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

GROUP PERFORMANCE AT 30 SEPTEMBER 2016

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

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

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

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

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

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

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

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

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

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

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

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

This performance is the result of constant and effective monitoring, and the ability to act on and manage all of the economic and financial variables typical of all of the Group’s business areas.

OUTLOOK FOR THE YEAR

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

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

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

PERFORMANCE OF GROUP BUSINESS AREAS AT 30 SEPTEMBER 2016

• BOOKS

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

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

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

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

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

On a like-for-like basis, the Trade Books Area revenue increased by 15.7% versus 9M15, as a result of the positive performance of sales from the titles launched between the end of 2015 and the first half of the current year. Regarding the Educational Area, revenue in 9M16 grew by 2.5% on a like-for-like basis versus 9M15.

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

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

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

• MAGAZINES ITALY

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

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

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

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

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

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

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

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

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

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

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

• MAGAZINES FRANCE

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

Specifically:

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

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

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

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

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

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

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

• RETAIL

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

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

Designation of the Lead Independent Director

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

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

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

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

 Publication of the Interim Report on Operations at 30 September 2016

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

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

Annexes (see pdf attached):

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

[1] This document, in addition to the statements and conventional financial measures required by IFRS, presents a number of reclassified statements and alternative performance measures in order to better evaluate the operating and financial performance of the Group, the definition of which is explained in Annex 5 “Glossary of terms and alternative performance measures used” .

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