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Today, the meeting of the Board of Directors of Arnoldo Mondadori Editore S.p.A., chaired by Marina Berlusconi, reviewed and approved the Interim Management Statement at 30 September 2023 presented by Chief Executive Officer Antonio Porro.

“The Mondadori Group has recorded excellent results and a sharp increase in profitability in the first nine months of 2023, attributable to the pursuit of a meticulous management of operations, the contribution of recent acquisitions and the synergy arising from their integration, which allowed for an improvement in the performance of all business areas and a capital strengthening of the Group. We can therefore confirm what was announced on 29 June in terms of expected results for the ongoing year, namely an economic and financial improvement”, said Antonio Porro, CEO of the Mondadori Group.

Performance at 30 September 2023

Consolidated revenue for the first nine months of 2023 amounted to € 679.9 million versus € 678.2 million in the first nine months of 2022, growing by 0.3%. Like-for-like, organic revenue growth came to 1.1%.

Adjusted EBITDA for the first nine months of 2023 was € 129.3 million, an increase of around € 14 million on the € 115.5 million recorded for the same period in 2022.

Netting the results for the respective periods in question of the reliefs and contributions respectively paid, the growth recorded by Group’s EBITDA would exceed € 17 million.

All business areas contributed to the result, especially the Trade BOOKS Area, due in particular to the effect of the consolidation of the results of the recently acquired companies, the Education BOOKS Area and the RETAIL Area.

Group EBITDA for the first nine months of the current year amounted to € 131.5 million, compared to € 114.5 million at 30 September 2022, an improvement of approximately € 17 million attributable to the operating dynamics and the recognition in the current year, in the MEDIA Area, of the net capital gain resulting from the sale of the titles Grazia and Icon (and the related international network).

Thanks to the positive performance of all business areas, the Mondadori Group’s EBIT for the first nine months of 2023, positive for € 90.5 million, showed an improvement of € 12.5 million compared to 2022. The result was achieved despite the booking of approximately € 4 million in higher depreciation/amortisation resulting from the greater investments made in the last 12 months, the consolidation of new companies (€ +1.0 million) and the accounting effects of the PPA (Purchase Price Allocation) process (€ +1.2 million compared to the first nine months of 2022).

Neutralising extraordinary items and the impact of the PPA process related to the companies acquired in the last 24 months, Adjusted EBIT would amount to € 92.1 million, up by more than € 10 million (+12.9%) compared to the same period of the previous year.

Financial expense grew by over € 3 million, of which around € 2 million as a result of the higher cost of debt.

The consolidated result before tax was positive at € 87.1 million, an improvement of about € 11 million compared to € 75.8 million in the first nine months of 2022. The over € 2 million improvement in the profits of associates, in addition to the information already noted, contributed to this performance, particularly as a result of the update in the fair value measurement of the investment in the company A.L.I. and the recognition of a capital gain of € 0.4 million from the sale of the residual investment in SEE, the publishing company of Il Giornale.

The Group’s net profit at 30 September 2023, after minority interests, was positive for € 66.3 million and showed a significant improvement of € 8 million (around 14%) versus € 58.3 million recorded in first nine months of 2022.

Tax costs in the period totalled € 20.5 million versus € 17.6 million at 30 September 2022 due to the higher pre-tax result.

The Group’s capital structure grew stronger still: the Net Financial Position excluding IFRS 16 at 30 September 2023 amounted to € -152.3 million (net debt), an improvement of over € 20 million versus € -173.4 million at 30 September 2022, as a result of the relevant cash generation of the business and despite the cash-out relating to acquisitions made during the last 12 months and the distribution of dividends in May 2023 for around € 29 million.

The IFRS 16 Net Financial Position came to € -223.9 million, from € -235.7 million recorded at 30 September 2022, including an IFRS 16 component of € -71.6 million.

At 30 September 2023, cash flow from ordinary operations in the last 12 months came to € 64.6 million, while cash flow from extraordinary operations was negative for € 13.2 million.

Consequently, LTM Free Cash Flow at 30 September 2023 was positive for € 51.4 million, confirming the Group’s capacity to finance its growth policy by external lines.

Performance of Business Areas

Trade Books Area

Following the consolidation phase of 2022, 2023 showed further growth in the book market for 2.3% (in terms of value) and a substantial stability in terms of volume compared to 2022. The third quarter in particular showed a 1.6% increase in terms of value (source: GFK, September 2023).

In this context, the Mondadori Group’s publishers recorded growth of 2.2% in the first nine months, which is in line with the reference market, despite the third quarter of 2022 having benefited from a strong publishing plan. Thanks to this performance, Mondadori has consolidated its national leadership position, with a market share which, in September 2023, remained stable at 27.3%.

Revenue in the first nine months of 2023 in the Trade BOOKS Area stood at € 268 million, increasing by 14% compared to the same period in 2022.

Adjusted EBITDA in the first nine months of 2023 amounted to € 41 million: net of reliefs relating to Electa’s museum activities (€ 6.4 million), which had benefited in 2022, the area recorded growth of 23% (€ 7.6 million), largely attributable to the contribution of the newly acquired companies in the current year.

The profitability at 30 September 2023 achieved by the Trade BOOKS Area was approximately 15%, showing improvement on the same period in 2022, excluding the contribution of the reliefs (14%).

Education Books Area

The Mondadori Group’s publishing houses in the context of school textbooks achieved a market share (adoption) of 32%, substantially stable compared to the figure reported in the previous year, with growth in the secondary school segment (upper and lower secondary schools) and a decrease in primary, characterised by higher volatility and lower profitability.

In the first nine months of 2023, the school textbooks business reported overall revenue of € 215.5 million (€ 213.7 million in the corresponding period of 2022), increasing by 0.8% despite a partial delay in the distribution activities.

In particular, an analysis of the trend by school level shows how revenue from first- and second-level secondary school – accounting for 80% of the area’s revenue – has grown by around 3%, with a trend offset by the decrease recorded by primary school (-7.9% compared to the same period in 2022), in line with the adoption trend reported. As expected, the sales of third-party publishers distributed by Rizzoli Education fell by 7%.

Adjusted EBITDA of the Education BOOKS Area in the first nine months of the year stood at € 73.9 million, a clear improvement compared to € 68.1 million in the corresponding period of financial year 2022 (+8.5%), mainly due to a different and more favourable mix of revenue and a lower percentage of product cost and promotional costs.

Retail Area

As already mentioned, the book market in Italy in the first nine months reported a 2.3% growth compared to the same period in 2022; in this context, the physical channel grew by +4.8% while the online channel declined (estimated at -1.6%), even if gradually recovering in the third quarter of 2023 compared to the figure from the corresponding period of 2022.

In the first nine months of 2023, Mondadori Retail recorded a 5.7% increase in book sell-out in stores; thanks to this overperformance, driven by excellent performance reported by physical stores, Mondadori Retail’s market share stood at 13% of the total market, +0.4% on 30 September 2022, and almost came to 20% of the physical market.

In the first nine months of the year, the RETAIL Area reported revenue of € 133.4 million, up by € 7.4 million (+5.9%) versus the same period of the prior year. The ongoing development and renovation of existing stores and the focus on the core business of books have enabled the Mondadori Store network to consolidate its role in the market, as demonstrated by the solid growth in revenue from the book product.

An analysis of sales by channel shows a further increase in revenue from directly-managed bookstores (+12.8% compared to the same period in the previous year) and franchisee bookstores (+4.0% compared to 30 September 2022) and, at the same time, a decline in the Online and Bookclub channels.

As far as the product categories are concerned:

• the book area was the main component of revenue (more than 80% of the total), up comprehensively by +6.6% compared to 2022, driven by the excellent performance of physical stores;
• Extra-Book sales were on a positive trend (+14.7% versus the first nine months of 2022) confirming the excellent signs arising in the last year, due to the growth in the stationery, games, gifts and music.

The RETAIL Area had a positive Adjusted EBITDA of € 8.3 million, a value that has doubled compared to the figure for the first nine months of 2022 (€ +4.2 million).

Media Area

In the first nine months of 2023, the MEDIA Area recorded revenue of € 101.5 million, a reduction of approximately 25% on the same period of the previous year. On a like-for-like basis (thus excluding the effect of the deconsolidation of the titles sold at the beginning of 2023 and of Press-di’s distribution activities), this reduction is smaller by around 6% thanks to the performance of near stability achieved in the third quarter of the year and shows different trends in the two digital and print components.

The Digital Area, which accounts for over 37% of the area’s overall revenue, showed an increase in advertising revenue of around 20%, deriving in particular from the positive performance of MarTech; the Print Area fell by around 16%, mainly due to the significant drop in add-on sales in the period.

In the first nine months of 2023, the Mondadori Group retained its position as Italy’s top multimedia publisher: in print with 13 titles and 9 million readers; on the web with 12 brands and approximately 27.7 million average unique users per month; on social media with 100 profiles and a fanbase of around 100 million.

In the magazine segment, the Group’s market share (in terms of circulation) stood at 20.3%, up slightly – with a like-for-like portfolio of titles – versus the figure in the same period of 2022 (19.8%), due to improved performance on that of the reference market.

Adjusted EBITDA in the MEDIA Area amounted to € 10.3 million, up by around 10% compared to the first nine months of 2022, mainly attributable to the traditional activities – which benefited from a contribution to offset the costs incurred by the publisher for the distribution of periodicals (€ 2.8 million) – which more than offset the decrease in the margin on sales of collateral items; in the Digital Area, Adjusted EBITDA is essentially stable on the same period in 2022 thanks to higher advertising revenue, despite the higher costs incurred for launching new initiatives tied to the influencer marketing segment and the deconsolidation of the result related to the digital activities of the titles sold.

Performance in Third Quarter 2023

Consolidated revenue for the third quarter of 2023 amounted to € 317.6 million (versus € 323.1 million the prior year), showing a slight decline compared with the same period of 2022 (-1.7%). Like-for-like, organic revenue performance recorded -1.2%.

Adjusted EBITDA for the third quarter of 2023 was € 91.1 million, an increase of almost € 3 million on the € 87.9 million recorded for the third quarter of 2022.

In the third quarter of 2023, EBIT closed with a positive € 76.5 million, showing an improvement of € 1.8 million.

Neutralising extraordinary items and the impact of the PPA process, Adjusted EBIT would stand at € 77.8 million, up by around € 2 million from € 75.9 million in the third quarter of 2022.

Outlook for the year

The forecasts previously communicated to the market on 29 June 2023 are confirmed, and reported in full below.

Income Statement

• single-digit revenue growth;
• high single-digit/low double-digit growth in Adjusted EBITDA, with margins expected to range between 16% and 17%;
• approximately 20% growth in net profit.

Cash Flow and Net Financial Position

• ordinary cash flow is expected to range between € 65 and 70 million, showing an increase of up to 15% compared to the figure from 2022;
• the Group’s net financial debt (IFRS 16) is confirmed to come in, at end FY 2023, as 1.0x adjusted EBITDA, down from 1.3x at end 2022.

The presentation of the results at 30 September 2023, approved today by the Board of Directors, is available on 1Info (www.1info.it), on www.borsaitaliana.it and on www.gruppomondadori.it (Investors section). A Q&A session will be held in conference call mode at 4.00 pm for the financial community, attended by the CEO of the Mondadori Group, Antonio Porro, and the CFO, Alessandro Franzosi. Journalists will be able to follow the meeting in listening mode only, by connecting to the following phone number +39.02.8020927 or via web at: 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 Statements of Financial Position
2. Consolidated Income Statement
3. Consolidated income statement – III quarter
4. Group cash flow
5. Glossary of terms and alternative performance measures used

Segrate, 10 November 2022 – Today, the meeting of the Board of Directors of Arnoldo Mondadori Editore S.p.A., chaired by Marina Berlusconi, reviewed and approved the Interim Management Statement at 30 September 2022 presented by CEO Antonio Porro.

HIGHLIGHTS

The current year has seen the Mondadori Group firmly pursue the strategic path of reshaping its business portfolio, on the one hand, by developing and strengthening its presence in book publishing and, on the other, by tapering its exposure to the magazines segment, with a focus on brands with greater multimedia potential.

“The results of these first nine months clearly show the positive impacts from our repositioning plan: the operating-financial metrics grow strongly, with a sharp improvement in revenue and margins across all business areas on a like-for-like basis”, said Antonio Porro, CEO of the Mondadori Group. “These elements, plus the positive performance of the books market, allow us, despite the higher costs of the main inputs, to further increase our estimates on the trend of revenue and margins at end 2022”, concluded Porro.

PERFORMANCE AT 30 SEPTEMBER 2022

Consolidated revenue in first nine months 2022 amounted to € 678.2 million, up by 15.2% versus € 588.9 million in the prior year.

Net of the consolidation of D Scuola, effective 1 January 2022, Group revenue grew by 3.8%, thanks to the performance of the Books and Retail areas and despite the additional asset disposals involving the Media area: net of the effects from the changed consolidation scope, Group revenue on a like-for-like basis in the first nine months of the current year would have grown by 5.8%.

Adjusted EBITDA came to a positive € 115.5 million; excluding the result of D Scuola in the period, adjusted EBITDA closes with a positive € 94.1 million.

As a result, the Group showed an overall improvement in profitability in excess of € 30 million versus € 85 million in 2021, growing by 35.8%, one third of which attributable to the positive performance across all business areas, Books and Retail in particular, and approximately two thirds from the contribution of D Scuola (€ 21.4 million).

Group EBITDA came to € 114.5 million (€ 93 million net of D Scuola), recording an even stronger improvement of € 34 million (+42.2% versus € 80.5 million at 30.09.2021), as a result of the abovementioned phenomena and dynamics and of the positive trend of non-ordinary items in the period.

EBIT closed at a positive € 78 million versus € 52 million at 30.09.2021, improving by € 26 million, or up by 50%, partly dampened by the effects of the Purchase Price Allocation process related to the acquisition of D Scuola.

Net of the amortization/depreciation resulting from this process, consolidated EBIT of the new scope would grow by approximately € 29 million (+55% versus 30.09.2021).

Excluding the contribution of D Scuola, the improvement would amount to € 11.3 million, attributable to the abovementioned operational dynamics.

Consolidated profit before tax came to € 75.8 million (€ 61.2 million excluding the contribution of D Scuola), increasing by almost 70% versus € 44.8 million in the same period of 2021. This growth benefits also from the improvement in the result of the associates, amounting to € 3.5 million, arising from the disposal of the investment in Monradio, from profit for the period of Attica, and from the accounting of the share of the result of A.L.I..

Total financial expense for the period, amounting to €2.8 million, improved by € 1.1 million, despite the higher average debt and the increase in ancillary expense from the outstanding pool loan, due to the accounting for IFRS 16 purposes of a non-recurring income of approximately € 1.5 million resulting from the early termination and renegotiation, as of July 2022, of the lease contract for the Segrate HQ.

Group net profit, after minority interests, amounted to € 58.3 million (€ 47.9 million excluding the net profit of D Scuola), up by 18% versus € 49.4 million in first nine months 2021, which had benefited however from a non-recurring income of € 18.7 million from the realignment of the tax amounts of trademarks and goodwill to their respective statutory amounts.

Neutralizing the one-off tax income of 2021, net profit in first nine months 2022 would be up by approximately 90% versus the prior year.

The net financial position before IFRS 16 stood at € -173.4 million and includes, in addition to the effects of the acquisition and consolidation of D Scuola, the debt arising from the acquisitions of A.L.I. and Star Comics, as well as the return to dividend distribution.

Including the IFRS 16 impact of € 62.3 million – down from 30.09.2021 due mainly to the renegotiation of the lease contract for the Segrate HQ – the NFP stood at € -235.7 million.

The LTM cash flow from ordinary operations (after cash out for financial expense and tax), amounting to € 71.4 million, allows the Group to continue to strengthen its financial structure.

D Scuola, consolidated as from January 2022, contributed a negative € 1.5 million to the cash flow for the period, consistent with the seasonal nature of the school publishing business.

Mention should be made that the generation of cash flow from ordinary operations benefited from the revaluation, amounting to € 10.1 million at 30 September 2022, of derivative instruments related to interest rate risk hedges applied to drawdowns of the pool loan taken out in May 2021.

The total Free Cash Flow in the past 12 months amounted to a positive € 9.5 million.

At 30.09.2022, Group employees amounted to 1,895 units, up by 4.5% versus 1,814 units at 30.09.2021 (+81 units), due primarily to the inclusion of D Scuola resources (totaling +127 units). Neutralizing the effect of all scope changes – namely, the acquisitions of D Scuola, De Agostini Libri and Star Comics, and the disposals of titles and assets in the Media area – the Group workforce would drop by approximately 1%, thanks to the continued efforts to increase the efficiency of individual business areas and functions.

PERFORMANCE IN THIRD QUARTER 2022

In the third quarter, consolidated revenue amounted to € 323.1 million, increasing by 20.3% versus € 268.5 million in the prior year; net of all the effects from changes in the scope, Group revenue would have recorded a like-for-like growth of +3.4% in the third quarter.

Adjusted EBITDA came to a positive € 88 million, up by over € 24 million (+38.5%) versus 2021.

Excluding the contribution of D Scuola, adjusted EBITDA came to € 65.7 million, increasing by
€2.1 million versus third quarter 2021, or by +3.4%. This improvement is attributable in particular to the positive performance of the Books segment, which benefited also from the consolidation of Star Comics as of third quarter 2022, and the Retail segment.

Group EBITDA came to € 87.7 million (€ 65.4 million without D Scuola), improving by € 26.2 million (+42.7%) versus the prior year, attributable to the business phenomena mentioned earlier, and to the positive trend in non-ordinary items, especially in the Corporate and Media areas.

EBIT came to a positive € 74.8 million, improving by approximately € 23 million versus third quarter 2021. The like-for-like comparison (excluding the contribution of approximately € 20 million from D Scuola) with 2021 shows an increase of € 3 million (+5.8%), despite higher amortization and depreciation resulting from increased expenditure made in the last 12 months.

Group net profit, after minority interests, amounted to € 55.5 million, up by 23.2% versus € 45 million in third quarter 2021; excluding the contribution of D Scuola and net of tax items, which in third quarter 2021 had benefited from a net non-recurring income of approximately € 9.8 million, net profit in third quarter 2022 would increase by 17% versus the third quarter last year.

BUSINESS OUTLOOK

In light of the positive operating-financial trend seen in the first nine months of the year, and despite the geopolitical uncertainty and the persisting problems arising from the increase in costs for raw materials, paper in particular, and for energy consumption, for the full year 2022 the Group believes:

• to be able to improve the estimate of:
  • Revenue, forecast to grow high single-digit (from mid single-digit);
  • Adjusted EBITDA, forecast to increase by 25% or more (from over 20%).

given the positive performance recorded by the Book product in the third quarter, as well as the consolidation of the Star Comics publishing house in the second half of the year;

• to be able to confirm at the consolidated level the other previously disclosed estimates.

Specifically:

• Double-digit growth of net profit, thanks also to significantly lower restructuring costs and to the improved results of associates versus 2021;
• Cash Flow from Ordinary Operations in line with 2021;
• Free Cash Flow in the region of € 10/15 million (before dividend);
• Group net financial debt (IFRS 16) at 1.3x adjusted EBITDA.

PERFORMANCE OF BUSINESS AREAS

• BOOKS

Following the remarkable growth seen in 2021, the year 2022 has witnessed a consolidation phase of the books market, which was basically steady in terms of both value (+0.1%) and volume (+0.1%) versus the same period last year[1].

Against this backdrop, Mondadori Group publishing houses posted a 2.4% growth in sell-out, the result of a gradually improving performance: in the third quarter in particular, the Group recorded a 14.6% increase in sell-out versus the market’s approximately +4% increase.

Thanks to these results, the Group was able to retain its domestic leadership, with its market share growing to 26.9%.

In the period under review, the Group retained a leadership position in the school textbooks segment, with a market share including D Scuola at 32.3%, a slight decline versus 32.9% in the prior year, fully attributable to the primary school segment, marked by greater volatility and lower profitability.

In first nine months 2022, revenue in the Books area stood at € 443.4 million, up by 27.2% versus € 348.7 million in first nine months 2021, driven by the positive performance of the Trade publishing houses and the consolidation of D Scuola.

Considering only the like-for-like scope of 2021, revenue in the Books area grew by 5.5%.

Specifically:

• revenue from Trade amounted to € 4 million, up by 11.2% versus € 200.9 million in the same period of 2021, driven by the positive performance recorded by all publishing houses, the upswing of Electa’s activities, and the consolidation of De Agostini Libri and Star Comics;
• total revenue from Education amounted to € 7 million, up by 48.2% versus first nine months 2021, due mainly to the changed consolidation scope related to the consolidation of the publishing house D Scuola, which contributed € 67.5 million to revenue for the period. On a like-for-like basis, revenue was up slightly (+1.4%) versus the same period of 2021 (€ 144.2 million), due to the early availability of a number of textbooks and the resulting accounting of the related revenue versus the prior year.

Adjusted EBITDA of the Books area in first nine months stood at € 107.9 million, up by more than
€ 28 million including the contribution of D Scuola (€ 21.4 million in the period under review).

Net of D Scuola, adjusted EBITDA on a like-for-like basis would come to € 86.4 million versus € 79.4 million in the same period of 2021, an improvement of over € 7 million (approximately +9%), thanks in particular to the positive trend of revenue and to the higher contribution of relief granted to museum activities, amounting to approximately € 3 million.

• RETAIL

In a basically steady domestic books market (+0.1%^[2]) versus 2021, the physical channel continued to grow versus the same period of the prior year, no longer burdened by the restrictions brought by the COVID-19 emergency.

Against this backdrop, in the first nine months, the market share of Mondadori Retail increased by 1.4% to reach 12.6%, driven by the outstanding performance of physical stores.

Revenue from the area totaled € 126 million, improving by € 11.6 million (+10.2%) versus € 114.3 million in the same period last year.

The ongoing development and renovation of existing stores and the focus on the core business of books have enabled the Mondadori Store network to consolidate its role on the market, as shown by the solid growth in revenue from the Book product (+13.6%), which is higher at the end of the third quarter even than in the pre-COVID period.

Specifically:

• directly-managed stores reported a sharp upswing in revenue (+35.3% versus the prior year), due to the abovementioned strategy of focusing on the book product and network development activities;
• the franchised channel continued its progression, increasing by +4.9% versus the same period of the prior year.

Adjusted EBITDA closed with a positive figure and up significantly to € 4.1 million (€ +2.4 million) versus € 1.7 million in first nine months 2021.

The structural actions put in place in recent years have brought a strong turnaround in the area’s operating and financial performance, as already seen by last year’s results. This target was achieved thanks to the deep transformation of the company, the ongoing renewal and development of the network of physical stores, as well as careful cost management and a thorough review of the organization and processes. All this complemented by constant work on product innovation and the expansion of the product range.

• MEDIA

The Media area recorded revenue of € 135.3 million in first nine months 2022, dropping by 9.8% versus € 150 million in the same period of the prior year, but increasing by 3.1% on a like-for-like basis (excluding the effect of the deconsolidation of the titles sold at end 2021 and the distribution activities of Press-di).

Specifically:

• digital activities, which now account for 24% of the area’s total revenue, rose sharply by +16% (+21.8% on a like-for-like basis of brands);
• traditional print activities on a like-for-like basis were down by approximately 3%.

Adjusted EBITDA in the Media area amounted to € 9.3 million, up versus € 7.8 million in first nine months 2021, the result of two opposing trends that marked the two segments of the area:

• the print area improved, thanks to higher income from FuoriSalone 2022, the accounting of a € 1.9 million tax receivable recognized on paper consumption, and the continued actions to curb operating costs launched in prior years;
• the digital area, instead, saw its result fall, attributable to one-off editorial and development costs incurred for the launch of The Wom and the lower performance of digital brand advertising sales, only partly offset by the strong trend recorded by the MarTech segment.

Significant events after 30 September 2022

As previously disclosed to the market, on 20 October the subsidiary Mondadori Media S.p.A. was granted by Reworld Media S.A. the option to sell to it the business unit related to the Grazia and Icon brands through a put option.

The scope of the option includes the print and digital publishing activities of the two titles, as well as the relating international network that ensures the brands’ overall presence in over 20 countries with licensed publications.

In 2021, these activities generated revenue of approximately € 18 million.

Based on the terms for exercising the option, the consideration for the scope in question is € 8.5 million, including € 2 million as earn-out conditional on the achievement of certain financial results in 2023 by the activities disposed of. The consideration was defined on the basis of an Enterprise Value of € 11 million (including earn-out), net of the difference between the average net working capital over the last 12 months and the net working capital at the closing date.

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

The decisions taken, as a result of the ongoing assessments, on the exercise of the option and any further phases, terms and conditions of the process underlying the transaction will be promptly disclosed to the market.

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

The presentation of the results at 30 September 2022, approved today by the Board of Directors, is available on 1Info (www.1info.it), on www.borsaitaliana.it and on www.gruppomondadori.it (Investors section). A Q&A session will be held in conference call mode at 4.30 pm for the financial community, attended by the CEO of the Mondadori Group, Antonio Porro, and the CFO, Alessandro Franzosi. Journalists will be able to follow the meeting in listening mode only, by connecting to the following  phone number +39.02.8020927 or via web at: https://hditalia.choruscall.com/?calltype=2&info=company 

The Interim Management Statement at 30 September 2022 is made publicly available by today through the authorized storage mechanism 1Info (www.1info.it), on www.gruppomondadori.it (Investors section) and at the registered office.

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:

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

[1] GFK, September 2022 (Week 39)

^[2] GFK (in terms of value)

Today, the meeting of the Board of Directors of Arnoldo Mondadori Editore S.p.A., chaired by Marina Berlusconi, reviewed and approved the Interim Management Statement at 30 September 2021 presented by CEO Antonio Porro.

HIGHLIGHTS
In first nine months 2021, thanks also to the buoyancy of the books market, the Mondadori Group recorded a significant growth in revenue and EBITDA across all business areas, and a strong increase in profitability at a consolidated level.

The overall improvement in results puts the Company in a position to pursue further growth opportunities, with a view to increasing focus more and more on its core business of books.

“The good performance recorded also in the third quarter bears witness to the healthy conditions of our company and to our stronger operating and financial standing marked by growing profitability”, said Antonio Porro, CEO of the Mondadori Group.
“These results, together with the positive trend of our core markets, allow us to make an upward revision of the targets we had set for the end of the year.
We carry this momentum into 2022 with an even more solid presence in the books segment: on the one hand, with a consolidated leadership in the Trade area; on the other, with a stronger leading role in school textbooks publishing thanks to the acquisition of De Agostini Scuola.
A growth plan complemented today by the major investment in the books distribution of third-party publishers, thanks to the acquisition of 50% of A.L.I.- Agenzia Libraria International”, concluded Porro.

PERFORMANCE AT 30 SEPTEMBER 2021
In first nine months 2021, consolidated revenue amounted to € 588.9 million, up by 8.7% versus  € 541.9 million of the prior year, thanks to the positive performance of all the business areas and, in particular, of the Books and Retail areas, which benefited from the buoyancy of the Books market.

Adjusted EBITDA came to a positive € 85 million, increasing by € 14 million versus € 71 million in first nine months 2020.
This performance reflects, on the one hand, the positive trend in revenue recorded by all business areas and, on the other, the ongoing efforts to curb operating and structural costs implemented by management.
The reduction in the ratio of fixed costs (overheads and payroll costs) to consolidated revenue enabled the Group to achieve a significant improvement in its margins, which rose to 14.4% from 13.1% in 2020.

The Group’s performance in the first nine months is even more striking when compared with the same period of 2019: despite a € 70 million drop in revenue, adjusted EBITDA rose by more than € 1 million versus € 83.4 million in first nine months 2019.

Group EBITDA, amounting to € 80.5 million, improved versus the € 65.1 million recorded in the same period of 2020, as a result of the abovementioned trends and dynamics, and to lower non-ordinary expense of € 1.4 million versus € 3.2 million in the same period of the prior year, which recorded a provision for charges arising from a tax dispute.

EBIT amounted to € 52 million, up by more than € 23 million versus € 28.9 million in the same period of 2020, due to the dynamics of the abovementioned operating components, to lower amortization and depreciation totaling € 2.1 million, and to the presence, in the result at 30 September 2020, of write-downs of € 5.8 million relating to TV Sorrisi e Canzoni and the goodwill of a number of other titles in the Media area.

Consolidated profit before tax amounted to € 44.8 million versus € 19.6 million in first nine months 2020. On top of that, the following items also contributed to the significant improvement of approximately € 25 million:

• the reduction of approximately € 1 million in financial expense (down from € 3.2 million to € 2.2 million), due primarily to a lower average debt and a lower average interest rate;
• the improvement of approximately € 2 million in the results of associates (consolidated at equity), thanks in particular to the performance of the joint venture Mediamond.

The Group’s net profit, after minority interests, came to € 49.4 million, a sharp increase of € 31.4 million versus € 18 million recorded in first nine months 2020.
Despite the growth in profit before tax, the tax components for the period show a positive operating balance of € 4.6 million, due to the effect of net non-recurring income of approximately € 19 million, from the completion of the process of realigning the tax amounts of trademarks and goodwill to their respective statutory amounts.

The net financial position before IFRS16 at 30 September 2021 stands at € -27.3 million, a significant improvement of € 55 million versus € -82.3 million at 30 September 2020, as a result of the strong cash generation from ordinary operations recorded in the last 12 months (€ 70.7 million including outlays for financial expense and tax).
The IFRS 16 net financial position stands at € -111.6 million and reflects the recognition of the financial payable from the application of IFRS16.

At 30 September 2021, Group employees amounted to 1,814 units, down by 5.3% from 1,916 resources at 30 September 2020, despite the increase in headcount following the acquisition of Hej! (net of which the reduction would be -5.8%).

PERFORMANCE IN THIRD QUARTER 2021
In third quarter 2021, consolidated revenue amounted to € 268.5 million, up by 6.1% versus € 253 million of the prior year, thanks to the positive contribution of all business areas.

Adjusted EBITDA came to € 63.5 million, increasing by € 3.5 million versus € 60 million of third quarter 2020, which basically reflects the positive performance of consolidated revenue, especially in the Books area.

EBIT too, amounting to € 51.8 million, improved by approximately € 6 million, up by over 12% versus the same quarter of 2020, driven by the performance of the abovementioned components and by lower amortization and depreciation during the period.

The Group’s net profit, after minority interests, came to € 45 million versus € 43 million of third quarter 2020.
The comparison with the prior year is affected not only by the above trend in operating profit, but also by the following additional elements (which have an opposite effect):

• in third quarter 2020, the recognition of the write-up of the investment in Reworld Media (fully sold in February 2021), amounting to € 7.5 million;
• non-recurring tax income of € 9.8 million in third quarter 2021, from the completion of the tax realignment process.

AGREEMENT ON THE ACQUISITION OF 50% OF THE BOOKS DISTRIBUTION COMPANY OF THIRD-PARTY PUBLISHERS A.L.I. – AGENZIA LIBRARIA INTERNATIONAL
The Mondadori Group announced today that it has entered into an agreement on the acquisition of a 50% stake in the share capital of A.L.I. S.r.l. – Agenzia Libraria International, a group that has been operating in books distribution for over 50 years now, boasting a portfolio of more than 80 publishing houses.

Thanks to the deal, the Mondadori Group establishes a partnership that enables it to strengthen its position in the books distribution area: a constantly evolving market requiring ongoing improvement of customer service levels.
The founders of A.L.I., the Belloni family, who retain a 50% stake, will continue to manage operations, continuing the path of growth and success enjoyed by the company so far.

The price, which will be paid in cash at the closing date, has been set at € 10.8 million.
The deal also envisages the signing of put&call option agreements whereby the Mondadori Group has the option to acquire the additional 50% of A.L.I. in two different tranches by 30 July 2025.
In 2020, A.L.I. reported consolidated revenue of € 40 million, EBITDA of € 4.6 million and net profit of € 3 million (in accordance with Italian accounting standards).
At 31 December 2020, the net financial position (cash) stood at a positive € 5.9 million.

The scope of the transaction also includes a number of subsidiaries operating in the publishing fields.
Completion of the acquisition is subject to the authorizations of law from the competent Antitrust authority.

BUSINESS OUTLOOK

The positive performance recorded also in the third quarter of the year by all business areas, the continued strong cash flow generation, as well as the improved trend forecast for the books market throughout the year, allow the Group to look forward with increased optimism to its development in the coming months, and therefore to increase – based again on the current scope – the estimates previously disclosed for the current year.

 Performance targets:

• consolidated revenue is expected to grow single-digit (from low single-digit);
• adjusted EBITDA – in percentage terms – is forecast to be over 13% of consolidated revenue (compared with the previous estimate of an EBITDA margin of 12%), therefore to reach over € 100 million;
• the net result for 2021 is confirmed on a sharp rise, propelled by the improvement in operations and by the non-recurring benefits from the tax realignment of intangible assets already recorded.

 Cash Flow and Net Financial Position:
Additionally, with regard to the Group’s financial debt, one can reasonably estimate a further increase in cash flow from ordinary operations, bringing it to a range between € 60 and 65 million (from the previous forecast between € 50 and 55 million), a Free Cash Flow of approximately € 50 million and, therefore, the achievement – before the impacts from the adoption of IFRS 16 – of a positive consolidated net financial position at year end equal to approximately € 35 million.

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.

PERFORMANCE OF THE BUSINESS AREAS AT 30 SEPTEMBER 2021

• BOOKS

In the first nine months of the current year, the Trade books market recorded an overall growth of 3%[1] versus the same period of the prior year; in the third quarter, the increase was 7%, consolidating the positive trend that had started in second half 2020.
If the comparison with 2020 is affected by the lockdown, which impacted on the operation of almost all sales channels in the months of March and April 2020, the comparison with 2019 bears more significance to the extraordinary trend that the Books market is experiencing: growth in the first nine months of the year versus the same period of 2019 amounted, in fact, to 20.6%.

Against this backdrop, the Mondadori Group saw an increase in sell-out in terms of market value of approximately 19%, which allowed it to retain its undisputed leadership in the Trade segment with a 23.4% market share[2].

In the School textbooks segment, the Mondadori Group’s publishing houses kept their market share steady at 22.1%, in line with the prior year, thanks to the positive results of the 2021 adoption campaign.

In first nine months 2021, revenue in the Books area amounted to € 348.7 million, up by 10.3% versus € 316.1 million in the same period of 2020, driven in particular by the increase recorded by the Trade area (+14.5%), the positive performance of the school textbook publishers (+5%, due also to a different monthly schedule of revenue from 2020, which had seen a delayed return to school), and the significant growth of Rizzoli International Publications (+27.6%).

Revenue from the sale of e–books and audiobooks, which accounted for approximately 7.4% of total publishing revenue, fell by 3.5%, while sales of physical books were instead on the rise. Versus 2019, this revenue grew instead by approximately 25%.

Adjusted EBITDA in the Books area amounted to € 79.4 million versus € 67.5 million in the same period of 2020, an improvement of approximately € 12 million, thanks to the abovementioned positive trend of revenue in the Trade and Education segments and of Rizzoli International Publications, and to the relief received by Electa in the museum segment and booked in the first nine months (approximately € 3 million, net already of certain provisions).

The profitability achieved by the Books area, amounting to 22.8% at 30 September 2021 (versus 21.3% in the same period of 2020), is even more worthy of notice when compared to the profitability recorded in the first nine months of 2019, equal to 21.5%, since the current year is still impacted by the drastic drop in volumes and margins from museum activities.

• RETAIL

In the first nine months of the year, Mondadori Retail achieved revenue of € 114.3 million, up by 12.1% versus € 102 million in the same period of 2020.
Sales of books, which account for 84% of total revenue for the area, rose by 15.8%.

Performance in the opening months of 2021 was affected by the anti-COVID measures, which severely curtailed sales activities, especially of directly-managed stores located in large cities and shopping malls.
In the second half of the period under review, thanks to the gradual lifting of social distancing measures, directly-managed PoS reported a sharp recovery in revenue, enabling them to close the first nine months with an increase of approximately 9% versus the prior year.
The franchised channel, composed mainly of proximity stores located in small towns, showed greater resilience and responsiveness, enabling it to record a growth of approximately 26% versus the same period of the prior year.
The gradual reopening of bookstores led to a decline in the activities of the online channel, which posted a 24% drop in revenue during the period; versus 2019, revenue improved, instead, by 13.1%.

Mondadori Retail reported a strong increase in adjusted EBITDA, which came to € 1.7 million, up by € 2.2 million versus the same period of 2020, and an improvement versus the same period of 2019 (€ 0.8 million).
This result is attributable to the deep transformation of the Area, 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 nine months of the year, the Media area posted revenue of € 150 million, up by 4.1% versus € 144.1 million in the same period of the prior year.

Advertising revenue grew by approximately 32% overall (+18% excluding Hej!), and grew even further in the third quarter by 39% (+23% on a like-for-like basis) versus the same period of 2020. Against this backdrop:

• advertising revenue on digital brands increased by 20% on a like-for-like basis (+44% including Hej!). A point worth mentioning is that digital revenue today accounts for 60% of total advertising revenue, confirming Mondadori Media’s leadership position in the digital field, in segments marked by high commercial value.

• advertising sales on print brands increased by approximately 16%, benefiting from the comparison with a period negatively affected by the pandemic.

Circulation revenue was down by 5.8%, with a more moderate drop (-4%) for television titles, which account for approximately 50% of revenue in this segment.
Against this backdrop, with results that outperformed the relevant market (-6.9%[3]), the Group’s market share rose to 23.9%1³.

Revenue from add-on products dropped by approximately 18% versus the first nine months of 2020, but with a reversal of the trend in the third quarter this year (+2.5%), thanks in particular to the presence of a number of successful initiatives in the music segment.

Other revenue, which includes revenue from distribution activities, increased by 9.5% versus the prior year, reflecting both the positive performance of international editions (Grazia in particular) and growth in newsstand distribution and subscriptions of third-party publishers.

Adjusted EBITDA in the Media area amounted to € 7.8 million, up sharply versus € 3.2 million in the first nine months of 2020, thanks in particular to the development of digital activities, the recovery of print advertising sales and the continued efforts to curb operating costs, which contributed to the increase in profitability: the overall EBITDA margin improved from 2% to approximately 5% in first nine months 2021.

SIGNIFICANT EVENTS AFTER FIRST NINE MONTHS 2021
On 8 November 2021, the Mondadori Group announced it had received notice from the Antitrust Authority of the authorization to acquire 100% of De Agostini Scuola S.p.A..
The provision envisages the adoption of appropriate behavioural measures, as indicated by the Authority and shared by the Mondadori Group, to safeguard the competitiveness of the school textbooks market, including, in particular, the commitment to continue to keep De Agostini Scuola separated until 31 December 2024.
These remedies confirm the rationale of the acquisition, the business development plan and the potential for value creation initially estimated by the Group.
The Authority’s go-ahead triggers the fulfilment of the suspensive condition attached to the agreement on the sale of the investment in De Agostini Scuola; the sale will therefore be fully executed on the closing date, scheduled to take place later this year.

§

The results at 30 September 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 at 4:30 pm.
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 – III quarter;
4. Group cash flow;
5. Glossary of terms and alternative performance measures used.

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

[2] GFK, September 2021 (figures in terms of value)

[3] Internal source: Press-di, August 2021, in terms of value

Today, the meeting of the Board of Directors of Arnoldo Mondadori Editore S.p.A., chaired by Marina Berlusconi, reviewed and approved the Interim Management Statement at 30 September 2020 presented by CEO Ernesto Mauri.

HIGHLIGHTS
The year 2020 was inevitably marked by the effects of the health emergency brought by the spread of COVID-19.
In the first half of the year, in fact, the gradual and increasingly widespread application from March of restrictive measures to social and economic activities significantly curtailed most of the activities related to the businesses where the Mondadori Group operates as a leader.

In order to address this situation, the Group has implemented a series of actions aimed at ensuring working conditions in total safety for its employees, encouraging smart working, allowing the continuation of activities and the containment of operating costs, with the aim of offsetting the operating and financial impact from the measures adopted by the authorities.
Against this backdrop, the book market has shown solid resilience and a strong recovery:

• in the Trade segment, following the gradual reopening of bookstores in May, the segment has witnessed a steady recovery, growing by 8.4%[1] in the third quarter versus the same period of 2019, reducing the loss to -3.8%[2] versus the prior year.
• as far as school textbooks are concerned, the segment managed to come out almost unharmed from the lockdown, since the period in which the restrictive measures were in force was concurrent to the promotional phase of the texts to be adopted and subsequently marketed during the summer period.

PERFORMANCE IN THIRD QUARTER 2020
In light of the outlined context, the Group’s operating and financial profile in the third quarter of the year is as follows:

• revenue amounted to € 253 million, down by 9.3% versus € 279 million in the same period of 2019 (-7.9% on a like-for-like basis), recovering strongly versus the first half of the year, despite the failed restart of the activities that gravitate around the management of museums, exhibitions and cultural assets.
  Specifically:
  – revenue in the Books Area was down by 7%, but recovering sharply from the -21% drop in first half 2020, as the recovery in the Trade segment, whose revenue grew by 13% in the third quarter, and the positive performance of the adoption campaign for school textbooks only partly offset the negative trend in museum activities;
  – revenue in the Retail Area decreased by approximately 5%, improving however from -27.5% in the first half of the year, a period impacted by the closure of bookstores for roughly two months, thanks to the recovery recorded by the book market from May.
  – revenue in the Media Area posted a 20% loss (approximately -14% on a like-for-like basis in terms of titles), with digital activities in particular on the rise, up on a like-for-like basis by approximately 7% during the quarter.

• adjusted EBITDA (including the IFRS 16 effect), amounting to € 60 million versus € 61.6 million in the prior year, was basically steady, thanks to the targeted measures to support activities and contain costs implemented by the Group across all the business areas.
  Mention should be made in this regard of the strong improvement in margins in the third quarter under review, which rose to 23.7%.
  More specifically:
  – the Books Area posted a result in the period that was € 5.8 million lower than the same quarter of the prior year, due largely to the difficulties reported by the museum business;
  – the Retail Area, on the other hand, saw its performance increase by € 0.8 million versus third quarter 2019, thanks to the cost saving plan and the rationalization of the store and product portfolio;
  – the Media Area equally recorded a significant improvement in margins (from € -1.4 million to € +2.1 million), thanks to the careful cost containment policy.

• the Group’s Net Result ended with a positive € 43 million, up by 72.2% versus € 25 million in the prior year, due partly to the write-back of Reworld Media shares held (€ 7.5 million) and the tax contribution from a tax receivable relating to the use of the “Patent box” (€ 5.5 million).

Cash flow from ordinary operations in the context of continuing operations over the last 12 months amounted to € 40.8 million versus € 36.7 million at 30 June, confirming the Group’s quick response and the ability of the business to steadily generate cash, even in a highly deteriorated context;

Net debt (no IFRS 16) stood at € -82.3 million at 30 September 2020, improving sharply versus € -110.4 million in the same period of 2019 (€ +28.1 million). Including the effects of the application of IFRS 16, net debt stands at € -170.4 million.

The gradual recovery of the business and the financial situation at the end of the third quarter, together with the Group’s medium-term outlook, provide reasons to maintain a positive attitude towards future developments, albeit in an economic scenario that is marked by the health emergency, and to be confident in the Group’s ability to continue to strengthen its capital and financial position.

CONSOLIDATED RESULTS AT 30.09.2020
In first nine months 2020, the Group’s consolidated revenue amounted to € 541.9 million, down by 17.8% versus € 658.9 million in the prior year (net of the changed scope of consolidation of the Media Area from the disposal of the five titles, the decrease would be approximately -16%, due basically to the effects of COVID-19).

Adjusted EBITDA in the period amounted to € 71 million, down by € 12.4 million versus first nine months 2019 (€ 83.4 million); this positive performance, the result of a trend in the third quarter basically in line with the prior year, reflects the significant effects of the quick response and countermeasures taken by the Group to tackle the consequences of COVID-19, which curbed the drop in revenue and reduced operating costs by approximately € 45 million.
Special mention should be made of profitability, equal to 13.1%, higher than the prior year and proof of the effectiveness of the operational efforts made by the Group.

EBITDA amounted to € 65.1 million versus € 78.4 million in the prior year, in line with the mentioned dynamics.

EBIT at 30 September 2020 amounted to € 28.9 million, down by € 21.2 million versus 30 September 2019, due mainly to the trend of the abovementioned components and to the extraordinary write-down and amortization of a number of titles for a total of € 7.8 million.

Consolidated profit before tax amounted to € 19.6 million versus € 41.5 million in first nine months 2019.

The Group’s net profit, after minority interests, came to € 18 million versus € 23.1 million in first nine months 2019 (which also included € 1.1 million from the discontinued operations of Mondadori France), a sharp upswing versus the first half of the year.

 Group employees at 30 September 2020 amounted to 1,913 units, down by approximately 9% versus 2,092 units at 30 September 2019.

BUSINESS OUTLOOK
The positive performance recorded in the third quarter by all the Group’s businesses, despite the caution inevitably brought by the scenario of uncertainty arising from the pandemic and the potential impact on the Christmas season, increases confidence on exceeding the targets set by the Group when it had approved the half-year results.

Revenue and EBITDA
With revenue confirmed to fall as expected between 16% and 18% in the year in progress versus 2019 – current estimates on adjusted EBITDA show margins in the upper part of the previously forecast range, therefore equal to 12%, the result of the following trends that are expected to mark the business units:

• Trade Books: market on the upswing and profitability holding ground;
• School Textbooks: steady market and profitability basically steady;
• Museums: the business model and the cost-cutting measures aim at a substantial operating breakeven, despite the drastic drop in revenue;
• Retail: book market and physical channels on the upswing; the deep organizational and process review and the rationalization strategy on the portfolio of stores are expected to help profitability recover;
• Media: digital advertising market on the upswing and a positive, albeit declining, profitability.

Cash Flow and Net Financial Position
Additionally, with regard to the Group’s financial debt, one can reasonably expect the positive cash generation of the business to continue over the final months of the current year which, together with a lower estimate of restructuring requirements, will allow the Group to significantly reduce the net financial position at end 2020 versus the prior year.

PERFORMANCE OF BUSINESS AREAS

• BOOKS

In the third quarter, the strong growth recorded by the Trade books market (+8.4% versus the same period of the prior year) produced a strong recovery, which reduced the overall decline to 3.8% at 30 September 2020 versus the prior year.

In the first nine months of the year, the Group placed 3 titles in the top ten bestsellers in terms of value^[3], retaining its leadership with a 24.6% market share.
Subsequently, the Group strengthened the relevance of its publishing plan with the publication in September and October of titles by a number of bestselling authors, including the new novel by Ken Follett, ranking first in the top twenty bestsellers[4], where the Group holds seven positions.

In first nine months 2020, revenue in the Books Area amounted to € 316.1 million versus € 366 million in the same period of the prior year (-13.6%).
Specifically:

• revenue in the Trade Books segment totaled € 144.1 million, down by -6.8% versus € 154.6 million in 2019, due to the effects of the COVID-19 health emergency. Mention should be made of the 13% increase in the third quarter versus the same period of 2019, confirming the post lockdown recovery, due partly to the shift in the launch of a number of new titles following the reprogramming and revision of the publishing plan.
  Revenue from e‐book and audiobook sales (approximately 8.6% of total publishing revenue) was up sharply in the lockdown period, closing the first nine months with a 29% increase versus the prior year, bucking the trend of sales of physical books.

• revenue in the Educational Books segment, amounting to € 167.4 million, was down by 18.6% versus € 205.7 million recorded in the same period of 2019, on a like-for-like basis net of the transfer of Electa’s trade books BU to Mondadori Libri S.p.A. in December 2019. The drop is attributable mainly to the museum segment, which had its operations severely impacted by the closure of sites and exhibitions owing to the measures to contain the pandemic, and by the virtual collapse of tourist travel also throughout the summer season.
  In the school textbooks segment, mostly unscathed by the effects of the pandemic, the Mondadori Group’s publishing houses achieved a market share of 22.1%, up versus the prior year, confirming the positive results of the adoption campaign in 2020.

In first nine months 2020, adjusted EBITDA of the Books Area amounted to € 67.5 million versus € 78.6 million in 2019, down due mainly to the above negative trend in revenue from the museum activities.

EBIT amounted to € 55.8 million versus € 68.5 million in nine months 2019.

• RETAIL

As mentioned, the Book market (over 80% of revenue^[5] in the Retail Area) recorded a minor fall in the first nine months (-3.8%^[6]) versus the same period of the prior year, due to the urgent measures that led to the closure of physical bookstores throughout the country from 12 March 2020 until the beginning of May.
The months following the reopening were particularly vibrant for the book market, which grew by 9.6% in the period from June to September.
Against this backdrop, Mondadori Retail’s market share stood at 11.7%.

In the first nine months, revenue in the Retail Area amounted to € 102 million versus € 126.6 million in the same period of the prior year (-19.4%), due to the abovementioned anti-COVID-19 measures.
In the third quarter, Mondadori Retail recorded an excellent performance: the decline in revenue versus the same period of the prior year amounted to -4.8% (-27.5% in first half), driven by the strong recovery in book sales, which were basically equal to the same period of 2019 (-0.6%).

In terms of sales channel performance, the third quarter saw strong results come from franchised bookstores and an improvement in the figures of directly-managed stores.
The online channel (15% of total revenue in the area) continued to grow, up by +48.8% at 30 September 2020.

Despite the steep drop in revenue, Mondadori Retail in the first nine months managed to curb the reduction in IFRS 16 adjusted EBITDA, which amounted to € -0.5 million versus € +0.8 million in the same period of 2019.
A result achieved thanks to careful cost management and a deep organizational and process revision carried out in the second half of 2019 and continued even during the harshest period of the health emergency.
With the exception of the lockdown months, Mondadori Retail showed a steady improvement in profitability throughout the year: in the months before lockdown, adjusted EBITDA was € 0.3 million higher than in the same period of 2019, while in the following months (June-September) the improvement amounted to € 1.6 million.
In the third quarter in particular, adjusted EBITDA increased by € 0.9 million versus the prior year to € 2.3 million.

IFRS 16 EBIT amounted to € -9.4 million (versus € -7.3 million at 30 September 2019).

• MEDIA

In the August surveys, the advertising market recorded an overall drop of -22%, suffering heavily in all channels from the negative effects of the health emergency: magazines lost -40.1% and digital -9.2%[7]. The digital channel alone recorded a remarkable turnaround in July and August, up by approximately 24% versus the same two-month period of 2019;

In terms of circulation, the Italian magazine market fell by -12.8%. In this context, the Mondadori Group’s market share stood at 24%[8].

At 30 September 2020, revenue in the Media Area amounted to € 144.1 million versus € 191.2 million in 2019 (-24.7%); net of the disposal in December 2019 of the five titles, the drop would be -19.1%.
In the third quarter alone, the drop in revenue was -19.9% (-14% on a like-for-like basis), with digital activities on a strong upswing, up on a like-for-like basis by approximately 7% in the quarter.

Specifically, in first nine months 2020:

• circulation revenue was down by -25%, due to both the disposal of the five titles and the COVID-19 impact (-15% net of discontinuity);
• revenue from add-on products fell by approximately -22% versus 2019, due partly to a different scheduling of planned releases (-20% net of the disposal of the five titles);
• advertising revenue fell by a total of approximately -37%; this is the form of revenue most affected by the ongoing health emergency, which has, among other things, led to the cancellation of an important event such as the Salone del Mobile and a reduction in proximity marketing solutions (AdKaora); net of the discontinuity of the scope, the fall would be -32%.
  In the third quarter alone, against the persisting decline in sales linked to print media, revenue from digital advertising sales grew by over 7%, with this component now making for 56% of total advertising revenue. 

  In terms of digital activities, mention should be made that in the period under review, the Mondadori Group retained its position as the leading multimedia publisher in Italy, on the web with an 81% reach (32.4 million unique users in August)[9] and in social media with an aggregate fan base of 34.5 million spread across 105 social profiles[10].

Adjusted EBITDA in the Media Area amounted to € 3.2 million, down by approximately € 2 million versus first nine months 2019 (€ 5.5 million).
The sharp drop in revenue was alleviated by the effective measures to contain operating costs, which curbed their negative impact on profitability.
In third quarter alone, Mondadori Media recorded adjusted EBITDA of € +1.2 million, improving significantly versus the result in the same period of 2019 (€ -1.4 million) thanks to the positive trend of digital advertising, the partial recovery of add-on sales, and the abovementioned cost containment measures.

EBIT amounted to € -9.5 million versus € -1.4 million, due mainly to the trend of the abovementioned components and to the extraordinary write-down and amortization of a number of titles for a total of € 7.8 million.

*

Additionally, the Board of Directors took note with regret of Ernesto Mauri’s decision to end his experience as CEO of the Mondadori Group by completing his term with the natural expiry of the company’s governing bodies and the approval of the financial statements scheduled in April 2021.

Mr. Mauri provided the reasons for his decision by explaining to the Board that he believes he has fulfilled the strong path of strategic re-launch and repositioning, marked by the financial recovery and solid results achieved, laying the foundations for the current Management – in total continuity – to push the Mondadori Group into a new phase of development.

In line with the strategic transformation that the Company has undergone in recent years, which has witnessed a gradual focus on its core business – Books – the Board of Directors, on the proposal of Chairman Marina Berlusconi, resolved to appoint Antonio Porro, current CEO of Mondadori Libri, as the future CEO of the Mondadori Group.
Mr. Porro’s nomination, in accordance with the outcome of the succession plan adopted by the Board of Directors, will be submitted to the Shareholders, who will submit the lists for the appointment of the new Board to the Shareholders’ Meeting next April.

*

SIGNIFICANT EVENTS AFTER FIRST NINE MONTHS 2020
On 14 October 2020, the Mondadori Group sold 8.5% of the share capital of Reworld Media. As a result of the transaction, the stake held in the French company is now 7.8%.
On 20 October 2020, the Mondadori Group completed the disposal of 25% of the share capital of Stile Italia Edizioni S.r.l. to La Verità, which already held the remaining 75%.

The documentation relating to the presentation of the results at 30 September 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 Interim Management Statement at 30 September 2020 approved by the Board will be available at the Company’s registered office, on the authorized storage mechanism 1Info (www.1info.it) and on www.gruppomondadori.it (Investors section) on 11 November 2020.

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

Annexes (in the pdf file):

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

[1] GFK, figures in terms of value, September 2020
[2] GFK, figures in terms of value, September 2020
[3]GFK, September 2020 (ranking in terms of cover value)
[4] GFK, Week 40-42 2020 (ranking in terms of cover value)
^[5] Product revenue excluding Club revenue
^[6] GFK, September 2020 (in terms of value)
[7] Nielsen, cumulative figures at August 2020
[8] Internal source: Press-di, figures at August 2020 (newsstands + subscriptions channel) in terms of value
[9] Comscore (August 2020)
[10] Shareablee and internal processing (September 2020)

Today, the meeting of the Board of Directors of Arnoldo Mondadori Editore S.p.A., chaired by Marina Berlusconi, reviewed and approved the Interim Management Statement at 30 September 2019 presented by CEO Ernesto Mauri.

HIGHLIGHTS OF FIRST NINE MONTHS OF 2019
In the first nine months of 2019, the Mondadori Group recorded basically steady revenue and an approximately 13% increase in adjusted EBITDA from continuing operations before IFRS 16 to
€ 71.3 million, overshooting the planned targets.

Actions continued, in fact, to be taken to improve operations in the Books Area and to reduce costs, as well as to strengthen the Digital component of Magazines Italy; additionally, the reporting period saw the disposal of Mondadori France.

The first nine months of the year recorded 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 performance (marked also by temporary benefits), together with the extended positive cash generation from ordinary operations, paves the way to the achievement of the targets set and disclosed for the entire financial year 2019.

GROUP PERFORMANCE AT 30.09.2019
Consolidated revenue came to € 658.9 million versus € 658.5 million in the prior year, despite the change in the consolidation scope of the Magazines Italy Area following the disposal of Inthera S.p.A. and Panorama (+1.5% on a like-for-like basis).

As mentioned above, adjusted EBITDA before IFRS 16 amounted to € 71.3 million, up by € 8.6 million (+13% approximately) versus the prior year (€ 62.8 million), with a percentage on revenue increasing from 9.5% to 10.8%.

IFRS 16 adjusted EBITDA amounted to € 83.4 million (IFRS 16 impact of € +12 million).

Consolidated EBITDA before IFRS 16, amounting to € 66.3 million versus € 53 million at 30.09.2018, was up sharply (+25%) versus the prior year. The result includes the increase in adjusted EBITDA and strong reductions in restructuring costs recorded in the period.

IFRS 16 EBITDA amounted to € 78.4 million (IFRS 16 impact of € +12 million).

EBIT before IFRS 16 improved significantly to € 49.2 million versus € 37.5 million at 30.09.2018, as a result of the dynamics of the above components (includes amortization, depreciation and write-downs of € 17.1 million). IFRS 16 amortization and depreciation amounted to € 11.1 million.

IFRS 16 EBIT amounted to € 50.2 million (includes the IFRS 16 impact of € +1 million).

Consolidated profit before tax was € 41.5 million, increasing sharply versus € 25.6 million in the first nine months of 2018. It includes:

• the significant reduction in financial expense, as a result of lower average net debt;
• improved performance by associates (consolidated at equity), from € -9.9 million to € -5.3 million in the same period of 2018.

The adjusted net result from continuing operations amounted to € 25.4 million, up more than 60% versus € 15.8 million at 30 September 2018.

Considering the net result of discontinued operations, the Group’s net result came to € 23.1 million versus € -181.5 million in 2018, which had included the impact from the fair value adjustment of Mondadori France of approximately € -200 million.

The Group’s net financial position before IFRS 16 stood at € -110.4 million, improving by approximately € 99 million versus € 209.3 million at 30 September 2018, as a result of the ongoing generation of cash flow from ordinary operations of continuing operations of € 52.5 million. The IFRS 16 Group net financial position stood at € -209.5 million.

At 30 September 2019, with regard to continuing operations, Group employees amounted to 2,092 units, down by -5% versus 2,203 units at 30 September 2018, as a result of the disposal of Panorama, of efficiency gains in the individual corporate areas, and excluding the employees of Mondadori France.

CONSOLIDATED FINANCIAL HIGHLIGHTS IN THIRD QUARTER 2019
Consolidated revenue came to € 279 million, up by 4.2% versus € 267.7 million at 30.09.2018, despite the effect of the change in the consolidation scope of Magazines Italy resulting from the disposal of Panorama.

Specifically, in the period revenue from Books increased by approximately +13% (partly temporary), while the Retail Area dropped by approximately -2%; the Magazines Italy Area fell by 7.3%, on a like-for-like basis, as a result of the dynamics of the relevant markets.

Adjusted EBITDA before IFRS 16 amounted to € 57.6 million, improving by 14% versus the prior year (€ 50.7 million), with different trends reported by the various businesses:

• in line with the revenue trend, the Books Area grew as a result of the positive performance of both the Trade and Education areas;
• the Retail Area fell versus 3° quarter 2018;
• the Magazines Italy Area grew despite the declining market trend, as a result of the disposals that took place, of the ongoing improvement of the digital area and of the actions aimed at reducing operating and structural costs.

IFRS 16 adjusted EBITDA amounted to € 61.6 million (IFRS 16 impact of approximately € 4 million). Consolidated EBITDA before IFRS 16 was up sharply, amounting to € 53.7 million versus € 49.5 million of the prior year.

BUSINESS OUTLOOK
In the first nine months of 2019, the Mondadori Group continued on the path of strategic repositioning and focus on its core businesses of Books and Retail and on Magazines with greater potential for multimedia development, completing the disposal of Mondadori France and moving ahead with the finalization of the disposal of five magazines.

In line with the outlined strategy and in light of the relevant context, including the performance in the first nine months, the operating targets for 2019, based on the current scope, allow the Group to confirm, at a consolidated level, a slight decrease in revenue (steady on a like-for-like basis following years of decline) and a single-digit growth of adjusted EBITDA no 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 around € 45 million, paving the way for the distribution of a dividend in 2020.

PERFORMANCE OF BUSINESS AREAS

• BOOKS

In the first nine months of the year, the Trade Books market grew by 4.6% versus the first nine months of the prior year[1]. The Mondadori Group retains its leadership position with a total 25.7% market share and places seven titles in the ranking of the twenty best-selling books in terms of value.

In the period under review, revenue from the Books Area amounted to € 366 million, up by 7.5% versus € 340.3 million in the first nine months of 2018, as a result of the good performance of both Trade (+9.3%) and Educational (+7.7%).

Adjusted EBITDA before IFRS 16 amounted to € 77.6 million, up versus € 68 million in the same period of the prior year, as a result of the increase in revenue and the ongoing improvement of operations. IFRS 16 adjusted EBITDA amounted to € 78.6 million (the impact of IFRS 16 was € 1 million).

Reported EBITDA before IFRS 16 amounted to € 77.1 million, improving versus € 66.8 million reported at 30 September 2018. IFRS 16 reported EBITDA amounted to € 78.1 million and includes an impact of € +1 million.

• RETAIL

In the first nine months of 2019, Mondadori Retail generated revenue of € 126.6 million, down by 2.1% versus € 129.3 million of the same period of the prior year.

In the Books segment, the relevant market for the Area (approximately 82% of revenue^[2]) with a 13.2% market share, Mondadori Retail recorded a performance of -0.7% (on a like-for-like basis -1.1%).

The analysis by channel shows the following:

• a basic stability of direct bookstores (on a like-for-like basis -1.6%);
• in the Megastores, an approximately 12.7% drop (on a like-for-like basis -10.7%), due mainly to the decline in sales of consumer electronics;
• in franchised bookstores, a performance in line with the prior year (on a like-for-like basis -1.2%);
• in e-commerce a +2% growth;
• in the bookclub, a decrease of approximately 4% versus the prior year.

Adjusted EBITDA before IFRS 16 amounted to € -5.2 million versus € -3.4 million at 30 September 2018: the deterioration is due mainly to the decrease in revenue on a like-for-like basis and to the higher inventory write-down of consumer electronics products.

IFRS 16 adjusted EBITDA came to € +0.8 million and includes the IFRS 16 impact of € +6 million.

Reported EBITDA before IFRS 16 amounted to € -5.5 million, down versus
€ -3.7 million at 30 September 2018. IFRS 16 reported EBITDA amounted to € +0.5 million and includes an impact of € +6 million.

• MAGAZINES ITALY

In the first nine months of 2019, the Italian advertising market reported a growth in the digital channel (+2.1%) and a fall in magazines (-15.2%)[3]. Circulation also declined (-12.3%), with a slowdown in both the newsstands and subscriptions channels.

In this context, the Mondadori Group‘s market share stood at 28.6%, steady on a like-for-like basis (excluding the disposal of Panorama)[4]. The Group also retained its position as Italy’s leading digital publisher, with a 73% reach and 28.2 million unique users in the month[5].

In the first nine months of 2019, revenue in the Magazines Italy Area came to € 191.2 million versus
€ 216.1 million at 30.09.2018 (-5% net of the disposals of Inthera and Panorama). Specifically:

• revenue from circulation and related to add-on products was down by
  -14.1% versus the same period of the prior year, affected also by the disposal of Panorama
  (-8.5% on a like-for-like basis);
• advertising revenue (print + digital) recorded an overall drop of -7.7% versus the first nine months of 2018 (-2% net of the disposal of Panorama): the digital component grew by approximately +18%, thanks also to the contribution of AdKaora, an agency specializing in proximity marketing solutions; print advertising sales fell by -19.5% (approximately -13% excluding Panorama in the nine months of 2018, in line with the market trend). The percentage of digital revenue on the total rose to approximately 41% (from 32% in the first nine months of 2018);
• distribution activities and other revenue in the nine months fell by -8.7% versus the prior year, due to the disposal of Inthera S.p.A. (+2.6% excluding Inthera in the nine months 2018).

Adjusted EBITDA before IFRS 16 amounted to € 5.4 million, up versus the same period of the prior year (€ 4.1 million), as a result of the actions aimed at reducing operating and structural costs, of the ongoing improvement in the digital area, and the positive effects of the sale of Inthera S.p.A. and Panorama. IFRS 16 adjusted EBITDA amounted to € 5.5 million.

Reported EBITDA before IFRS 16 amounted to € 2.5 million, improving sharply versus € -3 million at 30 September 2018, as a result of lower restructuring costs. IFRS 16 reported EBITDA amounted to € 2.6 million.

TRANSFER TO A SINGLE COMPANY OF ALL THE ACTIVITIES INVOLVING THE MAGAZINES ITALY AREA
Today’s meeting of the Board of Directors also approved the transfer – effective from 1 January 2020 – of the Magazines business unit to a wholly-owned single company, where all the activities regarding magazine titles and the websites of Arnoldo Mondadori Editore S.p.A., as well as the investments in the Magazines Area, will be transferred.

The transaction brings no change to the overall profile of the Group’s activities or basic operating features, but completes an organization that is focused more on the peculiarities of the individual businesses, as was the case for the Retail and Books areas.

The setup is also more functional to the achievement of strategic opportunities and partnerships.

The transfer will be made on the basis of book values, with no impact on the consolidated financial statements.

The transaction is excluded from the application of the “Regulations containing provisions on transactions with related parties”, adopted by CONSOB with resolution no. 17221 of 12 March 2010, as well as the procedures adopted by Arnoldo Mondadori Editore S.p.A. on the matter, as it is a transaction with a subsidiary in respect of which the interests of other related parties of the Company cannot be considered significant (according to the criteria set out in the abovementioned procedures).

Significant events after the reporting period
On 23 October, the Group announced that it had received a binding offer for the acquisition of magazines Confidenze, Cucina Moderna, Sale&Pepe, Starbene and Tustyle by La Verità S.r.l.. The Board of Directors has resolved to authorize CEO Ernesto Mauri to implement all the actions aimed at reviewing and finalizing the transaction, in line with the announced strategy of focusing on the core businesses of Books, Retail and Magazines with greater potential for multimedia development. The offer is valid until 31 December 2019 and envisages the creation of a NewCo, whose interest will be 75% held by La Verità S.r.l. and 25% by Arnoldo Mondadori Editore S.p.A.; the offer also includes an earn-out in favour of the shareholder Arnoldo Mondadori Editore S.p.A. and put/call mechanisms in favour of shareholders. The activities relating to the 5 titles in question recorded revenue of € 22.4 million in 2018.

In accordance with the provisions of law, the procedure with the trade unions has been put into effect.

Following the authorization given by the Shareholders’ Meeting of 17 April 2019, on 10 June Arnoldo Mondadori Editore S.p.A. launched a share buyback programme. Following the transactions carried out so far and disclosed to the market in accordance with current legislation, the Company holds, to date, no. 2,641,203 treasury shares, equal to 1.010% of the share capital and 0.659% of the total voting rights.

The documentation relating to the presentation of the results at 30 September 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 Interim Management Statement at 30 September 2019 approved by the Board will be available at the Company’s registered office, on the authorized storage mechanism 1Info (www.1info.it) and on www.gruppomondadori.it (Investors section) by today’s date.

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 – III quarter;
4. Group cash flow;
5. Glossary of terms and alternative performance measures used.

[1] Source: GFK, September 2019 (figures in terms of market value). As of May 2019, GFK has expanded its coverage panel by increasing the survey of e-commerce players; 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.
[2] Product revenue excluding the bookclub
[3] Source: Nielsen, cumulative figures at September 2019
[4] Internal source: Press-Di, cumulative figures at August 2019 (newsstands + subscriptions) in terms of value
[5] Source: comScore survey, August

Today, the meeting of the Board of Directors of Arnoldo Mondadori Editore S.p.A., chaired by Marina Berlusconi, reviewed and approved the Interim Management Statement at 30 September 2018 presented by CEO Ernesto Mauri.

INTRODUCTION
On 27 September 2018, as disclosed to the market, Arnoldo Mondadori Editore S.p.A. began exclusive negotiations with Reworld Media SA, in order to carry out the customary activities aimed at the possible disposal of the subsidiary Mondadori France SAS.

The transaction, which is in line with the Group’s strategy to refocus on the more solid business of Books, will help increase the availability of financial resources and support the strategic lines of development and the competitiveness of its core businesses, also through potential new investments.

At the reference date of this Interim Management Statement, as the activities leading up to the disposal are in progress, and the Directors have considered the requirements of the international accounting standards met, the transaction is classified as a discontinued operation, in accordance with IFRS 5, given that the successful outcome of the negotiations would imply an exit by the Mondadori Group from the French magazine publishing market.

GROUP PERFORMANCE AT 30 SEPTEMBER 2018
In the first nine months of 2018, the Mondadori Group, net of the French assets held for sale, recorded a 3.2% increase in adjusted EBITDA versus the prior year, in line with the scheduled operating plans, and improving significantly in the performance of the Books Area.

In the period under review, the Magazines Italy Area recorded restructuring and reorganization costs functional to the structural reduction in operating costs, as well as the disposal of non-strategic and non-profitable businesses (including the disposal of Inthera and the Panorama newsmagazine business units).

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 from continuing operations in the first nine months of 2018 amounted to € 658,1 million, down by 6.9% versus the prior year, due mainly to the performance of Magazines Italy, attributable to the persisting negative trends of the relevant markets, in terms of both circulation and advertising.

Including the positive results of Mondadori France in the period under review, consolidated revenue would have amounted to € 884.5 million, dropping by 7.2% versus the prior year, while total adjusted EBITDA would have come to € 78.4 million, increasing by 1% versus the figure at 30 September 2017.

Adjusted EBITDA from continuing operations in the period under review came to € 62.8 million, up by 3.2% versus the prior year (€ 60.8 million) – with a percentage on revenue growing from 8.6% to 9.5% and with different trends reported by the various businesses:

• the Books Area reported a sharp rise in the period, driven by further operating efficiencies in both the Trade and Educational segments;
• the Retail Area saw a gradual improvement as a result of the rationalization of directly-managed stores, especially of Megastores;
• the Magazines Italy Area fell in the first half, while in the third quarter the ongoing actions to cut operating and structural costs, and the disposal of non-profitable businesses, fully mitigated the effects of the decline in revenue triggered by the trend of the traditional markets.

The Group also continued with its effective measures to curb fixed overheads, which reduced their impact on revenue from 8.4% to 7.9%.

Consolidated EBITDA decreased from € 63.2 million in the prior year to € 53 million. The downturn reflects:

• less positive non-ordinary items versus the first 9 months of 2017, which had benefited from gains of approximately € 4 million from the disposal of a property;
• a loss (approximately € 2 million) by the Magazines Italy Area, due to the disposal of Inthera;
• higher restructuring costs in the period for the Magazines Italy Area, functional to the reorganization and revision of the operating and overhead costs structure.

Consolidated EBIT at 30 September 2018 amounted to € 37.5 million versus € 47.8 million at 30 September 2017, due to the dynamics of the above non-ordinary items, and includes amortization, depreciation and write-downs of € 15.5 million, in line with the prior year.

The consolidated profit before taxes came to approximately € 25.6 million and includes:

• the sharp drop in financial expense (from € 4.9 to € 2.1 million), as a result of an average interest rate that is half the prior year (from 4% to 2.01%), and of a lower average net debt;
• a negative performance by associates (consolidated at equity), down from € -2.2 million to € -9.9 million, due in particular to Mach2 Libri, active in the distribution of books in the Large Retailers channel and put into liquidation in 2018.

The overall tax burden for the period came to a negative € 9.8 million versus € 15.3 million in 2017.

Adjusted profit from continuing operations therefore amounted to € 15.8 million versus € 25.5 million at 30 September 2017.

In the third quarter, an adjustment of € 198.1 million was made to the fair value of Mondadori France, the company being sold, in line with the current negotiations underway, previously valued at value in use.

Accordingly, the adjusted net result from discontinued operations came to € -195.7 million (a profit of € 7.7 million in the first nine months of 2017, which had benefited from the gains from the disposal of NaturaBuy, amounting to € 3.7 million, net of tax effects) including € 2.4 million from the result of Mondadori France.

The net result of the Group, following the fair value adjustement of French operations, came to € -181.5 million versus € 31.2 million at 30 September 2017.

The Group’s net financial position at 30 September 2018 improved by approximately 18% to end at € -209.3 million versus € -256 million at 30 September 2017, due to the positive cash generation of the Group of approximately € 47 million.

Cash flow from ordinary operations (after outlays for financial expense, management of investments and taxes for the period) – which includes the cash flow generated by discontinued operations – amounted to € 64.8 million (of which € 11.3 million from discontinued operations), confirming the strong path of cash generation and financial improvement of the Group.

Cash flow from non-ordinary operations came to a negative figure of approximately € 18 million, of which € 4.8 million from discontinued operations, and includes mainly restructuring costs and a negative balance of acquisitions/disposals.

At 30 September 2018, Group employees amounted to 2,930 units (of whom 733 from Mondadori France), down by approximately 4% from 3,053 units at 30 September 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 2.6%.

CONSOLIDATED FINANCIAL HIGHLIGHTS THIRD QUARTER 2018
Consolidated revenue from continuing operations in third quarter 2018 amounted to approximately € 267.2 million, down by 10.6% versus € 298.8 million in the prior year, attributable to both the Magazines Italy Area and the Books Area, whose performance in the quarter under review was affected by unfavourable timing in the Educational segment and by the presence in the Trade segment in 2017 of the publication of the titles by Ken Follett and Dan Brown, bestsellers of the year.

Adjusted EBITDA from continuing operations in third quarter 2018 amounted to € 50.7 million, basically steady versus € 51.1 million in the same period of 2017, despite the different scheduling of revenue in the Books Area versus last year, and reflects the effects of the constant improvement of the Group’s operations.

In the Magazines Italy Area, the lower drop in overall revenue, triggered by the trend of the traditional markets, as a result of the benefits arising from portfolio review actions, and of the reduction in operating and structural costs, helped regain € 0.3 million on the third quarter of 2017 (from € -3 million to € -2.7 million).

At a consolidated level, in the quarter under review, the percentage margin on revenue increased from 17.1% in 2017 to 19% in 2018.

The trend of consolidated EBITDA from continuing operations (from € 51.3 million to € 49.5 million) reflects higher negative non-recurring items recorded in the quarter versus the same period of 2017.

The Group’s adjusted profit from continuing operations in the third quarter of the current year (€ 29.5 million) was approximately 3% higher than in the same period of 2017, due to a further reduction in the tax burden.

BUSINESS OUTLOOK
In light of the discontinuity produced by the French operations, the current relevant context and operations in the first nine months of the year, estimates for 2018, previously disclosed to the market, show for the scope of continuing operations:

• a slight increase in adjusted EBITDA,
• profit from continuing operations reduced by approximately € 7 million over the entire year versus 2017, due to higher negative non-ordinary items.
• cash flow from ordinary operations in the year of around € 50 million (€ 55/60 million including discontinued operations).

Versus the previous estimate, the consolidated revenue is expected to fall by a high single-digit percentage versus the prior year, due mainly to the performance of Magazines Italy, triggered by the negative trends of the relevant markets.

BUSINESS AREAS

BOOKS
In the first nine months of the year, the Trade Books market was basically steady versus the same period of the prior year (-0.4%)^[1].

The Mondadori Group retains its leadership with an overall 27.4% market share, with 5 titles appearing in the list of the top ten bestsellers in terms of value.

Revenue from the Books Area in the first nine months of 2018 amounted to € 339.6 million, down by 4.9% overall versus € 357.2 million in the same period of 2017, due to the expected decline in the Trade Area, attributable mainly to the drop in the Large Retailers channel and the presence in third quarter 2017 of the bestsellers by D. Brown and K. Follett.

The new titles include the publication from 27 September of Un Capitano, by Francesco Totti with Paolo Condò (Rizzoli), which sold 100,000 copies in October alone.

In the first nine months of 2018, the Educational Area achieved revenue of € 199.4 million, up by 1.2% versus the same period of 2017 (€ 197 million), driven by the positive performance of school textbooks.

Adjusted EBITDA for the Books Area amounted to € 68 million, improving by 9% versus the same period of 2017, due to the ongoing operating efficiencies, and to the different revenue mix of the Education Area.

EBITDA amounted to € 66.8 million, in line with the trend of adjusted EBITDA (€ 62 million at 30 September 2017).

RETAIL
At 30 September 2018, the market share of Mondadori Retail in the Books segment (approximately 80% of revenue^[2]) stood at 14.6%.

Revenue amounted to € 129.3 million, down slightly (approximately -2.5%) versus € 132.6 million in the same period of the prior year.

The analysis by channel shows the following:

• a 2.5% increase by directly-managed bookstores, driven by the positive performance of Books (-2.5% on a like-for-like basis in terms of stores);
• a positive +1% performance by Franchised bookstores; the channel continued to strengthen in the period (-0.4% on a like-for-like basis in terms of stores);
• a 10.9% drop by Megastores, due not only to the shrinking sales in Consumer Electronics, but also to the closure of two stores (+0.3% the Books category on a like-for-like basis in terms of stores);
• a slight drop in the online segment (-3.5%).

In the first nine months of the year, Mondadori Retail’s adjusted EBITDA improved by € 0.6 million to reach € -3.4 million versus € -3.9 million at 30 September 2017, as a result of the project to rationalize directly-managed stores, specifically in the Megastores channel, and of greater management efficiency.

EBITDA came to € -3.7 million, rebounding versus the nine months of 2017 (€ -4.6 million), as a result of lower restructuring costs.

MAGAZINES ITALY
In Italy, against the sharp fall of the market in the first eight months of the year, the Mondadori Group retained its leadership with a 30.9% share^[3].

Revenue amounted to € 216.1 million, down by 11.3% versus € 243.6 million in the same period of the prior year, due also to the sharp drop in add-on sales.^[4] Net of the disposal of Inthera in May, the decline would have come to 9.7%.

Circulation revenue (newsstands + subscriptions) was down by 10.5%, affected by the rather poor trend of Panorama (sold effective from 1 November 2018) and of the kitchen segment, which had benefited in 2017 from the launch of Giallo Zafferano.

Advertising revenue (print + web) fell by 4.3%: the web grew by approximately 7% (versus the market’s 4%^[5]) as a result of a series of co-marketing initiatives, while print advertising sales were basically in line with the segment^[6]. The percentage of digital advertising sales on the total increased to 30.5%.

In the period under review, the Mondadori Group retained its position as Italy’s top publisher also in the digital segment, leader in the high-value vertical segments such as women, food, wellness, fashion and education, with a total audience of 27.9 million/month^[7], up by 19% versus 2017.

In the first nine months of the year, adjusted EBITDA from the Magazines Italy Area reported a negative trend, dropping by € 3.9 million versus 2017.

The third quarter saw a partial recovery (€ +0.3 million) from the trend of the first six months.

The Area’s reported EBITDA (€ -6.2 million versus € 4.6 million in the first nine months of 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, in order to improve results in the coming years.

MAGAZINES FRANCE (assets held for sale)
In France, in a continually shrinking market versus the prior year in terms of circulation and advertising, Mondadori France held a 10.7%^[8] advertising share in terms of volume, ranking as second top player in the field.

In the first nine months of 2018, revenue from Mondadori France amounted to € 226.4 million, down by -8.1% versus € 246.4 million in the same period of 2017.

Circulation revenue posted a 6.8% drop versus the prior year (-8.2% newsstands channel; -5.1% subscriptions channel).

Advertising revenue (print + web) was down by an overall -9% versus the same period of 2017, with print (88% of total) falling (-8.7%) lower than the relevant market (-10.7%^[9]).

Adjusted EBITDA amounted to € 15.6 million, down by € 1.2 million versus € 16.8 million in the first nine months of the prior year (down by € -0.8 million net of the discontinuity deriving from NaturaBuy (sold in May 2017).

Reported EBITDA amounted to € 14.3 million, down versus € 18.2 million in the first nine months of 2017, which had benefited from the gains of € 4.3 million from the abovementioned disposal.

Significant events after the reporting period
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 8 October, the Group announced the purchase, in the period from 1 to 5 October, of a further 17,500 ordinary shares (equal to 0.007% of the share capital) at an average unit price of € 1.4831, for a total amount of € 25,954.35.

On 15 October, the Group announced the purchase, in the period from 8 to 12 October, of a further 19,500 ordinary shares (equal to 0.007% of the share capital) at an average unit price of € 1.4099, for a total amount of € 27,493.70.

On 22 October, the Group announced the purchase, in the period from 15 to 19 October, of a further 15,500 ordinary shares (equal to 0.006% of the share capital) at an average unit price of € 1.4439, for a total amount of € 22,380.10.

On 29 October, the Group announced the purchase, in the period from 22 to 26 October, of a further 12,500 ordinary shares (equal to 0.005% of the share capital) at an average unit price of € 1.4655, for a total amount of € 18,318.70.

On 1 November 2018, the business units of the newsmagazine Panorama were sold to La Verità S.r.l..

On 5 November, the Group announced the purchase, in the period from 29 October to 2 November, of a further 13,000 ordinary shares (equal to 0.005% of the share capital) at an average unit price of € 1.5272, for a total amount of € 19,853.35.

On 12 November, the Group announced the purchase, in the period from 5 to 9 November, of a further 13,000 ordinary shares (equal to 0.005% of the share capital) at an average unit price of € 1.5785, for a total amount of € 20,520.85.

Following the purchases made so far, Arnoldo Mondadori Editore S.p.A. holds 1,274,700 treasury shares, equal to 0.488% of the share capital.

The documentation relating to the presentation of the results at 30 September 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 Interim Management Statement at 30 September 2018, approved by the Board of Directors, will be made available by today’s date at the Company’s offices, on the authorized storage mechanism 1info (www.1info.it), and on www.gruppomondadori.it (Investors section).

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 – III quarter
4. Group cash flow;
5. Glossary of terms and alternative performance measures used.

[1] Source: GFK, September 2018 (figures in terms of market value)
[2] Store revenue on a like-for-like basis
[3] Internal source: Press-Di, cumulative figures at September 2018 (newsstands + subscriptions) in terms of value
[4] -21.6% versus the first nine months of 2017
[5] Source: Nielsen, cumulative figures at September 2018
[6] Magazines -8.9% (Source: Nielsen, cumulative figures at September 2018)
[7] Source: comScore, average figure January-August 2018
[8] Source: Kantar Media, Juin 2018
[9] Source: Net Index, in term of value, cumulative figures at Juin 2018)

Today, the meeting of the Board of Directors of Arnoldo Mondadori Editore S.p.A., chaired by Marina Berlusconi, reviewed and approved the Interim Report on Operations at 30 September 2017[1] presented by CEO Ernesto Mauri.

9M17 highlights

In 9M17, on a like-for-like consolidation basis with Rizzoli Libri versus 2016, the Group confirmed its operational improvement for the fourth consecutive year, posting an approximately 9% increase in adjusted EBITDA; concurrently, the Group continued on its path to achieve the targets set for the whole year, despite the lower-than-expected magazine market trend, mitigated however by greater operational efficiency and by the implementation of cost cutting measures.

The LTM cash flow from ordinary operations amounted to approximately 52 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, improved the net financial position by over 70 million euro, reaching -256 million euro versus -329 million euro in 9M16.

Net profit in 9M17 (+31.2 million euro) improved by over 13 million euro versus 30 September 2016, due also to the contribution of a number of positive extraordinary items.

Group performance at 30 September 2017

Consolidated revenue in 9M17 amounted to 924.7 million euro, down slightly (-1.1%) versus the prior year, due mainly to the performance of the Magazines areas, affected by the acceleration of the negative trends of the markets, and to the targeted reduction in revenue from consumer electronics products in the Retail Area.

In the Books Area, revenue in 9M17 increased by 8.4%, driven by the positive performance of both the Trade and Educational areas, amplified by the different consolidation period of Rizzoli Libri (present only from the second quarter of 2016).

On a like-for-like consolidation basis with Rizzoli Libri (excluding 1Q17), adjusted EBITDA grew by 8.6% (82.7 million euro versus 76.1 million euro in 9M16) with a percentage on revenue increasing from 8.1% to 9.1% – especially in the Books (from 58.7 million euro to 68.1 million euro net of Rizzoli Libri’s first quarter) and Magazines Italy areas (+24%).

Including the result of Rizzoli Libri as from 1 January, adjusted EBITDA amounted to 75.2 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, which includes in the first quarter expenses to promote the campaign on school textbooks adoption.

Consolidated EBITDA improved by 12.9% (from 70.3 million euro to 79.3 million euro), driven by the gains from the disposal of certain assets in the second quarter of the year.

Consolidated EBIT at 30 September amounted to 55.1 million euro, up by approximately 14.9% versus 30 September 2016, and includes amortization, depreciation and impairment of 24 million euro, up by approximately 2 million euro versus 9M16 from the impact of the amortization of Banzai Media intangible assets (1.8 million euro) and the amortization of capitalized expenses of the Rizzoli Libri school business (3 million euro).

Consolidated profit before tax came to 44.9 million euro and includes financial costs of 10.2 million euro, down versus the prior year (12.7 million euro), as a result of a lower average net debt and an average interest rate reduced by approximately 50 bps.

The overall tax burden in the period amounted to 11.8 million euro (16.2 million euro in 2016), benefiting from the adjustment of deferred tax of Mondadori France of 3.8 million euro, following the reduction in the rate introduced by the 2017 Budget Law (no. 2016-1917) from 34.4% to 28.9% starting from 2019.

At 30 September 2017, Group employees amounted to 3,053 units, down by 8.3% versus 3,330 units at September 2016, as a result of the disposal of the logistics activities in May, and of the ongoing restructuring and efficiency improvement measures involving each of the Group’s business areas.

Consolidated financial highlights in 3Q17[2]

In 3Q17, consolidated revenue amounted to 371.8 million euro, basically in line with 3Q16. A performance achieved thanks mainly to the publication from September in the Books Area of the bestsellers by Ken Follett (La colonna di fuoco) and Dan Brown (Origin).

The Retail Area also increased revenue versus the prior year, driven by the promotional activities launched in the quarter.

Revenue from magazines both in Italy and France continued the downward trend witnessed in prior quarters.

Adjusted EBITDA grew by 8.3% in the quarter, driven by the revenue trend of the Books Area (+6.5%) and by the implementation of ongoing cost-cutting measures in other business areas, confirming the Group’s continued efficiency recovery.

Consolidated EBITDA, including extraordinary items, confirmed the growth trend.

Consolidated net profit, after the minority shareholders’ result, came to approximately 27 million euro, up by 24.1% versus 30 September 2016.

Outlook 2017

In light of the trend of the markets and the Group’s performance in the first nine months, it is reasonable to estimate for 2017 – versus the 2016 pro-forma figures – a slight drop in revenue and a “high single-digit” growth of adjusted EBITDA, with a resulting improvement in profit margins and a sharp increase of approximately 30% in net profit.

Net debt at end 2017 is confirmed at a debt/adjusted EBITDA ratio below 2.0x.

Performance of group business areas at 30 september 2017

• Books

In 9M17, the Mondadori Group retained its leadership position in the trade books market (28.4%), placing 6 titles in the top 10 best-selling books in terms of value, besides winning the 2017 Strega Prize with Le otto montagne by Paolo Cognetti (Einaudi), and the 2017 Campiello Prize with L’arminuta by D. Pietrantonio (Einaudi). Einaudi is also the publisher in Italy of Kazuo Ishiguro, winner of the 2017 Nobel Prize in Literature.

The Group also confirmed its leadership in the school textbooks segment, with a market share steady at 24%.

The Area’s revenue amounted to 385.3 million euro, up by 8.4% versus 355.5 million euro in 9M16, driven by the positive performance of both the Trade and Educational areas, amplified by the different consolidation period of Rizzoli Libri (present only from 2Q16).

• trade revenue increased by +4.2% versus 9M16 as a result, as mentioned earlier, of both the publication and distribution from September of the bestsellers La colonna di Fuoco by Ken Follett (Mondadori) and Origin by Dan Brown (Mondadori), and of the different consolidation period of Rizzoli Libri versus 2016;
• Educational revenue increased by 8.1% versus 9M16, thanks to the positive performance of the school textbooks segment (+1.6%) and the sharp rise by Electa in museum and publishing activities (+16.6%);
• revenue from distribution and services on behalf of third publishers was up by +37.6% versus 9M16 as a result of the above mentioned different consolidation period of Rizzoli Libri;
• revenue from Rizzoli International Publications, including the sales of the Rizzoli Bookstore in New York, amounted to 19.9 million euro versus 13 million euro in 9M16, as a result of the different consolidation period, of the positive trend of the publishing schedule, and of the consolidation of the former joint venture Skira Rizzoli Publications.

Adjusted EBITDA of the Books Area came to 60.6 million euro; net of the loss reported in the first quarter by Rizzoli Libri, attributable to the typical seasonal nature of the school textbooks business, adjusted EBITDA would amount to approximately 68 million euro, up by approximately 16% versus 9M16 (58.7 million euro), as a result of the positive trend of revenue achieved by the Trade segment and by Electa, and of the progress in the integration process of Rizzoli Libri and the resulting synergies.

EBITDA amounted to 60.4 million euro, up by 4.4% versus the prior year (57.9 million euro at 30 September 2016).

• Retail

At 30 September 2017, the market share of Mondadori Retail in the Books segment (80% of revenue) rose to 15.3%[3].

In 9M17, the Area achieved revenue of 132.6 million euro, down by 1.8% versus 135 million euro in 9M16, due also to the targeted reduction in revenue from consumer electronics products. In the third quarter, revenue grew by 2.5% versus the prior year, driven by the promotional activities launched in the quarter.

The analysis by channel shows the following:

• a 6.5% drop by Megastores, due to the shrinking sales in consumer electronics and to closure of a store in Palermo (July 2017). The Books category grew by 3.2%, confirming the effectiveness of the actions undertaken in terms of assortment and promotion campaigns;
• a 1% drop by directly-managed bookstores, also following closure of a store in the province of Milan in May 2016 (+8.9% on a like-for-like basis in terms of stores);
• a slightly negative performance of Franchised Bookstores (-1.5%, also on a like-for-like basis in terms of stores);
• an approximately 35.5% increase in the online segment, driven by the positive performance of sales related to the government’s “Culture Bonus” for 18 year olds (“18app”);
• for book clubs, a trend in line with the structural decline forecast for the segment in the medium-term development plan.

Adjusted EBITDA of Mondadori Retail came to -3.9 million euro, deteriorating versus -2.7 million euro reported in 9M16, as a result of the structural decline in sales volumes in the book clubs channel, and the temporary decline of the franchised channel, affected by a number of promotional campaigns whose benefits are expected to be felt in the coming months, and by the costs associated with the targeted reduction in the sales of consumer electronics products.

EBITDA came to -4.6 million euro (-2.3 million euro in 9M16), also as a result of higher restructuring costs (1.5 million euro).

• Magazines Italy

In Italy, the Mondadori Group retained its leadership in magazines, increasing its share to reach 31.8%, in a market hit by shrinking circulation. In 9M17, 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 – Giallo Zafferano and SPY – which continue to receive a warm response from the public.

With an audience of 15.8 million unique users/month[4], Mondadori was once again Italy‘s top traditional publisher also in the digital business. In the same reporting period, ComScore counted 21.9 million unique users/month of the Group brands.

The Area’s revenue amounted to 216.2 million euro, down by 7.9% versus 234.8 million euro in 9M16, due also to the sharp drop in add-on sales.

Specifically:

• circulation revenue (newsstands + subscriptions) fell (-5.1%) less than the relevant market trend (-11.9%[5]).
• advertising revenue (print + web) increased by 4%; gross advertising sales in Italy, driven by the contribution of the consolidation of Banzai Media activities, were up by 13%, bringing the percentage of digital revenue on the total to 28%.

Print advertising sales in Italy – on a like-for-like basis of titles and barter deals for goods – outperformed (-4.1%) the relevant market trend (-7% at August[6]); digital advertising sales grew by 2% (on a pro-forma basis).

• Revenue from add-on products, as mentioned, dropped sharply (-29.4%) versus 9M16, in line with the market trend.
• distribution and revenue towards third publishers dropped at a more moderate pace (-2.1%) than the relevant markets, thanks to the ongoing commitment to developing third-publisher portfolios and to the increased amount of services provided.

Adjusted EBITDA in the Magazines Italy Area improved by approximately 23.9%, rising from 6.9 million euro to 8.5 million euro, driven mainly by the benefits of the digital business achieved with the combination of ex Banzai Media’s teams and products; print activities reported a slight decrease in margin, almost offsetting the drop triggered by the trend of the markets, with ongoing optimization actions and containment of editorial and overhead costs.

The Area’s EBITDA improved further, closing at 8.2 million euro, up versus 5.3 million euro in 2016.

• Magazines France

In 9M17, revenue from Mondadori France amounted to 220.1 million euro, down by 8% versus 239.4 million euro in 9M16.

Specifically:

• Circulation revenue (approximately 75% of the total) posted a more moderate downturn (-5%) than the relevant market (-7%), as a result of the improved performance of the subscriptions channel.

In September, Mondadori France launched Dr. Good!, the new bi-monthly women’s health magazine, which scored positive results in terms of advertising and circulation (over 100 thousand copies).

Revenue from the sale of digital copies grew sharply in 9M17 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 fell by an overall -18.5% versus 9M16; print advertising, accounting for over 85% of total advertising revenue, was basically in line (-12.9%) with the relevant market (-11.4%[7]), while the performance on the digital channel was affected by the internalization of advertising sales of the mobile/video segment, which led to a temporary drop in revenue (-23%), in a market that lost 8% at August[8].

In the reporting period, Mondadori France retained its position as second top player in the magazine advertising market, with a 10.7% share[9].

The digital readers (web, mobile & tablet) of Mondadori France magazines reached 11.2 million unique users[10], down by approximately -4% versus the average figure in 9M16.

Adjusted EBITDA came to 16.8 million euro versus 21.3 million euro in 9M16. The drop is mainly attributable to the downturn in circulation and in advertising revenue, and to the increase in circulation expenses, not fully offset by cost reductions. Adjusted EBITDA was also affected by the increase in rental costs for the offices (1.1 million euro) and by the deconsolidation from 1 May of NaturaBuy: net of the latter two effects, the decline in business would amount to approximately 3 million euro in 9M17.

Reported EBITDA amounted to 18.2 million euro, down by approximately 6% versus 9M16, 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

Arnoldo Mondadori Editore S.p.A. continued to purchase treasury shares, as previously disclosed to the market on 26 June 2017, 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. Following the purchases made so far, Arnoldo Mondadori Editore S.p.A. holds to date 760,000 treasury shares, equal to 0.291% of the share capital (including the 80,000 shares purchased in the period from 30 November to 2 December 2016, as per disclosure to the market on 6 December 2016).

On 19 October, the Mondadori share moved from the FTSE Italia Small Cap index to the FTSE Italia Mid Cap index.

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

 This Interim Report at 30 September 2017 approved by the Board of Directors will be available on 10 November 2017 at the Company’s registered office, on the authorized storage mechanism 1info (www.1Info.it) and on www.gruppomondadori.it (Investor section).

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 – third quarter
4. Group cash flow
5. Glossary of terms and alternative performance measures used

[1] 9M17 at Group level includes, as from 1 January, 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 Arnoldo Mondadori Editore S.p.A., with accounting effects as from 1 January 2017.
 [2] 3Q17 and 3Q16 are comparable considering the consolidation scope of Rizzoli Libri and Banzai Media activities.
[3] Source: GFK, September 2017 (figures in terms of market value)
[4] Source: Audiweb, January-August 2017 average figure
[5] Internal source: Press-di, cumulative figures at August 2017 (newsstands + subscriptions in terms of value)
[6] Source: Nielsen, cumulative figures at August 2017
[7] Source: Kantar Media, cumulative figures in terms of volume at August 2017
[8] Source: SRI, August 2017
[9]> Source: Kantar Media, cumulative figures in terms of volume at July 2017
[10] Source: Nielsen, January-July 2017 average figure

Today, the meeting of the Board of Directors of Arnoldo Mondadori Editore S.p.A., chaired by Marina Berlusconi, reviewed and approved the Interim Report on Operations at 30 September 2016 presented by CEO Ernesto Mauri.

GROUP PERFORMANCE AT 30 SEPTEMBER 2016

In 9M16, Mondadori Group reported a rather encouraging performance. After almost four years, revenue kept steady – on a like-for-like basis – versus the prior year; these results, together with the improvement of EBITDA for the eleventh consecutive quarter, laid the groundwork to improve the outlook for the full year.

Additionally, 2016 marked the transition to the new phase of the Group’s development, as a result of the consolidation of the recently acquired Rizzoli Libri and Banzai Media, a major step made to strengthen the leadership position in the Group’s strategic businesses.

In 9M16, consolidated net revenue grew by 14.3% to 935.3 million euro; net of the effects of the consolidation of the companies acquired in the year, the Group’s performance remained basically steady versus 818.3 million euro posted in the prior year.

Consolidated adjusted EBITDA[1] grew by 58.7% (76.1 million euro versus 48 million euro in 9M15), thanks also to the positive contribution from the companies acquired in 2016, from Rizzoli Libri (16.5 million euro) in particular. The Books Area increased by 65%, while Magazines Italy tripled its performance. The Retail Area, despite the negative impact (from the seasonality of the Rizzoli bookstore in Milan), improved by over 13%.

On a like-for-like basis, the Group’s adjusted EBITDA grew by 23.7%, with a percentage on revenue increasing from 5.9% to 7.3%. This performance is the result of a constant and focused management policy, launched and successfully implemented in all of the business areas; Books (+18.2%) and Magazines Italy (from 1.7 million euro to 6.5 million euro) performed strongly.

Consolidated EBITDA was up by 44% to 70.3 million euro, including the result of Rizzoli Libri and Banzai Media. On a like-for-like basis, the increase amounts to 9.9% (from 48.8 million euro to 53.7 million euro), confirming the Group’s strong and constant efficiency gains from its ability to stabilize revenue and thanks to the industrial and organizational review actions launched and implemented over the past three years, despite the benefits felt in 3Q15 from the capital gain of 7.6 million euro arising from the disposal of the Harlequin Mondadori joint venture (Books Area).

In 9M16, consolidated EBIT was up by 60.1% to 48 million euro, including amortization and depreciation of 5.2 million euro relating to Rizzoli Libri; on a like-for-like basis, EBIT amounted to 37 million euro, improving by 23.4% versus 30 million euro in 9M15, also as a result of the decrease in amortization, depreciation and impairment losses by 16.7 million euro versus 18.8 million euro at 30 September 2015, which included the impairment of 4 million euro of the interest held in the Greek Attica Publications subsidiary (Magazines Italy Area).

The consolidated result before taxes amounted to 35.3 million euro, up versus 16.1 million euro, or to 24.5 million euro on a like-for-like basis, rising sharply (+52.1%) versus 9M15, thanks also to the contribution of financial costs (12.5 million euro), which decreased sharply (-9.2%) as a result of the reduction in the average debt rate from the renegotiation of the loan agreement made at end 2015 (from 3.72% to 3.05%), and of a lower average debt in the period, despite the acquisitions made in 2016.

The Group consolidated net result amounted to 17.9 million euro, improving by over 20 million euro versus -2.8 million euro at 30 September 2015, which included the capital loss from the disposal of the Group’s radio business; on a like-for-like basis, the net result came to a positive 11 million euro.

At 30 September 2016, Group employees amounted to 3,330 units. The 7.8% increase in headcount versus September 2015 is due solely to the acquisitions made over the last 12 months; on a like-for-like basis, Group employees would be down by 5.8%.

The Group net financial position at 30 September 2016 came to -329 million euro versus -243.6 million euro at 30 September 2015, as a result of the Group’s significant cash generation over the past 12 months, which allowed net investments in acquisitions of 135.7 million euro.     

At 30 September 2016, cash flow from operations – on a like-for-like basis – in the last twelve months came to a positive 83.9 million euro; ordinary cash flow (after outlays for financial costs and taxes for the period) continued the upward trend of the seven previous quarters and came to 56.3 million euro. Including the contribution from recent acquisitions, cash flow from ordinary operations in the last twelve months amounted to 53.3 million euro.

This performance is the result of constant and effective monitoring, and the ability to act on 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 Group’s performance and of the results of the acquired companies, the forecasts previously announced on revenue for the current year can be reasonably confirmed: including Rizzoli Libri (for 9 months) and Banzai Media (for 7 months), revenue is expected to increase by approximately 14%, while, on a like-for-like basis, it is basically steady versus 2015.

Adjusted EBITDA estimate improves: including Rizzoli Libri and Banzai Media, adjusted EBITDA is forecast to grow by approximately 35% (from the previous estimate of +30%), while, on a like-for-like basis, forecasts point to a double-digit growth (from the previous high single-digit estimate) versus 2015, with a resulting increase in profitability.

The net financial position is expected to improve versus the previous forecast (3.5x), with a NFP/EBITDA ratio of about 3.3x, lower than the bank covenant for the year of 4.5x.

PERFORMANCE OF GROUP BUSINESS AREAS AT 30 SEPTEMBER 2016

• BOOKS

In 9M16, the Trade Books market in Italy grew by +2.3% versus 9M15 (GFK, September 2016, figures in terms of market value), confirming the positive signs reported in the first half of the current year.

Against this backdrop, Mondadori Libri retained its market leadership position with a 22.8% trade share.

At 30 September 2016, following the acquisition of the Rizzoli Libri brands (Rizzoli, BUR and Fabbri Editori), the Group increased its overall market share to 27.8%.

In the school textbooks segment, following the integration of Rizzoli Education, the Group increased its market share to 24.1%, becoming the leading player in the segment in Italy.

In the period under review, revenue from the Books Area of Mondadori Group amounted to 355.5 million euro, up by 52.5% as a result of the consolidation of Rizzoli Libri from April 2016 (+1.8% on a like-for-like basis versus 233.2 million euro in 9M15). Rizzoli Libri contributed an overall 118.4 million euro to the period.

On a like-for-like basis, the Trade Books Area revenue increased by 15.7% versus 9M15, 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. Regarding the Educational Area, revenue in 9M16 grew by 2.5% on a like-for-like basis versus 9M15.

Adjusted EBITDA in the Area came to 58.6 million euro, rising sharply (+65.1%) versus 9M15 (35.5 million euro); in the reporting period, Rizzoli Libri contributed 16.6 million euro, mainly as a result of the positive performance of the schools segment.

The Books Area performed strongly also on a like-for-like basis, surging by +18.2% (42 million euro at 30 September 2016), propelled by the increase in revenue from the targeted publishing policy and by the ongoing optimization of the operating processes implemented in the Trade segment, which helped slash the percentage of costs of goods sold on revenue. Concurrently, the cost containment policy aimed at cutting fixed costs and discretionary expenses continued and resulted in improved profitability.

Reported EBITDA in the Area amounted to 57.9 million euro versus 39.6 million euro at 30 September 2015, which included the capital gain of 7.6 million euro from the disposal of the interest held in the Harlequin Mondadori joint venture, partly offset in the reporting period by lower restructuring costs versus the prior year.

• MAGAZINES ITALY

Revenue from the Magazines Italy Area amounted to 234.9 million euro, up by 0.8% versus 233 million euro in 9M15 (-2.3% on a like-for-like basis, net of Banzai Media, consolidated as from 1 June 2016)[2].

Against this backdrop, Mondadori Group retained its market leadership position with a 31.8% share (Internal source: Press-di, August).

In 9M16, Banzai Media contributed approximately 7.2 million euro to the Area’s revenue. Following the acquisition, Mondadori has reached a total digital audience of 16.6 million unique monthly users (Audiweb, average figures at August 2016), becoming the leading Italian digital publisher.

Circulation revenue of the Magazines Italy Area dropped by 2.4%; on a like-for-like basis of titles, the drop was basically in line with the relevant market performance (-8.3%, internal source Press-Di, cumulative figures at August 2016: newsstands+subscriptions at cover price) in both the newsstand and subscription channels.

Revenue from advertising sales fell by 2.6%; print advertising sales in Italy dropped by 4% (in line with the market’s -3.6%, Nielsen, cumulative figures at August 2016); sales on websites increased by 0.6% and outperformed the relevant market trend (-1.6%, Nielsen, cumulative figures at August 2016), with the contribution of the consolidation of Mondadori Scienza properties (Nostrofiglio.it and Focus.it).

Revenue from add-on products was steady versus 9M15, thanks to the positive contribution of the home-video business (50% of total), which offset the drop in gadgets and music CDs.

Looking at distribution and revenue towards third publishers, the Area was in line with the prior year, thanks to the ongoing commitment to developing third-publisher portfolios.

International operations achieved revenue of 4.3 million euro, down versus 5.3 million euro reported in 9M15, as a result of the drop in licensing activities caused by the deteriorated market environment.

Revenue from Digital Marketing Service activities (8.7 million euro) grew by approximately 2% versus 9M15, as a result of the gradual expansion of the portfolio of solutions that had started in 2015.

Adjusted EBITDA in the Magazines Italy Area improved significantly to 6.9 million euro (including the contribution of Banzai Media), or to 6.5 million euro on a like-for-like basis versus 1.7 million euro in 9M15, driven by the effective review of the publishing structure, implemented while retaining the traditional focus on the publishing quality of the titles. The reporting period also saw a sharp drop in industrial costs, achieved also as a result of the renegotiation of printing contracts.

The Area EBITDA more than confirmed the growth trend, increasing by over 4 million euro (from 0.8 million euro to 5.4 million euro), despite the higher amount of negative non-recurring items; on a like-for-like basis, reported EBITDA came to 5.1 million euro.

• MAGAZINES FRANCE

In 9M16, revenue from Mondadori France amounted to 239.3 million euro, down by 3% versus 246.8 million euro in 9M15.

Specifically:

• Circulation revenue, accounting for approximately 75% of the total, fell by 2.4% versus the prior year.

Specifically, sales revenue in the subscription channel was basically stable, partly offsetting the decline in the newsstand channel (-6.1%, basically in line with the market trend) and confirming the strategic opportunity for further investments in this channel, which accounted for 53% of circulation revenue in 9M16, representing the major and most growing contribution to revenue of the area.

These positive performances were achieved with the constant attention paid to publishing quality and innovation. In the period under review, Mondadori France, in fact, launched various brand extensions, including Grazia Hommes.

• Advertising revenue fell by an overall 4.6% versus 9M15, but performance differed between offline and online component: digital advertising (accounting for about 20% of total advertising revenue) was up by approximately 22%, partly offsetting the drop in traditional print advertising (-8.9%). Against this backdrop, Mondadori France retained its 6% market share (Kantar Media: cumulative figures in terms of volume at June 2016) and was, once again, the second top player in the magazine advertising market.

Digital activities (approximately 5% of total revenue) grew by an overall 14.8%, propelled by the development of the properties, in addition to the positive performance of NaturaBuy (+29%). The web audience of Mondadori France magazines totaled 8.9 million unique users (Médiamétrie Netratings-Nielsen, January-August 2016 average figure), up by approximately 9% versus 9M15.

Adjusted EBITDA came to 21.3 million euro, down by 3.8% versus 9M15, due mainly to costs for M&A managed in the period (0.7 million euro). Focus continued on editorial and overhead cost containment to counter the lingering weakness of the relevant markets, with a view to further adjusting the organization to market changes, while retaining the ability to make investments in quality and in the gradual digitization of publishing activities. Digital activities continued to enjoy positively growing margins in 9M16 versus the loss in 9M15.

Reported EBITDA, amounting to 19.4 million euro, was down by 3.1% versus 20.0 million euro in 9M15, as a result of the abovementioned M&A costs and of restructuring costs of approximately 1.9 million euro (2.1 million euro in 9M15).

• RETAIL

In 9M16, the Retail Area revenue – on a like-for-like basis – rose to 135 million euro, increasing by 1.1% versus 131.9 million euro in 9M15, due mainly to the growth of the Franchised channel (+3.3%) and of Megastores (+3.8%), which more than offset the structural decline of the Book Clubs; the online channel posted a positive performance (+2.2%), driven mainly by the good results of school textbooks. As of 1 April 2016, following the consolidation of the acquisition of Rizzoli Libri, activities relating to the Rizzoli bookstore have been absorbed by the Retail Area; as a result, in 9M16, the Area increased revenue by an overall 2.4%.

In 9M16, Mondadori Retail adjusted EBITDA, on a like-for-like basis, came to -2.5 million euro, improving versus -3.1 million euro in 9M15 (-2.7 million euro, including the result of Librerie Rizzoli in the April-September six-month consolidation period). A result achieved through cost-curbing measures involving stores and central functions, which more than offset the effects arising from the structural decline of the book clubs channel. On a like-for-like basis, reported EBITDA came to -2.1 million euro versus -2.8 million euro in 9M15, as a result of a number of positive extraordinary items (0.4 million euro).

Designation of the Lead Independent Director

The Board of Directors, in accordance with the Corporate Governance Code, designated Independent Director Cristina Rossello as Lead Independent Director.

The Lead Independent Director remains in office for the same period as the members of the Board of Directors, thus until the Shareholders’ Meeting called to approve the financial statements for the year ending 31 December 2017.

The Board of Directors also approved the merger by incorporation, with no share exchange, of the wholly-owned company Banzai Media S.r.l., in accordance with the merger plan made available, as announced on 29 September, at the Company’s registered office, through the authorized storage mechanism 1info (www.1info.it) and on the Company website www.gruppomondadori.it (Governance section). The conclusion of the merger deed and the required entry in the Company Registry are scheduled by 15 January 2017, following expiry of the objection period for creditors pursuant to art. 2503 of the Italian Civil Code.

 The documentation relating to the presentation to analysts of the results for the first nine months of 2016 is made available to the public on the authorized storage mechanism 1info (www.1info.it) and on www.gruppomondadori.it (Investor section).

 Publication of the Interim Report on Operations at 30 September 2016

This Interim Report at 30 September 2016 was approved by the Board of Directors and is made available starting from today’s date at the Company’s registered office, on the authorized storage mechanism 1info (www.1Info.it) and on www.gruppomondadori.it (Investor 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.

Annexes (see pdf attached):

1. Consolidated financial situation
2. Consolidated income statement
3. Consolidated income statement – third quarter
4. Group cash flow
5. Glossary of terms and alternative performance measures used

[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 Annex 5 “Glossary of terms and alternative performance measures used” .

[2] On 1 January 2016, following reorganization, Digital Marketing Service activities and the central unit focused on the digital business of the Mondadori brands were transferred to Magazines Italy (previously included in Other Business, Corporate and Digital Innovation); the Area’s income statement was reclassified, for information sake, also in 9M15.

The Board of Directors of Arnoldo Mondadori Editore S.p.A., held on today’s date and chaired by Marina Berlusconi, examined and approved the interim report at 30 September 2015[1] presented by the CEO Ernesto Mauri.

GROUP PERFORMANCE AT 30 SEPTEMBER 2015

In the first nine months of 2015 consolidated net revenues totalled euro 817.1 million, down 4.1% against euro 851.9 million in the corresponding period of 2014.[2]

Consolidated EBITDA was up 21.3% at euro 48.8 million against euro 40.2 million at 30 September 2014, also as a result of the positive contribution of non-recurring items (specifically the capital gain generated by the transfer of 50% of the interest held in the Harlequin Mondadori joint venture). EBITDA net of non-recurring items shows profitability up by nearly one percentage point: EBITDA before non-recurring items was up 10%, from euro 43.6 million in the first nine months of 2014 to euro 48 million in 2015,[3] with an incidence on revenues rising from 5.1% to 5.9%.

This performance is the result of a rigorous and focused management policy that holds research and the continuous improvement of editorial products as its key objective. In particular:

• reduced incidence of the cost of goods sold by over 2% (from 41% to 38.7% of revenues), resulting in a better performance in all business areas and, specifically, in the Books area due to a more effective management of operating processes and to a targeted pricing policy, and, in the Magazines Italy area, due to effective publishing revision actions;
• the rising incidence of variable costs on revenues from 19.9% to 21.7% is mainly attributable to the Magazines France area and is referred to increased mail tariffs for subscriptions;
• the reduction in fixed costs (-8.8% against the first nine months of 2014) exceeded the reduction in revenues and was obtained through a cost containment policy implemented in all corporate areas;
• employee headcount at the end of the period (3,090 people) was down by 3.3% against the same period in 2014 due to the ongoing review of the organizational structures in Italy and in France (the reduction on a like-for-like basis would be equal to -5.6%).

Quarter after quarter, these results confirm the greater efficiency achieved by the Group as a result of the industrial and organizational review implemented over the last two years and achieved despite the difficult market scenario.

Consolidated EBIT in the first nine months of 2015 amounted to euro 30 million, up approximately 25% against euro 24 million of 2014 as a result of the abovementioned increased EBITDA, despite increased amortization and impairment deriving from the devaluation of the interest held in the Greek Attica Publications subsidiary (in the Magazines Italy area) equal to euro 4 million.

Consolidated profit before taxes is positive for euro 16.1 million against euro 6.2 million at 30 September 2014; in the first nine months of 2015, financial costs amounted to euro 13.7 million, considerably down against euro 17.8 million of the same period of the previous year, as a result of reduced average net debt for the period and average total cost of debt. Taxes in the period totalled euro 7.7 million (euro 8 million in 2014).

Consolidated net result from continuing operations, after minority interest, was positive for euro 6.6 million, up by over euro 10 million against a loss of euro 3.8 million registered at 30 September 2014. The result from discontinued operations in the first nine months of 2015, negative for euro 9.4 million, includes the period net result of the Radio Business area (up from euro -3.8 million at 30 September 2014 to euro -3.1 million), as well as the depreciation of Monradio operations for euro 6.3 million. The Group’s net result at 30 September 2015, after the result from discontinued operations, amounted to euro -2.8 million, up euro 4.7 million against the loss recorded in the previous year (euro -7.5 million), despite the inclusion of the depreciation of Monradio operations for euro 6.3 million.

The Group’s net financial position at 30 September 2015 was equal to euro -243.6 million, considerably up against euro-327.4 million of 30 September 2014 as a result of the Group’s cash generation over the last twelve months, equal to euro 83.8 million, deriving both from ordinary operations (euro 34.4 million) and extraordinary operations (euro 49.4 million).

At 30 September 2015, cash flow from operations in the last twelve months was positive for euro 59.9 million; ordinary cash flow (after the cash-out relative to financial charges and taxes for the period) was equal to euro 34.4 million, continuing the positive trend registered in the previous three quarters. Cash flow from extraordinary operations was positive for euro 49.4 million mainly as a result of the capital gain generated by the disposals completed in the period, amounting comprehensively to euro 56.4 million (of which euro 45.1 million include the transfer of 80% of Monradio and 50% of the Harlequin Mondadori joint venture).

BUSINESS AREAS

BOOKS
In the first nine months of 2015 the Trade Books market posted a 2% overall reduction, though showing a progressive improvement quarter after quarter.

In this context, Mondadori Group confirmed its leadership position with a 25% market share (25.9% at 30.09.2014; source GFK).

In the period the Group had 5 titles in the 10 top best-selling books in the first nine months of 2015 (Grey, La ragazza del treno, Cinquanta sfumature di grigio, La vigna di Angelica, Storia di una ladra di libri) and La ferocia by Nicola Lagioia (Einaudi) won the Strega Prize for 2015.

In the first nine months of 2015, revenues in the Books area amounted to euro 232.7 million, down 2.6% against euro 238.9 million of the same period in 2014. In particular:

• revenues from the Trade Books area registered a sharper decline than the market, also due to the performance of the large retail channel and the Paperback segment and, above all, due to a selective publishing policy aimed at increasing profitability;
• Educational Books posted growing revenues by 5.8% against the same period of 2014, mainly due to the management of museum concessions and the positive performance of school textbooks (+2%). In the period the Group confirmed its position as the third top player in the market of school textbooks.

Revenues from the download of e-books rose by 19% against the previous year, in line with the trend recorded in the first half of 2015, with a 7.3% share of digital sales on the total (5.3% at 30 September 2014).

EBITDA, net of non-recurring items and despite reduced revenues, remained essentially steady compared to the previous year, totalling euro 35.5 million as a result of a more effective management of operating processes deriving from the radical reorganization process and product revision implemented in the Trade Area, including actions aimed at reducing the number of titles and the average number of copies but still maintaining research and continuous improvement in the quality of the publishing programme.

Reported EBITDA for the area was equal to euro 39.6 million, up from euro 34.8 million recorded in the first nine months of 2014. It includes the capital gain equal to euro 7.6 million deriving from the transfer of the interest held in the Harlequin Mondadori joint venture (completed on 30 September 2015) and a higher incidence of restructuring costs compared to last year (euro 3.5 million in 2015 against 0.6 million in 2014).

MAGAZINES ITALY
In Italy, despite the negative scenario recorded in the market in terms of both circulation (newsstand channel in August: -7.2%; internal source) and sales from advertising (source: Nielsen in August: -3.6%), Mondadori confirmed its position as market leader with a 32% market share in circulation (slightly up from 31.8% recorded in August 2014).

Overall revenues of the Magazines Italy area amounted to euro 224 million, down by 3% (-5% on a like-for-like basis, net of the acquisition of 50% of Gruner+Jahr/Mondadori completed on 1 July 2015) against euro 231 million at 30 September 2014. In particular:

• revenues from circulation decreased by 3% (-7.3% on a like-for-like basis), also due to the rigorous policy adopted in the selection of the most profitable promotional initiatives in subscription and newsstand channel;
• revenues from advertising sales in the print+web segment of Mondadori brands in Italy dropped by 4% (-5% on a like-for-like basis); more specifically, advertising sales in the print media posted a 5.5% reduction on a like-for-like basis, while web advertising was up 0.3%, performing better than the reference market trend (-2.1% source: Nielsen, in August);
• revenues from add-on products decreased by 6.8% (-8.1% on a like-for-like basis), showing a progressive recovery in the third quarter.

EBITDA of the Magazines Italy area, net of non-recurring items, posted a remarkable improvement, going from a loss of euro 0.4 million to a positive value of euro 4.1 million,[4] 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 the implementation of targeted project selection policies the Group managed to maintain both its traditional publishing quality and its market leadership.

Reported EBITDA confirmed the growth trend, rising from euro 0.4 million to euro 3.3 million as a result of the above mentioned actions and of the progressive recovery of advertising sales, even if the previous year benefited from non-recurring items amounting to approximately euro 1 million, deriving from the contribution to Mediamond. The overall contribution of the international operations consolidated at equity was positive for euro 1.2 million, in line with the same period of the previous year.

Traffic data showed an overall audience rate equal to 6.7 million unique users; more specifically, the latest survey (August 2015) showed significant growth in the performance of Donnamoderna.com (+8%), Grazia.it (+13%) and Salepepe.it (+48%).

MAGAZINES FRANCE
In France, the magazines market showed a bearish trend both in terms of sales from advertising, down 8% (source: Kantar Media, data at July) and circulation, which fell by 3.9% at newsstands (internal source, data at August excluding the extraordinary edition of Charlie Hebdo in February).

In the first nine months of 2015, revenues from Mondadori France equalled euro 246.8 million, down 2.9% against euro 254.2 million of the same period in the previous year, mainly confirming the trend recorded in the first half of 2015.

Revenues from circulation (accounting for approximately 72% of the total) posted a 2.4% downturn against the previous year. In particular:

• the newsstand channel recorded a 6.2% reduction against the first nine months of 2014 (period including the publication of the “Hollande scoop” on Closer);
• the subscription channel instead posted a 0.2% increase.

These positive performances were made possible thanks to the constant attention paid to publishing quality and innovation.

Revenues from advertising sales were down 6.1% against the same period of the previous year, but performance differed between offline and online products: digital advertising was up (+24%) and now represents more than 14% of total advertising revenues, partially offsetting the drop in traditional print advertising (-9.8%). In this context Mondadori France confirmed its position as second top player in the magazine advertising market, with a market share of 11%.

EBITDA, net of non-recurring items, was equal to euro 22.1 million, down by 4.7% against the previous year, mainly as a result of increased mail tariffs and the extraordinary contribution, included in the same period of 2014, of the “Hollande scoop” published in January 2014 by the magazine Closer.

Mondadori France continued the process for the rationalization of structures and the implementation of the policy targeting editorial cost containment. These actions are expected to be continued through 2015 with a view to further adjusting the organization to the changes and to sustaining profitability, while keeping its ability to make investments in quality and in the progressive digitalization of editorial activities.

Reported EBITDA, equal to euro 20 million, was down 10% against the first nine months of 2014 (euro 22.3 million), due to higher restructuring costs for approximately euro 1.1 million.

The total number of readers of Mondadori France magazines reached 8.1 million unique users, up approximately 28% against 2014, also as a result of the progressive digitalization of the editorial teams.

RETAIL
In the first nine months of 2015, the Retail area posted revenues of euro 131.6 million, down by 9.2% against euro 144.9 million of the same period of the previous year, also as a result of the transfer (completed in 2014) of the flagship store located in corso Vittorio Emanuele in Milan (whose contribution in the first nine months of 2014 was equal to euro 10.4 million).

Books represent the predominant product category (accounting for 77.5% of the total) and outperform the market of reference on a like-for-like basis by approximately 1 percentage point. As for the distribution channels, the following is worth mentioning:

• direct bookstores: -4.3% (+1.8% on a like-for-like basis);
• franchised bookstores: slight downturn in the revenues of the book category and a more substantial drop in the non-book segment;
• megastores: dropping revenues as a result of the transfer of the flagship store of corso Vittorio Emanuele in Milan; on a like-for-like basis the performance of the book segment was positive (+7.8%) and consumer electronics products were back on a growing trend;
• in the online segment revenues were down comprehensively by 4.2% (-0.6% in the book segment).

EBITDA, net of non-recurring items, was equal to euro -3.1 million, sharply up against euro -5.4 million of the corresponding period in 2014.

Two main causes drove this result:

• the improved product margin, especially in the book category (thanks to actions aimed at network and format review and promotion containment activities) and in consumer electronics thanks to a more targeted and well-studied product assortment focused on accessories and services;
• the extended implementation of cost reduction measures, which resulted in a lower incidence of operating costs and overhead.

Reported EBITDA increased substantially in the period, by euro 3.2 million against the same period of the previous year (euro -6 million including restructuring costs for euro 0.6 million), totalling euro -2.8 million.

DIGITAL
In the first nine months of 2015 total revenues from digital activities posted an 8.4% increase against 30 September 2014 (euro 38.3 million against euro 35.3 million).

The purely digital activities that cut across all business areas posted increased revenues by 11.1% against the first nine months of 2014; revenues from digital marketing service activities were stable.

The incidence of digital activities on the Group’s total revenues was equal to 4.7% against 4.1% recorded at 30 September 2014.

2015 FULL YEAR OUTLOOK
In the third quarter of 2015 the Group continued the non core assets disposal plan, which, increasing the availability of the consolidated financial resources, also contributed to supporting the future development of the Group and its competitive position consistently with the strategic guidelines announced. In line with the Group’s focus on core business, the Group recently signed an agreement to acquire RCS Libri. This transaction will enable the Group to consolidate its presence in Italy in the Trade and Educational segments and in illustrated books at the international level.

Based on the Group’s positive performance in these first nine months and on the ongoing optimization of operating processes and cost structure, as well as on the measures aimed at rationalizing the portfolio of activities and 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 the Group level.

In the light of the aforementioned positive outlook, the recently completed disposals and the recovery of investments in the market, the Group’s net financial position is also expected to significantly improve against 2014 year end.

§

The documentation relating to the presentation of the results for the first nine months of 2015 to analysts 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.

§

INTERIM REPORT ON OPERATIONS AT 30 SEPTEMBER 2015
This interim report at 30 September 2015 was approved by the Board of Directors and is made available starting from today’s date at the Company’s legal offices, on the authorized storage device 1info (www.1Info.it) and on www.gruppomondadori.it (Investor Relations).

[1] On 30 September 2015 the transfer of 80% of the share capital of Monradio S.r.l. to R.T.I. S.p.A. was completed for a price equal to euro 36.8 million. Pursuant to IFRS 5 (“Non-current assets held for sale”) the Group’s radio business was qualified as “discontinued operations” and as such it was entered in the tables at 30.09.2015.. As a result, in the income statement of the first nine months of 2015 and of 2014 included for comparison purposes, the results achieved in the radio business area in the period, along with the depreciation of operations made in order to bring their value in line with the fair value resulting from the offer, were classified under “Result from discontinued operations”.

[2] The Magazines Italy area includes revenues generated from Gruner+Jahr/Mondadori consolidated since 1 July 2015 (euro 5.3 million) following the acquisition by Mondadori of 50% of the joint venture; net of this variation, at the Group level, the reduction in revenues would be equal to 4.7% in line with the performance recorded in the first half of 2015 (-4.8%).

[3] The consolidation of Gruner+Jahr/Mondadori as of 1 Juy 2015 contributed positively with euro 0.7 million.

[4] of which euro 0.7 mlllion generated from the consolidation of Gruner+Jahr/Mondadori

The Board of Directors of Arnoldo Mondadori S.p.A. met today, under the chairmanship of Marina Berlusconi, to examine and approve the interim report for the first nine months of the year to 30 September 2014, as presented by the Chief Executive, Ernesto Mauri.

THE MARKET SCENARIO
The international macroeconomic situation continues to be characterised by a progressive slowdown in emerging economies and relative stability in mature markets.

The sectors in which the Mondadori Group operates have begun to show, in both Italy and France, progressively less marked declines that in recent periods.

GROUP PERFORMANCE IN THE PERIOD TO 30 SEPTEMBER 2014
The Mondadori Group’s figures to 30 September 2014 confirm, with a more marked acceleration, the improvement and recovery in profitability already seen in the first half of the year; in particular, the third quarter, with revenues essentially in line with those of the previous year, recorded a net profit for the first time after a prolonged period (seven quarters) of negative results.

In this market context, during the first nine months of 2014 the Group recorded consolidated revenues of €859.6 million, a fall of 4.8%, taking account of the contribution of the advertising sales activities to Mediamond S.p.A., finalised in January 2014 (-7.7% on the €931.2 million recorded on 30 September 2013).

The fall in revenues was contrasted also by higher reductions in operating costs, down by some €86 million, which made it possible to significantly improve EBITDA, which was up to €36 million from the €8.9 million of the previous year.

A contribution of over 50% was made to this performance by the Magazine area (Italy and France), the result of a combination of improved efficiency through action taken on the product, reductions in operating costs and lower restructuring charges.

Consolidated operating profit came to €18.8 million, compared with a loss of -€9.6 million in 2013, with amortizations and depreciations of tangible and intangible assets of €17.2 million (€18.5 million in the first 9 months of 2013).

Profit before taxation amounted to €1 million, compared with a loss of -€26.2 million in the previous year; during the period, financial charges amounted to €17.8 million (€16.6 million in the same period of 2013).

After minority interest, there was a consolidated net loss of -€7.5 million, compared with a loss of -€32.3 million for the same period of 2013.

The company also recorded a positive cash flow over the last twelve months of €49.5 million, deriving from a positive ordinary cash flow of €9.8 million and an extraordinary flow of €39.7 million, the latter mainly the result of a capital increase approved in June and the impact of the contribution of advertising activities to Mediamond.

Consequently, on 30 September 2014, there was a marked improvement in the net financial position which totalled -€327.4 million, compared with -€363.2 million at the end of 2013 (-€376,9 million on 30 September 2013).

RESULTS OF THE BUSINESS AREAS

· BOOKS

There was a continuation of the negative trend of the first half of the year in the trade books market, in both the bookstore and large-scale retail channels, with third quarter revenues down – compared with the same period of 2013, albeit less marked – by 0.9% in terms of value (Source: Nielsen, to September).

Over the nine months, the trade book market was down by 4.3% in terms of value (Source: Nielsen, to September). The fall, always in terms of value, was more marked in the large-scale retail channel (13.5%, Source: Nielsen, to September).

Total revenues generated by the Book area in the first nine months of 2014 amounted to €238.9 million, an increase of 2% on the €234.2 million of same period of 2013. There was also a positive trend in the third quarter, with an increase, compared with the same period of the previous year, of 10.2%.

The publishing houses of the Mondadori Group also confirmed their overall leadership with a market share of 26% (excluding large-scale retail): during the reporting period, the Group published 11 of the titles in the list of the 25 best-selling books.

In the trade books area, revenues in the first nine months of the year have been affected by both the dynamics of the market and the different publishing schedule that foresees the publication of titles by the most established authors in the latter part of the year.

September saw the arrival of the first of the most significant titles due for publication before the end of the year, Ken Follett’s I giorni dell’eternità, which was an immediate absolute best-seller (120,000 copies in just 15 days).

With regard to the digital e-book market, the Group’s share remains stable at around 40%, with an offer of some 8,000 titles.

In the educational area, the Group recorded a rise in revenues in the first nine months of 2014, compared with 2013, as a result of a positive performance in primary school adoptions.

There was also an increase in revenues in the museum area thanks to the excellent performance in the management of museum concessions, the organisation of exhibitions and relative publishing activities, as well as the management of museum stores.

EBITDA was down to €35.8 million from the figure for 2013 (€39 million) due to the different mix in revenues resulting from the significant rise in third-party distribution with lower percentage profitability; in particular, the educational area saw an increase in gross operating profit of more than 10% compared with the previous year.

· MAGAZINES ITALY

In the third quarter of the year there was a further downturn in the markets of reference compared with the same period of 2013, albeit less marked than in the first two quarters: in the reporting period there was a fall in circulation of 8.7% (internal figures to August) and advertising was down by 8.7% (Source Nielsen, to September).

In this context, the Magazines Italy area saw a continuation of the trend of the first half of the year with a better-than-market performance in both circulation and advertising. Mondadori also confirmed its leadership position with a market share (in terms of value) of 32.2%, up from 30.5% on 30 September 2013.

Total revenues for the Area amounted to €227.5 million, a fall of 10.1% on the €253.1 million of 2013 (-8.7% on a like-for-like basis, taking account of titles closed and sold).

The revenues generated by Mondadori magazines were affected by the negative trend in the markets of reference but, nevertheless, recorded a better-than-market performance.

In particular:
– circulation revenues were down by 8.4% (-6.2% on a like-for-like basis);

– advertising revenues for Mondadori brands (web + print) were down by 7% on the previous year;

– while revenues from add-ons were down compared with the first nine months of 2013, there was an increase in the percentage of profitability;

– the Mondadori web sites saw revenues increase by 4.1%, compared with the same period of 2013, thanks to the performance of Grazia.it (+34.9%) and Donnamoderna.com (+1.1%), in an Internet market that recorded average growth of 0.1% (Source: Nielsen, to September). There was also a positive performance in terms of traffic compared with 2013 for Grazia.it (+49%), Donnamoderna.com (+34%) and Panorama.it (+9.5%).

Despite the fall in revenues, there was a marked improvement in EBITDA, which went from -€9.7 million to +€4.2 million.

Considering the efficiencies deriving from the action taken on the product and efforts to reduce operating and structural costs in the Magazines Italy Area, along with the positive impact of the reorganisation of advertising sales in Italy, in the first nine months of the year the Group saw an overall improvement in aggregate EBITDA for the two activities of €19.2 million.

The revenues of Mondadori Pubblicità amounted €7.6 million and cannot be compared with the same period of 2013 due to the contribution of the advertising sales activity to Mediamond, the 50-50 joint-venture between Mondadori Pubblicità and Publitalia ’80.

International Activities

In the first nine months of the year, Mondadori International Business S.r.l. recorded an increase in revenues compared with the same period of 2013 of around 6%, thanks to the consolidation of the editions of the Grazia International Network, now operating in 23 countries; the launch, in November 2013, of the first international licence for the male lifestyle title Icon, and advertising sales in Italy for the Spanish daily El Pais, since October 2013.

The Grazia International Network received an additional boost with the very recent launch of Graziashop.com, an integrated e-commerce fashion platform that will enable the Grazia community around the world, made up of 17 million readers and 16 million unique users per month, and fashion enthusiasts everywhere, to buy selected items from many of the world’s most fashionable boutiques.

• MAGAZINES FRANCE

During the reporting period, the markets of reference in France continued to record a downward trend, both in newsstand circulation (-8% internal figure to August) and advertising sales (-8.6%, internal re-elaboration of Kantar Media data to August). In this context, Mondadori France recorded a better-than-market performance in circulation.

In the first nine months of 2014 the consolidated revenues of Mondadori France came to €254.2 million, down 3.3% on the €262.9 million at 30 September 2013; on a like-for-like basis, taking account of the sale of Le Film Français at the end of 2013 and the different number of issues of some titles, the downturn was just 2.3%.

There was a split in advertising sales revenues between print and the web; print was down by 12.5% (-10.3% like-for-like), but improving when compared with the first half of the year; while the web grew by 36% (like-for-like).

The aggregate figure for advertising revenues therefore shows a downturn of 6,5% compared with the same period of 2013.

Circulation revenues, that make up 70% of the total, were down by 1.4% (-1% like-for-like):

– sales from the newsstand channel fell by 5.5% (5.4% like-for-like), compared with a reference market that was down by 8%, also as a result of the significant performance of Top Santé (+19%), Pleine Vie (+10%) and Closer (+6%).

– subscription sales were down by 1.5% (-0.7% like-for-like).

In the first nine months of 2014 digital activities, on a like-for-like basis, saw a significant rise in revenues (+37%), due to the development of NaturaBuy, advertising sales and the sale of digital copies.

Despite the fall in revenues, there was a 2.3% increase in the Area’s EBITDA (€22.3 million compared with the €21.8 million of the first nine months of 2013), also as a result of the rationalisation of the structure and reductions in editorial and industrial costs and overheads. This process, begun in previous quarters, will continue with a view to adapting the organisation to the transformations taking place in the market.

Since January 2014 digital advertising sales have been managed by specially created cross-title structures.

Some of the web sites have been updated and further developed with new functions for tablets and smartphones: these changes have been positively received by the audience that has now reached 6.6 million unique users, +26% compared with 2013 (Source: Nielsen, to August), with a peak of 7.8 million in January; on mobile there was an increase in unique users of 77% on 2013 (Source: Nielsen, to July).

Activities and efforts continued to create new efficiencies with a plan for voluntary redundancies that will reduce the size of the staff, and a plan to have the whole staff on a single site in the first months of 2015.

• RETAIL

The retail continued to feel the effects of the weakness in consumer spending. In this context, the channel that was best able to contain the fall in revenues was the chains, unlike independent book shops and large-scale retailers.

The overall revenues of the Area continued to suffer from the stagnation in consumer spending and in the first nine months of the year amounted to €144.9 million, a 5.5% fall on the €153.4 million of the same period of 2013, despite some signs of a recovery compared with the first half of the year, which was down by 8.9% on the previous year.

A breakdown of revenues by product type shows that:

– books were the preeminent product, accounting for 75% of the total: in fact, book sale were 9 percentage pints better than the market of reference (-4.3% in terms of value), enabling Mondadori Retail to increase its market share from 13.4% to 14.7%;

– sales of consumer electronics continued to fall faster than the sector in general;

– the book club channel continued its negative trend, with a downturn in revenues in the period of around 20%;

– online sales, on the mondadoristore.it web site were up by around 4%.

The trend in book sales helped to mitigate the negative impact on the Area’s EBITDA (-€6 million, compared with -€6.8 million in the first nine months of 2013), deriving from the fall in revenues from the book clubs and sales of consumer electronics.

When compared with the first nine months of 2013, the figure, if broken down by type of outlet, shows an improvement in directly-owned bookstores, stable for franchise outlets and in decline in the multicenters.

Given the ongoing recession, actions, already implemented in the first half, continued with the aim of recovering profitability.

In particular:

– progressive revision of the network, with the rationalisation of outlets and formats, in order to develop a new concept bookstore of the future;

– efforts to improve the assortment, supported by promotional activities, communication and advertising;

– the continuation of activities for the reorganisation of operating processes and staffing structures.

Mondadori Store was recently awarded Italy’s 2014-2015 Insegna dell’Anno (Retailer of the Year) as the bookstore chain offering the best customer experience in terms of price, assortment and service.

• RADIO

After a decidedly positive start, the radio market in the first nine months of 2014 experienced a downturn that led to a fall of -3.1% (Source: Nielsen, to September).

In this context, advertising sales for R101, in the first nine months of 2014, confirmed the trend of the first half, performing worse than the market.

The radio’s revenues, including those related to the web site and other initiatives, were down by 12,4% to €7.8 million (€8.9 million in the first nine months of 2013).

EBITDA (-€4.2 million compared with -€3,1 million in the first nine months of 2013) was affected by the negative trend in advertising sales and higher promotional and communication costs during the station’s re-launch phase in the early months of the year.

The main actions taken during 2014 to build the audience and offset the negative trend in the market, included:

– the repositioning of R101, partner of the concerts of leading Italian and international artists;

– an institutional television campaign aimed at strengthening the station’s brand awareness;

– the redesign of the layout and content of the r101.it web site and the release of the station’s new app;

– the enhancement of the music offer with the launch, with a view to creating an integrated system with the radio, of R101 TV, channel 66 on the digital terrestrial platform.

DIGITAL

In recent months the Digital Innovation area has continued its efforts aimed at consolidating the central structure, updating the platform for the management of users and contacts, as part of the CRM system, and technological enhancements aimed and a broader valorisation of the Group’s editorial content.

During the reporting period, revenues from purely digital activities in Italy and France rose, overall, by 8.7%, while revenues from marketing services (Cemit) were down compared with the first nine months of 2013.

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Information regarding personnel

At 30 September 2014, permanent and temporary staff in the companies of the Group, totalled 3,194, a fall of 242 (-7%) compared to the end of 2013 and 345 (-9.7%) compared with September 2013.

Net of extraordinary operations that have modified the scope of the Group, the reduction in headcount was 6.3% compared with the end of 2013 and 9% compared with the previous twelve months.

In the first nine months of the year, labour costs, net of extraordinary operations and lower restructuring costs, were down by 8.1% compared with 2013.

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Financial position and equity

The net financial position at 30 September 2014 improved by €35.8 million compared with 31 December 2013 and by €49.5 million, compared with the same period of the previous year.

Over the past year, there was a positive ordinary cash flow of €9.8 million as a result of the optimisation of the management of net working capital, which offset outflows for investment.

The first nine months of the year, also affected by the seasonal nature of the sector, recorded a normal cash absorption of €8.6 million (-€82.5 million in the first nine months of 2013) and an extraordinary cash flow of €44.4 million, of which €31.1 million resulting from the capital increase concluded in June; the net balance of the acquisition and disposal of assets takes account of the effects of the contribution to Mediamond and an advance amounting to €12 million, relating to the sale of an asset, the completion of which is expected by the end of the year.

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FULL YEAR 2014 OUTLOOK

In a market that continues to be characterized by signs of weakness, although less marked than in the first half of the year, the actions taken by the Group – regarding the strategic rationalisation of the business portfolio, along with the constant commitment to reducing both operating and structural costs, as well as the excellent performance recorded by the Magazine Area, in Italy and France – have enabled the Group to improve during the year its capacity to generate financial resources.

In view of the current context and the above-mentioned actions, which will continue also in the last quarter of the year, for the full year 2014, it is reasonable to confirm the forecast, already announced, of an EBITDA for the Group higher than that of 2012, and of a consolidated net result at breakeven.

In line with the trend recorded in the first nine months of the year, it is expected by year end a significant improvement in the Group’s Net Financial Position compared with 2013.

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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.

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The documentation relating to the presentation of the results to 30 September 2014 is available from the authorised storage system 1info (www.1info.it) and www.borsaitaliana.it and www.gruppomondadori.it (in the Investor Relations section).

PUBLICATION OF THE INTERIM REPORT FOR THE PERIOD TO 30 SEPTEMBER 2014
The interim report for the period to 30 September 2014, duly approved by the board of directors, will be available from today at the company’s headquarters, the authorised storage system 1info (www.1info.it), www.borsaitaliana.it and www.gruppomondadori.it (in the Investor Relations section).