Month: July 2020

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

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

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

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

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

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

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

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

To this end, the Group has:

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

For the different business activities:

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

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

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

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

• consolidated revenue amounted to € 288.9 million, down by -24% versus € 380 million in the same period of 2019. Net of the changed scope of consolidation of the Media Area in 2019, the drop stands at -22.2% and is attributable mainly to the effects of COVID-19;

• IFRS 16 adjusted EBITDA amounted to € 11 million versus € 21.8 million in the prior year (down by approximately € 10.9 million versus the same period of 2019).

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

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

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

 

• IFRS 16 EBIT amounted to € -17.2 million, down by € -19.3 million versus 30 June 2019, due mainly to the trend of the abovementioned components and the write-down and start of the amortization process of a number of titles;

• The consolidated result before tax amounted to € -30.9 million versus € -1.6 million in first half 2019, due also to financial expense (€ 4 million), the adjustment of the investment in Reworld Media (€ -6.6 million) and the loss of the associates consolidated at equity (€ -3.4 million);

• The result from continuing operations amounted to € -25 million versus € -4.6 million at 30 June 2019 (€ -20.4 million). The decline was strongly affected by the above non-operating and extraordinary cost components, which total approximately € 22 million, only partly offset by tax income of approximately € 5.9 million recorded by the Group during the year;

• The Group’s net result amounted to € -25 million versus € -1.9 million in first half 2019 (which had also included € 2.7 million from discontinued operations);

 

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

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

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

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

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

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

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

Performance of business areas

• BOOKS

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

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

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

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

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

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

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

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

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

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

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

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

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

• RETAIL

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

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

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

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

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

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

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

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

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

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

• MEDIA

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

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

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

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

Specifically:

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

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

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

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

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

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

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

Annexes (in the complete pdf):

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

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

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

^[3] Product revenue excluding Club revenue

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

[5] Nielsen, cumulative figures at May 2020

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

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

[8] Comscore (May 2020)

[9] Shareablee (June 2020)

The Mondadori Group has redesigned its Trade Books Area under the leadership of the chief executive of Mondadori Libri S.p.A. Enrico Selva Coddè, with the aim of pursuing growth and development opportunities for its publishing houses.

“We have defined a new organisational model that will enable us to respond more effectively to the central challenges in trade publishing, a sector in increasingly rapid evolution, also at the international level,” declared Enrico Selva Coddè. “A necessary change to look to the future of the country’s leading cultural industry with the innovative approach that has always characterised our publishing houses,” Selva Coddè concluded.

Consequently, two new crossover departments have been created that will report directly to Enrico Selva Coddè.

The first, the department of General Operations, will be headed up by Filippo Guglielmone, with the aim of orienting the business at the highest possible level of cost efficiency and service possible; operations and sales will be integrated in a single process to drive value generation and make it possible to optimise time-to-market, increase customer satisfaction and facilitate the growth of the publishing houses.

The second, the department for Strategic Marketing, Rights and Acquisitions, to be led by Lorenzo Garavaldi, aims to reinforce the company’s role in the publishing market through analysis and the definition of market strategy, the coordination of acquisition activities and the identification of development priorities.

Reporting to Enrico Selva Coddè, the publishing houses will also absorb product marketing activities giving them all control over communication, in line with a scenario in which the enhancement of authors’ work is part of a single publishing effort that goes from the title to readers’ comments.

The publishing houses are led by Francesco Anzelmo, General Manager of Mondadori; Ernesto Franco, General Manager and Editorial Director of Einaudi; Massimo Turchetta, General Manager of Rizzoli Trade and Publishing & Rights Development; Stefano Peccatori, General Manager of Sperling & Kupfer, Piemme and Mondadori Electa, and Lorenzo Garavaldi, General Manager of BU Ragazzi.

What will it be like going back to classes? 83.7% of the students who responded to a Studenti.it, survey say that they are concerned. In fact, of these, 41% think that everything will be more complicated in September while the remaining 42.7% are uncertain what will happen.

The biggest concern is about the health aspect: 45% wonder whether it will be safe to return to school, while a small percentage (8%) is worried that they will not be able to catch up with the syllabus. For  30% of those interviewd by Studenti.it lessons should have started up again before 14 September, in order to recoup what has been lost during the health emergency.

On the side of Italian students for more than 20 years, Studenti.it is preparing to go back to school and accompany kids as they make their return also by responding to their most frequent questions: How will we re-start? How will entrance tests be managed? How will we get to school and how will our habits have to change? Up-to-date editorial coverage will be available on the site, with a back to school special, everything new in the school calendar, as well as advice and suggestions for the choosing a university, with dedicated formats such as the new orientation podcasts and the Facebook group for the medical school entrance test. There will, of course, also be weekly surveys to have a picture of what students are feeling and their expectations for lessons, plus a new schedule of live social media events “Tg Scuola“.

During the health emergency, with lesson suspended across the whole of Italy, digital became essential for students, teachers and parents. In response, Studenti.it increased and expanded its offer with an enormous quantity of free content and constantly available didactic resources, such as video lessons with study tips, a series of  podcasts “Studenti Explains”, a new way of exploiting online notes that reached  100,000 listeners per month and live social events with experts and YouTubers.

All of which has led – for the Mondadori Brand – to a  30% increase in the site’s traffic compared with last year (Source: Google Analytics, average March-April-May), arriving, in the month of April, a month of total lockdown, to 5 million unique users, +34% compared with April 2019 (Source: Total Audience April 2020), and an increase of 50% in views on the YouTube channel compared with the same period of last year.

Donna Moderna will be on newsstands this week in a special edition entitled Talento Italiano (Italian Talent). In fact, the Mondadori Group magazine edited by Annalisa Monfreda has decided to support Made in Italy: buy Italian, travel in Italy, but also get to know our country’s big little stories of tradition and innovation as a new form of solidarity to offer concrete help to the country.

“In these strange times, marked by the health emergency, we have started to look more closely at what surrounds us,” explained the editor Annalisa Monfreda. “And we have discovered stories, flavours and colours in our neighbourhoods and cities. We have remembered that Italy is an exceptional country where you can travel for years without ever having to take the same road, where you can taste the outstanding food and wine of every province and find products that have become cults across the world. With this issue we want to celebrate the inexhaustible creativity of a country that derives its nourishment from its history to project itself into the future.”

The magazine

Each section of the special issue of Donna Moderna looks at a different aspect of Made in Italy. Starting from the “donne moderne” (modern women) of the week, three virtuous examples of female entrepreneurship: Maria Flora Monini, director of Comunicazione Monini, Carlotta Bevilacqua, CEO of Artemide, and Daniela Galetti, head of the management of supercomputer systems at the Consorzio Interuniversitario Cineca. Meanwhile, 9 women who symbolise Italian genius pose for an exceptional fashion feature, wearing only clothes and accessories of Italian brands. They include: Anna Fiscale, President and Founder of QUID, Viviana Varese, starred chef from the restaurant Viva,  Antonella Bondi, creator of perfumes, Tiziana Aranzulla, one of the world’s top ten  cardiologists, Carolina Vergnano, CEO of Vergnano, Vania Zoppé, ‘woodswoman’ and TV presenter, Grazia Di Franco, bar lady, Roberta Simone, producer of video clips, and Michela Cambiaghi, Serie A footballer of Sassuolo. In beauty, the feature Baci da…Cartoline dall’Italia, (Wish you were here… Postcards from Italy) presents beauty products that recall the colours and smells of 5 summer destinations, including Stromboli, Porto Cervo, Capri and Taormina. Then, of course, there are columns dedicated to cooking and the excellence of Italian food and wine with six female chefs who reinterpret some typical recipes. Then there is a section entitled La bella Italia dell’estate 2020 (Beautiful Italy in Summer 2020) with many suggestions of places to spend the holidays: from Liguria to Tuscany, from the South Tirol to Veneto and Umbria, as well as cruises in the Mediterranean. But we also talk about trends and lifestyle in furniture, Italian design icons that give our homes character and reinvented classics that have typified our way of living. Plus, there is a special survey on the Italian Silicon Valleys – with everything that is new in super-tech Made in Italy and technological hubs that are unique in the world – e and our universities that are climbing up the most prestigious international rankings thanks to the Polytechnics (of Milan and Turin), departments of outstanding excellence, the quality of research as well as the appreciation of our graduates by employers. The special issue ends with DM Like, a selection of small stories of innovation from around the country.

#talentoitaliano

The issue’s storytelling continues also online: on the web site and on social media there are the interviews with the three ‘modern women’ of the week, video stories on travel and beauty products, suggestions from the six chefs about the mistakes not to make in the kitchen, while the nine models from the fashion feature take part in a #talentoitaliano challenge and reveal the adjectives which for them best represent Italy.

“Talento Italiano is just the first of three special issues of Donna Moderna, in a project that will continue in the autumn,” announced Andrea Santagata, General Manager of Mondadori Media. “An innovative way of doing the magazine that confirms the brand’s extraordinary capacity, as a point of reference in the women’s segment, to reach its audience with complete, circular and multi-channel communication.”

“We are extremely pleased with this idea, because the Talento Italiano initiative by Donna Moderna, in addition to the important editorial value that it offers, is also a great opportunity for many companies from around the country who have shown great interest and participation in the project,” commented Davide Mondo, chief executive of Mediamond. In fact, the advertising sales for this issue have seen a 40% increase compared with a similar initiative last year, with over 60 adv. pages and numerous special productions on digital and social media, online from tomorrow, Thursday 9 July.

Thanks to its unique mix of practical advice, first-hand testimony and live daily coverage, Donna Moderna is always at the side of its readers and their needs, reaching a total audience (magazine and web) o 14 million net users each month (media impact data fusion December 2019 on Audiweb and Audipress figures), to which should be added over 2 million fans on social media with 1.4 million interactions per month (Source: Sensemakers May 2020).