Interim Management Statement. at September 30, 2014

Transcription

1 Interim Management Statement at September 30, 2014 Translation from the Italian original which remains the definitive 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 Group performance in the third quarter... 4 Group performance in the first nine months of the year... 8 Other Information Operating segment performance Media Italy Media Spain Books Advertising and Events Corporate Functions and Other Activities Significant events in the third quarter Significant subsequent events Outlook for the current year Additional information required by CONSOB pursuant to art. 114, paragraph 5 of Italian Legislative Decree 58/1998, provided on May 27, Consolidated financial statements Condensed income statement Condensed statement of comprehensive income Condensed statement of financial position Condensed statement of cash flows Condensed statement of changes in equity Notes to the condensed interim consolidated financial statements Format, content and other information on the condensed interim consolidated financial statement items Statement pursuant to Article 154 bis, paragraph 2 of the Consolidated Finance Act Annexes Related parties

3 CONSOLIDATED FINANCIAL HIGHLIGHTS OF RCS MEDIAGROUP The figures for the third quarter of 2013 and at September 30, 2013 have been revised to reflect the retroactive effects of adopting IFRS 10 and IFRS 11 relating to the scope of consolidation as of January 1, The effects of this adoption are illustrated in note No. 3 in the section Condensed financial statements 3rd quarter Sep ( /millions) (3) (1) (2) (3) (1) (2) INCOME STATEMENT Revenue EBITDA (4) 12.9 ( 16.5) ( 16.3) ( 121.3) OPERATING LOSS ( 4.0) ( 35.1) ( 69.2) ( 178.0) Loss before tax and non-controlling interests ( 19.7) ( 47.5) ( 111.1) ( 205.6) Income taxes ( 3.1) Loss from continuing operations ( 22.8) ( 46.4) ( 100.4) ( 166.9) Profit (loss) from assets held for sale and discontinued operations (5) ( 0.3) ( 3.5) 6.8 ( 8.9) Loss for the period ( 23.1) ( 50.0) ( 93.1) ( 175.3) Basic earnings per share: continuing operations (0.04) (0.14) (0.22) (1.37) Diluted earnings per share: continuing operations (0.04) (0.14) (0.22) (1.37) Basic earnings per share: assets held for sale and discontinued operations (0.00) (0.01) 0.02 (0.07) Diluted earnings per share: assets held for sale and discontinued operations (0.00) (0.01) 0.02 (0.07) STATEMENT OF FINANCIAL POSITION Sep Sep Dec Net capital employed Net financial debt (6) Equity Average number of employees excluding those involved with assets held for sale and discontinued operations 4,036 4,401 4,333 Average number of employees 4,036 4,750 4,594 (1) The Partworks business unit was sold on August 1, 2013, Edition d Art Albert Skirà was sold on December 11, 2013 and the Casa Editrice La Tribuna business unit and trademark was sold on March 1, These changes lead in total to lower consolidated revenue for 22.9 million and an improvement in the EBITDA of 9.2 million at September 30, 2014, as well as lower consolidated revenue of 7.2 million and an improvement in the EBITDA of 1.5 million in the third quarter of (2) The figures at September 30, 2013, December 31, 2013 and for the third quarter of 2013 have been revised to reflect the retroactive effects of adopting IFRS 10 and IFRS 11 relating to the scope of consolidation as of January 1, (3) Control over Editoriale del Mezzogiorno was acquired in the first quarter of 2014, an investment previously carried at equity. All of the company s revenue is intragroup, and its EBITDA totalled million at September 30, 2014 and 0.3 million in the third quarter of In the first quarter of 2014 control was acquired over Rizzoli Sfera International Advertising (Beijing) Co. Ltd. which holds 90% of Rizzoli Sfera International Convention & Exhibition (Beijing) Co. Ltd.. These companies, previously carried at equity, at September 30, 2014 presented total revenue of 2.8 million and an EBITDA of million, and in the third quarter of 2014 disclosed total revenue of 0.5 million and an EBITDA of million. (4) Earnings before interest, tax, amortisation/depreciation and impairment losses on non-current assets. (5) At September 30, 2014, Profit (loss) from assets held for sale and discontinued operations includes the 6.8 million net gain realised on the Via Solferino real estate complex, the disposal of which (in 2013) was subject to a condition precedent. (6) Indicator of financial structure, calculated as current and non-current financial liabilities less cash and cash equivalents, and non-current financial assets recognised for derivatives. This Interim Management Statement at September 30, 2014 was approved by the Board of Directors on November 13,

4 GROUP PERFORMANCE IN THE THIRD QUARTER During the second quarter of 2014 (latest updated figure), Italian GDP decreased 0.2% when compared with the previous quarter (Source: Bank of Italy) and 0.3% year on year (Source: ISTAT).. Italian economic recovery is still finding it difficult to take off. The weakness in activity has impacted inflation, which was marginally negative in August and September ( Source: Bank of Italy). Spanish GDP disclosedd growth of 0.6% in the second quarter of 2014, 0.5% in thee third quarter of 2014 and 1.6% on an annual basiss (Source: Ine). The advertising market disclosed a 7.3% decrease with respect to print in Italy during the three-month period July-September 2014 compared to the t third quarter of 2013, while in the same period the overall advertising market presented a drop of 5.4% and internet remained essentially in line with respect to the same period last year (Source: Nielsen). In Spain, there was a 1.4% increase in the third quarter of 2014 compared to the third quarter of 2013 for print, while the overall advertising market showed a 7.2% increase compared to the same period of last year. In particular, internet increased by 5% (Source: I2P/ArceMedia). Gross domestic product trends in Italy and Spainn in the second quarter of 2014 are shown below in comparison with the previous quarters. Gross domestic product Percentage change previous quarter (0.2) (0.4) (0.6) Spain, 0.6 Italy, (0.2) (0.8) (1.0) Q Q Q Q Q Q Source: Data Gross domestic product (GDP) Quarterly GDP 4

5 Reclassified consolidated income statement ( /millions) 3rd quarter 2014 % 3rd quarter 2013 % Difference Difference (4) (4) (5) A B A-B % Revenue (7.0) (2.2%) Distribution revenue (11.5) (5.5%) Advertising revenue (1) % Other publishing revenue (2) % Operating expenses (225.7) (72.7) (237.4) (74.8) 11.7 (4.9%) Personnel expense (65.6) (21.1) (85.0) (26.8) 19.4 (22.8%) Impairment losses on receivables (4.0) (1.3) (5.3) (1.7) 1.3 (24.5%) Provisions for risks (2.2) (0.7) (6.2) (2.0) 4.0 (64.5%) EBITDA (3) (16.5) (5.2) 29.4 (178.2%) Amortisation of intangible assets (9.5) (3.1) (10.8) (3.4) 1.3 Depreciation of property, plant and equipment (5.3) (1.7) (6.1) (1.9) 0.8 Depreciation of investment property (0.2) (0.1) (0.4) (0.1) 0.2 Impairment losses on non-current assets (1.9) (0.6) (1.3) (0.4) (0.6) Operating loss (4.0) (1.3) (35.1) (11.1) 31.1 Net financial expense (10.1) (3.3) (8.0) (2.5) (2.1) Losses on financial assets/liabilities (1.9) (0.6) (0.3) (0.1) (1.6) Share of profits (losses) of equity-accounted investees (3.7) (1.2) (4.1) (1.3) 0.4 Loss before tax (19.7) (6.3) (47.5) (15.0) 27.8 Income taxes (3.1) (1.0) (4.2) Loss from continuing operations (22.8) (7.3) (46.4) (14.6) 23.6 Loss from assets held for sale and discontinued operations (0.3) (0.1) (3.5) (1.1) 3.2 Loss before non-controlling interests (23.1) (7.4) (49.9) (15.7) 26.8 (Profit) loss attributable to non-controlling interests (0.1) (0.0) 0.1 Loss attributable to owners of the parent (23.1) (7.4) (50.0) (15.8) 26.9 (1) Advertising revenue in the third quarter of 2014 includes 55.9 million earned through the Group s Advertising concessionaire (of which 46.4 million by Media Italy, 3.8 million by Editrice La Stampa, 2.4 million by Poligrafici Editoriale, 2.1 million by selling the space of other publishers, 0.9 million in relation to sundry events and 0.3 million by Media Spain) and 34.8 million earned directly by publishers (of which 30 million by Media Spain, 0.6 million by Sports Events, 1.6 million by Media Italy, 2.7 million by Corporate Functions and Other Activities and 0.1 million in intragroup eliminations). Advertising revenue in the third quarter of 2013 includes 51.4 million earned through the Group s Advertising concessionaire division (of which 38.3 million by Newspapers Italy, 10.5 million by Magazines and 2.6 million by selling the space of other publishers) and 35.2 million earned directly by publishers (of which 25.4 million by Newspapers Spain, 4.1 million by Newspapers Italy, 3.5 million by Magazines, 2.3 million by Blei, 0.3 million by Digicast and 0.4 million in intragroup eliminations). (2) Other publishing revenue mostly refers to revenue from the sale of film rights by the Unidad Editorial group, revenue from the television activities of Media Italy and the Unidad Editorial group, royalty revenue from third parties, revenue associated with events and exhibitions in Italy and Spain, e-commerce revenue and revenue from the sale of customer lists and children's boxed sets by companies in the Sfera group. (3) Earnings before interest, tax, amortisation/depreciation and impairment losses. (4) The Partworks business unit was sold on August 1, 2013, Edition d Art Albert Skirà was sold on December 11, 2013 and the Casa Editrice La Tribuna business unit and trademark was sold on March 1, These changes lead in total to lower consolidated revenue for 7.2 million in the third quarter of 2014 compared to the third quarter of 2013 and an improvement in the EBITDA of 1.5 million. Control over Editoriale del Mezzogiorno was acquired in the first quarter of 2014, an investment previously carried at equity. All of the company s revenue is intragroup, and its EBITDA totalled 0.3 million in the third quarter of In the first quarter of 2014 control was acquired over Rizzoli Sfera International Advertising (Beijing) Co. Ltd. which holds 90% of Rizzoli Sfera International Convention & Exhibition (Beijing) Co. Ltd.. These companies, previously carried at equity, in the third quarter of 2014 presented an increase in consolidated Group revenue of 0.5 million and an EBITDA of million. (5) The figures for the third quarter of 2013 have been revised to reflect the retroactive effects of adopting IFRS 10 and IFRS 11 relating to the scope of consolidation as of January 1, Revenue for the third quarter amounted to million compared with million in the same period in the year before. The decrease of 7 million is the result of the drop of 11.5 million reported by distribution revenue, as well as the increases reported by advertising revenue (+ 4.1 million) and other publishing revenue (+ 0.4 million). The decrease in distribution revenue ( million) with respect to the third quarter of 2013 was partially caused by the disposal of certain activities in the Book area (Partworks, Edition d Art Albert Skirà, Casa Editrice La Tribuna), as well as the disposal of certain periodicals as from August 1, 2013, in addition to the closure as from the third quarter of 2013 of seven magazines and the review of the interior design publications, net of which there would have been a decrease of 2.7 million. The overall drop mainly derived from: 5

6 A decrease in distribution revenue in the Books segment (down 4.6 million), of which 6.8 million due to the disposal of certain activities as commented on above. Excluding these effects, there was an overall increase of 2.2 million in the segment s distribution revenue, substantially associated with revenue growth in the Fiction and Non-Fiction segment and the success of Illustrated Book sales in the United States. Education revenue was down despite the positive results of the adoption campaign and due to the tendency to postpone textbook purchases to even after the start of the school year and increasingly frequent reliance on the used book market. The 2.5 million decrease in Media Italy distribution revenue was almost entirely associated with the performance of Verticals revenue, due to the sale and suspension of certain magazines, as mentioned above. Newspapers revenue remained stable on the whole. There was a 4.2 million decrease in distribution revenue for the Media Spain area due to the drop in circulation and add-on sales. Compared to the third quarter of 2013, advertising revenue is up by 4.1 million. There was a rise in advertising revenue from other publishers for 5.7 million as a result of the advertising sale agreements with Editrice La Stampa and Poligrafici Editoriale S.p.A. and Media Spain advertising revenue (+ 4.8 million), also owing to institutional events. Media Italy revenue was down (- 3.2 million) due to both the difficulties of the print advertising market and the disposal and suspension of certain magazines, only partly mitigated by the positive effect on advertising revenue generated by the World Cup. Advertising and Events revenue was also down (- 3.5 million), largely due to the planned disengagement from foreign advertising concessionaire activities (Blei S.p.A in liquidation). Other publishing revenue was essentially stable (+ 0.4 million with respect to the third quarter of 2013). EBITDA was a positive 12.9 million, compared to negative EBITDA of 16.5 million in the third quarter of Excluding non-recurring expense and income, EBITDA would amount to a positive 17.9 million and would be compared to EBITDA of 7.6 million in the same period of 2013, marking an increase of 10.3 million. The improvement trend reported by EBITDA before non-recurring expense which started as from the third quarter of 2013, continued. In particular, in the third quarter of 2014 a particular boost was provided by EBITDA before non-recurring expense of Media Spain (+ 8.2 million compared to the third quarter of 2013) and of Advertising and Events (+ 6.3 million compared to the third quarter of 2013), essentially as a result of cost containment actions and, for Media Spain, the benefits of higher advertising revenue driven by institutional events. Media Italy s EBITDA before non-recurring expense and income was substantially stable, with a limited increase of 0.2 million. In particular, the increase in EBITDA before non-recurring expense of Verticals, also including the positive effect of the sale of non-core publications, was offset by the negative performance of EBITDA before non-recurring expense of Newspapers Italy. In the Books segment, EBITDA before non-recurring expense ( 0.4 million) improved essentially due to Fiction and Non-Fiction - Italy revenue performance, which was partially offset by the effects of the disposal of activities and business units, as noted above. Furthermore, the 4.9 million drop in revenue for Corporate Functions and Other Activities can be attributed essentially to the cost deriving from the subscription of the lease agreement on the Via San Marco and Via Solferino properties after that real estate segment was sold, resulting in financial expense savings. In the third quarter of 2014 the cost reduction activities set forth in the Plan continued, whose benefits in the third quarter of 2014 amounted to 15.9 million, of which 10.2 million in Italy and 5.7 million in Spain. Personnel expense was 65.6 million in the third quarter of 2014 ( 85 million in the third quarter of 2013). Excluding net non-recurring income of 3.4 million in the third quarter of 2014 and net non-recurring expense of 7.1 million in the same period in 2013, there would have been a drop of 9 million, attributable to more or less all the areas of the Group and in particular to Media Italy and Media Spain, whose personnel expense decreased respectively by 4 million (with a reduction in average headcount of 66) and 2.4 million (with a reduction in average headcount of 106). 6

7 The operating loss amounted to 4 million in the third quarter of 2014, compared to a loss of 35.1 million in the same period of The positive change of 31.1 million ( million excluding non-recurring expense) derives from the phenomena described above as well as the lower amortisation/depreciation for 2.3 million, essentially attributable to the lower amortisation of television rights in Italy and Spain consequent to the previous impairment losses and the suspension of the activities of the Marca TV channel, only partially offset by the increase in amortisation linked to digital development investments made by Corporate Functions. There was also lower depreciation of property, plant and equipment due to the impairment losses on certain rotary presses in the second half of 2013 within the sphere of the measures for rationalising the printing process. Going against the trend, there were greater impairment losses for 0.6 million mainly attributable to the Media Italy area and ascribable substantially to television rights. A summary of the main indicators per business area relating to the third quarters of 2014 and 2013 is shown below: ( /millions) Revenue EBITDA BEFORE NON- % of RECURRING revenue EXPENSE 3rd quarter rd quarter 2013 (4) EBITDA % of revenue OPERA TING PROFIT (LOSS) % of revenue EBITDA BEFORE NON- % of Revenue EBITDA RECURRING revenue EXPENS E % of revenue OPERATING PROFIT (LOSS) Media Italy (1) % % % % % % Media Spain % (4.9) (6.1)% (9.8) (12.2)% 78.9 (7.0) (8.9)% (20.1) (25.5)% (25.9) (32.8)% Books (2) % % % % % % Advertising and Events 57.8 (3.2) (5.5)% (3.6) (6.2)% (3.5) (6.1)% 56.8 (9.5) (16.7)% (19.3) (34.0)% (19.4) (34.2)% Corporate Functions and Other Activities 17.8 (6.9) (38.8)% (7.0) (39.3)% (12.9) n.a 18.2 (2.0) (11.0)% (2.6) (14.3)% (7.9) n.a Other and eliminations (52.7) 0.1 (0.2)% 0.1 (0.2)% 0.0 n.a (53.5) 0.0% - n.a 0.0 n.a Consolidated % % (4.0) (1.3)% % (16.5) (5.2)% (35.1) (11.1)% Assets held for sale and discontinued operations Other and eliminations Total % % (4.0) (1.3)% % (16.5) (5.2)% (35.1) (11.1)% % of revenue (1) Control over Editoriale del Mezzogiorno was acquired in the first quarter of 2014, an investment previously carried at equity. All of the company s revenue is intragroup, and its EBITDA totalled 0.3 million in the third quarter. (2) The Partworks business unit was sold on August 1, 2013, Edition d Art Albert Skirà was sold on December 11, 2013 and the Casa Editrice La Tribuna business unit and trademark was sold on March 1, These changes lead in total to lower consolidated revenue for 7.2 million and an improvement in the EBITDA of 1.5 million. (3) In the first quarter of 2014 control was also acquired over Rizzoli Sfera International Advertising (Beijing) Co. Ltd. which holds 90% of Rizzoli Sfera International Convention & Exhibition (Beijing) Co. Ltd.. These companies, previously carried at equity, in the third quarter of 2014 presented total revenue of 0.5 million and an EBITDA of million. (4) The figures for the third quarter of 2013 have been revised to reflect the retroactive effects of adopting IFRS 10 and IFRS 11 relating to the scope of consolidation as of January 1, Net financial expense stood at 10.1 million in the third quarter of 2014, up 2.1 million with respect to the 8 million of net financial expense in the third quarter of This change is primarily associated with negative effect of the discounting of the financial statement items. Expense and income from financial activities in the third quarter of 2014 include 1.9 million in expense, basically relating to the impairment loss on financial receivables. In the third quarter of 2013 expense amounted to 0.3 million. The share of profits (losses) of equity-accounted investees amounted to a net loss of 3.7 million and is attributable to the Finelco Group loss and the amortisation of the related radio broadcasting frequencies which was assigned the goodwill recognised on acquisition as well as the loss of IGPDecaux. During the third quarter of 2013 the net losses of equity-accounted investees amounted to 4.1 million. The loss for the third quarter of 2014 was 23.1 million (loss of 50 million in the third quarter of 2013). The improvement compared to the third quarter of 2013 amounted to 26.9 million and reflects the elements already mentioned, and also includes tax expense of 3.1 million ( 1.1 million in tax income in the third quarter of 2013). 7

8 GROUP PERFORMANCE IN THE FIRST NINE MONTHS OF THE YEAR The Group's financial highlights and related comments are presented below. ( /millions) Sep % Sep % Difference Difference (4) (4) (5) A B A-B % Revenue (43.4) (4.5%) Distribution revenue (53.4) (9.9%) Advertising revenue (1) % Other publishing revenue (2) % Operating expenses (670.2) (72.7) (724.6) (75.1) 54.4 (7.5%) Personnel expense (251.6) (27.3) (335.1) (34.7) 83.5 (24.9%) Impairment losses on receivables (11.0) (1.2) (14.6) (1.5) 3.6 (24.7%) Provisions for risks (5.0) (0.5) (11.9) (1.2) 6.9 (58.0%) EBITDA (3) (16.3) (1.8) (121.3) (12.6) (86.6%) Amortisation of intangible assets (27.3) (3.0) (33.1) (3.4) 5.8 Depreciation of property, plant and equipment (16.0) (1.7) (18.9) (2.0) 2.9 Depreciation of investment property (0.8) (0.1) (0.8) (0.1) 0.0 Impairment losses on non-current assets (8.8) (1.0) (3.9) (0.4) (4.9) Operating loss (69.2) (7.5) (178.0) (18.4) Net financial expense (31.0) (3.4) (19.8) (2.1) (11.2) Gains (losses) on financial assets/liabilities (1.9) (0.2) (1.9) Share of profits (losses) of equity-accounted investees (9.0) (1.0) (7.8) (0.8) (1.2) Loss before tax (111.1) (12.1) (205.6) (21.3) 94.5 Income taxes (28.0) Loss from continuing operations (100.4) (10.9) (166.9) (17.3) 66.5 Profit (loss) from assets held for sale and discontinued operations (8.9) (0.9) 15.7 Loss before non-controlling interests (93.6) (10.2) (175.8) (18.2) 82.2 Profit attributable to non-controlling interests Loss attributable to owners of the parent (93.1) (10.1) (175.3) (18.2) 82.2 (1) Advertising revenue as at September 30, 2014 includes million earned through the Group s Advertising concessionaire (of which million by Media Italy, 9.6 million by Poligrafici Editoriale, 13.6 million by Editrice La Stampa, 7 million by selling the space of other publishers, 1.4 million in relation to sundry events and 1.1 million by Media Spain) and million earned directly by publishers (of which million by Media Spain, 17.1 million by Sports Events, 6.8 million by Media Italy, 9.5 million by Corporate Functions and Other Activities and 0.7 million in intragroup eliminations). Advertising revenue as at September 30, 2013 includes million earned through the Group s Advertising concessionaire (of which million by Media Italy, 1.6 million by Poligrafici Editoriale, 3.3 million by selling the space of other publishers, and 1.7 million in relation to sundry events) and million (of which million by Media Spain, 17.3 million by Advertising and Events, 8.3 million by Blei, 9.5 million by Corporate Functions and Other Activities, 9 million by Media Italy and 1.2 million in intragroup eliminations). (2) Other publishing revenue mostly refers to revenue from the sale of film rights by Media Spain, revenue from the television activities of Media Italy and Media Spain, royalty revenue from third parties, revenue associated with events and exhibitions in Italy and Spain, e-commerce revenue and revenue from the sale of customer lists and children's boxed sets by companies in the Sfera group, which are classified within the Corporate Functions and Other Activities segment. (3) Earnings before interest, tax, amortisation/depreciation and impairment losses. (4) The Partworks business unit was sold on August 1, 2013, Edition d Art Albert Skirà was sold on December 11, 2013 and the Casa Editrice La Tribuna business unit and trademark was sold on March 1, These changes lead in total to lower consolidated revenue for 22.9 million and an improvement in the EBITDA of 9.2 million. Control over Editoriale del Mezzogiorno was acquired in the first quarter of 2014, an investment previously carried at equity. All of the company s revenue is intragroup, and its EBITDA totalled million at September 30, In the first quarter of 2014 control was acquired over Rizzoli Sfera International Advertising (Beijing) Co. Ltd. which holds 90% of Rizzoli Sfera International Convention & Exhibition (Beijing) Co. Ltd.. These companies, previously carried at equity, at September 30, 2014 presented total revenue of 2.8 million and an EBITDA of million. (5) The figures at September 30, 2013 have been revised to reflect the retroactive effects of adopting IFRS 10 and IFRS 11 relating to the scope of consolidation as of January 1, (6) At September 30, 2014, Profit (loss) from assets held for sale and discontinued operations includes the 6.8 million net gain realised on the Via Solferino real estate complex, the disposal of which (in 2013) was subject to a condition precedent. 8

9 The change in revenue with respect to September 30, 2013 is presented below. 965 (39) (34) Distribution/ Sundry 627 (5) (11) (4) (7) (17) 1 (18) (1) (1) (1) 9 (10) Advertising Revenue September 2013 Revenue Assets disposed of Revenue excluding assets disposed of Media Italy Media Spain Books Other Total Amounts received noncontrolling interests Revenue September 2014 Revenue at September 30, 2014 amounted to million, marking a decrease of 43.4 million over the first nine months of This change was primarily due to the disposal or suspension of a number of non-core magazines as well as the effect generated by the decreased scope of consolidation after the disposal of companies and business units, as described above. Excluding these effects, the decrease would be 4.8 million. At the same time, there was an increase in revenue from other publishers as a result of the advertising sale agreements entered into with Editrice La Stampa and Poligrafici Editoriale S.p.A. Revenue from digital activities, which are transversal across almost all segments of the Group, represents 12% of the Group s total revenue (10.7% in the first nine months of 2013) and reached million as at September 30, 2014, up 7.3% compared to the first nine months of The main events which affected the drop in distribution revenue concerned: The decrease in distribution revenue of the Books area (- 22 million) includes 21.5 million due to the effects on revenue of the disposals of the Partworks business, the investee Edition d Art Albert Skirà and the Casa Editrice La Tribuna trademark. Excluding these effects, the area s distribution revenue would be basically the same, with a limited decrease of 0.5 million. This change is the net result of increases in Fiction and Non-Fiction (+ 2 million compared to September 30, 2013) and Illustrated Books in the United States (+ 1 million), due in both countries to the success of new releases, which was more than offset by the decrease in Education distribution revenue due to the increasingly more frequent use of the used book market and the growing tendency of households to postpone textbook purchases. The 17 million decrease in distribution revenue generated by Media Spain, due to the general fall in circulation and lower add-on product revenue. The decrease in distribution of the traditional product is partially offset by the growth in digital editions of Orbyt. 9

10 The decrease in distribution revenue of the Media Italy segment, amounting to 13.9 million essentially attributable to the Verticals sector, while revenue of the Newspapers sector was more or less stable reporting a contained drop with respect to the first nine months of 2013 of 0.2%. The decrease in distribution revenue in the Verticals sector, excluding the effect originated by the disposal and suspension of a number of periodicals, would have come to 3.5 million when compared with the same period of This change is essentially attributable to Family Publications also as a result of the different sales policy of the add-ons based on lower sales prices, profit margin being the same. Newspapers distribution revenue remained stable (- 0.6 million). This reflects both the good performance of add-on products launched in recent months due to the different publishing plan adopted, and the positive effect of publication price increases, offset by the drop in paper copies. Advertising revenue for the first nine months of 2014 came to million, up 3.6 million compared to the same figure in the same period of The change was driven by the increase in advertising revenue from other publishers ( million) following the advertising sale agreements recently entered into with Editrice La Stampa and Poligrafici Editoriale S.p.A. Furthermore, Media Spain advertising revenue rose (+ 1.5 million) as a result of institutional events, despite unfavourable market performance. These increases were only partially offset by the decrease in Media Italy advertising revenue (- 16 million compared to the first nine months of 2013) caused by the disposal or suspension of a number of magazines as well as the downturn in advertising sales on almost all media of Corriere della Sera publications, although this was mitigated by the increase in advertising revenue for La Gazzetta dello Sport publications, favoured by recent sports events as well as publishing initiatives. Furthermore, mention is made of the 8 million drop in advertising revenue in the Advertising and Events segment caused almost entirely by the disengagement from the activities of Blei, concession holder on foreign media (- 7.5 million). Other publishing revenue was up by 6.4 million, net. Total increases amounting to 9.6 million include 7.7 million for additional Advertising and Events revenue attributable mainly to the organisation of new sporting events such as the Dubai Tour for cycling and the Eurolega Final Four for basketball held this year in Italy, as well as additional revenue from the sale of television rights linked to the Giro d Italia. Mention is also made of the additional revenue with respect to the same period of the previous year linked to the line-by-line consolidation of the Chinese activities of the Sfera Group headed up by the Corporate Functions and Other Activities sector. The areas which present other publishing revenue down were Books (- 1.8 million, primarily as a result of the change in consolidation), Media Italy (- 0.7 million) and Media Spain (- 0.7 million). 10

11 EBITDA is a negative 16.3 million (negative million in the first nine months of 2013), marking an improvement of 105 million compared to the same period of Excluding 30 million in non-recurring expense in the first nine months of 2014, EBITDA would be a positive 13.7 million, and would be compared with negative EBITDA of 21 million in the same period of 2013 prior to non-recurring expense, marking a 34.7 million improvement. Net non-recurring expense, amounting to 30 million in the first nine months of 2014, includes 21.2 million for Media Spain personnel restructuring plans, primarily costs for the changeover of the editor-in-chief and costs incurred for the adoption of a new remuneration model approved by union representatives also during a workers referendum. There was also non-recurring expense of 8.8 million, with 5.5 million resulting from the renegotiation of agreements governing relations with the Spanish company in which non-controlling interests are held, which was assigned the printing activities of the Unidad Editorial group, 1.8 million resulting from the disengagement from activities in France and the United Kingdom and 1.5 million primarily associated with Books area personnel restructuring plans. At September 30, 2014 the cost reduction activities set forth in the Plan continued, part of which were activated during The benefits of these activities in the first nine months of 2014 amounted to 47 million, of which 29.6 million in Italy and 17.4 million in Spain. The change in EBITDA before non-recurring expense with respect to September 30, 2013 is presented below. (1) Total Efficiencies +47 (21) EBITDA September 2013 Negative EBITDA Assets disposed of Media Italy Media Spain Books/Others EBITDA September 2014 The improvement in EBITDA before non-recurring expense and income, with respect to the first nine months of 2013, is 34.7 million and regards: The increase in the EBITDA before non-recurring expense reported in the Media Italy area ( million) for the positive effects originated by special initiatives, for the benefits deriving from the price increase of the paper publications and by the on-going action for recovering efficiency and containing costs, and for the effect of the World Cup, as well as for the benefits deriving from the disposal and 11

12 closing down of periodicals ( 8.1 million) and higher revenue from add-on product sales (+ 2.7 million). The increase in EBITDA before non-recurring expense for the Media Spain area ( million) is due to the on-going actions for cutting costs and recovering efficiency and the positive effect of the World Cup and institutional events. These initiatives more than offset the drop in advertising and circulation revenue. The increase in EBITDA before non-recurring expense for the Advertising and Events area (+ 9.8 million compared to the first nine months of 2013) is attributable to the cost containment actions undertaken by the advertising concessionaire in Italy ( 5.1 million) and the Sports Events segment ( 5.2 million), in addition to the effect of the disengagement from the advertising concessionary activities in foreign press of the subsidiary Blei S.p.A. in liquidation, which resulted in a change of 0.5 million. EBITDA before non-recurring expense in the Books segment recorded an increase of 3.4 million compared to the first nine months of Excluding from this change the effects of the sale of companies and business units as described above, there would have been a decrease of 2.2 million, mostly due to the Education EBITDA, which was down due to the decline in revenue during the period and higher promotional costs required after the block on textbook adoptions was lifted. The decrease in EBITDA before non-recurring expense of Corporate Functions, a total of 8.2 million, is mainly attributable to the costs deriving from the entering into of the rental agreement for the property in Via Solferino/Via San Marco, after the sale of said property. The transaction made it possible to achieve savings in terms of financial expense. In the first nine months of 2014, the RCS Group continued to pursue its strategies with determination focusing on the strategic business segments, by means of reinforcement of the core publishing businesses, enhancement of the digital segment, strengthening the value of the publishing brands and the authors in the Books segment and the development of the revenue from events, especially sports events. In particular, the publishing reinforcement and enhancement strategy was implemented in the third quarter and subsequent months with the new Berliner format of Corriere della Sera, the restyling of El Mundo, which celebrated its 25th year, the launch of the Mexican edition of El Mundo, the return of Abitare at newsstands and in the digital edition, the restyling of Oggi for its 75th anniversary and the special international edition of Amica. On November 4, the new Rizzoli Galleria bookshop was inaugurated in Milan. The shop has been fully renovated after a record four-month restoration. At the same time, the new app dedicated to the world of books, BOOKtoBOOK, was unveiled. September saw the launch of MyStudio, the innovative digital suite dedicated to the world of school, with over 60 thousand users registered to date. In terms of advertising, the new video display advertising concession holder Gold 5 began generating sales while, in the area of large events, the three-day Il Tempo delle Donne and the Color Run, which involved 60 thousand enthusiasts over the course of six stages, were highly successful. The Group continued making investments in property, plant and equipment and intangible assets, which amounted to 43.7 million in the first nine months of 2014, 60% of which was invested primarily in the digital area and to create the new Corriere della Sera format. These included the investments for the overhaul of the websites of Corriere della Sera and La Gazzetta dello Sport. These measures brought the two websites towards an innovative publishing formula, with the reorganisation of the news and with a graphic layout of great visual impact thanks to a completely renewed use of the images and the development of the video contents. Investments of around 6.5 million were made for the new Corriere della Sera format, which is smaller and more condensed, has a more modern impagination and a clearer and simpler article size, with more exclusive news and in-depth information. Investments of 4.3 million were also made for the design and development of textbooks, in line with the new business model introduced in light of regulatory developments in the Education segment, accentuated by the block on adoptions being lifted. 12

13 Also in the digital realm, the overhaul of the websites was accompanied by the activities linked to the overhaul of the Web Farm and all the infrastructural measures for the support and development of the digital activities. Personnel expense decreased by 83.5 million. That change, excluding from that item net non-recurring expense from the first nine months of 2014 totalling 20.8 million, and from the first nine months of 2013 totalling 76.2 million, would have been an overall decrease of 28.1 million as a result of downturns in average headcount trends in all areas, mainly for Media Italy and Media Spain, respectively equating to 11 million (with a decrease in average headcount of 84) and 10.1 million (with a reduction in average headcount of 154). Operating profit was a negative 69.2 million, compared to a negative 178 million in the first nine months of The improvement of million, in addition to reflecting the phenomena described above, was caused by lower amortisation of intangible assets (down 5.8 million compared to the first nine months of 2013) and depreciation of property, plant and equipment and investment property (down 2.9 million). The decrease in the amortisation charges on intangible assets is attributable in part to Media Italy (- 6 million) due to the impairment losses on the intangible assets of the TV Activities (Digicast) applied at December 31, 2013 so as to take into account the results of the impairment test, as well as Media Spain (- 1.9 million) primarily due to the suspension, as from July 31, 2013 of the Marca TV broadcasts. The amortisation of the intangible assets of the Corporate Functions and Other Activities and the Books areas increased, due to new investments in the web sphere, the purchase of licences and the development of new publishing projects. The drop in depreciation of property, plant and equipment included around 1.5 million due to the Media Italy area and was essentially due to the impairment loss on printing centres carried out in the second half of 2013, as well as around 0.7 million referring to Media Spain and 0.6 million referring to the Corporate Functions and Other Activities area essentially due to the completion of the depreciation schedules existing in The impairment losses in the first nine months of 2014 amounted to 8.8 million and compare with the impairment losses of 3.9 million in the same period of the previous year. The impairment losses refer in full to the Media Italy area and concern the impairment loss on the Pessano property ( 3.8 million), joined by impairment losses relating to Television activities ( 5 million). Revenue, EBITDA and operating profit (loss) per business segment are summarised below, illustrated in the Operating segment performance section, to which reference should be made for more details. ( /millions) Sep Sep (4) Revenue EBITDA BEFORE NON- % of RECURRING revenue EXPENSE EBITDA % of revenue OPERATING PROFIT (LOSS) % of revenue EBITDA BEFORE NON- % of Revenue EBITDA RECURRING revenue EXPENSE % of revenue OPERATING PROFIT (LOSS) Media Italy (1) % % % % (47.2) (11.5)% (68.6) (16.7)% Media Spain % (21.5) (8.4)% (36.0) (14.0)% (7.6) (2.8)% (22.5) (8.2)% (39.9) (14.6)% Books (2) % % (0.1) (0.1)% % (4.9) (2.7)% (5.7) (3.2)% Advertising and Events (2.0) (0.8)% (2.8) (1.1)% (2.9) (1.2)% (11.8) (4.9)% (26.9) (11.3)% (27.1) (11.3)% Corporate Functions and Other Activities (3) 55.6 (21.2) (38.1)% (21.4) (38.5)% (38.4) n.a 56.8 (13.0) (22.9)% (19.8) (34.9)% (36.7) n.a Other and eliminations (182.7) 0.0% % 0.0 n.a (193.7) 0.0% - n.a 0.0 n.a Consolidated % (16.3) (1.8)% (69.2) (7.5)% (21.0) (2.2)% (121.3) (12.6)% (178.0) (18.4)% Assets held for sale and discontinued operations (2) (5.2) Other and eliminations Total % (16.3) (1.8)% (69.2) (7.5)% 1,004.6 (16.9) (1.7)% (117.2) (11.7)% (183.2) (18.2)% % of revenue (1) Control over Editoriale del Mezzogiorno was acquired in the first quarter of 2014, an investment previously carried at equity. All of the company s revenue is intragroup, and its EBITDA totalled million at September 30, (2) The Partworks business unit was sold on August 1, 2013, Edition d Art Albert Skirà was sold on December 11, 2013 and the Casa Editrice La Tribuna business unit and trademark was sold on March 1, These changes lead in total to lower consolidated revenue for 22.9 million and an improvement in the EBITDA of 9.2 million. (3) In the third quarter of 2014 control was acquired over Rizzoli Sfera International Advertising (Beijing) Co. Ltd. which holds 90% of Rizzoli Sfera International Convention & Exhibition (Beijing) Co. Ltd.. These companies, previously carried at equity, at September 30, 2014 presented total revenue of 2.8 million and an EBITDA of million. (4) The figures at September 30, 2013 have been revised to reflect the retroactive effects of adopting IFRS 10 and IFRS 11 relating to the scope of consolidation as of January 1, Net financial expense increased 11.2 million, passing from 19.8 million in the first nine months of 2013 to 31 million in the first nine months of There was a net deterioration of 7.9 million emerging from the additional interest expense on loans granted by the banking system, essentially associated with the interest rate trend following the renegotiation in 2013, which realigned the spreads applied with the new market conditions, 13

14 which was only partially offset by the reduction in the average debt. This was joined by an increase in other net expense, primarily caused by the negative effect of the discounting back of the financial statement items. Expense and income from financial activities include 1.9 million in expense, basically relating to the impairment loss on financial receivables. At September 30, 2013, this item amounted to zero. The share of profits (losses) of equity-accounted investees amounted to a net loss of 9 million, compared to 7.8 million in the first nine months of The increase of 1.2 million, excluding the effects generated by the line-by-line consolidation of Rizzoli Sfera International Advertising (Beijing), a Chinese company control over which was acquired during the year, previously carried at equity, would come to 1.8 million and would be essentially attributable to the lower profits of the investees of the Unidad Editorial group (in particular Corporation Bermont) and the investees in the Books area (- 0.5 million) joined by the impairment loss on the investee Inimm due S.a.r.l.. Countering this trend, the Finelco Group profit (loss) improved (+ 0.2 million for the share attributable to the Group). Profit from assets held for sale and discontinued operations at September 30, 2014, standing at 6.8 million, includes the gain realised on the Via Solferino property, the sale of which, in 2013, was subject to a condition precedent linked to the exercise of the pre-emption right by the competent authorities with respect to the restriction put into place by the Lombardy Cultural and Environmental Heritage Regional Office - Ministry for Cultural Assets and Activities, at the request of the Milan Architectural and Environmental Heritage Department, which was not exercised. Compared to June 30, 2014, this item was down by 0.3 million due to the review of estimated expense associated with the new intended use of the Solferino property, net of the relative taxes. This compared with a loss of 8.9 million recorded in the first nine months of 2013, inclusive of the profit (loss) of the Dada Group net of the impairment losses applied, as well as profit recorded in relation to the classification of the San Marco property segment recorded under assets held for sale. Income taxes stood at 10.7 million at September 30, 2014, compared to 38.7 million in taxes at September 30, This item includes deferred tax assets of 15.9 million, partially offset by IRAP of 4.9 million and taxes on foreign companies of 0.4 million. Tax income of 0.1 million relating to previous years was also recognised. This change mainly relates to RCS MediaGroup S.p.A., common parent in the group tax consolidation ( million), mainly due to the reduction in prepaid taxes in the presence of lower provisions for risks relating to personnel, as well as to the Newspapers Spain area (- 6.7 million). The loss for the first nine months of 2014 is 93.1 million ( million in the first nine months of 2013), and reflects the trends described above, adjusted by losses attributable to non-controlling interests ( 0.5 million). Breakdown of the average number of employees by region The average number of RCS Group employees in the first nine months of 2014 totalled 4,036, considerably lower than in the same period of 2013 (4,750). The decrease, of 714 employees, is mostly due to the sale of the Dada Group (349 employees). Excluding the effects deriving from the sale of Dada, the decrease is attributable on the one hand to the effect of the reorganisation plans and the efficiency actions, and on the other hand to the transactions for rationalising the Group s activities with the consequent disposal of business segments or companies. Workforce reductions were particularly significant for Media Spain (154), Media Italy (84, also due to the disposal of some publications in the Verticals area and despite the consolidation of Editoriale del Mezzogiorno and the acquisition on September 1, 2014 of the Padua printing centre business unit by RCS Produzioni Padova SpA), Books (89, also associated with the sale of Skirà, the Partworks business and Casa Editrice La Tribuna) and Advertising and Events (52, partially due to the placement of Blei in liquidation). In Corporate Functions and Other Activities, the average number of employees of Other Activities increased due to the consolidation of Sfera Cina beginning on January 1, 2014 (average of 44 employees), while the average number of employees decreased by 39 for Corporate Functions. 14

15 Employees working in the Group s foreign operations accounted for approximately 40% of the Group s average total at September The breakdown of the average number of employees by geographical segment is shown below. Italy Spain Other countries Total Sep-30 Sep-30 Sep-30 Sep Media Italy 1,507 1, ,537 1,621 Media Spain 0 1,422 1, ,422 1,576 Books Advertising and Events Corporate Functions and Other Activities Consolidated total 2,402 2,663 1,459 1, ,036 4,401 Assets held for sale Dada Total 2,402 2,861 1,459 1, ,036 4,750 The exact headcount of the RCS Group at September 30, 2014 was down 227 on September 30, The decrease in employees was characterised by the efficiency-boosting initiatives, carried out mainly through restructuring plans that involved all the group s business units, and by changes in the scope of consolidation, including in particular the consolidation of the company Editoriale del Mezzogiorno (51), the acquisition of a business unit by RCS Produzioni Padova (39) and Hotelyo (6), the closure of Rizzoli Beijing (15) and the sale of some publications (35) in the Media Italy segment. In the Books segment the main factors contributing to this change were the disposal of Skirà (72), Partworks (16) and La Tribuna (17), while in the Advertising and Events segment, Blei was placed in liquidation and in Corporate Functions and Other Activities, Sfera Cina was consolidated (43). The government sponsored lay-off scheme (CIGS) was initiated in the last part of the first half of 2013, and its effect is not incorporated into the average employee figures (32 people placed in CIGS at September 30, 2014). At September 30, 2014, the exact headcount of the RCS Group net of employees placed in CIGS as mentioned above, is 3,935 people. Furthermore, as a result of the union agreement entered into on February 14, 2014, 143 journalists belonging to the Italy Media (Verticals) and Corporate Functions and Other Activities (Sfera) areas have been working under a solidarity regime since March 2014, involving a reduction in working hours up to a maximum of 30%. The exact headcount broken down by geographical area is shown below. Italy Spain Other countries Total Sep-30 Sep-30 Sep-30 Sep Media Italy 1,527 1, ,533 1,558 Media Spain 0 0 1,417 1, ,417 1,523 Books Advertising and Events Corporate Functions and Other Activities Consolidated total 2,373 2,509 1,453 1, ,967 4,194 15