Mediaset Group. Quarterly Report as at 30 September 2014

Transcription

1 Mediaset Group Quarterly Report as at 30 September 2014

2 MEDIASET S.p.A. - via Paleocapa, Milan Share Capital Euros 614,238, fully paid up Tax Code, VAT number and inscription number in the Milan Enterprises Register: Website:

3 INDEX Corporate Bodies... 1 Financial Highlights... 2 Introduction... 3 Interim Report on Operations at 30 September Significant events in the third quarter... 9 Performance by geographical areas and business segment Financial results Balance Sheet and Financial Position Group Headcount Related-party transactions Opt-out of the obligation to publish report in the event of significant transactions Subsequent events Forecast for the year Consolidated Accounting Tables and Explanatory Notes Consolidated Accounting Tables Explanatory Notes... 34

4

5 CORPORATE BODIES Board of Directors Chairman Fedele Confalonieri Deputy Chairman Pier Silvio Berlusconi Chief Executive Officer Giuliano Adreani Directors Marina Berlusconi Pasquale Cannatelli Paolo Andrea Colombo Mauro Crippa Bruno Ermolli Marco Giordani Alfredo Messina Gina Nieri Michele Perini Niccolò Querci Carlo Secchi Attilio Ventura Executive Committee Risk and Control Committee Compensation Committee Governance and Appointments Committee Committee of Independent Directors for Related-Party Transactions Board of Statutory Auditors Independent auditors Fedele Confalonieri Pier Silvio Berlusconi Giuliano Adreani Gina Nieri Carlo Secchi (Chairman) Alfredo Messina Attilio Ventura Attilio Ventura (Chairman) Paolo Andrea Colombo Bruno Ermolli Attilio Ventura (Chairman) Paolo Andrea Colombo Carlo Secchi Michele Perini (Chairman) Carlo Secchi Attilio Ventura Mauro Lonardo (Chairman) Francesca Meneghel (Regular Auditor) Ezio Maria Simonelli (Regular Auditor) Massimo Gatto (Alternate Auditor) Flavia Daunia Minutillo (Alternate Auditor) Riccardo Perotta (Alternate Auditor) Reconta Ernst & Young S.p.A. 1

6 MEDIASET GROUP: FINANCIAL HIGHLIGHTS Main Income Statement Data FY M M 2013 mio % mio % mio % 3, % Total net Revenues 2, % 2, % 2, % Italy 1, % 1, % % Spain % % % EBIT % % % Italy % % % Spain % % Profit before Tax and Minority Interest (10.1) 0.0% Net Result (46.8) 0.0% (27.3) Main Balance Sheet and Financial Data 31st December th September th September 2013 mio mio mio 4,436.7 Net Invested Capital 3, , ,977.7 Total Net Shareholders' Equity 2, , ,119.9 Net Group shareholders' Equity 2, , Minorities Shareholders' Equity (1,459.0) Net Financial Position (968.4) (1,493.5) 1,139.3 Operating Cash Flow Investiments 1, Dividens paid by the Parent Company Dividens paid by Subsidiares Personnel FY M M 2013 % % % 5, % Mediaset Group Personnel (headcount) 5, % 5, % 4, % Italy 4, % 4, % 1, % Spain 1, % 1, % 5, % Mediaset Group Personnel (average) 5, % 5, % 4, % Italy 4, % 4, % 1, % Spain 1, % 1, % Main Indicators FY M M % EBIT/Net Revenues 4.5% 4.6% 6.8% Italy 1.4% 3.6% 8.5% Spain 12.8% 7.7% 2.9% EBT/Net Revenues -0.4% 1.6% 0.3% Net Profit/Net Revenues -2.0% -1.1% 0.01 EPS (euro per share) (0.04) (0.02) 0.01 Diluted EPS (euro per share) (0.04) (0.02) 2

7 INTRODUCTION This Interim Financial Report as at 30 September 2014 (the "Quarterly Report") has been prepared in accordance with article 154-ter of Legislative Decree 58/1998 and amendments thereto and Consob Communication DEM/ of 30 April 2008 and in compliance with the international accounting and financial reporting standards (IAS/IFRS) applicable under Regulation (EC) No. 1606/2002 of the European Parliament and of the Council of 19 July 2002, in particular with IAS 34 Interim Financial Reporting. The presentation of the reclassified consolidated financial statements and of the statutory financial statements provided in this Interim Financial Report corresponds to the presentation adopted for the annual financial statements. The Explanatory Notes have been prepared in compliance with the minimum requirements of IAS 34 Interim Financial Reporting. As such, the information disclosed in this report is not comparable to that of complete financial statements prepared in accordance with IAS 1. This Quarterly Report has not been audited. INTERIM REPORT ON OPERATIONS AS AT 30 SEPTEMBER 2014 Group Highlights At the end of the period, operations confirmed trends already outlined in the first half of the year, reflecting the different conditions of the economy and markets in the two geographical areas where the Group operates. In Italy, deflation continued, with no clear signs yet of a sustainable recovery in domestic demand and consumption, while in Spain, the strengthening of the economic recovery sustained a marked increase in the advertising revenues and operating margins of the subsidiary Mediaset España, which also benefited from an excellent audience share in June and July, with broadcasts of the matches of the Soccer Word Cup held in Brazil. Against this background, the Group's consolidated performance during the third quarter of the year, compared to the same period of the previous year, improved considerably, capitalising on the very strong performance of the advertising revenues in Spain and actions to optimise editorial content planned for the start of the autumn TV season in Italy, to offset the continuing weak trend of advertising revenues on the domestic market. At the end the period, overall consolidated operating performance was more in line with the same period of the previous year, as reflected in the financial data reported below: Consolidated net revenues amounted to EUR 2,387.6 million, mainly in line with the figure of EUR 2,390.1 million for the same period of 2013; EBITDA amounted to EUR million, up from the EUR million recorded in 2013; EBIT was equal to EUR million, compared to EUR million recorded in the same period of the previous year. Operating profitability fell to 4.5% from 4.6% recorded in 2013; Profit (loss) from continuing operations, before tax and non-controlling interests amounted to a loss of EUR million compared to a profit of EUR 37.8 million as at 30 3

8 Interim Financial Report at 30 September 2014 Interim Report on Operations September 2013, of which EUR million consisting of capital losses, already recognised as at 30 June 2014, following the sale of the investment in Digital Plus on 4 July 2014, determined based on the part of the sale price not affected by future events. The effect on consolidated net profit/(loss) for the Group arising from this operation was equal to EUR million. The net profit (loss) for the Group amounted to a loss of EUR million, compared to a loss of EUR million for Consolidated net financial debt fell from EUR 1,459.0 million as at 31 December 2013 to EUR million as at 30 September 2014 due to the effect of free cash flow of EUR million generated in the period and net proceeds of EUR million arising from the offering on the market of the 25% investment in EI Towers at the start of the second quarter. Performance review by geographical area: Italy In the first nine months of 2014 consolidated net revenues from the Group's Italian operations totalled EUR 1,730.4 million, down from the EUR 1,806.6 million posted in the corresponding period of the previous year. Advertising revenues in the first nine months of the year continued to be affected by difficult conditions on the reference market. Against this backdrop, the sales strategy of the agency Publitalia stayed focused on safeguarding profitability, without resorting to the price cutting tactics of some competitors, even to the detriment of its short-term market share. Gross advertising revenues in the first nine months of the year for media licensed to the Group (free-to-air and pay television channels and the relative share of sub-licensing on websites) fell by -4.9%, although the figure suggests that the advertising market is slowly but progressively returning to normal compared to previous quarters. In the same period of 2013 advertising revenues fell by -13.5% year-on-year, while in the fourth quarter of 2013 they fell by -6.2%. According to the latest figures released by Nielsen, in the first nine months of the year, the advertising market fell by -3.3% year-on-year. Core revenues for Mediaset Premium from the sale of prepaid cards, recharges and easy pay subscriptions and revenues from the "Infinity" on demand service amounted to EUR million, compared to EUR million in the first nine months of Revenues for EI Towers from external customers came to EUR 39.8 million, in line with the 2013 figure. Operating costs (personnel expenses, costs for purchases, services and other charges) for the period fell by -2.7% compared to the same period of 2013, consolidating the structural reduction in running costs achieved over the last two years through cost efficiency measures. Total EBIT from operations in Italy amounted to EUR 23.7 million, compared to EUR 64.2 million as at 30 September Operating profitability at the end of the reporting period came to 1.4%, compared to 3.6% posted in Total audience over the 24-hour period averaged 10,178,000 viewers. Auditel statistics show that Mediaset networks as a whole, including both free-to-air and pay television (Premium Calcio) channels broadcast over the digital terrestrial network, obtained an 4

9 Interim Financial Report at 30 September 2014 Interim Report on Operations audience share of 32.3% over the 24-hour period, 32.1% in the Day Time slot and 33.4% in Prime Time. The table below shows the breakdown of audience share by network for the reporting period. (Source: Auditel) The Group is the affirmed market leader with the commercial target audience for all three of its general interest channels and as broadcaster in all three time slots. Notably, Canale 5 ranks in top spot and Italia 1 in third spot in all time slots with the year-old viewer target. 30 SEPTEMBER 2014 % COMMERCIAL TARGET SHARE years old hours Day Time Prime Time Mediaset RAI Mediaset's general interest channels held an audience share for the period of 25.9% over 24- hours, 26.2% in the Day Time slot and 25.9% in Prime Time. Adding to the Group's digital channels, total audience share over the 24-hour period came to 32.7% of all viewers, 32.8% in the Day Time slot and 33% in Prime Time. 5

10 Interim Financial Report at 30 September 2014 Interim Report on Operations A positive contribution also came from the Multichannel Free and Pay networks, which added nearly seven points of audience share for overall viewers and more than seven points for the commercial target audience. GUARANTEE PERIOD: AUTUMN 2014 (from 07/09 to 27/09) % COMMERCIAL TARGET SHARE years old hours Day Time Prime Time Mediaset RAI The following table shows the hours broadcast by each Mediaset network in the first quarter of the two years compared. Mediaset Networks - Broadcasted programs 1H H 2013 D D% Film 3, % 3, % (61) -1.9% Tv Movie % % (60) -7.0% Mini-series % % (33) -9.9% Telefilm 4, % 4, % (243) -5.4% Tv Romance % % (78) -73.6% Sit-com % % % Soap % % (8) -3.9% Telenovelas % % % Cartoons % % (465) -86.3% Total TV Rights 10, % 10, % (511) -4.8% News 2, % 2, % (572) -20.4% Information programmes 1, % 1, % % Sport programmes % % % Event % % (135) -48.6% Entertainment 3, % 3, % % Culture % % % Teleshopping % % % Total in-house productions 9, % 8, % % Total 19, % 19, % - 0.0% 6

11 Interim Financial Report at 30 September 2014 Interim Report on Operations Performance review by geographical area: Spain Consolidated net revenues for Mediaset España Group at the end of the first nine months of 2014 amounted to EUR million, increasing by 12.7% compared to the corresponding period of the previous year. Gross television advertising revenues amounted to EUR million, up 11.3% yearon-year. According to the latest figures released by Infoadex, total advertising investments on the Spanish market went up by 4.9% in the same period, while the television advertising segment increased 9.9% year-on-year. Mediaset España confirmed its leadership position in the television advertising segment, with a 44.4% share, breaking away from its main competitor Atresmedia by 2.6%. Total costs, equal to EUR million, thanks to ongoing policies of cost optimisation and control, increased by 6.7% compared to the same period of the previous year, due mainly to costs in June and July for rights to broadcast main matches of the 2014 Soccer World Cup held in Brazil and the Basketball World Cup. Over the last four years, strong cost control measures have brought a cumulative saving of EUR million (-20.1%), without however affecting the quality of production. As a result of the above performance EBIT came to EUR 84.2 million, compared to EUR 45.4 million in the same period of 2013, corresponding to an operating profitability of 12.8% compared to 7.7% in the first nine months of Mediaset España Group's free-to-air multichannel television offering as at 30 September 2014 included Telecinco and Cuatro, as well as the thematic channels Factoría De Ficción, Boing, Divinity and Energy. As stated in the Half Year Financial Report as at 30 June 2014, following the implementation of a supreme court ruling, as of 6 May 2014 the channels La Siete and Nueve from the Mediaset España Group's multichannel offering were blacked out. In terms of audience figures, Mediaset España consolidated its leadership position in the period. In particular, Mediaset España Group's average audience share in the period over the 24-hour segment was 30.6% of all viewers and 32.7% of the commercial target audience. In the first nine months of 2014, television consumption in Spain was mainly in line with the same period of the previous year, amounting to approximately 4 hours of viewing per day, with the an average daily audience of over seven million viewers. Mediaset España also consolidated its web leadership position during the period, with 27.7 million unique visitors and million pages visited, to become the reference site for videos on the Internet. Reported below is the breakdown of audience share for Mediaset España Group's general interest channels and thematic channels. 7

12 Interim Financial Report at 30 September 2014 Interim Report on Operations (*) Includes the viewing figures for the channels La Siete and Nueve up until 6 May 2014 The table below shows the programming schedule for the two main networks, Telecinco and Cuatro, for the reporting period, with comparative figures provided for the corresponding period of the previous year. Telecinco-Cuatro Schedule Hours of broadcasted contents 9M M 2013 D D% Film % % % TV Movies, Mini-series and Telefilm 2, % 2, % % Cartoons - 0.0% % (16) % Total TV Rights 3, % 2, % % Quiz-game-show 1, % 2, % (535) -22.7% Sport % % (64) -15.6% Documentaries and others 5, % 5, % (111) -2.0% News 1, % 1, % (74) -3.9% Fiction % % % Others - 0.0% - 0.0% - 0.0% Total in-house productions 9, % 10, % (398) -3.9% Total 13, % 13, % - 0.0% 8

13 Interim Financial Report at 30 September 2014 Interim Report on Operations Significant events in the third quarter On 4 July, Mediaset España sold its 22% investment in Distribuidora de Televisión Digital S.A. (Digital Plus-DTS) to Telefónica for EUR 325 million, of which EUR 295 million equivalent prorata to the valuation recognised by Telefónica for 100% of DTS, in relation to the acquisition of the controlling interest in Promotora de Informaciones S.A. (Prisa) and EUR 30 million relative to the valuation of the waiver of the pre-emption right (due under shareholder agreements entered into in 2010 with Digital Plus shareholders), following the acceptance of the binding offer made by Telefónica S.A. for the acquisition of a controlling interest of 56% from Prisa. The agreement also gives Mediaset España the right to collect an additional EUR 10 million if Telefónica acquires the controlling interest in DTS from Prisa, a transaction which is subject to authorisation from the relevant authorities, and up to a maximum of EUR 30 million, subject to reaching established customer targets generated by DTS and Movistar TV over the next four years. As part of the agreement, commitments were also signed that will enable Mediaset España to supply content for the Spanish pay TV market, on a non-exclusive basis. On 4 July, the Board of Directors of Mediaset España also resolved to start the process to evaluate different options to buyback treasury shares for an amount equal to the sale of the investment in DTS. On 7 July, Mediaset and Telefónica signed an agreement for Telefónica to acquire 11.11% of Mediaset Premium's assets for a total of EUR 100 million, which reflects an equity value of EUR 900 million, recognised for 100% of the pay TV activities of the Mediaset Group. On 31 July, a company (100% controlled by R.T.I. S.p.A.) was established, which took on the name Mediaset Premium S.p.A., from 2 October, and to which all pay TV activities will be transferred before the end of the year. This transaction marks the start of a process to expand Mediaset Premium's capital on an international level, with a view to developing its content production and distribution activities on all pay platforms, laying the foundations for a partnership between Mediaset and Telefónica for future joint pay TV operations, in terms of technology, know how and content. On 8 July 2014, with reference to the "Mediatrade" trial (case 40382/05 RGNR), involving Frank Agrama and Group directors and managers, the Court of Milan acquitted all persons charged. On 18 July, AGCOM, following the application from the Serie A League regarding the agreement between RTI and Sky Italia, authorised the sub-licensing to Sky Italia of multiplatform rights for 132 matches of the Serie A Championships for the 2015/2018 seasons of 12 minor teams, originally assigned to RTI by the League on 26 June. The decision of the Authority is subject to a prohibition on further sub-licensing the rights. On 23 July 2014, EI Towers S.p.A. signed an agreement for the acquisition of Hightel S.p.A., a company that manages a total of 216 sites mainly located in southern Italy, which host mobile telephone and Wifi - WiMAX operators. The agreement also included the concurrent acquisition of 35% of the share capital, by the subsidiary Towertel S.p.A., through the payment of an advance of EUR 5.0 million, with the subsequent acquisition of the remaining 65% completed on 31 October, as described in the section Subsequent events. On 24 July 2014, Mediaset España Comunicación, S.A. acquired 34,583,221 treasury shares representing 8.5% of the share capital in Mediaset España from the company Promotora de 9

14 Interim Financial Report at 30 September 2014 Interim Report on Operations Informaciones S.A. (PRISA). The purchase price was EUR per share, with a 2.5% discount on the trading price (EUR 9.120), for a total of EUR million. On 23 July, the Board of Directors of Mediaset España resolved the purchase of treasury shares (pursuant to the resolution passed by the Shareholders' Meeting on 9 April 2014) approving the decision already taken by the Board on 4 July of a repurchase plan of treasury shares in order to remunerate shareholders, following the sale of 22% of DTS Distribuidora de Televisión Digital S.A.. As a result of this transaction, Mediaset Group's share in Mediaset España based on shares in circulation as at 30 September 2014, went up from 42.1% to 46.0%. On 30 September 2014, Agcom adopted a resolution on criteria for the Ministry of Economic Development (MISE) to use to calculate network operator contributions. In order to bring contributions for analogue terrestrial frequencies in line with digital broadcasting, Agcom (in accordance with Law no. 44/2012 and Article 17, paragraph 2 bis of the Audiovisual Media Service Law) in its ruling 210/14/CONS published on 22 May 2014, launched a public consultation on the draft measure containing the criteria for the establishment, by MISE, of the contributions. The resolution takes the price for the award of TV frequencies in the public contract of June 2014 as the reference value, and establishes an increase in the contribution for each additional multiplex, on an anti-concentration basis, and discounts for the use of innovative technologies. Agcom has assigned MISE the option of establishing decreasing discounts for the first four years of use of assigned frequencies, for integrated network operators such as Elettronica Industriale, and for the first eight years for non-integrated network operators. The annual contribution to be determined will be valid as from 2014, until the expiry of user rights. On 31 July 2014, the subsidiary RTI S.p.A., as part of the AD4Venture equity investment programme undertaken by Mediaset Group during the year 2013, subscribed 11.83% of the share capital of Springlane Gmbh, a company operating in the e-commerce of kitchen and cooking items (kitchen equipment and accessories, domestic appliances, cookery books, food products, etc.), and on 25 September 2014 it subscribed 14.1% of the share capital of Private Griffe S.p.A., a company operating in the sector of on-line shopping for second hand clothing and accessories. 10

15 Interim Financial Report at 30 September 2014 Interim Report on Operations Performance by geographical area and business segment In this section we give a breakdown of the consolidated income statement, balance sheet and cash flow statement to show the contribution to Group performance of the two geographical areas of business, Italy and Spain. For each geographical area, revenues and operating performance are reported, broken down by business segment. The presentation of the income statement, balance sheet and cash flow figures shown below corresponds to the presentation adopted in the Report on Operations accompanying the Annual Consolidated Financial Statements. As such the figures are restated with respect to the financial statements attached, in order to highlight the intermediate aggregates considered most significant for understanding the performance of the Group and of the individual business units. Although not required by law, the criteria adopted in preparing the aggregates and notes referring the reader to the relevant statutory financial statement items have been disclosed in accordance with guidance provided by Consob Communication of 28 July 2006 and the CESR Recommendation on alternative performance measures (or non-gaap measures) dated 3 November 2005 (CESR/05-178b). The performance figures provided refer to the first nine months and third quarter of 2014 and 2013; balance sheet figures are stated as at 30 September 2014 and 31 December Group Performance The consolidated income statement reported below shows the intermediate aggregates making up earnings before interest, taxes, depreciation and amortisation (EBITDA) and earnings before interest and taxes (EBIT). EBITDA measures the difference between consolidated net revenues and operating costs, including costs of a non-monetary nature relating to amortisation, depreciation and write-downs (net of any impairment reversals) of current and non-current assets. EBIT is measured by deducting from EBITDA costs of a non-monetary nature relating to amortisation, depreciation and write-downs (net of any write-backs) of current and non-current assets. 11

16 Interim Financial Report at 30 September 2014 Interim Report on Operations Mediaset Group: Income Statement (values in EUR million) 9M 3rd Quarter Total consolidated net revenues 2, , Personnel expenses Purchases, services, other costs 1, , Operating costs 1, , EBITDA Rights amortisations Other amortisations and depreciations Amortisations and depreciations EBIT (2.0) (24.0) Financial income/(losses) (56.1) (50.6) (15.7) (19.9) Income/(expenses) from equity investments (61.4) (21.2) (0.8) (12.6) EBT (10.1) 37.8 (18.5) (56.4) Income taxes (6.9) (43.1) 0.3 (2.2) Net profit from continuing operations (17.0) (5.3) (18.1) (58.7) Net profit from discontinued operations Net profit from discontinued operations Minority interests in net profit (29.8) (22.0) - (8.1) 1.3 Mediaset Group net profit (46.8) (27.3) (26.3) (57.3) The following table shows key Group income statement figures stated as a percentage of consolidated net revenues Total consolidated net revenues 100.0% 100.0% 100.0% 100.0% Operating costs 62.5% 63.7% 65.7% 68.1% EBITDA 37.5% 36.3% 34.3% 31.9% Amortisation, depreciation and write-downs 33.0% 31.7% 34.6% 35.5% EBIT 4.5% 4.6% -0.3% -3.7% EBT -0.4% 1.6% -2.8% -8.6% Net profit -2.0% -1.1% -4.0% -8.8% Tax rate (EBT %) 68.1% n.s. -1.7% 3.9% 9M 3rd Quarter Below we look at the breakdown of the income statement by geographical area to report the contribution to performance of the Group's Italian and Spanish operations. 12

17 Interim Financial Report at 30 September 2014 Interim Report on Operations Breakdown by geographical area: Italy The following is a condensed income statement of Mediaset Group's domestic business: Italy: Income Statement (values in EUR million) 9M 3rd Quarter Total consolidated net revenues 1, , Personnel expenses Purchases, services, other costs Operating costs 1, , EBITDA Rights amortisations Other amortisations and depreciations Amortisations and depreciations EBIT (5.7) (22.2) Financial income/(losses) (55.5) (49.0) (15.9) (19.3) Income/(expenses) from equity investments (2.9) (7.8) (1.5) (7.0) EBT (34.7) 7.4 (23.1) (48.5) Income taxes (6.8) (34.7) 1.6 (2.4) Net profit from continuing operations (41.5) (27.3) (21.5) (50.8) Net profit from discontinued operations Minority interests in net profit (15.4) (9.2) (6.1) (3.3) Mediaset Group net profit (56.9) (36.5) (27.6) (54.1) The following table shows key income statement figures stated as a percentage of consolidated net revenues. 9M 3rd Quarter Total consolidated net revenues 100.0% 100.0% 100.0% 100.0% Operating costs 62.2% 61.2% 62.9% 64.7% EBITDA 37.8% 38.8% 37.1% 35.3% Amortisation, depreciation and write-downs 36.5% 35.2% 38.3% 39.8% EBIT 1.4% 3.6% -1.2% -4.5% EBT -2.0% 0.4% -4.9% -9.8% Net profit -3.3% -2.0% -5.8% -10.9% Tax rate (EBT %) 19.5% n.s. -6.8% 4.9% Below we report the performance of the Group's Italian operations broken down by business segment. Integrated Television Operations, including free-to-air and pay television broadcasting and accessory operations consisting of Web publishing, teleshopping, publishing, licensing and merchandising, and film production and distribution. EI Towers including hosting, maintenance and management operations in relation to radio, television and wireless telecommunications networks run by the listed company EI Towers S.p.A.. 13

18 Interim Financial Report at 30 September 2014 Interim Report on Operations The two abridged statements that follow report revenues and EBIT for the business segments identified. Revenues 9M 3rd Quarter changes % changes Business segments breakdown changes % changes Integrated Television Operations 1, , % % EI Towers % % Eliminations (135.1) (134.7) % (45.0) (44.8) % Total 1, , % % Operating Result 9M 3rd Quarter changes % changes Business segments breakdown changes % changes Integrated Television Operations (27.7) n.s. (24.0) (39.2) % EI Towers % % Total % (5.7) (22.2) % Reported below are the income statements for the two areas identified. 9M 3rd Quarter Integrated Television Operations changes % changes changes % changes Gross advertising revenues 1, ,430.2 (70.3) -4.9% (28.4) -7.7% Agency discounts (198.7) (209.5) % (49.8) (53.9) % Total net advertising revenues 1, ,220.7 (59.4) -4.9% (24.4) -7.7% Revenues from subscriptions/pre-paid cards (7.8) -1.9% (2.0) -1.5% Other revenues (8.6) -6.4% % Total Revenues 1, ,766.5 (75.9) -4.3% (22.7) -4.7% Personnel expenses % (0.7) -0.8% Operating costs (27.8) -3.8% (21.7) -10.6% TV and movie rights amortisation % (12.6) -7.8% Other amortisation and depreciation (14.9) -18.0% (3.1) -13.1% Inter-segment costs % % Total Costs 1, ,749.1 (30.8) -1.8% (37.9) -7.3% Operating result (27.7) 17.4 (45.1) n.s. (24.0) (39.2) % % on revenues -1.6% 1.0% -5.2% -8.1% EBIT from television broadcasting in the reporting period was driven by lower advertising revenues, as reported earlier. The drop in other revenues was almost entirely due to lower proceeds from movie distribution operations which, compared to 2013, do not include the transfer of the relative broadcasting rights to the pay television satellite platform. The change in total costs was due to higher costs and amortisation expense for pay television broadcasting rights, which included a EUR 46.8 million decrease in impairment of the 2012 financial statements. Excluding this component, the change in total costs was far lower compared to the same period of the previous year, in relation to targeted, optimised actions to guarantee a better editorial content/advertising revenues ratio. 14

19 Interim Financial Report at 30 September 2014 Interim Report on Operations (values in EUR million) 9M 3rd Quarter EI Towers changes % changes changes % changes Revenues towards third parties (0.3) -0.7% (0.4) -3.0% Inter-segment revenues % % Total revenues % (0.2) -0.4% Personnel expenses % (0.2) -2.3% Operating Costs (3.3) -5.5% (0.6) -3.0% Other amortisation and depreciation (1.8) -5.5% (0.7) -6.2% Inter-segment costs % % Total costs (4.5) -3.5% (1.5) -3.7% Operating result % % % on revenues 29.4% 26.8% 31.4% 29.0% Inter-segment revenues refer to hosting, assistance, maintenance and logistics services, broadcasting infrastructure use and engineering services provided to the subsidiary Elettronica Industriale. Revenues from other customers refer to hosting, maintenance and logistics services provided to other broadcasters and wireless telecommunications providers. During the period, the EI Towers Group increased profit by EUR 4.6 million and operating profitability by 29.4%, through a further optimisation of operating costs. 15

20 Interim Financial Report at 30 September 2014 Interim Report on Operations Breakdown by geographical area: Spain The following is an abridged income statement of the Group's Spanish business; figures are those of Mediaset España Group (consolidated figures). Spain: Income Statement (values in EUR million) 9M 3rd Quarter Total consolidated net revenues Personnel expenses Purchases, services, other costs Operating costs EBITDA Rights Amortisations Others amortisations and depreciations Amortisations and depreciations EBIT (1.8) Financial income/(losses) (0.6) (1.6) 0.2 (0.6) Income/(expenses) from equity investments (58.6) (13.4) 0.7 (5.6) EBT (8.0) Income taxes (0.1) (8.4) (1.2) 0.2 Net profit from continuing operations (7.8) Net profit from discontinued operations Minority interests in net profit (0.1) Mediaset Group net profit (8.0) The following table shows key income statement figures stated as a percentage of consolidated net revenues from Spanish operations Total consolidated net revenues 100.0% 100.0% 100.0% 100.0% Operating costs 63.3% 71.5% 72.5% 79.2% EBITDA 36.7% 28.5% 27.5% 20.8% Amortisation, depreciation and write-downs 23.9% 20.7% 25.4% 22.0% EBIT 12.8% 7.7% 2.2% -1.1% EBT 3.8% 5.2% 2.6% -5.1% Net profit 3.8% 3.8% 2.0% -5.1% Tax rate (EBT %) Tax rate (EBT %) -0.4% -27.5% -25.0% -2.0% 9M 3rd Quarter 16

21 Interim Financial Report at 30 September 2014 Interim Report on Operations The breakdown of Mediaset España Group's revenues is shown below: (values in EUR million) 9M 3rd Quarter % change %change Gross advertising revenues % % Agency discounts (28.7) (26.3) -9.1% (8.3) (1.4) % Net advertising revenues % % Other revenues % % Total net consolidated revenues % % The increase reported in the item Other revenues of 28.2% mainly refers to revenues from the distribution of movie co-productions and revenues from gambling and merchandising. In particular, the two films "Ocho apellidos vascos" and "El niño" which came out in cinemas in March and August did particularly well, contributing significantly to the increase in this item. 9M 3rd Quarter changes % changes changes % changes Operating costs % % Personnel expenses % % Purchases, services, other costs % % TV and movie rights amortisation % % Other amortisation and write-downs % % Total costs of the Mediaset España Group in the first nine months of 2014, thanks to the ongoing policies of cost optimisation and control, increased (6.7%) compared to the same period of the previous year, also in view of the costs incurred for matches of the 2014 Soccer World Cup and Basketball World Cup. As at 30 September 2014, EBIT from Spanish operations totalled EUR 84.2 million, up from EUR 45.4 million in the first nine months of 2014, with an operating profitability of 12.8%. Other income statement components for Mediaset Group as a whole are shown below. 9M 3rd Quarter changes % changes changes % changes Financial income/(losses) The higher net finance expenses, despite a lower average financial debt, were due to the higher level of bonds as a proportion of total financial debt (two bonds were placed last year by the subsidiary EI Towers S.p.A. after the end of the first quarter and by Mediaset S.p.A. during the last quarter) and the consequent difference between the rate of return applied to bonds and the rate applied to bank debt, as well as the costs resulting from the early termination of certain lines of credit. 9M 3rd Quarter changes % changes changes % changes Result from equity investments

22 Interim Financial Report at 30 September 2014 Interim Report on Operations The item Income from equity investments reflected the negative effect for the period of EUR million due to the loss from disposal of the investment held in Digital Plus, concerning the part of the agreed price not conditional on future events, on the basis of the sale agreements with Telefónica S.A. signed early in July this year. 9M 3rd Quarter changes % changes changes % changes EBT Income taxes Tax Rate (%) 68.1% n.s. -1.7% 3.9% Net profit from discontinued operations n.s n.s. Minority interests in net profit n.s. Group net profit Earnings for the reporting period are stated net of income taxes in accordance with the recognition criteria set forth by IAS 34, applying the estimated income tax rate that will be applied at year end. Minority Interests refers to the share of consolidated net earnings of Mediaset España and EI Towers attributable to third parties, on the basis of the interests held by the Group at the respective reporting dates. 18

23 Interim Financial Report at 30 September 2014 Interim Report on Operations Statement of Financial Position The Group's balance sheet and its breakdown by geographical area are reported below in abridged form, restated to show the two main aggregates Net Invested Capital and Net Financial Position; the latter consisting of Total Financial Debt, Cash and Other Cash Equivalents and Other Financial Assets. Details of the items making up the net financial position are provided in Note 4.8. The following tables therefore differ in their layout from the statutory balance sheet, which primarily distinguishes current from non-current assets and liabilities. Equity investments and other financial assets include assets recognised in the Consolidated statement of financial position as Investments in subsidiaries and other companies, and Other financial assets (only as regards Investments and Non-current financial receivables) with the exclusion of hedging derivatives, which are included as Net working capital and Other assets/liabilities). Net working capital and Other assets/liabilities include Current assets (apart from Cash and cash equivalents and Current financial assets included in the Net financial position), Deferred tax assets and liabilities, Non-current assets held for sale, Provisions for risks and charges, Trade payables and Tax payable. (values in EUR million) Balance Sheet Summary 30/09/ /12/2013 TV and movie rights 2, ,830.3 Goodwill Other tangible and intangible non current assets 1, ,218.9 Equity investments and other financial assets Net working capital and other assets/(liabilities) (796.5) 97.9 Post-employment benefit plans (95.4) (92.5) Net invested capital 3, , Group shareholders' equity 2, ,119.9 Minority interests Total Shareholders' equity 2, , Net financial position ,459.0 The breakdown of the balance sheet by geographical area (Italy and Spain) is shown below. With reference to the Group's Italian business, Equity Investments and Other Financial Assets include the carrying amount of the controlling interest held in Mediaset España and the 25% equity interest held in Mediacinco Cartera, a fully consolidated subsidiary of Mediaset España, which owns the remaining 75% interest. These holdings are then netted and eliminated on consolidation. 19

24 Interim Financial Report at 30 September 2014 Interim Report on Operations The decrease in the item Equity Investments and Other Financial Assets reflects EUR million for the sale of the equity investment in Digital Plus on 4 July and EUR 16.7 million for the reclassification of the carrying amount of the equity investment held in Capitolosette S.r.l. under Non-current assets held for sale included in Net working capital, following the sale agreements signed on 16 October (values in EUR million) Balance Sheet Summary (geographical breakdown) Italy Spain 30/09/ /12/ /09/ /12/2013 TV and movie rights 2, , Goodwill Other tangible and intangible non current assets Equity investments and other financial assets , Net working capital and other assets/(liabilities) (932.4) (41.6) Post-employment benefit plans (95.4) (92.5) - - Net invested capital 3, , , Group shareholders' equity 2, , , ,419.1 Minority interests Total Shareholders' equity 2, , , , Net financial position 1, ,552.5 (205.7) (93.5) The table below shows the breakdown of the Group balance sheet for 30 September 2014 to show the effect of the line-by-line consolidation of Mediaset España. (values in EUR million) Balance Sheet Summary (geographical Eliminations/ Mediaset Italy Spain breakdown) Adjustments Group TV and movie rights 2, (0.6) 2,703.1 Goodwill Other tangible and intangible non current assets ,122.0 Equity investments and other financial assets (952.7) 61.7 Net working capital and other assets/(liabilities) (932.4) (0.0) (796.5) Post-employment benefit plans (95.4) - - (95.4) Net invested capital 3, (590.1) 0.0 3, Group shareholders' equity 2, ,140.7 (1,194.8) 2,246.8 Minority interests Total Shareholders' equity 2, , (590.1) 0.0 2, Net financial debt 1,174.0 (205.7) The following table is an abridged cash flow statement broken down by geographical area, showing cash flows over two periods. Items have been restated with respect to the standard IAS 7 layout used to prepare the statutory cash flow statement in order to show changes in the Net Financial Position, considered the most significant indicator of the Group's ability to meet its financial obligations. 20

25 Interim Financial Report at 30 September 2014 Interim Report on Operations (values in EUR million) Cash Flow Statement Mediaset Group Italy Spain as at 30 September Net Financial Position at the beginning of the year (1,459.0) - (1,712.8) - (1,552.5) - (1,786.5) Free Cash Flow Cash Flow from operating activities (*) Investments in fixed assets (1,577.6) (444.6) (1,423.1) (295.4) (154.9) (149.3) - Disposals of fixed assets Changes in net working capital and other current assets/liabilities (141.4) (148.9) Change in the consolidation perimeter (8.4) - (8.4) Own share's sell/buyback (307.5) (307.5) - Equity investments/invesment in other financial assets and changes in stake of controlled entities Cashed-in dividends Dividends paid - (4.1) - (4.1) - - Financial Surplus/Deficit Net Financial Position at the end of the period (968.4) (1,493.5) (1,174.0) (1,579.0) (*): Net profit +/- minority interests + amortisations +/- net provisions +/- valuation of investments recorded using the net equity method + changes in valuation reserves - gains/losses on equity investments The Group's free cash flow amounted to EUR million. In particular, in Italy, free cash flow amounted to million compared to in the first nine months of Cash flow in the period compared to the corresponding period of the previous year was mainly affected by the change in advertising sales. The table below shows the increase of fixed assets reported in the cash flow statement. Increase in fixed assets Mediaset Group Italy Spain from 1/1 to 30/ Investments in TV and movie rights (1,551.5) (407.5) (1,402.2) (276.0) (149.7) (131.5) Changes in advances on TV rights (8.2) (13.9) (7.1) (0.7) (1.1) (13.2) TV and movie rights: investments and advances (1,559.7) (421.4) (1,409.3) (276.8) (150.8) (144.6) Investments in other fixed assets (17.9) (23.2) (13.8) (18.6) (4.1) (4.6) Total investments in fixed assets (1,577.6) (444.6) (1,423.1) (295.4) (154.9) (149.3) The item Investments in television and movie broadcasting rights includes the value of rights assigned to the Mediaset Group for the seasons of the Serie A Championships, amounting to EUR 1,110.0 million, with a corresponding amount recognised in working capital. A negative cash flow of EUR 4.8 million related to the item Change in consolidation area refers to outflows for the acquisition on 28 February 2014 of the company S.A.R.T. S.r.l. by the subsidiary Towertel S.p.A. at a price of EUR 3.9 million, net of cash and cash equivalents held by the target company, and the acquisition in July of 35% of the company Hightel S.p.A. at a price of EUR 5 million (acquisition of the entire company will be completed in the fourth quarter). The item Buybacks/sale of treasury shares relates to the outflow, of EUR million incurred for the buyback of treasury shares by Mediaset España during the third quarter of the year. The item Equity Investments and Other Financial Assets and Changes in investments held in subsidiaries includes proceeds from the sale of the 25% equity investment in the subsidiary EI Towers S.p.A. equal to and of the 22% equity investment in Digital Plus to Telefónica for EUR 325 million. 21

26 Interim Financial Report at 30 September 2014 Interim Report on Operations The item also includes outflows for a total value of EUR 8.2 million for the acquisition, as part of the AD4Venture activities of the 1.8% equity interest in the company Jade 1290 GMBH by the subsidiary RTI S.p.A., acquired via payment for new rights issued and subscribed by the subsidiary as at 31 December 2013 and of a 11.8% equity interest in Springlane GmbH and a 14.1% equity interest in Private Griffe S.p.A. during the third quarter. Group headcount At 30 September 2014 the Mediaset Group headcount came to 5,712 employees (5,897 at 30 September 2013 and 5,693 at 31 December 2013). The increase compared to 31 December 2013 is exclusively due to the higher number of employees on fixed-term contracts used in the Group's television production operations in Italy. The following tables show the change in the workforce for the reporting period, broken down by employment grade for the two geographical areas of operation. Number of employees (including temporary staff) ITALY SPAIN as at 30 September Managers Journalists Middle managers Office workers 2,896 2, Industry workers Total 4,451 4,609 1,261 1,288 Average workforce (including temporary staff) ITALY SPAIN 9M Managers Journalists Middle managers Office workers 2,903 2, Industry workers Total 4,440 4,573 1,280 1,

27 Interim Financial Report at 30 September 2014 Interim Report on Operations Related-party transactions Transactions conducted with related parties do not qualify as "atypical" or "unusual", and are part of the normal course of business of the Group companies. Such transactions are conducted at arm's length, considering the nature of the goods and services provided. Detailed information on the impact on Group performance, financial position and cash flow of transactions conducted with holding companies, associates, joint ventures and affiliates is provided in Note 7, together with the disclosures required by the Consob Communication of 29 July With reference to the significant transaction, in accordance with the Procedure for Related- Party Transactions, undertaken between the indirect subsidiary Elettronica Industriale S.p.A. and Mediobanca Banca di Credito Finanziario S.p.A., a related party of Mediaset, please refer, pursuant to Article 5.6 of Consob Regulation of 12 March 2010, to the Information Document available on the Company's website in the section Governance Related Parties and on the website of Borsa Italiana S.p.A.. Right to opt-out of the obligation to publish reports in the event of significant transactions Pursuant to Article 3 of Consob Resolution no of 20 January 2012, on 13 November 2012 the Board of Directors decided to apply the opt-out mechanism established in Article 70, paragraph 8 and Article 71, paragraph 1-bis of Consob Regulation no /99, as amended, thereby taking advantage of the right to opt-out of obligations to publish the reports required in the event of significant transactions such as mergers, spin-offs, and share capital issues through the transfer of assets in kind, acquisitions and disposals. 23

28 Interim Financial Report at 30 September 2014 Interim Report on Operations Subsequent events On 16 October 2014 RTI S.p.A., 21 Investimenti SGR S.p.A. and two managers of the company The Space Entertainment S.p.A. signed an agreement for the sale of their interests in the The Space Cinema Group to the British Vue Entertainment Group, which is a European leader in the multiplex cinema industry. After a process of growth and consolidation lasting more than five yeas, The Space Group, which was set up in 2009 following the merger of Warner Village circuits (from 21 investments) with the Medusa circuit (RTI S.p.A.), has established its position as the first cinema chain in Italy with a total of 36 multiplex cinemas and as a market leader with a share of over 20%. The value of the transaction, with 100% of The Space interests recognised, is equal to EUR 105 million, of which 81.7 million on closing, and the remaining portion corresponding to the maximum amount recognisable by the seller, subject to collection of the tax receivables and to The Space achieving specific performance targets in With the closing of the transaction, scheduled for the end of November, the Mediaset Group will receive EUR 36.6 million from the sale of its portion for the fixed component of the sum, plus a consolidated capital gain of approximately EUR 20 million. Following the framework agreement signed on 23 July by EI Towers S.p.A., the subsidiary Towertel S.p.A. completed the acquisition of the remaining 65% of share capital in Hightel S.p.A. on 31 October, paying a second advance on the price equal to EUR 6.2 million. The final acquisition price will be determined before the end of the current year based on parameters which are being verified. Hightel S.p.A. holds 100% of the share capital in the company Torre di Nora S.r.l.. 24