2013

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.

The board of directors of the subsidiary Glaming S.r.l. has resolved to begin proceedings for the surrender of its public gaming licence, following the ruling issued today by the Italian Customs and Monopolies Agency (Agenzia delle Dogane e dei Monopoli or ADM), authorising the suspension of the company’s right to gaming revenues as of 22 July 2013.

The implementation of the procedure will involve the gradual suspension of Glaming’s activities and is aimed at the definitive closure of the business once all of its outstanding obligations to the public administration, clients and suppliers have been met.

The decision is consistent with the aim, as previously communicated by the parent company Mondadori, to focus on the group’s core business and to recover profitability in the business areas with the most added value.

Arnoldo Mondadori Editore today announced that, pursuant to art. 70 paragraph 7 of Consob Regulation no. 11971/1999, it has made available at the Company’s registered office, at Borsa Italiana S.p.A. (www.borsaitaliana.it) and on the corporate website www.gruppomondadori.it (in the Governance section) details of the merger by incorporation by Arnoldo Mondadori Editore S.p.A. of the wholly-owned subsidiary Mondadori International S.p.A., together with an illustrative report and other documentation required by art. 2501-septies n. 3) of the Civil Code.

Pursuant to art. 2505, paragraph 2 of the Civil Code, resolutions concerning the merger by the acquiring company Arnoldo Mondadori Editore S.p.A. will be adopted by the Board of Directors when the terms of the law have expired.

Arnoldo Mondadori Editore SpA today announced that Stefano De Alessandri has indicated his intention to leave the group and the positions he currently holds in the subsidiaries Monradio and Mondadori International Business from 15 July, to take up new professional challenges.

A proposal will consequently be made to the boards of directors of Monradio Srl, the company that manages the radio station R101, and Mondadori International Business Srl, which operates in the area of magazine licensing for the appointment as chairman and chief executive of Carlo Mandelli, who will also remain General Manager of Magazines Italy.

Mondadori wishes to thank De Alessandri for his active collaboration, professionalism and rigour in the exercise of his roles with the company.

Federico Angrisano was today appointed the Mondadori Group’s Director of Communications and Media Relations, reporting directly to the chief executive, Ernesto Mauri.

The function aims to define, manage and coordinate all corporate communication activities and the promotion of the Group’s image, operating in the following areas: media relations, social media and digital communication, corporate image and institutional initiatives, sustainability and internal communications.

Angrisano, 45, was born in Cernusco sul Naviglio (MI) and has a degree in political science from the University of Milan. He began his career in communications in the early 1990s. In 1997 he joined the Communication Department of McDonald’s Italia, where he held positions of increasing responsibility before moving, in 2000, to Pirelli’s External Relations Department where he initially worked in the Group’s product press office before moving to the corporate function.

He joined Mondadori at the end of 2002 as head of press relations. In 2005, he was appointed head of institutional communications, within the department of External Relations and Communications.

The Board of Directors of Arnoldo Mondadori S.p.A. met today, under the chairmanship of Marina Berlusconi, to examine and approve the interim report for the first three months of the year to 31st March 2013, as presented by the chief executive, Ernesto Mauri.

THE MARKET SCENARIO
As in previous months, the first quarter of 2013 was characterised by a difficult and uncertain global economic situation. In Italy the prolonged recession continued, with all the main macroeconomic indicators of production, consumer spending and employment levels worsening.

Also in France, there has been a gradual deterioration of the economy, particularly in terms of GDP, which is expected to fall this year, and unemployment, which had already increased significantly in 2012.

The markets in which the Group operates were affected in the period by the current crisis, with marked declines in circulation and magazine advertising sales; also the book market in Italy saw a downturn ​​decrease, albeit to a lesser extent.

GROUP PERFORMANCE IN THE PERIOD TO 31st MARCH 2013
Consolidated revenues amounted to €292.7 million, a fall of 10.8% on the €328.1 million at 31st March 2012.

The consolidated gross operating loss amounted to €4.6 million (break even net of restructuring costs), compared with a gross operating profit of €15.2 million in the same period of the previous year, by also excluding the positive non-recurring items of 2012, the difference, on a like-for-like basis, would be -€5.2 million.

The consolidated operating loss amounted to €10.6 million, compared with an operating profit of €9.1 million in the first quarter of 2012, with amortizations and depreciations of tangible and intangible assets of €6 million (€6.1 million in 2012).

Consolidated pre-tax losses came to €15.6 million, compared with a pre-tax profit of €4.7 million in the same period of last year. During the quarter financial charges amounted to €5 million, compared with €4.4 million in 2012.

The company made a consolidated net loss in the period of €15.3 million, compared with a net profit of €2.6 million at 31st March 2012.

Gross cash flow in the first three months of 2013 amounted to –€9.3 million, compared with €8.7 million in the first quarter of 2012.

The Group’s net financial position went from -€267.6 million at the end of 2012 to -€310.6 million at 31st March 2013 (-€301.8 million at 31 March 2012).

Information regarding personnel
As of 31st March 2013, the personnel employed by companies of the Group (both on temporary and permanent contracts) amounted to 3,626, a fall of 3.7% (-138 positions) compared with the same period of last year. In the first quarter of 2013 alone, there was a reduction in the headcount of 77.

Similarly, during the first three months of 2013, personnel costs were reduced by 2.5% (-7.5% net of higher restructuring charges) to €71.2 million. The figure for 2012 has been adjusted to take account of the new measures introduced by IAS 19 that came into effect from 1st January 2013, and backdated. In particular, the principle foresees the booking of gains and losses regarding the calculation of severance indemnities in the “Comprehensive income statement”, rather than under “Personnel costs”.

The reduction in headcount and costs is due, essentially, to the effects of the restructuring processes underway, both in the Direct area and, above all, in the companies affected by the early retirement plan that began in October 2012: the parent company Arnoldo Mondadori Editore S.p.A., Mondadori Pubblicità S.p.A. and Press-Di Distribuzione Stampa and Multimedia S.r.l.

Across the Group, both in Italy and in France, the policy of reducing fixed costs through widespread efforts to improve organisational efficiency and specific actions for the simplification of hierarchical levels continues.

· BOOKS
In the first quarter of 2013, the trade books market declined both in terms of both copies (-3.1%) and value

(-4.1%) compared with the first quarter of 2012 (source: Nielsen).

In this context, the Mondadori Group confirmed its leadership with a market share of 25.7% in terms of value (source: Nielsen).

Total revenues generated by the Books Area came to €63.2 million, a fall of 1.6% compared with the first quarter of 2012.

Regarding the performance of the Group’s publishing houses, it should be noted that in the first quarter of 2013 a different editorial programme was developed for Edizioni Mondadori, with the publication in the second and fourth quarter of stronger tiles, including the highly anticipated new novel by Dan Brown, Inferno, published today across the world.

Einaudi ended the first quarter of 2013 with revenues up by 5.2% compared with the same period of last year, and a market share of 6% in bookstores.

At the end of the period Mondadori Electa recorded an increase in revenues of 24.5% compared with the first quarter of 2012: mainly thanks to the success of the exhibition Constantine 313 AD and the excellent performance bookshop revenues.

E-book revenues have doubled since last year, with an excellent performance by romantic fiction and the new book by John Grisham L’ex avvocato. Among the publishing activities was the launch of the series “Quanti” by Einaudi and the digitisation of the work of Gabriele D’Annunzio to mark the anniversary of his birth.

· MAGAZINES ITALY

The difficult macro-economic situation coupled with political uncertainty in the country continue to strongly affect the consumer magazine market, which is experiencing negative trends very similar to the last quarter of 2012. In February, the advertising market saw overall decline in value of 16.5%, with magazines suffering a 21.6% fall (source: Nielsen).

Compared with the first quarter of 2012, there was a distinct lack of homogeneity in the performance of the Mondadori Group’s Magazines Italy area, in particular, there was the closure of Economy, the transformation into a supplement of Flair and a different number of issues for Tv Sorrisi e canzoni, Telepiù and GuidaTV.

The overall decline in revenues in the Area was 14.9%, from €104.3 million in the first quarter of 2012 to €88.8 million this time.

– Circulation revenues were down compared with the previous year, albeit to a lesser degree: 14.1%

(-11% on a like-for-like basis). Among the titles in the portfolio, Chi – after a year-end and January 2013 downturn – improved its circulation in the months of February and March, to settle at a level ​​similar to the previous year.

Donna Moderna, Grazia and TuStyle, after changes, between December and early February, in their respective editors, were all re-launched at the same time last week, with the aim of reaffirming and consolidating Mondadori’s absolute leadership in women’s magazines.

Tv Sorrisi e canzoni remains Italy’s most popular weekly, with sales of 720,000 copies, despite a slight decline (-5%) compared with 2012.

Panorama saw a fall off, even due to the change underway in the circulation mix, but the basic version of the magazine has maintained a positive trend compared with the previous year.

– On the advertising side, the most affected by the current economic climate, revenues in the first quarter of the year saw a like-for-like fall of 22.1% (nominal -23.9%).

– With regard to add-on sales, Mondadori saw a fall of 11, 8%, with a performance that was better than the market which was in sharp decline (-19.1% in terms of value, internal source): the fall in revenues for Mondadori was the result of a precise decision to rationalise the initiatives to minimise the financial risks, with a strong increase in profitability.

– During the first quarter of 2013, the web sites of the Group’s main magazine titles performed very well with an increase in advertising revenue of 10.4%, a performance far superior to that of the market (+5%, source: Nielsen February), and traffic.

In particular, Donnamoderna.com, which grew strongly in March (source: Shinystat), with 11 million unique users remains at the top of women’s sites, Grazia.it, with 1 million uniques; Panorama.it, with 3.2 million unique users; and Panoramauto.it which also has 1 million unique users.

The negative trends in the magazine market, which began in 2009 and worsened in 2012, have led the company to implement a reorganisation plan for the rationalisation of the product portfolio and a review of editorial processes with the closure of 4 monthlies and the television programming unit, resulting in a total of 87 redundancies in the editorial departments of Mondadori.

To this plan should be added the project for the further rationalisation of costs, including industrial costs.

At the same time, work began on the re-launching and repositioning of some titles, including those dedicated to interiors and, after the end of the quarter, of the three most important women’s titles, with the aim of further strengthening Mondadori’s leadership.

International activities
The Group’s international activities, concentrated in the company Mondadori International Business, ended the first quarter of 2013 with an increase in revenues of 12.7% on the previous year.

Licensing: growth was driven by launch in the past 12 months in new editions in the Grazia International Network (South Africa, Poland, Spain and Korea), which contributed to an increase in revenues from royalties (+18.3%).

Advertising: in the first quarter of 2013 advertising sales on behalf of international partners was in line with the previous year thanks to the appeal of the network, which recorded a significantly better performance than the market of reference.

Investments:
– Mondadori Seec Advertising Co. Ltd, the exclusive advertising sales company for Grazia in China, recorded first quarter revenue growth of 17% over the same period of 2012;
– Mondadori Independent Media, publisher of Grazia in Russia, recorded first quarter revenue growth of 3% compared with 2012;
– Attica Publications, confirmed its leadership in Greece, despite the deepening crisis among its competitors. Despite a declining advertising market compared with 2012 (-15% in magazines, -30% in radio and TV), Attica generated results that were in line with the same period of 2012, due to the benefits from the restructuring plan put in place in 2011 (and continued in 2012), and diversification.

Total revenues generated by the Grazia International Network amounted to €27.9 million, an increase of 7.5% on the first quarter of 2012.

· ADVERTISING

Advertising expenditure in the first two months of the year was down by 16.5% compared with 2012, confirming the difficulties recorded in the previous 12 months.

Television continued the negative trend of 2012 (-16.1%), with the exception of a good performance by digital channels. In other media radio was in decline (-17.3%), despite a January almost in line with 2012, as was direct mail (-19%), while outdoor and Internet were up (+5%), even if there are now some signs of a slow down. For print media in general, the situation remains very negative and in line with the last quarter of 2012, an indication that the crisis that has hit Italy in particular shows no sign of loosening its grip. Newspapers were down by -26.1%, while magazines the decline was slightly lower (-21.6%), but with decidedly negative estimates for March and April.

The decline in advertising spending is continuing in all sectors that invest in magazines: there was a sharp drop in the fashion, interiors and auto sectors, while FMCGs, after two years of marked decline, seems to suffer less.

Mondadori Pubblicità ended the first quarter of 2013 with total revenues of €29.9 million, down 29.5% compared with the €42.4 million in the same period of 2012.

Due to the uncertain economic situation in the country, Mondadori weeklies have been affected by the downturn in revenues of its clients and a fall in advertising spending by the top spenders in the main sectors, with the exception of Tv sorrisi e canzoni and TuStyle; for Mondadori monthlies the decline was more modest, also because of the performance of magazines such as Flair, Icon and Interni, which suffered less than the market average, and the positive trend in the cooking system, also thanks to the good performance of the large-scale retail sector;

Radio advertising revenues were down by 25%, in particular R101 was down by -18.8%;

Internet advertising continued to grow (with Mediamond recording an increase of 38% compared with the first quarter of 2012), with excellent results for all the main Mondadori sites.

· MAGAZINES FRANCE

In an economic context that remains challenging, Mondadori France ended the first quarter of 2013 with consolidated revenues of €83 million. On a like-for-like basis, taking into account that the weeklies Télé Star, Télé Poche and Auto Plus benefited in the first quarter of 2012, from an extra issue compared with the first three months of 2013, revenues were down by 9.6%, rather than the nominal -12%.

Circulation revenues in the period, which account for about 72% of the total, were down by 8.1%, with the same number of issues (nominal -10.3%).

Newsstand sales, with the same number of issues, was down by 7.6%, in line with the market (-7.5%; internal source). Strikes at Presstalis, the main operator in distribution, also had an impact on sales.

The brand extension strategy hascontinued in 2013, with the entry into the portfolio of new products tested last year, including Faits Divers à la Une, Des Chiffres et des Lettres, Jeux Closer and Closer-C’est leur histoire. In addition, the Closer increased its spinoffs with the successful launch in February of Closer Teen, the first issue of which sold 58,000 copies.

Always having editorial quality as a priority, the formulas of Grazia, Modes & Travaux, Nous Deux and Sport Auto, have all been updated, and will be followed during the year by the redesign of Auto-Journal and Auto-Plus.

The monthly Science & Vie celebrated its centenary with a special issue enhanced by the re-publication of the first issue which appeared on 1st April 1913.

The last weeks of the first quarter also saw the launch of Nostalgie Jeux, a games magazine produced in collaboration with the radio station Nostalgie, and in the wellness area Vital. A new cooking magazine will be launches soon called 750g, in collaboration with the site www.750g.com.

Finally, the Syndicat des Editeurs de Presse Magazine (S.E.P.M.) awarded Biba for a distinguished “10 years of success.”

Advertising revenues, net of barters and with the same number of issues, were down by 10.3% (nominal -16.1%).

At the market level (source: Kantar Media in February) there was a 7.4% decline in volumes which for Mondadori in the same period was -5.8%.

In the first quarter, Mondadori France continued to invest in digital, where it is present with an aggregate audience of 5 million unique visitors (source: Nielsen). The volume of business rose by 20% in the first quarter, thanks, among other things, to the success of the sites Autoplus.fr, Closermag.fr and Science-et-vie.com, the launch of the new Télé Star and Auto-Journal apps for iPad, the new version of Grazia and Sport Auto for iPad.

Finally, with regard to the recent acquisitions, the site NaturaBuy.fr continued to grow with an increase in transactions of 24% compared with 2012.

· DIRECT

Total revenues generated by the Direct Area Direct in the first quarter of 2013 amounted to €55.8 million, down 4.5% from €58.4 million in the same period of 2012.

The critical economic situation, the continuing decline in consumer spending and the ongoing downturn in the book market (the Area’s main ​​activity) required continuous efforts to reduce costs, review the network and diversify the offer.

In particular, work was done to rationalise the network (now comprising 570 points of sale) with the closure of 12 stores. On a like-for-like basis the directly-controlled bookstore chain, however, saw an increase of revenues of 3%, while the multicentre stores and the chain of franchised outlets maintained an essentially stable performance compared with the previous year.

Work also continued on product diversification and the development of the inMondadori multi-channel strategy, aimed at integrating in a single online and off-line system, which will be completed during the year.

Cemit, the company that operates in direct marketing, in the first quarter of 2013 generated revenues that were in line with those of the previous year, despite operating in a market in marked and sustained decline.

· RADIO

The advertising market in Italy ended the first quarter with a sharp decline in all media (-16.5% in February, source: Nielsen) with the exception of the Internet (+5%), in particular Radio in February saw a fall of 17.3% (January -2.2% and February -27.7%).

In this context, advertising sales for R101, reflecting the heavy decline in the main sectors – Auto, Business (mostly Telecommunications and Finance) and FMCGs (which alone in the quarter account, for 85% of sales) – ended the period in line with the negative trend of the market, with revenues of €2.6 million (advertising revenues for radio, the website and other initiatives), a fall of 18.8% on the €3.2 million euro in the first quarter of 2012.

EXPECTATIONS FOR THE FULL YEAR

In the markets in which Mondadori operates the first quarter of the year confirmed a worsening trend and also at a general level there were no indications of recovery in the short term.

In this context, as already indicated in the presentation of the financial statements at 31st December 2012, the company will pursue a series of activities aimed at recovering profitability in the businesses suffering most, also with a significant process of structural reorganisation and cost reduction, with the investment of important financial and economic resources.

For these reasons the level of profitability of the Group for the year 2013 is expected to be lower than last year.

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EXTENSION OF THE COST REDUCTION AND REORGANISATION PLAN
Starting in May, Mondadori will accelerate on the organisational review and cost reduction plan in order to achieve a level of profitability compatible with the new size of the markets of reference and to consolidate the company’s leadership in its competitive sector.

The aim of the project, which will be coordinated by a Steering Committee under the direct guidance of the chief executive Ernesto Mauri, is to improve the functioning of the organisational structures to increase the effectiveness of business operations and expand the target of savings to €100 million by 2015.

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The board of directors also approved the 2012 Sustainability Report, in compliance with the GRI guidelines, with the application level B+.

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

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The report for the first quarter of 2013, approved by the board of directors, will be available at the company’s registered office, Borsa Italiana SpA and on the web site www.gruppomondadori.it (Investor relations section) from today, as will the documentation for the presentation of the first quarter results.

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The minutes of the Ordinary and Extraordinary Shareholders’ Meeting of 23 April 2013 are available today at the company’s registered office, Borsa Italian SpA and www.gruppomondadori.it (in the Governance section).

The Annual General Meeting of the Shareholders of Arnoldo Mondadori Editore S.p.A., which met today under the Chairmanship of Marina Berlusconi, approved the company’s Annual Report for the year ended 31 December 2012 and deliberated, in line with a proposal resolved by the board of directors, to make up the entire net loss for the period, amounting to €39,574,943.13 by drawing the corresponding sum from the “Share premium reserve”.

CONFIRMATION OF CO-OPTED DIRECTORS
The shareholders confirmed the appointment, for the period up to the end of the mandate of the current board (the approval of the financial statements for the year ending 31 December 2014) as directors of Ernesto Mauri and Danilo Pellegrino, previously co-opted by the board on 20 March and 28 February 2013, respectively.

Following the Shareholders’ Meeting, the board of directors met and confirmed the appointment of Ernesto Mauri as chief executive.

RENEWAL OF AUTHORISATION FOR THE BUY-BACK AND UTILISATION OF COMPANY SHARES
Following the expiry of the term fixed for the authorisation issued at the Annual General Meeting of 19 April 2012, the shareholders renewed authorisation to effect share buy-backs, up to a limit of 10% of the share capital. The shareholders also authorised, as per Art. 2357 of the Civil Code, the use of shares involved in such buy back operations or already in the company’s portfolio

It should be noted that, with regard to the previous authorisation, the company bought from the market a total of 1,398,291 shares, corresponding to 0.56% of the share capital.

By taking account of the shares previously in the portfolio, the total number of shares comprising treasury stock is now 14,953,500 (6.067% of the share capital), of which 10,436,014 are held directly in the Arnoldo Mondadori Editore S.p.A. portfolio and 4,517,486 are held by the subsidiary Mondadori International S.p.A..

In line with the provisions of art. 144 bis of Consob regulation 11971/1999, what follows is an outline of the buy-back programme authorised by the Shareholders:

1. Underlying motivation
– to use company shares, either bought or in the portfolio, for the exercise of rights, including conversion rights, deriving from financial instruments issued by the company, its subsidiaries or third parties;
– to use company shares, either bought or in the portfolio, as part or whole payment in any eventual acquisitions or equity investments that fall within the company’s stated investment policy;
– to take advantage, where and when considered strategic for the company, of investment opportunities, also in relation to available liquidity;
– to use company shares for the exercise of options for the purchase of shares assigned to participants in the stock option plans put in place by the shareholders.

2. Cap on the number of shares that may be bought
The authorisation refers to a limit of 10% of the share capital, or 24,645,834 shares. Given, as indicated above, that the company currently holds, directly or indirectly, a total of 14,953,500 shares, the new authorisation consequently foresees the possible acquisition of an additional 9,692,334 ordinary shares, or 3.933% of the share capital.

3. Method of acquisition and price range
Buy backs would be effected on regulated markets as per art. 132 of Legislative Decree n. 58 of 24 February 1998 and art. 144 bis, para. 1,B of Consob Regulation 11971/99 according to operating procedures established by the regulations for the organisation and management of the markets themselves, which, does not permit the direct combination of offers to buy with predetermined offers to sell.

The corresponding minimum and maximum price of sale will therefore be determined at the same conditions that applied to previous authorisations agreed by the Shareholders, i.e. at a unit price not less than the official market price on the day prior to any operation, less 20%, and not more than the official market price on the day prior to any operation, plus 10%.

In terms of price and daily volumes, acquisition operations will in any case be conducted in line with the norms foreseen by the EU regulation 2273/2005, in particular:
– the company will not buy shares at a price greater that the highest price of the last independent operation and the price of the highest current independent offer on the regulated market where the acquisition is made.
– in terms of daily volumes, the company will not purchase a quantity greater than 25% of the average daily volume of Mondadori shares traded on the regulated market and calculated on the basis of the average daily volume of trading of Mondadori shares in the 20 trading days prior to the dates of purchase.

Any operations that are effected will be communicated to the market as per the terms of art. 87 bis of Consob Regulation 11971/1999.

4. Duration
The authorisation for the buy-back and utilisation of own shares will remain valid until the AGM for the approval of the Annual Report for the year to 31 December 2013, and in any case, for a period of not more than 18 months from the date of the Shareholders’ resolution.

The Shareholders also passed resolutions on the following items on the agenda:

REMUNERATION REPORT
The Shareholders approved the policy outlined in the first section of the Remuneration Report, for fiscal 2013, regarding the compensation of directors and executives with strategic responsibilities.

MODIFICATIONS TO THE ARTICLES OF ASSOCIATION
In an extraordinary session, the Shareholders examined and approved changes to the Articles of Association regarding, in particular, new rules on nominations to the board of directors and the board of statutory auditors complaint with Law N. 120/2011 concerning gender equality in the corporate boards and control bodies of listed companies.

For Arnoldo Mondadori Editore S.p.A., Law N. 120/2011 will be applied for the first time from the renewal of the corporate boards following the approval of the company’s financial statements for the year ending 31 December 2014.

It should, however, be noted that the current board of directors already foresees that one fifth of the board is made up of the “less represented gender”, in line with the provisions of the law in its initial application.

Other modifications to the Articles of Association concerned the simple adoption of EU Directive 2007/36/CE (regarding “Shareholders’ Rights”) as introduced by Legislative Decree N. 91 of 18 June 2012.

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Professional profiles of the directors Ernesto Mauri and Danilo Pellegrino are available of the web site www.gruppomondadori.it, in the Governance Section.

From today, and reporting directly to the chief executive, Ernesto Mauri, the Mondadori Group will have an area for Digital Innovation, headed by Federico Rampolla, who will have the role of strategic adviser.

Rampolla, 47, has extensive experience and has worked with Matrix, FullSix, GroupM/Wpp and Accenture Interactive, as well as being the chairman of Iab (Interactive advertising bureau) Italia.

At Mondadori he will work on expanding the company’s presence in digital markets, structuring innovation processes and identifying new opportunities for business development.

The new Area will work alongside the digital activities linked to the magazine, book and retail businesses, which are integrated in their corresponding divisions within the company, confirming that the digital strategy involves both the development of new initiatives and the transformation of the Group’s existing strategic products and assets.

Arnoldo Mondadori Editore S.p.A. has announced that the annual financial report, comprising the draft financial statements and consolidated financial statements for the year ending 31 December 2012, the Directors’ Report and the statements pursuant to Article 154-bis paragraph 5 of Legislative Decree n.58/1998, together with the reports of external auditors and statutory auditors are available from today at the headquarters of the company, at Borsa Italiana S.p.A. and on the web site www.mondadorigroup.com (in the “Governance” section).

Likewise, the company has also published the report on corporate governance and the ownership structure, with reference to 2012, and the Report on Remuneration pursuant to Art. 123-ter of Legislative Decree n.58/1998.

Arnoldo Mondadori Editore S.p.A. has announced that Directors’ reports on the following items on the agenda of the Ordinary and Extraordinary Shareholders’ Meeting, to be held on 23 April 2013 (24 April, on second call) are available at the Company’s registered office, as well as Borsa Italiana S.p.A. and on www.mondadorigroup.com (Governance section):

• Proposals for the confirmation of co-opted directors, pursuant to art. 2386 of the Civil Code and resulting resolutions;
• Authorisation for the purchase and sale of own shares, pursuant to the combined provisions of Articles 2357 and 2357-ter of the Civil Code;
• Amendment to the Articles of Association 6-9-11-12-16-17-27-29, also in relation to amendments, as per Legislative Decree no. 91 of 18 June 2012, of the rules for the implementation of Directive 2007/36/EC regarding the exercise of certain rights of the shareholders of listed companies and the provisions of Law no. 120/2011 on equality of access to the administrative and control bodies of listed companies; resulting resolutions and mandates.

Further documentation concerning the AGM will be made available in the manner described above, within the period foreseen by current legislation.

The notice calling the AGM, along with the agenda, has been published today in the newspaper specified in the notice and on www.mondadorigroup.com (Governance section).