Interim Management Statement. at March 31, 2018

Transcription

1 Interim Management Statement at March 31, 2018 This is English translation of the Italian Interim Management Statement, which is the sole authoritative version. RCS MediaGroup S.p.A. Via A. Rizzoli, Milan Share Capital 475,134, Company Register and Tax Code/VAT No , REA No

2 Contents Consolidated financial highlights of RCS MediaGroup... 3 RCS Group performance at 31 March Significant events in the reporting period Significant events after the reporting period Business Outlook Additional information required by CONSOB pursuant to Art. 114, paragraph 5 of Legislative Decree no. 58/1998 of 27 May Statement pursuant to Article 154 bis, paragraph 2 of the Consolidated Finance Act

3 CONSOLIDATED FINANCIAL HIGHLIGHTS OF RCS MEDIAGROUP ( /millions) INCOME STATEMENT 1st Quarter Year 2017 Revenue EBITDA (1) OPERATING PROFIT (LOSS) 11.2 ( 0.6) 95.6 Profit (loss) before taxes and non-controlling interests 6.8 ( 7.0) 87.4 Income taxes ( 0.7) 1.3 ( 16.5) Profit (loss) from continuing operations 6.1 ( 5.7) 70.9 Profit (loss) attributable to owners of the parent 6.0 ( 5.7) 71.1 Basic earnings (losses) per share: continuing operations (Euro) 0.01 ( 0.01) 0.14 Diluted earnings per share: continuing operations (Euro) 0.01 ( 0.01) 0.14 STATEMENT OF FINANCIAL POSITION 31/3/ /3/ /12/2017 Net capital employed Net financial debt (2) Equity Average number of employees 3,325 3,421 3,390 (1) Earnings before interest, tax, amortization/depreciation and impairment losses. Includes the share of profits and losses of equity-accounted investees. (2) Indicator of financial structure, calculated as current and non-current loans and borrowings less cash and cash equivalents, current financial assets and non-current financial assets recognized for derivatives. Net financial debt as set out by CONSOB in its Communication DEM/ dated 28 July 2006 excludes non-current financial assets. Non-current financial assets relating to derivatives at 31 March 2018, 31 March 2017 and 31 December 2017 amounted to zero and, therefore, RCS s financial ratio at 31 March 2018, 31 March 2017 and 31 December 2017 matches the net financial debt as defined by the abovementioned CONSOB Communication. In relation to Directive 2013/50/EU (Transparency Directive) and the relative domestic regulation transposing it into Italian law, within the legal and regulatory framework resulting from CONSOB resolution no of 26 October 2016, the RCS Group informed the market of its decision to approve and publish interim management statements on a voluntary basis in order to guarantee alignment with international sector best practices and with a view to maintaining the utmost transparency with respect to the market. This Interim Management Statement has been prepared in accordance with the International Accounting Standards, with the exclusion of IAS 34. The Interim Management Statement at 31 March 2018, with respect to the 2017 Annual Report, incorporates the new IFRS 15 and IFRS 9, which came into effect as from 1 January For both of these standards, the Company opted not to restate comparative figures. Accordingly, it should be noted that: the IFRS 15 impact on the figures in first quarter 2018 produced an increase by 8.4 million in net revenue (publishing revenue million, advertising revenue -6.6 million, other revenue -9.9 million), with no effects on the margin and on initial equity; the IFRS 9 impact produced a reduction in receivables of 1.1 million, with a resulting reduction of 0.8 million (net of the tax effect) in initial equity, with no significant changes in income statement figures in first quarter The 2017 Annual Report presents the various cases involved in Note 10. This Interim Management Statement at 31 March 2018 was approved by the Board of Directors on 9 May

4 RCS GROUP PERFORMANCE AT 31 MARCH 2018 In first quarter 2018, ISTAT preliminary estimates indicate a 0.3% growth in GDP versus the prior quarter. A result that marks the 15th consecutive quarter of economic expansion of the Italian economy. A slowdown was reported, instead, in the trend growth rate versus the same quarter of the prior year, which closed at 1.4% from 1.6% at December 2017 (ISTAT). In Spain, GDP grew by 0.7% in first quarter 2018 (preliminary figures from INE - National Institute of Statistics), marking the third consecutive quarter of growth with the same percentage (+0.7%). Considering the twelve mobile months, GDP grew by a more modest 2.9% than the 3.1% reported at end Against this backdrop, the RCS Group achieved an EBITDA of 20.2 million, growing by over 60% versus first quarter With an EBIT and a profit of 11.2 million and 6 million, respectively, back into positive territory after 10 years, the RCS Group generated cash in the period of 28 million. The Group's financial highlights and related comments are shown below. ( /millions) 31 March 2018 % 31 March 2017 % Difference Difference A B A-B % Revenue % Publishing revenue % Advertising revenue (8.8) (9.5%) Other revenue (1) (8.2) (23.8%) Operating expenses (128.4) (59.4) (131.4) (61.6) % Personnel expense (66.4) (30.7) (67.5) (31.6) % Provisions for risks (2.0) (0.9) (1.4) (0.7) (0.6) (42.9%) Allowance for impairment (0.1) (0.0) (1.3) (0.6) % Share of profits (losses) of equity-accounted investees >100% EBITDA (2) % Amortization of intangible assets (5.8) (2.7) (8.8) (4.1) 3.0 Depreciation of property, plant and equipment (3.0) (1.4) (3.8) (1.8) 0.8 Depreciation of investment property (0.2) (0.1) (0.1) (0.0) (0.1) Other asset impairment Operating profit (loss) (0.6) (0.3) 11.8 Net financial income (expense) (4.4) (2.0) (6.4) (3.0) 2.0 Gains (losses) on financial assets/liabilities Profit (loss) before tax (7.0) (3.3) 13.8 Income taxes (0.7) (0.3) (2.0) Profit (loss) from continuing operations (5.7) (2.7) 11.8 Profit (loss) from assets held for sale and discontinued operat Profit (loss) before non-controlling interests (5.7) (2.7) 11.8 (Profit) loss pertaining to non-controlling interests (0.1) (0.0) (0.1) Profit (loss) attributable to owners of the parent (5.7) (2.7) 11.7 (1) Other revenue includes primarily revenue for television activities, the organization of events and exhibitions, e-commerce activities, sales of customer lists and boxed sets and, in Spain, for betting activities. (2) Earnings before interest, tax, amortization/depreciation and impairment losses. Includes the share of profits and losses of equity-accounted investees. Relevant market performance At end March 2018, the Italian advertising market fell by 1.3% versus the same period last year. The print media segment dropped by an overall 9.9%: newspapers lost 9.3%, with a negative trend for national business advertising (-12.4% versus the same period in 2017), and magazines were down by 11%. Bucking the trend were billboards (+9.7%), radio (+7.1%) and the online segment (+2.5%) versus the same period in 2017 (Nielsen). 4

5 In Spain, the gross advertising sales market at 31 March 2018 fell by 1.6% versus the same period of 2017 (i2p, Arce Media). The newspapers market fell by 8.4%, magazines dropped by 7.1% and supplements declined by 4.9% versus the same period of The Internet segment performed well (net of social channels) and climbed by 9.9%. Looking at circulation in Italy, the print product market continued its weak trend in the first three months of Specifically, the distribution of paper copies of general interest newspapers in the first three months of 2018 was down by 9.7%. Including digital copies, the market weakened by 6.9%. Sports newspapers in the first three months of 2018 fell by 9.9% versus the same period of Including digital copies, the market dropped by 9.3% (ADS figures, January-March 2018). In Spain, the sales performance on the newspapers market declined in the first three months of 2018 versus the same period of Circulation figures for Spain until March (OJD) regarding the general interest newspaper market show an overall reduction of 9.4%. Business newspapers dropped by 5.3% in the same period. Daily sports newspapers witnessed the same trend, with circulation down by 10%. Segment results The change in revenue versus 31 March 2017 is shown below: M (3.0) (2.1) (2.6) (0.1) 2,3 8, March 2017 Newspapers Italy Magazines Italy Advertising and Sport Unidad Editorial Other Corporate activities IFRS15 March 2018 Mention should be made that this Interim Management Statement at 31 March 2018 incorporates the new IFRS 15, which came into effect as from 1 January The income statement figures of 2018, therefore, cannot be directly compared with the corresponding amounts of the same period last year. Specifically, if this new standard had not been applied, revenue in first quarter 2018 would have amounted to million, comprising publishing revenue of 81.1 million, advertising revenue of 90.6 million and other revenue of 36.2 million. The Group s consolidated net revenue at 31 March 2018 amounted to million. Excluding from the comparison with the figures of first quarter 2017 the effects arising from the adoption of the new IFRS 15 ( +8.4 million) and discontinuity such as the termination of a number of advertising sales contracts with third- 5

6 party publishers ( -1.3 million), on a like-for-like basis, an overall decrease in revenue of 4.2 million would be reported versus first quarter 2017 (-2%). Publishing revenue by business area is shown below: ( /millions) Publishing revenue 31/03/ /03/2017 Change % Change Newspapers Italy % M agazines Italy % Advertising and Sport n.a. Unidad Editorial % Other Corporate activities n.a. Other and eliminations (0.2) (0.2) % Total Publishing Revenue (1) % (1) Publishing revenue from add-ons at 31 March 2018 totaled 14.4 million (net of the effects of the adoption of IFRS 15), of which 13 million attributable to Newspapers Italy, 0.4 million to Magazines Italy and 1 million to Unidad Editorial. At 31 March 2017, it had totaled 15.4 million, of which 13.2 million attributable to Newspapers Italy, 0.9 million to Magazines Italy and 1.3 million to Unidad Editorial. Publishing revenue amounted to 106 million versus 86.1 million in the first three months of Net of the above effects of the adoption of IFRS 15 ( million), revenue would drop by a total of 5 million ( million including the effects of IFRS 15). The drop of 5 million, calculated on a like-for-like basis, is explained basically by the following elements: 1. The decrease by 1.8 million in publishing revenue from Newspapers Italy (-3.4% versus revenue in first quarter 2017), is attributable mainly ( -1.4 million) to the decrease in the distribution of paper copies of the Corriere della Sera and La Gazzetta dello Sport publications. While in the presence of difficult market trends, both newspapers strengthened their circulation leadership in their respective market segments in March 2018 (ADS figures January-March 2018). Specifically, circulation of the Corriere della Sera and La Gazzetta dello Sport publications at newsstands (channels provided for by law) was down by 3.8% and 4.4% respectively versus the first three months of 2017, while the relevant market fell by -7.8% and -10.6% respectively (ADS January-March 2018). In the first three months of 2018, Corriere della Sera recorded an average of 298 thousand copies distributed, including average digital copies, while total average copies distributed of La Gazzetta dello Sport amounted to 165 thousand, including average digital copies (Internal Source). The main digital performance indicators show that average monthly unique browsers of the corriere.it site reached 52.7 million in the first three months of 2018 (+20.1% versus the same period of 2017), and the average unique browsers on weekdays totaled 3.5 million, up by 17.8% versus the same period of 2017 (Adobe Analytics). Average unique browsers per month of the mobile version of the website, Corriere Mobile, grew by 43.4% versus the first three months of 2017, reaching 32.2 million (Adobe Analytics). As regards all paid digital offers, consumer subscribers at end March increased once again (+11% versus the same period of 2017), with approximately 78 thousand paid subscribers between the digital edition membership and m-site (Internal Source). The site gazzetta.it recorded 33.8 million average unique browsers per month in the first three months of 2018 (+39.5% versus the same period of 2017). Average unique browsers on weekdays totaled 2.3 million, up by 12.2% versus the same period of 2017 (Adobe Analytics). Gazzetta Mobile reached an average of 20.3 million unique browsers per month, up by 68% versus the first three months of 2017 (Adobe Analytics). 2. The drop in publishing revenue of Unidad Editorial came to -2.6 million versus the first three months of This drop is attributable to circulation, which continues to suffer the lingering downtrend of the main relevant markets. Against this backdrop, Unidad Editorial remains the leading Spanish newspaper, reaching approximately 2.7 million readers on a daily basis through its brands and 6

7 outperforming main competitors by more than 600 thousand readers (EGM: Estudio General de Medios). The average daily circulation of El Mundo in first quarter 2018 stood at a total of 113 thousand copies (including digital copies. Internal Source), dropping by 7.3% versus first quarter El Mundo retains its position as second general interest publication at national level for copies sold at newsstands (OJD January-March 2018). The average daily circulation of the sports daily Marca stood at 120 thousand copies (including digital copies. Internal Source), dropping by 11% versus first quarter Marca retains its leadership in print circulation with 112 thousand copies (OJD January-March 2018). In first quarter 2018, Expansion achieved average daily circulation of approximately 36 thousand copies (including digital copies. Internal Source), falling by 1.1% versus the same period of The publication retains its leadership in the economic newspaper segment and outperforms the market trend also in terms of print copies only (OJD January-March 2018). As for online activities, the average monthly unique browsers (Omniture) of elmundo.es reached 57 million at 31 March 2018 (+17% versus the same period of 2017), and average weekly unique browsers (Mon.-Sun.) amounted to 3.9 million (+16.4% versus the first three months of 2017). At end March 2018, marca.com reached a monthly average of 52.6 million unique browsers (+27.6% versus the same period last year), and average weekly unique browsers (Mon.-Sun.) amounted to 5.1 million, up by 15.1% versus the first three months of The average monthly unique browsers of expansion.com reached 10.6 million in the first three months of 2018, down by 5.6% versus the same period last year, and average weekly unique browsers (Mon.-Sun.) totaled 0.6 million (-9.1% versus the same period of 2017). All three websites recorded a significant increase in mobile access million out of the 0.6 million drop in publishing revenue from Magazines Italy refers to lower revenue from add-on products. The performance of revenue from childhood magazines and from other brands is basically in line with revenue achieved in first quarter Mention should be made of the good performance of the website IoDonna.it with 2.1 million average unique browsers versus 1.9 million in first quarter 2017 (+7%). The Quimmamme.it network, with over 1.2 million average unique browsers in first quarter 2018, followed the same upward pattern, growing by 30% versus the same period of Advertising revenue by business area is shown below: ( /millions) Advertising revenue 31/03/ /03/2017 Change % Change Newspapers Italy (0.8) (2.4%) M agazines Italy (1) (0.6) (6.0%) Advertising and Sport (9.5) (16.2%) Unidad Editorial % Other Corporate activities (1) n.a. Other and eliminations (38.7) (40.3) 1.6 (4.0%) Total Advertising Revenue (2) (8.8) (9.5%) (1) The amounts at 31 March 2017 referring to Magazines Italy and Other Corporate activities have been changed and made consistent with the amounts at 31 March 2018, as a result of the reclassification of advertising revenue of MyBeautyBox S.r.l., transferred in 2017 from Other Corporate Activities to Magazines Italy. (2) Advertising revenue from add-ons at 31 March 2018 and 31 March 2017 amounted to zero. The total amount of advertising revenue, equal to 84 million, was down versus 92.8 million in the first three months of 2017 ( -8.8 million). The drop, net of the effects of the adoption of IFRS 15 ( -6.6 million) and of the termination of a number of advertising contracts with third-party publishers ( -1.3 million) would amount to -0.9 million, signifying a basically steady trend for advertising revenue (-1% versus first quarter 2017), and outperforming by far the relevant markets in Italy and Spain as previously explained. 7

8 Other revenue by business area is shown below: ( /millions) Other revenue 31/03/ /03/2017 Change % Change Newspapers Italy (0.4) (10.0%) M agazines Italy (1) (1.0) (23.8%) Advertising and Sport (8.2) (50.6%) Unidad Editorial % Other Corporate activities (1) (0.5) (8.5%) Other and eliminations (5.3) (6.5) 1.2 (18.5%) Total Other Revenue (2) (8.2) (23.8%) (1) The amounts at 31 March 2017 referring to Magazines Italy and Other Corporate activities have been changed and made consistent with the amounts at 31 March 2018, as a result of the aggregation of other revenue of MyBeautyBox S.r.l. from Other Corporate Activities to Magazines Italy in (2) Other revenue from add-ons at 31 March 2018 totaled 1.3 million, of which 0.5 million attributable to Newspapers Italy and 0.8 million to Unidad Editorial. At 31 March 2017, it totaled 0.2 million and referred to Newspapers Italy. This figure totaled 26.3 million versus 34.5 million in the first three months of 2017 ( -8.2 million). An exclusion of the effects of the adoption of IFRS 15 ( -9.9 million) from the comparison would result in an increase by 1.7 million, due mainly to higher revenue from Sporting Events generated in the UAE and to higher revenue from Unidad Editorial earned through the Marca Apuestas platform as part of the betting activities. ******* Corriere della Sera continued to enhance and develop its offering in Specifically, in first quarter 2018, it launched Corriere Innovazione, the new magazine that explores the varied facets of innovation, touching science, technology, culture, research and development, offering different perspectives in the digital and paper domains and a generous calendar of local-based dedicated events. Mention should also be made of the exhibition inaugurated on 23 February 2018 in Matera, displaying 319 pieces of cover art of La Lettura in view of the upcoming event Matera European Capital of Culture Parallel to the event, a 48-page supplement was added and distributed at newsstands in Apulia and Basilicata. Gazzetta dello Sport keeps growing by increasing its sections and shining a daily spotlight on Torino and Cagliari, offering more in-depth information dedicated to the two football teams and their fans. Further theme supplements were published: one covering the 2018 Winter Olympics, with surveys, trivia and interviews on the most exciting winter fixture; the other dealing with the F1 World Championship, offering interviews with the top drivers, plus stories from the Melbourne correspondents, statistics, details of the circuits and the new rules, as well as information on the calendar and tech insights. The information offer stretches to the website with two new sections, one on Nutrition, the other on virtual sports through the E-sports section, proof of the publication s ongoing focus on news and issues that appeal to its readers and users, with a significant editorial and organizational investment. Also worth mentioning are the successful initiatives launched last year, which continued to bring positive effects on circulation and advertising revenue in first quarter These include the new L Economia and the relaunch of 7, the launch of the new free weekly insert Buone Notizie L impresa del Bene and, starting from 24 November, the new local edition Corriere Torino. Additionally, Oggi Enigmistica Settimanale was relaunched at end June. The last quarter of 2017 saw the completed restyling of Sportweek. In Spain, starting from 23 February 2018, Su Vivienda was revamped; the supplement is a trusted source for the real-estate market, out on Fridays along with the local Madrid edition of El Mundo. Starting from 5 March, El Mundo comes every week with the sale of the supplement Actualidad Economica, the main business-economic periodical title of the Unidad Editorial group. Furthermore, the MarcaClaro portal was launched in January 2018 also in Colombia, following the launch of the new MarcaClaro portal in Mexico in

9 ******* EBITDA in the first three months of 2018 amounted to 20.2 million, improving by 8.1 million versus 12.1 million in the first three months of The trend is due to the positive results deriving, on the one hand, from investing in publishing content, from the constant enhancement of the offering and development of the portfolio of sporting events and, on the other, from the focus on costs in general and constant commitment to efficiency, which produced benefits on operating costs of 5.5 million, of which 2.9 million in Italy and 2.6 million in Spain. In addition, in the first three months of 2018, non-recurring income and expense amounted to a positive 2.2 million (zero at 31 March 2017). The item mainly includes non-recurring income of 2.6 million gained by RCS Sport from a dispute settlement agreement, as explained in the 2017 Annual Report. Lastly, it should be noted that the adoption of the new IFRS 15 produced no effects on EBITDA. The improvement in EBITDA before non-recurring net income would come to 5.9 million, 3 million referring to Unidad Editorial EBITDA (as a result also of increased digital revenue), 1.2 million to Advertising and Sport, due also to the increase in activities linked to sporting events, and 1.4 million to Other Corporate Activities. The change in EBITDA versus 31 March 2017 is shown below. M ,0 1, ,2 3, ,1 0,7 (0.8) March 2017 Newspapers Italy Magazines Italy Advertising and Sport Unidad Editorial Other Corporate March 2018 Revenue, EBITDA and operating profit (loss) by operating segment at 31 March 2018 and 31 March 2017 are summarized below: ( /millions) 31/03/ /03/2017 Revenue EBITDA % of revenue EBIT % of revenue Revenue EBITDA % of revenue EBIT % of revenue Newspapers Italy % % % % Magazines Italy (1) % (0.3) (1.5)% % % Advertising and Sport % % % % Unidad Editorial % % % (0.7) (1.0)% Other Corporate activities (1) 5.4 (3.6) n.a. (6.8) n.a. 5.9 (4.9) n.a. (9.2) n.a. Other and eliminations (44.2) 0.0 n.a. 0.0 n.a. (47.0) (0.1) n.a. (0.2) n.a. Consolidated % % % (0.6) (0.3)% (1) Revenue at 31 March 2017 referring to Magazines Italy and Other Corporate activities has been changed and made consistent with the amounts at 31 March 2018, as a result of the reclassification of revenue of MyBeautyBox S.r.l. transferred in 2017 from Other Corporate activities to Magazines Italy. 9

10 Personnel expense, equal to 66.4 million, decreased by 1.1 million versus the same period of The change includes 0.4 million from non-recurring expense incurred in first quarter 2018 in Magazines Italy (zero in first quarter 2017), net of which the decrease would total 1.5 million. Average headcount dropped by 96 units versus first quarter 2017, involving Italy for the most part (-61 units) and Spain (-30 units). Average employees working in the Group s foreign operations in the first three months of 2018 account for approximately 41% of the average headcount (percentage in line with first quarter 2017). The RCS Group s total average headcount in the first three months of 2018 came to 3,325 resources (3,421 at 31 March 2017), while the exact headcount decreased from 3,391 at 31 March 2017 to 3,300 at 31 March The share of profits of equity-accounted investees amounted to 0.8 million ( 0.3 million at 31 March 2017). This profit is related to the investees of the m-dis group and the Spanish Corporation Bermont group. The 0.5 million increase is attributable mainly to the improved performance of the Spanish subsidiary. The operating profit (EBIT) was 11.2 million versus a loss of 0.6 million in the first three months of 2017, marking an improvement of 11.8 million. The increase reflects the above situations, plus the effect of lower amortization and depreciation of 3.7 million, of which 3 million relating to intangible assets as a result of both the change from finite to indefinite useful life of the daily newspaper titles Marca and Expansion, as already explained in the Annual Report for the year ended December 31, 2017, and of the completion of the useful life of software licenses, publishing systems and web infrastructures of the Other Corporate Activities area. Net financial expense and net gains amounted to 4.4 million, down by a total of 2 million. The reduction is due mainly to lower interest accrued on the net financial debt, as a result of both the reduction in the average exposure and of the lower rate charged, plus the lower negative effect of hedging derivatives. The overall change includes 0.3 million from the increase in expense from discounting applied to certain financial statement items. Income taxes amounted to 0.7 million in the first three months of 2018 versus a positive 1.3 million at 31 March At 31 March 2018, the figure referred to IRAP ( 0.2 million) and to the allocation of deferred taxes ( 0.6 million). These were partly offset by the use of deferred tax assets for 0.1 million. The Group s net profit in the first three months of 2018 improved by 11.7 million versus the same period of 2017, rising from a loss of 5.7 million at 31 March 2017 to a profit of 6 million at 31 March 2018, generally reflecting the above trends. 10

11 Reclassified statement of financial position ( /millions) 31 March 2018 % 31 December 2017 % Intangible assets Property, plant and equipment Investment property Financial assets Non-current assets Inventories Trade receivables Trade payables (243.5) (55.9) (236.3) (51.5) Other assets/liabilities (54.0) (12.4) (66.6) (14.5) Net working capital (64.6) (14.8) (46.7) (10.2) Provisions for risks and charges (49.8) (11.4) (50.4) (11.0) Deferred tax liabilities (56.0) (12.8) (55.4) (12.1) Employee benefits (38.0) (8.7) (38.4) (8.4) Net capital employed Equ i ty Non-current financial liabilities Current loans and borrowings Current financial liabilities recognized for derivatives Non-current financial liabilities recognized for derivatives Non-current financial assets recognized for derivatives Cash and cash equivalents and current loan assets (10.1) (2.3) (16.5) (3.6) Net financial debt (1) Total sources of financing (1) Indicator of financial structure, calculated as current and non-current loans and borrowings less cash and cash equivalents, current financial assets and non-current financial assets recognized for derivatives. Net financial debt as set out by CONSOB in its Communication DEM/ dated 28 July 2006 excludes non-current financial assets. Non-current financial assets relating to derivative instruments at 31 March 2018 and 31 December 2017 amounted to zero and, therefore, RCS s financial ratio at 31 March 2018 and at 31 December 2017 matches the net financial debt as defined by the abovementioned CONSOB Communication. Net capital employed amounted to million, marking a net decrease of 23 million versus 31 December 2017, originating from the reduction in net non-current assets ( -5.5 million), in addition to the decrease in working capital of 17.9 million, partly offset by the overall downward change in provisions of 0.4 million. The decrease in non-current assets ( -5.5 million) is attributable mainly to the drop in intangible assets and property, plant and equipment ( -6.7 million) due to amortization/depreciation ( 8.8 million), partly offset by capital expenditure in the period ( +2.1 million). This decrease is offset by higher non-current financial assets ( +1.3 million), due mainly to the increase in deferred tax assets ( +0.6 million), and to investments in companies measured at equity ( +0.7 million) following the positive results of the period. Mention should be made that, as part of the assessments on the useful life of fixed assets made at end 2017, as explained in detail in the Annual Report at 31 December 2017, the daily newspaper titles Marca and Expansion have changed from finite to indefinite useful life, with consequent suspension of the relating amortization. Net working capital moved from million at 31 December 2017 to million at 31 March 2018, due mainly to the reduction in trade receivables ( million) and the change in trade payables ( -7.2 million), only partly offset by the increase in inventories ( +2.9 million) and the change in other net liabilities ( million). The 0.4 million decrease in provisions is linked to provisions for risks and derives mainly from the use of provisions recognized in prior years in Italy and Spain against non-recurring expense. Equity increased by 5.2 million versus 31 December 2017, due mainly to profit for the period ( +6 million), only partly offset by the effects of the adoption of the new IFRS 9, equal to -0.8 million net of the tax effect. The adoption of the standard resulted in the application of the new credit estimate model based on expected losses, with a consequent increase in the allowance for impairment of 1.1 million (tax effect of 0.3 million). Mention should be made that the adoption of IFRS 15, in force as from 1 January 2018, produced no effects on equity, since it implies only a different presentation of revenue and costs with no effect on margins. 11

12 Total net financial debt amounted to million ( million at 31 December 2017 and million at 31 March 2017). The improvement of 28.2 million is attributable to ordinary operations for 30.8 million. This positive performance was partly offset by net outlays (approximately 2.6 million) mainly for technical capex incurred in the period, and to non-recurring net expense previously booked net of insurance compensation received by RCS Sport for the above settlement agreement. The abovementioned changes in total net financial debt are specified in detail below: M ,0 (1,1) (1,5) (259.2) (287.4) Net financial debt 31/12/2017 Source: Management Reporting Ordinary operations Disposals and acquisitions Other (net nonrecurring expense) CAPEX Net financial debt 31/03/2018 ******* With regard to the contract for the purchase of RCS Libri S.p.A., commented on in the 2017 and 2016 Annual Reports, and to the earn-out established therein, it should be noted that the required procedures for verifying the existence (or less) of the conditions for payment of the earn-out and, in such case, for its determination, have been put in place and are still in progress, as set out in the sale contract. 12

13 SIGNIFICANT EVENTS IN THE REPORTING PERIOD On 15 March 2018, the Board of Directors of RCS MediaGroup S.p.A., which met under the chairmanship of Urbano Cairo, reviewed and approved the results at 31 December SIGNIFICANT EVENTS AFTER THE REPORTING PERIOD On 26 April, the shareholders of RCS MediaGroup S.p.A. met and: in ordinary session: - approved the Financial Statements for the year ended 31 December 2017, which closed with a profit of 53,686,184.36, and the reduction of prior years losses carried forward from 247,108, to 63,807, by using the above profit for the year, the share premium reserve of 110,405,136.84, the merger reserve of 130, and the legal reserve of 19,079,626.96; - appointed the Board of Statutory Auditors for and established their fees; the composition is as follows: Enrico Maria Colombo (Chairman), drawn from the minority list submitted by Di.Vi. Finanziaria di Diego Della Valle & C. S.r.l., holding 2.775% of the share capital; Marco Moroni and Paola Tagliavini (Standing Auditors), drawn from the majority list submitted by Cairo Communication S.p.A., holding % of the share capital; Piera Tula (Alternate Auditor), drawn from the list submitted by Di.Vi. Finanziaria di Diego Della Valle & C. S.r.l.; Guido Croci and Maria Pia Maspes (Alternate Auditors), drawn from the majority list submitted by Cairo Communication S.p.A.; - appointed Deloitte S.p.A. as the Independent Auditors for and established their fees; - expressed a favourable vote on Section One of the Remuneration Report prepared by the Board of Directors in accordance with the provisions of art. 123-ter, par. 6, of Legislative Decree no. 58/1998 and the related implementing provisions issued by CONSOB; in extraordinary session: - reduced the share capital to cover the losses carried forward resulting from the financial statements for the year ended 31 December 2017 (in the residual amount of 63,807,006.27, following use of profit for 2017 and reserves as described above), from 475,134, to 411,327,595.83; - reduced the share capital further from 411,327, to 270,000,000.00, using the amount of 141,327, therefore as follows: (i) 54,000, to establish the legal reserve pursuant to art of the Italian Civil Code; and (ii) 87,327, to establish an available reserve without proceeding with any capital repayment to the shareholders. 13

14 BUSINESS OUTLOOK While uncertainty persists, with reference markets continuing to decline (circulation and advertising in Italy and circulation in Spain), as in 2017 the Group improved its results strongly in the first quarter of 2018, year on year, achieving its margins targets and progressively reducing its financial debt. Considering the actions already implemented and those planned to defend and grow revenue and in continuous pursuit of operational efficiency, and considering the positive performance of the first quarter, in the absence of events that cannot for the moment be foreseen, the Group confirms its outlook for growth in 2018 in EBITDA and cash flow from current operations compared to 2017, such as to reduce financial debt by the end of 2018 below 200 million. The evolution of the general economic situation and reference sectors could however affect the complete achievement of these objectives. 14

15 ADDITIONAL INFORMATION REQUIRED BY CONSOB PURSUANT TO ART. 114, PARAGRAPH 5 OF LEGISLATIVE DECREE NO. 58/1998 OF 27 MAY 2013 a) The net financial position of the RCS Group and the Parent Company, highlighting short-term elements separately from medium-and long-term components. (EUR million) Carrying amount Change 31/03/ /12/2017 Cash and cash equivalents (6.4) Financial receivables Securities Current financial assets for derivatives - - A) TO TAL CURRENT FINANCIAL ASSETS (6.4) Current financial payables and liabilities (53.3) (67.0) 13.7 Current financial liabilities for derivatives (0.5) (1.0) 0.5 B) TO TAL CURRENT FINANCIAL LIABILITIES (53.8) (68.0) 14.2 (A+B) Net current financial (debt) (43.7) (51.5) 7.8 Non-current financial assets arising from derivative instruments C) TO TAL NO N-CURRENT FINANCIAL ASSETS Non-current financial payables and liabilities (215.0) (235.8) 20.8 Non-current financial liabilities for derivatives (0.5) (0.1) (0.4) D) TO TAL NO N-CURRENT FINANCIAL LIABILITIES (215.5) (235.9) 20.4 (C+D) Total net non-current financial (debt) (215.5) (235.9) 20.4 Net financial debt 1 (259.2) (287.4) 28.2 (1) The financial ratio determined as the result of current and non-current financial payables net of cash and cash equivalents as well as current and non-current financial assets related to derivatives. The net financial position defined by CONSOB communication DEM/ of 28 July 2006 excludes non-current financial assets. As non-current financial assets arising from derivative instruments amounted to zero at both 31 March 2018 and 31 December 2017, the financial ratio of RCS at 31 December 2018 and 31 December 2017 coincides with the net financial position as defined in the aforesaid CONSOB communication. Net financial debt amounted to million ( million at 31 December 2017), showing a drop of around 28 million compared to 31 December The improvement in the figure was mainly driven by the positive performance of core business operations ( 30.8 million), only partially offset by investment expenditure and non-recurring net expenses. 15

16 Below is the net financial debt of RCS MediaGroup S.p.A., highlighting short-term elements separately from long-term components. Carrying amount (EUR million) 31/03/ /12/2017 Change Cash and cash equivalents (0.1) Current financial receivables (2.3) A) TOTAL CURRENT FINANCIAL AS S ETS ( 2.4) Payables due to c/a banks ( 6.1) ( 16.8) 10.7 Current financial payables ( 117.0) ( 110.0) ( 7.0) Current financial liabilities for derivatives ( 0.5) ( 1.0) ( 0.5) B) TOTAL CURRENT FINANCIAL LIABILITIES ( 123.6) ( 127.8) 3.2 (A+B) Total net current financial (debt) Financial assets for derivatives C) TOTAL NON-CURRENT FINANCIAL AS S ETS Non-current financial payables ( 213.1) ( 233.3) 20.2 Non-current financial liabilities for derivatives ( 0.5) ( 0.1) 0.6 D) TOTAL NON-CURRENT FINANCIAL LIABILITIES ( 213.6) ( 233.4) 20.8 (C+D) Total net non-current financial (debt) ( 213.6) ( 233.4) 20.8 Net financial debt ( 68.6) ( 90.2) 21.6 The net financial debt of RCS MediaGroup S.p.A. at 31 March 2018 was 68.6 million, an improvement of 21.6 million compared to 31 December A major contribution to the figure came from core business operations ( 26.9 million), partially offset by investment expenditure and non-recurring net expenses. b) Mature debt positions distributed by category (financial, commercial, tax and social security) and connected to potential reactions from Group creditors (reminders, injunctions, suspensions of supplies). (EUR million) Analysis overdue debt positions 31/03/ days days days days > 360 days Total Due Total maturing Total Trade Debt Positions Financial Debt Positions Tax debt positions Social security debt positions Other debt positions Total short-term debt positions All of the debt positions with no contractual deadlines are eliminated, such as the short-term portion of provisions for risks and charges. Short-term debt positions at 31 March 2018 totalled million and show an overall decrease of 18.5 million compared to 31 December The decline was driven by 14.2 million in lower financial debt and 11.5 million in lower tax, social security and other debt positions, which was partially offset by 7.2 million in higher trade payables. Non-overdue positions, totalling 329 million, represent approximately 86.2% of the 16

17 total (at 31 December 2017 they totalled million and equalled 86.3% of the total). At 31 March 2018 there were no overdue accounts on financial, tax or social security debt positions. Overdue debt positions amounted to 52.6 million, down by 2.2 million on December 2017 ( 54.8 million). The comparison with 31 December 2017 shows a decrease in overdue debt positions for the following past due brackets: -2.3 million in the more than 360 days bracket; -2 million in the days bracket; and -1.5 million in the less than 30 days bracket. Overdue debt positions in the days bracket rose by 2.8 million, as did those in the days bracket by 0.8 million. Overdue debt positions include 8.3 million in accounts less than 30 days past due ( 9.8 million at 31 December 2017), which essentially relate to the company s operations. The remaining 44.3 million past due includes accounts payable to agents, totalling 10.5 million (20% of the total overdue amount). In relations with agents, industry practice requires the payment of a monthly advance on their activities which is reported under other receivables on the balance sheet. Advances to agents, which refer to overdue debts, totalled 10.2 million, an amount that is almost in line with the specific overdue amount. It should be noted that payables to agents past due by more than 360 days represent approximately 44% of this category of past due accounts. It should also be noted that positions expiring on 31 March 2018 were conventionally classified as debts due for payment, amounting to approximately 9.5 million. Overdue trade accounts of 52.1 million ( 54.3 million at 31 December 2017) mainly refer to the RCS MediaGroup S.p.A. ( 32.1 million). As part of its usual activities, the Company received some reminders, warnings to comply, injunctions (for nonsignificant amounts to the state entirely restated), from suppliers regarding trade accounts, which have been restated when applicable. c) Transactions with related parties of the RCS Group and the Parent Company. As required by Consob under article 114, paragraph 5, of Legislative Decree 58/98, protocol of 27 May 2013, transactions with related parties of the RCS Group are reported below. In relation to the Consob Regulation adopted by resolution of 12 March 2010, as amended, it is reiterated that on 10 November 2010 RCS MediaGroup S.p.A. adopted a specific procedure for transactions with related parties, governing their authorisation and their disclosure to the market and to Consob. The procedure was subsequently reviewed with effect as of 1 January 2014, and again with effect as of 1 October The most recent amendments to the procedure took effect as of 4 August The procedure is published on the Company website under the Governance section and is specifically addressed, as are previous provisions, in the Report on Corporate Governance and Ownership Interests. Under the provisions of the procedure, both significant transactions and some minor transactions are referred for prior approval to the Committee for Related-Party Transactions, set up in accordance with the procedure. As of July 2016, the Ultimate Parent Company of the Group is U.T. Communications S.p.A., the parent company that effectively controls the company Cairo Communication S.p.A., which in turn is the direct parent of RCS MediaGroup S.p.A. At 31 March 2018, Cairo Communication S.p.A. held an equity interest in RCS MediaGroup S.p.A. of % (59.831% including the equity interest held directly at 31 March 2018 by U.T. Communications S.p.A. Source: Consob). As such, the related parties of the Group include: the direct and indirect parent companies of RCS MediaGroup S.p.A., their subsidiaries, including joint ventures, and their associates; the subsidiaries (transactions with which are eliminated in the consolidation process), joint ventures and associates of RCS MediaGroup S.p.A.; key management personnel, their direct family members and any companies directly or directly controlled by them or subject to their joint control or significant influence. 17

18 Details of transactions conducted are provided below by financial statement area, together with the percentage they represent of each item. Intercompany transactions eliminated in the consolidation process have been excluded. Financial dealings (in EUR million) Trade receivables Current financial payables and liabilities Trade payables Sundry payables and other current liabilities Commitmen ts Parent companies Joint ventures Associates Manager supplementary retirement fund Other affiliates (1) Other related parties (2) Total Total RCS Group Related parties as a percentage of total RCS Group 11.5% 21.4% 7.1% 3.5% 5.2% Business dealings (in EUR million) Revenue from sales Costs for raw materials and services Personnel costs Other revenue and operating income Parent companies - (0.1) Joint ventures 49.1 (2.7) Associates 0.4 (5.2) - - Manager supplementary retirement fund - - (0.1) - Other affiliates (1) 0.1 (0.5) Other related parties (2) 0.5 (0.9) (0.8) - Total 50.1 (9.4) (0.9) 0.6 Total RCS Group (132.3) (66.4) 7.5 Related parties as a percentage of total RCS Group 23.2% 7.1% 1.4% 8.0% (1) Including the subsidiaries, associates and joint ventures of Cairo Communication S.p.A. and U.T. Communications S.p.A. (2) Mainly including dealings with key management personnel, their direct family members and any companies directly or directly controlled by them or subject to their joint control or significant influence. Dealings with subsidiaries, associates and jointly controlled entities mainly relate to the exchange of goods, the provision of services, the sourcing and lending of funds and tax relations. Such transactions are conducted at arm s length, taking into account the quality of the goods and services provided. Dealings with parent companies included 0.1 million of costs for materials and services, 0.2 million of other operating income, 0.9 million of trade receivables and 0.5 million of trade payables. Such accounts mainly refer to revenue for the lease of office space, charge-backs for RCS personnel that work at the Cairo Group and costs for the purchase of market research services. Dealings with joint ventures refer to the company m-dis Distribuzione Media S.p.A. and its subsidiaries and included 49.1 million of revenue earned by the Group, 2.7 million of costs for materials and services, 0.2 million of other revenue and operating income, 22.1 million of trade receivables, 11.4 million of current financial debt and 2.3 million of trade payables. The main business dealings with associates consisted of transactions with Bermont Group companies engaged for the printing of Unidad Editorial newspapers (totalling 13.1 million of trade payables, 0.2 million of trade receivables, 0.4 million of revenue from sales and 5.2 million of costs for materials and services). Economic and financial dealings with other affiliates refer to transactions with Cairo Group companies (totalling 0.5 million of cost for raw material and services, 0.3 million of revenue from sales and other revenue and operating income, 0.7 million of trade receivables and 1.3 million of trade payables). Other revenue and operating income mainly refers to the sale of advertising space, charge-backs for RCS personnel 18

19 that work at the Cairo Group and revenue from the lease of office space. Costs incurred mainly refer to the purchase of advertising space. Dealing with other related parties include remuneration paid to key management personnel, as reported earlier, 0.5 million of revenue and 0.8 million of trade receivables due from Della Valle Group and Pirelli Group companies for the sale of advertising space. *** IRES tax consolidation. In the first quarter of 2018, RCS MediaGroup S.p.A. continued to make use of a national tax consolidation arrangement, as permitted by Legislative Decree 344 of 12 December 2003, designed to deliver savings through the application of taxation on a single tax basis, enabling the immediate offsetting of tax credits and tax losses for the period. Intercompany dealings under the national tax consolidation arrangement are conducted with a view to ensuring neutrality and equal treatment. The companies that participate in the national tax consolidation arrangement, in which RCS MediaGroup S.p.A. is the consolidating company, as of the 2017 fiscal year, are: Trovolavoro S.r.l., RCS Sport S.p.A., RCS Produzioni Padova S.p.A., Sfera Service S.r.l., Blei S.r.l. in liquidation, RCS Edizioni Locali S.r.l., RCS Produzioni S.p.A., RCS Digital Ventures S.r.l., Digicast S.p.A., Digital Factory S.r.l., RCS Produzioni Milano S.p.A. and Editoriale del Mezzogiorno S.r.l. VAT consolidation. In the first quarter of 2018, RCS MediaGroup S.p.A. continued to make use of a VAT consolidation arrangement for the RCS Group, which resulted in VAT payable of 1.3 million. RCS MediaGroup S.p.A. contributed 4.7 million in VAT payable to the VAT consolidation arrangement for the RCS Group in the first quarter of For a list of key management personnel, see Section I of the Remuneration Report approved by the Shareholders Meeting on 26 April 2018 and published on the website Aggregate figures are provided below of remuneration paid to key managers identified. (amounts in EUR million) Costs for services Personnel costs Sundry payables and other current liabilities Board of Directors (0.8) Board of Statutory Auditors (0.1) Key management personnel - (0.8) 0.4 Total related parties (0.9) (0.8) 2.9 Total RCS Group (132.3) (66.4) 85.3 Related parties as a percentage of total RCS Group 0.7% 1.2% 3.4% Personnel costs include remuneration paid to key management personnel in the form of salaries for a total of 0.8 million. Personnel costs relating to related parties accounted for 1.2% of total personnel costs. Commitments to key management personnel totalled 2.3 million, while commitments to other related parties amounted to 0.8 million. As specifically concerns additional commitments to key management personnel of RCS MediaGroup S.p.A., see Section II, Part One, of the Remuneration Report published on the website Related parties of RCS MediaGroup S.p.A. Details of transactions conducted are provided below by financial statement area, together with the percentage they represent of each item. 19