FY

Consolidated annual report and results for the year to 31 December 2011

  • Consolidated revenues of €1,509.8 million: -3.1% on the €1,558.3 million in 2010
  • Gross operating profit of €130.4 million: -7% compared with €140.2 million in 2010
  • Consolidated net profit of €49.6 million: +17.8% compared with €42.1 million in 2010

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  • Proposal to contribute the net profit of the parent company to the extraordinary reserve

The Board of Directors of Arnoldo Mondadori S.p.A. met today, under the Chairmanship of Marina Berlusconi, to examine and approve the consolidated balance sheet and management report for the year to 31st December 2011 as presented by the Group’s Deputy Chairman and Chief Executive, Maurizio Costa.

MARKET SCENARIO

In the second half of 2011 the global economic situation, and in particular in the countries in the euro zone, continued to shown strong signs of difficulty. In Italy the economy outlook deteriorated significantly during the autumn, marking the beginning of recession. This has had a negative impact on industrial production and investment, resulting in a consequent decline in consumer spending. Also in France the main macroeconomic indicators in 2011 showed a negative trend compared with the previous year.
The macroeconomic performance in the markets of reference for the Mondadori Group, in Italy and France, was affected by these negative trends, with a significant deterioration in the final quarter.

GROUP PERFORMANCE FOR THE YEAR ENDED 31 DECEMBER 2011

In this context, the Mondadori Group ended 2011 with consolidated net revenues of €1,509.8 million, a fall of 3,1% on the €1,558.3 million of 2010.

Consolidated gross operating profit came to €130.4 million, a fall of 7% compared with the €140.2 million of the previous year, as a proportion of revenues 8,6% compared with 9% in 2010. Excluding non-recurring positive items and investments in the development of the digital business, the reduction in gross operating profit was 3.3%.

Consolidated operating profit amounted to €103.8 million, down 9.1% from the €114.2 million in 2010, with depreciation and amortization of tangible and intangible assets of €26.6 million (€26 million in 2010).

Consolidated pre-tax profit came to €82.7 million, down 8.4% on the €90.3 million in 2010, with lower borrowing costs of €3.4 million and higher investment charges of €0.6 million.

Consolidated net profit came to €49.6 million, up 17.8% compared with the €42.1 million for the previous year, during which, however, there was an additional tax charge for previous years’ taxes of €8.7 million.

Gross cash flow for 2011 amounted to €76.2 million, compared with €68.1 million in 2010.

The Group’s net financial position showed a deficit of €335.4 million, an improvement of €7 million from the end of 2010, after dividend payments of €40.3 million during the year.

Information concerning personnel
On 31 December 2011 employees, permanent and determined, pursuant to the Group companies, consists of 3,664 units compared to 3,649 at the end of 2010.
2011 saw the conclusion of early retirement plans authorised by the government, which have seen the exit over two years of 233 employees, including both publishing and journalistic staff. There was a similar situation in France where the implementation of the so-called “social plan” has resulted, over two years, in the departure of 74 employees.
Overall, the restructuring plan announced in 2009, of which the above-mentioned ministerial programme was an important but not exclusive part, has been successfully completed.

THE BUSINESS AREAS

  • BOOKS

In 2011, the trade book market in Italy has remained stable in terms of copies sold, while there was a decline of 1.4% in terms of value (source: Nielsen).
As regards the distribution channels, the slowdown of large-scale retailers was particularly critical, where the shortfall over the year was -7.9%, with a peak -20.3% in December. This figure is even more striking when one considers the performance of the ten best-selling titles: in terms of value in 2011 saw a decline of 48% in the top ten compared with the same figure as recorded in 2007.

In this context, Mondadori confirmed its leadership in the trade book market with a market share of 26.5% in terms of value (source: Nielsen).
In particular, 43 titles featured among the top 100 bestsellers of the year. Among these, Le prime luci del mattino by Fabio Volo, Nessuno si salva da solo by Margaret Mazzantini, the Steve Jobs biography by Walter Isaacson, published by Mondadori, and Tre atti e due tempi by Giorgio Faletti, published by Einaudi, respectively, were first, fourth, eighth and tenth in the overall rankings of the year.

Revenues generated by the Books area amounted to €389.1 million, a fall of 6% compared with the €413.9 million in the previous year.
Gross operating profit, despite the lower revenues cited above, was substantially in line with the high level of 2010, thanks to a focused policy of costs controls and the positive contribution of subsidiaries.
In the Paperback sector the most significant initiative was the launch of new series called NumeriPrimi °, which involved all the publishing houses of the Group – Edizioni Mondadori, Einaudi, Piemme, Sperling & Kupfer – and the publication of the most successful titles in large format and quality paperbacks.
In the first ten months, NumeriPrimi° achieved sales of two million copies, with particularly success in the large-scale retail channel.

2011 was undoubtedly important for Books in terms of digital publishing, with the normal operation of Mondadori’s digital distribution platform and, in the second half of the year, the arrival in the Italian market of the major international e-book retailers. During 2011 Mondadori introduced over 3,000 e-books, recording quarter of sales from the Mondadori platform.
The Christmas period saw the highest average sales of the year with peaks of more than 4,000 downloads per day. Among the best sellers, also in the digital format, were new titles by Walter Isaacson, Fabio Volo, Giorgio Faletti and Margaret Mazzantini, as well as backlist titles such as Miglio 81 by Stephen king.
The objective is to digitise the entire catalogue of the group, around 15,000 titles by 2014.
In the school textbooks segment, the digitization programme of the catalogue is already 90% complete, with about 1,300 titles already available in e-book format.

  • MAGAZINES ITALY

The current challenging macroeconomic environment continues to have a strong impact on the consumer magazine market in Italy, adversely affecting advertising revenues (-3.7% magazines; source: Nielsen), circulation (- 5% in terms of copies and -7.2% on a comparable basis; internal figures) and add-on sales (-0.5% in terms of value; internal figures). In addition to the effects of the economic situation are the structural changes, related to the digital evolution that is underway, which is having a negative impact on print products, to which especially younger readers are showing less and less interest.
Mondadori has acted to address the situation and has to achieved a performance that is better than the competition and strengthened its position as market leader (33.3%), as can be seen from the continued growth of the number of readers of the Group’s weekly and monthly titles that total some 35 million, or 82% of the total (Audipress 2011/III). In particular, the latest Audipress survey shows that Mondadori’s “audience” was up by 1.6% on the previous period.
In a markedly recessive context, the performance of the Magazines Italy area saw a fall in total revenues of 2.7%, from €471.40 million to €458.8 million.
In particular, Mondadori titles suffered most from the recessive phase in the market and ended the year with a shortfall in revenues of around 5%, due to a reduction in:
– circulation revenues (-4.7%), the effect of a sharp decline in subscriptions (-15%) and fewer copies sold with add-ons (-11%);
– revenues from sales of add-ons (-2.4%), mainly because of a decline in sales of music products. However, the Group’s leadership in the segment (35%) was maintained, with continued high level of profitability and in line with the previous year;
– advertising revenues were down by 3.8%, with a particularly poor performance in the weekly family titles and newsmagazines.This was partly offset by a positive trend in women’s magazines.
The results show, however, a significant increase that is also attributable to the capital gain realized on the sale of the stake in Hearst Mondadori Editoriale Srl. Even excluding the aforementioned non-recurring items, there was still growth in gross operating profit.

Properties
During 2011, Mondadori took a series of important steps with the Group’s web properties associated with the main magazine titles, achieving significant results, both in terms of advertising sales and traffic.
The results for 2011 should therefore be considered positive, with an improvement in all indicators at rates higher than the market, in particular advertising (+47.7% compared with +12.3% for the market as a whole; Nielsen) and growth in the number of unique users, over 6.6 million, an increase of 23.5% on the previous year. This trend benefited from positive performances by www.grazia.it (+73%), www.panorama.it (+63%) and www.donnamoderna.com (+27%). Also of note was the rapid growth of www.panoramauto.it, which was launched in the second half of the year.

  • ADVERTISING

Market trends in advertising spending in Italy in 2011 saw an overall fall of 3.8% (source: Nielsen), confirming that the global financial crisis and the downturn in GDP have had a noticeable effect on all media with the sole exception of the internet.
Television was down by 3.1%. There was a significant decline in Radio (-7.8%) and newspapers (-7.7%), while magazines saw a smaller decline of -3.7%, with a particularly bad performance in the final quarter (-8.2%).
The slowdown in advertising has involved all the main sectors of the magazine advertising market except cosmetics and fashion.

In 2011 Mondadori Pubblicità recorded an overall fall in sales compared with 2010, ending the year with revenues of €219.9 million, compared with €233.9 million in 2010.
In terms of the magazine advertising, the fall in sales was due to the particularly negative performance in certain sectors such as FMCGs and interiors. In particular, the weeklies were hit hard, despite the good performance of Grazia (+3.2%) and Tu Style (+11.1%) and the substantial stability of Donna Moderna, the other weeklies of the Group were down on the previous year.
For monthlies meanwhile, the decline was less marked (-1.2%), thanks to the resilience of interiors and cooking titles and to the success of Panorama Icon, which was launched in April 2011 and enabled the Group to strengthen its position in the male fashion segment and Mondadori Pubblicità to offer a product which meets the needs of companies operating at the high-end of the market.
During 2011 Mondadori Pubblicità maintained a continuous focus on the trend in average prices compared to 2010, with stability for Donna Moderna, Grazia and Tu Style among the weeklies, and growth in the interiors and cooking monthlies, sometimes at the expense of volume.

Radio advertising revenues (R101 and Radio Kiss Kiss) grew by 0.7% due largely to the performance of the new organisational model of Mondadori Pubblicità from May 2011; there was a particularly positive trend for R101 in a market that saw a fall in spending of 7.8% (source: Nielsen).

In the Internet market the excellent results achieved by Mediamond, with overall growth of 56% compared to 2010, was the result of a positive performance by the main sites of the Group and the considerable success of TgCom (+59%) and Sport Mediaset (+30.2%) of the RTI Group.
Overall, the Mediamond portfolio was enhanced in 2011 with the addition of www.ilgiornale.it with sales that were above expectations.
After just two years Mediamond now sells advertising for vertical 30 sites, with 11.5 million unique users per month, as well as a considerable number of case studies with leading companies in its sectors of reference.

  • MAGAZINES FRANCE

The magazine market in France, both in terms of circulation and advertising revenues, suffered a marked slowdown in the last part of the year, although less significant than in Italy. During the year, advertising, in terms of value was, essentially unchanged compared with the previous year while circulation saw a fall of 4.2%.
In this contexts, Mondadori France recorded growth in earnings thanks to positive performances by all of its titles.

The consolidated revenues for the year came to €348.1 million, up 1.1% on the €344.2 million of the previous year.
Gross operating profit was up by 16.8% on the previous year, thanks to a good performance in magazines and, in particular, the improvement of Grazia, as well as lower manufacturing costs and overheads.

Advertising revenues were up 3.3% to €85.4 million. This excellent performance is due mainly to strong growth in the upscale women’s titles, in particular the weekly Grazia (+34%) and the monthly Biba (+10%), which now account for 33.6% of total advertising revenues (27.2% in 2010).
It should also be noted that Grazia is now the second largest magazine in the market in terms of advertising pages (2,495 pages, up 39%). Even in terms of circulation, Grazia confirmed its success since the launch, growing by 3.1% to 184,000 copies.

In terms of circulation, which accounts for 69% of the total, revenues increased by 1.3%, to €239.5 million,, of particular relevance was the subscription channel, which accounted for 32.5% of total sales.
During the year a number of activities were launched focused on innovation and quality, key factors in the positive performance achieved in terms of circulation: in particular the launch of new formats for seven titles and the launch of the quarterly Guerres & Histoire.
The most successful titles include Modes & Travaux, which has become the leading title in its segment; among women’s magazines, Top Santé and Closer, which have strengthened their positions; in the popular science segment, Science & Vie and Science & Vie Junior continue to grow.
Mondadori France is the leader in the car sector with the weekly magazine Auto Plus and the bimonthly Auto-Journal.
Biba recorded the strongest growth among all of its competitors, with 326,000 copies (+4.5% compared with 2010).

International Activities
Despite some signs of a slowdown due to the ongoing global economic situation, the International Activities area confirmed the positive trend of previous years. Despite difficulties in terms of both consumer and advertising spending, the Group has responded with continuous expansion and geographic diversification and consolidating its position in major emerging markets such as China, Russia and the Asian market. The annual turnover of International Activities was over €160 million. Spearheading this growth is Grazia, a brand with a strong international success that now forms a network of twenty editions with editions in four continents.

Licensing: the end of 2011, there was a total of 27 international editions: seventeen of Grazia, seven of Casaviva, one of Flair, one of Interni, and one of Sale&Pepe. The different editions of Grazia generated a combined revenues of €107 million (+20% compared with 2010) with expectations of further growth for 2012, also thanks to the launch of new editions.

Advertising: thanks to a dedicated team focused on the fashion and interiors segments, in 2011 on the Italian market Mondadori generated advertising revenues of €6.8 million (+49% compared with 2010).

With regard to investments, Mondadori in active in China with its joint venture Mondadori SEEC Advertising Co Ltd: Grazia China, launched in February 2009, has already proved a great success (with revenues of €7.1 million, +87% compared with 2010). Given the rapid growth and potential of the Chinese market, Mondadori has several new projects currently under consideration, the first of which should be announced in the coming months.
Grazia Russia, which celebrated its fifth anniversary in March, during 2011 recorded revenues of €4.1 million, up 20% on an already positive 2010.
Despite the dramatic economic crisis in Greece, Attica Publications expects to be able to derive competitive advantages over its competitors.

  • DIRECT

The Direct Area, which manages the retail and direct marketing businesses, conducts its activities through:
– a network of outlets across the country, comprising at the end of 2011 of 628 outlets (22 directly operated and 307 franchised book shops; 9 Multicenters; 213 Edicolè franchises, 18 directly managed Book club and 59 franchised stores):
– Cemit, the market leader in diversified strategies for the design and development of one- to-one communication and CRM.

Revenues in 2011 came to €265.5 million, a fall of 1.4% compared with the €269.2 million of 2010. The figures are not comparable due to changes in the scope, including the acquisition of the whole of Mondolibri SpA. On a like-for-like basis, the shortfall would be around 5% compared with the previous year.

The Multicenter outlets and bookshops, clubs and directly managed outlets, were all penalised by marked downturns that were as high as 12%, only the franchises and Edicolè outlets maintained a positive trend in revenues.
Also Cemit, which suffered significantly from the overall decline in investments in direct marketing, ended the year with a fall in revenues of 24%.
Faced with these difficulties, the company has increased its focus on costs, which explains the merger of Mondadori Franchising S.p.A. and Mondolibri S.p.A. with Mondadori Retail S.p.A., which changed its name to Mondadori Direct SpA, in the middle of the year.

  • RADIO

R101, the Group’s radio station, generated revenues of €16.3 million, up by 12.4% compared with the €14.5 million of 2010, thanks to the performance of the car, food, media/publishing and telecommunications sectors, which account for approximately 50% of total turnover.
The market figures for total Radio advertising in 2011 however showed a fall of 7.8% compared with 2010 (source: Nielsen).

The increase in revenues for R101, as well as the alignment of the publisher’s share with other businesses of the Group, is also attributable to the performance of the sales network, which passed from a dedicated network to the more general representation of the entire sales force of Mondadori Pubblicità, which facilitated the entry of many new clients.

  • DIGITAL

Revenues generated by the Digital Area came to €17.2 million, an increase of 63.8% compared with the €10.5 million of 2010. The turnover from digital publishing, e-commerce, diversified activities and IT infrastructure development and databases, amounted to €44.2 million, an increase of 23.5% on 2010.
The digital publishing activities primarily refer to e-books, self-publishing, online bool clubs, properties and digital advertising.

In e-commerce in 2011, the business was mainly through www.bol.it sites, which are focused on the sale of books, CDs, DVDs and e-books, which recorded growth in the number of orders (+23%) and the number of unique users (+42%), and www.abbonamenti.it, which manages both print and digital subscriptions.
CRM activities in 2011 saw the creation of the Mondadori Customer Data Base, a single structure which brings together all of the customers of the different business units and the development of information processes for the reconciliation of customers of the different companies of the Group.

RESULTS OF THE PARENT COMPANY ARNOLDO MONDADORI EDITORE S.P.A.
The Annual Report of the parent company, Arnoldo Mondadori Editore SpA, for the year to 31 December 2011 shows a net profit of €55.3 million (€51.7 million on 31 December 2010), while gross operating profit came to €48.5 million (€70.8 million in 2010).
These economic indicators show a contrasting trend; gross operating profit was affected by the significant decline in sales in both books and magazines, where both revenue from sales of copies and from advertising was down compared with 2010.
Also of significance, in absolute terms, was the total investments in digital activities that are still in the start-up phase.
Net profit, meanwhile, benefited from higher returns from the management of investments that, in 2011, included a capital gain of around €10 million from the sale of the company’s stake in Hearst Mondadori Editoriale Srl and a reduction in taxes including, in 2010, a non-recurring charge of €8.7 million, resulting from the adherence to the definition of pending tax disputes, established by Law N° 73 of 22 May 2010, and regarding a dispute with the tax authorities in Milan for the year 1991.

PROPOSAL FOR THE DESTINATION OF NET PROFIT FOR THE YEAR ENDED 31.12.2011
The Board of Directors agreed to propose to the Annual General Meeting of the Shareholders, called for 19 April 2012 (or 20 April on second calling), to devolve to the extraordinary reserve the full amount of the net profit for the year ended 31 December 2011, which amounted to €55,342,667.63
Given the current market scenario and despite the increase in net profit for 2011 compared with that for 2010, the proposal of the Board of Directors not to distribute a dividend for 2011 is aimed at strengthening the financial structure.

FORECAST FOR THE FULL YEAR
In the first two months of the year trends related to consumer spending in general, and in particular in the markets of interest to Mondadori, remain significantly negative, in line with the closing months of 2011.
There are currently no signals of a turnaround that could significantly alter the trend, at least in the first half of the year. Similarly, there is also reduced visibility, also in the short term, with regard to the advertising market.
During 2012 the company’s priorities will be to maintain a firm hold on the Group’s leadership in magazines and books in Italy, the consolidation of the successes in France, the development of digital activities, both in books (e-books) and other areas, the expansion and diversification of the international activities, and the continuation of efforts to reduce operating costs in order to contain the negative impact of rising production costs.
In such a problematic scenario, and despite the abovementioned actions, it is currently difficult for the Group to achieve the same levels of profitability as in 2011.

Consolidated annual report and results for the year to 31 December 2010

  • Consolidated revenues of €1,558.3 million: +1.2% on the €1,540.1 million of 2009
  • Gross operating profit of €140.2 million: +32% compared with €106.2 million in 2009
  • Consolidated operating profit of €114.2 million: +59.1% on the €71.8 million of 2009
  • Consolidated net profit of €42.1 million: +22.7% compared with €34.3 million in 2009
  • Adjusted consolidated net profit of €50.8 million: more than double the €23.8 million of 2009

Proposed dividend of: €0.17 per ordinary share

Proposal for the cancellation of part of the treasury stock corresponding to 5% of the share capital

Renewal of authorisation to buy back and utilise own shares

  • Consolidated revenues of €1,558.3 million: +1.2% on the €1,540.1 million of 2009
  • Gross operating profit of €140.2 million: +32% compared with €106.2 million in 2009
  • Consolidated operating profit of €114.2 million: +59.1% on the €71.8 million of 2009
  • Consolidated net profit of €42.1 million: +22.7% compared with €34.3 million in 2009
  • Adjusted consolidated net profit of €50.8 million: more than double the €23.8 million of 2009
  • Proposed dividend of: €0.17 per ordinary share
  • Proposal for the cancellation of part of the treasury stock corresponding to 5% of the share capital
  • Renewal of authorisation to buy back and utilise own shares

The Board of Directors of Arnoldo Mondadori S.p.A. met today, under the Chairmanship of Marina Berlusconi, to examine and approve the consolidated balance sheet and management report for the year to 31st December 2010 as presented by the Group’s Deputy Chairman and Chief Executive, Maurizio Costa.

GROUP PERFORMANCE FOR THE YEAR ENDED 31 DECEMBER 2010

In terms of profitability, 2010 showed a substantial improvement on the previous year. In addition to an increase in revenues, all of the objectives for the year relating to reorganisation and the reduction of staff and operating costs were achieved.
In particular, the personnel rationalisation plan and reorganisation activities led to a reduction of 347 people in 2010, taking to around 700 the number for the three-year period (excluding the effects of the sale of the Printing division and the consolidation of Mondolibri). Further improvements are foreseen during 2011.
There was also a reduction in personnel costs for the year of 10.3%.
The year also saw the attainment of 93% of the plan to contain operating costs, which foresaw a saving of €170 million for the three-year period 2009/2011.

Consolidated revenues came to €1,558.3 million, an increase of 1.2% on the €1,540.1 million of 2009.

Consolidated gross operating profit totalled €140.2 million, up 32% from the €106.2 million of the previous year. While benefitting from lower restructuring costs than in 2009, this item was negatively impacted, for an analogous amount, by higher postal charges and, above all, by extraordinary charges from writedowns and the results of joint ventures in countries severely affected by the recession.
As a proportion of revenues, this represented a rise from 6.9% in 2009 to 9%.

Consolidated operating profit came to €114.2 million, a jump of 59.1% compared with the €71.8 million of 2009, with amortizations and depreciations on tangible assets of €26 million (€34.4 million in 2009).
As a proportion of revenues, this represented a rise from 4.7% in 2009 to 7.3%.

Consolidated pre-tax profit came to 90.3 million, an increase of 41.3% on the €63.9 million of 2009, with higher financial charges of €16 million due largely to a capital gain in 2009 of €14.5 million following the closure of a private placement and related derivatives.

Consolidated net profit amounted to €42.1 million, a 22.7% increase on the €34.3 million of the previous year: the result was affected by the payment of €8.7 million in line with new norms regarding the definition of pending tax litigation.

Consolidated net profit for 2010, adjusted to take account of the aforementioned extraordinary item (tax charges for previous years) would amount to 50.8 million, more than double the €23.8 million net profit recorded in 2009, adjusted for capital gains.

With regard to the company’s assets, net assets as of 31 December 2010 amounted to 581 million, compared with €546.3 million at the end of 2009.
The Group’s net financial position went from -€372.9 million at the end of 2009 to -€342.4 million on 31.12.2010, an improvement of €30.5 million.
During the period 2008-2010, the level of indebtedness has been reduced by around € 200 million.

Information concerning personnel
On 31 December 2010 permanent and temporary contract staff employed by the companies of the Group amounted to 3,649.
An analysis of this figure, compared with the figure on 31.12.2009 and excluding the effects of the consolidation in April of Mondolibri (246 employees last year), clearly shows the benefits of the cost containment actions carried out.
As already indicated, there was total reduction of staff in 2010 of 347, which corresponds to 8.7% of the whole, when account is also taken of the reduction during the period at Mondolibri. Of this figure, 80% is related to the realisation of programmed reductions for the year foreseen by the restructuring plan and involving the Italian companies Arnoldo Mondadori Editore S.p.A. and Mondadori Pubblicità S.p.A., as well as the foreign subsidiary Mondadori France SA.
Significant rationalisation efforts have also involved the Direct area where, following reorganisation and a strategic review of sales outlets, a reduction of 7% in headcount was achieved.

THE BUSINESS AREAS
· BOOKS
Total revenues generated by the Books area to 31 December 2010 amounted to €413.9 million, a slight fall (-2.2%) on the €423.1 million of 2009, with the second half of the year showing an improvement compared with the same period of the previous year.

Also in 2010 the Group confirmed its leadership in the sector with a market share of 27.1% and a high level editorial offer. Special note during 2010 were the prestigious successes of the novel Canale Mussolini by Antonio Pennacchi, winner of the Premio Strega 2010, and runner-up also in the Premio Campiello 2010; and Accabadora by Michela Murgia, winner of the Premio Campiello. Also of note was the award of the Nobel Prize for Literature to Mario Vargas Llosa.
The fall in revenues recorded by the school textbooks sector is the result of recently introduced educational reforms.
Operating profit was affected by losses suffered by the Random House Mondadori joint venture in markets severely affected by the international financial crisis. Adjusted to take account of non-recurring items, operating profit for 2010 was in line with that of the previous year.
October saw the launch of e-book sales, with a catalogue that by the end of the year had reached a total of 1,500 titles, available from the principal Italian e-commerce stores, including Bol.it. Prices are, on average, 40% lower than print editions for new titles and 25% lower for backlist titles. The biggest selling titles were La caduta dei giganti by Ken Follett, Io e te by Niccolò Ammaniti and La solitudine dei numeri primi by Paolo Giordano.

· MAGAZINES ITALY
The Italian consumer magazine market in 2010 was again characterised by the recessionary trend that has affected the world’s leading economies since the second half of 2008, with a decline in circulation, advertising investments and add-on sales.
The actions which have allowed Mondadori to successfully contrast this still problematic scenario – with a performance above that of the reference market – can be identified along tow distinct lines: the first aimed at exploiting the benefits of the multi-year reorganisation plan, and the second focused on sustaining the development of the product portfolio.

Magazine revenues in Italy in 2010 amounted to €471.4 million, a fall of 4.1% on the €491.8 million of the previous year.

After the marked slump in 2009, this result was achieved, in particular with regard to Mondadori titles, the main component of the area’s business, by a series of phenomena:

  • a 4% fall in circulation revenues, in line with the market of reference and the consequent maintenance of leadership and market share (34.2%);
  • a fall of 8.7% in revenues from add-on sales, a markedly better performance than the market as a whole (-23.6%, in terms of value);
  • a moderate slide in advertising revenues (-1.9%), which was better than the market (-5.4%, Source: Nielsen, in terms of value) and decidedly more resistant than the most qualified competitors in the magazine market;
  • the particularly positive overall turnover of the Magazines area was the result of a good performance by weeklies. Meanwhile, with some significant exceptions for products involved in specific re-launches, the performance of monthlies was markedly weaker.

· DIGITAL
With the overall advertising market in 2010 showing growth (+3.8%, Source: Nielsen) compared with 2009, a very difficult year for advertising, the most dynamic medium in the year was the Internet, which grew by 20.1%.
Mondadori web sites, for which advertising is sold by Mediamond, saw a 40% increase in gross revenues, above all thanks to the performance of sites for women, in first place Donnamoderna.com, followed by Graziamagazine.it.

· ADVERTISING
The Italian advertising market ended 2010 with total growth of 3.8%, confirming the progressive improvement – compared with 2009, a particularly bad year for advertising (Nielsen -13.4%) – in line with the positive signals that were first seen in the middle of the year, above all for certain media.
Mondadori Pubblicità closed the year with revenues of €233.9 million, a fall of 6.6% on the €250.4 million of 2009. On a comparable basis in terms of media, the fall was of just 1.9%.
Among the changes that characterised the year was the interruption of sales for il Giornale from November 2009, for the internet (passed to Mediamond) and the addition to the portfolio of Radio Kiss Kiss.

In magazines, after a positive final quarter, the titles published by Mondadori ended 2010 essentially in line (-0.8%), on a like-for-like basis, with the previous year, and distinguishing themselves, in a competitive context particularly affected by uncertain forecasts and a high level of volatility in advertising investments. There was a positive performance by weeklies (+1%), which benefitted from the strength of the entire women’s segment.
With regard to radio, where there was overall growth of 16.5%, R101 sales were up (+5.1%) and sales for Radio Kiss Kiss, which began in March, were also positive.

· MAGAZINES FRANCE
Revenues generated in 2010 by Magazines in France amounted to €344.2 million, an increase of 0.2% on the €343.5 million of 2009 (+6.2% net of titles sold and the effect of the launch of Grazia).
In a magazine market in which there was a healthy recovery in advertising pages and a slight fall in circulation, the results of Mondadori France demonstrate the wisdom of focusing on the portfolio of high-circulation titles and the success of the launch of Grazia, with figures clearly better than the market.
Mondadori France recorded a increase in circulation volumes of 1.7% (Diffusion France Payée), compared with a – 2.1% by competitors.
Circulation revenues (69% of the total) – which include both newsstand sales and subscriptions – were down by 1.3% at the consolidated level.
Excluding the titles sold or closed, there was an increase of 3.9%, mainly due to the positive sales of Grazia (51 issues compared with 18 in 2009) and a marked growth in subscription revenues, which, being less exposed to economic cycles, constitute an important asset (32.5% of magazine revenues in the period).

With regard to advertising, there was an 8% increase in consolidated revenues compared with the previous year. If the titles sold or closed are excluded, the increase was of 19.1%. These excellent results are above all due to a marked increase in advertising revenues for the Mondadori France “haut de gamme” women’s titles, which now account for 27% of total advertising sales (13% in 2009).
Volume sales in the magazine advertising market in France in 2010 was up by 9.5% (Source: Kantar Media). In the same period Mondadori France recorded an excellent performance (+24.9% in terms of volume), increasing its market share by 1.2%.

· INTERNATIONAL ACTIVITIES
In the period to 31 December 2010 the international activities of Mondadori Magazines generated total revenues of €142 million.
The 50-50 joint ventures in Russia and China performed decidedly better than the previous year and budget expectations, in particular with regard to advertising sales.
The Attica subsidiary was affected by the financial crisis in Greece and the Balkans, with a reduction in advertising revenues of around 27% (-21% on a like-for-like basis). Decisive ongoing efforts to reduce costs had a big impact on containing the loss of revenues in 2010 and are aimed at further contributing to re-balancing the results of 2011.
Other figures for the period show that licensing revenues were up by 36.4%, thanks to the positive performance of Grazia UK and Grazia Holland, as well as the German and French editions of the title, that had still to be launched in the first part of the previous year.
There was also an increase in revenues from advertising services in Italy for the network, both thanks to the new editions and the positive performance of existing titles (Grazia UK +14%, Grazia Russia +67%).

· DIRECT & RETAIL
Total revenues generated by Direct and Retail at year-end came to €279.7 million, an increase of 30.2% compared with the €214.8 million of 2009, also thanks to the consolidation of Mondolibri S.p.A. from April 2010.
On a like-for-like basis, the increase would be of 6.5%, mainly thanks to new affiliations in the franchising network.

Direct
There was a slight recovery in the market for direct communications in 2010 was characterised and, in this context, Cemit Interactive Media S.p.A. identified both new clients and new operations that resulted in a 14.3% increase in revenues compared with 2009, while also maintaining high value added activities.
In the e-commerce (Bol.it) area, the company recorded strong growth (+28%) compared with the previous year. This increase, the highest in the sector among the relevant operators in the book sector, was achieved also thanks to improvements in customer service and the adoption of a more aggressive commercial policy.

Retail
During 2010 the expansion of the network in Italy continued, resulting in the generation of combined revenues of around € 202.7 million. By normalising franchising revenues (i.e. converting them from the disposal value to the retail price), the total reaches around €250 million and gives the area in a highly significant position in Italian bookselling and a predominant position in terms of the number of outlets (with a combined total of 517 outlets under the Edicolè, Librerie Mondadori, Gulliver and Mondadori Multicenter fascia).

· RADIO
In 2010 the radio market saw revenues increase by 7.7% compared with the previous year, once again making it one of the best performing media.
The trend was markedly different between the first (+14.7% compared with 2009) and second halves of the year, which while remaining positive, was markedly less so, (+0.8%; Source: FCP Assoradio).

Advertising sales for R101 generated net revenues of €14.5 million, an increase of 5.1% on the €13.8 million of 2009. Such revenues are essentially the company’s share of total gross advertising sales of around €20.5 million.
There was also a big difference in the sales for R101 between the first and second halves of the year, due to a lower number of special initiatives and a performance that was decidedly better than the market average in the latter part of the year.
With regard to ratings, publication of the Audiradio national figures has been suspended: the last published figures refer to the first quarter of 2010 where R101 notched up a daily average of 2.5 million listeners and around 7 million over 21 days).

RESULTS OF THE PARENT COMPANY ARNOLDO MONDADORI EDITORE S.P.A.
The Annual Report of the parent company, Arnoldo Mondadori Editore SpA, for the year to 31 December 2010, shows a net profit of €51.7 million (€53.2 million on 31 December 2009), while gross operating profit came to €68.1 million (€42.3 million in 2009).
The improvement in the latter was due to the positive performance recorded by the Magazines area and the effects of staff reductions resulting from the implementation of the restructuring plan introduced in 2009.
The net profit figure was impacted by the payment of extraordinary tax charges of €8.7 million, resulting from new norms for the definition of pending tax litigation introduced by law N° 73 of 22 May 2010. This operation is related to an ongoing dispute with the Milan tax office regarding the year 1991.

DIVIDEND PROPOSAL
The Board of Directors agreed to propose to the Annual General Meeting of the Shareholders, called Thursday 21 April 2010 (or Friday 22 April on second calling), the distribution of a gross dividend of €0.17 per for each ordinary share (net of treasury stock) in circulation on the ex-dividend date.
In line with the dispositions of the “Regulations for organised markets managed by Borsa Italiana SpA” dividends will be paid as follows: coupon detachment 23 May 2011, payable from 26 May 2011.

FORECAST FOR THE FULL YEAR
With the absence of any changes in the trend and with no improvements in the forecasts, figures for consumer spending in the markets of relevance to the Mondadori Group for the first two months of 2011 do not show any significant signs of improvement in the short term or for the year as a whole.

Regarding the main areas of business:
– in Magazines, some slight signs of a recovery in advertising allow for reasonable optimism in terms of a recovery in revenues, thanks to the strength of the portfolio of titles both in Italy and in France and the ongoing commitment to the quality of the offer;
– the trade books area may be able to count on an important editorial programme, while Mondadori’s commitment to the development of e-books will continue to be strong;
– over the whole year, the maximum focus will be on digital activities, both in terms of the interaction with all of the other activities of the Group and in the development of new businesses, also linked to editorial content, the brands and the Mondadori communities.

Over the year, the reorganisation plan will continue, along with ongoing efforts to contain operating costs which have so far allowed the Group to recover profitability, also in extremely difficult trading conditions.

As a result of the above, Mondadori could improve both revenues and operating profitability in 2011, with a determined commitment to the development of digital activities. Caution is, however, necessary in a period of such economic instability, heightened, as it is, by international tensions that could have a negative impact on the already weak recovery underway.

PROPOSAL TO CANCEL PART OF THE TREASURY STOCK HELD AND CORRESPONDING TO 5% OF THE SHARE CAPITAL
Arnoldo Mondadori Editore S.p.A. directly holds 17,850,101 company shares, equivalent to 6.88% of the share capital and acquired at an average price of around €6.1697 per share. With an additional 4,517,486 Mondadori shares held by the subsidiary Mondadori International S.p.A., the total number of shares held, directly or indirectly, amounts to 22,367,587, or 8.62% of the share capital.

The board of directors will propose to an extraordinary meeting of the Shareholders the cancellation of 12,971,492 shares, with a nominal value of €0.26 per share, and corresponding to 5% of the share capital, while keeping in the portfolio, also to service stock option plans, 4,878,610 shares, in addition to the 4,517,486 held by Mondadori International.
The proposal to cancel a part of the shares held as treasury stock is explained by the fact that, in recent years, there have not been opportunities to use such stock as foreseen by the authorisations made by the shareholders, such as share swaps or conversions in financial instruments.Cancellation, and the consequent reduction in the number of shares making up the share capital, would – while maintaining the necessary solidity to support future growth objectives – result in the optimisation of the company’s capital structure and have a positive impact in terms of increasing both earnings per share and dividend per share.
In terms of the impact on the company’s accounts, the “treasury stock”, in compliance with international accounting principles, as a reduction in net assets would be reduced by around €80,030,000, against a reduction in the share capital of a nominal €3,372,587.92 – corresponding to 12,971,492 shares with a cancelled nominal value of €0.26 – and a reduction of the “share premium reserve” of around €76,658,000.
If approved by the Shareholders, the reduction in the share capital would become effective, subject to no objections being submitted, only after a period of ninety days from the registration of the resolution, as foreseen by article 2445 of the Italian Civil Code.

RENEWAL OF AUTHORISATION TO BUY BACK AND UTILISE COMPANY SHARES
Following the expiry, with the approval of the annual report for 2010, of the authorisation given by the Shareholders at the AGM of 27 April 2010, and with the aim of maintaining the legal conditions for eventual buy-backs and, in consequence, the possibility of pursuing eventual investment opportunities or other treasury stock operations, the board of directors will propose to the forthcoming Annual General Meeting the renewal of authorisation to buy back company shares.
The AGM of 27 April 2010 provided authorisation to effect share buy-backs up to a limit, considering the shares already held in the portfolio, of 15% of the share capital, or 38,914,474 ordinary shares.
Given the total of 22,367,587 shares (8.62% of the share capital) already directly or indirectly held at the date of the AGM, the authorisation thereby awarded the board the faculty to acquire a maximum number of 16,546,887 additional shares. No buy backs were made on the basis of the authorisation of 27 April 2010.

The Annual General Meeting of the Shareholders will also be asked to authorise the use of shares involved in such buy back operations or already in the company’s portfolio, as per Art. 2357 of the Civil Code.
The highlights of the board of directors’ proposal are as follows:

  • Underlying motivation

The underlying reason for the request for authorisation to effect buy-backs and make use of company shares is that it will allow the Board of Directors to:
– use company shares for the exercise of options for the purchase of shares assigned to participants in the stock option plans put in place by the Shareholders;
– use company shares, either bought or in the portfolio, for the exercise of rights, also conversion rights, deriving from financial instruments issued by the company, its subsidiaries or third parties;
– use company shares, either bought or in the portfolio, as part or whole payment in any eventual acquisitions or equity investments that fall within the company’s stated investment policy;
– take advantage, where and when considered strategic for the company, of investment opportunities, also in relation to available liquidity

  • Duration

Until the approval of the Anuual Report for 2011.

  • Cap on the number of shares that may be bought

In line with the expiring authorisation, the new authorisation would allow for the possible purchase of a maximum of 16,546,887 additional shares, given the number already directly or indirectly held by the company, as outlined above, an overall maximum of 15% of the current share capital.
If the proposed operation for the cancellation of 12,971,492 shares held in treasury stock is approved, with the consequent reduction in the share capital as outlined above, the authorisation would allow for the buy back of up to 10.52% of the share capital.

  • Method of acquisition and the price range

Buy-backs would be effected on regulated markets as per art. 132 of the legislative decree of 24 February 1998 n. 58 and art. 144 bis, para. 1, B of Consob regulation 11971/99 according to operating procedures established by the regulations for the organisation and management of the markets themselves, which, does not permit the direct combination of offers to buy with predetermined offers to sell.
Consequently, the corresponding minimum and maximum price of sale will be determined at the same conditions that applied to previous authorisations agreed by the Shareholders, i.e. at a unit price not less than the official market price on the day prior to any operation, less 20%, and not more than the official market price on the day prior to any operation, plus 10%.
In terms of price and daily volumes, acquisition operations will in any case be conducted in line with the norms foreseen by the EU regulation 2273/2003.

Today at 3pm, at the company’s headquarters in Segrate, the deputy chairman and chief executive, Maurizio Costa, and the CFO, and Carlo Maria Vismara, will present the results for 2010 approved today by the board of directors, to the financial community.

During the presentation management will also provide information regarding current activities and mid-term plans relative to the business in which the Group operates.

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

The Annual Report for the year ended 31 December 2010, containing the management report and the reports of the statutory auditors and the external auditors, along with all other legally required documentation, will be made publicly available by 31 March at the company’s corporate offices, at the Borsa Italiana S.p.A., as well as on the corporate web site www.gruppomondadori.it (in the Investor Relations section).

Board of Directors approves the Group’s consolidated annual report and results for the year to 31 December 2009

  • Consolidated revenues of €1,540.1 million: -9.2% like-for-like compared with the €1,695.3 million of 2008
  • Consolidated gross operating profit normalized at €133.1 million: -34.3% compared with €202.7 million in 2008
  • Consolidated net profit of €34.3 million: -64.7% compared with the €97.1 million of 2008
  • Net financial position of -€372.9 million. An improvement of €117.4 million compared with 2008
  • Proposal for the net profit of the parent company to be destined to an extraordinary reserve

The Board of Directors of Arnoldo Mondadori Editore S.p.A. met today, under the Chairmanship of Marina Berlusconi, to examine and approve the consolidated balance sheet and management report for the year to 31st December 2009 as presented by the Group’s Deputy Chairman and Chief Executive, Maurizio Costa.

The market scenario

2009 saw the full effects of the international financial crisis that was the forerunner to a recession that has severely undermined on the real economy, with a well-documented impact on production, consumer spending and employment.

During the year economic indicators continued to worsen, with an inevitable knock-on effect on corporate decisions, not merely on costs, but also and above all on investments, penalising any possible recovery which continued to be seen as difficult and far off.

Brief outline of business trends

In the sectors in which Mondadori operates the really critical element was the trend in advertising investments in magazines, which resulted for the Group in a sharp fall in revenues, despite sales, both in France and Italy, being better than the reference markets.

In the magazine sector Mondadori in Italy, thanks to the quality of its titles, was able to hold circulation relatively steady, while the market for add-on sales continued the expected sharp fall. In France, where a review of the product portfolio was completed, positive circulation figures were confirmed, also thanks to the contribution of subscriptions. At the end of August, the weekly women’s title Grazia was launched, with better than expected results, both in terms of sales and advertising.

In a book market which in Italy showed a slight tendency to buck the prevailing trends in consumer spending, Mondadori produced results, both in terms of revenues and profitability, in line with 2008, which was a record year due to the number of bestsellers, thanks to the publication of a number of successful new titles.

There was increased attention for the activities of other business. R101, the group’s radio station, in the last months of the year saw an upturn in advertising sales, anticipating what is hoped will be a recovery in 2010. There was a particularly intense expansion of the retail sector thanks to franchising agreements and a further push was given to the digital area, both for book sales and in magazines with sites for the main titles in Italy and France, as well as advertising sales, also through new joint ventures.

Significant events during the year

In addition to a sharp focus on the business, as indicated above, Mondadori’s reaction to an extraordinarily complex and negative market situation included a number of specific operations:

  • the sale of 80% of the printing business, finalised at the end of 2008, a year in which there was a marked improvement in the financial position and consistent capital gains. In 2009 the partnership generated the expected positive impact, both in terms of the maintenance of standards of printing quality and flexibility, and reductions in costs;
  • the continuation, with increased commitment, of a four-year plan for operating cost reductions begun in 2008 and centred on actions on cost structures, without sacrificing product quality, and a wide-ranging restructuring programme, both in Italy and in France.

The plan, that has already generated cost savings during 2009 of around €110 million, aims, by the end of 2011, to achieve total savings, on a like-for-like basis of €170 million;

  • debt restructuring, begun and completed during 2009, led in the final months of the year to an improvement in the financial flexibility of the business, with the expansion of covenants and the extension of terms on credit lines from banks.

GROUP PERFORMANCE IN THE YEAR TO 31 DECEMBER 2009

An outline of the results for the year 2009 will include the effects of some of the operations described above, particularly in the differences with 2008, in terms of capital gains and restructuring charges. Consequently, what follows is an indication of normalized operating profit, excluding the effects of the changes mentioned above.

Consolidated revenues in 2009 came to €1,540.1 million, a fall of 15.3% on the €1,819.2 million of 2008. On a like-for-like basis, excluding the printing business sold last year, revenues (€1.695,3 million in 2008) were down by 9.2% (only -2.6% in the last quarter of the year).

Consolidated gross operating profit for 2009 amounted to €106.2 million, a fall of 57.4% on the €249.2 million of the previous year.

Excluding the results from the printing business (on a like-for-like basis), capital gains and charges for organisational restructuring, normalized consolidated gross operating profit came to €133.1 million, a fall of 34.3% on the €202.7 million of 2008; a reduction essentially due to the downturn in advertising revenues and investments for the launch of Grazia in France; the impact of these two factors were mitigated by the growing results of efforts to reduce operating costs.

In this regard, it is worth underlining that in the last quarter of 2009 the fall was of 8.5% (-€4.8 million) compared with the same period of the previous year, which provides a clear indication of a significant slowdown in the downward trend.

Consolidated operating profit for 2009 amounted to €71.8 million, a 64.7% fall on the €203.5 million of 2008, with amortizations and depreciations on tangible assets of €13.4 million (€31.1 million in 2008) and intangibles of €20.9 million (€14.6 million in 2008).

Consolidated pre-tax profit came to €63.9 million, a fall of 57.8% on the €151.4 million of 2008, with an improvement of €44.2 million in net financial charges, the result of the lower cost of money, as well as lower average indebtedness and capital gains from debt restructuring activities (€14.5 million).

Consolidated net profit for 2009 amounted to €34.3 million, a 64.7% reduction on the €97.1 million (around €32 million of which from capital gains) of the previous year.

Consolidated gross cash flow (net profit plus amortizations) at 31 December 2009 came to €68.7 million compared with €142.8 million in 2008.

The consolidated net financial position went from -€490.3 million at the end of 2008 to -€372.9 million on 31 December 2009, an improvement of €117.4 million; compared with 30 September 2008 (i.e. before the sale of 80% of Mondadori Printing) the improvement was of €271.6 million.

Information concerning personnel

On 31 December 2009 permanent and temporary contract staff employed by the companies of the Group amounted to 3,750 (3,925 on 31 December 2008).

The consolidated figure, therefore, shows a fall of 175 (-4.5%), obtained through a block on turnover and efficiency policies related to the launch of the restructuring plan.

Personnel costs for 2009 came to €302.8 million, a fall of 15% compared with the previous year. However, the figure is not comparable in that the figure for 2008 includes, for ten months, the printing business. In fact, excluding the labour costs for Mondadori Printing and costs related to restructuring, the reduction was of 8%.

As already indicated, the Group will pursue, both in Italy and France, a reorganisation plan, begun in 2008, with the aim of achieving further significant efficiency gains by the end of 2011.

THE BUSINESS AREAS

· Books

The Mondadori Book Division recorded total revenues in 2009 of €425.7 million, compared with €434.3 million in the previous year (-2%); excluding add-on sales, the fall was of 1%.

During 2009 the Group published 2,449 new titles (2,695 in 2008) and 5,137 reprints (5,225 in 2008), a total of 51.6 million copies, compared with 53.4 million in previous year.

Over the year the Mondadori Group confirmed its leadership position, with a 28.4% market share in terms of value, an with a clear advantage over its competitors. The slight fall in the Group’s overall share was due to the expected downturn by Edizioni Mondadori compared with 2008, a year that was positively conditioned by the success of Paolo Giordano, winner of the Premio Strega with La solitudine dei numeri primi. Of note, compared with the previous year, was the growth in the market share of Einaudi, which, once again in 2009, was Italy’s second largest publishing house.

As regards the performance of the individual companies, Edizioni Mondadori generated revenues of €142 million, a slight fall on the previous year (-1.4%). Two new titles published in 2009 met with particular success among readers: Il simbolo perduto by Dan Brown, published in October, sold more than a million copies in just over two months (and became the year’s biggest selling title). There was also great success for Il tempo che vorrei by Fabio Volo, which in just over a month sold over 600,000 copies. Of particular note was Venuto al mondo by Margaret Mazzantini, winner of the Premio Campiello Letteratura. Published in November 2008, the novel had sold, by the end of 2009, a total of more than 500,000 copies. Remaining with Italian fiction, the exceptional sales of La solitudine dei numeri primi by Paolo Giordano continued which, two years after it was first published, has now sold more than 1,300,000 copies in Italy, and been published in 30 foreign translations.

In foreign fiction there was continued success for Marina by Carlos Ruiz Zafon (340,000 copies); of note in non-fiction was the book by Bruno Vespa, Donne di cuori, which sold more than 300,000 copies, making it the year’s top selling non-fiction title. Also the Strade Blu series saw continued success, especially with Roberto Saviano, with Gomorra and La bellezza e l’inferno.

During the period revenues at Einaudi amounted to €50.2 million (-2.9%). The fall was mainly due to a downturn in revenues for the sale of rights for add-on sales initiatives. Among the publisher’s series good performances were recorded Italian fictions (+27%), also as a result of the award of the Premio Strega to Tiziano Scarpa for Stabat Mater (over 140,000 copies), and by Economici (+5.3%). Other successful titles during the period included: Che la festa cominci by Niccolò Ammaniti (300,000 copies), Un luogo incerto and Scorre la Senna by Fred Vargas (a total of over 180,000 copies), Il museo dell’innocenza by Orhan Pamuk (55,000 copies).

Revenues at Sperling & Kupfer were up by 11.5% compared with the previous twelve months, reaching €23.2 million. Actions to re-focus the offer, begun in 2008, continued with a further containment in the number of new titles and copies produced. Among the biggest hits were Il gioco delle verità by Sveva Casati Modignani (170,000 copies).

In 2009 Piemme generated net revenues of €44.4 million (-8.8%). This result was achieved thanks to the excellent performance of the religion and paperback lines, that compensated for an expected downturn in fiction, determined by hard cover sales of Hosseini.

Revenues at Mondadori Electa during 2009 came to €40.3 million, a 5.4% fall on the previous year.

Mondadori Education generated net revenues of €81.7 million (-5.1%), maintaining a significant position in the school textbook sector, with a market share of 13.3%, and confirming its leadership position in the primary school segment.

· Magazines Italy

2009 was strongly characterised by the effects of the crisis in the second half of 2008 which continued to affect also the year just ended.

The fall in consumer spending affected all sectors of print media, impacting readers propensity to buy and, even more markedly, the level of advertising investment in traditional media. In terms of circulation, there was not so much a fall in the number of buyers as a downturn in the frequency of buying.

The fall in advertising revenues was, in turn, affected by both a fall in volumes and an inevitable reduction in ad rates. It should be noted, however, that Mondadori titles outperformed the market, in particular in the most relevant segment, that of weeklies.

In this difficult context, which in any case saw a strong reaction by Mondadori in terms of initiatives and management, the revenues of the Division in Italy came to €494.3 million, a fall of 14.1% compared with the €575.7 million of 2008.

This was largely due to the following phenomena:

  • a fall in circulation revenues (-3.6%) mainly the result of a reduction in volumes and only in part compensated by cover price increases;
  • a marked slump in add-on sales (-18.4%) which, while sustained by a significant increase in the number of initiatives, recorded an expected fall in average sales per single operation;
  • a substantial downturn in advertising revenues (-27.1%) split across, albeit unevenly, all advertising sectors and almost all titles.

Actions taken to face this unfavourable market situation included the support and development of titles, with a priority on actions aimed at improving efficiency and reducing operating and structural costs.

In the last quarter of 2009 the Group was also engaged in the implementation of an ambitious corporate restructuring plan, made possible by agreements reached with the unions in August and October for the adoption of measures foreseen by current norms to be applied at times of crisis, as well as individual incentives, affecting both graphics/layout and journalistic staff.

In terms of circulation, in a market that was a downturn of around 7%, Mondadori confirmed its leadership with a share of around 35%.

In the women’s segment Donna Moderna maintained its circulation revenues thanks also to an increase in the cover price introduced at the beginning of the year, while in the market area Grazia more than confirmed the sales levels of 2008. Of special note were the sales of Tu Style, so radically redesigned as to be considered an authentic “launch”, that drove circulation to 190,000 copies (+45%), increasing circulation revenues by 30%.

In the newsmagazine segment Panorama underlined its position of pre-eminence by further expanding the gap from competitors.

In the TV guides segment, which has been suffering from a long-term decline in circulation, the various titles in the Mondadori portfolio resisted rather well. In particular TV Sorrisi e Canzoni which, thanks to both a cover price increase during the year and constant efforts to renew the title, saw a very contained fall in circulation (-3%).

Among monthly titles there were particular problems with titles in the interiors and design segments (-5% in circulation revenues) while cookery titles performed well, showing growth in both circulation and revenues.

There were also promising prospects for Flair which, after its July relaunch, saw an encouraging increase in newsstand sales.

In add-on sales, that have been particularly relevant in the past for the profitability of a number of publishing groups, there was a continuation of the negative trend (-22.1%). Mondadori nevertheless generated significant revenues, performing slightly better than the market (-18.4%), and confirming its position as market leader, also with respect to the leading national daily newspapers.

Digital

Mondadori is active online with 47 web sites that cover all of the Group’s activities, with 2009 revenues that recorded growth of 13%, in a market that grew by 5.1% (Source: Nielsen).

Particularly positive was the performance of the Group’s sites for women, including Donnamoderna.com, Starbene.it, Grazia.blog.it and Cosmopolitan.it. Leadership in the segment will be further strengthened in 2010 with the GraziaMagazine.it site, launched in February.

International activities

During 2009 the international activities of Mondadori magazines generated total revenues of €118.5 million.

Thanks to a good performance by titles, and in particular an excellent performance by Grazia UK, licensing revenues were up by 15.4%; there was also a sharp increase in revenues from advertising for titles in the network (+34.4%), which partly compensated the fall in syndication revenues.

During the year the intense activities for the launch of new international editions continued: Grazia arrived in China, France, Thailand and Indonesia; Flair in the Czech Republic, Slovakia, Slovenia and Hungary, and Casaviva in India. Despite the overall economic-financial crisis, and the specific difficulties facing the media, the initial indications form these new initiatives are very positive and ahead of expectations.

In February 2010 the ‘Grazia International Network’ expanded again with the launch of the German edition of the magazine.

The subsidiary Attica was affected in Greece and the Balkans by cutbacks in advertising expenditure, but a sharp focus on containing costs was able to counterbalance the fall in revenues (-16.2%).

Among the international editions produced by the Group’s joint ventures, special mention should be given to Grazia Russia and Grazia China, launched in February 2009, that achieved higher than expected levels of circulation, in the face of advertising revenues that were affected by the international economic downturn.

  • Magazines France

The Magazine Division in France generated 2009 revenues of €343.5 million, a fall of 8.2% compared with the €374.1 million of the previous year. On a like-for-like basis, i.e. net of titles sold and new launches, the fall was of 6.6%.

During the period the activities of Mondadori France were characterised by the following:

  • the launch, at the end of August, of the weekly Grazia France, the upscale women’s title that from its first issues was well received both by readers and by the advertising market. Average circulation reached 180,000 copies (Source: OJD 2009), compared with an initial target of 160,000; while on the advertising side, Grazia France remained at an average of 32 pages per issue (+50% on the target), with a portfolio of upscale clients (fashion and cosmetics);
  • the grouping of the magazines Auto-Journal and Sport Auto in the EMAS joint venture, that publishes the weekly Auto Plus, means that it will become the leading publisher in the auto segment in France and a vital point of reference for advertisers in the sector;
  • a company reorganisation plan that foresees the cessation of publication of six titles (Mixte, Caméra Video, Le Photographe, ADDX, FHM and La Nouvelle Revue du Son et du Home Cinema) in line with the policy of focusing on more mass market titles, will also make it possible to realise significant cost reductions;
  • a plan to optimise costs concerning the company’s offices will be completed in 2010.

These changes, along with significant measures related to the restructuring of the company, had a negative impact at the operating level during the year of around €28 million.

Circulation revenues at Mondadori France, which include newsstand sales and subscriptions (around 70% of the total), were down by 6% (-4.9% on a like-for-like basis).

In detail, newsstand sales fell by 8.9%, while subscriptions were in line with the previous year. According to DFP (Diffusion France Payée) figures, the company saw a shortfall in terms of copies of 1.8%, outperforming the market (-3.5%). Among the best performing titles were the monthlies Biba, Science&Vie Junior, Modes et Travaux and Top Santé, and the weekly Télé Star which was the top performer in the TV guides segment.

2009 was particularly difficult for the advertising market in France, with investments down by 13% (in terms of volume, Source: TNS). Mondadori, meanwhile, performed better than the market with a fall of 10.3% in terms of volume, thanks to the aforementioned launch of Grazia and a good performance by Biba in the upscale monthly segment, recording revenues of €81.6 million (-13.8% compared with the previous twelve months).

· Advertising

Mondadori Pubblicità ended 2009 with revenues of €250.4 million, compared with the €331 million of 2008 (-24.4%), proving able to at least partially contain the slump recorded in the first months of the year, thanks to a decidedly better second half in the markets of reference. The market share in magazines covered by the advertising company in 2009 was of around 26.6% (Source: Nielsen).

The results of 2009 were also characterised by two changes:

– total sales were impacted by the absence, in the last two months of the year, of the titles published by Società Europea di Edizioni S.p.A. (Il Giornale and its supplements);

– the inclusion of sales for Radio Kiss Kiss from the month of March 2009.

The magazine portfolio, essentially unchanged with respect to 2008, recorded a performance that, while decidedly negative (-27.6%), was nevertheless better than the market of reference, despite a slump in some key sectors for the company, including fashion, furnishings, cosmetics, as well as auto, telecoms, finance and FMCGs. This result was made possible thanks to the weekly titles, while monthlies were in line with the market.

Sales for radio in 2009 were above the trend in the market, where R101 ended the year with a fall of 6.4%, but included sales for Radio Kiss Kiss, which entered the portfolio in March 2009, increasing the company’s revenues in the sector to a total of €25.5 million.

On the Internet front, there was a substantial recovery in the summer months, with the Donnamoderna.com site recording an increase in revenues of 13.8%.

Mediamond, the joint-venture between Mondadori Pubblicità S.p.A. and Publitalia ‘80 S.p.A. for online advertising online, began operations in January 2010 and currently can count on a product portfolio that every month reaches around 8 million unique users with 600 million page views.

  • Direct marketing

In 2009 the market for direct marketing saw a downturn of 15.8% (Source: Nielsen in terms of value). In this context Cemit Interactive Media reacted by identifying new clients and new operations, which had greatest success among a number of important Italian companies in the consumer. financial-insurance, automotive and non-profit sectors. All of which made it possible to contain the fall in revenues to 6.3%, closing at €20.9 million, compared with €22.3 million in 2008.

  • Retail

The total revenues of the Retail Division in 2009 amounted to €194 million, essentially in line (-0.3%) with the €194.5 million of 2008, with different trends in the two halves of the year: the first six months closed with a fall of 3.6%, while the second half recorded growth of 2.4%.

Mondadori Franchising recorded 2009 revenues of €74.2 million, an increase of 11.6% on the €66.5 million of 2008. During the period the company continued with its expansion programme, and the network now has the largest number of outlets for the sale of editorial products in Italy, with 249 bookshops (227 in December 2008) and 203 Edicolè (177 in December 2008).

Mondadori Retail generated revenues in 2009 of €119.8 million (-6.4%), compared with €128 million in 2008. A revenues breakdown shows that trends were different for different categories of goods. Editorial products remained essentially unchanged, stationery and gifts grew while there was a fall in IT and audio-video.

The network continued to expand in 2009 with the opening of three new outlets (Rome, Turin and Palermo), bringing the total to 23 bookstores and 9 Multicenters.

  • Radio

Advertising investments in radio market during 2009 were down by 7.7% on the previous year (Source: Nielsen). The excellent performance in the last quarter went a long way to rebalancing the sharp slump in the first months of the year. It also raises hopes for 2010 and confirms the value and the credibility of radio as an effective advertising media.

2009 net revenues at R101 amounted to €13.8 million (-6.8%), compared with €14.8 million in 2008, and correspond to advertising sales of €16.9 million (-6.4% on the €18.1 million of 2008).

I terms of ratings, R101 confirmed its position as the 5th most popular commercial radio network in Italy among those who have participated in the new Audiradio diary panel, with a daily average of around 2 million listeners and around 6.2 million over 7 days, reaching a pool of around 9 million listeners over 28 days.

RESULTS OF THE PARENT COMPANY ARNOLDO MONDADORI EDITORE S.P.A.

The Annual Report of the parent company, Arnoldo Mondadori Editore S.p.A., for the year to 31 December 2010, shows a net profit of €53.2 million (€66.2 million on 31 December 2008), while gross operating profit came to €43.6 million (€97.9 million in 2008).

The last indicator was particularly affected by the negative performance of the Magazine Division, which was in difficulty in terms of circulation, saw a further fall in the market for add-on sales and for a severe downturn in advertising.

FORECAST FOR THE FULL YEAR

There were no significant changes in prevailing market trends in the first two months of the current year compared with the previous year in terms of consumer spending and , above all, in advertising investments. It is there fore reasonable to presume that there will be a continuing period of uncertainty before any solid recovery.

Given this situation, significant importance should be given to the Mondadori Group’s commitment to reducing operating costs, with the pursuit of measures additional to those that already in the fourth quarter of 2009 allowed the company to record a level of profitability close to that of the same period of the previous year.

The strategic priorities on which the company will focus during the year will include a further focus on product quality and the management of the core business, alongside investments in growth areas, above all digital.

Over the short term it remains difficult to make detailed forecasts for the markets in which Mondadori operates. It is, however, possible to estimate that, unless there is a downturn in the current trends in advertising investments, the company will be able to improve the level of operating profitability compared with last year.

§

PROPOSAL FOR THE DESTINATION OF NET PROFIT FOR THE YEAR ENDED 31.12.2009

The Board of Directors agreed to propose to the Annual General Meeting of the Shareholders, called for 27 April 2009 (or 28 April on second calling), the deposit of the entire net profit for the year ended on 31 December 2009 of Arnoldo Mondadori Editore S.p.A., equal to €53,179,772.38, to the extraordinary reserve.

The proposal of the Board of Directors not to pay out a dividend for 2009 is consistent with the context indicated in the forecast for the full year and will also to allow the company to successfully complete the ongoing process of reorganisation and to pursue the activities indicated above.

§

SIGNIFICANT EVENTS AFTER THE END OF THE PERIOD ALREADY COMMUNICATED TO THE MARKET

On 8 February 2010, Arnoldo Mondadori Editore S.p.A. signed a preliminary agreement with Società Holding Industriale di Grafica S.p.A. for the acquisition of 50% of the share capital of Mondolibri S.p.A., 50% of which is already owned by Mondadori in a joint-venture with Direct Group Bertelsmann.

§

DECLARATION BY THE EXECUTIVE RESPONSIBLE FOR THE COMPANY’S ACCOUNTS

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

§

The results of 2009 will be outlined by the deputy chairman and chief executive, Maurizio Costa, and the CFO, Carlo Maria Vismara, at a meeting with the financial community to be held today at 14.30 pm at the company’s headquarters in Segrate.

Board of Directors approves the Group’s consolidated annual report and results for the year to 31 December 2008

  • Consolidated revenues of €1,819.2 million: -7.1% on the €1,958.6 million of 2007
  • Consolidated gross operating profit of €249.2 million: -7.3% compared with €268.9 million in 2007
  • Consolidated net profit of €97.1 million: -13.8% on the €112.6 million of 2007
  • Net financial position shows a deficit of €490.3 million. An improvement of €45 million
  • Board proposes to allocate the net profit of the parent company to an extraordinary reserve

The Board of Directors of Arnoldo Mondadori S.p.A. met today, under the Chairmanship of Marina Berlusconi, to examine and approve the consolidated balance sheet and management report for the year to 31st December 2008 as presented by the Group’s Deputy Chairman and Chief Executive, Maurizio Costa.

The market scenario

As is well known, there was a further worsening of the macro-economic scenario in the last three months of 2008. Indeed, the downturn was worse than the already pessimistic forecasts and the crisis that affected the financial sector at an international level had a serious impact on the productive sectors, on employment and on consumer spending in industrialised countries, as well as slowing growth in developing countries. Confirmation of the depth of the current recession comes also from the extremely negative perceptions regarding the evolution of the situation in the short to mid-term, with an inevitable impact on investments and spending. Also in Italy, where the banking system has been less exposed to assets risks than other European countries and the United States, the crisis has, nevertheless, had a serious effect on the real economy, with a fall in GDP of 1%, something not seen since 1975.

For Mondadori and its markets of reference, the following observations can be made:

– in Italy, while there was not an acceleration in the downturn in both circulation and add-on sales, the Group’s market share remained essentially unchanged. On the advertising front, investments, in the last part of the year, saw a marked fall. Meanwhile, the volume of business in the book sector, in which the Mondadori Group consolidated its position of absolute leadership, remained essentially unchanged;

– in France the downward trend in advertising continued, while magazine circulation, both newsstand sales and subscriptions, were in line with the previous year.

MANAGEMENT RESULTS AT 31 DECEMBER 2008

As communicated to the market in October 2008, Mondadori sold 80% of the share capital of Mondadori Printing S.p.A. to Gruppo Pozzoni; a comparison between the Mondadori Group’s consolidated revenues and gross operating profit in December 2008 and the figures for the previous year are consequently also represented on a like-for-like basis, excluding. Consequently, the results, both for 2007 and 2008, of printing activities sold with effect on the company’s accounts from the month of November 2008 and, therefore, consolidated for only ten months of 2008.

Consolidated revenues for 2008 came to €1,819.2 million (-7.1% on the €1,958.6 million of 2007).On a like-for-like basis, the fall was of 6%. While, net of the add-on sales, turnover recorded a fall of 2.5%.

Consolidated gross operating profit for the year amounted to €249.2 million (-7.3% compared with the €268.9 million in the previous year). As a proportion of revenues, the figure is 13.7%, in line with 2007.

Excluding the activities of Mondadori Printing, the difference in operating profit was -€2.7 million (-1.2%), essentially due to: the positive business performance (+€6.5 million); a fall in add-on sales (-€13.3 million); increased investments in business development (-€7.9 million); higher organisational restructuring costs (-€4.7 million) and increased capital gains (+€16.7 million).

Consolidated operating profit came to €203.5 million, (-9.6% on the €225.2 million of 2007), with amortizations and depreciations of fixed assets of €31.1 million (€36.5 million in 2007) and of intangible assets of €14.6 million (€7.2 million in 2007).

As a proportion of revenues, as shift from 11.5% in 2007 to 11.2%.

Consolidated profit before taxation amounted to €151.4 million (-20.1% compared with the €189.5 million of 2007). Net financial charges increased by €16.4 million due to the higher cost of debt (around €6 million), lower returns on financial assets (around €8.3 million, partly due to writedowns) and financial charges for actualization of the deferred part of the payment for Mondadori Printing (€2.1 million).

Consolidated net profit on 31 December 2008 amounted to €97.1 million (-13.8% compared with €112.6 million in the previous year).

Gross cash flow for came to €142.8 million, compared with €156.3 million in 2007.

The net financial position went from -€535.3 million at the end of 2007 to -€490.3 million on 31 December 2008; during the period payments for tax of €80.4 million and dividends of €83.8 million were made, while the positive financial effect of the sale of 80% of Mondadori Printing S.p.A. amounted to €121.4 million.

 

THE BUSINESS AREAS

· Books

Against a general background of falling consumer spending, the performance of the trade segment of the Italian book market in 2008 was essentially in line with that of 2007 (-0.6% in terms of value, for medium to large sized bookstores: source Nielsen Bookscan).

In this context the Mondadori Book Division confirmed, by a wide margin, its leadership, with a market share of 28.8%; total revenues amounted to €434.3 million (-2.4% on the €445 million of the previous year).

The slight downturn in revenues, largely the result of a marked fall in the sale of rights for add-on sales initiatives, would, therefore, net of add-on sales, be -1.1%.

During the period Mondadori maintained the excellent levels of profitability of the previous year, with a gross operating profit, as a proportion of revenues of 19.1%.

In 2008 the Group published 2,695 new titles (compared with 2,742 in 2007) and 5,225 reprints (5,242 in 2007), a total of 53.4 million copies, compared with 54.6 million in 2007.

Among the Group’s publishing houses, Edizioni Mondadori recorded 2008 revenues of €144 million (+4.7% compared with €137.6 million the previous year). Of note during the year was the success of two first-time authors whose books sold more than one million copies: Paolo Giordano, winner of the Strega Prize with his novel La solitudine dei numeri primi and Roberto Saviano with the long seller Gomorra, first published in 2006. Also of note was the new novel by Margaret Mazzantini, Venuto al mondo, which sold more than 300,000 copies. There were also good results for Idi di marzo by Valerio Massimo Manfredi (250,000 copies) and Storia di neve by Mauro Corona (100,000 copies).

Einaudi generated revenues for the year of €51.7 million, an increase of 3.6% on the €49.9 million of 2007. This increase was the result of excellent sales through the bookshop and large-scale retail channels, thanks to the very positive sales of numerous books with average and high print runs.

With a market share of 13.4%, Mondadori Education in 2008 maintained a significant position in the educational market and leadership in the primary school textbook segment: net sales revenues generated by the company in the period amounted to €86.1 million (-1.1% on the €87.1 million of the previous year).

· Magazines

The Magazine Division generated consolidated revenues in 2008 of €949.8 million (-9.3% on the €1,047.7 million of 2007).

Italy

Mondadori maintained in 2008 its position of absolute pre-eminence, with revenues in Italy of €575.7 million (-12.5% compared with €657.8 million in 2007); net of add-on sales, the fall was of 4.4%.

Performace during the year was characterised by the following phenomena

– A fall in circulation revenues of 5.1%, in line with the market of reference;

– A marked decline in add-on sales (-28.6%) in line with the sector, but with good levels of profitability;

– A fall in advertising revenues of 5.3%, in a market that fell by 7.1%: it is a downturn that was especially marked in the second half of the year.

Among women’s titles, Donna Moderna consolidated its leadership; in newsmagazines, Economy saw a significant increase in its newsstand sales.

In the TV listings segment, which has been hit by a generalised fall in circulation, TV Sorrisi e Canzoni bucked the trend by maintaining weekly sales of more than one million copies. In the entertainment segment, Chi remained the most vivacious magazine with sales in line with 2007. In the up market women’s segment, while Grazia and Flair recorded more limited circulation, sales were still in line with the previous year and they had a marked penetration in the advertising market. Good results were recorded by both the cooking and design titles.

France

In 2008 Mondadori France generated total revenues of €374.1 million (-4.1% compared with the €389.9 million of 2007).

Circulation revenues by Mondadori France, which account for 70% of the total, remained at the level of the previous year (+0.6% on a like-for-like basis, net of the sale of niche title in the Sport e Loisirs area), thanks also to the positive performance of the leading titles, as Closer that confirmed its leadership in its segment; there was a positive performance in the up market segment Haut de gamme, in which Mondadori has Biba, and as a consequence of re-designs on a number of titles in the Femme Grand Public segment. There was a drop, in line with the market, for TV titles.

On the add-on sales front, the initiatives launched by the company during the year generated an increase in revenues of 7.2% compared with the previous year, but with the negative contribution being the result of a market that is structurally still not ready for development.

The revenues of Mondadori France from the sale of advertising saw a downturn of 14.5% in 2008, in line with a market in considerable difficulty; on a comparable basis the fall was of 12.3%.

The company, which is also penalised by its poor presence in the up-market segment, the only sector that grew compared with the previous year, did, in any case, safeguard its market share.

In terms of profitability Mondadori France in 2008 generated a gross operating profit, as a proportion of revenues, of 10.5% (12.5% net of add-on sales), thanks also to the ongoing control and reduction of costs that have generated savings in industrial distribution and labour costs.

International activities

2008 was characterised by intense number of new launches of the Mondadori Group titles in international markets, including Flair in Austria, Casaviva in Greece, Bulgaria and Serbia, Sale e Pepe in Romania, Grazia Casa in Croatia. The Grazia network expanded during the period to include new editions in India and Australia, both of which generated positive results from the first months of publication.

During the year the stage was set for the launch of Grazia in China and Casaviva in India, which went ahead in the first quarter of 2009.

Overall, at the end of the year, the Mondadori titles in world markets numbered nineteen, with revenues from licensing and commissions from the sale of advertising up by 30% on 2007.

There were also positive results from the Greek subsidiary Attica, leader in circulation and advertising in Greece and with a significant presence also in Romania and Bulgaria.

· Advertising

Mondadori Pubblicità ended the year with revenues of €331 million (-5.3% on the €349.5 million of 2007). Thanks to a good performance in the first half of the year, the company was able to at least partially offset the marked downturn in the market in the second half.

In particular, in a magazine market that lost 7.3%, the company recorded sales on its portfolio of titles of €242.6 million (-4.8%).

In the radio market, meanwhile, which showed an overall increase of 2.3%, R101 saw its advertising revenues grow by 23.9%. There was also a significant increase in advertising sales for the Group’s web sites (+27%), in a market that grew by 13.9%.

  • Grafica

As mentioned above, the consolidated revenues from the Group’s printing activities refer only to the first ten months of the year. During this period there was a marked downturn in turnover, which came to €316.3 million (-28.1% on the €439.9 million of 2007).

This fall was the result of, in addition to two fewer months of business, the loss of the contribution of Mondadori Education that had been present in 2007, a marked reduction in magazine paginations and a sharp fall in the market for add-on sales.

  • Direct marketing

In 2008 Cemit Interactive Media recorded revenues of €22.3 million, a fall of 6.7% on the €23.9 million of the previous year, while maintaining an excellent level of profitability (+18.4%).

  • Retail

Total revenues by the Retail Division in 2008 amounted to 194.5 million (+6.2% on the €183.2 million of 2007). During the period the Group’s network of stores reached 434 units, making it Italy’s most extensive network of sale outlets for editorial products.

Mondadori Retail S.p.A. generated 2008 revenues of €128 million (+2.7% on the €124.6 million of 2007). During the year, having completed the integration of the ex-Messaggerie Musicali, there was an increase in the number of outlets (up to 30 from the 29 in 2007) and a simultaneous rationalisation of the chain.

Mondadori Franchising S.p.A. generated revenues of €66.5 million (+13.7% on the €58.5 million of 2007). During the period there was an increase in the number of bookstores, from 212 in 2007 to 227 in December 2008, while the number of Edicolè outlets rose from 136 in 2007 to 177 in 2008. Of note was also the testing of and formats were, including a children’s bookshop and a new form of franchising that combines the traditional bookshop and the book club.

  • Radio

In 2008 R101 recorded net revenues of €14.8 million (+31% on the €11.3 million of 2007), which corresponds to gross advertising sales of €21.8 million (+23.9% on the €16 million of 2007), in a market that grew by just 2.3%.

In terms of ratings, the Mondadori Group’s radio reached an average daily audience of 2.1 million listeners, an increase of 7%, confirming its position among the top six Italian commercial radio stations, with around 8.4 million listeners over the 7-days.

RESULTS OF THE PARENT COMPANY ARNOLDO MONDADORI EDITORE S.P.A.

The Annual Report of the parent company, Arnoldo Mondadori Editore SpA, for the year to 31 December 2008, shows a net profit of €66.2 million (€90 million on 31 December 2007).

FORECAST FOR THE FULL YEAR

As is known, figures for consumer spending in the first months of the current year, in all the principal economic sectors, show a further decline compared to the end of 2008 and a climate of great uncertainty means that also investments are down or, at least, postponed.

In the previous year, the Mondadori Group was able to safeguard its levels of profitability thanks to the diversification of the business and, above all, to cost cuts, in anticipation of the growing crisis.

For a 2009 that is already heavily influenced by the consequences of the general situation in the publishing sector and the impact of technological changes, the company will continue to pursue cost savings, organisational simplification and the re-engineering of processes, also through the specific allocation of dedicated investments.

The trend in revenues in the first months of the year and the objective difficulty in foreseeing developments and the evolution in consumer spending and investments, especially in advertising, over the coming months, suggest a prudent approach in forecasting the company’s performance in 2009, which, in any case, is not expected to be at the same level as the previous year.

§

PROPOSAL FOR THE ALLOCATION OF THE NET PROFIT FOR THE YEAR 2008

The Board of Directors will propose to the Annual General Meeting of the Shareholders, to be held on 29 April 2009 (on first calling, or 30 April on second calling), the allocation of the entire net profit for the year to 31 December 2008 of Arnoldo Mondadori Editore S.p.A., amounting to €66,197,031.51 to an extraordinary reserve.

Given the lack of clear signs of an improvement in the market, the Board’s proposal to not distribute a dividend for 2008 is aimed at allowing Mondadori to maintain its financial solidity, maintain the necessary levels of investment in products, finance the reorganisation process, and to ensure that the company is ready to take advantage of possible opportunities deriving from a recovery in the economic cycle.

§

PROPOSAL TO THE SHAREHOLDERS FOR A STOCK OPTION PLAN FOR THE THREE-YEAR PERIOD 2009-2011

Following the termination of the Stock Option plan for the previous three-year period 2006-2008, the Board of Directors have resolved, following the recommendations of the Remuneration Committee, to propose to the Annual General Meeting of the Shareholders, to be held on 29 April 2009 (on first calling, or 30 April on second calling) a Stock Option Plan for the three-year period 2009-2011, as per Art 114 bis of Legislative Decree, 58/1998.

The purpose of the Plan is essentially to give the company and its subsidiaries access to a tool with which to promote loyalty and render the management more directly involved in the results.

In conformity with art. 114 bis of legislative decree N°58 of 24 February 1998, the fundamental characteristics of the Plan to be approved by the shareholders are as follows:

Participants in the Plan

Participants in the Plan will be identified by the Board of Directors from: managers of the company or its subsidiaries with functions critical for the attainment of the group’s strategic objectives; directors of the company and its subsidiaries; journalists of the company and its subsidiaries with the position of editor or co-editor; managers of the holding company who carry out their function in the interest of the company.

Participants may therefore also include “relevant subjects” belonging to the categories, as at Art. 152 sexies, para. 1, C.1), C2) of CONSOB Regulation 11971/1999.

Implementation of the Plan

The Plan is organised in annual allocations to the participants of options, which are personal and non-transferable, for the acquisition of shares of the company, held in the portfolio or through subsidiary companies. Implementation of the plan is subordinate to the attainment of the company’s performance objectives as determined by the Board of directors following the recommendations of the Remuneration Committee. Exercise of the allocated options will be further subordinate to a lock-up period and will be possible only within a defined period.

Criteria for the determination of the purchase price of shares

The price of such shares will be calculated on the basis of the arithmetical average of the reference price of Mondadori ordinary shares, in the period measured by the Borsa Italiana that goes from the date of allocation to the same day of the previous month.

Subject to the approval by the AGM, Board of directors will define, in the light of the above, Regulations for the implementation of the Stock Option Plan.

§

RE-ATTRIBUTION OF POWERS AS PER ARTT. 2443 AND 2420 TER OF THE CIVIL CODE

Following the expiry of the five-year attribution of powers made by the Shareholders’ Meeting of 2004, the forthcoming AGM (the extraordinary part), to be held on 29 April 2009 (on first calling, or 30 April on second calling), will be asked to approve the re-attribution of powers to the Board of Directors to resolve capital increases and the issue of convertible bonds, as per artt. 2443 and 2420 ter of the Civil Code.

The new powers are in line with the previous expiring powers, both in terms of duration (five years, in accordance with current legislation) and for the maximum sums (a nominal €78 million and €260 million respectively).

§

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

§

The results of 2008 will be outlined by the deputy chairman and chief executive, Maurizio Costa, and the CFO, Carlo Maria Vismara, at a meeting with the financial community to be held today at 2.30 pm at the company’s headquarters in Segrate.

Board of Directors approves the Group’s consolidated annual report and results for the year to 31 December 2007

  • Consolidated revenues of €1,958.6 million: +11.9% on the €1,750.2 million of 2006
  • Consolidated gross operating profit of €268.9 million: +11.9% compared with €240.3 million in 2006
  • Consolidated net profit of €112.6 million: +3.3% on the €109 million of 2006
  • Net financial position shows a deficit of €535.3 million. An improvement of €19.4 million
  • Dividend proposal: €0.35 per share,in line with the ordinary dividend of 2006

The Board of Directors of Arnoldo Mondadori S.p.A. met today, under the Chairmanship of Marina Berlusconi, to examine and approve the consolidated balance sheet and management report for the year to 31st December 2007 as presented by the Group’s Deputy Chairman and Chief Executive, Maurizio Costa.

During 2007 Mondadori consolidated its leadership position in Italy in an essentially stable market for books and a magazine market in which a downward trend continued, especially for add-on sales.

Organisational changes and improvements in efficiency across the group, combined with the integration of Mondadori France, nevertheless made it possible to record results for the overall performance and that of activities in France that were better than expected, in a market that, especially in terms of advertising investments, is going through a difficult phase.

Consolidated revenues for 2007 came to €1,958.6 million, an increase of 11.9% on the €1,750.2 million of 2006 (+16.8% with a like-for-like inclusion of the distribution business)[1].

Consolidated gross operating profit amounted to €268.9 million, compared with €240.3 million in the previous year, an increase of 11.9%, and 13.7% as a proportion of revenues, a figure in line with that of 2006.

Net of non-recurring and extraordinary items, thanks to the performance of the various divisions, there was a 16.7% increase in the group’s operating margin, despite increased investments in business development of €8.8 million.

Consolidated operating profit came to €225.2 million, an increase of 11.8% on the €201.4 million of 2006, after increased amortizations of around €4.8 million resulting from the acquisitions in France and of Messaggerie Musicali. As a proportion of revenues, the figure of 11.5% was in line with the previous year.

Consolidated profit before taxation amounted to €189.5 million, a slight rise (+0.3%) on the €189 million of 2006. This result felt the impact of higher financial charges of €23.3 million, around €13.7 million due to the higher average indebtedness during the year and the rest from increases in interest rates resulting from the general economic climate.

Consolidated net profit came to €112.6 million, an increase of 3.3% on the €109 million of 2006. There was a benefit in 2007 from lower tax charges, despite a higher level of non-taxable income in 2006 and the difference in the results of holdings consolidated on an equity basis.

This is essentially the result of the net effect of the use of deferred tax liabilities and the replacement tax applied, in line with the provisions of the last government budget regarding the taxation of certain corporate assets. There was an insignificant improvement (+€0,4 million) form the application of new IRES and IRAP rates to both deferred and advance taxes.

Gross cash flow for came to €156.3 million, compared with €147.9 million in 2006.

The overall net financial position showed a deficit of €535.3 million on 31.12.2007, compared with a deficit of €554.7 million on 1 January 2007, an improvement of €19.4 million despite net investments of €58.9 million, share buy-backs for €10.3 million, dividend payments of €84.7 million and taxes of €86 million.

 

THE BUSINESS AREAS

· Books

In 2007 the total revenues of the Mondadori Group’s Book Division came to €445 million, an increase of 1.3% on the €439.5 million of the previous year.

The gross operating margin, as a proportion of turnover, was 19.7%.

The Division saw a marked confirmation in 2007 of its leadership in the book market, overtaking the already excellent result of the previous year, with a value market share of 29% just in the mid-to- large bookstores; in the large-scale retail sector, the market share of the Mondadori Group’s publishing houses is estimated at more than 35%[2].

There were no significant changes during the year to the overall structure of the Division and the balance between its various sectors. The trade books sector (fiction and non-fiction, for adults and children) and accounts for 61.5% of revenues; educational publishing, which is managed by Mondadori Education (a new name adopted on 1 January 2008) accounts for 20%; while books in the Art, Architecture, along with cultural heritage activities, make up 11.7% of revenues.

During 2007 the Book Division published 2,742 new titles (2,787 in 2006) and 5,242 reprints (4,937 in 2006), a total production of 54.6 million books, compared with 56.4 in 2006.

Among the Group’s various publishing houses, the performance of Einaudi and Piemme has been particularly good.

In 2007 Giulio Einaudi Editore saw a 4.4% increase in revenues, to €49.9 million, compared with €47.8 million the previous year. This improvement was due to excellent bookstore sales as well as add-on sales operations.

Piemme generated revenues in the period of €55.7 million, an 18% increase on the €47.2 million of the previous year. This growth was mainly in the fiction area which saw an increase of around 90%, thanks to the exceptional sales of new titles published in May by Khaled Hosseini, Mille splendidi soli (which sold more than 1 million copies during the year) and Il Cacciatore di aquiloni (more than 800,000 copies in the year), both of which were at the top of the best sellers lists for 2007.

Edizioni Mondadori generated 2007 revenues of €137.6 million, essentially in line with the €137.9 million of 2006 (-0.2%); a result which remains very positive if the further reduction in the Dan Brown effect and the fall in the sale of rights for add-on sales initiatives are taken into consideration.

2007 was a particularly difficult year for Sperling & Kupfer with a 13.7% fall in revenues to €25.3 million, from the €29.3 million of 2006.

The revenues of Mondadori Electa in 2007 came to €51.1 million, a fall of 5.2% on the €53.9 million of the previous year. This was due to the sharp fall (around 40%) in add-on sales, which was partly compensated by stability in the cultural heritage and books area. In particular, book sales increased by 11.4% compared with the previous year, with an improved performance across all lines.

The net 2007 revenues of Edumond Le Monnier (as mentioned earlier, since 1 January 2008 Mondadori Education S.p.A.), came to €87.1 million (-0.7%), compared with €87.7 million in the previous year.

The company maintained its leadership in the educational market with a share of 13.9% and an analysis of the various segments shows that Mondadori Education remains the leader, among the big publishers, in the primary and middle schools sector, and is in the number two position in the high school sector.

On the distribution and logistics front, the Division’s revenues for the period amounted to €33.7 million, in line with the previous year.

The distribution of Piemme products, for the whole of 2007 (compared with just five months in 2006), had a marked impact and, over the year, saw an increase of almost 50% in the number of dispatches, while managing to keep the average days of delivery (2.1), essentially unchanged alongside further improvements in efficiency.

· Magazines

The Group’s Magazine Division generated consolidated revenues in 2007 of €1,047.7 million, an increase of 20.8% on the €867.2 million of 2006.

In a difficult market scenario, Mondadori was able to improve its levels of profitability compared with the previous year, thanks to ongoing efforts to contain costs and returns. Gross operating profit as a proportion of revenues was 14.8%.

The year was also affected by the inclusion of Mondadori France (twelve months in 2007 compared with only four in 2006) and by the contribution of distribution activities, in Italy, to Press-Di Distribuzione Stampa Multimedia S.r.l.: a reclassification on a like-for-like basis of the distribution business and net of the impact of Mondadori France, revenues for the period would be essentially in line with the previous year.

Italy

The revenues of the Magazine Division Italy came to €657.8 million, in line with the €657.9 million of the previous year, net of the effect of the abovementioned Press-Di.

The performance during the year was characterised by the following:

– a fall in circulation revenues (-3.7%) where there was a drop in the number of copies sold, also as a consequence of a number of titles being closed down;

– an excellent performance in add-on sales, in a market in marked decline (-19.4% in terms of volume), with revenues which increased by 3.4% compared with the previous year;

– a fall (-1,7%) in advertising revenues which were penalised by a reduction in the amount of space sold, and only partially compensated by rate rises;

– the launch of two titles with high advertising potential, First, a monthly supplement to Panorama, and Grazia Casa which completes Mondadori’s offer in the interiors segment;

– the closured of the monthly Per Me and the sale of the weekly Star+TV, penalised by both overcrowding in their respective segments and poor advertising sales;

– the development of internet activities which affected a number of titles. In this context, online advertising sales saw an above market average increase of 54%;

– strong operation cost controls, especially in the technical, commercial and editorial areas, which led to a marked recovery in efficiency.

On the circulation side, Mondadori’s performance was slightly better than the market, which overall saw a fall in terms of copies of around 4.7%, confirming the company’s absolute leadership in the sector (38%).

In women’s titles Donna Moderna confirmed its strength by maintaining circulation revenues. In the male lifestyle and newsmagazine area, Panorama saw a fall in circulation of around 3%, while confirming its consolidated leadership in the segment. First, meanwhile, made a significant contribution to the weekly title’s advertising revenues; positive results were also recorded by Panorama Travel, Economy and PC Professionale.

In the TV-entertainment and family segments (which saw a fall of 6% in copies) Mondadori titles had the best performance in the reference market. TV Sorrisi e Canzoni continues to sell around twice as many copies as its direct competitor and continues to generate revenues with add-on sales initiatives.

Chi maintained its circulation revenues while recording a significant increase in advertising sales.

The up market segment maintained its 2006 level, thanks to a stable performance by Grazia and growth in the design-architecture and cooking segments, which compensated for a downturn in interiors.

In terms of add-on sales, there was acceleration in the downturn in the market as a whole (-19.4%) even though the phenomenon continued to make a significant contribution to the revenues of publishing companies.

In such a difficult context, which has also affected newspapers, Mondadori was able to buck the trend with revenues that increased by 3.4% on 2006, confirming the company’s leadership with a market share of 36%.

In the distribution of editorial and multimedia products, in its first year of business Press-Di generated results that were widely ahead of expectations, thanks to the fine-tuning of the organisational structure and operations, increased efficiencies generated during the year and the expansion of services to new third-party clients.

On the digital side, the excellent performance of the Donna Moderna, Panorama, MyTech e Cosmopolitan sites made it possible to increase advertising revenues by 54%, in a market that grew by 42.7%.

France

Mondadori France ended its first full year as part of the Mondadori Group with consolidated revenues of €389.9 million.

During the year a number of actions were taken aimed at:

– carrying out a complete review of all titles, starting with the most important, and consolidating leadership positions;

– encouraging greater integration with the Italian parent company;

– redefining the area for online activities and testing the market for add-on sales;

– redefining the organisational model and cost structure.

In terms of circulation Mondadori France recorded positive results: in particular, the weekly Closer (+28% on the previous year) improved its position at the top of its segment; Auto Plus continued the positive trend with an increase of 11%; in a difficult, Télé Star performed well, thanks to the successful launch of the first add-on sales operation in the French magazine market.

The advertising market in France saw an overall slowdown in investments (-3.6%, source: Secodip) with a fall in space sold compared with the previous year, due to the election held in the first half and new opportunities for retailers to advertise on television, something that was previously not permitted by law.

In this context Mondadori France generated advertising revenues of €115 million, closing the year in line with the performance of the market, after having recovered during the summer the shortfall of the first half of the year.

International activities

On the international side the development of the “Grazia International Network” continued with the launch of Grazia in Russia and Holland: the revenues of the network grew by 35%, including not only licensing fees, but also the contribution of advertising sales in Italy for the foreign editions and syndication activities.

2007 also confirmed the prospects for other Mondadori brands in addition to Grazia:, Sale&Pepe in Serbia and Interni in Russia, as well as Casaviva, the first international edition of which was launched in Thailand in 2006.

Mondadori also formalised an agreement with SEEC Media Group Ltd. to create a joint venture in China for the launch of Grazia in 2008. During the current year the Mondadori title will also be published in Australia, following a licensing agreement reached with the Australian publisher ACP Magazines.

There was an excellent performance by Attica, thanks to a positive trend in circulation for TV guides and the exceptional performance of add-on sales of DVDs. During 2007 the expansion of the Greek company’s activities continued in the Balkans, the effects of which will be seen in this year.

· Advertising

Mondadori Pubblicità closed 2007 with revenues of €349.5 million, and increase of 1.9% on the €342.9 million of the previous year, thanks to a marked upturn in the fourth quarter compared to the same period of the previous year.

There were no significant changes to the portfolio during the period, excluding the addition of Famiglia Cristiana and the exit of the Disney titles.

Advertising sales during the period were characterised by a positive performance in the fashion sector, with a positive impact on women’s and family titles: of these Grazia (+3.5%) and Chi (+7.4%). The situation was more stable among titles for men, in which the strengths of the tried and tested Panorama “system” were confirmed, strengthened further by First and Travel; the up scale design and architecture segment also performed well (in particular Interni and Casabella), while for the magazines managed in joint-ventures, of particular note was the positive performance (+8%) of Focus (Gruner+Jahr/Mondadori).

Sales for R101, sustained by the marked increase in listeners, were up by 24.8%, decidedly ahead of the market (+8%).

· Printing

The 2007 revenues of the Printing Division came to €439,9 million, compared with €447.9 million in the previous year, a fall of 1.8%,.

Captive revenues totalled €279.2 million, and increase of 7.7%, while third-party revenues (€160.7 million) saw a fall of 14.8%, above all as a result of the decline in the add-on sale of editorial products with magazines and newspapers.

The foreign market for rotary printed commercial products was stable in terms of volume and in this context there was a positive consolidation of the company’s position with its main clients despite the European competitive scenario being affected by increased competition and price tensions.

The market for monochrome books, both hardcover and paperbacks. Linked to add-on sales initiatives by magazines and newspapers saw a marked fall compared to previous years. Meanwhile the performance of trade books was very positive, the foreign illustrated book market was stable, even though increased competition from the Far East continues to increase the pressure on prices.

Since 2007, four monthlies published by Mondadori France have been printed by Mondadori Printing; and further synergies have been developed for the supply of paper.

During the year there was a marked increase in energy costs due to the trend in oil prices, which increased by 5.7 % on 2006.

There was a slight increase in the cost of paper, continuing a trend that had been noted the previous year.

  • Direct marketing

In 2007 the Direct Marketing sector, through the activities of Cemit Interactive Media S.p.A., recorded revenues of €23.9 million, in line (-0.4%) with the €24 million of the previous year.

After the fall off of business in the communication area due to the introduction of new privacy legislation in 2005, the company has brilliantly conducted a reorganisation of its structure and processes, refocusing its business on customer loyalty, an area in which Cemit continues to be the only operator able to offer a complete range of services.

  • Retail

The total revenues of the Retail Division in 2007 came to €183.2 million, an increase of 33.4% on the €137.3 million of 2006.

 

Mondadori Retail generated revenues in the period of €124.7 million, an increase of 38.6% on the previous year, thanks to the opening of three bookstores in shopping malls in Lonato (BS), Rome and Nola (NA), the new Multicenter in Piazza Duomo in Milan and the contribution made by the incorporation of the two Mondadori Shop S.p.A. stores (formerly Messaggerie Musicali S.p.A.).

On a like-for-like basis, excluding for 2007 the revenues of Mondadori Shop S.p.A. and in 2006 the sales of big clients, the increase would be 10.6%.

Having brilliantly refocused the book offer, the performance of Messaggerie Musicali was particulalry positive, generating revenues of €35.5 million.

Mondadori Franchising saw significant growth in 2007, recording an increase in revenues of 23.7% to €58.5 million: the number of outlets rose form 266 in 2006 to 349 (of which 141 with the new Edicolè formula).

  • Radio

The Radio Division’s revenues for 2007 came to €11.3 million, an increase of 21.5% on the €9.3 million of 2006.

During the year Radio R101 saw a further improvement in the quality of the product, enriching the schedule with new programmes and new presenters. At the same time brand-building and content communication efforts continued along with the significant implementation of the signal distribution for national coverage continued, thanks to frequency acquisitions made during the year (in particular in the Lazio, Campania, Emilia Romagna, Veneto and Puglia regions) increasing the level of coverage to 90%.

Audiradio figures for 2007 show a progressive increase in the number of listeners to R101 to an average daily level of more than 2 million. Compared with 2006, R101 recorded the best performance in the public and private radio market, with an increase of more than 40% in the daily average. Over the 7 days, listening figures, at more than 8.4 million, put the station among Italy’s top six commercial stations, after just two years.

 

 

RESULTS OF THE PARENT COMPANY ARNOLDO MONDADORI EDITORE S.P.A.

The Annual Report of the parent company, Arnoldo Mondadori Editore SpA, for the year to 31 December 2007, shows a net profit of €90 million, in line with the €90.2 million of the previous year.

DIVIDEND PROPOSAL

The Board of Directors agreed to propose to the Annual General Meeting of the Shareholders, called for 22 April 2008 (or 23 April on second calling), a gross dividend, before tax, of €0.35 for each ordinary share in circulation on the date of coupon detachment.

In line with the terms outlined by the regulations for markets organised and managed by Borsa Italiana S.p.A., dividends will be payable from 22 May 2007 (coupon detachment: 19 May 2008).

FORECAST FOR THE FULL YEAR

Economic forecasts for 2008 continue to evolve, with negative indicators for production, consumer spending and the industrial costs.

The situation is complicated by the ongoing liquidity crisis making it both expensive and difficult to finance development while encouraging the recourse to low risk investment. In addition, differing monetary policies in Europe and the United States have led to acceleration in the strength of the euro, with inevitable consequences for companies involved in international trade.

In this context, in which the Italian economy would appear to be among the most exposed and fragile, the Mondadori Group will pay particular attention to managing its core business, which is less susceptible to such factors, and the international activities that reduce the dependence on the domestic market. During the year the development will continue of the international network, digital activities and the product portfolio in France.

The current situation makes it especially difficult to make forecasts for companies’ 2008 results, however Mondadori’s track record in recent years makes it possible to hypothesise operating results for the current year, net of development costs and extraordinary items, in line with the positive results of 2007.

§

As per article IA.2.9.3 n.4 of Italian Market Regulations document, bonded loans expiring over the 18 months from 31 December 2007 are hereby indicated:

– date of issue: 20/10/2003;

– amount: €109,900,000, corresponding to 1,099 bonds of €100,000 each, convertible in ordinary shares of Arnoldo Mondadori Editore S.p.A.;

– issued by: Mondadori International S.A., a wholly-owned subsidiary of da Arnoldo Mondadori Editore S.p.A.;

– guarantor: Arnoldo Mondadori Editore S.p.A.;

– date of expiry: 20/10/2008.

§

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

§

The results of 2007 will be outlined by the deputy chairman and chief executive, Maurizio Costa, and the CFO, Carlo Maria Vismara, at a meeting with the financial community to be held today at 3.00 pm at the company’s headquarters in Segrate.

[1] From 1 January 2007, following the contribution of the distribution activities for Italian magazines to Press-Di Distribuzione Stampa Multimedia S.r.l. (a wholly-owned subsidiary of Arnoldo Mondadori Editore S.p.A.) the method of accounting has changed from that of costs and revenues to a premium method.

A reclassification of such distribution activities, using the same method for 2006, shows that the increase in consolidated revenues would have been 16.8%. Excluding the effect of Mondadori France (included for the whole of 2007, compared with only four months in 2006 the volume of business would show an increase of 1.8%.

[2] Since January 2007 the measurement of sales for trade books (fiction and non-fiction) has been conducted by Nielsen Bookscan. Due to the different methodology adopted by this company and that used by Demoskopea, starting with the sample, the figures for 2007 cannot be compared with those of the previous year.