Report on operations in the third quarter of 2006

Transcription

1 Report on operations in the third quarter of 2006

2 Class Editori S.p.A. and subsidiaries Registered office, Via Marco Burigozzo 5, Milan Notes to the consolidated accounts for the period ending 30th September, 2006 The quarterly report is drawn up on a consolidated basis since the company is obliged to produce consolidated accounts. ACCOUNTING PRINCIPLES AND POLICIES The accounting principles adopted when drawing up the consolidated quarterly financial statements and figures are the same as those utilised when drafting the consolidated financial statements for the previous financial period. The current consolidated quarterly financial position is drawn up using the historical-cost convention, except for financial instruments classified as available for sale that are carried at fair value. Figures for the comparative period are also stated in accordance with IFRS. The quarterly report for the period to September 2006 has been drawn up in accordance with the requirements of article 82 of CONSOB Regulation No /1999 (as amended by resolution No dated 14th April 2005) and annex 3D of said Regulation. Full details relating to both group consolidated financial statements and the parent company, Class Editori S.p.A., were published as part of the 2006 half-yearly report and the financial statement for the year ending to which reference should be made. 1

3 SCOPE OF CONSOLIDATION The scope of consolidation includes the Parent Company, Class Editori S.p.A., and the companies in which it holds a controlling interest, i.e. the power to decide the financial and management policies of a business in order to obtain benefits from its activities. Subsidiaries are consolidated with effect from the date on which control is actually handed over to the Group and stop being consolidated as from the date on which control passes to a party not belonging to the Group. Subsidiaries are consolidated with effect from the date on which control is actually handed over to the Group and stop being consolidated as from the date on which control passes to a party not belonging to the Group. Subsidiaries are consolidated using the line-by-line consolidation method. Consolidated figures were calculated by using the balance sheets and profit and loss accounts of the associated and subsidiary companies that were drawn up by the individual companies as at the accounting reference date having been suitably reclassified and adjusted in order to reflect the application of uniform accounting principles implemented by the group. In drawing up the consolidated quarterly financial statement all intercompany balances and transactions have been eliminated, as have unrealised losses and gains on intercompany transactions. Subsidiaries that are dormant or undergoing liquidation are consolidated using the equity method. In any event, they have a minimal effect on the Group result. Investments in associates, i.e. in which the group has significant influence, are valued using the equity method as defined by IAS 28. Gains or losses attributable to the Group appear in the consolidated financial statement with effect from the date on which the significant influence began up until the date on which it ceases. Details follow of the Publisher's scope of consolidation as at 30th September, 2006: 2

4 Global integration method The following Class Editori S.p.A. subsidiaries, apart from Class Editori S.p.A. itself, have been consolidated using the global integration method: Percentage stake - Milano Finanza Editori S.p.A % and subsidiaries: - Milano Finanza Servizi Editoriali S.r.l % - MF Editori S.r.l % - Lombard Editori S.r.l % - PMF News Editori S.p.A. (formerly Capitale Sud Editori % S.p.A.) - Campus Editori S.r.l % - Milano Finanza Service S.r.l % - Edis S.r.l % - MF Conference S.r.l % - DP Analisi Finanziaria S.r.l % - EX.CO S.r.l % - MF Interactive TV S.p.A. (formerly Alfa Media S.r.l.) % - (directly 80%) - (through E-Class 20%) - Classpi S.p.A % and subsidiaries: - Class Click S.p.A % - E-Class S.p.A. (formerly Tenfore Italia S.p.A.) % - Global Finance Media Inc % - Class CNBC S.p.A. * 3.69 % - CFN/CNBC B.V % - Radio Classica S.r.l % - Fainex S.p.A % - MF Dow Jones S.r.l. α % - Telesia Sistemi S.p.A. α % and subsidiaries: - Telesia Pubblicità S.r.l. (ex. Italnetwork S.r.l.) % - Country Class Editori S.r.l % - New Satellite Radio S.r.l % - Fashion Work Club S.r.l % * Consolidated using the line-by-line method as it is 63.34% controlled by CFN CNBC Holding B.V.. α Consolidated using the line-by-line method as Class Editori S.p.A. has operational control. 3

5 Net equity method The following Class Editori S.p.A. associated companies have been consolidated using the equity method: - Italia Oggi Editori - Erinne s.r.l. and % subsidiaries - Italia Oggi S.r.l % - Class Professionale S.r.l (formerly BOL S.r.l.), through % Erinne S.r.l directly as Class Editori S.p.A % Total % - WorldSpace Italia S.p.A.* % * held by New Satellite Radio S.r.l., 71.3% controlled Class Editori S.p.A.. The scope of consolidation has changed compared with 31/12/2005 as it now includes Country Class Editori S.r.l., the company which publishes the magazine Capital, as its percentage stake rose from 5% to 90%. During the financial year, Class Editori also increased its shareholding in New Satellite Radio S.r.l from 50% to 71.3%. This company was constituted during the 2005 financial year and is still at the start-up stage. New Satellite Radio S.r.l. in turn acquired 35% of the shares of WorldSpace Italia S.p.A. in On 29th September 2006, moreover, an 80% quota of F.W.C. Fashion Work Club S.r.l., a company operating in the fashion sector, was purchased. Agefi-Class S.A. and Web Job S.p.A. were not included as they are either dormant or undergoing liquidation. COMMENTS REGARDING INCOME STATEMENT ITEMS The main factors in the financial statement that have characterised performance and contributed to the operating result in the third quarter of 2006 can be summarised as follows: The value of production for the period amounted to 83 million euros, against 76 million in the same period of 2005, an increase of 9.5%. The main factors generating this increase in turnover were: 4

6 incorporation into the scope of consolidation of Capital, a magazine that has generated encouraging turnover (2.5 million euros, 2 million of which advertising revenues) and margins (Ebit approximately 100,000 euros) ever since; for the other publications, growth in advertising revenues of approximately 10% over the same period in the previous year, well above the market average; excellent sales of collateral products attached to Milano Finanza, especially the series of books The Great Classics of Economics ; good performance of Global Finance, a magazine published in New York, which, thanks to significant investments in the commercial sector and product quality, has achieved the best results for the last 5 years and begun to show a profit once again; the results of the two new products of the publishing house, Io e Lei and MFL Magazine for Living are also encouraging, as will be analysed later on in these notes. These initiatives required investments to increase the number of pages and develop content, thus significantly increasing production costs: the overall increase amounts to 9.2% while depreciation decreased by 5.3%. There is therefore a pre-tax profit for at 30th September 2006 of 410,000 euros, an improvement of 1,160,000 euros over the same period of the previous year. Pre-tax earnings, (minorities included) for the period ending 30th September 2006 amounted to 1,309,000 euros, compared to 750,000 for the corresponding period of MAIN ECONOMIC/FINANCIAL EVENTS DURING 2006 During the period in question it should be noted that: 5

7 1) The magazine Class has retained the leadership of its market with average circulation approaching 89,000 copies. 2) MF/ Milano Finanza has achieved average circulation of around 111,400 copies (moving average, ADS figures), thus firmly consolidating the circulation figures. 3) The magazine Capital achieved average circulation of over 68,000 copies in the first eight months of 2006, increasing its lead in the men's monthly market. As regards publications on sale in newsagents, we would mention that: ItaliaOggi has been on sale since February with a new look and additional content. The economic, legal and political daily newspaper is managed by Class Editori for the subsidiary Italia Oggi Erinne S.r.l that is consolidated using the net equity method. The newspaper's new format, that is close to achieving target circulation of 100 thousand copies, features a new front page with large colour photos and political stories, along with different organisation of the various news stories and increased use of colour inside. As regards contents, ItaliaOggi now deals with politics, thus providing its target readership of professionals with a complete picture from which they can gain a better idea as to how laws that concern them are drafted. March witnessed the beginning of the CartaSi Luna project that stems from the idea of linking the monthly magazine Luna to a means of payment like CartaSi that meets the needs of its target sophisticated high-income female readership. CartaSi Luna, whose initial aim is to achieve 120,000 cardholders within the next 24 months, marks a revolution in the women's periodical sector, because without debasing product quality with gadgets that bear no relation to content and distort what would be the true sales figures for a woman's magazine, it allows high circulation to be achieved, whilst at the same time establishing a unique bond of loyalty with cardholders. The credit card offers every cardholder a subscription to Luna in the specially produced compact version. This means that very high circulation will be achieved, an extremely important consideration for advertisers who will be able to direct their messages at a target with high purchasing potential whose true buying habits can be 6

8 ascertained from the CartaSi database rather than just trends obtained from demographic surveys. Readers have warmly received the recently-introduced collection The Great Classics of Economics that from 25th February for 20 weeks brings to the newsagent the pick of economic doctrine from the last 300 years with the works of leading authors ranging from Smith to Modigliani. In April the company extended its range with two new titles, IO & LEI and MFL- Magazine for Living: IO & LEI, the new women's magazine of ItaliaOggi, is the first aimed at female economists, politicians and members of the legal profession who already read ItaliaOggi (37% of the readership) and have less time for shopping. Also intended for the girlfriends, daughters and wives of the professionals who have always been the target of ItaliaOggi, IO & LEI is a large-format guide providing regular news on the latest in fashion, jewellery, design, cosmetics, hi-tech, fitness and travel. MFL-Magazine for Living is the new quarterly magazine from Class Editori dealing with the world of Italian design and fashion, based on the format of the popular MFF - Magazine for Fashion. It combines the zest of fashion with design trends in a single publication that has no rivals on the Italian market. MFL-Magazine for Living was very well received by experts and advertisers, who appreciated the original formula. Turning to radio activities, in May Class Editori broke into the satellite radio sector, through its subsidiary New Satellite Radio, which in turn has a 35% equity holding in Worldspace Italia Spa. Worldspace Italia Spa, controlled by Worldspace Inc of Silver Spring (Maryland), quoted on the Nasdaq, has obtained Ministry of Communications permission to launch the satellite radio based on the American XM and Sirius model. 7

9 The Milan Classic Finance Circuit, a syndication operation with national coverage consisting of several leading local radio stations, consolidated its catchment area during the period. The electronic publishing area was affected by the difficulties in the sector; in particular, the activities related to the supply of financial data via satellite (MF SAT) and Internet have encountered difficulties and lower sales arising from a fall in volumes and average price, whilst other innovative activities, such as Corporate TV and information services for banks, are showing signs of considerable growth after benefiting from new means of analysis and technical appraisal. During the period January/September 2006, the existing contractual relations between Class Editori S.p.A. and the subsidiary and associated companies have continued. All transactions terms are decided on the basis of normal market conditions. Revenues for period can be broken down as follows: (figures in thousand euros) Newsstand revenues 8,751 7,150. Subscription revenues 20,546 21,300. Advertising revenues 46,407 40,370. Other revenues 7,303 6,970 Total 83,007 75,790 8

10 BALANCE SHEET The balance sheet as at shows a consolidated debt of 15.7 million euro that is broken down as follows: (figures in thousand euros) Net long/medium-term indebtedness (4,500) (1,242) (6,542) Net short-term borrowings / net shortterm (11,200) (10,865) (3,992) cash flows Of which: Borrowings (17,090) (12,877) (8,787) Cash on hand and receivables 5,890 2,012 4,795 Net financial position: Net indebtedness/net cash flows (15,700) (12,107) (10,534) Comments regarding the net financial position The publisher's financial position set out in the statement for the period ending shows net indebtedness of 15.7 million euro, a worsening with respect to of 5.2 million euros, mainly as a result of extraordinary operations, such as: the purchase of a 1.5 million euro shareholding in Country Class Editori S.r.l., thus increasing the company's stake in the company to 90%; the signing of an operative leasing contract concerning the electronic equipment required for the agreement between E-Class and Banca Intesa, the value of which amounted to 1.2 million euros at 30th September Medium-to-long term indebtedness for 4.5 million euros concerns low-cost loans from Centrobanca and Mediocredito falling due in 2008 and 2015, and Centroleasing falling due in As well as bank overdrafts, short-term indebtedness includes the denaro caldo contract taken out with Banca Intesa. Short-term cash flows consist of bank overdrafts and shares in bond funds amounting to 800 thousand euro. 9

11 STAFF Averages for the period in question Managers Journalists Clerical staff TOTAL The increase in staff was due to the conversion of ongoing collaboration contracts into time contracts, amounting to an average of 54 units in the period, and, from June 2006, to the entry of Country Class employees where 9 time contracts are involved. PUBLISHER'S STRATEGIES During 2006, the Publisher continues with the objectives of diversifying the services offered and cost rationalisation in order to seize the current opportunities for growth being witnessed with the expected upturn in investments and changes to competitive scenarios. The Publisher will therefore continue to strengthen its market position with an increasingly wider multimedia range (daily newspapers, weekly and monthly publications, satellite, mobile phones and landlines, internet, digital terrestrial and satellite radio and television) and platforms (MF Trading, MF SAT, TV Banking, Corporate TV), seizing all the opportunities encountered in the various markets in which it operates. 10

12 SIGNIFICANT POST-BALANCE SHEET EVENTS Sales of the Orsi&Tori. Vent'anni di finanza (e malafinanza) italiana collection began on 14th October. This series of nine books traces and narrates the most important moments in the last twenty years of Italian finance (both good and bad) and economics. The nine volumes (the first free and the others on sale at euros more than the cover price of MF/Milano Finanza and ItaliaOggi) are a fundamental addition to the bookshelves of all who are interested in understanding and reinterpreting the economic and financial history of Italy. It is useful both for operators in the sector and for younger people who can discover the past by understanding the forces, often working behind the scenes, which determine the changes in the economic system and affect the market, in order to make an aware approach to current reality. In general, current forecasts for 2006 indicate a positive performance, though progressively contracting, in advertising revenues and a good general performance in newsagents revenues from the editorial products, in a substantially stagnating market, and in newsagents revenues from subscriptions. For the Board of Directors Vice President and Managing Director Paolo Panerai 11

13 CLASS EDITORI S.p.A. and subsidiaries Quarterly report Consolidated financial results (millions of euros) PROFIT AND LOSS ACCOUNT 30/09/06 30/09/05 REVENUES Revenues from sales Other operating revenues Total revenues COSTS Operating expenses Gross operating profit - Ebitda Value adjustments Operating result Ebit 0.61 (0.35) Net financial income (charges) (0.20) (0.40) Pre-tax profit 0.41 (0.75) Minority pre-tax loss (profit) Group pre-tax profit ,75 12

14 CLASS EDITORI S.p.A. and subsidiaries Quarterly report Consolidated financial results (millions of euros) PROFIT AND LOSS ACCOUNT 1/7-30/09/06 1/7-30/09/05 REVENUES Revenues from sales Other operating revenues Total revenues COSTS Operating expenses Gross operating profit - Ebitda Value adjustments Operating result Ebit (0.20) (0.36) Net financial income (charges) (0.22) (0.14) Pre-tax profit (0.42) (0.50) Minority pre-tax loss (profit) Group pre-tax profit 0.16 (0.23) 13