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The Board of Directors of Arnoldo Mondadori S.p.A. met today, under the Chairmanship of Marina Berlusconi, to examine and approve the consolidated balance sheet and management report for the year to 31st December 2013 as presented by the chief executive, Ernesto Mauri.

MARKET SCENARIO
The macroeconomic situation in Italy in 2013 was once again characterised by a marked downturn in the main economic indicators that were even worse than the already dramatic decline recorded in 2012.

Only in the final quarter of the year were there some signs of a modest recovery in economic activity, albeit in an unfavourable climate due also to the lack of dynamism in some emerging countries’ economies.

This recessionary situation, combined with significant technological and structural changes in the sectors in which the Group operates had a significant impact, in particular in Italy where:

– the book market saw a fall in terms of value of -6.2% (-13.8% in the last two-years);
– the magazine market was severely affected by the ongoing slump in advertising expenditure, down by 23.9% (-38% in the period 2012-2013) while also circulation was down in value terms by 11.2% (-23.3% in the last two-years); while the decline in add-on sales was even more marked: -23.4% (-35.2% in the last two-years).

Also in France the economic picture was affected by the general crisis in the Eurozone: specifically:

– the magazine market in which Mondadori France operates recorded a marked fall compared with the previous year, especially in advertising -9.2% (-13.7% in the last two-years); while also circulation was down in terms of value by 6,7% (-11.7% in the period 2012-2013).

2013 AT MONDADORI

2013 was a year of change for the Mondadori Group as, in response to the market scenario outlined above, the Group embarked on a series of fundamental operations, both in terms of organisation and operating processes, aimed at bring the cost structure into line with the revenues trends of the traditional businesses and to ensure adequate resources to the excellence of the products and for businesses in development.

Organisational changes have affected almost the whole of the Group, with the redefinition of the responsibilities of both central and business functions and the renewal of most of the first line management.

As part of efforts to reduce operating costs, the “change of pace” plan, which foresees overall savings of €100 million by the end of 2015, touched on all cost items: among the most significant among the many measures introduced have been reductions in industrial costs (paper and printing), editorial costs and logistics (office space, retail outlets and distribution).

During the year total headcount (3,436 at year end), both permanent and temporary contracts, was down by 267 (-7.2% of the total on 31 December 2012) both through the ongoing review of organisational structures and extraordinary restructuring initiatives in all of the companies of the Group: excluding non-recurring costs related to restructuring, total personnel costs in 2013 were 10.1% lower than the previous year.

GROUP PERFORMANCE FOR THE YEAR ENDED 31 DECEMBER 2013
The consolidated financial statements for 2013 also feature:

– restructuring costs and other non-recurring charges of €61.9 million, mostly attributable to reorganisation activities;

– write-downs of €145.4 million, following the impairment process that has aligned assets and holdings to values that conform to the current market situation.

Below, are the consolidated results for the year 2013, compared with the figures for the previous year, that have been adjusted as a result of the application of the new IAS 19: the income statement to 31.12.2012 shows an improvement in gross operating profit of €1.6 million and in net profit of €1.2 million compared with the previous year.

Consolidated net revenues came to €1,275.8 million, a fall of 9.9% on the €1,416.1 million in 2012.

Consolidated gross operating profit, net of non-recurring items came to €49.1 million, a 32.2% reduction on the €72.4 million of the previous year: non-recurring items not included refer to restructuring costs of €50.4 million (€18.8 million in 2012) and other charges of €11.5 million (income of €14.5 million in 2012).

Consolidated gross operating profit showed a loss of €12.8 million, compared with a profit in the previous year of €68.1 million.

The consolidated operating loss for the year came to -€183.1 million (-€149.9 million in 2012) following impairments of €145.4 million (€194.3 million in 2012).

The impairments refer to Mondadori France for €99.3 million (€140 million in 2012), R101 for €31.1 million (€46.3 million in 2012) and related investments and other assets for €15 million (€8 million in 2012). Amortizations in the year amounted to €24.9 million (€25 million in 2012).

Consolidated pre-tax losses for the year amounted to -€207.3 million (-€172.1 million in 2012) with financial charges of €24.2 million (€22.2 million in 2012).

The consolidated net loss came to -€185.4 million, compared with -€166.1 million in 2012.

The Group’s net financial position showed a deficit of -€363.2 million, compared with a deficit of -€267.6 on 31 December 2012, a result of the impact of financial outlays related to the restructuring process carried out during the year.

It should be pointed out that in November 2013 all of the Group’s credit lines were renegotiated.

THE BUSINESS AREAS

• BOOKS

The 2013 revenues of the Book Area amounted to €334.3 million, a 9.8% fall on the €370.6 million of 2012.

Trade books confirmed their leadership with a market share of 27%, with an editorial programme that enabled the Group’s brands (imprints) to have an average of 10 titles among the top 20 bestselling books of the year and to be in the top position for 23 weeks out of 52.

In terms of profitability, comparison with 2012 was particularly tough due to the “Fifty shades” phenomenon, which significantly stimulated margins; there was a very positive trend in the development of e-books (+70%) with 2 million downloads and the number of titles available in a digital format has now risen to almost 6,000 with a market share of over 40%.

It was a successful year for the educational and art books sector: with the educational area increasing its market share, after years of decline, to 13%, thanks to an extensive and appealing offer at all school levels while in the art publishing segment, thanks to the management and organisation of exhibitions, there was an increase in revenues in the year of 12.7%.

The importance of the Group’s activities in these sectors is underlined by the increase in profitability, despite a difficult market environment.

• MAGAZINES ITALY

The Magazines Italy area saw the biggest concentration of reorganisation and cost reduction activities during the year. These were focused on industrial costs and all the items that come under editorial costs, as well as personnel reductions.

In terms of the products, with the closure of 4 titles the Group’s portfolio was strengthened while the reorganisation of the editorial departments for TV guides and the wellness segments made it possible to confirm the Group’s leadership market (38%) through the re-launch of the main titles.

2013 revenues for the area amounted to €326.1 million, a 15.1% reduction on the €383.9 million of 2012 (-13.7% on a like-for-like basis). In particular:

– circulation revenues (-7% on a like-for-like basis) were penalised by a fall in newsstand sales and subscriptions;
– revenues from add-on sales (-13.7%) – while down, for a strategic decision to focus on the rationalisation of the initiatives – maintained their market leadership, with a more than 40% share and a high level of profitability;
– advertising revenues for Mondadori titles (-24.5% on a like-for-like basis) were affected by a decline in both weeklies and monthlies.

The performance of the Group’s leading web sites was very positive with revenues rising by 7.3% in a market that was down by 1.8%. In particular, Donnamoderna.com confirmed its position as the second most popular web site for women in terms of unique users (an annual average of 4.5 million, an increase of 20%), Grazia.it also saw its audience grow by 28% while the percentage growth of other sites were even higher.

With regard to the Group’s international activities, which continue to grow significantly, Mondadori International Business recorded revenues of €10.2 million, an increase of around 10% on 2012.

The number of editions of Grazia rose to 23 following the launch of the magazine during the year in Spain, Korea and Mexico. The year also saw the launch of Icon in Spain, distributed with El Pais.

Despite the difficult market conditions, the aggregate revenues generated by the international network came to €154.8 million, a fall of 4.2% compared with 2012.

In this context, advertising revenues came to €10.6 million, a rise of 14%, thanks also to an expansion of the international client portfolio.

Regarding the investments, there was an excellent revenue performance by the joint venture in China (+18%) while the Russian JV was essentially stable. Meanwhile, despite a negative performance during the year (-11%), Attica Publications recorded a reversal in the trend in the final quarter.

• ADVERTISING

The most important organisational change for the Group, implemented in 2013 and effective from the beginning of 2014, was the contribution of the advertising sales for magazines and radio (R101 and other radio stations under licence) to Mediamond, the joint venture with Publitalia ’80, that already managed the sale of advertising for the Mondadori web sites, as well as those of R.T.I. and a number of third parties

As a result of this operation, Mediamond is now Italy’s most complete advertising sales company, able to offer an integrated commercial package for print, web and radio, with the creation of a radio network that is the leader in the market with an daily average of 9.7 million listeners.

Thanks to this operation the Group will have a greater capacity to face a market that is expected to continue to decline, also in 2013, and in which all segments have shown negative trends.

2013 revenues generated by Mondadori Pubblicità amounted to €141.6 million, a fall of 18.1% on the €172.9 million of 2012. In Particular:

– advertising sales for magazines of the Mondadori Group were down by 29.7% on 2012; the figure was -23.6% on a like-for-like basis, essentially in line with the market;
– advertising sales for radio in 2013 were up by 41.8% thanks mainly to the acquisition of the sales contract for Radio Italia, to which were added Radio Subasio and Radio Norba;
– with regard to the Internet, the joint venture Mediamond generated revenues of €45.4 million (+21.6% on 2012) with results that were substantially better than the market.

• MAGAZINES FRANCE

Despite a market that has been in decline for two years, the Magazines France area continued and intensified efforts in brand extensions and to reduce costs that resulted in the maintenance of a still good level of profitability, with total revenues in 2013 amounted to €353.9 million, a fall of 7.3% on the €381.6 million of 2012.

In an advertising scenario strongly conditioned by the economic crisis (-6.2% in terms of volume, Source: Kantar Media), the sales company of Mondadori France performed better than the market (-4.5% in terms of volume) and saw its market share rise to 11% (+0.2%), confirming its position as France’s second magazine advertising sales company. The women’s haut de gamme titles (Grazia and Biba) remained the most important advertising segment for the Group, with revenues that were 32.9% of the total.

Circulation sales from newsstands and subscriptions, which account for around 70% of total revenues, were down by 6.1%. In particular, newsstand revenues fell by 6.8%, in line with the market of reference.

In the digital sector, there was a significant increase in the average audience of the Group’s sites (+25%), with unique users in December totalling 6.3 million, while at the same time revenues grew by 23.8%.

For the future, the company is pursuing further reductions in costs and during 2013 a project was launched to the digitisation of the editorial teams which will enable the editorial staffs to work with a single production flow and to make use of content produced across all platforms, print and digital.

• RETAIL

The retail area in 2013 generated revenues of €225 million, a fall of 8.2% on the €245.2 million of 2012. The year was characterised by a number of important changes:

– in terms of management, with the arrival of significant professional figures with established experience in the sector, followed by an extensive review of the structure;
– the closure of outlets and the development of higher potential locations;
– the expansion of the “non-book” assortment (stationery, toys, own label) and IT products also related to reading (e-readers), along with an ever-more complete offer of books (160,000 titles);
– the loyalty project, with the development of the Mondadori Card, of which 1,150,000 had been issued by the end of the year.

Particular attention has also been given to cost reductions through a simplification of the corporate and organisational structures, the renegotiation of rental agreements and a review of the logistical chain (offices and warehouses).

• RADIO

Also at R101 2013 was a year of change with a market in continuous decline (-9.3%) during which the reduction in budgets in important sectors (auto, large-scale retail, telecoms) had a significant impact.

In this context R101 recorded revenues of €11.3 million, a fall of 18.7% on the €13.9 million of 2012.

Confirming the strategic role R101 has for the Mondadori Group, the alliance with radio Italia has been consolidated and reinforced. Following the launch of the advertising concessions, in 2014 the relationship was extended to cover also programming and marketing, which has been entrusted to professionals from the sector in order to further enhance the identity of R101 in the Italian radio market.

On 25 March the creation of the new R101 was announced, with the presentation to the market of a completely revised editorial line, new commercial policies and partnerships with television programmes and important sporting events.

• DIGITAL

Similarly important in structural terms, a business model was defined in 2013 that envisages Digital as the cross-company driver for all of the Group’s activities, and consequently led to the hiring of specific new competencies aimed at enhancing the Group’s technological know-how, editorial content and the development of new activities.

Digital-based revenues at the end of 2013 amounted to €60.2 million (-4.3% compared with the €63 million in 2012), and included activities in the various areas of the Group, including the e-books published by the Trade Books area (+70%), the Group’s main sites in Italy (+7.3%), and in France (+23.8%) and the e-commerce site inMondadori.it (which saw a slowdown in sales).

RESULTS OF THE PARENT COMPANY ARNOLDO MONDADORI EDITORE S.P.A.
The Annual Report of the parent company Arnoldo Mondadori Editore S.p.A. on 31 December 2013 shows a loss of €315 million, higher than that of the previous year, which came to €39.6 million, essentially due to:

– the results of the Group’s businesses, in the difficult market environment of reference;
– organisational changes, involving the top management, editorial structures – in particular for magazines – and central functions, that resulted in significant non-recurring costs;
– the non receipt of dividends from the companies of the Group due to the poor results of the previous year;
– as well as the process of evaluation of the recoverable value of subsidiary and associated assets which, for the second consecutive year, resulted in significant impairment losses for a total of around €275 million.

FORECAST FOR THE FULL YEAR
In a market that is still not showing clear signs of a reversal in the trend, the performance of the Group’s businesses in the first months of 2014 is ahead of expectations: in addition to the positive results of the businesses and editorial products, there is also evidence of the effects of the reorganisation efforts and cuts in operating costs made in 2013.

This, and the substantial reduction of non-recurring charges in the current year, make it possible to estimate for the end of the year substantial growth in gross operating margins and higher than in 2012.

Among the most important new initiatives in the first three months of 2014 were:

– the launch of Il mio Papa, the world’s first weekly entirely dedicated to the Holy Father which, after the great success of the first issue, sold over 300,000 copies of the second;
– the acquisition of the brand and assets of the social reading service of Anobii Ltd, a platform with over a million users around the world, of which more than 300,000 in Italy;
– the scoop by the French weekly Closer about President François Hollande that sold a record number of more than 600,000 copies. The magazine has confirmed its position as the main point of reference among people titles in the country;
– the launch of the new R101, with a completely new editorial line and the presentation of new commercial partnerships;
– the launch of a revamped Panorama the first issue of which had 110 advertising pages, 40 of which for the fashion sector.

GUIDELINES OF THE 2014-2016 PLAN: CONSOLIDATED GROSS OPERATING PROFIT AT THE END OF THE PERIOD OF MORE THAN €100 MILLION
The macroeconomic scenario for the current year doesn’t appear to offer much that is different from last year, if not an inversion of the trend in GDP. Meanwhile, an improvement, in a situation that remains volatile, is expected in 2015-2016.

With regard to the trends in the main markets in which the Mondadori group operates, it is possible to foresee a further downturn, albeit at a slower pace than in the last three years.

In this context Mondadori – thanks to the action taken in 2013 – aims to achieve a level of profitability at the end of 2016, in terms of consolidated gross operating profit (EBITDA), of more than €100 million, with all businesses showing an improving trend and in profit.

Further efficiency measures, the revision of processes and cost reductions affecting all areas of the Group’s business will be of fundamental importance.

For the core businesses, the focus will concern:

 

• Books:

– Trade: confirmation of undisputed leadership in printed books;
– Education: a continuation of the upward trend in market share.

There will also be a big development in digital thanks to the strength of the catalogue of the Group’s publishing houses: in terms of revenues, there will be a rise from the current 5% to 16% of the total of the area and with higher margins on e-books than those on the physical product.

• Magazines & Advertising:

– continued efforts to renew the product portfolio aimed at consolidating leadership in all segments;
– rationalisation of editorial structures and integration with digital;
– Properties: profitable in both Italy and France from 2016;
– full effect of the integration of advertising sales in Mediamond, with a consequent recovery of market share.

• International Network:

– increase in the number of editions of Grazia and other titles in emerging markets;
– possibility of developing e-commerce activities for all 23 editions around the world of Grazia;
– activities in China: in April 2014 Grazia goes weekly, with significant effects on circulation growth and, particularly, advertising sales;
– brand extension activities built around the Grazia brand.

• Retail:

– big development of the franchising network and a process of rationalisation of sales outlets;
– optimisation of logistics (office space and distribution);
– diversification of the offer with an expansion of the assortment to include stationery, toys and food.

• Radio:

– full effects of the change of management at R101 and the capitalising, in terms of a further increase in advertising revenues, of the radio network of Mediamond that today has a daily average of over 9.7 million listeners.

With regards to digital:

the Digital Innovation area will be a cross-company driver for all of the Group’s businesses with the aim of tripling the proportion of digital revenues to 13% at the end of 2016.

In addition to completing the organisation with the most suitable professional skills and the transformation of the Group through the inclusion and integration of new businesses and technologies, the focus will be on:

– growth and the reinforcement of digital activities in existing businesses: e-books, properties and e-commerce;
– diversification and development of new revenue streams in non-traditional activities (marketing services);

– searching for partnership with third parties and acquisitions that are strategic and synergic with the core business.

***

 

THE RESIGNATION OF THE CFO CARLO MARIA VISMARA EFFECTIVE FROM 31 MAY 2014

The Board of Directors has accepted the resignation submitted by Carlo Maria Vismara from his position as chief financial officer, and director of procurement and information systems, as well as the manager in charge of preparing the corporate accounts, and his position as a member of the board.

The decision by Vismara is related needs of a personal and family nature no longer compatible with the continuation of the full professional commitment required by a management role of such primary importance.

In order to ensure proper coordination and completion of activities related to the approval of the 2013 Annual Report and the interim report for the first quarter of 2014, the resignation will be effective from the Board of Directors already scheduled for the coming 13 May to approve the management report for the period to 31 March 2014 and, in any case, by the 31 May of this year.

The Directors expressed deep regret for the decision of Carlo Maria Vismara and expressed their gratitude and appreciation for the highly professional contribution made by him in more than eight years with the Mondadori Group.

***

 

PROPOSAL TO COVER OF THE LOSS OF THE YEAR FROM AVAILABLE RESERVESThe Board of Directors will propose to the Shareholders’ Meeting convened for 30 April 2014 on first calling (2 May, on second calling), to settle in full the loss for the year to 31 December 2013 of €314,970,500.44 through the use of reserves as follows:

 

• for €170,624,621.21 entirely through the use of the share premium reserve, following the allocation from the share premium reserve to the extraordinary reserve of the restriction on the availability of the amount corresponding to the book value of the treasury shares, defined in line with the provisions of art. 2357 I, final para. of the Civil Code;
• for €5,334,814.39 entirely through the use of the reserve for capital grants, included under “Other reserves and retained earnings”;
• for a total of €51,132,983.35 entirely through the use of the following retained earnings, included under “Other reserves and retained earnings”:

Legal Reserve 675 of 12/08/1977 equal to €351,348.61;
Legal Reserve 904 of 16/12/1977 equal to €750,738.83;
Legal Reserve 124/1993, art. 13 equal to €159,607.90;
Merger reserve equal to €43,998,556.21;
Reserve for waived dividends equal to €5,872,731.80;

• for a total of €10,802,729.52 through the partial use of the available resources of the IAS/IFRS Reserve, included under “Other reserves and retained earnings”;
• for €77,075,351.97 through the partial use of the available resources of the Extraordinary Reserve, included under “Other reserves and retained earnings”.

PROPOSAL FOR THE RENEWAL OF AUTHORISATION FOR THE BUY-BACK AND UTILISATION OF COMPANY SHARES
Following the expiry on 31 December 2013 of the term fixed by the authorisation issued at the Annual General Meeting of 23 April 2013, the board of directors resolved to ask the forthcoming Annual General Meeting of the shareholders to renew authorisation to effect share buy-backs, giving the board the possibility of seizing eventual investment opportunities or operations based on the company’s shares.

It should be noted that, taking account of the shares previously in the portfolio, at the AGM of 23 April 2013, the shareholders authorised the acquisition of up to 10% of the share capital, which amounts to 24,645,834 ordinary shares.

Given the total of 14,953,5000 shares already directly or indirectly held at the date of the AGM – of which 10,436,014 are held directly in the portfolio of Arnoldo Mondadori Editore SpA and 4,517,486 by the subsidiary Mondadori International SpA – the authorisation consequently provided an option to buy an additional maximum of 9,692,334 shares.

Subsequent to the authorisation issued on 23 April 2013, Arnoldo Mondadori Editore SpA made no acquisitions or use of said shares, either directly or indirectly.

Consequently the number of shares held remains unchanged at 14,953,5000, or 6.067% of the share capital. It should also be noted that, as a result of the merger, by incorporation of Mondadori International SpA, completed during 2013, the total number of shares held are now in the portfolio of Arnoldo Mondadori Editore SpA.

The Shareholders will also be asked to authorise, pursuant to Art. 2357 ter of the Civil Code, the use of shares acquired or already in the company’s portfolio.

What follows is an outline of the proposal to be put to the Shareholders:

• Underlying motivation

The motivation for the request for authorisation to buy and use company shares is to provide the board of directors with the possibility:

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

• Duration

Until the approval of the Annual Report for the year 2014.

• Cap on the number of shares that may be bought

The authorisation refers to a limit of 10% of the share capital, in line with the previous authorisation that is about to expire. Given, as indicated above, that the company currently holds, directly or indirectly, a total of 14,953,500 shares, the new authorisation consequently foresees the possible acquisition of an additional 9,692,334 ordinary shares, or 3.933% of the share capital.

• Method of acquisition and price range

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

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

In terms of price and daily volumes, acquisition operations will in any case be conducted in line with the norms foreseen by the EU regulation 2273/2003.

***

PROPOSED RENEWAL AND ATTRIBUTION OF POWERS TO THE BOARD OF DIRECTORS PURSUANT TO 2443 AND 2420 TER OF THE CIVIL CODE

The board of directors will propose to the Shareholders’ Meeting called for 30 April 2014, in extraordinary session, the adoption of the resolutions referred to in Articles 2443 and 2420 of the Civil Code, relating to powers of the board to increase the share capital and to issue convertible bonds.

Specifically, the board will ask the Shareholders to:

– renew the powers already granted to the board of directors by the Extraordinary Shareholders’ Meeting of 29 April 2009, which is due to expire at the end of the five-year term, in accordance with Art . 2443 and 2420 of the Civil Code, of attribution for the board of directors to increase, without excluding option rights, the share capital by a maximum nominal amount of €78,000,000 and to issue convertible bonds for a maximum nominal amount of €260,000,000 . The renewal is proposed under the same conditions as the authorisation about to expire and not used by the board, for a further period of 5 years, which corresponds to the maximum term foreseen by law.
– attribute to the board of directors, for the same five-year period, additional power to increase the share capital within a limit of 10% of the existing share capital and excluding the right of option, as per Articles 2443 and 2441, paragraph 4, second sentence, of the Civil Code.

The proposals for the renewal and granting of such powers are motivated by the opportunity to maintain and attribute to the board of directors the authority to implement, with greater speed and flexibility with respect to the resolutions of an Extraordinary Shareholders’ Meeting, any capital transactions aimed at strengthening the financial structure of the company in support of the development objectives of the Group, represented, as previously disclosed to the market, both in terms of the consolidation of the business lines with higher added value and improved profitability in the magazine sector, as well as growth in particular in the digital area.

With specific reference to the powers exercisable for any eventual capital increase with exclusion of option right to a limit of 10% of the existing share capital, it should be noted that any offer made to a third party may be a valuable tool to increase the free float and enable the company to maintain an adequate level of liquidity of the shares, or be functional for the entry into the capital of accredited investors, while limiting the dilutive effects for existing shareholders.

_______

Today at 3pm, at the company’s headquarters in Segrate, the management of the Mondadori Group will present the results for 2013 approved today by the board of directors, to the financial community.

All relative documentation is available on the web site www.mondadorigroup.com (in the Investor Relations section) and from Borsa Italiana S.p.A. (www.borsaitaliana.it).

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

Arnoldo Mondadori Editore S.p.A. has announced that the modifications, requested by Consob, to the Disclosure Document published on 21 November 2013, have been made and the document is now available at the company’s headquarters, at Borsa Italiana and on www.gruppomondadori.it (in the Governance section).

The document refers to the operation with related parties concerning the contribution of the business activities regarding the sale of advertising for magazines and radio stations by the subsidiaries Mondadori Pubblicità S.p.A. and Mediamond S.p.A.

Arnoldo Mondadori Editore S.p.A. today announced, as per Art. 2.6.2 of the regulations governing markets organised and managed by Borsa Italiana S.p.A., the corporate events scheduled for 2014:

– Thursday 27 March 2014: meeting of the Board of Directors for the approval of the Annual Report for the year ended 31 December 2013;

– Tuesday 13 May 2014: meeting of the Board of Directors for the approval of the 1st Quarter Report to 31 March 2014;

– Thursday 31 July 2014: meeting of the Board of Directors for the approval of the Interim Report to 30 June 2014;

– Wednesday 12 November 2014: meeting of the Board of Directors for the approval of the 3rd Quarter Report to 30 September 2014.

The Annual General Meeting of the Shareholders for the approval of the Annual Report for the year ended 31 December 2013 will be held on Wednesday 30 April 2014.

Analysts’ presentations of the results for the full year to 31 December 2013, the interim report to 30 June 2014 and the reports on the first and third quarters of 2014 will be held on the dates, as indicated above, of the respective meetings of the Board of Directors.

Any eventual changes will be promptly communicated to the market.

Arnoldo Mondadori Editore S.p.A. has announced that the prospectus (pursuant to Art. 5 of Consob Regulation n. 17221/2010 and subsequent modifications) regarding the contribution to Mediamond S.p.A. of the business concerning the sale of advertising for magazines and radio managed by Mondadori Pubblicità S.p.A. is now available at the company’s head office, Borsa Italiana and on the web site www.gruppomondadori.it (in the Governance section).

The boards of Arnoldo Mondadori Editore S.p.A. and Mediaset S.p.A. have approved the general outline of the plant to integrate the advertising sales activities of Mondadori Pubblicità S.p.A., a subsidiary of Arnoldo Mondadori Editore S.p.A., in Mediamond S.p.A., a joint venture established in 2009 and owned 50-50 by Mondadori Pubblicità S.p.A. and Publitalia ’80 S.p.A.

Specifically, the plan concerns the integration in Mediamond – which already manages the sale of advertising on the web sites of the Mondadori Group, RTI and third-party publishers – of advertising sales activities for magazine titles and the radio stations, currently managed by Mondadori Pubblicità S.p.A.

The operation will make it possible create, under a single company – Mediamond S.p.A. – the most complete, integrated advertising sales company for magazines, radio and the web in Italy.

For Mondadori this operation – which is part of a more extensive process of innovating the business model – will contribute to further reinforcing the Group’s leadership, thanks to a new approach that offers significant synergies and types of offer more in line with the new needs of the market. Advertising clients need to be able to respond to the needs of their potential customers across all possible platforms and at any time of the day: the new Mediamond, with digital, magazines and radio, will be able to help them in this regard.

For Mediaset the reinforcement of Mediamond makes it possible to profile the Group’s offer at the high end of innovation in the sector and to interpret the new needs of advertising clients. Companies will now find, within a single sales company, both the leading media for their sector of reference and the possibility of developing multimedia plans in order to ensure that their communication in more creative and effective.
In detail, the operation will involve:

(i) the contribution by Mondadori Pubblicità S.p.A. to Mediamond S.p.A. of the business activity concerning the sale of magazine and radio advertising for titles and stations run owned Mondadori and by third party publishers.

The business activity has been the subject of an evaluation conducted by independent experts;

(ii) an increase in the capital of Mediamond S.p.A. underwritten by Publitalia ’80 S.p.A. thereby maintaining the existing 50-50 balance of the ownership of Mediamond S.p.A. by the existing shareholders.

The activities of Mondadori Pubblicità S.p.A. will henceforth concentrate on the management of operations, i.e. the provision of operational support services for advertising sales.

The expected benefits of the operation aim to gradually absorb the losses made by Mondadori Pubblicità S.p.A. by improving the capacity to generate new revenues.

At the same time the Mediaset Group will see the enhancement of its advertising sales on its web sites that will be offered through a more experienced sales network in typically “vertical” sectors. The online commercial offer will be further enhanced by enabling clients to access, in both integrated and stand-alone ways, media that are complimentary to the web, such as magazines and radio. Mediamond, meanwhile, will not be active in the TV area: advertising sales on Mediaset’s free-to-air channels will continue to be managed exclusively by Publitalia and sales for pay TV channels exclusively by Digitalia.

Related parties

The operation is defined as being one between related parties: Mondadori Pubblicità S.p.A., a wholly-owned subsidiary of Arnoldo Mondadori Editore S.p.A.; Publitalia ’80 S.p.A., a company that is a wholly owned subsidiary of Mediaset S.p.A.; Mediamond S.p.A., a company jointly owned (50-50) by Mondadori Pubblicità S.p.A. and Publitalia ’80 S.p.A..

The general outline of the operation has been approved by the boards of both companies, after receiving favourable evaluations by their respective committees of independent directors for operations with related parties, in line with the rules laid down by Consob regulation 17221 of 12 March 2010 and subsequently modified and integrated (“Consob Regulations”) and the relative procedures adopted by the boards of directors.

With regard and limited to the procedure adopted by the board of directors of Arnoldo Mondadori Editore S.p.A. concerning operations with related parties, it should be noted that the operation is defined as being of “significant relevance”, involving, with regard to the consolidated assets of Mondadori at 30 September 2013, a higher level of significance in the relevance to assets and liabilities, as identified, in line with art. 4 of the Consob Regulation, and endorsed (on a ratio of 2.5%) in the relative procedure adopted by the board of directors.

Following the definition of the terms of the operation, an inline with art. 5 of the Consob Regulation, Arnoldo Mondadori Editore S.p.A. will proceed with the publication of a detailed prospectus, in line with the provisions of the same art. 5.

With regard to the procedure adopted by the board of directors of Mediaset S.p.A. regarding operations with related parties, this operation is defined as being of “minor significance”. The internal committees of independent directors on operations with related parties unanimously agreed that the operation was in the interest of the company and its shareholders, as well as approving the substantial correctness of the relative conditions.

The definition of the operation, which is subject to the regular completion of information procedures foreseen by law for trade unions, is expected by the end of 2013 and to become effective from 1 January 2014, having secured definitive approval also by the relevant corporate bodies of the subsidiaries affected as well as the completion of the legal documentation for the contribution and the increase of capital of Mediamond S.p.A.

The Board of Directors of Arnoldo Mondadori S.p.A. met today, under the chairmanship of Marina Berlusconi, to examine and approve the interim report for the first nine months of the year to 30 September 2013, as presented by the Chief Executive, Ernesto Mauri.

HIGHLIGHTS 30 SEPTEMBER 2013

In a market that is showing no signs of improvement also in sectors of relevance for Mondadori, the Group continued to pursue activities aimed at changing the strategy, reviewing the organisation and effecting significant reductions in costs.

A business model was also defined that sees digital as a driver of development cutting across all areas in the coming years, with the inclusion of new and specific skills in order to strengthen technological know-how, digital marketing and e-commerce.

As part of the of cost reduction plan, in the third quarter further savings for a total of €80 million have been identified, confirming the target of saving €100 million by 2015. In September the effects of cost reductions in both staff (-8.6% net of restructuring costs restructuring) and other operating costs (-5.8%) were evident.

Figures to 30 September 2013 confirm the trend already evident in the first half.

The decline in economic performance, compared with the same period of the previous year, is attributable to the presence in 2012 of positive non-recurring items worth €8.9 million and in 2013 of non-recurring negative items worth €27.3 million; the latter are primarily attributable to restructuring charges: in particular, in the Magazines Area, a reduction in operating costs, together with the relaunch of leading titles, is expected to enable a recovery in profitability.

A comparison of the first three quarters of 2013 with those of 2012, shows a trend toward stabilisation in the decline in revenues and a gradual recovery of the fall in gross operating margins (before non-recurring and restructuring charges ): -17.3% in the third quarter compared with -48.9% in the first half of the year.

GROUP PERFORMANCE IN THE PERIOD TO 30 SEPTEMBER 2013

Consolidated revenues amounted to €931.2 million, a fall of 9.5% on the €1,028.4 million in 2012.

Consolidated gross operating profit net of non-recurring items came to €36.2 million, a reduction of 33.5% compared with the €54.4 million in the same period of the previous year.

Consolidated gross operating profit came to €8.9 million, a fall of 85.9% on the €63.3 million in the same period of the previous year.

The Group made a consolidated operating loss of €9.6 million, compared with a profit of €44.8 million in 2012, with amortizations and depreciations of tangible and intangible assets of €18.5 million (€18.5 million in 2012).

The Group made a consolidated loss before taxation of €26.2 million, compared with a profit of €32.2 million last year; financial charges during the period amounted to €16.6 million (€12.6 million in 2012).

The consolidated net loss for the period amounted to €32.3 million, compared with a profit of €16.3 million in the same period of 2012.

Gross cash flow in the first nine months of 2013 showed a deficit of €13.8 million, compared with a surplus of €34.8 million in the same period of 2012. The Group’s net financial position showed a deficit of €376.9 million at 30 September 2013 (-€346 million at 30 September 2012 and -€267.6 at the end of 2012).

Information regarding personnel

At 30 September 2013, permanent and temporary staff in the companies of the Group, totalled 3,539, a fall of 164 (-4.4%) compared to the end of 2012 and 204 (-5.5%) compared with September 2012, confirming the ongoing efforts at optimising the structures of the Group.

In terms of business areas, the biggest drop was in the parent company Arnoldo Mondadori Editore where, as a result of the joint effect of the early retirement of graphics staff, especially belonging to the Central Staff, and the restructuring plan of journalists of Magazines Italy, the total headcount was reduced by 8% compared with last year.

Also at the subsidiaries, the effect of the reductions in fixed costs has led to a reduction of 6% ​​compared with September 2012, a third of which in the Retail Area.

Total personnel costs benefited, net of non-recurring charges, as well as from a fall in the number of employees, also from the effects of various social safety nets, resulting in a reduction compared with the same period of 2012 of €17.3 million, or 8.6%. More specifically, the Parent Company recorded a reduction of close to 10%, the Italian subsidiaries more than 12% and Mondadori France more than 4%.

It should be noted that the restructuring plans of the Central Staff and Magazines in Italy of the parent company, as well as in the subsidiaries Mondadori Pubblicità and Press-Di, will continue, until April 2014 and May 2015 respectively, enabling further savings in the coming years.

RESULTS OF THE BUSINESS AREAS

· BOOKS
In the first nine months of 2013 the trade books market remained below the level of the same period of 2012 with a fall in terms of value of 6.3%. In this market context, the Mondadori Group confirmed its leadership in its market of reference with a market share of 26.8% in in terms of value (source: Nielsen).

During the period, revenues generated by the Books area amounted to €234.2 million, a fall of 10.5% from the €261.6 million the previous year; excluding the effect of the significant fall in revenues from the distribution of third-party publishers, the figure is 8.4%.

It should be noted that the revenues of the Group’s publishing houses were affected in the third quarter by a particularly penalising comparison with the same period of 2012 which benefitted from the great success of the EL James Fifty Shades trilogy. There was also a significant fall in revenues from third-party publishers. These effects were partially compensated by the success of Dan Brown and Khaled Hosseini and the ongoing double-digit growth in ebooks.

• MAGAZINES ITALY

The negative trend in the consumer magazine market continued in the third quarter; in particular, figures for August showed a fall in circulation of 12.4% (internal estimate), of add-on sales of 20.4% (internal estimate) and advertising sales of 24.3% (source: Nielsen, September).

In this context, in the first nine months of 2013 Mondadori recorded revenues of €253.1 million, a fall of 14.2% on the €295.1 million of the same period of 2012. This is attributable to reductions in revenues from:

• circulation (-9.9%), penalised by a fall in subscriptions and single copy sales;
• add-on sales (-12.2%), despite an increase in market share to more than 41%;
• advertising (-26.3%), in a seriously compromised advertising market and with a number of discontinuities;

and an increase in licensing revenues (+13.8%).

It should be noted that in the third quarter Casaviva, VilleGiardini, Panorama Travel and Men’s Health ceased publication, in addition to the changes of the first half (the closure of Panorama Economy and the transformation of Flair in a supplement of Panorama ).

During the period revenues generated by Mondadori titles were down 16%; on a like-for-like basis, i.e. net of the effects of the events mentioned above, the fall was 13.4%: in particular, advertising revenues were down 28.4% (22.8% on a like-for-like basis) and circulation revenues were down 9.9% (-8.2% on a like-for-like basis ).

Regarding the performance of the magazines, the excellent results of the main women’s titles were confirmed, Donna Moderna, Grazia and TuStyle all of which were relaunched in May, and performed very well during the summer, reaching, with the addition of the weekly magazine Chi, an average combined circulation of 1,200,000 copies, an increase of 37% compared with April.

During 2013, the websites of the main magazine titles of the Mondadori Group, confirmed an ability to attract a growing number of users and the interest of advertisers, with higher growth rates than the market, which fell by 2.6% (source: Nielsen).

In a still highly critical context, the Mondadori sites recorded growth of 6.2% compared with 2012, thanks to the performance of Donnamoderna.com (+5%), Grazia.it (+26%) and Panoramauto.it (+25%).

International Activities
In the first nine months of 2013, the volume of business generated by Mondadori’s international network grew by 6.3% compared with 30 September 2012. The improvement is mainly attributable to the Grazia International Network, which in February launched Grazia in Spain and Korea, and is currently working on new projects for further development. A few days ago the first international edition of Icon was launched in Spain.

Despite difficult market conditions, in the first nine months of 2013, advertising sales on behalf of international partners showed a slight improvement compared with 2012, in contrast to the local market also as a result of the expansion of the range of Mondadori’s International Business.

Mondadori is present in China with a 50% stake in Mondadori Seec Advertising Co. Ltd, the exclusive advertising sales company for the local edition of Grazia, which, in the first nine months of 2013, achieved revenue growth of 23% compared with the same period of 2012.

There was also a positive performance by the joint-venture Mondadori Independent Media, publisher of the Russian edition of Grazia, which, in the first nine months of 2013, recorded an increase in revenues of 9%.

In Greece, in an economic environment which remains extremely difficult, and an advertising market down 30%, Attica Publications in the first nine months of the year saw a fall in revenues of approximately 10.7%. Despite this, it achieved a positive result thanks to strong and consistent efforts to reduce costs and diversify revenues.

• ADVERTISING

In the first nine months of the year advertising investments in the market were down by 14.6% (source: Nielsen) compared with 2012, confirming the trend of recent years. Even the Internet which during these years of crisis, maintained a positive performance, was down (-2.6%).

Mondadori Pubblicità closed the first nine months with total sales of €105.1 million, a fall of -18.6% on the €129.1 million in the previous year.

Revenues from Magazine advertising was affected by the downturn of Mondadori titles (-28.4%), significantly affected by the closure of a number of titles, net of these changes, the fall was 22.8%.

The trend outlined, that is significantly better than the market (-24.3 %, source: Nielsen), is the result of two main phenomena: on the one hand the excellent results of the combined sale of advertising for Grazia, Donna Moderna and TuStyle, and the monthly cooking and furniture titles, and, on the other, the continuing difficulties in finding advertisers in other sectors, including in particular in the fashion industry.

With regard to sales for radio, the first nine months of 2013 closed up 32% thanks to the acquisition of the contract, starting in April, for Radio Italia Solo Musica Italiana and, from September, of Radio Subasio, which was joined in October by Radionorba, enabling Mondadori Pubblicità to strengthen its presence in the sector with an offer of a total daily average of 9.3 million listeners.

The advertising relating to the Internet, managed by the joint venture Mediamond, performed much better performance than the market, with an 18.3% increase on the same period of 2012, thanks to the excellent performance of Grazia.it (+26%) and Videomediaset.it (+42%).

• MAGAZINES FRANCE

During the third quarter of 2013 the French consumer magazine market continued to face a difficult period with a downturn in both advertising and circulation revenues.

In this context, the revenues of Mondadori France at the end of September came to €262.9 million, a fall of 7.6% from the €284.5 million in the first nine months of 2012.

Mondadori France saw a fall in advertising revenues, in terms of value, of 11.1%, while, in terms of volume, despite a decline of 3.3%, it still performed significantly better than the market which was down by 6.9% (source: Kantar Media, for August). Mondadori France confirmed its position as the second largest operator with a market share of 11.2% (source: Kantar Media), an increase of 0.4%.

Circulation revenues, including newsstand sales and subscriptions, and accounting for around 72% of total revenues, were down by 6.5% compared with the same period last year.

Newsstand sales were down 5.7%, compared to a market that saw a fall of 7% in January- September 2013 (internal source/in terms of value).

During the period brand extension efforts continued with the launch of successful new products, including Closer Teen and Vital by TopSanté.

The focus on editorial quality remains a priority pursued with the new formulas for Modes&Travaux, Sport-Auto, Science&Vie Junior, Grand Gibier, Auto-Journal and Auto Plus. In addition new titles were launched in the games and a cooking sectors.

Mondadori has continued to invest in the digital sector bringing the audience for its sites to over 5 million unique users (source: Nielsen), an increase of 20% compared with the same period of last year. Revenues were up by 19.8% in the period.

• RETAIL

Starting from the third quarter 2013, following the redefinition of the scope of the business area, the results and assets of the direct marketing activity managed by Cemit Interactive Media are shown in the Corporate and other business section. The comparable figures to 30 September 2012 have therefore been adjusted and made comparable to the figures from the current year.

Revenues generated by the Retail area in the first nine months of the year amounted to €153.4 million, a fall of 3% on the €158.1 million of the same period of the previous year.

The Retail Area manages its business across the country through a network that, on 30 September 2013, comprised 565 sales outlets, ranging from directly-owned and franchised bookshops, Multicenter stores, Edicolè and book clubs.

In view of the ongoing recession, which has resulted in a further decline in revenues, the process of rationalisation has continued and has led to the closing of 32 outlets since the beginning of the year.

Also sales generated through the web site www.inMondadori.it recorded a fall compared with the first nine months of 2012, both as a result of increased competition from the different players in the market and for the general downturn in consumer spending for non-essential goods.

• RADIO

Advertising spending in Italy has been severely affected by the general crisis with all media more or less sharply affected compared with 2012. Radio, in particular, while remaining in a negative trough (-14.4% to June), in September picked up slightly at -12.1% (source: Nielsen) and showing, in recent months, pale signs of containing the decline.

In this context, advertising sales for R101 in September were essentially in line with the trend in the market showing, in addition to the downturn in the main product sectors – in particular the automotive sector – also the typically marked seasonality of the period: total revenues came to €8.9 million, a fall of 13.6% on the €10.3 million of the first nine months of 2012.

On the content side, in addition to the appointment of a new head of content, efforts continued for the implementation of the renewal and enhancement of formats with a series of targeted actions, some of which already defined, others in progress, aimed at enabling R101 to take advantage of the opportunities that will derive from the hoped for recovery in advertising spending.

RENEGOTIATION OF CREDIT LINES FOR A TOTAL OF €570 MILLION WITH WAIVERS ON EXISTING COVENANTS

Mondadori has renegotiated the credit facilities for a total amount of €570 million.

In particular, it has signed a new loan agreement with a syndicate of five banks for an amount of €270 million with maturities, for the same sum, in 2016-2017-2018 to replace existing credit lines with short maturities for a total of around €380 million.

Existing credit lines, amounting to €300 million, comprising a loan of €200 million granted by Intesa Sanpaolo expiring at the end of 2016, and by a €100 million loan granted by Mediobanca and expiring at the end of 2017 have also been renegotiated.

The “all-in” face value cost of all credit lines is 485 bps (+Euribor).

Waivers on the existing covenants net debt/EBITDA for 2013 and 2014 have also been defined to facilitate the processes of organisational restructuring and relaunching of the Group.

EXPECTATIONS FOR THE FULL YEAR

The actions put in place by the Group regarding the change in strategy and organisation and significant cost reductions, have affected all the businesses and will have more positive effects in the latter part of the year, for which we expect a level of gross operating profit (before restructuring charges and extraordinary items) in line with that of the same period last year.

As for the full year 2013, the ongoing lack of any signs of improvement in the market means that the gross operating result will be substantially lower than last year, also as a result of marked effect of non-recurring items and restructuring charges.

§

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

§

The interim report for the period to 30 September 2013 will be available from today at the the company’s headquarters, Borsa Italiana S.p.A. (www.borsaitaliana.it) and on the web site www.gruppomondadori.it (in the “Investor Relations” section).

Also today, the documentation relating to the analysts’ presentation of the results for the year to 30 September 2013 will be available on www.gruppomondadori.it (in the “Investor Relations” section) and www.borsaitaliana.it.

The board of directors of Mondadori Pubblicità S.p.A. has appointed Ernesto Mauri as chairman and chief executive of the company following the resignation today of Angelo Sajeva.

Sajeva has decided to leave the company, in full agreement with the shareholder Arnoldo Mondadori Editore S.p.A., for personal reasons that the board has accepted with regret.

The board of directors is especially grateful to Angelo Sajeva for the extraordinary job he has done from 2007 to the present, with uncommon enthusiasm and determination.

Thanks to the definition of new targets and areas of interest, the optimisation and, at the same time, the extensive involvement of the sales network and the creation of new formats, Sajeva was able to successfully face very difficult market challenges and keep Mondadori Pubblicità in in a leadership position over these years in an extremely complex situation of publishing in general and advertising in particular.

For these reasons, Mondadori has expressed its deep gratitude to Angelo Sajeva, and offers him best wishes for new and brilliant successes in the future.

Arnoldo Mondadori Editore S.p.A. has today announced the appointment, with immediate effect, of Mario Maiocchi as chief executive of Mondadori Direct S.p.A., a company of the Mondadori Group – led by chief executive Ernesto Mauri – that operates in the retail sector.

Mondadori Direct, which operates across the country through a chain of over 550 shops – either wholly owned bookstores, of which 8 are multicenters, or franchised outlets – and online with the inMondadori.it site, which in 2012 generated total revenues of €245 million.

The board of directors of Mondadori Direct S.p.A. has at the same time appointed Mario Resca as chairman. Resca who, among other things, boasts an extensive and consolidated experience in Italian and international retailing was the man behind the McDonald’s phenomenon in Italy.

Maiocchi, 57, who was born in Bolzano and has a degree in economics and business administration from Milan’s Bocconi University, has had a significant career in different companies, both in Italy and abroad. He began his career at 3M Italia, moving in 1985 to Control Data Corporation, then Nashua and, in 1990, EMI Music. From 1998 Maiocchi occupied a series of positions with growing responsibility at the Metro Group, until 2008 when he was appointed chief executive of Unieuro, part of the European Dixons Retail Group where, in 2010, he was appointed managing director for South Europe.

Mondadori warmly thanks Renato Rodenghi, who leaves his operating responsibilities after having, in a long career in the Group, made a significant contribution to the development of Italy’s largest bookshop chain and the birth of a multi-channel system for the offline and online sale of mainly media products.

Arnoldo Mondadori Editore S.p.A. has announced that the Half-yearly Report for the period to 30 June 2013, as approved by the Board of Directors on 30 July, together with the external auditors’ report, is now available at the company’s headquarters, at Borsa Italiana and on the web site www.gruppomondadori.it (in the Investor Relations section).

The company has also published, available at the company’s headquarters, at Borsa Italiana and on the web site www.gruppomondadori.it (in the Governance section), the minutes relating to the approval by the Board of Directors of the planned merger by incorporation of the wholly owned subsidiary Mondadori International S.p.A.

The Board of Directors of Arnoldo Mondadori S.p.A. met today, under the chairmanship of Marina Berlusconi, to examine and approve the interim report for the first half of the year to 30th June 2013, as presented by the Chief Executive, Ernesto Mauri.

THE MARKET SCENARIO

The first half of 2013 saw a continuation of the difficult recessionary period facing the country with GDP expected to be down by about 2% at year-end and unemployment, expected to reach about 12%, and the prospects are of a further deterioration in 2014.

Also France is in a difficult situation, characterised by rising unemployment, now close to 11%, and a fall in consumer confidence to the lowest level since 1987. GDP growth in the first half was close to zero and in July, the ratings agency Fitch downgraded the country’s debt rating.

HIGHLIGHTS TO 30 JUNE 2013
During the reporting period even greater emphasis was given to the relaunch of magazines, particularly in Italy where the three main women’s weeklies – Grazia, Donna Moderna, TuStyle – and Chi generated very positive results. The development of digital activities in Italy and France continued and, in Books, the company consolidated its market leadership, thanks to the publication of new bestsellers by Dan Brown (in May) and Khaled Hosseini (in June).

The cost reduction and reorganisation plan, already outlined during the presentation of results at 31 March 2013, continued with target savings of €100 million in 2015, of which approximately €76 million has already been identified.

GROUP PERFROMANCE IN THE PERIOD TO 30 JUNE 2013

The Mondadori Group’s results in the first half of 2013 broadly confirm the trend seen in the first quarter, in particular, compared with last year, revenues were down by 9.4%, resulting in a reduced operating margin, however, this was in line with budget forecasts.

The difference compared to last year is also due to the presence of positive non-recurring items of €8.2 million in 2012, while in 2013 non-recurring items have resulted in losses of €19.5 million: largely due to due restructuring costs in the Magazine area with the aim of reducing operating costs and recovering profitability.

Consolidated revenues amounted to €612.3 million, a fall of 9.4% on the €676.2 million in the first half of 2012.

Consolidated gross operating profit net of non-recurring items came to €14.2 million, a reduction of 48.9% compared with the €27.8 million in the same period of the previous year.

Consolidated gross operating profit came to -€5.3 million, compared with the €36 million in the same period of the previous year.

Consolidated operating profit amounted to –€17.7 million, compared with €23.8 million in the first half of last year, with amortizations and depreciations of tangible and intangible assets of €12.4 million (€12.2 million in 1H 2012).

Consolidated profit before taxation showed a loss of –€28.2 million, compared with a profit of €15.6 million in the same period of last year, financial charges during the period amounted to €10.5 million.

Consolidated net profit for the period showed a loss of -€27.1 million, compared with a profit of €7.5 million in the previous year.

Gross cash flow in the first six months of 2013 was negative for an amount of €14.7 million, compared with a positive level of €19.7 million in 1H 2012. The Group’s net financial position of -€367.3 million is in line with the situation at 30 June 2012 (-€370 million).

Information regarding personnel

At 30 June 2013, permanent and temporary staff in the companies of the Group, totalled 3,574, a fall of 129 (-3.5%) compared to year-end and 171 (-4.6%) compared with June 2012.

A similar trend can be seen in personnel costs (€148 million in the first six months of 2013) which, net of higher restructuring charges, was down by 5.5% compared with the first half of 2012.

The reduction in staff is comparable across the Group and is the result of the introduction, from the end of 2012, of more decisive actions to reduce fixed costs. In particular, compared with a year ago, the Parent Company has reduced its headcount by 7.1% and costs by 6.1% (net of non-recurring charges), other subsidiaries in Italy have reduced staffing levels and costs, by 5.7% and 7.5% respectively, while Mondadori France has seen a reduction of 2.9%, despite a stable structure.

In terms of cost reductions, the start of the restructuring plan in the clerical areas of Magazines and the centralised units of Arnoldo Mondadori Editore have been particularly incisive, and will continue until the spring of 2014, along with the continued the use of social welfare incentives in various areas of the Direct division. With regard to magazine journalists, where at the beginning of June an agreement was reached for 87 redundancies, it should be noted that solidarity contracts and reduced-hour layoffs have already been activated for the end of the year, as part of the decree concerning access to early retirement 2013-2015, which will generate further significant savings.

COST REDUCTION PLAN
In line with what was announced on 14 May during the presentation the results for the first quarter of 2013, actions are ongoing to reduce costs on various fronts.

In addition to what is described in the section on personnel, in terms of industrial costs we would point to the successful conclusion of negotiations with Elcograf which led to a reduction of layout and printing fees, with the expectation of significant savings from the second half of the year.

In 2014 we also expect further benefits from the direct purchase of paper.

In terms of logistics costs, we are currently reviewing expenses related to the rental agreements, also with the aim of rationalizing the Group’s offices. The is also an ongoing project aimed at improving logistical efficiency related to all of the Group’s major business activities.

Finally, in terms of operating costs, the redefinition of contracts for the provision of general services, a new strategy for Information Technology and other service activities is underway, along with a review of business processes and costs.

RESULTS OF THE BUSINESS AREAS

BOOKS

In the first half of 2013 there was a slowdown in the trade books market (source Nielsen: -2.7% in terms of copies; -4.1% in terms of value). In this market context, the Mondadori Group confirmed its leadership with a market share of 26% in in terms of value (source: Nielsen).

During the period, revenues generate by the Books area amounted to €134 million, a fall of 7.3% from the €144.6 million the previous year.

Among the Group’s publishing houses, Edizioni Mondadori saw revenues rise by 2.6% over the same period of 2012. Of particular note was the 14 May 2013 publication, simultaneously worldwide, of the highly anticipated new novel by Dan Brown, Inferno, ten years after the success of The Da Vinci Code (80 million readers around the world, including 3 million in Italy) .

With a print run of 700,000 copies, Inferno was supported by a major marketing and communication campaign, which involved all the channels, from traditional retail to digital outlets, making the book to be the most sold in the first six months of the year, with excellent results also in the e-book format.

Edizioni Piemme closed the first half of 2013 with an increase in revenues of 8.2% over the previous year. The most important event was the publication on 21 June of E l’eco rispose, the new novel by Khaled Hosseini, which went straight to the top of the best-sellers list, where it remains.

In the first half of 2013 Mondadori Electa saw sales rise by 19.6% over the same period of 2012. The main reasons for this was the great success of the exhibition area and in the excellent performance of museum bookshop sales.

On the e-book side, the market segment recorded steady growth, during the period January to June 2013, the Mondadori Group’s four trade publishing houses saw an increase of 129% of total downloads, compared with the same period of 2012.

MAGAZINES ITALY

The ongoing recession continues to have an adverse affect on the performance of consumer magazines.

The figures available in May 2013 showed a decline in newsstand revenues of 12.3% (internal source), a slump of 18.3% in add-on sales (internal source) and magazine advertising revenues down by 24.4% (source: Nielsen).

The Magazines Italy area recorded revenues in the period of €177.9 million, a fall of 15.2% from the €209.9 million in the first half of 2012. The most important part of this trend can be attributed to the magazines (-16.2%), only partly offset by strong growth in revenues from Internet sites (+9.3%) and the licensing of International Activities (+14%).

In more detail, magazines were affected by the negative trend in the reference markets and recorded, as already mentioned, an overall fall of 16.2% (-13.4%, on a like-for-like basis, i.e. net of the effects due to the transformation of Flair as a supplement of Panorama, and the closure of Panorama Economy).

This trend was characterised by important activities and significant differences:

• in May, there was the simultaneous relaunch of the three main women’s weeklies Donna Moderna, Grazia and TuStyle, a segment where Mondadori is the absolute leader;
• in June Casaviva, VilleGiardini, Panorama Travel and Men’s Health were closed, with the subsequent introduction of solidarity incentives and layoffs;
• the results of 2013 had to do without the contribution of Panorama Economy, which ceased publication in May 2012;
• Flair was transformed into a supplement of Panorama.

In particular:

• Circulation revenues fell by 13.1% compared with the previous year (-9.7% on a like-for-like basis). The relaunch operations have resulted in very positive results, both in terms of copies sold and in terms of advertising sales.
• There was a progressively positive performance in June of the three women’s magazines: compared with the last issue before the relaunch, Grazia saw an increase of 22.1% in copies; Donna Moderna a hike of 25.6%; while TuStyle was up by +39.5% (source internal; progressive April-June).
• The good performance of Chi also continues thanks to a review of the editorial content and the various exclusive news stories published during the period. The ADS figures for May showed an average circulation of 299,283 copies (up 9% compared with the same month of 2012 and 4% in the second quarter of 2013 compared with the same period last year).
• In July, to total average weekly circulation of more than 1,150,000 copies per week is expected for the three women’s titles and Chi.
• The second quarter also saw the redesign of GraziaCasa, with an enrichment of the content to talk to readers not only about furniture, but also art, style and fashion.
• TV Sorrisi e Canzoni confirmed its role as Italy’s biggest selling weekly with 647,300 copies (down 7% compared with 2012, source: ADS May 2013).

In terms of advertising revenues for Mondadori magazines, see the “Advertising” section;

The market for add-on sales in the first five months of 2013 saw significant reduction (-18.3% in terms of value, internal source); in this context Mondadori recorded a better performance with a slowdown of 10.7%. During the period the number of initiatives was rationalised, in order to minimise the economic risks and maximise margins: this strategy has resulted in a reduction in both initiatives and revenues, but a significant increase in profitability.

The websites of the main magazine titles of the Mondadori Group have confirmed in 2013, not only the ability to generate ever-increasing traffic, but also to achieve results in terms of advertising revenues, which were up 9.3% compared with the first half of 2012, significantly outperforming the market (-0.3%, source: Nielsen in May). Contributing to these results:

• Donnamoderna.com confirmed a very positive trend in the first half compared with 2012, both in advertising sales (+8%), and levels of network traffic that saw a further improvement on the already excellent results in the first quarter, with a monthly average of almost 12 million unique users;
• Grazia.it saw a sharp increase in advertising revenues (+42% over the previous year) and the audience (+34% unique visitors in June compared with the same month last year, and a +14% hike in page views), thanks to a mix of actions on the user-experience and the handling of editorial content;
• Panorama.it which showed an increase in the period of unique users of 67% and 51% in page views compared with the same month of 2012, thanks to the traffic of the male style/fashion segment in the Icon channel;
• Panorama-auto.it continued to see a high performance both in terms of unique users and page views, which now total an average of more than 11 million per month.

International Activities

The Group’s international activities, concentrated in the company Mondadori International Business S.r.l., saw a rise in first half 2013 revenues of 10% compared with the previous year.

Licensing: revenues from royalties were up by 14%, thanks to new editions launched by Grazia International Network over the last 12 months (South Africa, Poland, Spain and South Korea).

Advertising: advertising sales were in line with the previous year, with a decidedly better performance than the market of reference.

From January 2013, Mondadori International Business S.r.l. expanded its activities to include the sale of advertising for international clients also in the French and Swiss markets and began operating as exclusive agent for advertising sales in Italy for titles that are not part of the Mondadori Group.

Holdings:

• Mondadori Seec Advertising Co. Ltd, the exclusive advertising sales company for the edition of Grazia in China, launched in February 2009, in the first half of 2013 recorded a rise in revenues of 28% compared with the same period of 2012;
• Mondadori Independent Media, the joint-venture that publishes the Russian edition of Grazia, saw first-half 2013 revenues up by 9% compared with 2012.
• Attica Publications, in an economic context that continues to be very difficult, has taken a dominant position in the Greek magazine market; faced with a fall of almost 30% in the market, Attica saw a fall in advertising sales of around 8% and ended the first half with a positive net result that was beyond expectations.

At 30 June 2013 the volume of business generated by the international network for Grazia amounted to €51.6 million, an increase of 9% on the first half of 2012.

ADVERTISING
Advertising investments in the first five months of the year were down by 17.2% compared with 2012, confirming the difficulties seen in recent years. There was a slight improvement, compared with previous months, for newspapers and radio, the exceptions were magazines and internet.

Mondadori Pubblicità ended the first half of 2013 with total sales of €76.8 million, a fall of 20% compared with the €96 million of the same period of 2012.

Mondadori magazines saw a like-for-like fall of 21.9%, with a performance that was significantly better than the market (cumulative to June Fcp: -26.1%), also as a result of the simultaneous relaunch of the three main women’s weeklies, Grazia, Donna Moderna and TuStyle, and initiatives on cooking and interiors titles. If we exclude the titles no longer in the portfolio, the figure is -29,3%.

Regarding advertising sales for radio, the first half of 2013 ended with an increase of 17.6%, mainly thanks to the acquisition of the concession, from 15 April, for Radio Italia Solo Musica Italiana. This operation substantially modified the positioning of Mondadori Pubblicità in the radio market: with a daily average of 7.5 million listeners net of duplications (source: Eurisko Radiomonitor 2012) and placing the company among the top three operators in the sector, with a leadership position in the female target that permits significant synergies with the print portfolio and the web.

In the Internet segment Mediamond outperformed a market in a continuing slowdown with +19,9% compared with 2012. Of special note were the results for Grazia.it (+42%) and Videomediaset (+40%).

MAGAZINES FRANCE

Also during the second quarter of the year, the market of reference for Mondadori France saw a slowdown in both circulation and advertising sales.

Consolidated revenues in the period came to €176.9 million, a fall of 8.6% on the €193,6 million of the first half of 2012; on a like-for-like basis, a fall of 7.5% (Télé Star, Télé Poche and Autoplus benefited from an extra issue in 2012).

The downturn in the period is mainly the result of

• a lower number of weekly issues in the auto and TV segments;
• increased and significant investments for the development of digital products;
• a reduction in magazine circulation due to a strike by Presstalis, the main distributor;
• comparison with a first half in 2012 when the advertising trend was still positive, with a marked slowdown in the second half (-4.9% at year end 2012; source: Kantar Media).

Advertising sales: the market trend was in line with the first quarter, with a shortfall in terms of volume of 6.8% (source: Kantar Media, May). In this context, Mondadori France, which remains the second operator, saw a fall of 3.1% in terms of volume, outperforming the market, which resulted in a rise of its market share to 10.8%.

Revenues were down by 11.9% (-10.4% like-for-like) due to difficulties in the food, auto and clothing segments.

During the period circulation revenues, which account for 72% of the total (including add-on sales), were down by 8.2%; on a like-for-like basis the figure is 6.8%.

In particular:

• newsstand sales were down by 5.8%, in a market that lost 6.4% (January/May; internal source);
• subscription revenues were down by 5.7% compared with the same period of last year and by 2.3% excluding non-recurring items, such as the loss of the subscriber base of Pleine Vie, following contractual changes adopted by an important insurance operator.

The strategy of brand extensions continues with good results for the launch of two new products: Closer Teen (a magazine for teens) and Vital by Top Santè (a fitness and wellbeing title).

Mondadori has also developed its first “web to print” experience, publishing a print version of the cooking site 750g.com (which had 4 million unique visitors in 2012; source: Nielsen).

The focus on editorial quality remains a priority: in the first half the redesign of Modes & Travaux, Sport-Auto, Science&Vie Junior, Grand Gibier and Auto-Journal was completed while in the second half of the year it will be the turn of AutoPlus, Grazia, and Biba. Also planned in the second half of the year is the launch of two new games titles in collaboration with France Television (Slam Magazine and Fort Boyard) and a new cooking title (MasterChef, in collaboration with the famous television format, which will be broadcast in France from September).

In the first half Mondadori France continued to invest in the development of digital activities, the audience of the sites, reached 5 million unique users (source: Nielsen), an increase of 21.5% compared with 2012. Also revenues were up 19% over the previous year.

The main actions in the first six months involved the development of new sites Autoplus.fr, Closermag.fr, Science-et-vie.com, putting online 25 years of archive material, TopSante.com Diapason.com; as well as iPad and iPhone applications for Tele-Star, Auto-Journal for iPad, and a new iPad version of Grazia and Sports-Auto.

The digital newsstand platform has been completely revamped for online subscriptions (kiosquemag.com), offering bundled print and digital subscriptions, but also only digital subscriptions, with the significant target of doubling the platform’s volume business in the next two years.

NaturaBuy.fr, the classifieds site for hunting and leisure, continued to grow, increasing the number of transactions by 18% compared with the same period of 2012.

DIRECT

In the first half of 2013 Direct revenues amounted to €110.4 million, a fall of 2.4% on the €113.1 million in the first six months of last year.

The decline significantly affected the book club activity and mail order sales in general, as well as the online sales of the dedicated web site; meanwhile sales from the network of shops were stable.

During the period, the rationalisation of sales outlets continued with the closure of 28 outlets, alongside the development of private label products and services focused on the new inMondadori brand.

In order to counteract the negative trend in the first half greater emphasis was also given to the customer loyalty campaign through the use of the Mondadori Card In terms of product, development continued of the Box for You gift boxes line and the Emporio Mondadori brand.

The distribution of the e-reader Kobo in its different versions, a cutting-edge device for the use of cultural content in digital format, has been a source of great satisfaction.

In a competitive environment characterised by a progressive reduction in advertising spending and consolidation of forms of digital-based communication, Cemit Interactive Media generated first half 2013 revenues in line with 2012.

This is even more significant when compared with a market that, in the period January-May, fell by 23.5% (source: Nielsen).

RADIO
Advertising revenues for radio, like the advertising market as a whole, saw a marked downturn of 14.6%, after the first 5 months of the year.

In this difficult context, the revenues generated from advertising on R101, which was affected in particular by a decline in major market sectors, especially the auto segment, for the first half of 2013 came to €6.8 million, a fall of 10.5% on the €7.6 million of the first half of 2012.

From an editorial perspective, R101 continued actions aimed at enhancing the formats, with the introduction of new programmes, and promotional activities with the organisation and sponsorship of events around the country.

In the first half a number of digital activities were developed that enabled the R101.it site to double the number of visitors (source: Google Analytics), raising the number of page views to 3.5 million and average monthly unique users to over 200,000, with positive trends also on social networks.

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APPROVAL FOR THE PLAN TO MERGE BY INCORPORATION THE WHOLLY-OWNED SUBSIDIARY MONDADORI INTERNATIONAL S.P.A.
The Board of Directors approved the merger by incorporation of the wholly-owned subsidiary Mondadori International S.p.A., in accordance with the merger plan presented, as announced on 27 June, to the Italian Stock Exchange and at www.gruppomondadori.it (Governance section).

Completion of the merger is expected by the end of this year after the deadline for the opposition of creditors as foreseen by Article 2503 of the Civil Code.

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EXPECTATIONS FOR THE FULL YEAR

In the first half all the activities of the Group have suffered the effects of the ongoing recession, which is not expected to improve during the year.

The actions carried out by the Group in support of the quality of magazine brands, the publishing programme for books and a range of activities aimed at cost containment are expected to show more positive effects in the second half of the year, and therefore the company also expects to post a gross operating profit in line with, or even greater that, that of the second half of 2012.

For the full year 2013, gross operating profit will in any case be less than the previous year, also on account of positive non-recurring items, present in 2012, and higher restructuring charges in the current year.

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The documentation relating to the analysts’ presentation of the results for the first half of the year to 30 June 2013, is available in the Investor Relations section of the company’s website

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