1H

BoD approves results at 30 june 2021

  • Revenue € 320.4 million: +10.9% versus € 288.9 million in first half 2020
  •  Adjusted EBITDA € 21.5 million: up sharply versus € 11 million in first half 2020
  •  Net profit € 4.4 million: recovering strongly versus € -25 million in first half 2020
  • NFP before IFRS 16 at € -68.3 million: improving by 47.5% versus € -130.1 million in first half 2020

OUTLOOK: 2021 TARGETS CONFIRMED

  • Low single-digit revenue growth
  • Adjusted EBITDA with margin around 12% of revenue
  • Strong growth of net profit
  • Cash flow from ordinary operations forecast between € 50 million and € 55 million
  • NFP before IFRS 16 forecast positive at year end

Today, the meeting of the Board of Directors of Arnoldo Mondadori Editore S.p.A., chaired by Marina Berlusconi, reviewed and approved the Half-Year Report at 30 June 2021, presented by the CEO of the Mondadori Group, Antonio Porro.

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

HIGHLIGHTS OF FIRST HALF 2021

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

PERFORMANCE AT 30 JUNE 2021

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

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

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

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

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

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

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

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

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

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

BUSINESS OUTLOOK

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

Performance targets:

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

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

PERFORMANCE OF THE BUSINESS AREAS IN FIRST HALF 2021

  • BOOKS

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

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

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

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

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

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

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

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

  • RETAIL

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

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

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

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

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

  • MEDIA

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

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

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

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

  • advertising revenue reached € 28.8 million, up by approximately 28% overall (+16% excluding the contribution of the acquisition of Hej!).
    Considering the second quarter alone, the increase is over 50% versus the same period of 2020 (+41% on a like-for-like basis):
    – digital activities grew by 25.7% on a like-for-like basis while, including the contribution of the newly-acquired Hej!, the increase stands at approximately 48% versus the first half of the prior year. A point worth mentioning is that digital revenue now accounts for 63% of total advertising revenue (from 54% in first half 2020).
    – print advertising sales increased by approximately 5%.
  • circulation revenue was down by 4%, with television titles and the CasaFacile brand performing better.
  • revenue from add-on products fell by approximately 27%, but with a more moderate decline in the second quarter (-16.6%), a trend due primarily to the success of musical initiatives last year and the reduced availability of film releases on DVD.
  • other revenue, which includes revenue from distribution activities, rose by 1%.

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

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

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

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

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

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

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

Annexes (in the complete pdf):

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

 

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

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

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

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

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

[6] Nielsen, May 2021

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

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

BoD approved results at 30 June 2020

  • Consolidated revenue € 288.9 million: -24% versus € 380 million at 30 June 2019 (-22.2% on a like-for-like basis)
  • Adjusted EBITDA € 11 million versus € 21.8 million at 30 June 2019: the cost reduction measures for € 31.8 million have contained the impacts from the contraction in revenue and margins caused by the COVID-19 emergency
  • Result from continuing operations € -25 million versus € -4.6 million at 30 June 2019: this change was greatly affected, for the amount of approximately € 22 million, by extraordinary and non-operating components, the operating ones bringing a drop in the result of only € 10.9 million
  • Group net financial position (before IFRS 16) € -130.1 million: improving sharply versus € -204.2 million at 30 June 2019 (€ +74.1 million), also as a result of the steady generation of cash flow from ordinary operations

2020 outlook

  • Revenue expected to decline by between 16% and 18% versus 2019 as a result of the dynamics of the different businesses
  • Double-digit adjusted EBITDA margin forecast between 11% and 12%
  • Positive cash generation, albeit down versus the past

Net financial position:

  • the Group debt will depend on the amount of restructuring costs that will be financed through the cash flow from ordinary operations
  • NFP before IFRS 16 no higher than € -55.4 million at 31.12.2019

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

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

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

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

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

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

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

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

To this end, the Group has:

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

For the different business activities:

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

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

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

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

  • consolidated revenue amounted to € 288.9 million, down by -24% versus € 380 million in the same period of 2019. Net of the changed scope of consolidation of the Media Area in 2019, the drop stands at -22.2% and is attributable mainly to the effects of COVID-19;
  • IFRS 16 adjusted EBITDA amounted to € 11 million versus € 21.8 million in the prior year (down by approximately € 10.9 million versus the same period of 2019).

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

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

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

 

  • IFRS 16 EBIT amounted to € -17.2 million, down by € -19.3 million versus 30 June 2019, due mainly to the trend of the abovementioned components and the write-down and start of the amortization process of a number of titles;
  • The consolidated result before tax amounted to € -30.9 million versus € -1.6 million in first half 2019, due also to financial expense (€ 4 million), the adjustment of the investment in Reworld Media (€ -6.6 million) and the loss of the associates consolidated at equity (€ -3.4 million);
  • The result from continuing operations amounted to € -25 million versus € -4.6 million at 30 June 2019 (€ -20.4 million). The decline was strongly affected by the above non-operating and extraordinary cost components, which total approximately € 22 million, only partly offset by tax income of approximately € 5.9 million recorded by the Group during the year;
  • The Group’s net result amounted to € -25 million versus € -1.9 million in first half 2019 (which had also included € 2.7 million from discontinued operations);

 

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

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

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

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

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

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

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

Performance of business areas

  • BOOKS

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

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

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

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

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

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

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

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

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

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

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

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

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

  • RETAIL

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

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

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

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

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

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

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

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

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

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

  • MEDIA

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

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

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

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

Specifically:

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

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

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

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

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

The documentation relating to the presentation of the results at 30 June 2020, is made available through the authorized storage mechanism 1Info (www.1info.it) and in the Investors section of the Company website www.gruppomondadori.it.

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

Annexes (in the complete pdf):

  • Consolidated balance sheet
  • Consolidated income statement
  • Consolidated income statement – II quarter
  • Group cash flow
  • Glossary of terms and alternative performance measures used

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

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

[3] Product revenue excluding Club revenue

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

[5] Nielsen, cumulative figures at May 2020

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

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

[8] Comscore (May 2020)

[9] Shareablee (June 2020)

BoD approves results at 30 June 2019

The results of the half-year financial report at 30 June 2019[1] have been prepared by showing Magazines France amounts under “Adjusted result from discontinued operations” [2]

  • Consolidated revenue € 380 million versus € 390.8 million at 30 June 2018;
  • Adjusted EBITDA (before IFRS 16) € 13.8 million: +14% versus € 12.1 million at 30 June 2018;
  • EBITDA (before IFRS 16) € 12.6 million: up significantly (€ +9 million) versus € 3.5 million at 30 June 2018;
  • Adjusted net result from continuing operations € -5.7 million: improving by € 9 million versus € -14.7 million at 30 June 2018;
  • Group’s net result improves significantly: € -1.9 million versus € -12.5 million at 30 June 2018;
  • Group net financial position (before IFRS 16) € -204.2 million: improving in the 12 months by € 34.2 million as a result of the steady generation of cash flow from ordinary operations

TARGETS FOR CONTINUING OPERATIONS IN 2019 CONFIRMED

  • Slight drop in revenue;
  • Single-digit growth of adjusted EBITDA (before IFRS 16);
  • Strong growth (before IFRS 16) in net result (forecast in the range of € 30-35 million);
  • Cash flow from ordinary operations forecast at approximately € 45 million, creating sustainable conditions for a possible future return to a dividend

[1] As of 1 January 2019, the Group has adopted the new IFRS 16 – Leases. The new standard provides a new definition of lease (operating leases) and introduces a criterion based on the control (right of use) of an asset to distinguish leases from service contracts, the differences lying in: the identification of the asset, the right to replace the asset, the right to essentially receive all the financial benefits arising from the use of the asset, and the right to control the use of the asset underlying the contract. The standard introduces a single lessee accounting model, by which an asset under an operating lease is recognized in assets with an offsetting financial liability. P/L will no longer record lease payments as operating/general costs, rather the depreciation of the booked asset and the financial expense implicit in the lease payment. An exception to this accounting model are leases regarding low-value assets and those with a term of 12 months or less.

[2] In 2019, the “Adjusted result from discontinued operations” included the net result of Mondadori France in the current year, together with the recognition of the fair value adjustment of the disposal group, to reflect the negotiations in progress. This item also includes the financial expense held by the Parent Company, but attributable to Mondadori France and charged to the latter under the intercompany loan agreement (approximately € 1.3 million). The “Adjusted result from continuing operations” and the “Adjusted result from discontinued operations” therefore differ by this amount from the amounts of the statements attached to this Report (equal to € 5.2 million in first half 2019 and € 3.9 million in first half 2018), prepared in accordance with IFRS international accounting standards. To enable a like-for-like comparison, 2018 figures have been restated accordingly.

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 2019, presented by CEO Ernesto Mauri.

HIGHLIGHTS OF FIRST HALF 2019
In first half 2019, in line with the targets set, the Group recorded adjusted EBITDA from continuing operations of € 13.8 million, up by 14% net of the effect of the application of IFRS 16.

Actions continued to be taken to improve operations in the Books Area and to reduce costs, as well as to strengthen the Digital component in Magazines Italy.

The six months saw significantly lower restructuring and reorganization costs than in the same period of 2018, due to the planned reduction and different timing of the divestment of non-strategic businesses and the reorganization of Group activities.

This trend, together with the extended positive performance of cash generation from ordinary operations, paves the way to the achievement of the targets set and disclosed for the entire financial year 2019.

PERFORMANCE AT 30 JUNE 2019
Consolidated revenue in first half 2019 came to € 380 million versus € 390.8 million in the prior year, due partly to the change in the consolidation scope of Magazines Italy following the sale of Inthera S.p.A. and Panorama.

Adjusted EBITDA (before IFRS 16) for the period under review came to € 13.8 million, up by € 1.7 million versus the prior year (€ 12.1 million), with a percentage on revenue increasing from 3.1% to 3.6%.

IFRS 16 adjusted EBITDA came to € 21.8 million and includes the IFRS 16 impact of € +8 million.

EBITDA (before IFRS 16) grew strongly versus the prior year, from € 3.5 million to € 12.6 million, including the increase in adjusted EBITDA and the significant reduction in restructuring costs recorded in the first half of the year.

IFRS 16 EBITDA amounted to € 20.6 million and includes the IFRS 16 impact of € +8 million.

EBIT (before IFRS 16) at 30 June 2019 amounted to € 1.5 million, increasing sharply versus € -6.6 million at 30 June 2018, as a result of the dynamics of the above components, and includes amortization, depreciation and write-downs of € 11.1 million, slightly higher than the prior year.

IFRS 16 amortization and depreciation amounted to € 7.4 million.

IFRS 16 EBIT amounted to € 2.1 million and includes the IFRS 16 impact of € +0.6 million.

The consolidated result before tax came to € -1.6 million, improving strongly versus € -16.1 million in first half 2018. It includes:

  • the decrease in financial expense (from € -1.4 million to € +0.3 million) as a result of lower average net debt;
  • the result of the associates (consolidated at equity) from € -8.2 million to € -3 million.

The adjusted net result from continuing operations improved by approximately € +9 million and amounted to € -5.7 million versus € -14.7 million at 30 June 2018.

The net result from discontinued operations came to a positive € 3.9 million and includes the positive effect of the fair value adjustment of Mondadori France at 30 June 2019.

The Group’s net result was € -1.9 million, improving strongly versus € -12.5 million at 30 June 2018.

At 30 June 2019, the net financial position (before IFRS 16) stood at € -204.2 million, improving by € 34.2 million (approximately -14%) versus € -238.4 million at 30 June 2018, as a result of the ongoing cash generation from ordinary operations of continuing operations, amounting to
€ 46.5 million
.

Including the effect of the application of IFRS 16 (€ -102 million), the Group’s net financial position at 30 June 2019 stood at € -306.2 million.

At 30 June 2019, with regard to continuing operations, Group employees amounted to 2,117 units, down by approximately -5% versus 2,224 units at June 2018, as a result of the sale of Panorama and of efficiency gains in the individual business areas, and excluding the 691 employees of Mondadori France.

Cost of personnel[1] of continuing operations in the first six months of the year amounted to € 79.3 million, down by approximately 7% versus the same period of 2018, as a result of the ongoing reduction in the workforce and of the sale of Inthera and Panorama.

CONSOLIDATED FINANCIAL HIGHLIGHTS IN SECOND QUARTER 2019
Consolidated revenue in second quarter 2019 amounted to € 213.1 million, steady versus the prior year, despite the effect of the change in the consolidation scope of Magazines Italy following the sale of Inthera S.p.A. and Panorama.

In the Books Area, revenue in the second quarter increased by approximately 8%, while the Retail Area grew by approximately 1%; the Magazines Italy Area fell by 5% on a like-for-like basis as a result of the dynamics of the relevant markets.

Adjusted EBITDA (before IFRS 16) came to € 16 million, up by € 1.1 million versus the prior year
(€ 14.9 million).

IFRS 16 adjusted EBITDA came to € 20.1 million and includes the IFRS 16 impact of approximately
€ +4 million.

BUSINESS OUTLOOK[2]
The Group will continue its strategic repositioning and further focus on its core businesses, in particular by consolidating its leadership in the Books Area, completing the sale of Mondadori France and identifying new areas of development.

In line with the outlined strategy and in light of the current relevant context, including the performance in the first half, the operating targets for 2019, based on the current scope, allow the Group to confirm, at a consolidated level, a slight decrease in revenue and a single-digit growth of adjusted EBITDA before IFRS 16 versus 2018.

The net result from continuing operations in 2019 is expected to be significantly higher than last year (in the range of € 30-35 million).

Cash flow from ordinary operations in 2019 is forecast at approximately € 45 million, creating sustainable conditions for a possible future return to a dividend.

PERFORMANCE OF BUSINESS AREAS

  • BOOKS

In the first six months of the year, the trade books market grew by +4%[3] versus the first six months of the prior year. During the period, the Mondadori Group retained its leadership, with an overall 25.3% market share.

Revenue in the Books Area in first half 2019 amounted to € 183.8 million, up by 2.7% versus € 179 million in first half 2018. Specifically: the Trade Area recorded a +1.6% increase, the Educational Area +5.4%.

Adjusted EBITDA (before IFRS 16) came to € 15.6 million, up versus the same period of 2018
(€ 13.3 million), as a result of the ongoing improvement in operations.

IFRS 16 adjusted EBITDA came to € 16.2 million and includes the IFRS 16 impact of approximately
€ +0.6 million.

EBITDA (before IFRS 16) amounted to € 15.2 million, up versus € 12.5 million at 30 June 2018.

IFRS 16 EBITDA amounted to € 15.8 million and includes an impact of approximately € +0.6 million.

  • RETAIL

The relevant market for the Retail Area is books (approximately 83% of store revenue), where Mondadori Retail has a 12.8% market share.

In the first six months of the year, the Retail Area recorded revenue of 81.4 million, down slightly
(-2%) versus € 83.1 million in first half 2018.

The analysis by channel shows the following:

  • a +1.2% increase by direct bookstores, as a result of the performance of the new stores in Roma Valle Aurelia and Taranto, opened respectively in April and September 2018 (-1.8% on a like-for-like basis in terms of stores);
  • an approximately 12% drop by Megastores, due mainly to the shrinking sales of consumer electronics (-11.3% on a like-for-like basis in terms of stores);
  • the Franchised Bookstores are in line with the prior year (also on a like-for-like basis in terms of stores);
  • a slight decrease by the online segment (-3.4%);
  • a slight fall by the Clubs channel versus the prior year (approximately -3%).

In first half 2019, Mondadori Retail’s adjusted EBITDA (before IFRS 16) came to € -4.6 million versus € -3.2 million at 30 June 2018.

IFRS 16 adjusted EBITDA came to € -0.6 million and includes the IFRS 16 impact of € +3.9 million.

EBITDA (before IFRS 16) amounted to € -4.8 million, down versus € -3.5 million at 30 June 2018.

IFRS 16 EBITDA amounted to € -0.9 million and includes the IFRS 16 impact of € +3.9 million.

  • MAGAZINES ITALY

In the first five months of 2019, the Italian advertising market reported a growth in digital channels (+2%) and a -15.4% drop in magazines[4].

Circulation also declined in Italy in the period (-12.3%), with a slowdown in both the newsstands and subscriptions channels.

The Mondadori Group’s market share in this segment stood at 28.8%[5].

The Magazines Italy Area generated revenue of € 130.9 million versus € 147.5 million in first half 2018 (-3.9% net of the disposals of Inthera and Panorama).

Specifically:

  • circulation revenue and revenue from add-on sales recorded an overall reduction of 12.5% versus first half 2018 (-5.9% net of the sale of Panorama);
  • advertising revenue was down overall by -10.2%: the digital channel recorded a growth of approximately +15% versus first half 2018. The percentage of digital revenue on the total rose to approximately 39% versus 30% at 30.06.2018.
  • distribution activities and other revenue fell by 9% versus the prior year, due to the sale of Inthera (+5.9% excluding Inthera).

The Mondadori Group retained its position as Italy’s leading digital publisher in the latest comScore survey in May, with a reach of 77% and 29.3 million unique users in the month.

Adjusted EBITDA (before IFRS 16) from the Magazines Italy Area came to € 6.8 million, in line with the same period of 2018 (€ 6.8 million), as a result of the actions aimed at reducing operating and structural costs, the ongoing improvement in the digital area and the positive effects of the sale of Inthera and Panorama.

IFRS 16 adjusted EBITDA amounted to € 6.9 million.

EBITDA (before IFRS 16) amounted to € 6.3 million, up sharply versus € -0.1 million at 30 June 2018, as a result of lower restructuring costs.

IFRS 16 EBITDA amounted to € 6.4 million.

  • MAGAZINES FRANCE (discontinued operations)

In first half 2019, Mondadori France generated revenue of € 139.8 million (€ 152.9 million in first half 2018). Specifically:

  • circulation revenue (approximately 80% of the total) was down by 5.1%;
  • advertising revenue fell by 17% overall.

Adjusted EBITDA came to € 11.4 million versus € 12.1 million in the first six months of the prior year.

EBITDA amounted to € 11 million versus € 10.8 million in the first six months of 2018.

SIGNIFICANT EVENTS AFTER FIRST HALF 2019
On 24 July, the sale of the subsidiary Mondadori France S.A.S. to Reworld Media S.A. received clearance from the Autorité de la Concurrence.

In accordance with the remedy set out in the clearance, Reworld Media undertakes to sell a title of its choice that could be either L’Auto-Journal, published by the joint venture EMAS (Editions Mondadori Axel Springer) or Auto Moto, published by Reworld Media.

The parties have agreed to update – according to the terms disclosed on 24 July 2019 – the structure of the consideration from the transaction, which remains, as expected, equal to € 70 million (cash free/debt free), also adding an earn-out of € 5 million.

Additionally, on 29 July 2019, the Shareholders’ Meeting of Reworld Media resolved to grant the Board of Directors the power to implement the reserved capital increase.

The transaction remains subject to the provision of the bank loan, already authorized, to Reworld Media.

Following the authorization given by the Shareholders’ Meeting of 17 April 2019, on 10 June Arnoldo Mondadori Editore launched a share buyback programme.  

Following the transactions carried out so far and disclosed to the market in accordance with current legislation, Arnoldo Mondadori Editore S.p.A. currently holds no. 1,728,703 treasury shares, equal to 0.661% of the share capital and to 0.431% of the total voting rights.

The documentation relating to the presentation of the results at 30 June 2019, is made available through the authorized storage mechanism 1Info (www.1info.it) and in the Investors section of the Company website www.gruppomondadori.it.

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

Annexes:

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

[1] Cost of enlarged personnel includes costs for collaborations and temporary employment.
[2] Before application of IFRS 16.
[3] Source: GFK, June 2019 (figures in terms of market value). As of May 2019, GfK has expanded its coverage panel by increasing the survey of e-commerce operators; as a result, the overall market value and the YoY deviations have been restated pro-forma and the details by channel have been reviewed by merging book chains and e-commerce.
[4] Source: Nielsen, cumulative figures at May 2019
[5] Internal source: Press-Di, cumulative figures at May 2019 (newsstands + subscriptions) in terms of value

  • Consolidated revenue € 543.8 million: -5.1% versus € 573.1 million at 30.06.2017
  • Adjusted EBITDA[1] € 24.2 million: +9% versus € 22.2 million at 30.06.2017
  • Net result € -12.5 million versus € +4.4 million in first half 2017, which had included gains and lower restructuring costs
  • Net financial position € -238.4 million: improving by 16% versus € -284.4 million at 30.06.2017

 2018 targets confirmed

  • Consolidated revenue slightly down;
  • Adjusted EBITDA basically steady;
  • Net profit up sharply in second half 2018; down by € 7 million for full year due to less positive non-ordinary items;
  • Cash flow from ordinary operations forecast at around € 55-60 million

[1] This document, in addition to the statements and conventional financial measures required by IFRS, presents a number of reclassified statements and alternative performance measures in order to better evaluate the operating and financial performance of the Group, the definition of which is explained in the section “Glossary of terms and alternative performance measures used”.

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 2018[1], presented by CEO Ernesto Mauri.

Group performance in first half 2018

In first half 2018, the Mondadori Group recorded a 9% increase in adjusted EBITDA, rebounding from the weaker performance of the first quarter of the year, in line with the forecast operating plans.

Actions continued on improving operations in the Books Area, reducing costs and focusing on the core business in the Magazines areas.

Against this backdrop, the half year comprised non-ordinary restructuring and reorganization costs functional to the structural reduction in operating costs, and to the disposal of non-strategic and non-profitable businesses in the Magazines Italy Area. 2017 had, instead, recorded most of the restructuring costs in the second half, while in the first six months of the year, it had benefited from certain gains from the disposal of assets.

This trend, together with the enduring positive performance of cash generation from ordinary operations, makes the achievement of the targets set and disclosed for the whole 2018 financial year increasingly feasible.

Consolidated revenue in first half 2018 amounted to approximately € 543.8 million, down by 5.1% versus € 573.1 million in the prior year, due mainly to the performance of the Magazines areas, attributable to the persisting negative trends of the relevant markets, in terms of both circulation and advertising. Revenue from the Books Area increased by 4%.

In the first half under review, the Group more than made up for the operating loss recorded in the first quarter, which was entirely attributable to Magazines Italy.

Adjusted EBITDA came to € 24.2 million, up by 9% versus the prior year (€ 22.2 million in first half 2017) – with a percentage on revenue growing to 4.4% (from 3.9%).

The various businesses recorded different trends:

  • a sharp rise in the Books Area, driven by further operating efficiencies and for a different timing in revenue from the supplies to a number of clients in the School Textbooks segment;
  • a gradual improvement in the Retail Area, as a result of the rationalization of directly-managed stores;
  • a steady performance by the Magazines France Area (net of the discontinuity associated with the disposal of NaturaBuy in 2017);
  • a drop in the Magazines Italy Area, previously recognized in the first quarter, while in the second quarter the ongoing actions to cut operating and structural costs offset the decline in revenue triggered by the trend of the traditional markets.

In the period under review, the Mondadori Group also continued with its effective measures to curb fixed overheads, which reduced their impact on revenue from 8.5% to 8% in the first half of the year.

Consolidated EBITDA came to € 14.3 million, down versus € 27.6 million in the first half of the prior year. This downturn reflects:

  • less positive non-ordinary items versus first half 2017, which had benefited from gains of approximately € 8.5 million (€ 4.3 million from the disposal of NaturaBuy in the Magazines France Area and € 4.2 million from the disposal of a property in the Corporate & Shared Services Area);
  • a loss (approximately € 2 million) by the Magazines Italy Area, due to the disposal of Inthera;
  • higher restructuring costs recorded in the first half, due mostly to the Magazines Italy Area and functional to the reorganization and revision of the operating and overhead costs structure.

Consolidated EBIT came to € -1.1 million versus € +11.5 million at 30 June 2017, and includes amortization, depreciation and impairment losses of € 15.4 million, down versus € 16 million in the prior year, due to the dynamics of the abovementioned extraordinary items.

The consolidated result before taxes amounted to € -12.4 million and includes: the sharp drop in financial expenses, due to an average interest rate of 2.13% versus 4.36% in the prior year; a lower average net debt; the negative result of associates (consolidated at equity), which deteriorated due in particular to Mach2 Libri, active in the distribution of books in the Large Retailers channel and put into liquidation in 2018.

The net result came to € -12.5 million versus € +4.4 million in first half 2017, which had included net gains of approximately € 7 million and lower restructuring costs, while first half 2018 included liquidation costs of approximately € 7 million for Mach2 Libri.

The Group’s net financial position at 30 June 2018 stood at € -238.4 million, improving by approximately 16% versus € -284.4 million at 30 June 2017, due to the positive cash generation of the Group of approximately € 46 million.

At 30 June 2018, cash flow from operations in the last twelve months came to a positive € 80.3 million; cash flow from ordinary operations (after outlays for financial expenses, management of investments and taxes for the period) came to € 62.1 million, confirming the strong path of cash generation and financial improvement of the Group, and the cash conversion of adjusted EBITDA (rolling basis) to over 50%.

Cash flow from non-ordinary operations came to € -16 million, as a result of a negative acquisition/disposal value of € 5 million and of restructuring costs of approximately € 11 million.

At 30 June 2018, Group employees amounted to 2,962 units, down by 4.8% from 3,112 units at 30 June 2017, as a result mainly of the disposal of the subsidiary Inthera, despite the acquisition of Direct Channel, and of the ongoing restructuring and efficiency improvement measures involving each of the Group’s business areas. Net of these discontinuities, the drop would have been around 3.4%.

Consolidated financial highlights in second quarter 2018
Consolidated revenue in second quarter 2018 amounted to € 290.4 million, down by 3.7% versus the prior year, attributable mainly to the Magazines areas: as mentioned earlier, the Magazines Italy Area, however, saw a steady improvement in the drop in the second quarter which, net of the disposal of Inthera, would have amounted to 6.7%.

Revenue from the Books Area grew by 6.2%, due partly to a different timing in the Educational segment.

At a consolidated level, all cost items in the quarter under review reduced their percentage on revenue, despite the contraction of the latter.

Adjusted EBITDA in second quarter 2018 amounted to € 23.7 million, up significantly versus € 18.2 million in the same period of 2017, thanks mainly to the Books Area, which improved by € 5.2 million.

In the Magazines areas – both in Italy and France – the measures to reduce operating costs and overheads helped reach basically steady results versus second quarter 2017, despite the drop in overall revenue triggered by the trend of the traditional markets.

Business outlook
In light of the current relevant context and the results achieved in the first six months of the year, the forecasts on 2018, on a like-for-like basis versus 2017, previously disclosed to the market, can be reasonably confirmed: a slight drop in consolidated revenue; adjusted EBITDA basically steady; net profit up sharply in second half 2018 versus the same period of the prior year and down by approximately € 7 million for the full year versus 2017, which had included positive non-ordinary items.

Cash flow from ordinary operations is forecast at around € 55/60 million.

Business areas

  • BOOKS

In the first six months of the year, the Trade Books market was basically steady versus the same period of the prior year (-0.1%)[2].

Against this backdrop, Mondadori Libri retained its leadership position with an overall 27.8% market share.

In the period under review, the Mondadori Group placed 6 titles in the ranking of the top ten bestselling books in terms of value[3]: Storie della buonanotte per bambine ribelli 2 by Cavallo Francesca, Favilli Elena (Mondadori); Quando tutto inizia by Volo Fabio (Mondadori); Storie della buonanotte per bambine ribelli. 100 vite di donne straordinarie by Cavallo Francesca, Favilli Elena (Mondadori); Origin by Dan Brown (Mondadori); Il morso della reclusa by Fred Vargas (Einaudi); Divertiti con Luì e Sofì. Il fantalibro by Me contro Te (Mondadori Electa).

In first half 2018, the Area revenue amounted to € 178.5 million, up by 4% versus € 171.6 million in the same period of 2017, driven by the positive performance of the Educational Area (+18.8%), due mainly to the timing of invoicing to large customers in the school textbooks business.

In the Trade segment, revenue fell by 5.4% versus the same period of the prior year, due mainly to the continued strategy of selective production of new titles, and the meticulous management of the related print runs, aimed at increasing operating efficiency and, therefore, overall profitability.

Adjusted EBITDA amounted to € 13.3 million, improving strongly versus € 6 million in the same period of the prior year, as a result of further operating efficiencies and of the continued management streamlining process undertaken in recent years, and of the different timing of revenue from supplies to a number of clients in the Education Area.

EBITDA amounted to € 12.5 million, confirming the abovementioned growth versus the prior year (€ 5.6 million at 30 June 2017).

  • RETAIL

The relevant market for the Retail Area is books (approximately 80% of revenue[4]), where Mondadori Retail’s market share stands at 14.1%.

In the first six months of the year, revenue amounted to € 83.1 million, down slightly (-1.9%) versus € 84.7 million in the same period of the prior year. The analysis by channel versus first half 2017 shows: a 2.3% increase in directly-managed Bookstores, driven by the positive performance of Books; an approximately 11% drop by Megastores, attributable to the decline in consumer electronics sales and closure of two stores; a 3.6% increase in franchised Bookstores, in line with the strategy to strengthen this channel.

Adjusted EBITDA amounted to € -3.2 million, improving versus € -3.7 million at 30 June 2017, due to the rationalization plan of directly-managed stores. EBITDA came to € -3.5 million, rebounding sharply versus the six months of 2017 (€ -5 million), as a result of lower restructuring costs.

  • MAGAZINES ITALY

In Italy, against the sharp fall of the relevant market in the first five months of 2018, the Mondadori Group retained its leadership in magazines with a 31.4% share.[5]

The Area’s revenue amounted to € 147.5 million, down by 11% versus € 165.7 million in the same period of the prior year, due also to the sharp drop in add-on sales (-23.6%).

Net of the disposal of Inthera in May, the decline would have come to 9.7%. This performance reflects a steady improvement recorded in the second quarter, which shows a 6.7% decrease (on a like-for-like basis).

In the first half, circulation revenue lost 7.1%, performing slightly better than the relevant market[6], due also to the contribution of the new titles Giallo Zafferano and Spy.

Advertising revenue (print + web) was down by 7.1%; web advertising sales were steady versus first half 2017, while print sales were basically in line with the market[7]. The percentage of digital advertising sales on the total increased to 30% (from 28% in 1° half 2017).

In the period under review, the Mondadori Group retained its position as Italy’s top traditional publisher also in the digital segment, with a total audience of 27.7 million unique users per month[8], up by 15% versus 2017. The reach on the market is close to 76% of the Italian digital population.

In the first six months of 2018, adjusted EBITDA fell by € 6.8 million versus € 11 million in first half 2017, due to the drop previously recorded in the first quarter of the current year. The digital area continued to improve in the period and increased its adjusted EBITDA by over € 1 million in the half year.

The Area’s EBITDA (€ -0.1 million versus € 10.8 million in first half 2017) reflects higher restructuring costs recorded in the period from the necessary accelerated structural reorganization and cost reduction process and from the loss generated by the disposal of Inthera.

  • MAGAZINES FRANCE

In France, in a continually shrinking market in terms of circulation and advertising, Mondadori France held a 10.1% share[9], basically steady versus the prior year, ranking as second top player on the magazine advertising market.

In the first six months of 2018, revenue amounted to € 152.9 million, down by 7.3% versus € 164.9 million in the same period of 2017. In terms of circulation (approximately 77% of total revenue), the decline was -6.7% versus the prior year. Advertising revenue (print + web) fell by an overall -7.3% versus the same period of 2017, with print advertising (87% of total) down by -5.6% versus the market’s -10.7%.

Adjusted EBITDA amounted to € 12.1 million, basically steady versus € 12.5 million of the six months of the prior year, net of the discontinuity from NaturaBuy (sold in May 2017), thanks to the effective actions to contain industrial costs, and to the reorganization of the teams, which started to offset the decline in revenue triggered by the trend of the markets. Adjusted EBITDA from digital operations ended positive versus the loss recorded in first half 2017.

EBITDA amounted to € 10.8 million, down versus € 15.7 million in the first six months of 2017, which had benefited from the gain of € 4.3 million from the abovementioned disposal.

Significant events after first half 2018
Following the authorization to purchase treasury shares approved by the Shareholders’ Meeting held on 24 April 2018, on 25 June, Arnoldo Mondadori Editore S.p.A. launched a share buyback program.

On 2 July, the Group announced the purchase, in the period from 25 to 29 June, of a further 27,500 ordinary shares (equal to 0.011% of the share capital) at an average unit price of € 1.3006, for a total amount of € 35,766.85.

On 9 July, the Group announced the purchase, in the period from 2 to 6 July, of a further 16,000 ordinary shares (equal to 0.006% of the share capital) at an average unit price of € 1.3530, for a total amount of € 21,648.10.

On 16 July, the Group announced the purchase, in the period from 9 to 13 July, of a further 17,500 ordinary shares (equal to 0.007% of the share capital) at an average unit price of € 1.4700, for a total amount of € 25,725.70.

On 23 July, the Group announced the purchase, in the period from 16 to 20 July, of a further 17,500 ordinary shares (equal to 0.007% of the share capital) at an average unit price of € 1.5102, for a total amount of € 26,428.50.

On 30 July, the Group announced the purchase, in the period from 23 to 27 July, of a further 27,000 ordinary shares (equal to 0.010% of the share capital) at an average unit price of € 1.4606, for a total amount of € 39,435.25.

Following the purchases made so far, Arnoldo Mondadori Editore S.p.A. holds to date 1,025,500 treasury shares, equal to 0.392% of the share capital (including the approximately 80,000 shares purchased in the period from 30 November to 2 December 2016, as per disclosure to the market on 6 December 2016).

The documentation relating to the presentation of the results at 30 June 2018 is 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 Financial Reporting Manager – Oddone Pozzi – hereby declares, pursuant to art. 154 bis, par. 2, of the Consolidated Finance Law, that the accounting information contained herein corresponds to the Company’s records, books and accounting entries.

Annexes (in the pdf file):

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

[1] Beginning from 1 January 2018 (and to provide a consistent presentation, also for 2017), the Mondadori Group has adopted the new IFRS 15 – Revenue from Contracts with Customers – revenue recognition standard.
The new IFRS 15 presents revenue and costs differently, with no effect on EBITDA. Beginning from 2018, the result generated by associates (consolidated at equity), previously classified in adjusted EBITDA, is shown under EBIT; for consistency, 2017 has been reclassified accordingly.
[2] Source: GFK, June 2018 (figures in terms of market value)
[3] Source: GFK, June 2018 (ranking in terms of cover value)
[4] Store revenue on a like-for-like basis
[5] Internal source: Press-Di, cumulative figures at May 2018 (newsstands + subscriptions) in terms of value
[6] -9.1%: Internal source: Press-Di, cumulative figures at May 2018 (newsstands + subscriptions) in terms of value
[7] -8.6% (Nielsen, cumulative figures at May 2018)
[8] Source: comScore, average figure Jan.-May 2018
[9] Source: Kantar Media, cumulative figures in terms of volume at April 2018

  • Consolidated net revenue 553 million euro: down slightly versus 562.5 million euro in 1H16 (-1.7%);
  • Consolidated EBITDA 27.3 million euro, up by 21.2% versus 1H16, due also to the positive contribution of certain gains; improving for the fourth consecutive year;
  • Net result of +4.4 million euro improves by over 8 million euro versus the loss in 1H16;
  • Group net financial position at -284.4 million euro, improving by approximately 90 million euro versus -374.8 million euro  in 1H17

Current year projections

  • Targets confirmed, versus 2016 pro-forma[1] figures, with steady revenue, “high single-digit” growth of adjusted EBITDA[2], with resulting improvement in profit margins and sharp increase in net profit (+30%);
  • Net financial position projections improve and expected to further reduce versus 31 December 2016 with a net debt/adjusted EBITDA ratio below 2.0x

***

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

[1] 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.

[2] This document, in addition to the statements and conventional financial measures required by IFRS, presents a number of reclassified statements and alternative performance measures in order to better evaluate the operating and financial performance of the Group, the definition of which is explained in Annex 5 “Glossary of terms and alternative performance measures used”.

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-digitgrowth 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

  • Consolidated net revenue: +1.1% on a like-for-like basis versus 1H15;including the effects of the consolidation of Rizzoli Libri and Banzai Media, consolidated net revenue 562.6 million euro: +8.6% versus 1H15
  • Consolidated EBITDA: +24% on a like-for-like basis versus 1H15; including Rizzoli Libri and Banzai Media, consolidated EBITDA 22.5 million euro: +18.7% versus 1H15
  • Group consolidated positive net result of 0.2 million euro on a like-for-like basis versus -12.2 million euro in 1H15; -3.8 million euro including Rizzoli Libri and Banzai Media
  • Group net financial position -374.8 million euro versus -326.5 million euro at 30 June 2015 as a result of the significant cash generation despite net investments of over 150 million euro for the acquisition of Rizzoli Libri and Banzai Media

CURRENT YEAR PROJECTIONS
(including Rizzoli Libri for 9 months and Banzai Media for 7 months):

  • Revenue to increase by approximately 14% versus 2015;
  • Adjusted EBITDA* to improve by approximately 30%;
  • Net financial position expected with a NFP/EBITDA ratio of about 3.5x, lower than the bank covenant of 4.5x

 

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 2016, presented by CEO Ernesto Mauri.

GROUP PERFORMANCE AT 30 JUNE 2016

In 2016, the Mondadori Group enjoyed a rather positive start to the year, even more rewarding if one considers the persisting volatile macroeconomic environment.

Specifically, after almost four years, revenue grew versus the prior year, a performance which confirms, along with the improvement in EBITDA for the tenth 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 marking the transition to the new phase of the Group’s development.

2Q16 saw the consolidation of Rizzoli Libri and Banzai Media, a major step in strengthening the leadership position in the Group’s strategic businesses, accelerating the growth process of the Company.

These acquisitions helped strengthen the already positive performance of revenue in 1H16, which increased by 8.6%.

In 1H16, consolidated net revenue amounted to 562.6 million euro, as mentioned, up by 8.6%. Net of the effects of the consolidation of the companies acquired in 2016, the Group reported a 1.1% increase.

Adjusted EBITDA amounted to 26.7 million euro, improving by 11.9% versus 23.8 million euro in 1H15. On a like-for-like basis, the growth is 15.9%, with a percentage on revenue increasing from 4.6% to 5.3%. This performance was the result of a constant and focused management policy successfully implemented in all of the Group’s business areas.

Consolidated EBITDA came to 22.5 million euro versus 19 million euro in 1H15, up by 18.7%, including the result of Rizzoli Libri (-1.5 million euro) and Banzai Media (+0.6 million euro). On a like-for-like basis, the increase amounts to 24%: a result that confirms the Group’s strong efficiency gains from its ability to stabilize revenue and the industrial and organizational review actions launched and implemented over the past two years.

Consolidated EBIT in 1H16 amounted to 8.5 million euro, including amortization and depreciation of 3 million euro relating to Rizzoli Libri; on a like-for-like basis, EBIT amounted to 12.4 million euro, improving by 34.7% versus 9.2 million euro in 1H15, despite the increase in amortization, depreciation and impairment losses (11.1 million euro versus 9.7 million euro at 30 June 2015), resulting from higher amortization following the upturn in investments.

The consolidated result before taxes amounted to 0.6 million euro, or to 4.6 million euro on a like-for-like basis, a sharp increase versus 0.6 million euro in 1H15, thanks also to the contribution of financial costs, which amounted to 7.8 million euro, decreasing sharply (-8.4%) as a result of the reduced average net debt in the period and average total cost of debt.

The Group consolidated net result amounted to -3.8 million euro, improving strongly versus -12.2 million euro at 30 June 2015, while on a like-for-like basis, the net result came to a positive 0.2 million euro.

Fixed-term or permanent staff employed by the Group at 30 June 2016 amounted to 3,404 units; the figure includes 438 resources coming from the acquisition of Rizzoli Libri and Banzai Media; on a like-for-like basis, Group staff would be down by 2.5%.

The Group net financial position at 30 June 2016 came to -374.8 million euro versus -326.5 million euro at 30 June 2015, as a result of the Group’s significant cash generation, including of an extraordinary nature, over the past 12 months, which allowed net investments in acquisitions of 157.3 million euro.

At 30 June 2016, cash flow from operations in the last twelve months, on a like-for-like basis, came to a positive 79.4 million euro, while cash flow from ordinary operations (after outlays for financial costs and taxes for the period) came to 51.5 million euro, continuing the rising trend seen in the seven previous quarters.

Including the effects of Rizzoli Libri and Banzai Media, the overall cash flow from ordinary operations amounted to 42.8 million euro, lower than the figure on a like-for-like basis, owing to the seasonal performance of the Rizzoli Libri business in 2Q16.

This performance was the result of constant and effective monitoring, and the ability to act and manage all of the economic and financial variables typical of all of the Group’s business areas.

OUTLOOK FOR THE YEAR

In light of the positive performance of the Group in the first half of the year and considering the integrations in progress, the forecasts previously announced on a like-for-like basis for the current year can be reasonably confirmed (basically steady revenue versus 2015 and a “high-single digit” growth in adjusted EBITDA, with a resulting increase in profit margins).

Including the effects of the consolidation of Rizzoli Libri (for 9 months) and of Banzai Media (for 7 months), revenue is expected to grow by approximately 14% versus 2015, while adjusted EBITDA is expected to increase by approximately 30%. The net financial position is expected to increase versus the figure at 31 December 2015, with a NFP/EBITDA ratio of about 3.5x, lower than the bank covenant of 4.5x.

CO-OPTATION OF A DIRECTOR

At today’s meeting, the Board of Directors took note of the resignation, for professional reasons, of non-executive director Bruno Ermolli, also member of the Remuneration and Appointment Committee.

Accordingly, the Board of Directors, pursuant to art. 2386 of the Italian Civil Code, and to art. 17.6 of the company by-laws, approved the appointment by cooptation of Paolo Ainio, who will remain in office until the next Shareholders’ Meeting.

At the same meeting, the Board of Directors, in accordance with the provisions of the Corporate Governance Code issued by Borsa Italiana S.p.A., approved the reintegration of the Remuneration and Appointment Committee, by appointing non-executive director Alfredo Messina, who replaces director Bruno Ermolli.

Mention should be made that director Bruno Ermolli, at the date of his resignation, holds no equity interest in the Company.

The curriculum vitae of director Paolo Ainio, who qualifies as a non-executive director, in accordance with the provisions of the Corporate Governance Code issued by Borsa Italiana S.p.A., is available on the Company’s website www.gruppomondadori.it, Governance section.

PERFORMANCE OF GROUP BUSINESS AREAS AT 30 JUNE 2016

  • BOOKS

In 1H16, the Italian Trade Books market grew by +2.6% versus 1H15 (GFK, June 2016; figures in terms of market value). Against this backdrop, the Trade Books Area of Mondadori Libri was once again market leader, boasting a 22.9% share; following the acquisition of the Trade Books brands of Rizzoli Libri (Rizzoli, BUR and Fabbri Editori), the Group increased its overall Trade Books market share, reaching 28.8% (at 30 June 2016).

In the period under review, revenue from the Books Area of the Group amounted to 170.1 million euro, up by 37.9% versus 123.4 million euro in 1H15, as a result of the consolidation of Rizzoli Libri (with total revenue in the April/May 2016 period amounting to 36.6 million euro from the activities relating to trade, educational and Rizzoli International Publications, which operates in the high-end illustrated books market and through the activities of the Rizzoli Bookstore located in New York).

On a like-for-like basis, revenue from the Books Area of the Group increased by +8.2% versus 1H15.

Regarding the Trade Books Area on a like-for-like basis in 1H16 (net of the contribution of Rizzoli Libri), revenue amounted to 85.6 million euro, increasing by 14.3% versus 1H15, as a result of the positive performance of sales from the titles launched between the end of 2015 and the first half of the current year.

The Educational Area revenue grew by 17% on a like-for-like basis versus 1H15, as a result of supplies provided in advance in the school textbooks segment and of the positive performance of museum management activities.

Mondadori Libri’s adjusted EBITDA surged by over 29% on a like-for-like basis versus 1H15 to settle at 11 million euro, driven by the increase in revenue from the targeted publishing policy, by the remarkable success of the new titles published, and by the ongoing optimization of the operating processes implemented since 2015 in the Trade segment.

EBITDA on a like-for-like basis came to 10.7 million euro, doubling the result of 1H15 (5.2 million euro), thanks also to lower restructuring costs versus 1H15.

In the consolidation quarter (April-June 2016), Rizzoli Libri contributed negatively – 1.5 million euro – to the reported EBITDA of the Books Area, due mainly to the Educational Area’s seasonal performance, which generates most of its revenue in the second half of the year.

Reported EBITDA of the Books Area of the Group, including the effects of the consolidation of Rizzoli Libri, amounted to 9.1 million euro (+74.2% versus 1H15).

  • MAGAZINES ITALY

In 1H16, Mondadori Group retained its leadership position in the magazines market, with a 32.1% share (Internal source: Press-di, figures in terms of value at May, newsstands + subscriptions).

In the period under review, revenue from the Magazines Italy Area amounted to 161.1 million euro[1], up by 1.1% versus 159.4 million euro in 1H15 (-0.8% on a like-for-like basis, net of the effects of the acquisition of Banzai Media).

Specifically:

  • circulation revenue grew by 0.8%, due also to the contribution of the Mondadori Scienza titles;
  • revenue from advertising sales dropped by 2%; print advertising sales of Magazines Italy lost 4%, in line with the market’s -3.6% (Nielsen; cumulative figures at May); sales on websites increased by 4.7%, outperforming the relevant market (-1.9%: Audiweb; cumulative figures at May). Overall, in the period under review (print+web), advertising sales on Mondadori brands in Italy were down by 2.7%.

Traffic data of Mondadori websites showed an overall audience rate of 8.4 million unique users (Audiweb, cumulative figures at May) versus 7.2 million at May 2015 (+16% on January-May average);

  • revenue from add-on products sold in attachment to Mondadori magazines rose by 1.7% versus 1H15;
  • distribution and revenue towards third publishers was in line with 1H15, thanks to the ongoing commitment to developing third-publisher portfolios;
  • international operations achieved revenue of 3 million euro, down from the 3.5 million euro reported in 1H15, following the drop in licensing activities due to the deteriorated international macroeconomic environment and the negative effect of British and Chinese exchange rates;
  • revenue from Digital Marketing Service activities (6.2 million euro) grew by 2%, as a result of the gradual expansion of the portfolio of solutions that had started last year.

In 1H16, Banzai Media contributed approximately 2.9 million euro to the Magazines Italy Area’s revenue (in June): with the acquisition of an audience of 16.4 million unique users (Audiweb, average figures at May 2016), Mondadori becomes the leading Italian digital publisher.

Adjusted EBITDA in the Magazines Italy Area improved considerably on a like-for-like basis (approximately +13%), rising from 8.8 million euro to 9.9 million euro, driven 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 half-year period saw a significant reduction in industrial costs, achieved also as a result of the renegotiation of printing contracts. Including the contribution of Banzai Media, the increase in the period is 20.4%.

Reported EBITDA in the Area more than confirmed the growth trend in 1H16, increasing by 17% on a like-for-like basis, and by 25% (including the consolidation of Banzai Media), thanks to the above measures and to lower restructuring costs.

  • MAGAZINES FRANCE

In 1H16, revenue from Mondadori France amounted to 160.3 million euro, down by 3.8% versus 166.6 million euro in 1H15. Specifically:

  • circulation revenue (making for approximately 75 of the total) lost 2.8% versus 1H15: revenue from subscriptions (53% of circulation revenue) was basically steady, partly offsetting the drop by the newsstand channel (-6.3%) and confirming the opportunity to continue investments in this channel;
  • advertising revenue was down by 5.8% versus 1H15, but performance differed between offline (-10.9%) and online (18% of total advertising revenue) products, which reported a 27% increase.

The number of readers of Mondadori France magazines totaled 9.8 million unique users (Médiamétrie Netratings – Nielsen; average figure January/May 2016), up by approximately 19% versus 1H15, also as a result of the gradual digitization of the editorial teams.

Adjusted EBITDA came to 15.5 million euro, down by 3.8% versus 1H15, due mainly to M&A costs (0.6 million euro) incurred in the period. In keeping with the positive performance of 2015, digital activities enjoyed positive margins in 1H16 versus the loss in IH15.

Reported EBITDA, amounting to 14.2 million euro, dropped slightly versus 14.4 million in 1H15, as a result of the abovementioned M&A costs and of higher restructuring costs of approximately 0.3 million euro, arising from the voluntary redundancy plan launched in 2015, which has already produced benefits.

  • RETAIL

In 1H16, the Retail Area achieved revenue of 88.2 million euro, improving by 2.8% versus 85.9 million euro in 1H15.

As of 1 April 2016, following the consolidation of the acquisition of Rizzoli Libri, Librerie Rizzoli activities, relating to the long-standing bookstore in Galleria Vittorio Emanuele, Milan, and to the rizzolilibri.it ecommerce site, have been absorbed by the Retail Area. Accordingly, on a like-for-like basis, the Retail Area grew by 1.6%, thanks mainly to the growth of the Franchised channel (+5.2%) and the Megastores (+3.8%), which more than offset the structural decline of the Book Clubs (-8.8%).

In 1H16, Mondadori Retail adjusted EBITDA, on a like-for-like basis, came to -3 million euro, improving versus -3.2 million euro in 1H15 (-3.1 million euro, including the result of Librerie Rizzoli in 2Q16). A result achieved through cost-curbing measures for stores and central functions, which determined a lower percentage of personnel costs and overheads, and more than offset the reduction in the product margin arising from the different product mix/channel, related also to the effects of the structural decline of the book clubs channel.

Reported EBITDA came to -3 million euro (-3.1 million euro including the result of Librerie Rizzoli;   -2.8 million euro in 1H15 as a result of positive extraordinary items).

SIGNIFICANT EVENTS AFTER THE REPORTING PERIOD

CLOSING OF THE DISPOSAL OF MARSILIO EDITORI S.P.A.

On 26 July 2016, Arnoldo Mondadori Editore S.p.A. completed the disposal, through its subsidiary Rizzoli Libri S.p.A., of its 94.71% interest in the share capital of Marsilio Editori S.p.A. to GEM S.r.l.. The amount cashed in from the transaction is 8.9 million euro, based on an enterprise value in line with the price of the acquisition of the interest, part of the Rizzoli Libri transaction completed last 14 April 2016; the amount includes an adjusted positive net financial position of 1.3 million euro.

The disposal of Marsilio Editori S.p.A. was completed in accordance with the remedies set out in the provision issued by the Antitrust Authority. GEM S.r.l., a company operating in the publishing industry, headed by the De Michelis family, had held an interest in Marsilio Editori S.p.A. from 1985 to April 2016.

Based on the 2016 budget, Marsilio Editori is expected to achieve revenue of approximately 9.4 million euro and EBITDA of 1 million euro.

* * *

The documentation relating to the presentation of the results at 30 June 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.

Annexes:

  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 indicators used

* This document, in addition to the statements and conventional financial indicators required by IFRS, presents a number of reclassified statements and alternative performance measures in order to better evaluate the operating and financial performance of the Group, the definition of which is explained in Annex 5 “Glossary of terms and alternative performance measures used” .

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

 

The Board of Directors approved the half year report at 30.06.2015

  • Consolidated net revenues: Euro 517.1 million, -4.8% against Euro 543.3 million of 30.06.2014
  • EBITDA before non-recurring items: Euro 23.8 million, up 32% against Euro 18.1 million of 30.06.2014
  • Total consolidated EBITDA: Euro 19 million, up 7.9% against Euro 17.6 million of 30.06.2014
  • Consolidated net result from continuing operations (excluding discontinued operations in the radio business area): Euro -3.4 million, remarkably up against  Euro -8.6 million of 30.06.2014
  • Net financial position: Euro -326.5 million, up against Euro -368.9 million of 30.06.2014

§

  • Improved results from operations in all of the Group’s business areas and focus on the strategic rationalization of the operations portfolio

§

  • EBITDA increase estimates confirmed for 2015; expected improvement in net financial position against end of 2014

 

The Board of Directors of Arnoldo Mondadori Editore S.p.A., held on today’s date, examined and approved the half year financial report at 30 June 2015 presented by the CEO Ernesto Mauri.

GROUP PERFORMANCE AT 30 JUNE 2015

In the first half year period of 2015 net consolidated revenues amounted to euro 517.1 million, down 4.8% against euro 543.3 million of the same period in 2014. A progressive improvement (-3.3%) was recorded in the second quarter against the performance of the first quarter (-6.2%).

EBITDA before non-recurring items registered an increase of 32%, from euro 18.1 million in the first half of 2014 to euro 23.8 million this year, with a percentage on revenues rising from 3.3% to 4.6%; consolidated EBITDA improved by 7.9%, totalling euro 19 million vs. euro 17.6 million of 30 June 2014. The recovery of profitability is even more significant net of non-recurring items (which had a negative impact on the result for approximately euro 5 million, mainly due to restructuring costs).

This performance is the result of a rigorous management policy. In particular:
– the majority of the business areas posted reduced incidence of the cost of goods sold, specifically the Book Area and the Retail Area, due to a more effective management of operating processes and to a targeted pricing policy;
– the rising incidence of variable costs on revenues is mainly attributable to the Magazines France Area and is referred to increased mail tariffs for subscriptions;
– the reduction in fixed costs is higher than the drop in revenues and was also reached through the implementation of a cost containment policy for third party services and rents;
– employee headcount at the end of the half year period was down by 144 people (-4.5%) against the first half year of 2014, due to the ongoing review of the organizational structures; cost of personnel consequently dropped by 4.6% against the previous year, essentially in line on revenues (20.9%).

Quarter after quarter, this result confirms the greater efficiency achieved by the Group across all business areas, especially in the Books and Magazines Italy Areas, as a result of the industrial and organizational review implemented over the last two years.

In the first half year of 2015, consolidated EBIT amounted to euro 9.2 million, up 32% against euro 7 million posted in the same period of 2014, as a result of the above-mentioned increased EBITDA and reduced amortization and depreciation.

Consolidated profit before taxes is positive for euro 0.6 million against euro -5.3 million at 30 June 2014; in the first half year of 2015, financial costs amounted to comprehensively euro 8.5 million, considerably down against euro 12.3 million of the same period in 2014, as a result of reduced average net debt for the period and average total cost.

Taxes in the period totalled euro 2.8 million (euro 2.1 million in the first half year of 2014).

Consolidated net result from continuing operations, after minority interest, was negative for euro 3.4 million, remarkably up against the euro 8.6 million loss registered at 30 June 2014.

The result from discontinued operations in the first half year of 2015, negative for euro 8.8 million, includes the same-period result of the Radio business area (up from euro -2.5 million at 30 June 2014 to euro -1.8 million) as well as depreciation of Monradio operations in order to bring their value in line with the fair value resulting from the offer received on 30 June 2015 by R.T.I. S.p.A.

The Group’s net financial position at 30 June 2015 was equal to euro -326.5 million, up against euro -368.9 million of 30 June 2014 as a result of the significant Group’s cash generation – especially from operations – over the last twelve months; the comparison with the value at 31 December 2014 (euro -291.8 million) includes the effects of the seasonal fluctuations typical of the business.

At 30 June 2015, cash flow from operations in the last twelve months is positive for euro 59.6 million; ordinary cash flow (after cash-out relative to financial charges and taxes for the period) is equal to euro 31.5 million, continuing the rising trend registered in the four previous quarters.

Cash flow from extraordinary operations is positive for euro 10.9 million despite cash-out for restructuring actions, and results from the capital gain deriving from the disposal of an asset in the Retail Area and from the collection of tax receivables accrued in previous years.

BUSINESS AREAS

  • BOOKS

In the first six months of 2015, the Trade Books area continued the trend already shown in the first quarter, down 2.7% vs. 30 June 2014 (source: GFK, value in June).

In this context, Mondadori Group confirmed its position as market leader with a 24.4% market share.

During the period, the Group has 4 titles in the ranking of the 10 top bestsellers books and was awarded the Strega Prize 2015 with La ferocia written by Nicola Lagioia (Einaudi) and the Strega Giovani Prize 2015 with Chi manda le onde written by Fabio Genovesi (Mondadori).

In the first six months of 2015, Mondadori Group’s Books Area recorded revenues for euro 123 million, down by 4.3% against euro 128.5 million of the same period of 2014.

Revenues from the Trade Books registered a higher decline than the market, influenced by a selective publishing policy aimed at increasing profitability. Mondadori’s positive performance in the second quarter benefited from the distribution of Grey, the new novel by E.L. James, which continues the Fifty shades of grey trilogy: launched on July 3rd in 500,000 copies, Grey is already an outstanding bestseller, with over 200,000 copies sold in the first two weeks.

Revenues from the download of e-books rose by 18.6% against the first six-months of 2014, with a 6.1% share of digital sales on the total revenues of Trade Books (4.7% at 30 June 2014).

In the first six months of 2015, revenues from Educational Books grew by 12.4% against the same period of 2014. The Education segment is characterized by the seasonal effects of the school textbook business, whose revenues are typically generated in the second half of the year.

EBITDA in the Books Area, net of non-recurring items, despite dropping revenues (-4.3%), posted a significant increase (+65.8%) from euro 5.1 to 8.5 million as a result of a more effective management of operating processes deriving from the radical restructuring process implemented in the Trade Area. Concurrently, the actions aimed at reducing fixed costs and cost of personnel continued.

Reported EBITDA, including a higher incidence of restructuring costs compared to last year (euro 3.2 million in 2015 against 0.5 million in 2014), which were concentrated in the first part of 2015, is equal to euro 5.2 million, up by approximately 12% against the same period of 2014 (euro 4.7 million).

  • MAGAZINES ITALY

In Italy, despite the negative scenario recorded in the market in terms of both circulation – down by 6.5% (internal source, newsstand channel, in May) – and sales from advertising – down by 3.6% (source: Nielsen, in May) – Mondadori confirmed its position as market leader with a 32.3% market share in circulation.

Overall revenues of the Magazines Italy Area amounted to euro 153 million, down by 6.1% (-5.7% on a like-for-like basis, considering magazines sold in March 2014), against euro 162.9 million in the first six months last year.

More specifically, revenues from circulation decreased by 7.6% (-6.8% on a like-for-like basis), however showing a significant recovery in the second quarter compared to first-quarter data.

The drop results from the combined effect of the reference market performance and of the rigorous policy adopted in the selection of the most profitable promotional initiatives.

Revenues from advertising sales in the print segment dropped by 6.3% (-6% on a like-for-like basis), while web advertising (-0.7%) performed better than the reference market trend (-2.2% source: Nielsen, in May), posting a +2.5% growth in the second quarter of the year, also thanks to the positive results of Grazia.it (+7.3% against the first six months of 2014). On the whole and on a like-for-like basis, sales from advertising on Mondadori (print + web) brands dropped by 5.6% during the same period.

Revenues from add-on products decreased by 10.6% against the first six months of 2014 as a result of rationalization actions aimed at support profitability, even if they post a progressive recovery vs. the first quarter of 2015.

EBITDA of the Magazines Italy Area, net of non-recurring items, posted a remarkable improvement, up 28.6% (from euro 8.2 million to euro 10.5 million) as a result of the effective review of the publishing and operating organization as well as of promotional activities, despite the downward revenue trend determined by market conditions and by project selection policies.

Reported EBITDA confirmed the growth trend, rising from euro 9.1 to 9.8 million as a result of the above-mentioned actions and of the progressive recovery of advertising sales, even if the first half year of 2014 benefited from non-recurring items amounting to approximately euro 1 million, deriving from the contribution to Mediamond.

Traffic data show an overall audience rate equal to 6.7 million unique users with a 41% growth against the same period of the previous year (source: Audiweb, in May), also thanks to the performance of Grazia.it (+38%) and Panorama.it (+11%).

  • MAGAZINES FRANCE

In France, the magazines market showed a downward trend, both in advertising sales (-10.9% in May, source Kantar Media) and in circulation, which is down 5.2% in the newsstand channel (in May, internal source, excluding the extraordinary edition of Charlie Hebdo in February, which influenced the French magazines market in the first half year).

In the first six months of 2015, revenues from Mondadori France equalled euro 166.6 million, down 2% against euro 169.9 million in the same period in 2014, essentially confirming the trend of the first quarter.

Revenues from circulation (approximately 75% of total revenues) recorded a slight decline (-1.9%) against the previous year. In particular:
– the newsstand channel recorded a 7.3% reduction; the comparison with 2014 results is affected by the exceptional performance of January 2014, resulting from the publication of the “Hollande scoop” on Closer; net of such exceptionality, revenues from circulation dropped by –5,2%, in line with the reference market;
– on the other hand, the subscription channel posted a 0.6% growth, partly off-setting the newsstand channel decline.

Revenues from advertising sales (print + web) were down 5.2% against the same period of 2014, but performance differed between offline and online products: digital advertising (14% of total advertising revenues) grew over 23%, partially offsetting the drop in traditional print advertising (-8.5%), performing better than the reference market.

Mondadori is confirmed as second top player in the magazine advertising market, with a market share (in volume) of 10.3%.

EBITDA, net of non-recurring items, is stable against last year, totalling euro 16.1 million, even if the first half year of 2014 benefited significantly from the “Hollande scoop” published in January by the magazine Closer.

Mondadori France has continued the process of rationalizing structures and containing editorial costs, and it will be extended through 2015 in order to further adjust the organization to market changes and to sustain profitability, also limiting the impact of the increased postage fees associated with subscriptions and of some promotional investments. Reported EBITDA, equal to euro 14.4 million, is down 5.7% against the first half year of 2014 (euro 15.3 million), due to higher restructuring costs.

The fall in traditional activities stopped at 3.5%, while diversification activities (about 8% of total revenues) grew by 18.2% mainly as a result of the development of digital activities (+18.6%), with special emphasis on the growth of advertising sales of the properties (+23.5%).

The total number of readers of Mondadori France magazines reached 8.3 million unique users, up approximately 19% against 2014, also as a result of the progressive digitalization of the editorial teams.

  • RETAIL

In the first six months of 2015, the Retail Area posted revenues for euro 85.7 million, down 7.4% against euro 92.6 million of the same period last year (in line with the trend of the first quarter), mainly as a result of the disposal of the flagship store located in corso Vittorio Emanuele in Milano.

Books are the predominant product category (77% of the total) and outperform the reference market on a like-for-like basis by approximately 3 percentage points.

Revenue highlights from the single sales channels: direct bookstores are substantially stable (-0.6%); franchise bookstores are substantially stable in the books category, with a drop in the non-book sector; the book category in megastores (on a like-for-like basis) posted a positive performance and consumer electronics started to grow again; the online channel grew (+2.5%), especially for books, which outperformed the market by over 5 percentage points (+8.5% vs. +3.1% of the market); the trend in the book club segment is in line with the structural decline expected in the medium-term development plan (-13.5%).

EBITDA of Mondadori Retail, net of non-recurring items, totalled euro -3.2 million, clearly up (+37.1%), against euro -5.1 million in the same period of 2014. This result derives from two main elements:
– the improved product margin, especially in the book category and in consumer electronics, achieved thanks to actions aimed at network and format review (during this half year, the new megastore was opened in via San Pietro all’Orto, in Milano, in June), promotion containment and well-studied product assortment;
– the extended implementation of cost reduction measures determined a lower incidence of promotional expenses and a significant reduction in personnel costs and overhead.

This increase, compared to the first six months of 2014, is visible in the majority of the sales channels. Reported EBITDA remarkably improved in the first half year period, from euro -5.5 million in the first six months of 2014, which included restructuring costs for euro 0.4 million, to euro -2.8 million of the same period this year.

  • DIGITAL

In the first half year, total revenues from digital activities posted a 8% increase against 30 June 2014 (euro 25.6 million against euro 23.7 million at 30 June 2014). The incidence of digital activities on the Group’s total revenues is 5%, against 4.4% in the first six months of last year.

The purely digital activities that cut across all business areas posted increased revenues by 12.1% against the first six months of 2014.

The digital marketing service activities posted revenues for euro 6.2 million, down from euro 6.4 million in 2014, as a result of the shift of some projects relative to Cemit traditional activities, only partially offset by the launch of digital and multimedia products.

OUTLOOK FULL YEAR 2015
During this half-year period, the Group carried on the process aimed at strategically rationalizing portfolio activities and some non-core assets disposal in order to further strengthen its competitive position in the core businesses and eventually exploit any upcoming opportunities. This strategy includes the already mentioned transfer of the majority interest of the Group’s radio business.

Based on the Group’s positive performance in these first six months, on the ongoing optimization of operating processes and cost structure, as well as on the measures aimed at mitigating the downturn in revenues due to the performance of the market, it is reasonable to confirm the 2015 projections of a growing EBITDA at Group level.

Consistently with the description above and notwithstanding the higher investments and possible changes in the Digital Area aimed at ensuring future development of the Group, the net financial position is also expected to improve against 2014 year end.

The documentation relating to the presentation of the first half-year period results is made available to the public on the authorized storage device 1info (www.1info.it) and on www.gruppomondadori.it (Investor Relations section).

The Executive Manager responsible for drafting 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.

Board of Directors approves interim report on the first half of the year to 30 June 2014

  • Consolidated revenues: €549.2 million -10.3% on the €612.3 milllion to 30 June 2013 (-7% on a like-for-like basis)
  • Consolidated gross operating profit: €14.9 million, an increase of €20.2 million compared with -€5.3 million to 30 June 2013
  • Consolidated net loss: -€11 million, an improvement of €16.1 million compared with 30 June 2013
  • Operating costs down by €70 million: -13.1% compared with 30 June 2013
  • Net financial position: -€368,9 million, an improvement of  €27.6 million on the first quarter of 2014 and in line with the first half of 2013; marked improvement expected by year end
  • Further confirmation of a recovery in profitability expected for the full year 2014

The Board of Directors of Arnoldo Mondadori S.p.A. met today, under the chairmanship of Marina Berlusconi, to examine and approve the interim report for the first half of the year to 30 June 2014, as presented by the chief executive, Ernesto Mauri.

THE MARKET SCENARIO

In the first six months of the year, the markets in which the Group operates continued to decline compared with the same period of the previous year.

In particular in Italy:

– the book sector saw a downturn of 9% in terms of copies and 6.6% in terms of value compared with the first half of 2013 (Source: Nielsen, figures to 14 June);
– the magazine market saw a fall in circulation of 9.6% (internal data to May), a slump of 14.3% in add-on sales (internal data to May) and a fall in advertising sales of 11.6% (Source: Nielsen, figures to May);

Meanwhile in France:

– magazine circulation was down in the newsstand channel by 8.1%;
– advertising sales were down 9.4% on the same period of 2013 (figures to May: internal data for circulation and Kantar Media for advertising).

GROUP PERFORMANCE IN THE PERIOD TO 30 JUNE 2014

In a context characterised by a marked decline, the Mondadori Group recorded a 10.3% fall in consolidated revenues for the period to €549.2 million, compared with €612.3 million in the first half of 2013; on a like-for-like basis, taking account of the contribution, effective from 1 January 2014, of the advertising sales activities to Mediamond S.p.A., a company consolidated on an equity basis, the reduction was 7%.

Consolidated gross operating profit came to €14.9 million, an increase of €20.2 million compared with the loss of €5.3 million in the first six months of 2013, thanks to the impact of actions on the product, cost reduction efforts and a fall in non-recurring charges. The Magazine area made a decisive contribution to this marked improvement given that, after years of continuous decline, it recorded a total gross operating profit (Italy and France) amounted to €26.3 million, an increase of 50.3%.

This particularly positive result, in excess of expectations, is the result of actions on the product and a reduction in operating costs, which were down by around €70 million (-13.1%).

Consolidated gross operating profit net of non-recurring items amounted to €15.4 million, an increase of 8.5% compared with the €14.2 million of the previous year.

Consolidated operating profit came to €3.6 million, a marked improvement on the -€17.7 million of the first half of 2013, with amortisations of tangible and intangible assets of €11.3 million, compared with €12.4 million in 2013.

Pre-tax profit and consolidated net profit, amounting respectively to -€8.7 million (-€28.2 million in the first half of 2013) and -€11 million (-€27.1 million in the first half of 2013), include higher financial charges due, in part, to higher interest rates resulting from the renegotiation of credit lines concluded in November last year, as well as a higher average level of debt.

The Group’s net financial position on 30 June 2014 showed a deficit of -€368.9 million, an improvement on the situation in the first quarter of the year (-€396.5 million) and in line with the same period of 2013 (-€367.3 million) and at 31.12.2013. In addition to the seasonality of some of the Group’s businesses, the net financial position was affected by expenditure for restructuring and a recovery in investments and benefitted from an influx of €31 million from the placement of a total of 29,953,500 ordinary shares completed in the month of June.

RESULTS OF THE BUSINESS AREAS

  • BOOKS

In the second quarter of the year the trade books segment felt the impact of the negative economic situation that has slowed down the recovery in consumer spending and the buying of books. This resulted in a further fall in the market which (to June) recorded a fall of 9% in terms of copies and 6.6% in terms of value (Source: Nielsen, figures to 14 June); in the second quarter the fall, in value terms, was of -8% (-5.3% in Q1). The downturn was more marked in the large-scale retail channel and independent bookshops that were down, respectively, by 15% and 7.5% (Source: Nielsen, figures to 14 June).

Substantially confirming the company’s market leadership, the share of the Mondadori Group’s publishing houses was 25.5% (excluding large-scale retail sales), a slight fall compared with the same period of last year that was positively affected by the performance of the bestsellers E l’eco rispose by Khaled Hosseini and Inferno by Dan Brown.

First half revenues generated by the Book area amounted to €128.5 million, a 4.1% fall on the €134 million of the previous year.

The fall in revenues and margins was determined by the aforementioned market trend as well as a different publishing schedule which, compared with 2013, will feature an absolutely significant launch of titles for the Christmas period as well as the publication of new works by the well-know authors in the second half, including, Follett, Grisham, Cornwell, Corona, Littizzetto and Camilleri.

Regarding to e-books, revenues were up by almost 13% compared with the first half of 2013 thanks to a catalogue that is continuously expanding and that currently includes over 7,000 titles.

The fall in revenues had an impact on gross operating profit compared with the first half of 2013. However, targeted actions aimed at cutting costs in different areas, in particular production and logistics, made it possible to mitigate the impact (from €9.8 million in the first half of 2013 to €5.4 million on 30 June 2014).

  • MAGAZINES ITALY

In a generally uncertain climate, the second quarter saw a continuation of the downturn, albeit at a less marked level than the previous year.

In this context the Magazines Italy area – faced with an overall fall in revenues of 9.9% (-8.3% on a like-for-like basis, considering titles that were closed or sold) that amounted to €160.3 million, compared with €177.9 million in the first half of 2013 – recorded a significant increase in gross operating profit, which rose from €3.6 million to €11 million in the first half of 2014 due to the focus on the segments in which the Group is leader (fashion, well-being, cooking), the launch of new titles (Il mio Papa), the redesign of Panorama and actions aimed at the structural reduction of industrial, editorial and photographic costs, as well as labour costs.

Revenues from Mondadori titles were particularly hit by the negative trends in the markets of reference, but the Mondadori Group nevertheless managed to increase its market share in terms of value to 33.2%, compared with 32.6% in the first half of last year.

In particular:

– circulation revenues fell by 5.9% on a like-for-like basis, in a market that was down by 9.6%;
– gross advertising revenues were down by 8.5% on a like-for-like basis, in a market that was down by 11.6%;
– advertising sales for the web sites of the magazine brands recorded growth of 12.8% on a like-for-like basis compared with the same period of 2013, bucking the trend of a market that was down by 2.1% (Source: Nielsen, to May). Particularly positive results for the web sites Donnamoderna.com (+8.4%) and Grazia.it (+55.9%);
– in a market that in the first five months saw a fall of 14.3% in terms of value (internal source: Press-Di), add-on sales were down by 19.8%, following the decision to select and rationalise initiatives but, by comparison, affected also by the excellent performance achieved in 2013.

International activities

In the first half of 2014 Mondadori International Business recorded a 10% growth in revenues compared with the previous year. The increase was mainly attributable to the Grazia network which now has 23 editions around the world, the launch, last November, of the first international edition under licence of Icon and advertising sales in Italy since last October on behalf of El Pais, Spain’s leading daily newspaper.

In May, as part of the development of the digital activities of the Grazia International Network, it is worth underlining the acquisition of the marketplace London-Boutiques.com, an operation that is part of a more extensive project to launch, in the second half of the year, a global e-commerce platform using the Grazia brand.

With regard to holdings, Attica Publications, leader in the Greek magazine and radio broadcasting markets, after a positive first quarter, saw a fall in advertising revenues; Mondadori Seec Advertising Co. Ltd, the exclusive advertising sales company for the edition of Grazia published in China, saw an increase in revenues of 14% compared with the first half of 2013 and from April, the frequency of publication increased from monthly to weekly; Mondadori Independent Media LLC, the publisher of Grazia in Russia, closed the first half of the year with a fall in advertising revenues of 4%.

  • MAGAZINES FRANCE

In the first half of 2014 the markets of reference in France saw a further decline, both in terms of newsstand sales (-8.1%; internal data to May) and advertising (-9.4%; internal figures based on Kantar Media data, to May).

Mondadori France performed decidedly better than the market keeping the fall to 2% in a market that was down by 8.1% and reporting growth of 50.6% in internet activities.

First half consolidated revenues generated by Mondadori France amounted to €169.9 million, -4% on the €176.9 million in the first half of 2013; on a like-for-like basis, considering the sale of Le Film Français finalised at the end of 2013 and the different number of issues of some titles, the fall was of 3.7%.

There was a marked difference in the performance of advertising revenues on print and for online: while the former saw a fall of 13.5% (-11% on a like-for-like basis), the latter were up by 49.3%, (51.1% on a like-for-like basis), as a result of which, digital sales now account for 10% of the total.

The advertising sales company remained among the main players in the market with a 10.5% share in terms of volume (Source: Kantar Media), making it the second player in the market.

Circulation revenues, that account for over 70% of total revenues, were down by 1.5% (-1,1% on a like-for-like basis):

– newsstand sales were down by 2%; some of the main titles, including Closer, Pleine Vie and Top Santé, saw growth of more than 10%;
– subscriptions remained stable thanks to the strong performance of Télé-Star, Pleine Vie and Top Santé.

During the first half Mondadori France launched a number of new products, such as Le Journal de Lucky Luke, Slam, Histoire & Jeux and Fort Boyard, and completed the redesign of L’Auto-journal Évasion, Diapason, Modes & Travaux, Science & Vie, Top Santé, Grazia and Closer, placing more focus on editorial quality.

The many activities carried out in recent quarters, and still ongoing, have made it possible, as indicated above, to launch new titles and realise significant reductions in editorial, industrial and general costs and thereby widely compensating for the fall in revenues.

Gross operating profit was up by 10.1% to €15.3 million from €13.9 million in the first half of 2013.

With regard to digital activities, since January 2014 advertising sales have been exclusively managed internally, cross-tile editorial teams have been created and some of the main properties have been updated and further enhanced with new functions for tablets and smartphones.

These efforts have had a positive impact on the audience which, in April, the latest Nielsen figures available, had reached 6.5 million unique users (+26% on 2013), with a peak of 7.8 million in January; while on mobile, the increase in unique users was 67% compared with 2013 (Source: Nielsen, to April).

Activities are also continuing aimed at creating new efficiencies, in particular, a plan has been introduced for the reduction of the structure along with a project for the rationalisation of the locations.

  • ADVERTISING

The figures for the area are not comparable given that, as already mentioned, from January 2014, the advertising sale activities of Mondadori Pubblicità S.p.A., a subsidiary of Arnoldo Mondadori Editore S.p.A., were contributed to Mediamond S.p.A., a 50-50 joint-venture set up in 2009 by Mondadori Pubblicità S.p.A. and Publitalia ’80 S.p.A..

Revenues generated by the current Mondadori Pubblicità came to €5.8 million, a fall on the revenues generated by comparable activities in the first half of 2013 for the reasons outlined above.

Gross operating profit, that also includes the pro-quota results of Mediamond, consolidated on an equity basis, saw an improvement compared with the first half of 2013 (up from -€3.5 million to -€1.9 million), highlighting the first positive effects of the operation.

The revenues of Mediamond S.p.A. saw an overall increase of 1.8%.

The Mondadori brands (magazines and web) recorded a like-for-like reduction of 6.7% compared with 2013. In particular:

– the fall in advertising revenues for magazine titles amounted 8.5%, in a market of reference that was down by -11.6% (Source: Nielsen, to May);
– advertising revenues for the web sites was up by 12.8% in a segment that was down by 2.1% (Source: Nielsen, to May).

  • RETAIL

Also in the first half of the year the retail market continued to show signs of weakness in consumer spending. With regard to the products sold, the book segment saw a fall of 6.6%, in terms of value, during the period, a situation that worsened in the second quarter also as the result of a lack of bestsellers. The channel that was best able to contain the downturn in revenues was the bookshop chains channel, compared with independent bookshops and large-scale retail outlets.

In the non-book area, there was growth only in gift-boxes, mobile phones and e-readers, while consumer electronics showed a general slowdown.

The 2013 figures have been reclassified to take account of the configuration introduced in the Retail area from September 2013, when Cemit Interactive Media S.p.A. was included under Other businesses and Corporate.

In the first half of 2014 the Retail area recorded revenues of €92.6 million, an 8.9% fall compared with the €101.7 million of the same period of 2013.

A breakdown of revenues by category shows that books – the most important, accounting for 74% of the total – had the best performance (+3.5%) compared with the market of reference, while consumer electronics continued to record a fall greater than the general trend in the sector.

The negative trend in the club channel continued with a fall in revenues of 20% and, finally, also online sales through inMondadori.it were also down (by around -4%).

The impact on gross operating profit (-€5.5 million from the -€6.1 million to 30 June 2014) of the reduction in revenues from the clubs and the consumer electronics segment was more than compensated by the positive performance of books and the effects of cost reductions.

To contrast the generally recessive economic environment actions, already underway in the first quarter and aimed at recovering profitability, continued. In particular:

– a progressive review of the network with actions to rationalise the sales outlets (the opening of a directly-owned and run bookstore in a new shopping mall, the Nave de Vero, near Marghera, and the closure of a number of franchise outlets), and formats for the development of a new concept for the bookshop of the future;
– the rebranding of the entire network; a new offer, above all in consumer electronics; co-marketing activities with important partners in the banking and telecoms sectors;
– the maintenance of promotional, communication and advertising initiatives to support sales and gain market share for books;
– the continuation of reorganisation efforts with the application of a solidarity procedure (20% compared with 10% in 2013) at the offices in Milan and Rimini.

  • RADIO

After a positive start in the first quarter, the second quarter the radio market saw a phase of turbulence that had an impact on the performance of di R101.

Revenues generated by R101 in the first half amounted to €5.9 million, -13.2% compared with the €6.8 million at 30 June 2013

Gross operating profit (which went from -€1.6 million to -€2.7 million) was affected not only by the negative trend in revenues, but also by higher promotional and communication investments made in the second quarter to support the re-launch of the station.

Such efforts in the first half included, the launch at the end of March of the new R101, confirming greater engagement with sports events and partnerships with music events alongside national and international artists and their summer tours; the redesign of the look and content of the web site www.r101.it and the launch in June of the TV channel, on the digital terrestrial channel 66.

The launch of the TV platform, integrated with the radio station and other digital supports, will make it possible to offer a wide-ranging entertainment system.

  • DIGITAL

The first half of 2014 saw the completion of the first step in strengthening the central control of the Digital Innovation area with the arrival of new and specialised resources. This has made it possible to give a greater impulse to digital projects functional to the different business units.

Total revenues were slightly down due to the fall in sales of marketing services (Cemit), while purely digital activities increased by 9.2% compared with the first half of 2013, as a result of the increase in e-books (+13%), the web sites of magazines in Italy (advertising revenues +12.8%) and France (advertising revenues +51.1%).

***

Information regarding personnel

As of 30 June 2014, the personnel employed by companies of the Group (both on temporary and permanent contracts) amounted to 3,213, a reduction of 361 (-10.1%) compared with 12 months previously and 223 (-6.5%) compared with December 2013.

Gross of extraordinary items, personnel costs (mounting to €117.4 million in the first six months) showed a significant fall (-20.7%) compared with the figures for the first half of 2013.

The significant fall in the headcount is attributable to important restructuring actions taken between the end of 2012 and last year, and is also influenced some imbalances in the scope of the company. Net of these extraordinary operations, compared with the situation in June 2013, the number of personnel was in any case down by 324 (-9.2%). The cost of personnel on a like-for-like basis, and net of restructuring charges was down by 10.9%.

***

EXPECTATIONS FOR THE FULL YEAR

In a market that still shows no clear signs of improvement, the positive performance in the first half – better than expected and the result of actions taken on the product, reorganisation and the reduction of costs, as well as the excellent performance of Magazines, both in Italy and France – makes it possible to estimate for the full year a level of gross operating profit higher than that of 2012, confirming what was stated during the presentation of the 2013 Annual Report and the Report on QI 2014.

Also the second half of the year will see a continuation of the management initiatives aimed at improving the organic capacity of the Group to generate financial resources and actions aimed at the sale/realisation of non-strategic assets, with a view to reinforcing access to the resources necessary for investment.

The net financial position is expected to be significantly better than the level in 2013.

***

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

The documentation relating to the presentation of the results for the first half of the year to 30 June 2014, will be made available through the authorised storage mechanism 1Info (www.1info.it), in the Investor Relations section of the company’s website www.gruppomondadori.it, on www.borsaitaliana.it and at the company’s corporate offices.

Board of Directors approves interim report on the first half of 2013

  • Consolidated revenues of €612.3 million: -9.4% compared with the €676.2 million at 30 June 2012
  • Adjusted consolidated gross operating profit (net of extraordinary items) of €14.2 million: -48.9% compared with the €27.8 million at 30 June 2012
  • Consolidated gross operating profit of -€5,3 million compared with the €36 million at 30 June 2012
  • Consolidated net loss of-€27.1 million compared with a consolidated net profit of €7.5 million at 30 June 2012
  • Increased focus on the cost reduction plan with target savings of €100 million by 2015
  • Magazines Italy: the re-launch of the three leading women’s weekly titles has produced results beyond expectations

The Board of Directors of Arnoldo Mondadori S.p.A. met today, under the chairmanship of Marina Berlusconi, to examine and approve the interim report for the first half of the year to 30th June 2013, as presented by the Chief Executive, Ernesto Mauri.

THE MARKET SCENARIO

The first half of 2013 saw a continuation of the difficult recessionary period facing the country with GDP expected to be down by about 2% at year-end and unemployment, expected to reach about 12%, and the prospects are of a further deterioration in 2014.

Also France is in a difficult situation, characterised by rising unemployment, now close to 11%, and a fall in consumer confidence to the lowest level since 1987. GDP growth in the first half was close to zero and in July, the ratings agency Fitch downgraded the country’s debt rating.

HIGHLIGHTS TO 30 JUNE 2013
During the reporting period even greater emphasis was given to the relaunch of magazines, particularly in Italy where the three main women’s weeklies – Grazia, Donna Moderna, TuStyle – and Chi generated very positive results. The development of digital activities in Italy and France continued and, in Books, the company consolidated its market leadership, thanks to the publication of new bestsellers by Dan Brown (in May) and Khaled Hosseini (in June).

The cost reduction and reorganisation plan, already outlined during the presentation of results at 31 March 2013, continued with target savings of €100 million in 2015, of which approximately €76 million has already been identified.

GROUP PERFROMANCE IN THE PERIOD TO 30 JUNE 2013

The Mondadori Group’s results in the first half of 2013 broadly confirm the trend seen in the first quarter, in particular, compared with last year, revenues were down by 9.4%, resulting in a reduced operating margin, however, this was in line with budget forecasts.

The difference compared to last year is also due to the presence of positive non-recurring items of €8.2 million in 2012, while in 2013 non-recurring items have resulted in losses of €19.5 million: largely due to due restructuring costs in the Magazine area with the aim of reducing operating costs and recovering profitability.

Consolidated revenues amounted to €612.3 million, a fall of 9.4% on the €676.2 million in the first half of 2012.

Consolidated gross operating profit net of non-recurring items came to 14.2 million, a reduction of 48.9% compared with the €27.8 million in the same period of the previous year.

Consolidated gross operating profit came to -€5.3 million, compared with the €36 million in the same period of the previous year.

Consolidated operating profit amounted to –17.7 million, compared with €23.8 million in the first half of last year, with amortizations and depreciations of tangible and intangible assets of €12.4 million (€12.2 million in 1H 2012).

Consolidated profit before taxation showed a loss of –28.2 million, compared with a profit of €15.6 million in the same period of last year, financial charges during the period amounted to €10.5 million.

Consolidated net profit for the period showed a loss of -€27.1 million, compared with a profit of €7.5 million in the previous year.

Gross cash flow in the first six months of 2013 was negative for an amount of €14.7 million, compared with a positive level of €19.7 million in 1H 2012. The Group’s net financial position of -€367.3 million is in line with the situation at 30 June 2012 (-€370 million).

Information regarding personnel

At 30 June 2013, permanent and temporary staff in the companies of the Group, totalled 3,574, a fall of 129 (-3.5%) compared to year-end and 171 (-4.6%) compared with June 2012.

A similar trend can be seen in personnel costs (€148 million in the first six months of 2013) which, net of higher restructuring charges, was down by 5.5% compared with the first half of 2012.

The reduction in staff is comparable across the Group and is the result of the introduction, from the end of 2012, of more decisive actions to reduce fixed costs. In particular, compared with a year ago, the Parent Company has reduced its headcount by 7.1% and costs by 6.1% (net of non-recurring charges), other subsidiaries in Italy have reduced staffing levels and costs, by 5.7% and 7.5% respectively, while Mondadori France has seen a reduction of 2.9%, despite a stable structure.

In terms of cost reductions, the start of the restructuring plan in the clerical areas of Magazines and the centralised units of Arnoldo Mondadori Editore have been particularly incisive, and will continue until the spring of 2014, along with the continued the use of social welfare incentives in various areas of the Direct division. With regard to magazine journalists, where at the beginning of June an agreement was reached for 87 redundancies, it should be noted that solidarity contracts and reduced-hour layoffs have already been activated for the end of the year, as part of the decree concerning access to early retirement 2013-2015, which will generate further significant savings.

COST REDUCTION PLAN
In line with what was announced on 14 May during the presentation the results for the first quarter of 2013, actions are ongoing to reduce costs on various fronts.

In addition to what is described in the section on personnel, in terms of industrial costs we would point to the successful conclusion of negotiations with Elcograf which led to a reduction of layout and printing fees, with the expectation of significant savings from the second half of the year.

In 2014 we also expect further benefits from the direct purchase of paper.

In terms of logistics costs, we are currently reviewing expenses related to the rental agreements, also with the aim of rationalizing the Group’s offices. The is also an ongoing project aimed at improving logistical efficiency related to all of the Group’s major business activities.

Finally, in terms of operating costs, the redefinition of contracts for the provision of general services, a new strategy for Information Technology and other service activities is underway, along with a review of business processes and costs.

RESULTS OF THE BUSINESS AREAS

BOOKS

In the first half of 2013 there was a slowdown in the trade books market (source Nielsen: -2.7% in terms of copies; -4.1% in terms of value). In this market context, the Mondadori Group confirmed its leadership with a market share of 26% in in terms of value (source: Nielsen).

During the period, revenues generate by the Books area amounted to €134 million, a fall of 7.3% from the €144.6 million the previous year.

Among the Group’s publishing houses, Edizioni Mondadori saw revenues rise by 2.6% over the same period of 2012. Of particular note was the 14 May 2013 publication, simultaneously worldwide, of the highly anticipated new novel by Dan Brown, Inferno, ten years after the success of The Da Vinci Code (80 million readers around the world, including 3 million in Italy) .

With a print run of 700,000 copies, Inferno was supported by a major marketing and communication campaign, which involved all the channels, from traditional retail to digital outlets, making the book to be the most sold in the first six months of the year, with excellent results also in the e-book format.

Edizioni Piemme closed the first half of 2013 with an increase in revenues of 8.2% over the previous year. The most important event was the publication on 21 June of E l’eco rispose, the new novel by Khaled Hosseini, which went straight to the top of the best-sellers list, where it remains.

In the first half of 2013 Mondadori Electa saw sales rise by 19.6% over the same period of 2012. The main reasons for this was the great success of the exhibition area and in the excellent performance of museum bookshop sales.

On the e-book side, the market segment recorded steady growth, during the period January to June 2013, the Mondadori Group’s four trade publishing houses saw an increase of 129% of total downloads, compared with the same period of 2012.

MAGAZINES ITALY

The ongoing recession continues to have an adverse affect on the performance of consumer magazines.

The figures available in May 2013 showed a decline in newsstand revenues of 12.3% (internal source), a slump of 18.3% in add-on sales (internal source) and magazine advertising revenues down by 24.4% (source: Nielsen).

The Magazines Italy area recorded revenues in the period of €177.9 million, a fall of 15.2% from the €209.9 million in the first half of 2012. The most important part of this trend can be attributed to the magazines (-16.2%), only partly offset by strong growth in revenues from Internet sites (+9.3%) and the licensing of International Activities (+14%).

In more detail, magazines were affected by the negative trend in the reference markets and recorded, as already mentioned, an overall fall of 16.2% (-13.4%, on a like-for-like basis, i.e. net of the effects due to the transformation of Flair as a supplement of Panorama, and the closure of Panorama Economy).

This trend was characterised by important activities and significant differences:

  • in May, there was the simultaneous relaunch of the three main women’s weeklies Donna Moderna, Grazia and TuStyle, a segment where Mondadori is the absolute leader;
  • in June Casaviva, VilleGiardini, Panorama Travel and Men’s Health were closed, with the subsequent introduction of solidarity incentives and layoffs;
  • the results of 2013 had to do without the contribution of Panorama Economy, which ceased publication in May 2012;
  • Flair was transformed into a supplement of Panorama.

In particular:

  • Circulation revenues fell by 13.1% compared with the previous year (-9.7% on a like-for-like basis). The relaunch operations have resulted in very positive results, both in terms of copies sold and in terms of advertising sales.
  • There was a progressively positive performance in June of the three women’s magazines: compared with the last issue before the relaunch, Grazia saw an increase of 22.1% in copies; Donna Moderna a hike of 25.6%; while TuStyle was up by +39.5% (source internal; progressive April-June).
  • The good performance of Chi also continues thanks to a review of the editorial content and the various exclusive news stories published during the period. The ADS figures for May showed an average circulation of 299,283 copies (up 9% compared with the same month of 2012 and 4% in the second quarter of 2013 compared with the same period last year).
  • In July, to total average weekly circulation of more than 1,150,000 copies per week is expected for the three women’s titles and Chi.
  • The second quarter also saw the redesign of GraziaCasa, with an enrichment of the content to talk to readers not only about furniture, but also art, style and fashion.
  • TV Sorrisi e Canzoni confirmed its role as Italy’s biggest selling weekly with 647,300 copies (down 7% compared with 2012, source: ADS May 2013).

In terms of advertising revenues for Mondadori magazines, see the “Advertising” section;

The market for add-on sales in the first five months of 2013 saw significant reduction (-18.3% in terms of value, internal source); in this context Mondadori recorded a better performance with a slowdown of 10.7%. During the period the number of initiatives was rationalised, in order to minimise the economic risks and maximise margins: this strategy has resulted in a reduction in both initiatives and revenues, but a significant increase in profitability.

The websites of the main magazine titles of the Mondadori Group have confirmed in 2013, not only the ability to generate ever-increasing traffic, but also to achieve results in terms of advertising revenues, which were up 9.3% compared with the first half of 2012, significantly outperforming the market (-0.3%, source: Nielsen in May). Contributing to these results:

  • Donnamoderna.com confirmed a very positive trend in the first half compared with 2012, both in advertising sales (+8%), and levels of network traffic that saw a further improvement on the already excellent results in the first quarter, with a monthly average of almost 12 million unique users;
  • Grazia.it saw a sharp increase in advertising revenues (+42% over the previous year) and the audience (+34% unique visitors in June compared with the same month last year, and a +14% hike in page views), thanks to a mix of actions on the user-experience and the handling of editorial content;
  • Panorama.it which showed an increase in the period of unique users of 67% and 51% in page views compared with the same month of 2012, thanks to the traffic of the male style/fashion segment in the Icon channel;
  • Panorama-auto.it continued to see a high performance both in terms of unique users and page views, which now total an average of more than 11 million per month.

International Activities

The Group’s international activities, concentrated in the company Mondadori International Business S.r.l., saw a rise in first half 2013 revenues of 10% compared with the previous year.

Licensing: revenues from royalties were up by 14%, thanks to new editions launched by Grazia International Network over the last 12 months (South Africa, Poland, Spain and South Korea).

Advertising: advertising sales were in line with the previous year, with a decidedly better performance than the market of reference.

From January 2013, Mondadori International Business S.r.l. expanded its activities to include the sale of advertising for international clients also in the French and Swiss markets and began operating as exclusive agent for advertising sales in Italy for titles that are not part of the Mondadori Group.

Holdings:

  • Mondadori Seec Advertising Co. Ltd, the exclusive advertising sales company for the edition of Grazia in China, launched in February 2009, in the first half of 2013 recorded a rise in revenues of 28% compared with the same period of 2012;
  • Mondadori Independent Media, the joint-venture that publishes the Russian edition of Grazia, saw first-half 2013 revenues up by 9% compared with 2012.
  • Attica Publications, in an economic context that continues to be very difficult, has taken a dominant position in the Greek magazine market; faced with a fall of almost 30% in the market, Attica saw a fall in advertising sales of around 8% and ended the first half with a positive net result that was beyond expectations.

At 30 June 2013 the volume of business generated by the international network for Grazia amounted to €51.6 million, an increase of 9% on the first half of 2012.

ADVERTISING
Advertising investments in the first five months of the year were down by 17.2% compared with 2012, confirming the difficulties seen in recent years. There was a slight improvement, compared with previous months, for newspapers and radio, the exceptions were magazines and internet.

Mondadori Pubblicità ended the first half of 2013 with total sales of €76.8 million, a fall of 20% compared with the €96 million of the same period of 2012.

Mondadori magazines saw a like-for-like fall of 21.9%, with a performance that was significantly better than the market (cumulative to June Fcp: -26.1%), also as a result of the simultaneous relaunch of the three main women’s weeklies, Grazia, Donna Moderna and TuStyle, and initiatives on cooking and interiors titles. If we exclude the titles no longer in the portfolio, the figure is -29,3%.

Regarding advertising sales for radio, the first half of 2013 ended with an increase of 17.6%, mainly thanks to the acquisition of the concession, from 15 April, for Radio Italia Solo Musica Italiana. This operation substantially modified the positioning of Mondadori Pubblicità in the radio market: with a daily average of 7.5 million listeners net of duplications (source: Eurisko Radiomonitor 2012) and placing the company among the top three operators in the sector, with a leadership position in the female target that permits significant synergies with the print portfolio and the web.

In the Internet segment Mediamond outperformed a market in a continuing slowdown with +19,9% compared with 2012. Of special note were the results for Grazia.it (+42%) and Videomediaset (+40%).

MAGAZINES FRANCE

Also during the second quarter of the year, the market of reference for Mondadori France saw a slowdown in both circulation and advertising sales.

Consolidated revenues in the period came to €176.9 million, a fall of 8.6% on the €193,6 million of the first half of 2012; on a like-for-like basis, a fall of 7.5% (Télé Star, Télé Poche and Autoplus benefited from an extra issue in 2012).

The downturn in the period is mainly the result of

  • a lower number of weekly issues in the auto and TV segments;
  • increased and significant investments for the development of digital products;
  • a reduction in magazine circulation due to a strike by Presstalis, the main distributor;
  • comparison with a first half in 2012 when the advertising trend was still positive, with a marked slowdown in the second half (-4.9% at year end 2012; source: Kantar Media).

Advertising sales: the market trend was in line with the first quarter, with a shortfall in terms of volume of 6.8% (source: Kantar Media, May). In this context, Mondadori France, which remains the second operator, saw a fall of 3.1% in terms of volume, outperforming the market, which resulted in a rise of its market share to 10.8%.

Revenues were down by 11.9% (-10.4% like-for-like) due to difficulties in the food, auto and clothing segments.

During the period circulation revenues, which account for 72% of the total (including add-on sales), were down by 8.2%; on a like-for-like basis the figure is 6.8%.

In particular:

  • newsstand sales were down by 5.8%, in a market that lost 6.4% (January/May; internal source);
  • subscription revenues were down by 5.7% compared with the same period of last year and by 2.3% excluding non-recurring items, such as the loss of the subscriber base of Pleine Vie, following contractual changes adopted by an important insurance operator.

The strategy of brand extensions continues with good results for the launch of two new products: Closer Teen (a magazine for teens) and Vital by Top Santè (a fitness and wellbeing title).

Mondadori has also developed its first “web to print” experience, publishing a print version of the cooking site 750g.com (which had 4 million unique visitors in 2012; source: Nielsen).

The focus on editorial quality remains a priority: in the first half the redesign of Modes & Travaux, Sport-Auto, Science&Vie Junior, Grand Gibier and Auto-Journal was completed while in the second half of the year it will be the turn of AutoPlus, Grazia, and Biba. Also planned in the second half of the year is the launch of two new games titles in collaboration with France Television (Slam Magazine and Fort Boyard) and a new cooking title (MasterChef, in collaboration with the famous television format, which will be broadcast in France from September).

In the first half Mondadori France continued to invest in the development of digital activities, the audience of the sites, reached 5 million unique users (source: Nielsen), an increase of 21.5% compared with 2012. Also revenues were up 19% over the previous year.

The main actions in the first six months involved the development of new sites Autoplus.fr, Closermag.fr, Science-et-vie.com, putting online 25 years of archive material, TopSante.com Diapason.com; as well as iPad and iPhone applications for Tele-Star, Auto-Journal for iPad, and a new iPad version of Grazia and Sports-Auto.

The digital newsstand platform has been completely revamped for online subscriptions (kiosquemag.com), offering bundled print and digital subscriptions, but also only digital subscriptions, with the significant target of doubling the platform’s volume business in the next two years.

NaturaBuy.fr, the classifieds site for hunting and leisure, continued to grow, increasing the number of transactions by 18% compared with the same period of 2012.

DIRECT

In the first half of 2013 Direct revenues amounted to €110.4 million, a fall of 2.4% on the €113.1 million in the first six months of last year.

The decline significantly affected the book club activity and mail order sales in general, as well as the online sales of the dedicated web site; meanwhile sales from the network of shops were stable.

During the period, the rationalisation of sales outlets continued with the closure of 28 outlets, alongside the development of private label products and services focused on the new inMondadori brand.

In order to counteract the negative trend in the first half greater emphasis was also given to the customer loyalty campaign through the use of the Mondadori Card In terms of product, development continued of the Box for You gift boxes line and the Emporio Mondadori brand.

The distribution of the e-reader Kobo in its different versions, a cutting-edge device for the use of cultural content in digital format, has been a source of great satisfaction.

In a competitive environment characterised by a progressive reduction in advertising spending and consolidation of forms of digital-based communication, Cemit Interactive Media generated first half 2013 revenues in line with 2012.

This is even more significant when compared with a market that, in the period January-May, fell by 23.5% (source: Nielsen).

RADIO
Advertising revenues for radio, like the advertising market as a whole, saw a marked downturn of 14.6%, after the first 5 months of the year.

In this difficult context, the revenues generated from advertising on R101, which was affected in particular by a decline in major market sectors, especially the auto segment, for the first half of 2013 came to €6.8 million, a fall of 10.5% on the €7.6 million of the first half of 2012.

From an editorial perspective, R101 continued actions aimed at enhancing the formats, with the introduction of new programmes, and promotional activities with the organisation and sponsorship of events around the country.

In the first half a number of digital activities were developed that enabled the R101.it site to double the number of visitors (source: Google Analytics), raising the number of page views to 3.5 million and average monthly unique users to over 200,000, with positive trends also on social networks.

§

APPROVAL FOR THE PLAN TO MERGE BY INCORPORATION THE WHOLLY-OWNED SUBSIDIARY MONDADORI INTERNATIONAL S.P.A.
The Board of Directors approved the merger by incorporation of the wholly-owned subsidiary Mondadori International S.p.A., in accordance with the merger plan presented, as announced on 27 June, to the Italian Stock Exchange and at www.gruppomondadori.it (Governance section).

Completion of the merger is expected by the end of this year after the deadline for the opposition of creditors as foreseen by Article 2503 of the Civil Code.

§

EXPECTATIONS FOR THE FULL YEAR

In the first half all the activities of the Group have suffered the effects of the ongoing recession, which is not expected to improve during the year.

The actions carried out by the Group in support of the quality of magazine brands, the publishing programme for books and a range of activities aimed at cost containment are expected to show more positive effects in the second half of the year, and therefore the company also expects to post a gross operating profit in line with, or even greater that, that of the second half of 2012.

For the full year 2013, gross operating profit will in any case be less than the previous year, also on account of positive non-recurring items, present in 2012, and higher restructuring charges in the current year.

§

The documentation relating to the analysts’ presentation of the results for the first half of the year to 30 June 2013, is available in the Investor Relations section of the company’s website

§

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

Board of Directors approves interim report on the first half of 2012

  • Consolidated revenues of  €676.2 million: -8.5% compared with the €738.7 million at 30 June 2011
  • Gross operating profit of €36 million: -39% compared with the €59 million at 30 June 2011
  • Consolidated net profit of €7.5 million: -67% on the €22.7 million at 30 June 2011
  • Net financial position of -€370 million</b><b> compared with €335.4 million at the end of 2011

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

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

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

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

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

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

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

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

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

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

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

RESULTS OF THE BUSINESS AREAS

  • BOOKS

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

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

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

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

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

  • MAGAZINES ITALY

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

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

In particular, revenue trends were as follows:

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

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

  • ADVERTISING

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

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

  • MAGAZINES FRANCE

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

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

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

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

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

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

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

  • DIGITAL

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

  • DIRECT

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

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

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

  • RADIO

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

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

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

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

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

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

§

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

§

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