Financial results

Today, the meeting of the Board of Directors of Arnoldo Mondadori Editore S.p.A., chaired by Marina Berlusconi, reviewed and approved the draft Parent Company and Group consolidated financial statements at 31 December 2020 presented by CEO Ernesto Mauri.

2020 HIGHLIGHTS
2020 was marked by the effects of the COVID-19 health emergency and the resulting application from March of containment measures that greatly curtailed economic activities and the businesses in which Mondadori operates and is a leader^[1], leading to a severe economic crisis.

Against this backdrop, the Mondadori Group was able, on the one hand, to benefit from the resilience shown by the Books market – today the major business component, contributing 92% to the Group’s profitability – and, on the other, to take a series of targeted actions in a timely and effective manner.

These actions were aimed both at guaranteeing its employees safe working conditions – also by encouraging smart working – and at allowing business continuity.

In order to protect Group profitability, an effective plan was launched to contain operating and structural costs of approximately € 48 million, which enabled the company to increase efficiency and sustain profitability even in a severely deteriorated context.

The measures adopted by Management included social shock absorbers, further actions to contain payroll costs – such as a freeze on pay policies, the use of holidays, a hiring freeze -, significant savings on discretionary spending, such as marketing and advertising, as well as the renegotiation of lease agreements on the network of bookstores.

More specifically, mention should be made that the books market in 2020 showed an extraordinary resilience: following the gradual reopening of bookstores after the first lockdown, the segment witnessed a steady recovery, peaking in an approximately 17% growth in the fourth quarter (versus the same period of 2019); with regard to the full year, the market increased by 3.3%.

A strong contribution to the buoyancy of the books market came from the development of the e-commerce channel, which saw double-digit growth in 2020, and from the increased penetration of digital books (e-books and audio-books), which made for 7.4% of total segment revenue.

PERFORMANCE AT 31 DECEMBER 2020
Taking account of the situation of general crisis surrounding the Group, the results achieved in 2020 are far higher than those initially indicated and forecast and are truly outstanding, in the face of the restrictions imposed by the emergency situation.

Consolidated revenue amounted to € 744 million, down by 15.9% versus € 884.9 million in 2019. Net of the change in the scope of consolidation of the Media area from the disposal of the five titles at end 2019, revenue fell by approximately 14%, due mostly to the effects of COVID-19.

Adjusted EBITDA amounted to € 98.1 million, down by € 12.3 million versus 2019 (€ 110.4 million). This performance reflects both the significant effects of the quick response and countermeasures implemented by the Group to tackle the consequences of COVID-19 – which enabled it to curb operating and structural costs by approximately € 48 million – and the grants acknowledged for the exhibitions suspended, cancelled or postponed due to the pandemic.

With regard to the Group as a whole, special mention should be made of the profitability percentage, amounting to 13.2% versus 12.5% recorded in 2019, proof of the effectiveness of the operational efforts made.

EBITDA amounted to € 84.6 million, down by approximately € 18 million versus € 102.9 million in the prior year, due to the above trends and higher non-recurring negative items totaling € 6 million.

EBIT amounted to € 14.8 million, down by approximately € 48 million versus 2019, due to higher amortization, depreciation and write-downs for a total of approximately € 30 million: mention should be made of the write-down of TV Sorrisi e Canzoni, other brands and goodwill for a total of € 26.5 million, in addition to the start of the amortization process of TV Sorrisi e Canzoni (€ 3.5 million). The write-off, resulting from the impairment test, is attributable mainly to the strong discontinuity in the relevant markets of the magazines business, which accelerated the downward trend in advertising sales, relating in particular to traditional print activities, and to circulation trends in the newsstands and subscriptions channels.

Consolidated profit before tax came to € 1.5 million versus € 50.6 million in 2019. In addition to the above, the drop was affected also by the greater financial expense (from € 2.2 million to € 4.1 million) from the recognition of two positive components in 2019: income related to the adjustment of amortized cost under IFRS 9 and a substitute tax refund.

The adjustment of the amount of the remaining investment in Reworld Media to the stock market price at 31 December 2020 (€ 3.17 versus € 2.75 at 31 December 2019), together with the sale of the company’s shares in the fourth quarter of the year, resulted in the recognition of a capital gain of € 0.6 million.

The result of the associates (consolidated at equity) came to a negative € 7.3 million, improving however versus 2019, thanks also to the halved investment in the company that publishes Il Giornale (SEE), although largely offset by the further deterioration in the result of the other investments in the Media area (Attica Publications, SEEC) and of Mediamond, due to the economic trend.

The Group’s net profit, after minority interests, came to € 4.5 million^[2] versus € 28.2 million in 2019 (which included € -2.6 million from the discontinued operations of Mondadori France).

The net financial position before IFRS 16 at 31 December 2020 stood at € -14.8 million, a sharp improvement versus € -55.4 million at end 2019, due to the significant cash generation recorded in the year.

The IFRS 16 net financial position stood at € -97.6 million and includes the financial payable from the application of IFRS 16, totaling € 82.8 million.

Cash flow from ordinary operations amounted to € 51.2 million, up versus € 48.4 million in 2019 (continuing operations), due also to the grants^[3] received, confirming the ability of the business to steadily generate cash, even in a highly deteriorated context.

Group employees amounted to 1,845 units, down by approximately 9% versus 2,018 units at 31 December 2019, as a result of the continued efforts to increase the efficiency of the individual business areas.

BUSINESS OUTLOOK
The ability demonstrated by the Mondadori Group in 2020 to react promptly to a strongly deteriorated context, as well as the financial solidity shown by the capital position at year end, give reasons, from an operational point of view, to be optimistic all in all on the future development of the business and the results that the Group can achieve in the new year.

From a strategic point of view, the Group has all the managerial and financial resources required to continue along the path of strengthening its core businesses, of expanding into new segments in or adjacent to publishing, and of rationalizing, if possible, non-strategic activities consistently pursued in recent years, including through M&A operations.

More specifically, in 2021 the Mondadori Group intends to continue to consolidate its leadership in the Books area – both in the school textbooks and Trade publishing segments, increasing its relevance and impact on the Group’s overall activities – and to complete its skills and solutions in the digital area.

As for the Group’s operating-financial targets, referring to a business scope unchanged from today’s:

• Revenue and EBITDA

In line with the outlined strategy and in light of the relevant context, the operating targets for 2021 envisage estimates pointing to a slight growth in revenue (low single-digit) and an adjusted EBITDA that reflects margins between 11% and 12%, in a context – in the absence of the grants received in 2020 – that shows a substantial stability of the Group’s operating profit.

This is the result of a renewed effort to contain costs aimed at countering the lack of temporary measures, relating primarily to payroll costs, which brought benefits to the Group last year.

• Net profit

The net result in 2021 is expected to grow strongly due also to two “one-off” effects:

• the impact on the 2020 results of the write-down of certain balance sheet items, which is currently not expected to repeat in the new year;
• the likely resort by the Group to tax redemption on part of the intangible asset, which would give rise to recognition of a positive tax component.
• Business Units

The outlook for the individual Business Units is as follows:

• Trade books: the area is expected to operate in a low growing market with a competitive publishing plan that should enable it to achieve higher growth rates than the market and, therefore, to increase its market share. The increase in operating costs attributable, as mentioned, mainly to the lack of social shock absorbers, cannot be totally neutralized by the efficiency measures planned by Management, consequently, eating away, albeit moderately, the operating profit generated by the business unit;
• School textbooks: the forecast of greater changes in book adoptions authorizes expectations on market and revenue growth for the business unit. The more subdued growth (versus the Trade area) in operating costs is neutralized by the cost-cutting policies implemented by Management, allowing the area to keep profitability basically steady;
• Museums: the easing of COVID-19 restrictions on the management of museum activities gives reasons to suggest a modest “restart” and a moderate improvement in revenue and profitability, net of compensation and grants received in 2020;
• Retail: the deep organizational and process review, the rationalization strategy on the portfolio of stores, the continued focus on the book product as part of a broader streamlined offering are expected to bring a sharp increase in profitability;
• Media: recovery of both the print and digital advertising market versus 2020; with overall revenue of the area in slight decline, percentage profitability basically steady thanks to the continued optimization of the structures, and the continued strengthening of the digital area.
• Cash Flow and Net Financial Position

In 2021, the Group is expected to confirm the cash-generating capacity shown in recent years, in a 2020 year marked by adverse events. Specifically, forecasts on the new year indicate that cash flow from ordinary operations will range between € 40 million and € 45 million.

These forecasts suggest, in the absence of transformational acquisitions and excluding the impacts of the adoption of the accounting standards under IFRS 16, a positive consolidated net financial position at year end.

Conversely, taking account of the impact of IFRS 16, indications point to a Group financial debt no greater than 0.8x adjusted EBITDA.

As already mentioned, financial strength gives reasons to believe that during the year the Group will be able to firmly and actively pursue any acquisition opportunities that may arise, as well as to pave the way for a return to a shareholder remuneration policy from 2022, applied to the net result of 2021.

PERFORMANCE OF BUSINESS AREAS

• BOOKS

Owing to the COVID-19 emergency and the relating health measures adopted, at the end of the first half, the Trade Books market had lost 10.1% in terms of value versus 2019, the result of a reduction generated mainly in March (-29.2%) and April (-45.8%).

The strong growth witnessed in the third quarter (+8.4% versus 2019) and especially in the fourth quarter (+16.8% versus 2019) helped the market make a strong recovery, materializing at the end of the year in a 3.3% increase in terms of value^[4], driven mainly by the double-digit growth of the e-commerce channel.

Against this backdrop, the Mondadori Group retained its leadership position with a 24.8% market share.

In 2020, 4 titles from the Group’s publishing houses ranked among the top ten bestselling books in terms of value of the year, and 10 titles among the top twenty^[5].

In particular: “Fu sera e fu mattina” by K. Follett (Mondadori) in first position overall, “Insieme in cucina” by B. Rossi (Mondadori Electa), sixth, “Come un respiro” by F. Ozpetek and “La misura del tempo” by G. Carofiglio (Einaudi), ninth and tenth respectively.

In the school textbooks segment, whose market suffered an estimated 7% decline due to the pandemic^[6], the Mondadori’s Group publishing houses achieved a market share of 22.1%, higher than in 2019, thanks to the positive results of the 2020 adoption campaign.

Revenue in the area in 2020 amounted to € 422.9 million, down by 11.6% versus € 478.4 million of the prior year. Specifically:

• the Trade area fell by 5.6%;
• the Educational area dropped by 16.7%, due to the interruption of museum activities: owing to the restrictions to contain the pandemic, the area saw its operations severely impacted by the closure of sites and exhibitions, and by the virtual collapse of tourist travel also throughout the summer season.

In the last quarter of the year, however, museum activities were able to benefit from grants which partly offset, at the margin level, the effects of the closures of archaeological sites and the suspension of exhibitions, and other measures to contain the contagion.

Revenue from the sale of e-books and audiobooks, which accounted for 7.8% of total publishing revenue in 2020, rose sharply (+27.1%), driven by the lockdown period (March-May) which curtailed operations of the physical channel. Listening hours of the audiobook catalogue jumped by over 87% versus 2019, while downloads of e-books increased by 21.9%.

Adjusted EBITDA in the Books area stood at € 87.5 million versus € 94.5 million in 2019, down mainly as a result of the negative trend of revenue from the Trade area and museum activities, only partly offset by the grants received which, net of the related provisions made, amounted to approximately € 8 million.

Reported EBITDA amounted to € 84.8 million versus € 94 million in 2019, with a trend consistent with the above dynamics.

EBIT amounted to € 69.4 million versus € 81.4 million in 2019, dropping more due partly to higher amortization and depreciation recognized in 2020 resulting from higher investments related to the creation of school textbooks in the Educational area.

• RETAIL

As previously mentioned, the books market (which generates over 80% of revenue^[7] in the area) showed significant growth in 2020 versus 2019 (+3.3%^[8]), driven mainly by the double-digit increase in sales in the e-commerce channel, which benefited from the restrictions imposed on the physical channels by the COVID-19 emergency: during the year, the authorities imposed the closure from 12 March 2020 until early May (first lockdown) of physical bookstores throughout the Country, as well as the points of sale located in shopping centres, for several public holidays and pre-holidays and on weekends in the last quarter of the year (second lockdown).

In 2020, as a result of the above government measures, the Retail area reported revenue of

€ 153.7 million, down by € 33.2 million (approximately -18%) versus € 186.9 million in 2019, of which approximately half related to products other than Books.

If in the first six months of the year, sales were 27.5% lower than in the same period of 2019, in the second half of the year, Mondadori Retail saw its performance improve (-10.2% versus 2019), due in particular to the strong rebound of the Book product. This rebound was achieved mostly in the third quarter, which recorded basically steady revenue versus the prior year, while the final months of the year were affected by the introduction of new restrictions.

With regard to the trend of revenue by channel, mention should be made of the improved performance of franchised stores versus the network of directly-managed stores, whose operations were impacted more by the restrictive measures imposed by the authorities, and the significant growth of online operations (+47.7% versus 2019).

Despite the sharp decline in revenue, Mondadori Retail’s adjusted EBITDA in 2020 came to a positive € 1.3 million, down only by € 3.8 million versus 2019.

A result achieved thanks to heightened maintenance and renewal of the network of physical stores (opening of 18 franchised stores and 2 directly-managed stores), careful cost management and a deep organizational and process revision carried out in the second half of 2019 and continued even during the harshest period of the health emergency.

Reported EBITDA amounted to € –2.7 million (versus € +2.9 million in 2019), due to extraordinary items, which mainly include restructuring costs and closure of a dispute related to IMU tax for 2013 – 2019.

EBIT (which includes, under IFRS 16, among the cost components, imputed depreciation relating to directly-managed stores) amounted to € -13 million (versus € -7.7 million in 2019) and was equally impacted by the above extraordinary components.

• MEDIA

In 2020, the advertising market posted an overall 15.3% decline, heavily affected by the impact of the COVID-19 health emergency. All channels fell during the period, including digital -0.8% and magazines -36.6%^[9].

The digital advertising segment alone showed a clear reversal from third quarter 2020, growing by approximately 12% in the fourth quarter versus the same period of the prior year.

In 2020, the magazines circulation market the in newsstands and subscriptions channels, dropped by 11.8%^[10]. The add-on segment reported a negative -17.5% for add-ons bundled with magazines^[11].

Against this backdrop, the Mondadori Group retained its position as Italy’s leading multimedia publisher: in print, with a circulation market share of 24.2%^[12] and 10.2 million readers (6.8 million of whom women)^[13]; on the web, with a reach in December of 83.5% and approximately 34 million unique users in December 2020^[14]; in social media, with an aggregate fan base of 36.5 million people and 106 profiles^[15].

In 2020, the Media area recorded revenue of € 197.6 million (-23% versus € 256.6 million in 2019; -17.5% net of the titles sold at end 2019).

In the fourth quarter of the year, the drop was 18.2% (approximately -12.8% on a like-for-like basis), with a strong upswing in digital operations which grew by 17.3% (+20.8% on a like-for-like basis) versus fourth quarter 2019.

Specifically, in 2020:

• advertising revenue was down by a total of approximately 28%; this is the form of revenue most affected by the ongoing health emergency, which led to the cancellation in 2020 of an important event such as the Salone del Mobile. Net of scope discontinuities, the reduction would be 23%, with the print segment down -41% and digital advertising sales basically steady (+0.3% versus 2019).

In the last quarter of the year, against the persisting decline, albeit mitigated, in revenue from print media (down by approximately -22% on a like-for-like basis), revenue from digital advertising grew by approximately 21%, as already mentioned.

• circulation revenue (newsstands and subscriptions) was down by approximately 24%, due both to the disposal of the above five titles and the impact of COVID-19; on a like-for-like basis, the fall would be approximately 14%.
• revenue from add-on products fell by approximately 26% versus 2019 (down by approximately -24% net of the disposal of the five titles).

In 2020, digital revenue as a percentage of the business unit’s total advertising revenue amounted to 57% (from 42% in 2019).

Adjusted EBITDA in the Media area amounted to € 7.9 million in 2020, down by approximately € 3.3 million versus € 11.3 million in 2019.

The sharp drop in revenue was alleviated by the effective measures to contain operating costs, which curbed their negative impact on profitability, and by the excellent result of digital operations, which generated higher margins than in 2019.

Against slightly declining revenue, digital operations in fact recorded a growth in adjusted EBITDA, up from € 7 million to € 7.2 million, with a margin of over 20%.

In the last quarter of 2020, Mondadori Media recorded adjusted EBITDA of € 4.7 million, down by € 1.1 million versus the same period of the prior year, but recovering versus the trend seen in the first nine months of the year due to the combined effect of:

• the positive performance of digital advertising, which contributed in the quarter under review to an increase in margins of approximately € 1 million versus fourth quarter 2019
• the abovementioned continued cost containment actions, which partly offset the decline in profitability of print operations versus fourth quarter 2019.

Reported EBITDA amounted to € 3.7 million versus € 9.4 million in 2019.

EBIT came to € –30.6 million versus € 1.1 million, due to the start of amortization of TV Sorrisi e Canzoni (for a total annual amount of € 3.5 million) and the concurrent non-recurring write-downs of the title, other brands and goodwill for a total of € 26.5 million, which impacted only on this area.

PERFORMANCE OF ARNOLDO MONDADORI EDITORE S.P.A.
As from 1 January 2020, all the activities referring to the print and digital magazines, as well as the investments in the Magazines Italy area, were transferred to Mondadori Media S.p.A. (100% owned by Arnoldo Mondadori Editore S.p.A.). For a clearer understanding and comparison of results, the Company’s income statement at 31 December 2020 is also compared with the income statement of the prior year, which is presented pro forma to take account of the changed scope due to the contribution of assets and the disposal of titles in December 2019.

The Parent Company’s income statement at 31 December 2020 shows the same profit as in the consolidated financial statements of € 4.5 million (€ 29.6 million in 2019), due to the fact that the Company has chosen to use the equity method to measure its investments in the separate financial statements.

Revenue, amounting to € 45.1 million, was up versus € 38.5 million of the prior year, due mainly to the accounting of revenue recognized for services provided to the company set up in 2020, Mondadori Media S.p.A. (the Corporate and Shared Services business area and the Magazines area were included in the same company, Arnoldo Mondadori Editore S.p.A. in 2019).

Adjusted like-for-like EBITDA dropped slightly from € -0.4 million to € -0.9 million, resulting mainly from higher costs related to labour management during the COVID-19 pandemic.

The year 2020 includes net negative extraordinary items of € 3.3 million, attributable mainly to M&A costs versus € 3 million in 2019.

The Company’s net profit, after tax income of € 8.6 million recognized in 2020, which includes the tax receivable arising from the use of the “Patent box” facility of € 5.2 million, amounted to € 4.5 million (versus € 29.6 million in pro forma 2019).

The Board of Directors of Arnoldo Mondadori Editore S.p.A. has convened the Ordinary Shareholders’ Meeting on Tuesday 27 April 2021 in first call to approve the financial statements for the year ended 31 December 2020 and, if required, in second call for Wednesday 28 April 2021.

PROPOSED ALLOCATION OF THE PARENT COMPANY’S NET PROFIT TO THE EXTRAORDINARY RESERVE
The Board of Directors will propose to the Shareholders’ Meeting, called on Tuesday 27 April 2021 in first call (in second call on Wednesday 28 April 2021), to fully allocate to the extraordinary reserve the net profit resulting from the financial statements for the year ended 31 December 2020 of Arnoldo Mondadori Editore S.p.A., equal to € 4,502,600.02.

SIGNIFICANT EVENTS AFTER YEAR-END
On 29 January 2021, with a view to further strengthening its foothold in the digital world, the Group completed the acquisition of Hej!, a company that specializes in tech advertising, a sector where Mondadori already operates successfully through AdKaora, a leading media agency in the field of mobile advertising and proximity marketing.

On 15 February 2021, the Group completed the sale of its investment in Reworld Media (from the original 16.3% stake to 3.2% at 31 December 2020), realizing an overall gain of approximately € 1.1 million.

PROPOSED RENEWAL OF THE AUTHORIZATION TO PURCHASE AND DISPOSE OF TREASURY SHARES
Following the expiry of the previous authorization resolved upon by the Shareholders’ Meeting on 22 April 2020, with the approval of the financial statements at 31 December 2020, the Board of Directors will propose to the next Shareholders’ Meeting the renewal of the authorization to purchase and dispose of treasury shares with the aim of retaining the applicability of law provisions in the matter of any additional buyback plans and, consequently, of seizing any investment and operational opportunities involving treasury shares.

Below are the key elements of the Board of Directors’ proposal:

• Motivations

The motivations underlying the request for the authorization to purchase and sell treasury shares refer to the opportunity to attribute to the Board of Directors the power to:

• to use the treasury shares purchased as consideration in the acquisition of interests as part of the Company’s investment policy;
• to use the treasury shares purchased against the exercise of option rights, including conversion rights, deriving from financial instruments issued by the Company, its subsidiaries or third parties and to use the treasury shares for lending, exchange or transfer transactions or to support extraordinary transactions on the Company’s capital or financing transactions that imply the transfer or sale of treasury shares;
• to undertake any investments, directly or through intermediaries, including for the purpose of containing abnormal movements in share prices, stabilizing share trading and prices, supporting the liquidity of the share on the market, in order to foster the regular conduct of trading beyond normal fluctuations related to market performance, without prejudice in any case to compliance with applicable statutory provisions;
• to rely on investment or divestment opportunities, if considered strategic by the Company, also in relation to available liquidity;
• to dispose of treasury shares as part of share-based incentive plans pursuant to Article 114-bis of the TUF, and of plans for the free allocation of shares to employees or members of the governing or supervisory bodies of the Company or of an associate or to Shareholders.
• Duration

The authorization to purchase treasury shares is set to last until the approval of the financial statements for the year ending 31 December 2021, while the authorization to sell is requested to last for an unlimited period, given the absence of provisions in this regard pursuant to the provisions in force and the opportunity to allow the Board of Directors to make use of the maximum flexibility, also in terms of time, to carry out the acts of disposal of the shares.

• Maximum number of purchasable treasury shares

The new authorization would allow the purchase, including in more than one tranche, of ordinary shares of Arnoldo Mondadori Editore S.p.A., with a par value of € 0.26 each, in one or more tranches in an amount freely determinable by the Board of Directors – up to a maximum number of shares – also taking into account the ordinary shares held, directly and indirectly, in the portfolio from time to time – of no more than 10% overall of the share capital, in accordance with Article 2357, paragraph 3, of the Italian Civil Code.

• Criteria for purchasing treasury shares and indication of the minimum and maximum purchasing cap

The purchases would be made in compliance with the principle of equal treatment of shareholders under Article 132 of the TUF, in accordance with any of the procedures set out in Article 144-bis of the Issuer Regulation, to be identified from time to time, and any other applicable regulations, as well as, where applicable, the market practices allowed from time to time in force.

Additionally, share purchase transactions may also be carried out in the manner envisaged in Article 3 of EU Delegated Regulation no. 2016/1052 in order to benefit, if the conditions are met, from the exemption under Article 5, paragraph 1, of EU Regulation no. 596/2014 on market abuse with regard to inside information and market manipulation.

As far as disposal transactions are concerned, the authorization would allow the adoption of any appropriate method to fulfill the purposes pursued – including the use of treasury shares to service stock incentive plans and/or the transfer of real and/or personal rights and/or stock lending – to be carried out either directly or through intermediaries, in compliance with the relevant laws and regulations in force.

Without prejudice to the fact that purchases of treasury shares would be made in accordance with the time limits, conditions and requirements established by the applicable Community legislation and by the Admitted Market Practices, the minimum and maximum purchase price would be determined for a unit price not lower than the official Stock Exchange price of Arnoldo Mondadori Editore S.p.A. shares on the day preceding the purchase transaction, reduced by 20%, and not higher than the official Stock Exchange price on the day preceding the purchase transaction, increased by 10%.

However, in terms of purchase prices, the additional conditions set forth in Article 3 of the above EU Delegated Regulation 2016/1052 would apply.

With regard to the provisions of Article 2357, paragraph 1, of the Italian Civil Code, purchases would in any case be made within the limits of the available “extraordinary reserve” as shown in the last duly approved financial statements.

In any case, purchases would be made, in terms of definition of volumes and unit prices, in accordance with the conditions governed by Article 3 of EU Delegated Regulation 2016/1052, and in particular:

• no shares shall be purchased at a price higher than the higher between the price of the last independent trade and the price of the highest current independent bid on the trading venue where the purchase is carried out;
• in terms of volumes, no more than 25% of the average daily trading volume of Arnoldo Mondadori Editore S.p.A. shares shall be purchased in the 20 trading days prior to the dates of purchase.

Purchases instrumental in the support to market liquidity shall also be made in accordance with the conditions provided by the admitted market practices.

To date, Arnoldo Mondadori Editore S.p.A. holds a total of no. 1,838,326 treasury shares, equal to 0.703% of the share capital.

For further information on the proposed authorization for the purchase and disposal of treasury shares, reference should be made to the Directors’ Explanatory Report, which will be published within the time limits and in the manner prescribed by applicable regulations.

GRANTING OF SHARES UNDER THE 2018-2020 PERFORMANCE SHARE PLAN: DISCLOSURE PURSUANT TO ARTICLE 84-BIS, PARAGRAPH 5 OF CONSOB REGULATION NO. 11971/1999
The Board of Directors, on the proposal of the Remuneration and Appointments Committee, resolved to grant, effective from 14.5.2021, a total of no. 878,347 Arnoldo Mondadori Editore S.p.A. shares to 8 beneficiaries, in implementation of the provisions contained in the “2018-2020 Performance Share Plan” established by the Board of Directors on 13 March 2018 and subsequently approved by the Shareholders’ Meeting on 26 April 2018 (the “2018-2020 Plan”).

Mention should be made that the 2018-2020 Plan takes the form of a share granting plan and grants its beneficiaries the right to receive, free of charge, shares in the Company provided that, at the end of a reference period of three financial years, the performance targets set in the 2018-2020 Plan have been achieved.

The 8 beneficiaries of the 2018-2020 Plan are the Chief Executive Officer and 7 managers identified by name by the Chief Executive Officer, as delegated by the Board of Directors.

The characteristics of the 2018-2020 Plan are explained in detail in the Directors’ Report to the Shareholders’ Meeting of 26 April 2018 and in the information document contained therein, available on mondadori.it, Governance section, to which reference should be made.

Attached is the information required by Schedule 7 of Annex 3A to CONSOB Regulation no. 11971/1999 to account for the granting of shares in the context of the 2017-2019 Performance Plan.

The Board of Directors, on the favourable opinion of the Remuneration Committee, approved the granting of an accelerated vesting schedule on the 2019-2021 Performance Share Plan to the Chief Executive Officer, who has decided to end office, as a more favourable condition in line with the provisions of the relevant Regulation in the event of good leaving for the specific case. Accordingly, the Chief Executive Officer will be granted no. 770,142 shares effective 14.5.2021. A return condition applies in the event that the overall results of the Plan, upon approval of the 2021 financial statements, are not in line with the targets set out in the Plan.

With regard to the prior notice of 10 November on Ernesto Mauri’s decision to end his experience as Chief Executive Officer of the Mondadori Group, the Board of Directors resolved to integrate, in terms of duration and territorial scope of application, a non-compete agreement already established during his office, in reason of the protection of Group interests, also on an international level, taking account of the priority and confidentiality needs regarding the revision of strategic priorities also following the impact of the pandemic on the relevant markets.

A supplementary agreement was finalized on a gross consideration of € 800,000, with a non-compete clause extended to the territory of the European Union and until April 2023, approved by the Board of Directors on the favourable opinions of the Remuneration Committee and the Related Party Committee.

The above agreement complies also with the parameters and limits payable of consideration for the assumption of non-compete obligations governed by the Remuneration Policy for 2021 approved by the Board of Directors.

In accordance with the above, the effectiveness of the agreement is subject to approval, pursuant to Article 123 ter of the TUF, of Section One of the Remuneration Policy by the Shareholders’ Meeting called on 27 April.

PROPOSED ADOPTION OF A 2021-2023 PERFORMANCE SHARE PLAN
The Board resolved, on a proposal from the Remuneration and Appointments Committee, and in keeping with the introduction of the performance share approved last year for the medium/long-term remuneration of executive directors and key management personnel, to submit to the approval of the Ordinary Shareholders’ Meeting, the adoption of a 2021-2023 Performance Share Plan, in accordance with Article 114-bis of Legislative Decree no. 58 of 24 February 1998, intended for the Chief Executive Officer who will be appointed by the Board of Directors after the Shareholders’ Meeting, the CFO – Executive Director and a number of Company managers who have an employment and/or directorship relationship with the Company or with its subsidiaries on the grant date of the shares.

With the adoption of the Plan, the Company aims to encourage Management to improve medium to long-term performance, in terms of both industrial performance and growth in the value of the Company.

The Plan envisages the right for beneficiaries to receive a bonus in the form of Company shares, subject to the achievement of specific targets set and measured at the end of the three-year performance period from 2021 to 2023.

These targets are structured to include both shareholder remuneration indicators and management indicators functional to raising the share value, ensuring maximum alignment of Management remuneration and the creation of value for the Company.

For details on the proposed adoption of the 2021-2023 Performance Share Plan, the beneficiaries and the main characteristics of the Regulations of the Plan, reference should be made to the Information Document drawn up by the governing body, pursuant to Article 84-bis and annex 3A of the Issuer Regulation, and to the Explanatory Report, which will be published within the time limits and in the manner prescribed by applicable regulations.

COMPLIANCE WITH THE CORPORATE GOVERNANCE CODE
The Board of Directors resolved to comply with the Corporate Governance Code for Listed Companies published by the Corporate Governance Committee in line with the best practices of listed issuers.

The Board also resolved to transpose the Code by the end of the current year and will provide disclosure to the market in the corporate governance report to be published during 2022.

The Board of Directors also approved on today’s date the Guidelines on the qualitative and quantitative composition deemed optimal of the Board of Directors (hereinafter the “Guidelines”), as well as the Policy on the criteria for assessing the independence requirements of directors, including the quantitative and qualitative criteria for assessing the relevance of the relationships indicated in Recommendation 7 letters c) and d) of the Corporate Governance Code.

The above documentation is made publicly available on the website www.mondadori.it Governance section. The Guidelines are also made publicly available on the authorized storage mechanism 1info (www.1info.it).

REGULATION ON INCREASED VOTING RIGHTS
Notice is given that the Regulation on increased voting rights, as amended by the Board of Directors’ meeting held today, in order to bring the Regulation in line with the amendments to the Bylaws adopted by the company on 4 March 2021, as well as with the legislative and regulatory changes regarding Post Trading, is publicly available on the website www.gruppomondadori.it Governance section.

PUBLICATION OF DOCUMENTS
Arnoldo Mondadori Editore S.p.A. hereby announces that the notice of call of the Annual General Meeting, to be held on Tuesday 27 April 2021 in first call and, if required, in second call on Wednesday 28 April 2021, will be made publicly available at the registered office, at the authorized storage mechanism 1info (www.1info.it) and on the website www.gruppomondadori.it (Governance section), together with the Directors’ explanatory reports, in accordance with Article 125-ter of the TUF, on the following items on the agenda to be discussed in ordinary session: financial statements at 31 December 2020 and resolutions relating to the allocation of the result for 2020 of Arnoldo Mondadori Editore S.p.A.; authorization to purchase and dispose of treasury shares pursuant to the combined provisions of articles 2357 and 2357-ter of the Italian Civil Code; appointment of the Board of Directors; appointment of the Board of Statutory Auditors; resolutions, pursuant to Article 114-bis of the TUF on the granting of financial instruments

Also made available, in the above manners, the Information Document on the 2021-2023 Performance Share Plan, prepared in accordance with Annex 3A, under the provisions of art. 84-bis of the Issuer Regulation.

The notice of call of the AGM was published today also in the daily newspaper indicated in the notice.

The additional AGM documentation will be made available, in the manners above, within the time limits of current laws.

CONSOLIDATED NON-FINANCIAL STATEMENT PURSUANT TO LEGISLATIVE DECREE 254/2016
Under Legislative Decree 254/2016, the Board of Directors’ 2020 Report on Operations of the Mondadori Group is also composed of the Consolidated Non-Financial Statement, a qualitative-quantitative description of the non-financial performance of the Company, associated with environmental, social, and staff-related issues, as well as those regarding respect for human rights, and the fight against active and passive corruption, which are relevant given the activities and characteristics of the Company.

With regard to 2020, the Mondadori Group has updated its materiality analysis, in accordance with the principles set out by the GRI Sustainability Reporting Standards (GRI Standards), including the “Media Sector Disclosures”, defined in 2016 and 2014 respectively by the Global Reporting Initiative (GRI).

With a view to continuous improvement of the process, in 2020 the stakeholder engagement activity was expanded by involving the customers of Mondadori Store bookstores, who were given an online questionnaire.

In accordance with the recommendations of ESMA and CONSOB, the document presents an analytical description of the actions readily taken by the Mondadori Group for the necessary prevention to protect the health of its employees and associates, to guarantee its customers access to products and services during the lockdown period and to support the bookstores and newsstands chains.

The results for the year ended 31 December 2020, approved on today’s date by the Board of Directors, will be presented by the Mondadori Group Management to the financial community in a webcast presentation scheduled today at 3:30 PM.

The corresponding documentation will be available on 1Info (www.1info.it), www.borsaitaliana.it and www.gruppomondadori.it (Investors).

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 – fourth quarter;
• Group cash flow;
• Arnoldo Mondadori Editore S.p.A. balance sheet;
• Arnoldo Mondadori Editore S.p.A. income statement;
• Arnoldo Mondadori Editore S.p.A. statement of cash flows;
• Glossary of terms and alternative performance measures used;
• Information pursuant to Schedule 7 of Annex 3a to CONSOB Regulation no. 11971/1999

[1] From 12 March up to the end of April, the adoption of government measures to contain the pandemic led to the closure of bookstores throughout Italy, with the resulting suspension of most of the activities related to the Group’s Retail business.
[2] It should be noted that the 2020 result benefited from the recognition of tax income of € 5.5 million related to the tax receivable from the “Patent box” facility.
[3] Pursuant to Decree M.D. 521 16/11/2020 “further allocation of a portion of the emergency fund for companies and cultural institutions”, intended to provide grants to art exhibition operators.
[4] GFK, December 2020 – sell-out figures in terms of market value (53 Weeks in 2020 vs. 52 Weeks in 2019)
[5] GFK, December 2020 (ranking in terms of cover value)
[6] Databank, June 2020 (revenue in terms of value net of channel discount)
[7] Product revenue excluding Club revenue
[8] GFK (in terms of value)
[9] Nielsen, December 2020, net of search, social, classified and OTT
[10] Internal source: Press-di, December 2020 (in terms of value)
[11] Internal source: Press-di, December 2020 (in terms of value)
[12] Internal source: Press-di, December 2020 (newsstands + subscriptions channel) in terms of value
[13] Press-di, December 2020 (newsstands + subscriptions channel) in terms of value; Audipress 2020/III
[14] Comscore, December 2020
[15] Shareablee, December 2020 + internal processing on Pinterest and TikTok figures

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

PERFORMANCE OF BUSINESS AREAS

• BOOKS

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

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

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

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

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

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

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

• RETAIL

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

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

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

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

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

• MEDIA

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

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

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

Specifically, in first nine months 2020:

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

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

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

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

*

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

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

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

*

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

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

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

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

Annexes (in the pdf file):

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

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

Today, the meeting of the Board of Directors of Arnoldo Mondadori Editore S.p.A., chaired by Marina Berlusconi, reviewed and approved the 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)

Today, the meeting of the Board of Directors of Arnoldo Mondadori Editore S.p.A., chaired by Marina Berlusconi, reviewed and approved the draft Parent Company and Group consolidated financial statements at 31 December 2019 presented by CEO Ernesto Mauri.

PERFORMANCE AT 31 DECEMBER 2019
In 2019, the Mondadori Group strengthened its business and financial standing even further, completing the second step in its strategic repositioning with the disposal of the Magazines France activities and the sale of a number of titles in the Magazines Italy Area.

At a consolidated level, the results achieved in 2019 confirm the indications disclosed to the market at the beginning of the year[1].

Consolidated revenue was basically steady at € 884.9 million versus € 891.4 million in 2018
(-0.7%), despite the change in the consolidation scope of the Magazines Italy Area following the disposal of Inthera S.p.A. and Panorama (+1% on a like-for-like basis).

Adjusted EBITDA before IFRS 16 amounted to € 94.5 million, up by € 4.4 million (+4.9%) versus the prior year (€ 90.1 million).

As a percentage of revenue, the item rose from 10.1% to 10.7%, with different trends shown by the various businesses:

• in line with the revenue trend, the Books Area reported an increase in the period, as a result of the positive performance of both the Trade and Education areas;
• the Retail Area retreated, as a result mainly of the drop in revenue on a like-for-like basis and less positive non-recurring items versus the prior year;
• the Magazines Italy Area fell versus 2018, as a result of the declining market trend, despite the continuing cuts in operating and structural costs, the further significant improvement in the digital area and the positive effects of the disposals made.

IFRS 16 adjusted EBITDA amounted to € 110.4 million and includes the IFRS 16 impact of approximately € 16 million.

EBITDA before IFRS 16 was up sharply versus the prior year from € 77.5 million to € 87 million (+12.2%). The improvement includes the increase in adjusted EBITDA and the strong reductions in restructuring costs recorded in the period.

IFRS 16 EBITDA amounted to € 102.9 million and includes the IFRS 16 impact of approximately
€ 16 million.

EBIT before IFRS 16 amounted to € 61.1 million, improving sharply (+8.4%) versus € 56.3 million at 31 December 2018, as a result of the dynamics of the above components, and includes amortization, depreciation and write-downs of € 25.9 million.

IFRS 16 EBIT amounted to € 62.3 million and includes the IFRS 16 impact of € +1.2 million.

Consolidated profit before tax came to € 51.7 million, improving sharply versus € 35.2 million in 2018 and includes:

• the decrease in financial expense (from € 2.9 million to € 2.2 million) as a result of lower average net debt;
• improved performance by associates (consolidated at equity) at € -8.1 million versus
  € -18.2 million in 2018.

The net result from continuing operations improved by € 12.8 million to € 33.1 million, up sharply by +62% versus € 20.3 million in 2018.

While still part of the Group (until 31 July 2019), Mondadori France generated net revenue of
€ 163.2 million (€ 178.6 million in the 7 months of 2018) and adjusted EBITDA of € 11.6 million
(€ 13.5 million in the 7 months of 2018). The net result from discontinued operations came to € -2.6 million and includes the net result for the seven months of Mondadori France and the fair value adjustment of French assets at the closing on 31 July 2019.

The Group’s net result before IFRS 16 amounted to € 29.3 million versus € -177.1 million in 2018, which included approximately € -200 million from the fair value adjustment of Mondadori France.

The net financial position before IFRS improved by € 91.8 million, with a resulting reduction in net financial debt at € -55.4 million versus € -147.2 million at 31 December 2018, as a result of the disposal of Mondadori France, equal to € 62.8 million, as well as the significant generation of cash flow from ordinary operations in the year, equal to € 48.5 million, from continuing operations.

The debt/adjusted EBITDA ratio stands at 0.7x (1.6x in 2018).

Considering the effect of the application of IFRS 16 (€ -95.9 million), the Group’s net financial position at 31 December 2019 stood at € -151.3 million.

At 31 December 2019, with regard to continuing operations, Group employees amounted to 2,018 units, down by -6% versus 2,137 units at December 2018 (net of the 743 employees of Mondadori France at 31 December 2018), as a result of efficiency gains across all areas of the Group.

CONSOLIDATED FINANCIAL RESULTS FOR FOURTH QUARTER 2019[2]
Consolidated revenue in fourth quarter 2019 amounted to € 225.9 million, down by -3% versus
€ 232.9 million in the prior year, due partly to the change in the consolidation scope of the Magazines Italy Area following the disposal of Panorama.

Adjusted EBITDA before IFRS 16 amounted to € 23.2 million versus € 27.3 million in the prior year.

IFRS 16 adjusted EBITDA came to € 27 million and includes the IFRS 16 impact of approximately € 4 million.

EBITDA before IFRS 16 amounted to € 20.7 versus € 24.5 million in 2018.

IFRS 16 EBITDA amounted to € 24.5 million and includes the IFRS 16 impact of approximately € 4 million.

BUSINESS OUTLOOK^[3]
In 2020, the Mondadori Group will continue along the path of strategic repositioning and focus on its core businesses of Books and Retail and on brands with greater potential for multimedia development.

In line with the outlined strategy, the operating targets for 2020, based on the current scope, allow the Group to estimate, at a consolidated level, a slight decrease in revenue (steady on a like-for-like basis) and a single-digit growth of adjusted EBITDA before IFRS 16 versus 2019.

The net result from continuing operations for 2020 is expected to increase versus the prior year (in the range of € 35-38 million), while continuing the dividend distribution policy.

Cash flow from ordinary operations in 2020 is forecast to improve at € 55 million.

This forecast refers to the current scope of the Group’s business: owing to the current
Covid-19-related emergency, no reliable forecasts can be made at this time on the duration and on the impacts, if any, on operations and results in 2020; the current events are, however, believed not to change the Group’s solid medium-long term prospects.

PERFORMANCE OF BUSINESS AREAS

BOOKS
The Trade Books market, following the slight decline in 2018 (-1.1%), recorded significant growth in terms of value (+5.5%) versus the prior year (+4% in terms of volume). In absolute terms, the increase amounted to € 65 million[4].

Against this backdrop, the Mondadori Group retained its leadership position with a 26.2% market share and 5 books appearing in the top 10 best-selling titles of the year: Una gran voglia di vivere by Fabio Volo (Mondadori); La misura del tempo by Gianrico Carofiglio (Einaudi), La versione di Fenoglio by Gianrico Carofiglio (Einaudi), Entra nel mondo di Luì e Sofi. Il Fantalibro di Me contro Te by Me contro Te (Mondadori Electa), In cucina con voi! by Benedetta Rossi (Mondadori Electa).

In the school textbooks market, the Mondadori Group retained its strong foothold, with a 21.7% share, adoptions-wise[5].

In Italy, this segment showed an overall growth trend in 2019 (+2.2%), with increases in the lower and upper secondary segments and stability in the primary[6]segment.

In 2019, revenue from the Books Area amounted to € 478.4 million, an overall increase of 6% versus € 451.3 million in 2018. Specifically:

• in the Trade Area, revenue increased by +7.6%;
• in the Educational Area, revenue grew by +5.9%.

Adjusted EBITDA before IFRS 16 amounted to € 93.2 million, improving sharply versus the same period of the prior year (€ 84.7 million), as a result of a vigilant management policy focused on the ongoing optimization of operating processes, which allowed the Group to lift profitability above 19%.

IFRS 16 adjusted EBITDA came to € 94.5 million and includes the IFRS 16 impact of € 1.3 million.

EBITDA before IFRS 16 amounted to € 92.8 million, improving versus € 82.9 million at 31 December 2018.

IFRS 16 EBITDA amounted to € 94 million and includes an impact of € 1.2 million.

RETAIL
In 2019, the Group continued to implement strategic actions to align the organization and the sales channels of the Retail Area with market developments, focusing on steady format and network revision.

In the Books segment, making for 82% of revenue, the market share of Mondadori Retail stood at 12.9%.

In 2019, Mondadori Retail recorded revenue of € 186.9 million, down by 2.6% versus
€ 191.8 million in the prior year, attributable to the performance of consumer electronics and the rationalization of the direct sales network.

The analysis by channel shows the following:

• a basic stability (+0.3%) of direct bookstores (-1.5% on a like-for-like basis in terms of stores);
• a decline in Megastores (-12.1%), attributable to the drop in consumer electronics sales and as a result of the rationalization of the sales network (-9.9% on a like-for-like basis in terms of stores);
• a slight improvement (+0.5%) in franchised bookstores (-1.1% on a like-for-like basis in terms of stores), despite the reduction in the number of points of sale;
• a slight drop in sales in the e-commerce channel (-0.5%);
• a drop by the Bookclub, albeit less than in prior years.

Adjusted EBITDA before IFRS 16 amounted to € -2.9 million versus € +1.4 million at 31 December 2019. The decrease is due mainly to lower revenue on a like-for-like basis, less positive non-recurring items and higher write-downs in consumer electronics.

IFRS 16 adjusted EBITDA amounted to € +5 million and includes the IFRS 16 impact of approximately € +8 million.

EBITDA before IFRS 16 amounted to € -5 million, down from the breakeven in 2018.

IFRS 16 EBITDA amounted to € +2.9 million and includes an impact of approximately
€ +8 million.

MAGAZINES ITALY
Once again, in 2019 the magazines market witnessed a continued drop in both print advertising[7] (versus a growth in the digital channel[8]) and in circulation[9] and add-on sales[10].

In the reporting period, the Magazines Italy Area recorded revenue of € 256.6 million, down by 10.6% versus € 287 million in 2018.

Net of the disposal of Inthera and Panorama, the decline was -5.4%, in particular:

• circulation revenue (newsstands + subscriptions) was down by -12.8%, in line with the performance of the relevant market (-16.6% considering Panorama in 2018);
• revenue from add-on products was up by 0.9% (-6.5% considering Panorama in 2018);
• advertising revenue (print + digital) fell by an overall -4.8% (-9.1% considering Panorama in 2018) with:
  • the digital channel up by approximately +12.5%, as a result in particular of the good performance of the food and health segments and the strong contribution of AdKaora’s proximity marketing solutions;
  • the print channel down by -14.8%, basically in line with market dynamics
    (-20.2% considering Panorama in 2018).

In 2019, digital revenue as a percentage of total advertising revenue in the Area amounted to approximately 42% (34% in 2018).

In 2019, the Mondadori Group retained its position as Italy’s top multimedia publisher in:

• print, with a 9% share of the circulation market^[11] in terms of value and 15.5 million readers per month;
• digital, with a 77% reach and over 30 million unique users per month;
• social, with an aggregate fan base of 31 million followers and 120 profiles.

Adjusted EBITDA before IFRS 16 in the Magazines Italy Area amounted to € 11.2 million, a slight fall versus the prior year (€ 11.9 million). This was attributable to actions that alleviated the impact from the drop in volumes, in turn influenced by the negative performance of the relevant markets, including the ongoing reduction in operating and structural costs; the further improvement in profitability of the digital area (€ 7 million); the disposal of Inthera S.p.A. and Panorama.

IFRS 16 adjusted EBITDA amounted to € 11.3 million.

EBITDA before IFRS 16 amounted to € 9.2 million, improving sharply versus € -0.2 million in 2018, as a result of less extraordinary items

IFRS 16 EBITDA amounted to € 9.4 million.

PERFORMANCE OF ARNOLDO MONDADORI EDITORE S.P.A.
The Parent Company’s income statement at 31 December 2019 shows the same net result as in the consolidated financial statements of € 29.3 million before IFRS 16 (€ 28.2 million IFRS 16), due to the fact that the Company has opted to use the equity method to measure its investments in the separate financial statements.

Revenue amounted to € 228 million and was down versus € 256.6 million in the prior year, due mainly to the reduction in print activities in the Magazines Italy Area (-16.4%, in line with the performance of the relevant markets and as a result also of the disposal of Panorama).

Revenue from the digital operations of the Magazines Italy Area, on the other hand, increased (+1.5%) thanks to the positive results from advertising sales. The Parent Company also recognizes revenue from services provided to other Group companies, equal to € 39.1 million.

Adjusted EBITDA before IFRS 16 increased slightly to € +0.3 million versus € -0.4 million in 2018, due in particular to the positive contribution of the digital operations of the Magazines Italy Area, achieved through efficiency gains and cost revision implemented by Management, which offset the lower margins of print magazines.

SIGNIFICANT EVENTS AFTER YEAR-END

Approval of Draft Law S.1421 containing provisions to promote and support reading

Following approval by the Chamber of Deputies in July 2019, on 5 February 2020 the Senate passed D.L. S.1421 containing provisions to promote and support reading. Pending the implementing decrees that will set out the terms and timing of application of these provisions more explicitly, the decree introduces – alongside a series of measures aimed, among other things, at disseminating the habit of reading, promoting the attendance of libraries and bookshops, enhancing and supporting the Italian language and the diversity of editorial production – a range of limitations (in terms of value and period) to promotional discount policies.

Specifically, the decree has introduced a reduction in the maximum ordinary discount applicable to books in bookshops, online stores and large retailers from 15% to 5% (15% for school textbooks); points of sale may organize promotions once a year with a 15% discount limit; publishers may apply a maximum discount of 20% (instead of the previous 25%), except for the month of December.

The effects of the introduction of these provisions on book purchasing trends are currently hard to forecast.

Law no. 160/2019 (2020 Budget Law) on early retirement
Under Article 1, paragraph 500, of Law 160/2019 (2020 Budget Law), from 1 January 2020 to 31 December 2023, print workers from newspaper and magazine printing companies, and from publishers of newspapers and magazines and press agencies with national circulation, which have submitted to the Ministry of Labour and Social Policies, from 1 January 2020 to 31 December 2023, crisis-related reorganization or restructuring plans, may apply for early retirement with a contribution period of 35 years only (instead of 38 years under the regulations currently in force).

During the relevant time period, early retirement could potentially affect a total of 116 employees of Arnoldo Mondadori Editore S.p.A., Mondadori Media S.p.A. and Press-di covered by graphics publishing collective labour agreements.

The Board of Directors of Arnoldo Mondadori Editore S.p.A. has convened the Ordinary Shareholders’ Meeting for Wednesday 22 April 2020 in first call to approve the financial statements for the year ended 31 December 2019 and, if required, in second call for Wednesday 20 May 2020.

DIVIDEND DISTRIBUTION PROPOSAL OF € 0.06 PER ORDINARY SHARE
The Board of Directors will propose to the next Shareholders’ Meeting, convened for Wednesday 22 April 2020 in first call and, if required, in second call for 20 May 2020, the distribution of a unit dividend, gross of tax, of € 0.06 for each ordinary share (net of treasury shares) outstanding on the ex-coupon date.

The total value is € 15.6 million.

The dividend will be paid, in accordance with the provisions of the “Regulations of the markets organized and managed by Borsa Italiana S.p.A.”, from 10 June 2020 (payment date), with ex-coupon date on 8 June 2020 (ex date) and with the date of entitlement to payment of the dividend, pursuant to Article 83-terdecies of the TUF (record date) on 9 June 2020.

PROPOSED RENEWAL OF THE AUTHORIZATION TO PURCHASE AND DISPOSE OF TREASURY SHARES
Following the expiry of the previous authorization resolved upon by the Shareholders’ Meeting on 17 April 2019, with the approval of the financial statements at 31 December 2019, the Board of Directors will propose to the next Shareholders’ Meeting the renewal of the authorization to purchase and dispose of treasury shares with the aim of retaining the applicability of law provisions in the matter of any additional buyback plans and, consequently, of seizing any investment and operational opportunities involving treasury shares.

Below are the key elements of the Board of Directors’ proposal:

• Motivations

The motivations underlying the request for the authorization to purchase and dispose of treasury shares refer to the opportunity to attribute to the Board of Directors the power:

• to use the treasury shares purchased as consideration in the acquisition of interests as part of the Company’s investment policy;
• to use the treasury shares purchased against the exercise of option rights, including conversion rights, deriving from financial instruments issued by the Company, its subsidiaries or third parties and to use the treasury shares for lending, exchange or transfer transactions or to support extraordinary transactions on the Company’s capital or financing transactions that imply the transfer or sale of treasury shares;
• to undertake any investments, directly or through intermediaries, including for the purpose of containing abnormal movements in share prices, stabilizing share trading and prices, supporting the liquidity of the share on the market, in order to foster the regular conduct of trading beyond normal fluctuations related to market performance, without prejudice in any case to compliance with applicable statutory provisions;
• to rely on investment or divestment opportunities, if considered strategic by the Company, also in relation to available liquidity;
• to dispose of treasury shares as part of share-based incentive plans pursuant to Article 114-bis of the TUF, and of plans for the free allocation of shares to Shareholders.

• Duration

The authorization to purchase treasury shares is set to last until the approval of the financial statements for the year ending 31 December 2020, while the authorization to sell is granted to last for an unlimited period, given the absence of provisions in this regard pursuant to the provisions in force and the opportunity to allow the Board of Directors to make use of the maximum flexibility, also in terms of time, to carry out the acts of disposal of the shares.

• Maximum number of purchasable treasury shares

The new authorization would allow the purchase, including in more than one tranche, of ordinary shares of Arnoldo Mondadori Editore S.p.A., up to a maximum number of shares – also taking into account the ordinary shares held, directly and indirectly, in the portfolio from time to time – of no more than 10% overall of the share capital, in accordance with Article 2357, paragraph 3, of the Italian Civil Code.

• Criteria for purchasing treasury shares and indication of the minimum and maximum purchasing cap

The purchases would be made in compliance with the principle of equal treatment of shareholders under Article 132 of the TUF, in accordance with any of the procedures set out in Article 144-bis of the Issuer Regulation, to be identified from time to time, and any other applicable regulations, as well as, where applicable, the market practices allowed from time to time in force.

Additionally, share purchase transactions may also be carried out in the manner envisaged in Article 3 of EU Delegated Regulation no. 2016/1052 in order to benefit, if the conditions are met, from the exemption under Article 5, paragraph 1, of EU Regulation no. 596/2014 on market abuse with regard to inside information and market manipulation.

As far as disposal transactions are concerned, the authorization would allow the adoption of any appropriate method to fulfill the purposes pursued – including the use of treasury shares to service stock incentive plans and/or the transfer of real and/or personal rights and/or stock lending – to be carried out either directly or through intermediaries, in compliance with the relevant laws and regulations in force.

Without prejudice to the fact that purchases of treasury shares would be made in accordance with the time limits, conditions and requirements established by the applicable Community legislation and by the admitted market practices, the minimum and maximum purchase price would be determined for a unit price not lower than the official Stock Exchange price of Arnoldo Mondadori Editore S.p.A. shares on the day preceding the purchase transaction, reduced by 20%, and not higher than the official Stock Exchange price on the day preceding the purchase transaction, increased by 10%.

However, in terms of purchase prices, the additional conditions set forth in Article 3 of the above EU Delegated Regulation 2016/1052 would apply.

With regard to the provisions of Article 2357, paragraph 1, of the Italian Civil Code, purchases would in any case be made within the limits of the available “extraordinary reserve” as shown in the last duly approved financial statements.

In any case, purchases would be made, in terms of definition of volumes and unit prices, in accordance with the conditions governed by Article 3 of EU Delegated Regulation 2016/1052, and in particular:

• no shares shall be purchased at a price higher than the higher between the price of the last independent trade and the price of the highest current independent bid on the trading venue where the purchase is carried out;
• in terms of volumes, no more than 25% of the average daily trading volume of Arnoldo Mondadori Editore S.p.A. shares shall be purchased in the 20 trading days prior to the dates of purchase.

Purchases instrumental in the support to market liquidity shall also be made in accordance with the conditions provided by the admitted market practices.

To date, Arnoldo Mondadori Editore S.p.A. holds a total of no. 2,938,293 treasury shares (1.124% of the share capital).

For further information on the proposed authorization for the purchase and disposal of treasury shares, reference should be made to the Directors’ Explanatory Report, which will be published within the time limits and in the manner prescribed by applicable regulations.

GRANTING OF SHARES UNDER THE 2017-2019 PERFORMANCE SHARE PLAN: DISCLOSURE PURSUANT TO ART. 84-BIS, PARAGRAPH 5 OF CONSOB REGULATION NO. 11971/1999
The Board of Directors, on the proposal of the Remuneration and Appointments Committee, resolved to grant, effective from 1.6.2020, a total of no. 1,649,965 Arnoldo Mondadori Editore S.p.A. shares to 10 beneficiaries, in implementation of the provisions contained in the “2017-2019 Performance Share Plan” established by the Board of Directors on 21 March 2017 and subsequently approved by the Shareholders’ Meeting on 27 April 2017 (the “2017-2019 Plan”).

Mention should be made that the 2017-2019 Plan takes the form of a share granting plan and grants its beneficiaries the right to receive, free of charge, shares in the Company provided that, at the end of a reference period of three financial years, the performance targets set in the 2017-2019 Plan have been achieved.

The 10 beneficiaries of the 2017-2019 Plan, identified by name by the CEO, as delegated by the Board of Directors, are the CFO – Executive Director and selected managers.

The characteristics of the 2017-2019 Plan are explained in detail in the Directors’ Report to the Shareholders’ Meeting of 27 April 2017 and in the information document contained therein, available on mondadori.it, Governance section, to which reference should be made.

Attached is the information required by Schedule 7 of Annex 3A to CONSOB Regulation no. 11971/1999 to account for the granting of shares in the context of the 2017-2019 Performance Plan.

PROPOSED ADOPTION OF A 2020-2022 PERFORMANCE SHARE PLAN
The Board resolved, on a proposal from the Remuneration and Appointments Committee, and in keeping with the introduction of the performance share approved last year for the medium/long-term remuneration of executive directors and executives with strategic responsibilities, to submit to the approval of the Ordinary Shareholders’ Meeting, the adoption of a 2020-2022 Performance Share Plan, in accordance with Article 114-bis of Legislative Decree no. 58 of 24 February 1998, intended for the CFO – Executive Director and a number of Company managers who have an employment and/or directorship relationship with the Company or with its subsidiaries on the granting date of the shares.

With the adoption of the Plan, the Company aims to encourage Management to improve medium to long-term performance, in terms of both industrial performance and growth in the value of the Company.

The Plan envisages the right for beneficiaries to receive a bonus in the form of Company shares, subject to the achievement of specific targets set and measured at the end of the three-year performance period from 2020 to 2022.

These targets are structured to include both shareholder remuneration indicators and management indicators functional to raising the share value, ensuring maximum alignment of Management remuneration and the creation of value for the Company.

For details on the proposed adoption of the 2020-2022 Performance Share Plan, the beneficiaries and the main characteristics of the Regulations of the Plan, reference should be made to the Information Document drawn up by the governing body, pursuant to Article 84-bis and annex 3A of the Issuer Regulation, and to the Explanatory Report, which will be published within the time limits and in the manner prescribed by applicable regulations.

CONSOLIDATED NON-FINANCIAL STATEMENT PURSUANT TO LEGISLATIVE DECREE 254/2016
Under Legislative Decree 254/2016, the Board of Directors’ 2019 Report on Operations of the Mondadori Group is also composed of the Consolidated Non-Financial Statement, a qualitative-quantitative description of the non-financial performance of the Company, associated with environmental, social, and staff-related issues, as well as those regarding respect for human rights, and the fight against active and passive corruption, which are relevant given the activities and characteristics of the Company.

With regard to 2019, the Mondadori Group has updated its materiality analysis, in accordance with the principles set out by the GRI Sustainability Reporting Standards (GRI Standards), including the “Media Sector Disclosures”, defined in 2016 and 2014 respectively by the Global Reporting Initiative (GRI).

With a view to continuously improving the process, in 2019 the stakeholder mapping was updated and stakeholder engagement activities were expanded: in addition to external interviews, carried out by involving suppliers of the main utilities and franchisees of Mondadori Store bookshops, an online questionnaire was administered to all Group employees.

The results for the year ended 31 December 2019, approved on today’s date by the Board of Directors, will be presented by the Mondadori Group Management to the financial community in a conference call scheduled today at 3:30 PM.

The corresponding documentation will be available on 1Info (www.1info.it), www.borsaitaliana.it and www.gruppomondadori.it (Investors).

The Financial Reporting Manager – Oddone Pozzi – 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 – fourth quarter;
• Group cash flow;
• Arnoldo Mondadori Editore S.p.A. balance sheet;
• Arnoldo Mondadori Editore S.p.A. income statement;
• Arnoldo Mondadori Editore S.p.A. cash flow statement;
• Glossary of terms and alternative performance measures used;
• Information pursuant to Schedule 7 of Annex 3a to CONSOB Regulation no. 11971/1999

[1] 2019 outlook disclosed to the market prior to application of IFRS 16
[2] Before application of IFRS 16
[3] Before application of IFRS 16
[4] GFK, December 2019 (in terms of value)
[5] ESAIE, 2019 (number of adopted sections)
[6] Databank, 2019
[7] Magazines: -13.9% (Nielsen, cumulative figures at December 2019);
[8] Digital: +3.5% (Nielsen, cumulative figures at December 2019);
[9] -12.4% in terms of value (Internal source, figures at December 2019, newsstands + subscriptions channel)
[10] -11.9% in terms of value (Internal source, figures at December 2019, newsstands + subscriptions channel)
[11] -12.4% in terms of value (Internal source, figures at December 2019, newsstands + subscriptions channel)

Today, the meeting of the Board of Directors of Arnoldo Mondadori Editore S.p.A., chaired by Marina Berlusconi, reviewed and approved the Half-Year Financial Report at 30 June 2017[1], presented by CEO Ernesto Mauri.

HIGHLIGHTS IN 1H17

In 1H17, on a like-for-like consolidation basis with Rizzoli Libri versus 2016[2], the Group continued on its path of operational improvement, delivering a 9% increase in adjusted EBITDA and paving the way to accomplishing the targets set for the whole 2017.

The LTM cash flow from ordinary operations – the first time it includes Rizzoli Libri for the previous 12 months – amounted to approximately 63 million euro, continuing the positive performance of cash generated by the Group’s businesses which, along with the extraordinary transactions involving the strategic rationalization of the portfolio of activities, improve forecasts on net financial position at year end.

Adjusted EBITDA has little bearing on the performance of the entire year since the negative contribution of Rizzoli Libri (outside the scope in 1Q16) is attributable to the seasonal nature of the Education business, which includes in the first quarter expenses to promote the campaign on school textbooks adoption, while revenue is typically recorded in the second half of the year.

Net profit in the reporting period, amounting to +4.4 million euro, improved by over 8 million euro versus 30 June 2016, due also to the contribution of a number of positive extraordinary items.

GROUP PERFORMANCE AT 30 JUNE 2017

Consolidated revenue in 1H17 amounted to 553 million euro, down slightly (-1.7%) versus 562.5 million euro in the prior year, due mainly to the performance of the Magazines areas, to the temporary effect (recovered in July) of the shift forward of revenue from supplies to a number of clients in the Educational Area, and to the targeted reduction in revenue from consumer electronics products in the Retail Area.

On a like-for-like consolidation basis with Rizzoli Libri (in the second quarter only), adjusted EBITDA grew by 9% (from 26.7 million euro to 29.1 million euro) with a percentage on revenue increasing from 4.7% to 5.3% – especially in the Books (from 9.5 million euro to 13.2 million euro net of Rizzoli Libri’s first quarter) and Magazines Italy areas (+13%).

Including the result of Rizzoli Libri as from 1 January, adjusted EBITDA amounted to 21.6 million euro, as a result of the negative contribution of -7.5 million euro in 1Q17, attributable to the seasonal nature of the education business.

Consolidated EBITDA improved by 21.2% (from 22.5 million euro to 27.3 million euro), driven by the gains from the disposal of certain assets in the second quarter of the year (4.2 million euro from the disposal of a property in Corporate & Shared Services, and 4.3 million euro from the disposal of NaturaBuy in Magazines France).

Consolidated EBIT in 1H17 amounted to 11.2 million euro, up by approximately 33% versus 30 June 2016, and includes amortization, depreciation and impairment of 16 million euro, up versus 14 million euro in 1H16 from the impact of the amortization of Banzai Media intangible assets (1.2 million euro) and the capitalized expenses of the Rizzoli Libri school business (2 million euro, 1.1 million euro of which in the first quarter).

Consolidated profit before taxes came to 4.1 million euro and includes financial costs of 7.1 million euro, down versus the prior year (7.9 million euro) on a like-for-like basis of average net debt, due to the reduction in the average interest rate of approximately 40 bps.

The overall tax burden in the period amounted to +1.6 million euro (-3.1 million euro in 2016), benefiting from the adjustment of 3.8 million euro of deferred taxes of Mondadori France.

At 30 June 2017, Group employees with a fixed-term or permanent labour contract amounted to 3,112 units, down by 8.6% versus 3,404 units at June 2016, as a result of the outsourcing of logistics activities in May, as well as the ongoing restructuring and efficiency improvement measures involving each of the Group’s business areas.

The Group’s net financial position at 30 June 2017 stood at -284.4 million euro, improving by approximately 90 million euro versus -374.8 million euro at 30 June 2016, as a result of the positive cash generation from ordinary operations of 63.2 million euro, the first time it includes the contribution of Rizzoli Libri for 12 months, and extraordinary operations in the last twelve months, which generated 27.3 million euro.

CONSOLIDATED FINANCIAL HIGHLIGHTS IN 2Q17

In 2Q17, consolidated revenue amounted to 291.9 million euro, down by 5.2% versus 2Q16.

Despite discontinuity from the shift forward of revenue from the Educational Area, Books – on a like-for-like basis for the first time – were basically stable versus 2Q16 (+0.8%).

Adjusted EBITDA grew by 9.5% in the quarter, especially in Books (from 5.4 million euro to 8.6 million euro) and Magazines Italy (+27.8%), confirming the Group’s continued efficiency recovery.

Consolidated EBITDA, including extraordinary items, improved significantly by over 10 million euro (from 14.0 million euro to 25.5 million euro), driven by the positive contribution of the abovementioned gains.

Consolidated net profit, after minority shareholders’ result, came to 13.5 million euro versus a loss of 2 million euro at 30 June 2016.

OUTLOOK FOR THE YEAR

In light of the Group’s performance in the first half of the year, it is reasonable to confirm the previously disclosed estimates for 2017 versus the 2016 pro-forma figures[3] that indicate steady revenue and a “high single-digit” growth of adjusted EBITDA, with a resulting improvement in profit margins and a sharp increase of approximately 30% in net profit.

Also as a result of the extraordinary transaction involving the disposal of an asset in the first six months, net debt at end 2017 is estimated to further reduce versus 31 December 2016, with a net debt/adjusted EBITDA ratio below 2.0x (from the previous forecast between 2.2/2x).

PERFORMANCE OF GROUP BUSINESS AREAS AT 30 JUNE 2017

• BOOKS

In 1H17, the Trade Books market grew by +1.3% versus 1H16[4]. Against this backdrop, Mondadori Libri retained its market leadership position with an overall 28.1% share.

In 1H17, the Group held a total of 5 positions in the ranking of the ten best-selling titles in terms of value, with Storie della buonanotte per bambine ribelli. 100 vite di donne straordinarie by F. Cavallo and E. Favilli, in first place, L’arte di essere fragili. Come Leopardi può salvarti la vita by A. D’Avenia (3°), Dentro l’acqua and La ragazza del treno by P. Hawkins (5° and 6°), and Tredici by J. Asher (7°).

Additionally, in July the publisher Einaudi won the 71st edition of the Strega Prize with Le otto montagne by Paolo Cognetti, a remarkable success translated in over 30 countries.

Revenue from the Books Area amounted to 187.9 million euro, up by 10.4% versus 1H16 (170.1 million euro), also as a result of the consolidation of Rizzoli Libri (present only in the second quarter of 2016), despite the publishing plan to schedule the release of best-selling titles mostly in the second half of the year:

• trade revenue grew by 4.3% versus 1H16; the increase is explained by the consolidation of Rizzoli Libri, which contributed 18.2 million euro to revenue in the first half of the year;
• educational revenue improved by 16.3% versus 1H16, driven also by Electa’s performance in museum and publishing activities;
• revenue from distribution activities was up by 27.2% versus 1H16, due to the different consolidation period of Rizzoli Libri.

Adjusted EBITDA of the Books Area came to 5.7 million euro; net of the loss reported in the first quarter by Rizzoli Libri, explained by the typical seasonal nature of the school textbooks business, adjusted EBITDA would amount to 13.2 million euro, up by approximately 39% versus 1H16 (9.5 million euro), as a result of the progress in the integration process and resulting synergies, as well as the positive performance of Electa.

EBITDA amounted to 5.6 million euro (9.1 million euro at 30 June 2016).

• RETAIL

In 1H17, the Retail Area achieved revenue of 84.7 million euro, down by 4% versus 88.2 million euro in 1H16, due also to the targeted reduction in revenue from consumer electronics products.

Books were the predominant product category, making for 80% of total revenue of the Area[5]: in 1H17, the product grew by 3.4%, outperforming the relevant market trend.

The result benefited from the directly-managed network and confirms the effectiveness of the actions undertaken in terms of product penetration and assortment.

In the period under review, Mondadori Retail’s market share in books rose to 14.7% from 14.3%.

Non-book revenue was basically steady in the impulse (stationery and toys) and media categories, while, as mentioned, Consumer Electronics continued to fall as targeted (approximately -22% versus 2016).

Adjusted EBITDA came to -3.7 million euro, deteriorating versus -3.1 million euro reported in 1H16, as a result of the structural decline in sales volumes in the book club channel, despite the positive performance of other channels.

EBITDA came to -5 million euro (-3.1 million euro in 1H16), as a result of higher restructuring costs (1.5 million euro).

• MAGAZINES ITALY

In Italy, in a continually adverse market in terms of magazine circulation, the Mondadori Group retained its leadership, increasing its share to reach 31.6%.[6]

In 2Q17, in line with the selective strategy on the development of the product portfolio to sustain revenue and optimize editorial costs, Mondadori launched two new publications, both receiving a warm welcome from the public: the monthly Giallo Zafferano, with an average circulation of approximately 200,000 copies, and the weekly SPY, with average sales of approximately 300,000 copies for the first four issues.

Revenue from the Area amounted to 148.1 million euro, down by 7.9% versus 160.9 million euro in 1H16, due also to the sharp drop in add-on sales. Specifically:

• circulation revenue (newsstands + subscriptions) fell by 8.2%, less than the relevant market trend in both the newsstand and subscription channels;
• advertising revenue (print + web) increased by approximately 7%, driven by the contribution of the consolidation of Banzai Media activities, bringing the percentage of digital revenue on the total to approximately 28%. Gross advertising sales grew by 14.5% in the reporting period; considering print alone, on a like-for-like basis of titles and barter deals, sales fell by -3.9%, outperforming, however, the relevant market trend (-6.1% at May);
• revenue from add-on products, as mentioned, dropped sharply versus 1H16, in line with the market trend (-29.7%[7]);
• distribution and revenue towards third publishers managed by Press-Di dropped at a more moderate pace (-2.2%) than the relevant market[8], thanks to the ongoing commitment to developing third-publisher portfolios.

In the digital area, the Mondadori Group reached a unique audience of 16.6 million users/month[9] in the first six months of the year versus 8 million/month of May 2016 (+3.5% versus December 2016), retaining its position as Italy’s top traditional publisher also in the digital business, boasting a supremacy in key vertical segments such as women, food, health & wellness.

A position corroborated by comScore surveys, which reported a Group audience of 23.6 million unique users/month at May 2017, steady versus December.

Adjusted EBITDA in the Magazines Italy Area improved by approximately 12.8%, rising from 10.6 million euro to 11.9 million euro, driven mainly by the benefits of the digital business achieved with the combination of Banzai Media and Mondadori’s teams and digital products; print activities reported a steady margin, offsetting the drop triggered by the trend of the markets, as a result of the ongoing optimization actions and containment of editorial and overhead costs.

Digital activities in the period achieved an overall positive adjusted EBITDA (negative in 1H16).

The Area’s reported EBITDA confirmed the growth trend, closing at 11.7 million euro (10 million euro).

• MAGAZINES FRANCE

In 1H17, revenue from Mondadori France amounted to 148.1 million euro, down by 7.6% versus 160.4 million euro in 1H16. Specifically:

• circulation revenue (approximately 74% of the total) lost 4.5% versus 1H16: -7% subscriptions (representing the strongest and steadiest contribution to revenue of the Area with 54%); -5.1% the newsstand channel, outperforming the relevant market trend (-8.1%)[10].

Revenue from the sale of digital copies grew sharply in the first half versus 2016, driven by the new partnerships with a number of French telco players to offer Mondadori France brands to their subscriber base.

• advertising revenue (print + web) fell by an overall 17.4% versus 1H16; print (-13.3%), basically in line with the relevant market, accounted for approximately 86% of total advertising revenue, while digital advertising accounted for the remaining approximately 14%.

In the reporting period, Mondadori France held a 10.6% market share[11], basically steady versus the prior year, retaining its position as second top player on the magazine advertising market.

The digital readers (web, mobile & tablet) of Mondadori France magazines reached 11.4 million unique users[12], up by approximately +16% versus the average figure in 1H16.

Adjusted EBITDA came to 12.5 million euro versus 15.5 million euro in 1H16. The drop is mainly attributable to the downturn in advertising revenue generated by the Digital Area, to the increase in rental costs for the offices and deconsolidation since 1 May of NaturaBuy: net of the latter two effects, the decline in business would amount to approximately 1.9 million euro in the first half of the year, mitigating the drop in revenue brought by the lingering weakness of the relevant markets, as a result of the constant attention placed on editorial and overhead cost containment.

Reported EBITDA amounted to 15.7 million euro, up by approximately 10% versus 1H16, driven by the positive contribution of the gain of 4.3 million euro from the disposal of NaturaBuy in May.

SIGNIFICANT EVENTS AFTER THE REPORTING PERIOD

On 26 June, Arnoldo Mondadori Editore launched a share buyback plan, under art. 5 of Regulation (EU) No. 596/2014, in execution of the resolution adopted by the Shareholders’ Meeting held on 27 April 2017, authorizing the purchase and disposal of treasury shares for a maximum amount of up to 0.96% of the share capital, which is intended to provide the Company with the 2.49 million shares needed in the three-year period to meet the obligations under the 2017-2019 Performance Share Plan approved by the Meeting.

On 3 July, the Company announced the purchase, in the period from 26 to 30 June, of 198,098 ordinary shares (equal to 0.076% of the share capital) at an average unit price of Euro 1.6283, for a total amount of Euro 332,566.59.

On 10 July, the Company announced the purchase, in the period from 3 to 7 July, of a further 38,902 ordinary shares (equal to 0.015% of the share capital) at an average unit price of Euro 1.5906, for a total amount of Euro 61,876.25.

On 17 July, the Company announced the purchase, in the period from 10 to 14 July, of a further 25,000 ordinary shares (equal to 0.010% of the share capital) at an average unit price of Euro 1.6694, for a total amount of Euro 41,734.50.

On 24 July, the Company announced the purchase, in the period from 17 to 21 July, of a further 29,500 ordinary shares (equal to 0.0113% of the share capital) at an average unit price of Euro 1.7062, for a total amount of Euro 50,331.45.

Following the purchases made so far, Arnoldo Mondadori Editore S.p.A. holds 371,500 treasury shares, equal to 0.1421% of the share capital (including the approximately 80,000 shares purchased in the period from 30 November to 2 December 2016, as disclosed to the market on 6 December 2016).

* * *

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

Regarding the agreement on the acquisition of RCS Libri S.p.A., completed on 14 April 2016, Arnoldo Mondadori Editore S.p.A. announces that it has reached an agreement with RCS MediaGroup S.p.A. on a price adjustment, contained in the purchase agreement, based on the achievement of RCS Libri S.p.A.’s financial targets for 2015, amounting to approximately 2 million euro in favour of Arnoldo Mondadori Editore S.p.A.. As a result, given the above price adjustment, the overall purchase price for RCS Libri S.p.A. amounts to 125.1 million euro. The agreement still provides for an earn-out of up to 2.5 million euro in favour of RCS MediaGroup S.p.A., based on the achievement in 2017 of specific results in the Books Area of the Mondadori Group, as previously disclosed. As part of these understandings, the parties have also defined all the mutual relations under the above purchase agreement.

* * *

The documentation relating to the presentation of the results at 30 June 2017, will be made available through the authorized storage mechanism 1Info (www.1info.it) and in the Investors section of the Company’s website  www.gruppomondadori.it.

* * *

The Executive Manager responsible for the drafting of the corporate accounting documentation – Oddone Pozzi – hereby declares, pursuant to Art. 154 bis, par. 2, of the Finance Consolidation Act, that the accounting documentation contained in this press release corresponds to the Company’s accounting entries, books and results.

Annexes (see attached pdf):

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

[1] The results at 30 June 2017 include the contribution of Rizzoli Libri, which was outside the scope of consolidation in 1Q16, and Banzai Media activities, consolidated as from 1 June 2016 and merged by incorporation into the parent company, with accounting effects as from 1 January 2017.

[2]  Net of Rizzoli Libri in 1Q17

[3] Pro-forma figures: consolidation of the companies acquired (Rizzoli Libri and Banzai Media) assumed as from 1 January 2016; revenue of approximately 1,280 million euro and adjusted EBITDA of approximately 100 million euro.

[4] Source: GFK, June 2017 (figures in terms of market value).

[5] Store revenue.

[6] Internal source: Press-Di, cumulative figures at May 2017 (newsstands + subscriptions in terms of value).

[7] Internal source, figure at May 2017.

[8] Drop in copies sold in the Newsstand/Large Retailer channel, 8% for dailies and 7% for magazines (source: ADS, figures in terms of copies, May).

[9] Source: Audiweb, at May 2017.

[10] Internal source Mondadori France, figure at April 2017.

[11] Source: Kantar Media, cumulative figures in terms of volume at May 2017

[12] Source: Nielsen, average figure January-April 2017

Today, the meeting of the Board of Directors of Arnoldo Mondadori Editore S.p.A., chaired by Marina Berlusconi, reviewed and approved the Interim Report at 31 March 2016 presented by CEO Ernesto Mauri.

GROUP PERFORMANCE AT 31 MARCH 2016
Mondadori Group enjoyed a rather positive start to the year, even more rewarding if considering the persisting volatile macroeconomic environment.

Specifically, after almost four years, revenue grew versus the prior year (before the foregoing acquisitions), a performance which confirmed, along with the improvement in EBITDA for the ninth consecutive quarter, the success of the measures adopted over the past two years, paving the way to accomplishing the targets set for the full year and to the new phase of the Group’s development.

In 1Q16, consolidated net revenue amounted to 254.8 million euro, up by 2.2% versus 249.2 million euro in 1Q15, rebounding strongly versus previous quarters (+0.8% on a like-for-like basis, including revenue from the Mondadori Scienza magazines[1]).

EBITDA before non-recurring items rose by 15.3% to 10.1 million euro from 8.8 million euro in 1Q15, with a percentage on revenue up from 3.5% to 4%. The consolidation of Mondadori Scienza as of 1 July 2015 resulted in a negative contribution in the quarter of 0.1 million euro.

Consolidated EBITDA improved by 22.1%, settling at 8.5 million euro versus 7 million euro in 1Q15, a performance that, thanks also to lower restructuring costs and fewer extraordinary items, confirms the Group’s efficiency gains from the industrial and organizational review actions launched and implemented over the past two years.

Consolidated EBIT in 1Q16 amounted to 3.1 million euro, improving by approximately 45% versus 2.1 million euro in 1Q15, thanks to the abovementioned growth in EBITDA, despite the increase in depreciation and amortization (5.4 million euro versus 4.9 million euro at 31 March 2015).

Consolidated result before taxes amounted to -0.5 million euro versus -2.4 million euro at 31 March 2015; in 1Q16, financial costs amounted to 3.6 million euro, decreasing sharply (-19%) versus 4.4 million euro in 1Q15, as a result of the reduced average net debt in the period and average total cost of debt. Tax costs in the period came to 0.9 million euro, basically in line with 1Q15 (0.8 million euro).

Consolidated net result from continuing operations, after minority interest, amounted to -1.8 million euro, improving by over 50% versus the loss of 3.7 million euro at 31 March 2015. The Group’s net result at 31 March 2016, net of the result from discontinued operations of the Radio Area (-1 million euro in 1Q15), amounted to -1.8 million euro, improving by 2.9 million euro versus 1Q15.

The Group’s net financial position at 31 March 2016 came to -224.9 million euro, improving significantly versus -319.2 million euro at 31 March 2015, as a result of the Group’s twelve-month cash generation from ordinary operations (48.4 million euro) and extraordinary operations (45.9 million euro).

At 31 March 2016, cash flow from operations in the last twelve months came to a positive 71.7 million euro; cash flow from ordinary operations (after outlays for financial charges and taxes for the period) came to 48.4 million euro, continuing the rising trend of the six previous quarters. Cash flow from extraordinary operations came to a positive 45.9 million euro, due mainly to the cash-ins from the disposals completed over the past 12 months, amounting to 58.4 million euro, relating to the transfer of 80% of Monradio (September 2015), of 50% of the Harlequin Mondadori joint venture (September 2015), and of a property in Rome (December 2015).

BUSINESS AREAS

• BOOKS

In 1Q16, Mondadori Group retained its leadership position with a 22.9% share of the trade market (GFK, March 2016).

In the period under review, the Books Area posted revenue of 63.4 million euro, rising sharply (+13.3%) versus 56 million euro in 1Q15.

Specifically, the Trade Area grew by 16.9%, driven by the ongoing positive trend in the sales of titles launched in late 2015, and by the enthusiastic response from the public of the new titles distributed during the year, as proven by the sales charts: in the first three months of the year, the Group held the top three positions in the ranking of the best-selling titles in terms of copies, and boasted 5 titles in the 10 top best-selling books.

Revenue from Educational books improved by 17.7% versus 1Q15, driven by the growth of Mondadori Electa.

EBITDA, net of non-recurring items, surged (over 50%) versus 1Q15 to settle at 4.1 million euro, driven by the increase in revenue from the targeted publishing policy, which also led to a cut in new titles produced, and from greater efficiency in managing operating processes, achieved following the deep organizational and product review implemented since 2015 in the Trade segment.

• MAGAZINES ITALY

In 1Q16, Mondadori Group retained its leadership position in the magazine market, with a 32.7% share (Internal source: Press-di, at February 2016).

In the period under review, revenue from the Magazines Italy Area amounted to 78.5 million euro, up by 0.8% versus 77.9 million euro in 1Q15 (-3.7% on a like-for-like basis).

Specifically:

• circulation revenue grew by 3.7%, due mainly to the contribution of the consolidation of the Mondadori Scienza titles;
• revenue from add-on products dropped by 1.8% versus 1Q15;
• revenue from advertising sales was basically in line with 1Q15 (-0.3%); Traffic data showed an overall audience rate of 8.9 million unique users (Audiweb, February 2016) versus 6.9 million in February 2015 (+29%).
• distribution and revenue towards third publishers rose slightly (+1.4%) versus 1Q15, thanks to the ongoing commitment to developing third-publisher portfolios;
• international activities achieved revenue of 2.8 million euro, basically in line with 1Q15 (2.8 million euro);
• revenue from digital marketing services (3.3 million euro), transferred to Magazines Italy on 1 January 2016[2], grew by 5.2%, as a result of the gradual expansion of the range of offers that had started in 2015.

EBITDA for the Magazines Italy Area, net of non-recurring items, improved considerably by approximately 11%, rising from 6.2 million euro to 6.8 million euro, driven by the positive revenue trend after a long chain of negative quarters, and by the effective review of the publishing structure and of promotional activities, implemented while retaining the traditional focus on the publishing quality of the titles. The quarter saw a significant reduction in industrial costs, achieved also as a result of the renegotiation of printing contracts.

• MAGAZINES FRANCE

In 1Q16, Mondadori increased its market share in France to 10.3% (Kantar Media, figures in terms of volume at February 2016), confirming its position as the second-largest player in the magazine advertising market.

In the reporting period, revenue from Mondadori France amounted to 77.1 million euro, down by 3.5% versus 79.9 million euro in 1Q15 (on a like-for-like basis in terms of publications, revenue would show a drop of 2%, basically confirming the -1.9% of 2015).

Specifically:

• circulation revenue (making for 74% of the total) lost 3.4% versus 1Q15: revenue from subscriptions (53% of circulation revenue) was basically steady (-0.2%, +0.6% on a like-for-like basis), partly offsetting the drop by the newsstand channel (-7.5%), confirming the opportunity to continue investments in this channel;
• advertising revenue edged down by an overall 0.7% versus 1Q15, as a result of the positive trend in digital revenue, which increased by over 20% (accounting for approximately 20% of the total), offsetting almost entirely the drop in print advertising (-6.9%).

The total number of readers of Mondadori France magazines reached 9.9 million unique users (Médiamétrie Netratings, February 2016), up by approximately 13% versus the same period of 2015.

EBITDA, net of non-recurring items, came to 4.3 million euro, down by 8.4% versus 1Q15, due mainly to M&A costs (0.4 million euro). In keeping with the positive performance of 2015, digital activities enjoyed positive margins in 1Q16, increasing versus 1Q15.

• RETAIL

In 1Q16, the Retail Area revenue rose to 44.4 million euro, up by +0.8% versus 44.1 million euro in 1Q15, thanks mainly to the growth of the franchised channel (+3.7% on a like-for-like basis), to direct bookstores (+4.5% on a like-for-like basis) and to the basically steady performance of Megastores, which more than offset the structural decline of the book clubs (-10.4%) and the drop in the online segment (-10.1%), due primarily to the reduction in special offers designed to improve profitability.

In 1Q16, Mondadori Retail EBITDA, net of non-recurring items, came to -1.8 million euro, improving slightly versus -1.9 million euro in 1Q15.

OUTLOOK FOR THE YEAR
The Group’s positive performance in the first quarter confirmed the expectations previously announced on a like-for-like basis; including the effects of the completion of the Rizzoli Libri transaction (consolidated as from 1 April 2016), and of the agreement on the acquisition of Banzai Media Holding (the contribution of which will be included basically in the second part of the year), it is reasonable to expect for the current year a growth of around 14% in revenue versus 2015 and of approximately 30% in operating EBITDA.

These estimates include the expected synergies in the current year from the integration of Rizzoli Libri, but exclude the contribution of Marsilio Editori and the Bompiani BU, which will be disposed of within the established deadlines, therefore not consolidated, in accordance with the provisions of the Antitrust Authority on 23 March 2016.

The net financial position, including the effects of both extraordinary transactions and of the planned disposals, is expected to increase versus 31 December 2015, with a NFP/EBITDA ratio of around 3.5x/3.6x, lower than the bank covenant of 4.5x.

SIGNIFICANT EVENTS AFTER THE REPORTING PERIOD

CLOSING OF THE ACQUISITION OF RCS LIBRI
As previously disclosed to the market on 14 April 2016, Mondadori Group, following the go-ahead from the relevant Authorities, completed the acquisition of RCS Libri S.p.A. (today Rizzoli Libri S.p.A.) through its subsidiary Mondadori Libri S.p.A., in execution of the agreement signed and disclosed to the market on 4 October 2015. The scope of the transaction includes the entire equity interest (99.99%) held by RCS MediaGroup S.p.A. in RCS Libri S.p.A., including the underlying subsidiaries, and the exclusive ownership of all the trademarks in the books segment, including Rizzoli. The price of the transaction, which incorporates certain contractual adjustments, is 127.1 million euro, settled in cash through a dedicated credit line made available to the Group.

Under specific contractual clauses, the price may be subject to adjustments of up to +/-5 million euro, if certain financial targets are met in 2015, as resulting in the 2015 financial statements of RCS Libri S.p.A., which will be determined and disclosed in accordance with the contractual agreements. The agreement also provides for an earn-out of up to 2.5 million euro to RCS MediaGroup S.p.A., based on the achievement in 2017 of specific results in the Books Area of Mondadori Group.

AGREEMENT ON THE ACQUISITION OF BANZAI MEDIA HOLDING
As previously disclosed to the market on 10 May 2016, Arnoldo Mondadori Editore S.p.A., following the meeting of the Board of Directors chaired by Marina Berlusconi, signed an agreement with Banzai S.p.A. on the acquisition of Banzai Media Holding S.r.l., the vertical content division of the Banzai Group.

The transaction provides Banzai Media Holding an enterprise value of 45 million euro, split up into a fixed component of 41 million euro and an earn-out of 4 million euro.

The acquisition price at closing – net of an estimated net normalized financial debt of 16.4 million euro (including financial payables to the parent Banzai S.p.A. and 3.3 million euro for deferred price components related to certain investments) – is 24.6 million euro. The earn-out will be paid to Banzai S.p.A. if certain established results for the 2016-2018 three-year period are met.

§

Mention should be made that, following entry into force of Legislative Decree no. 25 of 15 February 2016, which implemented the latest European regulations on transparency requirements, the previous disclosure obligations of quarterly results to the market no longer apply. The interim report on operations of Arnoldo Mondadori Editore S.p.A. at 31 March 2016, and the following ones, are, therefore, to be considered prepared on a voluntary basis by the Company.

The interim report on operations at 31 March 2016 will be made available at the Company’s registered office, on the authorized storage device (www.1Info.it) and on www.gruppomondadori.it (Investor Relations section), within the time limits previously provided by law. The documentation relating to the presentation of the results at 31 March 2016, will be made available through the authorized storage mechanism 1Info (www.1info.it) and in the Investor Relations section of the Company’s website www.gruppomondadori.it.

§

The Executive Manager responsible for the drafting of the corporate accounting documentation – Oddone Pozzi – hereby declares, pursuant to Art. 154 bis, par. 2, of the Finance Consolidation Act, that the accounting documentation contained in this press release corresponds to the Company’s accounting entries, books and results.

[1] Consolidated as from 1 July 2015 following the acquisition by Mondadori of 50% of the Gruner+Jahr/Mondadori S.p.A. joint venture, today Mondadori Scienza S.p.A.

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

Today, the meeting of the Board of Directors of Arnoldo Mondadori Editore S.p.A., chaired by Marina Berlusconi, reviewed and approved the draft Parent Company and Group consolidated financial statements at 31 December 2015[1] presented by CEO Ernesto Mauri.

2015 was a truly important year in the history of the Mondadori Group, a year in which we laid the structural foundations to address the challenges of our new phase of growth.
We confirmed the positive outcome of the path taken for some years now which, thanks to the steadfast commitment to the reduction in operating and overhead costs, brought a sharp improvement in our results, with a positive profitability touching all business areas, and in Mondadori’s ability to generate financial resources.
We continued to successfully focus on our core businesses, through the strategic rationalization of the portfolio of activities: the extraordinary transactions for the disposal of a number of non-strategic assets completed in 2015 (transfer of the majority interest in R101, a property in Rome, and 50% of the Harlequin Mondadori joint venture) have further increased available financial resources.
These positive results were used to reduce consolidated debt – which was almost halved in less than 24 months – and to provide adequate resources to the strategic lines of the Group’s development.
2015, in fact, was a year of transition to a new phase for Mondadori, in which the Company has returned to investing in order to strengthen its competitive edge in the Group’s strategic businesses and sustain the growth process.
In July, Mondadori increased its investment in Gruner+Jahr/Mondadori to 100%, adding even further value to its portfolio with a successful brand such as Focus, in line with its strategy to strengthen Group leadership in the magazine market by focusing on the key titles with the highest growth potential in the digital segment.
In October, the Group took a crucial step in its strategic development, signing the agreement to acquire RCS Libri, which will allow Mondadori, from 2016, to extend its foothold in the Italian trade books and school textbooks market, and in the international illustrated books business (United States in particular).

GROUP PERFORMANCE AT 31 DECEMBER 2015

In 2015 consolidated net revenue came to 1,122.8 million euro, down by 4% versus 1,169.5 million euro in 2014. The Magazines Italy area includes revenue generated by Gruner+Jahr/Mondadori, consolidated since 1 July 2015 (9 million euro) – now Mondadori Scienza; net of this change, at the Group level, the drop in revenue would amount to 4.7%.

In 2015 consolidated EBITDA improved strongly (+14%), reaching 81.6 million euro versus 71.5 million euro in 2014, due also to the benefits from non-recurring items such as the gain from the disposal of a property in Rome and of 50% of the Harlequin Mondadori joint venture.
Even net of non-recurring items, EBITDA grew by 7.5%, from 67.9 million euro in 2014 to 73 million euro in 2015, increasing its percentage on revenue from 5.8% to 6.5%. The consolidation of Gruner+Jahr/Mondadori contributed a positive 0.4 million euro, while the disposal of the Harlequin Mondadori joint venture contributed a negative 0.2 million euro.

The quarter-by-quarter results confirm the Group’s increasing efficiency, achieved despite the difficult market scenario in which it operates, deriving from the industrial revision actions and re-organization launched and implemented over the last two years, while maintaining continuous improvement in the quality of the publishing programme as a key objective.
Profitability (net of non-recurring items) recovered thanks to the lower percentage of the cost of items sold by over 2 percentage points (from 41.1% to 38.8% of revenue, improving across all business areas), and to the reduction in fixed costs (from 11% to 10.4% of revenue), higher than the reduction in revenue, partly alleviated by the rising percentage of variable costs on revenue (from 23.3% to 24.9%).

At 31 December 2015, the headcount dropped by 1.5% (3,076 units versus 3,123 in 2014), as a result of the ongoing review of the organizational process both in Italy and in France (like-for-like: -3%, or 94 units); net of non-recurring restructuring costs, the cost of personnel in 2015 fell by 3.4% versus 2014 (-5.3% like-for-like).

In 2015 consolidated EBIT amounted to 54.5 million euro, up by approximately 13% versus 48.2 million euro in 2014, as a result of the abovementioned growth in EBITDA, despite increased amortization, depreciation and impairment mainly from the impairment of the interest held in the Greek Attica Publications subsidiary (4 million euro), and from the impairment of goodwill of Kiver and Mondadori UK (3 million euro).
Depreciation of tangible assets (6.9 million euro versus 9.8 million euro in 2014) and amortization of intangible assets (13.1 million euro versus 13.5 million euro in 2014) continued to fall as a result of lower capital expenditure.

Consolidated profit before taxes came to a positive 38.3 million euro, up by 52% versus 25.2 million euro in 2014; financial costs in 2015 amounted to 16 million euro, falling sharply versus 23 million euro in 2014, as a result of reduced average net debt and average total cost of debt, and of the contribution of 1.6 million euro from the derecognition of a number of put options.
Tax costs in the reporting period came to 20.4 million euro (16.7 million euro in 2014), and include the impairment of deferred tax assets on prior-years’ losses, following the tax rate reduction introduced by the 2016 Stability Law (IRES rate from 27.5% to 24% from 1 January 2017).

The consolidated net profit from continuing operations, net of minority interests, almost tripled versus 31 December 2014, and came to 15.1 million euro versus 5.3 million euro in 2014.
The result from discontinued operations, which came to a negative 8.7 million euro in 2015, includes the period net result of the Radio Business area (improving from -4.7 million euro at 31 December 2014 to -3.1 million euro), as well as the loss of 5.6 million euro from the impairment of Monradio operations, disposed of in September 2015.

The Group’s net profit at 31 December 2015, net of the result from discontinued operations, came to a positive 6.4 million euro, up by 5.8 million euro versus 0.6 million euro in 2014, despite the inclusion of the depreciation of Monradio operations.

The Group’s net financial position at 31 December 2015 came to -199.4 million euro, improving sharply (92.4 million euro) versus -291.8 million euro at 31 December 2014, as a result of the Group’s twelve-month cash generation, deriving both from improved ordinary operations and extraordinary operations.

At 31 December 2015, cash flow from operations came to a positive 70 million euro; ordinary cash flow (after the cash-out for financial charges and taxes for the year) amounted to 45.4 million euro, continuing the improvement witnessed in the previous five quarters.

Cash flow from extraordinary operations came to a positive 47 million euro, mainly as a result of the gain generated by the disposals completed in the period, totalling 54.8 million euro, from the transfer of 80% of Monradio and 50% of the Harlequin Mondadori joint venture, previously recognized at 30 September 2015, as well as a property in Rome completed in December.

BUSINESS AREAS

• BOOKS

In 2015, after years of constant decline, the Books market rose by 0.9% versus 2014 (GFK, December): against this backdrop, the Mondadori Group retained its leadership in the trade segment with a 24% market share (versus 25.3% in 2014).
In the school textbooks market, Mondadori Education held to its third place in the segment, with a 12.5% share, adoptions-wise (AIE).

In 2015, the Books Area revenue amounted to 320.8 million euro, down by 5.7% versus 340.1 million euro in 2014, with a good performance achieved by the Educational area, and a drop reported by the Trade segment.

• Trade Books: the reduction in revenue witnessed in trade in 2015 versus the previous year (from 182.4 million euro to 160.4 million euro) is attributable to the selective publishing policy focused on improving efficiency, therefore, profitability; specifically, in 2015, the amount of new titles and average print run was cut to reduce future unsold stock. These targeted actions have and will be taken maintaining the priority objective of research and ongoing improvement of the quality of the publishing schedule, as shown by the ranking of the top ten bestselling titles in 2015, with 5 of the Group’s titles in the charts (Grey, La ragazza del treno, È tutta vita, After and Cinquanta sfumature di grigio);
• Educational Books: in this segment, the Group grew by 2.8% versus 2014, driven by the good performance of Mondadori Electa (+17.5%), as part of the management of museum concessions and the organization of exhibitions, and by EXPO Milano 2015, which more than offset the decline in revenue in the school textbooks segment (-4.3%).

Revenue from the download of e-books, amounting to 10 million euro, rose by 15% versus 2014, with digital sales accounting for 6.2% of total trade (4.8% at 31 December 2014).

Reported EBITDA for the Area came to 45.9 million euro, up from 45.1 million euro in 2014, and includes the 7.6 million euro gain from the transfer of the interest held in the Harlequin Mondadori joint venture (completed on 30 September 2015), and a higher percentage of restructuring costs versus 2014 (4.3 million euro in 2015 versus 0.9 million euro in 2014).

EBITDA, net of non-recurring items, fell from 46 million euro to 42.7 million euro, parallel to the drop in revenue.
The figure was basically steady as a percentage on revenue (13.3% versus 13.5% in 2014), as a result of the good performance in the Educational area, and of greater efficiency in managing operating processes, achieved thanks to the deep organizational and product review implemented in the Trade segment.

• MAGAZINES ITALY

In 2015, the Mondadori Group retained its leadership with a market share of 31.2% at 31 December 2015 (internal source Press-di; December 2015).

In 2015, Magazines Italy posted revenue totalling 296.3 million euro, down by 2.1% versus 302.7 million euro in 2014 (-4.9% like-for-like, net of the 50% acquisition of Gruner+Jahr/Mondadori), outperforming the relevant segment in terms of advertising, while being in line circulation-wise:

• circulation revenue dropped by 1.7%; on a like-for-like basis, the drop was 7.5%, in line with the market, due also to the decline in the subscription channel caused by the rationalization of low-profit subscriptions;
• revenue from add-on products dropped by 8.8% versus 2014, as a result of the rationalization process implemented, which targeted increased project profitability (-10.6% like-for-like);
• total advertising revenue fell by 1.8%; on a like-for-like basis, gross advertising sales on Mondadori brands in Italy (print + web) were down by 3.7%.

International activities, through Mondadori International Business, increased revenue by 2.4% versus 2014, thanks mainly to the performance of the Grazia International Network and the launch of the international editions of Il mio Papa.

EBITDA for the Magazines Italy area, net of non-recurring items, posted a remarkable improvement, rising from -0.7 million euro to a positive 5.8 million euro, despite the decline in revenue caused by the market conditions and by the implementation of targeted project selection policies, as a result of the effective review of the publishing and operating organization, and the containment of promotional activities, while retaining the traditional focus on the publishing quality of the titles.

Reported EBITDA confirmed the growth trend, rising from -1 million euro to a positive 2.6 million euro, as a result of the abovementioned actions and of the lower reduction in advertising sales, despite higher restructuring costs and non-recurring items of approximately 1 million euro in 2014, deriving from the contribution of advertising operations to Mediamond.

Traffic data of Mondadori websites showed an overall audience rate of 9.5 million unique users (Audiweb, December 2015), up by 16% versus 2014, due also to the inclusion in the scope of the Nostrofiglio.it brand (Gruner+Jahr/Mondadori), which boasted over 1.3 million unique users in December 2015 (+19% versus 2014).

MAGAZINES FRANCE
In the reporting period, Mondadori France revenue came to 334.6 million euro, down by 1.9% versus 2014 (340.9 million euro), halving last year’s decline (-3.7% in 2014).
Revenue from print activities was down by 2.9%, while digital activities stepped up their growth (+27%), thanks to the development of the digital activities on the properties (+26%: advertising revenue and revenue from the sale of digital copies) and of NaturaBuy (+31%).

Against a sliding market backdrop and despite a rather poor start to the year following the January terrorist attacks, Mondadori France’s advertising revenue (print + digital) dropped by 3.3% versus 2014. Specifically:

• print advertising sales were down by 5% in value versus 2014, outperforming the market (-6.3%; Kantar Media, December); Mondadori France retained its position as the second player in the magazine advertising market, with its share in terms of volumes at 10.9%.
• digital advertising revenue rose by almost 30% (versus the market’s 5.5% increase; SRI-Udecam-PwC), making for almost 15% of total advertising revenue, as a result of the sharp increase in audience (+20%).

Circulation revenue (newsstands and subscriptions), which accounts for more than 70% of the total, showed an overall 1.8% decline, slightly improving versus 2014, thanks to the performance of subscriptions, which make for over half the total.
Specifically:

• newsstand channel revenue dropped by 5.8%; the comparison with 2014 results is affected, on the one hand, by the poor start of the market in 2015, as a result of the challenging national environment and, on the other, by the outstanding performance in January 2014, driven by the publication of the “Hollande scoop” on Closer;
• on the other hand, subscription channel revenue posted a 0.8% growth versus 2014, thanks to the good trend in volumes, propelled by the ongoing promotional initiatives and steady prices, confirming the strategic opportunity to further invest in this channel.

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

EBITDA, net of non-recurring items, was basically steady versus 2014, totalling 36 million euro, with margins on revenue again above 10% (10.8% in 2015 versus 10.5% in 2014). A positive result achieved by Mondadori France, which continued to rationalize structures and curb editorial costs, while retaining its ability to invest in publishing quality and in diversification, with a view to further adjusting the organization to market changes and to sustaining profitability.
Specifically, two projects were launched in 2015, critical to countering the market downturn and to transforming the company into a truly digital organization: a restructuring plan based on voluntary staff leaving, launched in May; and the reorganization of the editorial teams, to be fully completed from end 2016.
As forecast, digital activities achieved a positive EBITDA in 2015.

Reported EBITDA, amounting to 32.4 million euro, was down by 7.5% versus 2014 (35 million euro), due to higher restructuring costs of approximately 2.8 million euro resulting from the above plan in effect.

Digital and diversification activities (over 8% of total revenue) grew by 14% thanks mainly to the growth of digital activities (+26.9%), regarding both the titles (+26.2%) and the NaturaBuy website (+30.9%).
The total number of readers of Mondadori France magazines reached 8.8 million unique users (Mediamètre Net Ratings MNR, average figure January-December 2015), up by approximately 23.8% versus 2014, also as a result of the steady digitization of the editorial teams.

• RETAIL

In the Retail area, the Group continued to implement strategic actions to align the organization and the sales channels to the developments of the market, which showed the first signs of recovery in 2015, focusing on operating costs reduction, on gradual network revision and format.

In 2015, the Retail area’s revenue fell by 7.2% to 196 million euro versus 211.2 million euro in 2014, mainly as a result of the disposal of the flagship store in corso Vittorio Emanuele in Milan (which had contributed 14.2 million euro in 2014). In the Books segment, which made for 77% of store revenue, Mondadori Retail has a 14.2% market share.

The analysis by channel showed the following:

• the growth of directly-managed book stores: +2.0% on a like-for-like basis;
• franchised bookstores: slight downturn of revenue in the books segment, but a slight increase overall with stores like-for-like (+0.8%);
• net of the disposal of the flagship store in corso Vittorio Emanuele in Milan, books in Megastores posted a good performance (+6.8%), while consumer electronics returned to growth (+2.3%);
• in the online segment, revenue was down by 5.7% overall (-1.8% in the books segment);
• book clubs performed in line with the structural reduction expected in the medium term development plan (-14.3%).

In 2015, Mondadori Retail posted a positive EBITDA, net of non-recurring items, of 2.2 million euro, improving sharply versus 0.2 million euro in 2014. The recovery of one percentage point of profitability is due largely to the improved product margins, specifically in the Books segment and in consumer electronics, and to the extended implementation of cost reduction measures, which led to a lower percentage of fixed and personnel costs.

Reported EBITDA in 2015 amounted to 1.8 million euro versus 8.9 million euro in 2014, which included the contribution of 9.3 million euro from the gain generated by the disposal of the flagship store in corso Vittorio Emanuele in Milan.

PERFORMANCE OF ARNOLDO MONDADORI EDITORE S.P.A.
The financial statements of the Parent company, Arnoldo Mondadori Editore S.p.A., for the year ended 31 December 2015, show a loss of 32 million euro (12.9 million euro in 2014).
As a result of the transfer of the business unit relating to publishing and distribution activities in the Books area, effective 1 January 2015, the two years are not comparable. The net profit in 2014 included operating profit of 11.7 million euro from the transferred BU, in addition to over 20.1 million euro in dividends received from a number of subsidiaries in the Books area.
The net profit was also affected by:

• EBITDA before non-recurring items amounting to -7.5 million euro, as a result of the structural costs of the Digital and Corporate area (-12.2 million euro), offset by the positive result in the Magazines Italy area (4.8 million euro);
• the adjustment to equity of the measurement of subsidiary and associated companies, amounting to 24.7 million euro versus 28.2 million euro in 2014, in addition to the charges from the disposal of Monradio and resulting exit from the radio business, amounting to 1.9 million euro;
• positive non-recurring items of 7.2 million euro, as a result of the gain from the disposal of the property in Rome, net of restructuring costs for incentives granted to employees and contractors.

SIGNIFICANT EVENTS AFTER YEAR END
On 22 January 2016, the Antitrust Authority announced the opening of an investigation into the acquisition of RCS Libri. The investigation will be completed within 45 days from 21 January 2016. An additional 30 days will be needed to receive an opinion from the Communications Authority.

2016 OUTLOOK
In 2015, the Group continued to vigorously implement its efficiency measures, consistent with the dynamics of its relevant markets, and the strategic rationalization of its portfolio of activities. The success of these strategies, coupled with the improvement of business performance, allowed it to achieve EBITDA of over 80 million euro and a positive net profit, on the rise versus 2014, as well as a strong reduction in the net financial position.

In 2016, the Group will continue to strengthen its core businesses – this also includes the mentioned agreement on the acquisition of RCS Libri – through constant focus on publishing quality and on the optimization of operating processes and cost structure, in order to further strengthen its competitive position and implement the development plan in the digital segment.

In light of the current relevant context and the Group’s positive performance in the opening months, it is reasonable to expect for the current year basically steady revenue (on a like-for-like basis) versus 2015 and a “high-single digit” growth of operating EBITDA (on a like-for-like basis), with a resulting increase in marginality.

In line with the above and notwithstanding a recovery in investments, the net financial position (on a like-for-like basis) is expected to further improve versus 31 December 2015.

To date, these projections do not include the consolidation of RCS Libri and the relating synergies from the integration, the impact on the outlook for the current year of which will be readily disclosed to the market once the transaction is completed.
§

The Board of Directors of Arnoldo Mondadori Editore S.p.A. also aligned financial and non-financial disclosures by approving its 2015 Sustainability Report, drafted according to the GRI Guidelines, standard G4, based on the “in accordance” – core rating.
A summary of the Sustainability Report in line with the provisions contained in the 2014/95/EU directive adopted by the EU Parliament and Council on 22 October 2014 will be supplemented in the Annual Report; the complete document will be made available at the Shareholders’ Meeting.

§

The Board of Directors of Arnoldo Mondadori Editore S.p.A. called the Shareholders’ Meeting on Thursday 21 April 2016 in first call.

PROPOSAL TO COVER THE LOSS OF THE PERIOD BY USING AVAILABLE RESERVES
The Board of Directors will propose to the Shareholders’ Meeting to entirely cover the loss of the year of 31,981,679.37 euro at 31 December 2015 by using the available reserves as follows:

• 1,100,690.02 euro by fully resorting to the stock option reserves under item “Other reserves and profit (loss) carried forward”;
• 30,880,989.35 euro by partially resorting to the available portion of the extraordinary reserve under item “Other reserves and profit (loss) carried forward”;

§

RENEWAL OF THE AUTHORIZATION TO PURCHASE AND SELL TREASURY SHARES
Following the expiry of the preceding authorization resolved upon by the Shareholders’ Meeting on 23 April 2015, with the approval of the financial statements at 31 December 2015, the Board of Directors will propose to the next Shareholders’ Meeting the renewal of the authorization to purchase Treasury Shares with the aim of retaining the applicability of law provisions in the matter of any additional re-purchase plans and, consequently, of picking up any investment and operational opportunities involving Treasury Shares.
The Shareholders’ Meeting of 23 April 2015 authorized the purchase of Treasury Shares up to a maximum of 10% of the share capital made up of No. 26,145,834 ordinary shares.

In relation to the authorization of 23 April 2015, Arnoldo Mondadori Editore S.p.A. did not proceed, either directly or indirectly through its subsidiaries, to purchase any Treasury Shares.

On the occasion of the next Shareholders’ Meeting the proposal for the renewal of the authorization to sell the treasury shares acquired by the Company will also be made pursuant to article 2357 ter of the Italian Civil Code.
Here below are the main elements of the proposal made by the Board of Directors:

• Motivations

The motivations underlying the request for the authorization to purchase and sell treasury shares refer to the opportunity to attribute to the Board of Directors the power to:

• to use the treasury shares purchased as compensation for the acquisition of interests within the framework of the Company’s investments;
• to use the treasury shares purchased against the exercise of option rights, including conversion rights, deriving from financial instruments issued by the Company, its subsidiaries or third parties and to use the treasury shares for exchange or transfer transactions or to support extraordinary transactions on the Company’s capital or financing transactions that imply the transfer or sale of treasury shares;
• to possibly rely on investment or divestment opportunities, if considered strategic by the Company, also in relation to available liquidity;
• To sell treasury shares against the exercise of option rights for the relevant purchase granted to the beneficiaries of the Stock Option Plans established by the Shareholders’ Meeting.

• Duration

Until the Shareholders’ Meeting called to approve the financial statements at 31 December 2016 and, in any case, for a period not exceeding 18 months from the effective date of the resolution made by the Shareholders’ Meeting.

• Maximum number of purchasable Treasury Shares

The renewed authorization will enable the Company to reach the cap of 10% of its share capital, in line with the previous authorization.
Considering that, as indicated above, the Company does not hold any treasury shares, either directly or indirectly, the authorization would refer to the purchase of maximum No. 26,145,834 treasury shares (10% of the share capital).

• Criteria for purchasing Treasury Shares and indication of the minimum and maximum purchasing cap

Purchases shall be made on the regulated markets pursuant to article 132 of Italian Legislative Decree n. 58 of 24 February 1998 and article 144 bis, paragraph 1, letter B of Consob Regulation n. 11971/99 according to the operating criteria established in the organization and management regulations of the same markets, which do not allow the direct combination of the purchase negotiation proposals with pre-determined sale negotiation proposals, and also in compliance with any additional applicable regulations
The minimum and maximum purchase price would be determined under the same conditions established by the preceding Shareholders’ Meeting authorizations, i.e. at a unit price not lower than the official Stock Exchange price of the day preceding the purchase transaction, reduced by 20%, and not higher than the official Stock Exchange price of the day preceding the purchase transaction, increased by 10%.
In terms of daily prices and volumes the purchase transactions would be completed in compliance with the conditions established in EC Regulation n. 2273/2003.

§

The 2015 results, approved today by the Board of Directors, will be presented by the Mondadori Group Management to the financial community today, 3.30 PM, at the Mondadori Megastore in piazza Duomo, Milan.
The corresponding documentation will be made available on 1Info a twww.1info.it, www.borsaitaliana.it and www.gruppomondadori.it (Investor Relations).

§

The Executive Manager responsible for the drafting of the corporate accounting documentation – Oddone Pozzi – hereby declares, pursuant to Art. 154 bis, par. 2, of the Finance Consolidation Act, that the accounting documentation contained in this press release corresponds to the Company’s accounting entries, books and results.

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

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

GROUP PERFORMANCE AT 30 SEPTEMBER 2015

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

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

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

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

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

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

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

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

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

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

BUSINESS AREAS

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

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

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

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

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

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

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

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

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

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

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

EBITDA of the Magazines Italy area, net of non-recurring items, posted a remarkable improvement, going from a loss of euro 0.4 million to a positive value of euro 4.1 million,[4] as a result of the effective review of the publishing and operating organization as well as of promotional activities. Despite the downward revenue trend determined by market conditions and by the implementation of targeted project selection policies the Group managed to maintain both its traditional publishing quality and its market leadership.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Two main causes drove this result:

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

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

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

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

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

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

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

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

§

The documentation relating to the presentation of the results for the first nine months of 2015 to analysts is made available to the public on the authorized storage device 1info (www.1info.it) and on www.gruppomondadori.it (Investor Relations section).

§

The Executive Manager responsible for drafting the corporate accounting documentation – Oddone Pozzi –hereby declares, pursuant to Art. 154 bis, par. 2, of the Finance Consolidation Act, that the accounting documentation contained in this press release corresponds to the Company’s accounting entries, books and results.

§

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

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

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

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

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

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

GROUP PERFORMANCE AT 30 JUNE 2015

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

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

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

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

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

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

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

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

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

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

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

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

BUSINESS AREAS

• BOOKS

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

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

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

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

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

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

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

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

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

• MAGAZINES ITALY

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

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

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

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

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

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

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

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

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

• MAGAZINES FRANCE

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

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

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

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

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

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

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

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

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

• RETAIL

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

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

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

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

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

• DIGITAL

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

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

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

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

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

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

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

The Executive Manager responsible for drafting the corporate accounting documentation – Oddone Pozzi – hereby declares, pursuant to Art. 154 bis, par. 2, of the Finance Consolidation Act, that the accounting documentation contained in this press release corresponds to the Company’s accounting entries, books and results.

The Board of Directors of Arnoldo Mondadori Editore S.p.A., held on today’s date and chaired by Marina Berlusconi, examined and approved the interim report at 31 March 2015 presented by the CEO Ernesto Mauri.

GROUP PERFORMANCE AT 31 MARCH 2015
In the first quarter of 2015 net consolidated revenues amounted to euro 251.7 million,
down 6.2% against euro 268.3 million of the same period in 2014.

Consolidated EBITDA totalled euro 5.9 million, up 4.7% against euro 5.6 million of 31 March 2014. The recovery in profitability is even more significant net of non-recurring items (reflecting a negative impact on the result of the quarter for approximately euro 1.5 million mainly due to restructuring costs); EBITDA before non-recurring items registered growth by over 48%, increasing from euro 5 million of the first quarter of 2014 to euro 7.5 million of the first quarter of 2015, with a percentage incidence on revenues rising from 1.9% to 3%.

This performance is the result of the implementation of a rigorous policy targeting the reduction of the main cost items:

• reduced cost incidence on sold items obtained in the majority of the business areas: specifically in the Books Area due to a more effective management of operating processes, and in the Retail Area;
• the reduction in fixed costs is essentially consistent with the reduction in revenues and was obtained through the implementation of a cost containment policy on third party services and rents;
• the number of employees at 31 March 2015 (3,083 employees) was reduced by 187 people (-5.7%) against the first quarter of the previous year, due to the ongoing re-organization of the company structures; cost of personnel dropped consequently by 6.7%.

The result obtained confirms, with a remarkable acceleration, the Group’s improved efficiency resulting from the actions undertaken in the last two years, aimed at re-defining the industrial structure and organization.

In the first quarter of 2015 consolidated EBIT amounted to euro 0.7 million, up against euro 0.1 million posted in the same period of the previous year, as a result of increased EBITDA and reduced amortization and depreciation (from euro 5.5 million to euro 5.2 million).

Consolidated profit before taxes is negative for euro 3.8 million against euro -5.9 million at 31 March 2014; in the first quarter of 2015, financial costs amounted to comprehensively euro 4.4 million, considerably down against euro 6 million of the same period of the previous year, as a result of reduced average net debt for the period and average total cost.

Consolidated net result, after minority interest, is negative for euro 4.7 million, up against a loss of euro 6.4 million registered at 31 March 2014.

The Group’s net financial position at 31 March 2015, equal to euro -319.2 million, increased substantially against euro -396.5 million of 31 March 2014 as a result of the significant Group’s cash generation in the last twelve months and it includes the effects of the seasonal fluctuations typical of the business (euro -291.8 million at 31 December 2014).

At 31 March 2015, cash flow from operations in the last twelve months is positive for euro 56.6 million (euro 47.2 million at 31 December 2014); cash flow deriving from operations (after outlays relative to financial costs and taxes for the period) is equal to euro 28.6 million, continuing the rising trend registered in the two previous quarters (euro 18.8 million at 31 December 2014 and euro 9.8 million at 30 September 2014).

Cash flow from extraordinary operations is positive for euro 48.7 million (euro 52.6 million in 2014) despite outlays for restructuring costs (euro 18 million) and is mainly attributed to the Company’s capital increase transaction (June 2014) and the capital gain deriving from the transfer of an asset in the retail area (December 2014).

BUSINESS AREAS

• BOOKS

In the first quarter of 2015 the trade Books market in Italy posted a 2.9% reduction (GFK at March): in this context the Mondadori Group confirmed its leadership with a 24.9% market share, essentially maintaining the share in line with the previous year. In the period the Group has 4 titles in the ranking of the 10 bestselling books.

In the first quarter of 2015 revenues in the Books Area amounted to euro 55.8 million, down 1.8% against euro 56.8 million of the same period in 2014.

Revenues from e-books grew by 23% against 31 March 2014.

EBITDA of the Area dropped from euro 1.3 million in the first quarter of 2014 to euro 0.3 million as a result of a greater incidence of restructuring costs (euro 2.3 million in 2015 against euro 0.2 million in 2014), mainly concentrated in the first part of the year; net of non-recurring items, despite dropping revenues, EBITDA increased by 87.8%, up from euro 1.4 to euro 2.7 million, as a result of a more effective management of operating processes deriving from the radical revision of the Trade Area. Concurrently, the actions aimed at reducing fixed costs and cost of personnel have continued.

• MAGAZINES ITALY

As for magazines Mondadori confirms its leadership with a 31.8% market share.

In the first quarter of 2015 overall revenues of the Magazines Italy Area – which, following the transfer of advertising sales activities to Mediamond, also includes the activities of the Advertising Area – amounted to euro 74.6 million, down 11.9% against euro 84.7 million of the first quarter of 2014 (-11.2% on a like-for-like basis).

Revenues from circulation – down 11.3% (-9.8% on a like-for-like basis) – was influenced by the rigorous policy implemented for the selection of the most profitable initiatives, a different scheduling of add-on sale activities and, also, by the performance of the markets of reference.

Revenues from advertising sales in the printed media dropped by 5.7% (-5.1% on a like-for-like basis) against a market dropping by 6.2% (source Nielsen, data at February); advertising sales in web sites (-5.1%) showed a performance essentially in line with the trend registered in the market of reference (-5.3%: source Nielsen; data at February).

Revenues from international activities posted a performance essentially in line with the previous year (+0.2%).

In the period Grazia Turkey was launched, which increased to 24 the number of the international editions of the magazine. After one year of publication, the first international edition of Il mio Papa was launched last March in Germany (with circulation also in the German area of Switzerland, Austria and Liechtenstein). As of today’s date agreements for a total of 10 international editions of the magazines have been stipulated.

EBITDA of the Area dropped from euro 6.9 million to euro 6.3 million, down 9.2% due to advertising sales, whose margin was reduced by euro -1.5 million against euro -0.6 million of the first quarter of the previous year in which non-recurring items, amounting to approximately euro 1 million, reflected the effect of the transfer transaction to Mediamond; net of non-recurring items, EBITDA of the Area increased by 9.5% as a result of the important re-organization implemented in the editorial and operating structures, despite the significant revenue reduction determined by market conditions and the implementation of rigorous policies for the selection of projects.

• MAGAZINES FRANCE

In France, the magazines market showed a dropping trend for advertising sales (-7.7%; source Kantar Media, data at February) and circulation (newsstand channel -6.5% at March; internal source). In this context revenues of Mondadori France amounted to euro 79.9 million, down by 2.2% against euro 81.7 million of the first quarter of 2014.

The reduction in revenues, reflecting market performance, was mitigated by the positive performance of subscriptions (+0.4%) and increased advertising sales in the digital area (+26%).

Reported EBITDA, equal to euro 4.8 million, was down by 7.2% (euro -0.4 million) against the first quarter of 2014.

Mondadori France continued the process for the rationalization of structures and the implementation of the policy targeting editorial cost containment. These actions are expected to be maintained throughout 2015 with a view to further adjusting the organization to the changes occurred in the market, limiting also the impact of the increased mail tariffs associated with the management of subscriptions and a few investments in promotions.

Net of non-recurring items, EBITDA is down by euro 1.1 million against the first quarter of the previous year, the period benefiting from the “Hollande scoop” by the Closer magazine.

• RETAIL

In the first three months of 2015, the Retail Area posted revenues of euro 44 million, down by 6.8% against euro 47.2 million of the same period of the previous year, also as a result of the transfer completed in 2014 of the flagship store located in corso Vittorio Emanuele in Milan.

The breakdown of store revenues shows the predominance of books (77% of the total) with a better performance than the reference market by approximately 1 percentage point.

The revenues of the channels showed the positive performance of direct bookstores (+4%), a slight reduction in the franchising segment (-3.2%), a steady performance of Megastores net of the transfer of the flagship store of corso Vittorio Emanuele in Milan, and an increase in online sales (+12%), while the performance of the Bookclubs continued to reflect the expected structural downturn (-13.5%)

In the period Mondadori Retail posted EBITDA, net of non-recurring items, equal to euro -1.9 million, sharply up (+44.1%) against euro -3.4 million of the corresponding period in 2014.

This increase, compared to the first three months of 2014, cut across the majority of the sales channels.

Reported EBITDA improved remarkably against the same period of the previous year, when it included restructuring costs for euro 0.3 million.

• RADIO

In the first three months of 2015, R101, though posting reduced advertising sales compared to 2014 (gross advertising sales equal to -4.8%), reached total revenues for euro 2.9 million, up 9.5% against euro 2.6 million of the first quarter of 2014, including revenues relative to the television channel that started operations in June of last year.

EBITDA, net of non-recurring items, negative for euro 1.3 million (euro 1.2 million in the first quarter of 2014), reflected higher costs of promotion of the television channel, compensated by the cost reduction actions implemented in the technical and artistic area.

EBITDA including non-recurring items increased from euro -1.2 million of the first quarter of 2014 to euro -1.1 million of the first quarter of 2015, benefiting from the positive contribution deriving from the transfer of a transmission system for euro 0.2 million.

• DIGITAL

In the quarter total revenues from digital activities were up 9.3% against 31 March 2014 (euro 12.6 million against euro 11.5 million at 31 March 2014). The incidence of digital activities on the Group’s total revenues grew to 5% against 4.3% of the first quarter of last year.

Digital marketing services, including the integration of traditional direct marketing services offered by Cemit with those promoted by Kiver, posted revenues of euro 3.1 million, down from euro 3.4 million of 2014 as a result of delayed orders relative to Cemit traditional activities and only partially compensated by the launch of digital and multimedia products.

Purely digital activities cutting across all business areas posted increased revenues by 16% against the first quarter of 2014.

OUTLOOK FULL YEAR 2015
Based on the Group’s performance in the first months of 2015 and the optimization actions targeted to operating processes and cost structure of all business areas, as well as the measures aimed at mitigating the downturn in revenues resulting from market performance, it is reasonable to confirm the 2015 estimate of a sustained growth in Group’s operating EBITDA as already indicated in the presentation of the financial statements at 31 December 2014. In parallel, activities focused on a rigorous evaluation of the possible disposal of the Group’s non-core assets are continued.

Consistently with the description above and notwithstanding the higher investments and eventual changes in the Digital area, the net financial position is also expected to improve towards 2014 year end.

This interim report at 31 March 2015 is made available at the Company’s legal offices, on the authorized storage device (www.1Info.it) and on www.gruppomondadori.it (Investor Relations section). The minutes of the ordinary Shareholders’ Meeting held on 23 April 2015 is also made available at the Company’s legal offices, on the authorized storage device (www.1Info.it), and on www.gruppomondadori.it (Governance section ). The documentation relating to the presentation of the results for the interim report at 31 March 2015, will be made available through the authorised storage mechanism 1Info (www.1info.it) and in the Investor Relations section of the company’s website www.gruppomondadori.it

The Executive Manager responsible for the drafting of the corporate accounting documentation – Oddone Pozzi – hereby declares, pursuant to Art. 154 bis, par. 2, of the Finance Consolidation Act, that the accounting documentation contained in this press release corresponds to the Company’s accounting entries, books and results.