Interim Management Statement. at March 31, 2010

Transcription

1 Interim Management Statement at March 31, 2010 Translation from the Italian original which remains the definitive version RCS MediaGroup S.p.A. Via San Marco, Milan Share capital 762,019,050 Company Registration, Tax Code & VAT Number Business Register Number

2 Contents Consolidated financial highlights of RCS Mediagroup... 3 Group performance in the first quarter... 4 Operating segment performance Newspapers Italy Newspapers Spain Books Magazines Advertising Dada Television Corporate Functions Significant events in the first quarter Significant events subsequent to March 31, Outlook for the current year Condensed interim consolidated financial statements Condensed income statement Condensed statement of comprehensive income Condensed statement of financial position Condensed statement of cash flows Condensed statement of changes in equity Notes to the condensed interim consolidated financial statements Format, contents and other information on the condensed interim consolidated financial statements Statement pursuant to art. 154-bis par. 2 decree 58/ Attachments Quarterly consolidated income statements

3 CONSOLIDATED FINANCIAL HIGHLIGHTS OF RCS MEDIAGROUP ( /millions) 1st quarter Full year (1) (1) INCOME STATEMENT Revenue ,206.4 EBITDA (2) ( 6.9) ( 11.6) 35.7 Operating profit (loss) ( 31.5) ( 35.6) ( 97.1) Profit (loss) before tax and non-controlling interests ( 40.6) ( 51.6) ( 133.4) Income taxes Profit (loss) from continuing operations ( 34.8) ( 46.4) ( 117.6) Profit (loss) from assets held for sale and discontinued operations (3) ( 5.9) Profit (loss) for the period attributable to owners of the parent ( 30.8) ( 40.7) ( 129.7) Basic earnings per share: continuing operations ( ) (0.04) ( 0.06) ( 0.17) Diluted earnings per share: continuing operations ( ) (0.04) ( 0.06) ( 0.17) Basic earnings per share: assets held for sale and discontinued operations ( ) ( 0.01) Diluted earnings per share: assets held for sale and discontinued operations ( ) ( 0.01) STATEMENT OF FINANCIAL POSITION Mar Mar Dec Net capital employed 2, , ,140.7 Net financial debt (4) 1, , ,057.1 Equity 1, , ,083.6 Average number of employees excluding those involved in assets held for sale and discontinued operations 6,212 6,550 6,427 (1) Dada Entertainment LLC has been consolidated since June 2009, having been previously equity accounted. Only the second-half figures of Dada Entertainment have been consolidated in the results for FY (2) Earnings before interest, tax, depreciation, amortization and impairment losses. (3) The figures for 1st quarter 2009 and FY 2009 refer to the Unidad Editorial group's printing operations and the operations of the subsidiary La Coccinella. (4) Indicator of financial structure, calculated as current financial liabilities less cash and cash equivalents, current financial assets and non-current financial assets recognized for derivatives, and excluding net financial debt relating to assets held for sale and discontinued operations. This Interim Management Statement at March 31, 2010 was approved by the Board of Directors on May 12,

4 GROUP PERFORMANCE IN THE FIRST QUARTER Although the first quarter of 2010 showed an easing of the negative economic performance seen in the last quarter of 2009, there were still no clear signs of a trend reversal. Advertising markets in Italy reported slight growth, while those in Spain, except for sports newspapers, were still struggling. The Group's financial highlights and related comments are presented below. Reclassified consolidated income statement ( /millions) 1st quarter 2010 % 1st quarter 2009 % Difference (5) (5) A B A-B Revenue (23.3) Distribution revenue (29.7) Advertising revenue (1) Other publishing revenue (2) Operating expenses (375.7) (76.4) (394.5) (76.6) 18.8 Personnel expense (116.3) (23.7) (125.8) (24.4) 9.5 Impairment losses on receivables (4.3) (0.9) (3.5) (0.7) (0.8) Increases in provisions for risks (2.2) (0.4) (2.7) (0.5) 0.5 EBITDA (3) (6.9) (1.4) (11.6) (2.3) 4.7 Amortization of intangible assets (13.9) (2.8) (13.8) (2.7) (0.1) Depreciation of property, plant and equipment (10.0) (2.0) (9.9) (1.9) (0.1) Impairment losses on non-current assets (0.7) (0.1) (0.3) (0.1) (0.4) Operating profit (loss) (31.5) (6.4) (35.6) (6.9) 4.1 Net financial expense (8.9) (1.8) (10.7) (2.1) 1.8 Net gains (losses) on financial assets/liabilities Share of profits (losses) of equity-accounted investees (0.9) (0.2) (5.3) (1.0) 4.4 Profit (loss) before tax (40.6) (8.3) (51.6) (10.0) 11.0 Income taxes Profit (loss) from continuing operations (34.8) (7.1) (46.4) (9.0) 11.6 Profit (loss) from assets held for sale and discontinued operations (4) (0.4) Profit (loss) for the period (34.8) (7.1) (46.0) (8.9) 11.2 (Profit) loss attributable to non-controlling interests (1.3) Profit (loss) attributable to owners of the parent (30.8) (6.3) (40.7) (7.9) 9.9 (1) Advertising revenue in 1st quarter 2010 comprises 90.5 million earned through the group concessionaire RCS Pubblicità (of which 67.2 million by Newspapers Italy, 21.1 million by Magazines and 2.2 million by selling the space of other publishers) and 68.7 million earned directly (of which 46.2 million by Newspapers Spain, 7.4 million by Blei, 5.6 million by Newspapers Italy, 5.4 million by Magazines, 4.2 million by Dada and 0.7 million by Digicast less 0.8 million in intragroup eliminations). Advertising revenue in 1st quarter 2009 comprises 84.9 million earned through the group concessionaire RCS Pubblicità (of which 61.3 million by Newspapers Italy, 21.7 million by Magazines and 1.9 million by selling the space of other publishers) and 70.1 million earned directly (of which 44.6 million by Newspapers Spain, 7.1 million by Dada, 6.8 million by Blei, 5.9 million by Newspapers Italy, 5.7 million by Magazines and 0.6 million by Digicast less 0.6 million in intragroup eliminations). (2) Other publishing revenue mostly refers to the revenue of the Dada group, revenue from the sale of film rights by the Unidad Editorial group, revenue from Digicast's television activities, royalty revenue from third parties, revenue associated with sporting events in Italy and Spain, and revenue from the sale of customer lists and children's boxed sets by companies in the Sfera group. (3) Earnings before interest, tax, depreciation, amortization and impairment losses. (4) The figures for 1st quarter 2009 refer to the Unidad Editorial group's printing operations and the operations of the subsidiary La Coccinella. (5) Following a strategic agreement between Dada and Sony Music Entertainment, Dada Entertainment, a US company, has no longer been equity accounted but consolidated since the month of June In addition, Poundhost, a provider of hosting and virtual services, was acquired on January 18, These transactions had an overall impact of 6.2 million on revenue and 1.1 million on EBITDA in 1st quarter Revenue for the first quarter of 2010 amounted to million compared with million in the same period the year before. The shortfall of 23.3 million is largely due to lower distribution revenue ( million), in turn reflecting a sharp fall of 30.3 million in add-on and partworks sales. Advertising revenue was 4.2 million up on the corresponding figure at March 31, 2009, while other publishing revenue was 2.2 million higher. If other publishing revenue is adjusted to exclude the impact of consolidating Dada Entertainment from June 2009, this revenue would have reported a decline of 4 million. Distribution revenue was 29.7 million lower than in the first quarter of 2009, of which: 4

5 15.2 million in the Newspapers Italy segment, as a direct result of lower add-on sales. This result is also penalized by comparison with the first quarter of 2009 which featured a number of particularly successful add-ons. Distribution revenue rose by 2%, also benefiting from the price rise for Corriere della Sera with effect from January 2, Both Corriere della Sera and La Gazzetta dello Sport retained their leadership positions despite a reduction in distribution through promotional channels. 7.8 million in the Newspapers Spain segment, due to a drop in circulation and lower add-on sales. This was partly offset by the effect of a price rise for El Mundo.es at the start of million in the Books segment, reflecting a decline in Partworks revenue (- 5.3 million) due to few launches in foreign markets, and a drop in Fiction and Non-Fiction revenue (- 4.8 million), which suffers from comparison with the first quarter of 2009 which benefited from the success of the Millenium trilogy. This decline was partly offset by increased revenue from other areas of the business, particularly Flammarion (+ 4.4 million), due to the success of new books launched in the first quarter of In particular, Le Conflit, a new book by Elisabeth Badinder, received a very enthusiastic reception from the French public. 1 million in the Corporate Functions area, particularly reflecting the drop in revenue at RCD Redazione Contenuti Digitali following the sale of its radio news services business unit in July million in the Magazines segment, even if this decline in revenue (-1.9%) was lower than the market as a whole. Of particular note was the good performance by the weekly titles. The increase of 4.2 million in advertising revenue on the first quarter of 2009 includes 5.6 million for Newspapers Italy and 2 million for Newspapers Spain, thanks to the good performance of advertising revenue by Marca and the start in March of the advertising concession to A3 Advertising (the television concessionaire of the Antenna 3 Group) for managing advertising on the Veo Tv channel. Blei and Digicast had largely stable revenue, with increases of 0.3 million and 0.1 million respectively. Advertising revenue was down for the Dada group (- 2.9 million) and Magazines (- 0.9 million). Other publishing revenue was up by 2.2 million, attributable to the Dada group whose revenue climbed from 30.4 million at March 31, 2009 to 33.7 million at March 31, 2010 (+ 3.3 million). Adjusting for the fact that the subsidiaries Dada Entertainment and Poundhost were not consolidated in the first quarter of 2009 since their control was only subsequently acquired, the Dada group's other publishing revenue would have reported a decrease of 2.9 million, reflecting its gradual withdrawal of certain traditional products, partly as a result of starting up the new service known as The Music Movement. Newspapers Spain reported an increase of 0.5 million in other publishing revenue thanks to sporting and other events. The overall increase in other publishing revenue also reflects decreases for Magazines in connection with Sfera's activities, for Digicast's television activities and for the Advertising segment. EBITDA was a negative 6.9 million, an improvement of 4.7 million on the first quarter of Assuming a like-for-like group perimeter and excluding non-recurring income and expense in the first quarter of 2010 and the first quarter of 2009, EBITDA would have reported an increase of 14.2 million, to which all the Group's main businesses made their contribution with the exception of Dada. In detail, this reflects: Increases in EBITDA before non-recurring income and expense for Newspapers Italy ( 7.6 million) and Newspapers Spain ( 5.3 million), due to the impact of higher advertising revenue in the first quarter of 2010 than in the first quarter of 2009 and the benefits of the reorganization plan implemented in An increase in EBITDA for the Advertising segment which, excluding 1.4 million in intragroup gains on the sale of the Classifieds business in the first quarter of 2009, would have been 1.9 million. This increase mainly reflects higher advertising revenue at Newspapers Italy, and the benefits of the reorganization plan implemented in Blei, the foreign advertising concessionaire, also reported a modest increase in EBITDA. 5

6 An increase of 1.6 million in EBITDA for Magazines, realized, despite the year-on-year decrease in revenue, thanks to constant attention to costs and the benefits of the reorganization plan implemented in the prior year. An increase in EBITDA before non-recurring income and expense for the Books segment of 0.4 million on the first quarter of 2009 (+4%); this was due to the positive results of Flammarion's publishing program featuring important new releases, to fewer launches of partworks abroad with a consequent reduction in promotional costs, and to additional benefits of the reorganization plan implemented in An increase of 0.7 million in EBITDA from Corporate Functions, generated by cost savings under last year's reorganization plan, and an increase of 0.3 million in EBITDA from the Television segment thanks to the new mix of channels offered by Digicast. A decrease of 2.4 million in EBITDA for the Dada group. Excluding the changes in its group perimeter, this decrease would be 2 million. The shortfall of 2.4 million is largely due to costs for starting up the new poker on-line service, and to lower advertising revenue, particularly from mobile phones. The reorganization plan started in 2009 generated a total of 19.3 million in additional savings for the first quarter of Non-recurring items reported 0.2 million in net non-recurring income in the first quarter of 2010 compared with 10.8 million in net non-recurring income in the first quarter of Non-recurring income amounted to 2 million in the first quarter of 2010 and reflects adjustments to the estimated personnel expense of the reorganization started last year. Non-recurring expense amounted to 1.8 million in the first quarter of 2010, of which 1.6 million for top management changes at Newspapers Italy and 0.2 million for non-recurring expense in the Books segment, particularly the Education division. The first quarter of 2010 reported an operating loss of 31.5 million, partly for seasonal reasons, compared with a loss of 35.6 million in the first quarter of The reduction in this loss reflects the factors described above. At 24.6 million, amortization, depreciation and impairment losses were largely stable compared with the first quarter of 2009, reporting an overall increase of 0.6 million, largely attributable to a reduction in the useful life of office furniture and equipment in the Calle Pradillo premises of Newspapers Spain. Revenue, EBITDA and operating profit (loss) in the first quarters of 2010 and 2009 are reported below by operating segment: ( /millions) 1st quarter st quarter 2009 Revenue EBITDA % of revenue Operating profit (loss) % of revenue Revenue EBITDA % of revenue Operating profit (loss) % of revenue Newspapers Italy (1) % % % (1.4) (0.9)% Newspapers Spain (4.2) (3.4)% (11.6) (9.5)% % (5.2) (4.1)% Books (9.0) (7.6)% (10.8) (9.2)% (9.1) (7.3)% (10.9) (8.7)% Magazines 51.5 (5.0) (9.7)% (5.4) (10.5)% 53.7 (6.6) (12.3)% (7.0) (13.0)% Advertising (2) 98.2 (2.7) (2.7)% (3.1) (3.2)% 92.6 (3.2) (3.5)% (3.5) (3.8)% Dada (1) % (0.4) (1.0)% % % Television % % % (0.2) (2.9)% Corporate Functions 13.6 (2.5) (18.4)% (7.2) (52.9)% 15.4 (3.4) (22.1)% (8.5) (55.2)% Other and eliminations (95.5) (0.1) n.a (0.0) n.a (94.2) (1.4) n.a (1.3) n.a Consolidated total (6.9) (1.4)% (31.5) (6.4)% (11.6) (2.3)% (35.6) (6.9)% Assets held for sale and discontinued operations (3) % % Other and eliminations (0.2) n.a n.a Total (6.9) (1.4)% (31.5) (6.4)% (7.9) (1.5)% (34.5) (6.6)% (1) Following a strategic agreement between Dada and Sony Music Entertainment, Dada Entertainment, a US company, has no longer been equity accounted but consolidated since the month of June In addition, Poundhost, a provider of hosting and virtual services, was acquired on January 18, These transactions had an overall impact of 6.2 million on revenue and 1.1 million on EBITDA in 1st quarter On October 12, 2009, RCS Digital sold its subsidiary Fueps to Dada, meaning that the Fueps income statement was consolidated by Newspapers Italy in 1st quarter 2009, which reported 0.1 million in revenue and a negative EBITDA of 0.4 million. In 1st quarter 2010, the Fueps income statement was consolidated by Dada, reporting 0.3 million in revenue and a negative EBITDA of 1.5 million. (2) Advertising segment EBITDA and operating profit (loss) in 1st quarter 2009 include 1.4 million in gains realized on the sale of the Classifieds business to Newspapers Italy. The elimination of the intragroup gain is included in the "other and eliminations" line. 6

7 (3) Refers in 1st quarter 2009 to the Unidad Editorial group's printing operations and the operations of the subsidiary La Coccinella. Net financial expense amounted to 8.9 million in the first quarter, compared with 10.7 million in the first quarter of The year-on-year reduction of 1.8 million primarily reflects lower interest expense on borrowings and bank loans and overdrafts (- 3.8 million), as well as lower financial expense on lease agreements (- 0.8 million).this was mainly associated with the decline in market interest rates and was partially offset by the expense of interest rate hedging derivatives ( 3.4 million). Net gains on financial assets and liabilities were 0.7 million, compared with zero net gains and losses in the first quarter of They refer to the gain realized on the sale of the investment in Raisat ( 0.5 million) and to dividends received from Raisat ( 0.3 million), net of the impairment loss of 0.1 million on the investment in MB Venture Capital. The share of profits (losses) of equity-accounted investees was a net loss of 0.9 million in the first quarter of 2010, compared with a net loss of 5.3 million in the first quarter of The difference of 4.4 million is mainly due to the reduction of 2 million in the loss reported by IGP Decaux relative to the first quarter of 2009, and to the change in the method of consolidating Dada Entertainment from June 2009, for which losses of 1.1 million were equity accounted in this line item in the first quarter of The first quarter of 2010 also reflects the recognition of 1.7 million in negative goodwill arising on the additional investment in Finelco under its capital increase, at the end of which in April the RCS interest in this company had increased from 34.6% to 38.89%. The net loss attributable to owners of the parent amounted to 30.8 million in the first quarter of This was 9.9 million better than in the first quarter of 2009 and reflects the various factors discussed above. Income taxes reported a positive 5.8 million, staying generally in line with the first quarter of Net losses attributable to non-controlling interests went from 5.3 million in the first quarter of 2009 to 4 million in the first quarter of 2010, worsening the loss attributable to owners of the parent by 1.3 million. Lastly, the profit (loss) from assets held for sale and discontinued operations was zero in the first quarter of 2010, compared with a profit of 0.4 million in the first quarter of

8 Breakdown of the average number of employees by region The average number of employees in the quarter ended March 31, 2010 was 6,212. This compares with 6,550 in the first quarter of last year. The decrease of 338, excluding the discontinued operations, is mainly attributable to the Group's policy of improving efficiency by restructuring in every area of its business. The decrease related to Newspapers Spain (-153 employees), the Advertising segment (-46 employees), Newspapers Italy (-62 employees), the Magazines segment (-34 employees), the Books segment (-30 employees) and Corporate Functions (-39 employees), where the reduction reflected the disposal of RCD's business specializing in the production of radio news services. These reductions were only partly offset by increases at the Dada group (+21 employees), due to continued expansion of its international and new media activities. The breakdown of the average number of employees by region is as follows: Italy Spain France Other countries Total Mar-31 Mar-31 Mar-31 Mar-31 Mar Newspapers 1,247 1,309 1,890 2,043 3,137 3,352 Books ,082 1,112 Magazines Advertising Dada Television Corporate Functions Consolidated total 3,303 3,479 1,993 2, ,212 6,550 Assets held for sale and discontinued operations (1) Imprentas (Unidad Editorial) La Coccinella (Libri) Total 3,303 3,485 1,993 2, ,212 6,808 (1) Assets held for sale and discontinued operations in 2009 reflect the average headcount of Unidad Editorial's printing operations, being held for sale, and of La Coccinella classified as held for sale since the start of

9 Reclassified consolidated statement of financial position ( /millions) Mar % Dec % Intangible assets 1, , Property, plant and equipment Investment property Non-current financial assets Non-current assets 2, , Inventories Trade receivables Trade payables (600.2) (28.5) (652.4) (30.5) Other assets/liabilities (68.6) (3.3) (73.5) (3.4) Net working capital Provisions for risks and charges (105.0) (5.0) (110.5) (5.2) Deferred tax liabilities (146.9) (7.0) (147.0) (6.9) Employee benefits (78.4) (3.7) (78.8) (3.7) Net capital employed 2, , Equity 1, , Non-current financial liabilities Current financial liabilities Non-current financial assets recognized for derivatives (1.8) (0.1) (3.7) (0.2) Cash and cash equivalents and current financial assets (85.4) (4.1) (74.3) (3.5) Net financial debt (1) 1, , Total sources of financing 2, , (1) Indicator of financial structure, calculated as current and non-current financial liabilities less cash and cash equivalents, current financial assets and non-current financial assets recognized for derivatives, and excluding net financial debt relating to assets held for sale and discontinued operations. Net financial position as defined by CONSOB in its Communication DEM/ dated July 28, 2006 excludes non-current financial assets and includes net financial debt of assets held for sale and discontinued operations and so is equal to 1,066.9 million ( 1,060.8 million at December 31, 2009). Net capital employed in continuing operations was 2,103.7 million at the end of March 2010, having come down by 37 million since December 31, 2009, reflecting a decrease of 39.4 million in net working capital and of 3.6 million in non-current assets, as partly offset by a reduction of 6 million in provisions. The trends in the main components of net capital employed are discussed in the later section of this Interim Management Statement containing the notes to the condensed interim consolidated financial statements. Net financial debt amounted to 1,065.1 million at the end of March 2010, having increased by 8 million (+0.7%) since December 31, 2009, mainly due to investments in property, plant and equipment in the period, and the acquisition of Poundhost ( 7.6 million), of another 15% in the share capital of Giglio Group ( 1.1 million) and the acquisition of Nexso ( 2.2 million). These outlays were partially offset by proceeds from the sale of Raisat ( 3 million) and positive cash flows from operating activities. Net financial debt also benefited from the reclassification to current assets of the investment in Poligrafici Editoriale, sold in April ( 9.5 million). The main cash flows are summarized below: ( /millions) Mar Mar Total cash and cash equivalents from operating activities Total cash and cash equivalents used in investing activities (12.0) (38.8) Total cash and cash equivalents from (used in) financing activities (11.1) 28.7 Net increase (decrease) in cash and cash equivalents (A+B+C) (10.8) 4.0 Opening cash and cash equivalents (1.7) (1.4) Closing cash and cash equivalents (12.5) 2.6 Increase (decrease) for the period (10.8) 4.0 The main changes are described in more detail in the notes to the condensed interim consolidated financial statements. 9

10 OPERATING SEGMENT PERFORMANCE 10

11 NEWSPAPERS ITALY Segment profile The Newspapers Italy segment comprises the editing, production and marketing of publications relating to the titles Corriere della Sera, La Gazzetta dello Sport, and City. Corriere della Sera, the leading national news and information daily, comprises a structured, integrated platform of paper and digital information media, including the national daily, a network of local titles, the weekly Sette, special inserts and general interest and specialized supplements, as well as the corriere.it website. La Gazzetta dello Sport is the leading national sports daily and comprises a structured, integrated platform of information media, including the national daily, local editions, the weekly Sportweek, special inserts and specialized supplements and the gazzetta.it website. City is a free press daily with national distribution and local editions in Italy's major cities. This segment also includes RCS Sport, which organizes and runs the Giro d'italia and other cycling races and sporting events, RCS Digital, which manages development of the titles on digital media, and Trovolavoro srl and Trovocasa srl, which are respectively devoted personnel search and property sales. Financial highlights 1st quarter st quarter 2009 % change ( /millions) (3) (3) Publishing revenue (18.4) Advertising revenue (2) Other publishing revenue (2.8) Total revenue from sales and services (1) (7.6) EBITDA >100 (1) of which add-on product sales: (2) Advertising revenue in 1st quarter 2010 includes 57.5 million earned through the Group's advertising concessionaire ( 52.3 million in 1st quarter 2009). (3) On October 12, 2009 RCS Digital sold its subsidiary Fueps to Dada, meaning that the Fueps income statement was consolidated by Newspapers Italy in 1st quarter 2009, which reported 0.1 million in revenue and a negative EBITDA of 0.4 million. Market trend Daily newspapers have continued to report a negative trend in circulation in 2010, being affected by the uncertain economic environment and its impact on the level of consumption. Generalist dailies with circulation of more than 100,000 copies reported a 9.8% drop in circulation (source: ADS moving average for February 2009-January 2010); this is even larger for the main national dailies which not only report a structural fall in newsstand sales, but have lost circulation because of the decision to stop promotional distribution, still in force in the first few months of Sports dailies posted an 8.3% drop in circulation (source: ADS moving average for February 2009-January 2010), also reflecting the reduction in promotional activities. The advertising market (source: Nielsen) showed slight signs of recovery in the first quarter of 2010, growing by 2.7% on the same period of last year in a still highly uncertain economic context. The results varied considerably between the various media. Radio and TV saw advertising grow by 11% and 4.9% respectively, while press advertising continued to contract, this time by 4.3% (compared with 27.4% in the first quarter of 2009). Paid newspapers reported a slight recovery in advertising (+1%), with national business advertising growing by 9.8% (confirming the improvement starting in the last part of 2009), while local advertising was stable and classified advertising down by 13%. The Free Press experienced difficulty, with advertising shrinking by 6.7% (partly due to the fact that certain titles stopped being published), reflecting contraction of 10.7% for national titles but growth of 2.9% for local ones. 11

12 Internet advertising has carried on growing in The first quarter reported an increase of 3.8% (+3.9% in the first quarter of 2009), although reflecting very different trends between the various internet sectors: the "search advertising/keywords" sector dipped by 3.2%, while the "display" sector grew by 11.9% relative to the first two months of 2009 (source: Nielsen). In terms of the number of readers of newspapers and magazines, the latest figures published in Audipress 2010/1, reflecting a new method of measurement not comparable with the past editions of this report, indicate that the population of newspaper readers amounts to 24.1 million on an average day; La Gazzetta dello Sport is the most read newspaper in Italy, with 4.0 million average daily readers, followed by La Repubblica with 3.2 million and Corriere della Sera with 2.9 million. As for the free press, Leggo is the most widely read daily, with 2.2 million average daily readers, followed by City with 2.0 million and Metro with 1.8 million (source: Audipress). Segment results The Newspapers Italy segment posted million in consolidated revenue in the first quarter of 2010, compared with million in the first quarter of The 7.6% decrease is entirely due to lower add-on sales, which were down 17.2 million year-on-year. Advertising revenue climbed by 4.9 million (+8.4%), while publishing revenue, excluding add-ons, grew by 2 %. The two paid newspapers retained their overall circulation leadership in their respective market segments. Corriere della Sera had an average daily circulation of 474,000 in the quarter, 19% lower than in the same period the year before, due to a reduction in distribution through promotional channels and a 4.3% decline in newsstand sales, despite the rise in the title's price as from the start of January La Gazzetta dello Sport had an average daily circulation of 307,000, which was 8.1% lower than in 2009 solely due to the cut in distribution through promotional channels, while newsstand sales climbed by 3,000 copies. Actions continued in the quarter to introduce novelty to both titles and the publishing platforms that they head. From January Corriere della Sera expanded its weekly Friday section on employment and jobs, boosting sales on this day by about 2%. La Gazzetta dello Sport continued to publish its monothematic supplements focusing on sports champions and personalities. Excluding add-on sales, publishing revenue grew by 2%, reflecting steady sales and an increase in the cover price of Corriere della Sera, raised from 1.00 to 1.20 with effect from January 2, 2010, except for Thursdays and Saturdays when it is sold together with a supplement. Revenue from add-on products amounted to 19.2 million, 47.2% below the first quarter of 2009, reflecting a reduction in the average sales per individual initiative and comparison with a period of 2009 that featured some particularly successful products. Advertising revenue increased by 8.4%, reflecting improvements for all media and a better performance than their own respective market segments. Corriere della Sera publications (including supplements, local editions and the internet) posted 8.6% growth in advertising. All areas of press advertising displayed positive signs; only classified advertising was worse than in 2009, after a shift from press towards on-line media. Internet advertising climbed by 28.1%. La Gazzetta dello Sport publications (including supplements, local editions and the internet) posted a 13.9% rise in net advertising revenue, with particularly good results for Sport Week (+39.7%) and the internet (+86.6%), while revenue from sporting events was down, solely because of differences in the timing of such events relative to the prior year. City publications reported a 2.4% drop in advertising revenue, mainly from the free monthly Urban. The on-line sector continued to expand its business in the period as part of the strategy of introducing new ways of reading editorial content, from hard copy to the internet and mobile phones, in order to satisfy new habits and growing reader mobility. All the traffic and readership indicators for the websites continued to enjoy steady growth in the first quarter of 2010, with the websites managed by Newspapers Italy reaching a total of 24.2 million unique users (+37%) on average per month. 12

13 The corriere.it website reached 17.6 million unique visitors per month in the quarter, reporting a record of 19.4 million in March 2010 (+49% on 2009). The average number of unique readers per weekday was 1.5 million in the quarter (+28%), while the number of pages viewed amounted to 381 million. The websites of the local editions had 4.2 million unique readers in March, becoming the market leaders in nearly all the cities served. Cucina, a new cookery channel, was launched in the quarter as part of the corriere.it site, while the Viaggi travel channel completed its restyling. The video section enjoyed strong growth. The gazzetta.it website also confirmed its upward trend: an average of 10.1 million unique visitors per month in the quarter (+32%), and an average of 899,000 unique visitors per weekday (+24%); a total of 373 million pages (+32%) were viewed in the period. The gazzetta.it website also reported record readership in the quarter: the average number of readers per day hit a record of 910,000 in February, a 23% increase on February corriere.it and gazzetta.it also launched in the quarter their offer of paid applications for smartphones: at the end of March more than 200,000 applications had been downloaded and over 8,000 subscriptions activated. As for operating costs, continued cost savings generated 7.6 million in benefits for the period, without detriment to product quality. First-quarter EBITDA amounted to 11.5 million, compared with 3.5 million in the first quarter of The smaller contribution from add-ons and the investments in projects to develop digital business and to support and enhance the titles and their contents were more than offset by the margins from higher advertising revenue, by the effects of the reorganization plan and of the increase in the cover price of Corriere della Sera, and by the benefits of a reduction in paper costs. Non-recurring items reported 0.4 million in net non-recurring income in the first quarter of 2010 (zero in the first quarter of 2009). Non-recurring income amounted to 2 million in the first quarter of 2010 and reflects adjustments to the estimated personnel expense of the reorganization started last year. Non-recurring expense amounted to 1.6 million in the first quarter of 2010 and related to top management changes. The Printers Plan was carried on during the period. On January 11, 2010 an agreement was signed with the company unions to apply for the placement of up to 67 employees with a print publishing payroll contract from the Group's Lombardy offices in the Special Government-sponsored Redundancy Scheme (CIGS) for a period of 24 months, starting from February 1, 2010, and so allow them to take early retirement. Union negotiations were also completed to start restructuring in the area of journalists. On February 1, 2010 the Italian Ministry of Employment and Social Policy signed a decree allowing CIGS to be accessed for early retirement by 67 journalists at RCS Quotidiani S.p.A., valid for

14 NEWSPAPERS SPAIN Segment profile Unidad Editorial is one of the principal players on the Iberian media market, where it operates through several media with numerous brands. In fact, its operations cover the publication of daily newspapers, magazines and books, radio broadcasting, national, regional and local digital television, the production of audiovisual material for television and of digital content for the web, and the organization of events and conferences. It also distributes its own products as well as those of third parties, and is also present on the Portuguese books market. Lastly, it organizes national events, particularly sporting ones, through the company Last Lap. As for its product portfolio, the group publishes El Mundo.es, Spain's number two daily newspaper by circulation, and is leader in sports news with its daily Marca, and in business news with the title Expansión. It is on-line leader in all three of these news segments through the respective websites of elmundo.es, marca.com and expansion.com. It is present in the magazines market with Telva, a women's magazine, and several specialist magazines (Marca Motor, Actualidad Económica, Golf Digest, Arte, Historia, and Siete Leguas). It operates in book publishing with the publishing houses of La Esfera de los Libros and A Esfera dos Livros (Portugal). It produces news and entertainment programs for television through the production house of El Mundo TV, while it operates in radio with Radio Marca, the top national sports radio station. In the local and regional digital television business it owns licenses for Madrid, the Balearic Islands and the region of Valencia. Unidad Editorial owns, through Veo TV, a multiplex for national digital television transmission. Three TV channels are broadcast through this platform: Veo TV, Set in Veo (Sony Entertainment TV) and La Tienda en Casa, a telesales channel with El Corte Inglés. Spain switched over to digital terrestrial television on April 1, Financial highlights ( /millions) 1st quarter st quarter 2009 % change Publishing revenue (10.5) Advertising revenue Other publishing revenue Total revenue from sales and services (1) (4.1) Total revenue from sales and services of assets held for sale and discontinued operations (2) EBITDA (4.2) 1.4 >(100) EBITDA of assets held for sale and discontinued operations (2) (1) of which add-on product sales: (2) Revenue and EBITDA in 1st quarter 2009 relating to assets held for sale and discontinued operations refer to the printing business. Unidad Editorial and the Bermont group signed an agreement in February 2009 to create a new company in the printing sector, which would be 63% owned by the Bermont group and 37% by Unidad Editorial. This transaction was completed in May with the transfer of all Unidad Editorial's printing activities to the new company Bermont Corporaciòn. Market trend Circulation of Spanish generalist newspapers with circulation in excess of 100,000 contracted by 4.6% in the first quarter of 2010 (Source: OJD). Business dailies shrank by even more with a loss of 16.3%, while the contraction for sports dailies was 2.3%. The advertising market shrank by 2.6% in the quarter (Source: Arce Media). Continued difficulties were reported by both newspapers (-3.9%) and magazines (-6.2%), while the internet managed to grow by 11.4%. 14

15 Segment results Unidad Editorial's consolidated revenue came to million, posting a decrease of 5.3 million (-4.1%) on the first quarter of The fall of 7.7 million in publishing revenue (-10.5% on the first quarter of 2009) was entirely due to fewer add-on launches. The loss of circulation by Expansión and Marca was offset by the price rise for El Mundo.es, by higher revenue from distributing third-party products and by higher revenue from the books business. Advertising revenue was 4.3% higher than in the first quarter of 2009 at 46.5 million, reflecting good performance by Marca, the internet, radio, and events and conferences, as well as growth in advertising revenue for the Veo TV channel. Other publishing revenue improved by 0.5 million on the first quarter of 2009 thanks to good results from events and conferences. In the newspapers sector, El Mundo.es confirmed its position as the number two national daily with average daily circulation of around 304,000, 6.1% lower than in the first quarter of 2009 (source: OJD). The title's cover price was raised in January from 1.10 to 1.20 (and from 2.20 to 2.50 for the Sunday edition). Marca, the leading sports daily, had average daily circulation of about 266,000 (source: OJD March figures), which was 6.1% below the same period last year, suffering from comparison with a period featuring more compelling news and from fewer promotional investments. The country's prolonged economic difficulties had a negative impact on circulation of Expansión whose average daily figures fell by 16.2% on the first quarter of 2009 to about 41,000 (source: OJD March figures). Add-on sales were 62.9% lower than in the same period of last year, reflecting a reduction in the number of launches in order to achieve greater focus. Gross advertising revenue closed the quarter 5.9% up on the same period of Advertising revenue from newspapers climbed by 3.1% thanks to better performance by Marca, while advertising in El Mundo.es and Expansión remained at the same level as last year. Advertising revenue from magazines and newspaper supplements shrank by 12.6% and 8.1% respectively. On-line advertising grew by 3.8% on the first quarter of last year. Classified advertising performed well, as did the websites, especially Marca. Advertising on the Veo TV channel performed particularly well, with revenue more than quadrupling on the first quarter of 2009 thanks to a new concession agreement with A3 Advertising, taking effect from March 1, Advertising on Radio Marca grew by 19.8%. As for the on-line business, elmundo.es further strengthened its leadership among the Spanish-language news information websites, both nationally and globally. The first-quarter figures (source: OJD) for unique users report an average of 24 million (+25% on the corresponding figure for the same period in 2009), with a record number of 25.1 million unique users reached in March The average number of unique readers was 1.8 million per weekday (+16% on the first quarter of 2009), while the number of pages viewed in the quarter amounted to 372 million. El Mundo.es has also strengthened its leadership with the launch of two new publications at the end of 2009: elmundo.es America which aims to confirm the newspaper's strong on-line presence in South America, and Orbyt, which offers paid video and audio content and analysis and discussion. Marca.com, the leading sports website, had an average of 21.4 million unique users (source: OJD), confirming its position as Spain's second biggest news website. In March 2010 this title reached a new all-time record of 23.9 million unique users. The average number of unique readers during the quarter was 2 million per weekday (+31% on the first quarter of 2009), while the total number of pages viewed in the quarter amounted to 592 million. The Expansión.com website continued to grow fast, with an average of 2.3 million unique users in the first quarter of 2010 (source: OJD), well above its competitors and 39% higher than in the same period of last year. With the final switchover to digital terrestrial television, the Veo TV channel can be viewed nationally, reaching a share of 0.98 in March (source: Kantar Media) compared with 0.63 in the same period of 2009 (+55.6%). Relative to March 2009 there were improvements by both the La tienda en Casa channel and the Aprendingles channel, in this case particularly thanks to the launch of an innovative platform for teaching English. The Sony channel continues to be broadcast on Veo TV as per the related contract. 15

16 In the book publishing business, La Esfera de los Libros performed better in the first quarter of 2010 than in the corresponding period of 2009 thanks to the publication of two bestsellers in Spain: Los ojos amarillos de los coccodrillos by K. Pancol and El maquiavelo de Leòn by J.G. Abad. Sales in Portugal were stable. Radio Marca closed the first quarter with 539,000 listeners (source: EGM), up 4.3% on the same period of The quarter closed with a negative EBITDA of 4.2 million compared with a positive 1.4 million in the first quarter of Adjusting for 10.8 million in non-recurring income in 2009, first-quarter EBITDA would have improved by 5.2 million on the first quarter of 2009, thanks to the factors described above and continuation of the measures started in 2009 to contain costs, resulting in benefits of 7.8 million. Of particular note is the renegotiation of the lease of the Avenida de San Luis premises, the renegotiations of certain printing contracts, both for newspapers and magazines, plus the benefits of a reduction in the price of paper. 16

17 BOOKS Segment profile The Books segment comprises the RCS Group's activities in the book publishing sector in Italy (Fabbri, Bompiani, Rizzoli, BUR, Sonzogno, Marsilio, Lizard, Adelphi, R.L. in joint venture with the Mauri Spagnol group in the "cut price" segment), in France (Flammarion group including Editions Flammarion, J'Ai Lu, Casterman) and the United States (Rizzoli and Universe); in Italy's art books sector (Skira); in the textbook and professional publishing sector (Fabbri, Etas, La Nuova Italia, Sansoni, Tramontana, Oxford, Calderini, Edagricole, Markes, Educazione & Scuola, Edizioni del Quadrifoglio); in the legal, university and professional publishing sector (Etas and La Tribuna); in the reference sector (Rizzoli-Larousse); and in the partworks sector (in Italy and abroad, mainly via Fabbri). In addition, this segment, through the subsidiary Log607, develops original formats, based on a publishing product, which combines traditional and digital media. Financial highlights ( /millions) 1st quarter st quarter 2009 % change Fiction and Non-Fiction - Italy (16.4) Flammarion Partworks (15.8) Education Rizzoli Int.l Publications Other revenue n.s. Total revenue from sales and services (5.4) Total revenue from sales and services of assets held for sale and discontinued operations (1) 0.4 EBITDA (9.0) (9.1) (1.1) EBITDA of assets held for sale and discontinued operations (1) (0.1) (1) Revenue and EBITDA relating to assets held for sale and discontinued operations refer to the activities of La Coccinella, classified as held for sale from the start of The segment's total revenue came to 118 million in the first quarter of 2010, a decrease of 6.7 million on the same period in the prior year (-5.4%). This was attributable to lower revenue from Fiction and Non-Fiction in Italy and from Partworks, that was only partly offset by increases for the other divisions. The decline in revenue from Fiction and Non-Fiction in Italy reflects a smaller contribution from third-party publisher distribution and comparison with the first quarter of 2009 which had benefited from the exceptional success of the Millennium trilogy published by Marsilio. The slide in Partworks revenue was due to the effects of a different publishing plan that were only partly offset by a more favourable rouble-sterling exchange rate. Flammarion's revenue increased by 5 million (+11.4%) on the first quarter of 2009 thanks to the success of new books published by the Flammarion group's publishing houses. Revenue at Rizzoli International Publications was 0.2 million higher (+7.1%) than in the first quarter of 2009, with greater enthusiasm for new titles indicating the first signs of recovery from the deep crisis in the illustrated books market in the United States, also aided by the dollar's appreciation against the euro. First-quarter EBITDA is negative for seasonal reasons (- 9 million), reporting a minor improvement on the negative 9.1 million posted in the first quarter of The increase of 0.1 million in EBITDA would have been 0.3 million excluding non-recurring expense. This improvement was due to the smaller number of partworks launched abroad, with a consequent reduction in promotional costs, and to higher revenue at Flammarion. The first-quarter result also reflects 0.8 million in benefits from the cost-cutting measures adopted last year. 17

18 Fiction and Non-Fiction - Italy Market trend Nielsen's survey of the Italian market reports a 4.6% growth in value in the first quarter of 2010 and a 4.1% increase in volume, with a slight fall in average cover price (-0.7%). This reflects the growth in paperbacks following major promotional campaigns conducted by the principal publishers at the start of the year. All the main segments of the bookstore channel reported an increase. Non-Fiction grew the most on the first quarter of 2009, both in terms of volume (+9.4%) and value (+10.6%), with average cover prices climbing by 3.2%. Fiction grew both in volume (+7.7% versus 2009) and value (+4.7%), reflecting a decline of 1.6% in the average cover price. This increase was mostly concentrated in Italian Fiction (+9.4% in volume, +7.4% in value). The "Children and Young Adults" segment posted an increase of 15.1% in value and 15.2% in volume. The RCS Libri market share fell by 1.1 percentage points from 12.9% to 11.8% because of the unfavourable comparison with a prior-year period that featured not only the publication of major bestsellers like the Millenium Trilogy by Stieg Larsson published by Marsilio, but also strong sales of John Boyne's Il bambino con il pigiama a righe (The boy in the striped pyjamas), published by BUR Rizzoli. Division results The revenue of Fiction and Non-Fiction in Italy came to 30.6 million, a decrease of 16.4% on the same period of last year, reflecting the absence of last year's bestselling Millenium trilogy and the termination of distribution activities for certain third-party publishers. The more successful titles published by Rizzoli in the first quarter of 2010 included Acciaio, a novel by the newcomer Silvia Avallone, La vita senza me, a new novel by Maria Ventura, Perché è santo. Il vero Giovanni Paolo II raccontato dal postulatore della causa di beatificazione, an essay by Slawomir Oder and Gaeta Saverio, Libera scienza in libero stato, an essay by Margherita Hack, and Requiem per una pornostar (Death of a blue movie star) a new novel by Jeffery Deaver. Successful books published by Bompiani included Amore (What is love?) by Paulo Coelho and Nonna Carla by Alain Elkann. Fiction and Non-Fiction - France Market trend According to the figures published by the GFK research institute, the French book market grew by 1.1% in the first quarter of 2010, especially thanks to performance in the sectors of Fine Arts (+11%), Comic books (+7%), History (+8%) and Literature (+5%), while the Youth sector declined by 10% (after the huge success in 2009 of Stephenie Meyer's Twilight saga). Paperbacks also grew by 3.7% on the first quarter of In terms of sales channels, traditional bookstores reported a decline in sales, while other channels enjoyed an increase. Flammarion was the number four publisher in France in the first quarter of 2010 with a 5.4% market share. Division results The revenue of Flammarion grew by 5 million (+11.4%) on the first quarter of last year due to differences in the publishing program of its publishing houses. Among the titles published by Flammarion were: Le conflit. La femme et la mère by Elisabeth Badinter, Les derniers jours de Stefan Zweig by Laurent Seksik and 100 recettes pour mincir sans effort; new titles published by J Ai Lu included: Je ne sais pas maigrir by Pierre Dukan, La communauté du Sud T9 by C. Harris and Là où les tigres sont chez eux by J-M. Blas de Roblès; new titles published by Casterman included Les Simpson T9 (Simpsons Book 9) by Matt Groening. 18