in the quarter of 0.1 million euro.

Consolidated EBITDA improved by 22.1%, settling at 8.5 million euro versus 7 million euro in 1Q15, a performance that, thanks also to lower restructuring costs and fewer extraordinary items, confirms the Group’s efficiency gains from the industrial and organizational review actions launched and implemented over the past two years.

Consolidated EBIT in 1Q16 amounted to 3.1 million euro, improving by approximately 45% versus 2.1 million euro in 1Q15, thanks to the abovementioned growth in EBITDA, despite the increase in depreciation and amortization (5.4 million euro versus 4.9 million euro at 31 March 2015).

Consolidated result before taxes amounted to -0.5 million euro versus -2.4 million euro at 31 March 2015; in 1Q16, financial costs amounted to 3.6 million euro, decreasing sharply (-19%) versus 4.4 million euro in 1Q15, as a result of the reduced average net debt in the period and average total cost of debt. Tax costs in the period came to 0.9 million euro, basically in line with 1Q15 (0.8 million euro).

Consolidated net result from continuing operations, after minority interest, amounted to -1.8 million euro, improving by over 50% versus the loss of 3.7 million euro at 31 March 2015. The Group’s net result at 31 March 2016, net of the result from discontinued operations of the Radio Area (-1 million euro in 1Q15), amounted to -1.8 million euro, improving by 2.9 million euro versus 1Q15.

The Group’s net financial position at 31 March 2016 came to -224.9 million euro, improving significantly versus -319.2 million euro at 31 March 2015, as a result of the Group’s twelve-month cash generation from ordinary operations (48.4 million euro) and extraordinary operations (45.9 million euro).

At 31 March 2016, cash flow from operations in the last twelve months came to a positive 71.7 million euro; cash flow from ordinary operations (after outlays for financial charges and taxes for the period) came to 48.4 million euro, continuing the rising trend of the six previous quarters. Cash flow from extraordinary operations came to a positive 45.9 million euro, due mainly to the cash-ins from the disposals completed over the past 12 months, amounting to 58.4 million euro, relating to the transfer of 80% of Monradio (September 2015), of 50% of the Harlequin Mondadori joint venture (September 2015), and of a property in Rome (December 2015).

BUSINESS AREAS

• BOOKS

In 1Q16, Mondadori Group retained its leadership position with a 22.9% share of the trade market (GFK, March 2016).

In the period under review, the Books Area posted revenue of 63.4 million euro, rising sharply (+13.3%) versus 56 million euro in 1Q15.

Specifically, the Trade Area grew by 16.9%, driven by the ongoing positive trend in the sales of titles launched in late 2015, and by the enthusiastic response from the public of the new titles distributed during the year, as proven by the sales charts: in the first three months of the year, the Group held the top three positions in the ranking of the best-selling titles in terms of copies, and boasted 5 titles in the 10 top best-selling books.

Revenue from Educational books improved by 17.7% versus 1Q15, driven by the growth of Mondadori Electa.

EBITDA, net of non-recurring items, surged (over 50%) versus 1Q15 to settle at 4.1 million euro, driven by the increase in revenue from the targeted publishing policy, which also led to a cut in new titles produced, and from greater efficiency in managing operating processes, achieved following the deep organizational and product review implemented since 2015 in the Trade segment.

• MAGAZINES ITALY

In 1Q16, Mondadori Group retained its leadership position in the magazine market, with a 32.7% share (Internal source: Press-di, at February 2016).

In the period under review, revenue from the Magazines Italy Area amounted to 78.5 million euro, up by 0.8% versus 77.9 million euro in 1Q15 (-3.7% on a like-for-like basis).

Specifically:

• circulation revenue grew by 3.7%, due mainly to the contribution of the consolidation of the Mondadori Scienza titles;
• revenue from add-on products dropped by 1.8% versus 1Q15;
• revenue from advertising sales was basically in line with 1Q15 (-0.3%); Traffic data showed an overall audience rate of 8.9 million unique users (Audiweb, February 2016) versus 6.9 million in February 2015 (+29%).
• distribution and revenue towards third publishers rose slightly (+1.4%) versus 1Q15, thanks to the ongoing commitment to developing third-publisher portfolios;
• international activities achieved revenue of 2.8 million euro, basically in line with 1Q15 (2.8 million euro);
• revenue from digital marketing services (3.3 million euro), transferred to Magazines Italy on 1 January 2016[2], grew by 5.2%, as a result of the gradual expansion of the range of offers that had started in 2015.

EBITDA for the Magazines Italy Area, net of non-recurring items, improved considerably by approximately 11%, rising from 6.2 million euro to 6.8 million euro, driven by the positive revenue trend after a long chain of negative quarters, and by the effective review of the publishing structure and of promotional activities, implemented while retaining the traditional focus on the publishing quality of the titles. The quarter saw a significant reduction in industrial costs, achieved also as a result of the renegotiation of printing contracts.

• MAGAZINES FRANCE

In 1Q16, Mondadori increased its market share in France to 10.3% (Kantar Media, figures in terms of volume at February 2016), confirming its position as the second-largest player in the magazine advertising market.

In the reporting period, revenue from Mondadori France amounted to 77.1 million euro, down by 3.5% versus 79.9 million euro in 1Q15 (on a like-for-like basis in terms of publications, revenue would show a drop of 2%, basically confirming the -1.9% of 2015).

Specifically:

• circulation revenue (making for 74% of the total) lost 3.4% versus 1Q15: revenue from subscriptions (53% of circulation revenue) was basically steady (-0.2%, +0.6% on a like-for-like basis), partly offsetting the drop by the newsstand channel (-7.5%), confirming the opportunity to continue investments in this channel;
• advertising revenue edged down by an overall 0.7% versus 1Q15, as a result of the positive trend in digital revenue, which increased by over 20% (accounting for approximately 20% of the total), offsetting almost entirely the drop in print advertising (-6.9%).

The total number of readers of Mondadori France magazines reached 9.9 million unique users (Médiamétrie Netratings, February 2016), up by approximately 13% versus the same period of 2015.

EBITDA, net of non-recurring items, came to 4.3 million euro, down by 8.4% versus 1Q15, due mainly to M&A costs (0.4 million euro). In keeping with the positive performance of 2015, digital activities enjoyed positive margins in 1Q16, increasing versus 1Q15.

• RETAIL

In 1Q16, the Retail Area revenue rose to 44.4 million euro, up by +0.8% versus 44.1 million euro in 1Q15, thanks mainly to the growth of the franchised channel (+3.7% on a like-for-like basis), to direct bookstores (+4.5% on a like-for-like basis) and to the basically steady performance of Megastores, which more than offset the structural decline of the book clubs (-10.4%) and the drop in the online segment (-10.1%), due primarily to the reduction in special offers designed to improve profitability.

In 1Q16, Mondadori Retail EBITDA, net of non-recurring items, came to -1.8 million euro, improving slightly versus -1.9 million euro in 1Q15.

OUTLOOK FOR THE YEAR
The Group’s positive performance in the first quarter confirmed the expectations previously announced on a like-for-like basis; including the effects of the completion of the Rizzoli Libri transaction (consolidated as from 1 April 2016), and of the agreement on the acquisition of Banzai Media Holding (the contribution of which will be included basically in the second part of the year), it is reasonable to expect for the current year a growth of around 14% in revenue versus 2015 and of approximately 30% in operating EBITDA.

These estimates include the expected synergies in the current year from the integration of Rizzoli Libri, but exclude the contribution of Marsilio Editori and the Bompiani BU, which will be disposed of within the established deadlines, therefore not consolidated, in accordance with the provisions of the Antitrust Authority on 23 March 2016.

The net financial position, including the effects of both extraordinary transactions and of the planned disposals, is expected to increase versus 31 December 2015, with a NFP/EBITDA ratio of around 3.5x/3.6x, lower than the bank covenant of 4.5x.

SIGNIFICANT EVENTS AFTER THE REPORTING PERIOD

CLOSING OF THE ACQUISITION OF RCS LIBRI
As previously disclosed to the market on 14 April 2016, Mondadori Group, following the go-ahead from the relevant Authorities, completed the acquisition of RCS Libri S.p.A. (today Rizzoli Libri S.p.A.) through its subsidiary Mondadori Libri S.p.A., in execution of the agreement signed and disclosed to the market on 4 October 2015. The scope of the transaction includes the entire equity interest (99.99%) held by RCS MediaGroup S.p.A. in RCS Libri S.p.A., including the underlying subsidiaries, and the exclusive ownership of all the trademarks in the books segment, including Rizzoli. The price of the transaction, which incorporates certain contractual adjustments, is 127.1 million euro, settled in cash through a dedicated credit line made available to the Group.

Under specific contractual clauses, the price may be subject to adjustments of up to +/-5 million euro, if certain financial targets are met in 2015, as resulting in the 2015 financial statements of RCS Libri S.p.A., which will be determined and disclosed in accordance with the contractual agreements. The agreement also provides for an earn-out of up to 2.5 million euro to RCS MediaGroup S.p.A., based on the achievement in 2017 of specific results in the Books Area of Mondadori Group.

AGREEMENT ON THE ACQUISITION OF BANZAI MEDIA HOLDING
As previously disclosed to the market on 10 May 2016, Arnoldo Mondadori Editore S.p.A., following the meeting of the Board of Directors chaired by Marina Berlusconi, signed an agreement with Banzai S.p.A. on the acquisition of Banzai Media Holding S.r.l., the vertical content division of the Banzai Group.

The transaction provides Banzai Media Holding an enterprise value of 45 million euro, split up into a fixed component of 41 million euro and an earn-out of 4 million euro.

The acquisition price at closing – net of an estimated net normalized financial debt of 16.4 million euro (including financial payables to the parent Banzai S.p.A. and 3.3 million euro for deferred price components related to certain investments) – is 24.6 million euro. The earn-out will be paid to Banzai S.p.A. if certain established results for the 2016-2018 three-year period are met.

§

Mention should be made that, following entry into force of Legislative Decree no. 25 of 15 February 2016, which implemented the latest European regulations on transparency requirements, the previous disclosure obligations of quarterly results to the market no longer apply. The interim report on operations of Arnoldo Mondadori Editore S.p.A. at 31 March 2016, and the following ones, are, therefore, to be considered prepared on a voluntary basis by the Company.

The interim report on operations at 31 March 2016 will be made available at the Company’s registered office, on the authorized storage device (www.1Info.it) and on www.gruppomondadori.it (Investor Relations section), within the time limits previously provided by law. The documentation relating to the presentation of the results at 31 March 2016, will be made available through the authorized storage mechanism 1Info (www.1info.it) and in the Investor Relations section of the Company’s website www.gruppomondadori.it.

§

The Executive Manager responsible for the drafting of the corporate accounting documentation – Oddone Pozzi – hereby declares, pursuant to Art. 154 bis, par. 2, of the Finance Consolidation Act, that the accounting documentation contained in this press release corresponds to the Company’s accounting entries, books and results.

[1] Consolidated as from 1 July 2015 following the acquisition by Mondadori of 50% of the Gruner+Jahr/Mondadori S.p.A. joint venture, today Mondadori Scienza S.p.A.

[2]On 1 January 2016, following reorganization, Digital Marketing Services were transferred to Magazines Italy (previously included in Other Business, Corporate and Digital Innovation); accordingly, the Area’s income statement has been reclassified, for information sake, also in the same quarter of 2015

Arnoldo Mondadori Editore S.p.A. announces that, following the meeting of the Board of Directors chaired by Marina Berlusconi, an agreement with Banzai S.p.A. on the acquisition of Banzai Media Holding S.r.l., the vertical content division of the Banzai Group, has been signed.

The transaction provides Banzai Media Holding an enterprise value of 45 million euro, split up into a fixed component of 41 million euro and an earn-out of 4 million euro.

The acquisition price at closing – net of an estimated net normalized financial debt of 16.4 million euro (including financial payables to the parent Banzai S.p.A. and 3.3 million euro for deferred price components related to previous acquisitions) – is 24.6 million euro.

The earn-out will be paid to Banzai S.p.A. if certain established results for the 2016-2018 three-year period are met.

Under the agreement, advertising spaces will be available for Banzai S.p.A. in a three-year period, with an estimated benefit of about 7 million euro.

In 2015, the acquired scope, which excludes the news segment¹, posted revenue of 24 million euro and EBITDA (before non-recurring items) of 4 million euro, with 17.1 million unique users.²

The transaction allows the Mondadori Group, led by CEO Ernesto Mauri, to become the leading Italian digital publisher and to benefit from the complementarity of the vertical segments of the two companies.

By adding to the over 8.9 million active unique users the audience acquired from Banzai – which includes established websites on the Italian market such as PianetaDonna, Giallo Zafferano, Studenti.it and Mypersonaltrainer – Mondadori will achieve leadership in the women, food, and health & wellness vertical segments, strategic areas which allow the integration and expansion of the multi-channel offering of the brands already in portfolio, with significant growth potential also through product innovation and brand extension initiatives.

The extensive know-how and solid technological expertise of Banzai Media Holding, complemented with the brand value and the high-quality publishing content of Mondadori, will enable the Group to step up the development process in the digital segment. Additionally, the combination will allow audience profiling into specific targets, offering greater monetization opportunities.

The agreement with Banzai also includes the opportunity to identify a number of Mondadori Retail stores to extend the Pick&Pay network of the Banzai Group.

The acquisition of Banzai Media Holding, which provides the customary representations and warranties in favour of the acquiror, will be settled by using existing credit lines and completed in the first half of 2016.

¹ Composed of the investment in Il Post S.r.l. and the Giornalettismo website BU.
² Audiweb View figures – total audience December 2015.

Today, the Shareholders’ Meeting of Arnoldo Mondadori Editore S.p.A., chaired by Marina Berlusconi, approved the financial statements for the year ended 31 December 2015, and reviewed the 2015 consolidated financial statements, which show a Group net profit of 6.4 million euro, net of the result from discontinued operations; consolidated net profit from continuing operations, net of minority interests, almost tripled versus 31 December 2014, and came to 15.1 million euro versus 5.3 million euro in 2014.

The Shareholders’ Meeting also resolved to fully cover the Parent Company’s loss for the year of 31,981,679.37 euro by using a corresponding amount of reserves, in accordance with the proposal made by the Board of Directors.

In his report, CEO Ernesto Mauri also presented the key figures on Group performance in 2015, as disclosed to the market last 17 March.

Moreover, the Shareholders’ Meeting resolved on the following items on the agenda:

RENEWAL OF THE AUTHORIZATION TO PURCHASE AND SELL TREASURY SHARES
Given the approaching expiry of the previous authorization resolved on 23 April 2015, the Shareholders’ Meeting renewed the authorization to purchase treasury shares up to a cap of 10% of its share capital. The Shareholders’ Meeting also authorized to sell the treasury shares acquired by the Company in compliance with art. 2357-ter of the Italian Civil Code.

Over the period of the authorization approaching expiry, the Company did not purchase treasury shares either directly or indirectly through its subsidiaries.

Here below is the information provided on the purchase plan authorized by the Shareholders’ Meeting, also with reference to the provisions of art. 144-bis of Consob Regulation no. 11971/1999:

1. 1. Motivations

– to use the treasury shares purchased as compensation for the acquisition of interests within the framework of the Company’s investments;
– to use the treasury shares purchased against the exercise of option rights, including conversion rights, deriving from financial instruments issued by the Company, its subsidiaries or third parties and to use the treasury shares for exchange or transfer transactions or to support extraordinary transactions on the Company’s capital or financing transactions that imply the transfer or sale of treasury shares;
– to possibly rely on investment or divestment opportunities, if considered strategic by the Company, also in relation to available liquidity;
– to sell treasury shares against the exercise of option rights for the relevant purchase granted to the beneficiaries of the Stock Option Plans established by the Shareholders’ Meeting.

1. 2. Maximum number of purchasable treasury shares

The authorization refers to the purchase of a maximum number of ordinary shares with a nominal value of euro 0.26 each up to a cap of 10% of the Company’s share capital. Considering that, as indicated above, the Company does not own, to date, treasury shares either directly or indirectly, the new authorization, therefore, grants the Board of Directors the power to purchase up to maximum no. 26,145,834 shares equal to 10% of the share capital.

1. 3. Criteria for purchasing treasury shares and indication of the minimum and maximum purchasing cap

Purchases shall be made on the regulated markets pursuant to art. 132 of Legislative Decree n. 58/1998 and art. 144 bis, par. 1, letter B of Consob Regulation no. 11971/99 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 additional applicable regulations.

The minimum and maximum purchase price would be determined under the same conditions established by the preceding Shareholders’ Meeting authorizations, i.e. at a unit price not lower than the official Stock Exchange price of the day preceding the purchase transaction, reduced by 20%, and not higher than the official Stock Exchange price of the day preceding the purchase transaction, increased by 10%.

In terms of daily prices and volumes the purchase transactions would be completed in compliance with the conditions established in EC Regulation no. 2273/2003. Specifically:

– the Company shall not purchase treasury shares at a price higher than the higher between the price of the latest single transaction and that of the highest single bid traded in the market;
– in terms of daily purchase volumes, the Company shall not purchase a quantity of shares higher than 25% of the daily average volume of Mondadori Editore S.p.A. shares traded in the regulated market in the 20 trading days preceding the dates of purchase.

Any completed transaction shall be subject to disclosure pursuant to the terms and criteria set out in art. 87-bis of Consob Regulation no. 11971/1999.

1. 4. Duration

Until the Shareholders’ Meeting called to approve the financial statements at 31 December 2016 and, in any case, for a period not exceeding 18 months from the effective date of the resolution made by the Shareholders’ Meeting.

REMUNERATION REPORT
The Shareholders’ Meeting also approved Section One of the Remuneration Report on the policy adopted for 2016 regarding remuneration to directors and executive managers with strategic responsibilities.

The minutes of the Shareholders’ Meeting shall be made available according to the criteria and terms established by law.

Arnoldo Mondadori Editore S.p.A. announces to have completed today – following the go-ahead from the relevant Authorities – the acquisition of RCS Libri through its subsidiary Mondadori Libri S.p.A.

The acquisition marks a major step in Mondadori Group’s successful strategy to focus on core businesses, strengthening its competitive position on the Italian trade and education books market, and on the international illustrated books market.

The acquisition of RCS Libri was finalized today in accordance with the agreement signed and disclosed to the market on 4 October 2015.

The scope of the transaction includes the entire equity interest (99.99%) held by RCS MediaGroup S.p.A. in RCS Libri S.p.A., including the underlying subsidiaries, and the exclusive ownership of all the trademarks in the books segment, including Rizzoli.

The price of the transaction, which incorporates certain contractual adjustments, is 127.1 million euro, settled in cash today by a dedicated credit line made available to the Group.

The net financial position of the scope at 31 March 2016 shows a positive figure (cash) of approximately 29 million euro, reduced in April following the cash out of approximately 9 million euro for the purchase of a 43.71% interest in Marsilio Editori S.p.A. (increasing the total investment to 94.71%), while at closing, it shows an estimated positive net financial position of approximately 16 million euro.

Under specific contractual clauses, the price may be subject to adjustments of up to +/- 5 million euro, if certain financial targets are met in 2015, as resulting in the 2015 financial statements of RCS Libri S.p.A., which will be determined and disclosed in the coming weeks, in accordance with the contractual agreements.

The transaction includes an earn-out of up to 2.5 million euro to RCS MediaGroup S.p.A., upon the occurrence of certain results in 2017 Mondadori Group’s books segment.

This scope, which will be consolidated as from 1 April 2016, achieved in 2015 the following pro-forma figures: revenue of 225 million euro and EBITDA before non-recurring costs of 13.6 million euro.

Under the authorization of the Antitrust Authority, as part of the remedies set out therein, Mondadori will dispose of Marsilio Editori S.p.A. and of the business unit of the Bompiani publisher.