Interim Management Statement. at March 31, 2017

Transcription

1 Interim Management Statement at March 31, 2017 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 in the first quarter of the year... 4 Significant events during the first quarter of the year Events after the reporting date Outlook Additional information required by Consob on 27 May 2013, pursuant to art. 114, paragraph 5 of Legislative Decree 58/ Statement pursuant to Article 154 bis, paragraph 2 of the Consolidated Finance Act

3 CONSOLIDATED FINANCIAL HIGHLIGHTS OF RCS MEDIAGROUP 1st quarter Year ( /millions) INCOME STATEMENT Revenue EBITDA (1) 12.1 ( 3.7) 89.9 OPERATING PROFIT (LOSS) ( 0.6) ( 17.5) 35.0 Profit (loss) before tax and non-controlling interests ( 7.0) ( 25.4) 5.0 Income taxes ( 9.9) Loss from continuing operations ( 5.7) ( 22.2) ( 4.9) Profit (loss) from assets held for sale and discontinued operations Profit (loss) for the period ( 5.7) ( 22.0) 3.5 Basic earnings per share: continuing operations ( 0.01) ( 0.04) ( 0.01) Diluted earnings per share: continuing operations ( 0.01) ( 0.04) ( 0.01) Basic earnings per share: assets held for sale and discontinued operations Diluted earnings per share: assets held for sale and discontinued operations STATEMENT OF FINANCIAL POSITION Mar Mar Dec Net capital employed Net financial debt (2) Net financial debt - continuing operations Equity Average number of employees excluding those involved with assets held for sale and discontinued operations 3,421 3,656 3,584 Average number of employees 3,421 3,987 3,584 (1) Earnings before interest, tax, amortisation/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 recognised for derivatives. Net financial debt as defined by CONSOB in its Communication DEM/ dated July 28, 2006 excludes non-current financial assets. Non-current financial assets relating to derivatives at March 31, 2017, March 31, 2016 and December 31, 2016 amounted to zero and, therefore, RCS s financial ratio at March 31, 2017, March 31, 2016 and December 31, 2016 matches the net financial debt as defined by the above-mentioned CONSOB Communication. This Interim Management Statement has been prepared in continuity with the International Accounting Standards applied in the Annual Report at December 31, 2016 and does not apply IAS 34. In relation to Directive 2013/50/EU (Transparency Directive) and the relative domestic regulation transposing it into Italian law, within the new legal and regulatory framework resulting from CONSOB resolution no of October 26, 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. As described in the 2016 annual report, the organisational structure and the resulting identification of operating segments are subject to assessment, particularly in relation to the Sport segment, for which the setup of a specific business unit was planned at the start of 2016, combining all La Gazzetta dello Sport and Marca activities, as well as the sporting events organisation activities of RCS Sport S.p.A. and Last Lap S.L. This unification of operations has not yet been implemented. In particular, Unidad Editorial continued and continues to operate as a single segment and single cash generating unit. As the organisational structure and resulting identification of the operating segments are currently subject to assessment, in this interim management statement the results were represented according to the areas of activity identified on the basis of the Group s current operating structure. This Interim Management Statement at March 31, 2017 was approved by the Board of Directors on May 9,

4 RCS GROUP PERFORMANCE IN THE FIRST QUARTER OF THE YEAR In Italy, in April 2017 the Bank of Italy estimated that GDP had risen by 0.2% compared to the final quarter of The estimated favourable performance in the services sector especially contributes to this growth. (Source: Bank of Italy Economic Bulletin no April 2017). In Spain, first-quarter growth reached 0.8% in 2017 (preliminary data of the national statistics institution, INE), equal to the growth recorded in the fourth quarter of Compared to the same period of last year, GDP rose by 3%. The Group's financial highlights and related comments are presented below. Mar % Mar % Difference Difference ( /millions) A B A-B % A B A-B % Revenue (6.4) (2.9%) Publishing revenue (8.6) (9.1%) Advertising revenue (4.6) (4.7%) Other revenue (1) % Operating expenses (131.4) (61.6) (151.0) (68.7) % Personnel expense (67.5) (31.6) (71.1) (32.3) % Provisions for risks (1.4) (0.7) (1.6) (0.7) % Allowance for impairment (1.3) (0.6) (0.4) (0.2) (0.9) >100% Share of profits of equity-accounted investees (0.3) n.s. EBITDA (2) (3.7) (1.7) 15.8 >100% Intangible asset amortisation (8.8) (4.1) (9.2) (4.2) 0.4 Property, plant and equipment depreciation (3.8) (1.8) (4.4) (2.0) 0.6 Investment property depreciation (0.1) (0.0) (0.2) (0.1) 0.1 Other asset impairment EBIT (0.6) (0.3) (17.5) (8.0) 16.9 Net financial income (expenses) (6.4) (3.0) (8.0) (3.6) 1.6 Income (expenses) from financial assets/liabilities (0.1) Profit (loss) before tax (7.0) (3.3) (25.4) (11.6) 18.4 Income taxes (1.9) Profit (loss) from continuing operations (5.7) (2.7) (22.2) (10.1) 16.5 Profit (loss) from discontinued operations Profit (loss) before non-controlling interests (5.7) (2.7) (22.2) (10.1) 16.5 (Profit) loss pertaining to non-controlling interests (0.2) Group's profit (loss) for the period (5.7) (2.7) (22.0) (10.0) 16.3 (1) Other revenue includes primarily revenue for television activities, the organisation 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, amortisation/depreciation and impairment losses. Includes the share of profits and losses of equity-accounted investees. Market trend In Italy, the advertising market (Source: Nielsen) decreased by 2.3% at the end of February 2017 compared to the same period of last year. In the print media segment there was an overall downturn of 8.6%: newspapers dropped by 9.7%, with a negative trend for national business of 10.5%, and magazines were down by 6.4%. The on-line segment also fell by 2.9% over the same period of the previous year. In Spain, there was a 2.2% increase in advertising sales in March 2017 compared to the same period of 2016 (Source: i2p, Arce Media), with newspapers decreasing by 7.4% and magazines declining by 5.7%. On the other hand, on-line sales posted 7.2% growth compared to the first quarter of In terms of circulation, in Italy the unfavourable trend in the paper products market continued in the first three months of Specifically, circulation of general-interest newspapers in the reference market was down (including digital copies) by 15.6% (Source: ADS). Circulation of sports newspapers in the same period was down (including digital copies) by 7.3% (Source: ADS). 4

5 As regards circulation figures for Spain until March 2017, OJD data point to a downturn with respect to the first quarter of 2016 in general interest newspapers (those with a circulation exceeding 60 thousand copies) of 12.4%, in business newspapers of 6% and in sports newspapers of 11.1%. Group results The Group s consolidated revenue at March 31, 2017 amounted to million, down 6.4 million compared to the same period of 2016, primarily due to the termination of several advertising sales agreements with third-party publishers. On a like-for-like basis, revenue in the first quarter of 2017 was substantially in line with The main changes influencing this decline are summarised below: ( /millions) % Advertising Publishing/Other 0.5 Advertising 0.7 Publishing/Other 4, Advertising 0.5 Publishing/Other Advertising 6.5 Publishing/Other 2.5 Advertising +7.4 Publishing/Other Revenue March 2016 Newspapers Italy Magazines Italy Advertising and Sport Unidad Editorial Other Activities * Revenue March 2017 *Includes Other Corporate activities and intragroup eliminations. Source: Management Reporting Newspapers Italy includes the Newspapers and Digital activities of RCS MediaGroup S.p.A., as well as the local editions (Editoriale del Mezzogiorno S.r.l., Editoriale Fiorentina S.r.l, Editoriale Veneto S.r.l, RCS Edizioni Locali S.r.l.) and the television activities of the investee Digicast S.p.A. It also includes printing activities, in addition to the classified activities of Trovolavoro S.r.l. and the digital activities of RCS Digital Ventures S.r.l. Magazines Italy includes the Magazines and Sfera activities of RCS MediaGroup S.p.A., the investees for the most part abroad within the Sfera activities of RCS MediaGroup S.p.A. and Hotelyo SA, a company operating in the online travel segment. Advertising and Sport includes the Group s concessionaire activities and event and exhibition organisation. Unidad Editorial includes the activities of the entire Spanish publishing group. Other Corporate activities includes centralised services for Group companies, primarily consisting of the RCS MediaGroup S.p.A. Corporate activities. The downturn was caused by publishing revenue (- 8.6 million), also due to the lower revenue from add-on products (- 3 million due to the different publishing plan adopted and the focus on more profitable add-ons, with the resulting positive impact on margins), as well as advertising revenue (- 4.6 million) due primarily to the already planned cancellation in the first quarter of 2017 of advertising concession agreements with thirdparty publishers (- 6.3 million) characterised by low profit margins. Excluding this effect, advertising revenue would record growth of 1.7 million. Other revenue was also up (+ 6.8 million compared to March 31, 2016). Comments on these changes are provided below in this interim management statement. 5

6 Publishing revenue by business area is presented below: ( /millions) Publishing revenue Source: Management Reporting Mar Mar Change % Change Newspapers Italy (4.6) (8.0%) Magazines Italy (0.4) (5.7%) Unidad Editorial (3.5) (11.7%) Other Corporate activities (0.3) n.s. Other and eliminations (0.2) (0.4) 0.2 n.s. Total Publishing revenue (1) (8.6) (9.1%) (1) Publishing revenue from add-ons at March 31, 2017 totalled 15.4 million, of which 13.2 million attributable to Newspapers Italy, 1.3 million to Unidad Editorial and 0.9 million to Magazines. At March 31, 2016, it totalled 18.4 million, of which 16.1 million attributable to Newspapers Italy, 1.2 million to Magazines and 1.1 million to Unidad Editorial. Publishing revenue totalled 86.1 million, compared to publishing revenue of 94.7 million in the first quarter of The decline amounted to 8.6 million, of which 4.6 million attributable to Newspapers Italy and 3.5 million to Unidad Editorial. In particular: The downturn in publishing revenue of Newspapers Italy (- 4.6 million) relates primarily to lower revenue for add-on products (- 2.9 million), as commented on above. This publications leadership in the reference market segment was confirmed (Source: ADS). Market surveys have highlighted circulation trends in the newsstand channel for Corriere della Sera as well as La Gazzetta dello Sport which are clearly outperforming the reference market, with a decline compared to the first quarter of 2016 of 3.9% and 5.1%, respectively (Source: ADS). In the first quarter of 2017, Corriere della Sera recorded an average of 348 thousand copies distributed, including 109 thousand digital copies on average, while total average copies distributed of La Gazzetta dello Sport amounted to 180 thousand copies, including an average of 19 thousand digital copies (Internal Source). In addition, the main digital performance indicators show that average monthly unique browsers for the corriere.it site reached 43.4 million in the first quarter of 2017 (+8.3% compared to the first quarter of 2016), and the average unique browsers on weekdays totalled 2.9 million, up 10.9% compared to the first quarter of 2016 (Source: Omniture). Average unique browsers per month for the mobile version of the website, Corriere Mobile, also recorded growth of 31.9% compared to the first quarter of 2016, reaching 22.5 million (Source: Omniture). For the paid product range, Corriere della Sera memberships reached 35 thousand paying subscribers. (Internal Source). The site gazzetta.it recorded 24.2 million average unique browsers per month in the first quarter of 2017 (up 1.6% compared to the same period of 2016). The average unique browsers on weekdays totalled 2 million, up by 4.7% compared to the first three months of 2016 (Source: Omniture). Gazzetta Mobile reached 12.1 million unique browsers, up by 10.7% with respect to the first quarter of 2016 (Source: Omniture). The decrease of 0.4 million in Magazines publishing revenue was substantially due to lower add-on product revenue (- 0.3 million compared to the first three months of 2016). Excluding this change, publishing revenue was basically stable. The publication Oggi sold individually through the newsstand channel marked excellent performance, with an increase of 24% in average copies distributed compared to the first quarter of The decrease of 3.5 million in Unidad Editorial publishing revenue compared to the first quarter of 2016 would have been a decrease of 2.6 million (-8.8% compared to the same figure in the first quarter of 2016) excluding the change generated by the continuous revision of the promotional policy adopted for the different Group publications for the benefit of margins. This change is basically associated with the decline in sales for the publication El Mundo as well as Marca. This performance was primarily the result of the market trends described above, and was partially mitigated by the 6

7 increased cover price of El Mundo, which rose from 1.40 to 1.50 for the Monday-Friday editions starting in February The average daily circulation of copies (Source: OJD) of El Mundo and Expansión (including digital copies) stood at 122 thousand (-11.6% compared to the first quarter of 2016) and 36 thousand copies, down 2.3% compared to the same period of 2016, respectively. The circulation of sports daily Marca (average daily circulation of roughly 135 thousand copies, including digital copies, Source: OJD) fell by 9.3% over the same period in the previous year. As regards on-line activities, the average monthly unique browsers (source: Omniture) of elmundo.es reached 48.7 million in the first quarter of 2017 (+17.4% compared to the same period of 2016), and average daily unique browsers (Mon.-Sun.) amounted to 3.3 million (+13.2% compared to the first quarter of 2016). At the end of March 2017, marca.com reached a monthly average of 41.3 million unique browsers (+13% compared to the same period of last year), and average daily unique browsers (Mon.-Sun.) amounted to 4.5 million, up 10.3% compared to the first quarter of The average monthly unique browsers of expansión.com reached 11.3 million unique users in the first three months of 2017, up by 30.5% compared to the same period in the previous year. Average daily unique browsers (Mon.-Sun.) totalled 0.7 million (up 25.7% compared to the same period of 2016). All three websites recorded sizeable growth in website accesses from mobile devices, with an increase of 37% on a monthly basis for El Mundo, 29.7% for Marca and 35.8% for Expansión. Advertising revenue by business area is presented below: ( /millions) Advertising Revenue Mar Mar Change % Change Newspapers Italy (0.9) (2.6%) Magazines Italy (0.5) (4.9%) Advertising and Sport (2.5) (4.1%) Unidad Editorial (1.2) (3.7%) Other Corporate activities n.s. Other and eliminations (40.3) (40.7) 0.4 n.s. Total Advertising Revenue (4.6) (4.7%) Source: Management Reporting This figure totalled 92.8 million, compared to 97.4 million in the first quarter of Excluding from this comparison the effect of the cancellation of several agreements with third-party publishers, mentioned above, there would have been an increase of 1.7 million compared to the first quarter of The improvement was essentially due to advertising revenue relating to the organisation of the Abu Dhabi Tour (+ 4.4 million) due to the fact that this event took place earlier in the calendar of cycling events (until last year it was held in October), which more than offset the decline in advertising revenue of Unidad Editorial ( 1.2 million) and Newspapers Italy, as well as to a lesser extent Magazines Italy. Other revenue by business area is presented below: ( /millions) Other revenue Mar Mar Change % Change Newspapers Italy (1.9) (32.2%) Magazines Italy (0.3) (6.8%) Advertising and Sport % Unidad Editorial % Other Corporate activities (3.7) n.s. Other and eliminations (6.5) (8.8) 2.3 n.s. Total other revenue (1) % Source: Management Reporting (1) Other revenue from add-ons at March 31, 2017 totalled 0.2 million and refer to Newspapers Italy. At March 31, 2016 it totalled 1 million. 7

8 This figure totalled 34.5 million, compared to 27.7 million for the first three months of 2016 (+ 6.8 million). The change compared to the first quarter of 2016 was basically caused, for 7.4 million, by other revenue for the organisation of the sports event noted above and, for 3 million, by other revenue of Unidad Editorial due to the broadcasting through the multiplex owned by Unidad Editorial of the new GOL Television channel (which replaced Canal 13 in the second quarter of 2016) and the increase in betting activities carried out through the Marca Apuestas platform. These increases more than offset the decline in other revenue relating to the other activities of the Group for a total of 3.6 million, primarily associated with Newspapers Italy (- 1.9 million) due to lower revenue from add-on products and the disengagement in Italy from some e-commerce activities. ******* As part of initiatives to boost the value of publications and activities in Italy, Corriere Economia was restyled, and as of March 13 it was renamed L Economia, featuring enhanced content: with more pages and the use of better paper in terms of weight and white point, today L Economia showcases the best business writers from Corriere della Sera and many prestigious international columnists who, along with innovative graphics and large-scale recourse to infographics, increase the perception of this publication s quality. In late March, once again the great event in Milan was held dedicated to Food: Cibo a Regola d Arte: Le parole del gusto, which provided the public (more than 12 thousand people participated in the two days in Milan) with the best of the national and international food scene, involving 28 chefs (23 Michelin stars) in more than 50 events. La Gazzetta dello Sport also launched a new in-depth supplement: V come Volley, which starting on February 10 and every Friday thereafter outlines the results of the previous week and provides a guide to the events planned over the weekend, along with all of the information and details about the men s and women s volleyball championships. The localisation initiative of La Gazzetta dello Sport was also launched, with the presence every day in the football section of an entire page dedicated to various local football teams, with a mention on the first page. The initiative began on February 6 with pages dedicated to Atalanta Bergamasca Calcio and continued with Hellas Verona Football Club, which will be followed by other teams. As regards Unidad Editorial development activity, please note that in January, the new Marca portal was launched in Mexico in partnership with Claro Sports, the largest sports content multimedia platform in Latin America, which resulted in significant growth in traffic as well as average monthly unique users in this area. Indeed, average monthly unique users more than doubled compared to the first few months of ******* In the first three months of 2017, EBITDA totalled 12.1 million, an improvement of 15.8 million compared to million in the first quarter of 2016, marking the return to a positive value even though the results of the first and third quarters of the year are typically negatively impacted by seasonal trends of Group activities. The change is mainly due to the significant commitment to cost reduction ( 14.8 million in efficiencies achieved, of which 8.3 million in Italy and 6.5 million in Spain). Please also note that there were no non-recurring expenses in the first quarter of

9 Revenue and EBITDA by business area are summarised below: ( /millions) Revenue Mar EBITDA % of revenue Revenue Mar EBITDA % of revenue Newspapers Italy % % Magazines Italy % 21.7 (1.1) (5.1)% Advertising and Sport % 70.1 (1.8) (2.6)% Unidad Editorial % 70.0 (2.3) (3.3)% Other Corporate activities 6.2 (4.9) n.s (4.5) n.s. Other and eliminations (47.0) (0.1) n.s. (49.9) (0.2) n.s. Total % (3.7) (1.7)% Source: Management Reporting The change in EBITDA with respect to March 31, 2016 is presented below. ( /millions) , , , , , ,7 3.7 EBITDA March 2016 Newspapers Italy Magazines Italy Advertising and Sport Unidad Editorial Other Activities Non Recurring Expense EBITDA March 2017 Source: Management Reporting Personnel expense, equal to 67.5 million, decreased by 3.6 million compared to the first quarter of This decline would amount to 3.3 million excluding non-recurring expense of 0.3 million at March 31, 2016 and is due mainly to the reduction in average headcount in Spain (-153 resources compared to March 31, 2016). Employees working in the Group s foreign operations accounted for approximately 41% of the Group s average headcount in the first quarter of 2017 (42% in the first quarter of 2016). The RCS Group s total average headcount in the first quarter of 2017 was 3,421 resources (3,656 at March 31, 2016), while the exact headcount decreased from 3,630 at March 31, 2016 to 3,386 at March 31, Please also note that the exact headcount at March 31, 2017 includes 935 people in Italy working under solidarity arrangements, with a reduction in working hours up to a maximum of 20% (143 journalists for the publication La Gazzetta dello Sport, 792 other non-editorial staff) and 137 journalists placed in the extraordinary redundancy fund (CIGS) up to a maximum of 20% in the Magazines area. The share of profits of equity-accounted investees amounted to 0.3 million ( 0.6 million at March 31, 2016). This profit comes from the investee m-dis and Corporation Bermont. The decrease can basically be attributed to the profit of the above-mentioned Spanish investee, which was down compared to the first quarter of

10 EBIT was million, compared to a loss of 17.5 million in the first three months of 2016, marking an improvement of 16.9 million. The increase reflects the phenomena described above in addition to the effect of the 1.1 million decrease in amortisation and depreciation, essentially due to the completion of the amortisation and depreciation schedule for several software licences as well as improvements on leased real estate at the Via Rizzoli office. Net financial expense improved by 1.6 million, passing from 8 million in the first quarter of 2016 to 6.4 million in the first three months of The improvement was due for the most part to the reduction in average debt. Income taxes registered an income of 1.3 million in the first quarter of 2017, compared to a tax income of 3.2 million at March 31, The decline was substantially correlated with the reduced provision of deferred tax assets due to the gradual improvement of taxable income correlated with the Italian tax consolidation, while IRAP remained substantially stable with respect to March 31, The loss for the first three months of 2017 amounted to million, recording a 16.3 million improvement compared to the same period of 2016 and overall reflecting the trends described above. Reclassified statement of financial position ( /millions) Mar-31- Dec-31- % % Intangible assets Property, plant and equipment Investment property Financial assets Non-current assets Inventories Trade receivables Trade payables (279.4) (60.3) (292.9) (62.8) Other assets/liabilities (37.4) (8.1) (54.4) (11.7) Net working capital (72.5) (15.7) (73.6) (15.8) Provisions for risks and charges (55.3) (11.9) (58.5) (12.5) Deferred tax liabilities (56.1) (12.1) (56.4) (12.1) Employee benefits (39.9) (8.6) (40.2) (8.6) Net capital employed Equ i ty Non-current financial liabilities Current financial liabilities Non-current financial liabilities recognised for derivatives Non-current financial assets recognised for derivatives Cash and cash equivalents and current loan assets (17.3) (3.7) (19.3) (4.1) 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 recognised for derivatives. Net financial debt as defined by CONSOB in its Communication DEM/ dated July 28, 2006 excludes non-current financial assets. Non-current financial assets relating to derivatives at March 31, 2017 and December 31, 2016 amounted to zero and, therefore, RCS s financial ratio at March 31, 2017 and December 31, 2016 matches the net financial debt as defined by the above-mentioned CONSOB Communication. Net capital employed amounted to 463 million and reports a net decrease of 3.5 million compared to December 31, The decrease was the result of the reduction in net non-current assets ( 8.4 million) and in particular the decline in intangible assets (- 6.4 million) and property, plant and equipment (- 3.7 million), 10

11 offset only in part by an increase of 1.7 million in non-current financial assets. Net working capital went from million at December 31, 2016 to million at March 31, 2017, with the effect of increasing net capital employed by 1.1 million. Provisions also decreased by 3.8 million, in part offsetting the decline in net non-current assets. Equity disclosed a reduction with respect to December 31, 2016 amounting to 5 million, due to the Group s net loss for the period of million, offset only in part by the increase in the hedging reserve. Noncontrolling interests were substantially stable with respect to December 31, 2016 and were primarily associated with subsidiaries running several local editions and subsidiaries of the Spanish Unidad Editorial group. Total net financial debt amounted to million ( million at December 31, 2016). Positive cash flows from ordinary operations (of 10 million) essentially offset outlays for technical investments incurred primarily for digital development, as well as the amount paid for non-recurring expense recognised previously. ( /millions) (1.5) (366.1) (0,7) (0.7) 10.0 (367.6) (6,2) (6.2) (4.6) (4,6) Net financial debt at Dec Disposals and acquisitions Other (non recurring expense) CAPEX Ordinary operations Net financial debt at Mar Source: Management Reporting 11

12 SIGNIFICANT EVENTS DURING THE FIRST QUARTER OF THE YEAR On January 27, 2017 RCS MediaGroup announced and published on the website - the calendar of the meetings of the Board of Directors and the Shareholders Meeting for 2017 and publications of the quarterly financial reporting; - the model of the content of the quarterly financial reporting that the Company will continue to prepare and publish, on a voluntary basis, until decided otherwise; - the methods and timing for approval by the Board of Directors of the quarterly financial reporting and the methods for publishing such reports. On March 7, 2017 the RCS MediaGroup S.p.A. Board of Directors, chaired by Urbano Cairo, accepted the resignations of the alternate auditors Barbara Negri and Ugo Rock, received on February 9, On March 17, 2017 the Board of Directors of RCS MediaGroup S.p.A., which met under the chairmanship of Urbano Cairo, examined and approved the results at December 31, EVENTS AFTER THE REPORTING DATE On April 27, 2017, RCS MediaGroup S.p.A. s ordinary Shareholders Meeting, chaired by Urbano Cairo, by a wide majority: - unanimously approved the financial statements at December 31, 2016; - appointed Guido Croci and Paola Tagliavini, proposed by the shareholder Cairo Communication S.p.A., as alternate auditors of the Company s Board of Statutory Auditors; - expressed a favourable vote on Section 1 of the Remuneration Report drafted by the Board of Directors; - approved the Board of Directors proposal for the disposal of treasury shares. 12

13 2017 OUTLOOK In a context still characterised by uncertainty, with reference markets falling (circulation and advertising in Italy and circulation in Spain), the Group s performance in the first quarter of 2017 showed a strong improvement in results compared to the same period of the previous year. EBITDA grew EUR 15.8 million compared to the first quarter of 2016, and EBIT, which improved EUR 16.9 million, are in line with the expectations for achievement of the Group s objectives for 2017, primarily thanks to the effects of the strong commitment to reduce costs and pursuit of consolidation opportunities and development of revenue. Net financial debt at 31 March 2017 stood at EUR million (EUR million at 31 December 2016). Expenditures were incurred during the quarter for non-recurring expenses reported in previous years for around EUR 6 million. In light of the above and in the absence of currently unpredictable events, the objectives for 2017 have been confirmed including EBITDA totalling around EUR 140 million, thanks - on one hand - to a continuous commitment to cut costs with efficiency measures forecast for 2017 between EUR 42 and EUR 46 million, and - on the other - the development of revenue through a stronger focus on advertising sales if the Group s products, reinforcement of publishing activities, enhancement of the editorial contents of newspapers and magazines and their websites, with focus on product quality, and development of revenue from organisation of sports events and the growing net result. The evolution of the general economic situation and reference sectors could however affect the complete achievement of these objectives. 13

14 ADDITIONAL INFORMATION REQUIRED BY CONSOB ON 27 MAY 2013, PURSUANT TO ART. 114, PARAGRAPH 5 OF LEGISLATIVE DECREE 58/1998 a) The net financial position of the RCS Group and its subsidiary, highlighting short-term elements separately from medium-and long-term components (EUR million) Carrying amount Change 31/03/ /12/2016 Non-current financial assets for derivatives TOTAL NON-CURRENT FINANCIAL ASSETS Securities Financial receivables Current financial assets for derivatives - - Current financial receivables and assets Cash and cash equivalents (2.0) TOTAL CURRENT FINANCIAL ASSETS (2.0) Non-current financial payables and liabilities (309.5) (275.1) (34.4) Non-current financial liabilities for derivatives (4.0) (5.1) 1.1 TOTAL NON-CURRENT FINANCIAL LIABILITIES (313.5) (280.2) (33.3) Current financial payables and liabilities (71.4) (105.2) 33.8 Current financial liabilities for derivatives TOTAL CURRENT FINANCIAL LIABILITIES (71.4) (105.2) 33.8 Net Financial Debt (1) (367.6) (366.1) (1.5) (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. Non-current financial assets related to derivatives at 31 March 2017 and 31 December 2016 are equal to zero and therefore the financial ratio of RCS at 31 March 2017 and 31 December 2016, coincides with the net financial position as defined in the aforesaid CONSOB communication. The net financial debt at 31 March 2017 is basically in line with 31 December The increase, totalling EUR 1.5 million, pertains to expenditures for non-recurring expenses reported as accruing in previous years, as well as outlays for investments, almost entirely offset by the positive contribution of operations. It should be noted that there was also a decrease in payables and current financial liabilities for EUR 33.8 million and an increase in payables and non-current financial liabilities for EUR 34.4 million. This change was mainly due to the fact that for a few days (before the end of FY 2016 and for the first days of January 2017) the Clean Down included in the loan agreement was implemented, in compliance with this the revolving credit line totalling EUR 100 million was only used up to EUR 50 million at 31 December

15 Below is the net financial debt of RCS MediaGroup S.p.A., highlighting short-term elements separately from long-term components. (EUR million) Carrying amount Change 31/03/ /12/2016 Non-current financial assets for derivatives TOTAL NON-CURRENT FINANCIAL ASSETS Securities Financial receivables Current financial assets for derivatives Current financial receivables and assets Cash and cash equivalents (0.1) TOTAL CURRENT FINANCIAL ASSETS Non-current financial payables and liabilities (304.4) (269.8) (34.6) Non-current financial liabilities for derivatives (3.9) (5.1) 1.2 TOTAL NON-CURRENT FINANCIAL LIABILITIES (308.3) (274.9) (33.4) Current financial payables and liabilities (586.7) (619.3) 32.6 Current financial liabilities for derivatives TOTAL CURRENT FINANCIAL LIABILITIES (586.7) (619.3) 32.6 Net Financial Debt (864.7) (873.6) 8.9 The RCS MediaGroup S.p.A. s net financial debt as of 31 March 2017 was negative for EUR million and reported a decrease of EUR 8.9 million. The positive contribution of operations was significant, plus the collection of dividends, in part offset by expenditures incurred for non-recurring expenses reported when accrued in previous years and expenditures for investments. 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 current 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 current debt position 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 2017 totalled EUR million, and show an overall decrease of EUR 61.4 million compared to 31 December All of the debt positions decreased, in particular financial payables for EUR 33.6 million (as commented on in the previous paragraph), trade payables for EUR 13.5 million, tax and social security liabilities for a total of EUR 9.1 million and other debt positions for EUR 5.2 million. Non-overdue positions, totalling EUR million, represent approximately 82.2% of the total (at 31 December 2016 they totalled EUR million and equalled 84% of the total). On 31 March 2017 there were no overdue accounts on financial, tax or social security debt positions. 15

16 Overdue debt positions, mainly commercial in nature, total EUR 76.8 million (EUR 79.4 million at 31 December 2016), reporting a decrease of EUR 2.6 million compared to December Specifically, the comparison with 31 December 2016 shows a decrease of EUR 11.9 million in the range between 91 and 180 days, EUR 0.8 million in the range over 360 days and EUR 0.1 million in the range between 31 and 90 days. These decreases are partly offset by increases for EUR 6 million in the range between 181 and 360 days and for EUR 4.2 million in the range less than 30 days. Overdue debt positions include EUR 12.8 million in accounts less than 30 days overdue (EUR 8.6 million at 31 December 2016), which essentially relate to the company s operations. The remainder, of EUR 64 million, includes accounts payable to agents, totalling EUR 17 million (22.1% 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 EUR 17.8 million, an amount that is greater than the specific overdue amount. It should be noted that payables due to agents overdue more than 360 days represent approximately 70.4% of this category of overdue accounts. It should also be noted that the positions expiring on 31 March 2017 were conventionally classified among the debts due for payment, and amount to approximately EUR 17.4 million. Overdue trade accounts of EUR 76.1 million (EUR 78.7 million at 31 December 2016) mainly refer to the RCS MediaGroup S.p.A. (EUR 44.3 million). During the current analysis, review and renegotiation phase for the possible redefinition of supply relations, the Company has received some reminders, warnings and injunctions to pay (for insignificant sums) from suppliers for trade transactions recreated on a time to time basis. c) Transactions with the RCS Group and subsidiary related parties In compliance with the requirements of the Consob communication pursuant to article 114, paragraph 5, of Italian Legislative Decree no. 58/98, protocol number of 27 May 2013, transactions with related parties of the RCS Group are provided below. First of all, it should be noted that the Group s Ultimate Parent Company as of July 2016 is U.T. Communications S.p.A. a de facto parent company of the investee Cairo Communication S.p.A., in turn became the direct parent company of RCS MediaGroup S.p.A. The share capital of RCS MediaGroup S.p.A. held by Cairo Communication S.p.A. at 31 March 2017 totalled % (59.831% including the stake held at 31 March 2017 by U.T. Communications S.p.A. Source: Consob). Based on the above the following are identified as related parties: The direct and indirect controlling entities of RCS MediaGroup S.p.A. and their subsidiaries, including jointly and associates; the subsidiaries (whose transactions are eliminated in the consolidation process), that are jointly controlled as well as the associates of RCS MediaGroup S.p.A.; in addition based on the Related Parties procedure adopted by the RCS Group as better described below, all shareholders have been qualified as related parties (and the relative corporate groups composed of parent companies and subsidiaries, including indirectly, and jointly controlled companies) that have a stake in the voting capital of more than 3%, excluding intermediaries that engage in asset management, if the conditions of independence required by the Issuers Regulation are complied with; executives with strategic responsibilities and their close family members. It should be noted that, in terms of the Regulation approved by Consob with resolution no of 12 March 2010 as amended, RCS MediaGroup S.p.A. adopted a procedure on 10 November 2010 related to the implementation of transactions with related parties regarding the authorisation and communication aspect with the market and with Consob. This procedure was revised effective as of 1 January 2014 and later other revisions were made effective as of 1 October A copy of the new edition of the Procedure has been published on the Company s website in the Governance section and also disclosed, as well as the previous 16

17 provisions, in the Corporate Governance Report and Shareholders Structure. It should be noted that, based on the provisions of the aforesaid Procedure, in addition to major transactions, certain minor transactions are subject to prior approval by the Related party transaction committee. Pursuant to this procedure, in addition to the subjects as per annex 1 of the aforesaid Consob resolution 17221/2010 shareholders and relative corporate groups under them (parent companies, subsidiaries, or subject to common control) described in the third point of the above list are identified as related parties - on a voluntary basis. Below are details divided by balance sheet heading, showing their impact on the total of each item. Intercompany transactions are eliminated in the consolidation process. Asset/liability ratios (EUR million) Trade receivables Current financial receivables and assets Non-current financial payables and liabilities Non-current financial liabilities for derivatives Current financial payables and liabilities Trade payables Other current payables and liabilities Commitme nts Parent companies Jointly controlled companies Associates Supplementary pension fund for executives Other sister companies (1) Other Related Parties (2) Total Total RCS Group Percentage of related parties out of RCS Group 11.7% 16.7% 4.1% 22.5% 16.0% 5.5% 1.2% 5.0% Profitability ratios (EUR million) Revenue from sales Consumption of raw materials and services Labour costs Other operating (expenses) and income Financial income (expenses) Parent companies Jointly controlled companies 52.2 (2.6) Associates 0.5 (6.5) Supplementary pension fund for executives - - (0.1) - - Other sister companies (1) 1.2 (0.4) (0.4) Other Related Parties (2) - (0.4) (0.8) - - Total 53.9 (9.9) (0.9) 0.4 (0.4) Total RCS Group (131.4) (67.5) 0.6 (6.4) Percentage of related parties out of RCS Group 25.3% 7.5% 1.3% 66.7% 6.3% (1) They include shareholders and relative corporate groups (parent companies, subsidiaries, or subject to common control) with a stake in the voting capital of RCS of more than 3%, as well as the subsidiaries, associates and jointly controlled companies of Cairo Communication S.p.A. and U.T. Communication S.p.A. (2) Mainly refers to transactions with executives with strategic responsibilities, and their close family members Transactions with parent companies, subsidiaries and jointly controlled companies mainly relate to the exchange of goods, the provision of services, the sourcing and use of funds, and fiscal relations, and are governed by market conditions, taking into account the quality of the goods and services provided. Transactions with parent companies include other operating revenue for EUR 0.1 million and trade receivables for EUR 0.2 million. They mainly regard the sale of advertising space and revenue for charge backs of seconded RCS personnel. Transactions with companies subject to joint control refer mainly to the company m-dis Distribuzione Media S.p.A., with which the Group generated revenue of EUR 52.2 million, costs of EUR 2.6 million, operating revenue of EUR 0.2 million and has trade receivables for EUR 24.3 million, current financial payables for EUR 6.3 million and trade payables for EUR 1.9 million. The most significant trade transactions with associates regard the companies of the Bermont group (totalling: EUR 12.5 million of trade payables, EUR 0.2 million of trade receivables, EUR 0.5 million of revenue and EUR 6.3 million of costs). Equity transactions with other affiliates mainly refer to financing transactions with companies of the Mediobanca group. Economic transactions with other affiliates primarily regard revenue for EUR 1.2 million, costs for EUR 0.4 million as well as net financial expenses for EUR 0.4 million. Revenue was mainly generated with companies in the Della Valle Group and Cairo Group, while the costs incurred primarily regard companies in the Cairo group. Revenue mainly refers to the sale of television rights, advertising spaces as well as revenue from charge back for seconded RCS personnel; the costs incurred primarily regard the purchase of advertising space. 17

18 Financial expenses refer to companies belonging to the Mediobanca Group - Banca di Credito Finanziario S.p.A: and refer to financial transactions for loans. *** There are also derivatives contracts with a notional value of EUR 38.2 million, signed for ordinary operating needs and at market conditions with Gruppo Mediobanca - Banca di Credito Finanziario S.p.A. Tax consolidation for IRES. During the first three months of 2017 RCS MediaGroup S.p.A. continued to make use of the National Tax Consolidation introduced with Italian Legislative Decree no. 344 of 12 December 2003, in order to achieve savings through taxation calculated on a unified taxable income basis, with consequent immediate compensation between tax credits and losses for the period. Intercompany transactions, originating from adoption of the national tax consolidation are based on the objectives of neutrality and equal treatment. VAT consolidation. During the first three months of 2017 RCS MediaGroup S.p.A. continued to make use of the special VAT consolidation scheme of the RCS Group, reporting a credit of EUR 2.7 million. RCS MediaGroup S.p.A. contributed its payable balance totalling EUR 3.3 million to the consolidated VAT of the RCS Group for the first three months of For the figures with strategic responsibility see the list in Section I of the Remuneration Report approved by the Shareholders Meeting of 27 April 2017 and published on the website Information is provided below in an aggregate form on the remuneration for the identified figures with strategic responsibility: (values in EUR million) Costs for services Labour costs Other current payables and liabilities Board of Directors (0.3) Board of Statutory Auditors (0.1) Executives with strategic responsibility (0.8) 0.8 Total related parties (0.4) (0.8) 1.0 Total RCS Group (131.4) (67.5) 80.7 Percentage of related parties out of RCS Group 0.3% 1.2% 1.2% The personnel costs include payments to figures with strategic responsibilities in the form of remuneration for EUR 0.8 million. The costs for personnel related to related parties had a 1.2% impact on total personnel costs. Commitments to figures with strategic responsibilities have been reported for EUR 2.7 million and to other related parties for EUR 1 million. In addition, in terms of specific other commitments to figures with strategic responsibility of RCS MediaGroup S.p.A. see what is described in the Remuneration Report (Section II - First part) published on the website 18

19 RCS MediaGroup S.p.A. related parties Below are details divided by balance sheet heading for these parties, showing their impact on the total of each item. Statement of Financial Position assets Statement of financial position assets Investments measured at cost Trade receivables Other current receivables and assets Current tax assets Current financial receivables Parent companies Subsidiaries 1, Associates Other affiliates Associates and their parent companies Total related parties 1, Financial statement total 1, Percentage % 24.40% 0.30% 43.50% 99.70% Statement of Financial Position liabilities Statement of financial position liabilities Non-current financial payables Financial liabilities for derivatives Other non-current payables and liabilities Current financial payables Current tax liabilities Trade payables Other current payables and liabilities Commitmen ts Parent company Subsidiaries Associates Other affiliates Associates and their parent companies Other related parties (1) Total related parties Financial statement total Percentage 4.10% 22.50% 24.30% 93.90% % 8.00% 3.90% 26.40% (1) Mainly refers to transactions with executives with strategic responsibilities, and their close family members, as per the following details. Income statement Income statement Revenue Consumption of raw materials and services Labour costs Other operating revenue and income (1) Mainly refers to transactions with executives with strategic responsibilities, and their close family members, as per the following details. Financial income Financial expenses Other income (expenses) from financial assets and liabilities Parent companies Subsidiaries Associates Other affiliates Supplementary pension fund for executives Associates and their parent companies Other related parties (1) Total related parties Financial statement total Percentage 47.30% 24.20% 1.80% 44.20% % 40.80% % The related party transactions undertaken by RCS MediaGroup S.p.A. mainly relate to the provision of services as already explained in the Notes on the RCS Group, to which please refer for a more in-depth analysis. Added to these are the relations with subsidiaries (eliminated in the consolidation process) which mainly relate to the exchange of goods (primarily the acquisition of advertising space), the provision of services (mainly administrative, IT-related, legal/corporate and fiscal, as part of the centralisation of these functions within the Other Activities area, as well as production and printing services), the sourcing and use of funds, fiscal relations, and commercial relations relating to the leasing of space for offices and operating sites. 19