Half-year Report. at June 30, 2015

Transcription

1 Half-year Report at June 30, 2015 This is English translation of the Italian Half-year report, 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 Corporate Officers... 3 Group structure of RCS MediaGroup... 5 Brief description of the Group... 6 Consolidated financial highlights of RCS MediaGroup... 8 Report on operations... 9 Group performance in the second quarter Group performance in the first half of the year Other Information Operating segment performance Media Italy Media Spain Books Advertising and Events Corporate Functions and Other Activities Related party transactions Significant events during the first half of the year Events after the reporting period Outlook Additional information required by CONSOB pursuant to Art. 114, paragraph 5 of Italian Legislative Decree no. 58/1998 of May 27, Condensed interim consolidated financial statements 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 Annexes List of group equity investments at June 30, Exchange rates against the euro Related parties

3 CORPORATE OFFICERS Honorary Chairman Cesare Romiti Board of Directors (^) Maurizio Costa Pietro Scott Iovane ( ) Gerardo Braggiotti Laura Cioli Paolo Colonna Teresa Cremisi Dario Frigerio Tom Mockridge Stefano Simontacchi Chairman Chief Executive Officer Director Director Director Director Director Director Director (^) The Board of Directors in office at the date of approval of this Report. The Directors are in office for the years and therefore until the Shareholders Meeting called to approve the 2017 financial statements. ( ) Also holds the office of Chief Operating Officer. Powers delegated by the Board of Directors (^) Without prejudice to internal observance of the functions and rules of corporate governance adopted, the Board of Directors has delegated in particular all the powers to the Chief Executive Officer and Chief Operating Officer for the conduct of the Company's ordinary administration, as well as a set of powers for the company s management, with limits on the size of financial commitments and/or risks that may be assumed for certain types of transactions. Board of Statutory Auditors (^) Lorenzo Caprio Gabriella Chersicla Enrico Colombo Barbara Negri Renata Maria Ricotti Ugo Rock Chairman Standing auditor Standing auditor Alternate auditor Alternate auditor Alternate auditor (^) The Board of Statutory Auditors in office as at the date of approval of this Report. The Statutory Auditors are in office for the years and therefore until the Shareholders Meeting called to approve the financial statements relating to the last of these years. Independent auditors (^) KPMG S.p.A. (^) In office until the Shareholders Meeting called to approve the 2017 financial statements. 3

4 GROUP STRUCTURE OF RCS MEDIAGROUP 4

5 GROUP STRUCTURE OF RCS MEDIAGROUP Media Italy Media Sp ain Books Advertising and Events Corporate Functions an d Oth er Activ ities 5

6 BRIEF DESCRIPTION OF THE GROUP RCS MediaGroup is one of the leading multi-media publishing groups at international level. The Group is active in various publishing sectors, from newspapers to magazines, books to TV, radio to new media, as well as being among the primary operators on the advertising sales and distribution market. In a global context characterised by a deep change in communication mediums, media is increasingly important for the development of civil society and its individuals. RCS MediaGroup is a leading player in the evolution process of the publishing sector, fortified by the founding values and principles which inspire it and the acknowledged influence which characterises its contents, brands and authors. In particular, the RCS Group is leader in newspaper publishing in Italy and Spain. In Italy, the RCS Group publishes Corriere della Sera and La Gazzetta dello Sport, leaders among national and sport dailies, in addition to numerous weekly and monthly magazines, including Amica, Living, Style Magazine, Dove, Oggi, Io Donna, Sportweek, Sette and Abitare. In Spain, the Group is one of the main players in the media sector with the Unidad Editorial Group, which publishes Spain's number two daily newspaper El Mundo, Marca, leader in sports news, and Expansión, leader in business news, in addition to numerous magazines, including Telva, Marca Motor, Actualidad Económica, Golf Digest, Historia, Siete Leguas. The Group is also active in multimedia communication dedicated to early childhood with the Sfera Group, which operates in Italy, China, Spain, Mexico and France, where it is active with numerous initiatives, including e-commerce and industry trade fairs. Via RCS Sport, the RCS Group organises very important sporting events at global level, including the Giro d Italia, the Dubai Tour, the Milan City Marathon and the Color Run, and presents itself as partner for the creation and organisation of events via the newly-established RCS Live Agency. In Spain, with Last Lap, it is a point of reference for non-conventional mass events. Also in the sports arena, RCS MediaGroup entered the football and sport on-line betting sector with the launch of GazzaBet, which began operating on September 10, This activity is also carried out in Spain through the Marca Apuestas website. In Italy, RCS MediaGroup is also active in the television sector, by means of the subsidiary Digicast S.p.A. with the satellite channels Lei, Dove and Caccia & Pesca, and via the web TV channels of Corriere della sera and La Gazzetta dello Sport. In addition, broadcasting of GazzettaTV began on February 26, 2015 on digital terrestrial channel 59. In Spain it is present with the first Spanish sports radio station Radio Marca, with the web TV channel of El Mundo and with the digital TV channels Canal 13 and Discovery max. In addition to the natural digital off-shoots of the Group brands, the strategy towards innovation has led to the creation of the incubator for start-ups RCS Nest, which incorporates a number of successful start-ups such as Dunkest and to the development of multimedia systems such as Corriere Innovazione and transversal projects such as La27Ora. Numerous cross-media initiatives have also been launched, such as the TV talent show Masterpiece, the web series Una Mamma Imperfetta and the co-publishing contest YouCrime, and apps and e- commerce have been developed such as City1Tap, Quimammeshop and DoveClub. RCS MediaGroup is the leading operator with regard to advertising sales in Italy and Spain. In Italy, besides advertising sales for the Group s publications, the Advertising Division also acquired the national advertising sales activities for the Monrif Group and Editrice La Stampa and other important southern Italian publishers such as: Società Editrice Sud or SES for Gazzetta del Sud ; Domenico Sanfilippo Editore for La Sicilia ; Editrice del Sud Edisud for Gazzetta del Mezzogiorno ; Giornale di Sicilia Editoriale Poligrafica for il Giornale di Sicilia ; Sicilia Multimedia for lasiciliaweb.it. The publications Il secolo XIX and Il secolo XIX.it were added on January 1, Furthermore, together with other operators in the sector it established Gold 5, the new video display advertising concession holder. The Group is present in below the line marketing thanks to RCS Numix, a creative agency which includes various business lines in support of advertising customers. RCS MediaGroup holds an investment in m-dis Distribuzione Media S.p.A. and Corporaciòn Bermont, leaders in distribution on the newsstand channel in Italy and in the daily press in Spain, respectively. 6

7 The RCS Group is the second leading Italian operator in the book publishing field via RCS Libri. It should be pointed out that, on July 30, 2015, the Board of Directors, as part of the wider assessments of the Group s strategy, acknowledged the communication received from Arnoldo Mondadori Editore S.p.A., for the integration of the offer sent on June 29, 2015 in relation to the purchase of the entire shareholding in RCS Libri S.p.A. and - despite reserving the right to take any decision on the transfer of the equity investment - unanimously resolved to provide the Chief Executive Officer with the mandate to continue negotiations and with the definition of the contractual aspects. The equity investment in the Finelco Group, operating in the radio sector, which heads up national broadcasters Radio 105 Network and Radio Monte Carlo, plus Virgin Radio, was reclassified to Assets held for sale and discontinued operations. The preliminary sale agreement was signed on July 30, 2015 with Blue Ocean S.r.l., a company representing a consortium of Italian entrepreneurs. The Parent is a publicly listed company on Italy's electronically-traded equities market, organised and run by Borsa Italiana S.p.A.. It is headquartered in Via Angelo Rizzoli 8, Milan, and has been registered under number in the Milan Company Register since March 6, 1997 (RCS MediaGroup S.p.A. ISIN code: IT ). 7

8 CONSOLIDATED FINANCIAL HIGHLIGHTS OF RCS MEDIAGROUP 2nd quarter 1st half of ( /millions) (2) INCOME STATEMENT Revenue EBITDA (1) ( 3.0) ( 29.2) OPERATING LOSS ( 46.5) ( 5.1) ( 85.5) ( 65.1) Loss before tax and non-controlling interests ( 63.3) ( 17.0) ( 111.2) ( 87.7) Income taxes Loss from continuing operations ( 61.1) ( 15.6) ( 96.7) ( 73.8) Profit (loss) from assets held for sale and discontinued operations (3) 1.1 ( 0.6) Loss for the period ( 60.2) ( 16.1) ( 95.4) ( 70.0) Basic earnings per share: continuing operations ( 0.12) ( 0.03) (0.19) (0.16) Diluted earnings per share: continuing operations ( 0.12) ( 0.03) (0.19) (0.16) Basic earnings per share: assets held for sale and discontinued operations ( 0.001) Diluted earnings per share: assets held for sale and discontinued operations ( 0.001) STATEMENT OF FINANCIAL POSITION Jun Jun Dec (2) Net capital employed Net financial debt (4) _ of which net financial debt related to assets held for sale and discontinued operations Equity Average number of employees excluding those involved with assets held for sale and discontinued operations 4,009 4,038 4,023 Average number of employees 4,009 4,038 4,023 (1) Earnings before interest, tax, amortisation/depreciation and impairment losses. (2) The Casa Editrice La Tribuna business unit and trademark were sold on March 1, This change led in total to a decrease in consolidated revenue of 0.3 million and an improvement in the EBITDA of 0.4 million. (3) In the first half, and in the second quarter of 2014, profit (loss) from assets held for sale and discontinued operations was restated to also take account of the profit (loss) accrued in the first half of 2014 and relating to the investees IGPDecaux transferred at June 30, 2015 and Finelco Group, classified under assets held for sale and discontinued operations starting from the end of 2014, whose preliminary sale contract was signed on July 30, (4) Indicator of financial structure, calculated as current and non-current financial liabilities 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 at June 30, 2015, June 30, 2014 and December 31, 2014 amounted to zero and, therefore, RCS s financial ratio at June 30, 2015, June 30, 2014 and December 31, 2014 matches the net financial debt as defined by the abovementioned CONSOB Communication. The Half-year Report was approved by the Board of Directors on August 25,

9 REPORT ON OPERATIONS DRAFTED IN ACCORDANCE WITH LAW DECREE No. 58/1998 AND SUBSEQUENT AMENDMENTS 9

10 GROUP PERFORMANCE IN THE SECOND QUARTER The Italian macroeconomic context confirmed modest signs of a recovery, characterised by the halt in the fall of GDP at essentially stable values, with variations of around 0.1% (up 0.2% over the previous quarter: Source - Istat preliminary estimate). The unknown quantity relating to developments in the Greek crisis affected the overall scenario. By contrast, Spanish GDP recorded more robust growth of 3.1% on an annual basis in the second quarter of 2015 (Source: Ine). The advertising market disclosed a 6.6% decrease with respect to print in Italy during the second quarter of 2015, while the overall advertising market presented a drop of 3.4% with respect to the same period in 2014 (Source: Nielsen). In Spain, there was a 0.2% increase compared to the second quarter of 2014 for print, while the overall advertising market showed a 6.9% increase compared to the same period of last year (Source: I2P/ArceMedia). Reclassified income statement Reference to ( /millions) financial statements 2nd quarter 2015 % 2nd quarter 2014 % Difference Difference (5) (4) A B A-B % Revenue (12.8) (3.7%) Distribution revenue I (0.2) (0.1%) Advertising revenue (1) I (10.0) (6.7%) Other publishing revenue (2) I (2.6) (5.8%) Operating expenses II (223.6) (66.7) (241.9) (69.5) 18.3 (7.6%) Personnel expense III (85.4) (25.5) (85.7) (24.6) 0.3 (0.4%) Allowance for impairment IV (2.6) (0.8) (2.9) (0.8) 0.3 (10.3%) Provisions for risks V (3.4) (1.0) (1.0) (0.3) (2.4) 240.0% EBITDA (3) % Amortisation of intangible assets VI (11.0) (3.3) (9.2) (2.6) (1.8) Depreciation of property, plant and equipment VII (5.2) (1.6) (5.4) (1.6) 0.2 Depreciation of investment property VIII (0.2) (0.1) (0.3) (0.1) 0.1 Other impairment losses on non-current assets IX (50.5) (15.1) (6.9) (2.0) (43.6) Operating loss (46.5) (13.9) (5.1) (1.5) (41.4) Net financial expense X (9.4) (2.8) (10.6) (3.0) 1.2 Gains (losses) on financial assets/liabilities XI (7.9) (2.4) (7.9) Share of profits (losses) of equity-accounted investees XII (1.3) (0.4) 1.8 Loss before tax (63.3) (18.9) (17.0) (4.9) (46.3) Income taxes XIII Loss from continuing operations (61.1) (18.2) (15.6) (4.5) (45.5) Profit (loss) from assets held for sale and discontinued operations (4) XIV (0.6) (0.2) 1.7 Loss before non-controlling interests (60.0) (17.9) (16.2) (4.7) (43.8) (Profit) loss attributable to non-controlling interests XV (0.2) (0.1) (0.3) Loss attributable to owners of the parent (60.2) (17.9) (16.1) (4.6) (44.1) (1) Advertising revenue in the second quarter of 2015 includes 77.4 million earned through the Communication Solutions division, a Group concessionaire (of which 63.9 million by Media Italy, 12.6 million by selling the spaces of other publishers, 0.5 million by Media Spain and 0.4 million by Advertising and Events) and 62.3 million earned directly by publishers (of which 41.1 million by Media Spain, 12.4 million by Sports Events in Advertising and Events, 4.7 million by Media Italy and 4.1 million by Corporate Functions and Other Activities). Advertising revenue in the second quarter of 2014 includes 86.4 million earned through the Communication Solutions division, a Group concessionaire (of which 71.7 million by Media Italy, 13.9 million by selling the space of other publishers, 0.5 million in relation to sundry events and 0.3 million by Media Spain) and 63.3 million earned directly by publishers (of which 44.1 million by Media Spain, 12.4 million by Sports Events, 2.6 million by Media Italy, 4.4 million by Corporate Functions and Other Activities and 0.2 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 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) In the first half of 2014, profit (loss) from assets held for sale and discontinued operations (zero in the Half-year Report at June 30, 2014) was restated to also take account of the profit (loss) accrued in the first half of 2014 and relating to the investees IGPDecaux and Finelco Group, classified under assets held for sale and discontinued operations starting from the end of (5) These notes relate to the corresponding headings in the condensed income statement. Revenue for the second quarter amounted to million compared with million in the same period of the previous year. The 12.8 million decrease is attributable, in the first place, to the decrease in advertising revenue (down 10 million) and, secondarily, the fall in other publishing revenue (down 2.6 million). Distribution revenue remained essentially stable (down 0.2 million) The trend in advertising revenue (down 6.7% compared to the second quarter of 2014), is mainly attributable to a decrease in advertising revenue in the Media Italy segment (down 5.7 million) and the Media Spain segment (down 2.7 million), both adversely affected by a comparison with the second quarter of 2014 characterised by the World Cup, in addition to, solely for the Media Spain segment, the effect of the reduction in the perimeter 10

11 of advertising sales activities on behalf of third parties, effective from On a like-for-like basis, the advertising revenue of Media Spain would essentially be in line with the second quarter of 2014, while the advertising revenue of Media Italy, although recording a reduced decrease, would show an adverse impact due to the unfavourable trend in the print media segment and advertising sales via the on-line media corriere.it and gazzetta.it. Advertising revenue with third party publishers, characterised by reduced profit margins, recorded a decrease of 1.3 million compared to the second quarter of 2014, despite the new advertising concession acquired in the first quarter of 2015 for the print media and on-line sales of the publication of Il Secolo XIX. The advertising sales of the other areas were essentially stable. The decrease in other publishing revenue of 2.6 million is attributable, for 1.2 million, to the activities of the Media Spain segment, adversely impacted by the closure of two television channels in May The generally stable trend in distribution revenue with respect to the second quarter of 2014 is the result of the drop in the distribution revenue of Media Spain, almost fully offset by the increases in the distribution revenue recorded by Media Italy and the Books segment. More specifically: A decrease of 5.7 million in the distribution revenue of the Media Spain segment, adversely affected primarily by the contracting market and the reduction in promotional activities for the publication El Mundo, benefitting profit margins. An increase of 3.7 million in the distribution revenue of the Media Italy segment due to the positive effect of both the increase in the publication price (introduced for the Corriere della Sera in January 2015 and for La Gazzetta dello Sport in August 2014 and in June 2015) and the different timing of publication of add-on products with respect to the 2014 publishing plan (up 6 million over the second quarter of 2014). The overall effects of these initiatives more than offset the natural and continuous decline in circulation. An increase in the distribution revenue of the Books segment (up 2 million), owing to both the positive performance in the period, thanks in particular to the books published by Marsilio and Adelphi and the special projects relating to Illustrated Books Italy, and the constant growth in digital revenue. The revenue of Rizzoli International Publications also recorded an increase of 0.5 million. EBITDA was positive at 20.4 million, compared to positive EBITDA of 16.7 million in the second quarter of Excluding non-recurring expense and income, EBITDA would amount to a positive 27.4 million and would be compared to EBITDA of 24.8 million in the same period of 2014, marking an increase of 2.6 million. EBITDA was affected, in the second quarter of 2015, by costs relating to the launch of the Gazzetta TV channel and the comparison with a second quarter of 2014 which benefitted from the effect of the World Cup and the special editions of Corriere della Sera and La Gazzetta dello Sport. Excluding these aspects and the positive impact of the Expo on EBITDA in the second quarter of 2015, EBITDA before non-recurring income and expense would register an improvement of around 13 million compared to the second quarter of The overall change in EBITDA before non-recurring income and expense (up 2.6 million) includes the positive contribution from the Advertising and Events segment (up 2.9 million compared to the second quarter of 2014), due to the strong performance of proprietary sporting events and cost reduction initiatives, in addition to the positive contribution from the Books segment (growth of 2.1 million). These increases were only partially offset by the decrease recorded by EBITDA before non-recurring income and expense of the Corporate Functions and Other Activities segment and the decrease of 0.8 million of Media Spain. EBITDA before non-recurring income and expense of the Media Italy segment was essentially stable, nonetheless affected by the comparison with the second quarter of 2014 and the already mentioned negative effects attributable mainly to the absence of significant sporting events and the costs incurred by Digital Factory S.r.l. for the launch of Gazzetta TV. The positive trend continued with respect to the corresponding period of the previous year, highlighted by EBITDA before non-recurring expense and income, starting from the third quarter of In the second quarter of 2015 the cost reduction activities set forth in the Plan continued, whose benefits amounted to 12.6 million, of which 10.1 million in Italy and 2.5 million in Spain. 11

12 Personnel expense was 85.4 million in the second quarter of 2015 ( 85.7 million in the second quarter of 2014). Excluding net non-recurring expense of 5.6 million in the second quarter of 2015 ( 7.7 million in the same period in 2014), an increase of 1.8 million would be registered, attributable almost entirely to Media Spain, as a result of the increase in the average headcount and the positive effect of the adjustment due to the revision of the salary model in the second quarter of The operating loss amounted to 46.5 million in the second quarter of 2015, compared to a loss of 5.1 million in the same period of The decrease of 41.4 million was due not only to the above-mentioned phenomena but also to greater amortisation/depreciation and impairment losses. The increase of 1.5 million is essentially attributable to intangible assets, particularly in the Books segment, due to the increases in investments linked to the lifting of the block on adoptions, in force from 2014, in the Education segment. The impairment losses in the second quarter of 2015 amounted to 50.5 million and compare with the impairment losses of 6.9 million in the same period of the previous year. They refer, for 34.7 million, to the impairment loss resulting from the impairment test on the publications of the Unidad Editorial Group (net of the reversal of the impairment loss of the publication Expansion amounting to 1.1 million) and for 14.9 million to the impairment losses on the intangible assets in the Books segment, and in particular on the Education segment ( 14.1 million) and the Fiction and Non-Fiction segment ( 0.8 million), as a result of the fair value measurement of the associated cash-generating units (as better described in note 16). Lastly, goodwill in the Sfera segment of Corporate Functions impaired by 1.2 million as a result of impairment testing. These amounts were partially offset by reversals of impairment losses of 0.3 million relating to the Television Activities of Digicast. A summary of the main indicators by business area relating to the second quarters of 2015 and 2014 is shown below: ( /millions) Revenue EBITDA BEFORE NON- RECURRING ITEMS % of revenue 2nd quarter nd quarter 2014 EBITDA OPERATING % of % of BEFORE NON- % of EBITDA PROFIT Revenue revenue revenue RECURRING revenue EBITDA % of revenue (LOSS) ITEMS OPERATING PROFIT (LOSS) Media Italy % % % % % % Media Spain % % (34.7) (39.8)% % % (0.8) (0.8)% Books % % (16.3) (34.2)% 45.7 (1.7) (3.7)% (2.3) (5.0)% (2.6) (5.7)% Advertising and Events % % % % % % Corporate Functions and Other Activities 19.6 (7.5) (38.3)% (7.5) (38.3)% (14.6) n.a 20.8 (5.8) (27.9)% (5.8) (27.9)% (11.5) n.a Other and eliminations (67.1) 0.0% % 0.0 n.a (73.2) 0.0% - n.a (0.1) n.a Consolidated % % (46.5) (13.9)% % % (5.1) (1.5)% Net financial expense decreased by 1.2 million, passing from 10.6 million in the second quarter of 2014 to 9.4 million in the second quarter of There was an improvement of 0.5 million due to lower interest expense on loans granted by the banking system, essentially associated with the reduction in interest rates applied following the renegotiation in August 2014 of the applicable conditions of the Loan Agreement governing medium and long-term loans. This was augmented by a decrease in net expense, deriving from the discounting of the financial statement items. Losses on financial assets and liabilities amounted to 7.9 million, include estimated ancillary charges relating to the application of the fair value less cost to sell to the cash generating units of the Books segment (as better described in note 16), settlement expense of certain investees and the impairment loss on a financial receivable from a printing centre. These losses were only partially offset, primarily by the capital gain realised on the transfer of Accademia Holding ( 1.8 million) and the reversal of the impairment loss on financial assets available for sale. In the second quarter of 2014, this item amounted to zero. The share of profits (losses) of equity-accounted investees amounted to 0.5 million (net loss of 1.3 million in the second quarter of 2014) due to the share of the improved results of the investees m-dis Distribuzione Media S.p.A. and Corporation Bermont. In the second quarter of 2014, the item also included the impairment loss on the investee INIM 2 ( 0.9 million). Current tax income stood at 2.2 million in the second quarter of 2015, compared to 1.4 million in positive taxes in the second quarter of The variation is mainly attributable to the higher deferred tax assets and lower IRAP taxes. Profit from assets held for sale and discontinued operations came to 1.1 million and is composed of the realignment of the company amount of the investee Finelco Group to the price agreed in the preliminary sale 12 % of revenue

13 agreement signed on July 30, In the second quarter of 2014, the profit from assets held for sale and discontinued operations was restated with respect to the total in the half-year report in 2014 to take account of the profit accrued in the second half of 2014 relating to the investees IGPDecaux and Gruppo Finelco, classified under assets held for sale and discontinued operations starting from the end of The loss for the second quarter of 2015 was 60.2 million (loss of 16.1 million in the second quarter of 2014). The decrease compared to the second quarter of 2014 amounted to 44.1 million and reflects the elements already mentioned. 13

14 GROUP PERFORMANCE IN THE FIRST HALF OF THE YEAR The Group's financial highlights and related comments are presented below. ( /millions) Reference to financial statements First half of 2015 % First half of 2014 % Difference Difference (6) (4) (5) A B A-B % Revenue (19.2) (3.1%) Distribution revenue I (0.9) (0.3%) Advertising revenue (1) I (14.8) (5.9%) Other publishing revenue (2) I (3.5) (4.8%) Operating expenses II (418.8) (70.8) (444.5) (72.7) 25.7 (5.8%) Personnel expense III (165.4) (27.9) (186.0) (30.4) 20.6 (11.1%) Allowance for impairment IV (5.2) (0.9) (7.0) (1.1) 1.8 (25.7%) Provisions for risks V (5.5) (0.9) (2.8) (0.5) (2.7) 96.4% EBITDA (3) (3.0) (0.5) (29.2) (4.8) % Amortisation of intangible assets VI (21.1) (3.6) (17.8) (2.9) (3.3) Depreciation of property, plant and equipment VII (10.3) (1.7) (10.7) (1.8) 0.4 Depreciation of investment property VIII (0.3) (0.1) (0.5) (0.1) 0.2 Impairment losses on non-current assets IX (50.8) (8.6) (6.9) (1.1) (43.9) Operating loss (85.5) (14.4) (65.1) (10.7) (20.4) Net financial expense X (18.3) (3.1) (20.9) (3.4) 2.6 Gains (losses) on financial assets/liabilities XI (8.1) (1.4) (8.1) Share of profits (losses) of equity-accounted investees XII (1.7) (0.3) 2.4 Loss before tax (111.2) (18.8) (87.7) (14.4) (23.5) Income taxes XIII Loss from continuing operations (96.7) (16.3) (73.8) (12.1) (22.9) Profit (loss) from assets held for sale and discontinued operations XIV (2.3) Loss before non-controlling interests (95.6) (16.2) (70.4) (11.5) (25.2) (Profit) loss attributable to non-controlling interests XV (0.2) Loss attributable to owners of the parent (95.4) (16.1) (70.0) (11.5) (25.4) (1) Advertising revenue in the first half of 2015 includes million earned through the Communication Solutions division, a Group concessionaire (of which million by Media Italy, 22.1 million by selling the space of other publishers, 1 million by Media Spain and 0.5 million by various Advertising and Events) and million earned directly by publishers (of which 71.3 million by Media Spain, 15.7 million by Advertising and Events, 7.9 million by Media Italy, 6.5 million by Corporate Functions and Other Activities and 0.2 million in intragroup eliminations). Advertising revenue in the first half of 2014 includes million earned through the Communication Solutions division, a Group concessionaire (of which million by Media Italy, 21.9 million by selling the Space of other publishers, 0.7 million by Media Spain and 0.5 million by Advertising and Events) and million earned directly by publishers (of which 74.5 million by Media Spain, 16.5 million by Advertising and Events, 6.8 million by Corporate Functions and Other Activities, 5.2 million by Media Italy 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 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 Casa Editrice La Tribuna business unit and trademark were sold on March 1, This change led in total to lower consolidated revenue for 0.3 million and an improvement in EBITDA of 0.4 million. (5) In the first half of 2014, profit from assets held for sale and discontinued operations ( 7.1 million in the Half-year Report at June 30, 2014) was restated to also take account of the profit (loss) accrued in the first half of 2014 and relating to the investees IGPDecaux and Gruppo Finelco, classified under assets held for sale and discontinued operations starting from the end of (6) These notes relate to the corresponding headings in the condensed income statement. 14

15 The change in revenue with respect to the first half of 2014 is presented below. M Distribution/ Sundry Advertising Revenue first half of 2014 Media Italy Media Spain Books Other Total Amounts received - non-controlling interests Revenue first half of 2015 Revenue at first half of 2015 amounted to million, marking a decrease of 19.2 million over the first half of 2014, attributable mainly to the trend in advertising revenue (down 14.8 million, marking a decrease of 5.9% compared to the advertising revenue in the first half of 2014), and lower other publishing revenue (down 3.5 million). Distribution revenue remained essentially stable (down 0.3%). Revenue from digital activities, which are transversal across almost all segments of the Group, represents 13.6% of the Group s total revenue (15.2% excluding the Books segment) and reached 80.8 million at June 30, 2015, up 1.5% compared to the first half of Advertising revenue for the first half of 2015 came to 236 million, down 14.8 million compared to the same figure in the first half of The main contributions to the variation came from the fall in the advertising revenue of Media Italy (down 11.2 million), adversely impacted by the persistently decreasing trend in the reference markets of the two newspaper publications, in addition to, for the La Gazzetta dello Sport publications, the positive effect generated by the World Cup on the first half of Also the advertising revenue of Media Spain, down 2.9 million, was negatively affected by the comparison with the first half of 2014 in relation to the advertising sales of Marca, augmented in this case by the effects of the reduction in the perimeter of activities of advertising sales on behalf of third parties, effective from Excluding these effects, the trend in the advertising sales of Media Spain would register a decrease of just 0.9% compared to the first half of Other publishing revenue recorded a net decrease of 3.5 million compared to the first half of 2014, primarily due to other publishing revenue of Media Spain (down 2.1 million) and, in particular, to the effects of the closure of two of the four television channels, in fulfilment of the legislative provisions introduced in Spain in May 2014, and to lower mail-order sales of Corriere della Sera paper add-on products and lower revenue generated by the Sfera group in China. On the contrary, the Books segment recorded a positive trend in other publishing revenue, due to higher revenue from the rights sales (up 0.8 million). Distribution revenue, although registering a generally stable performance, was affected by the following main phenomena: The 11.2 million decrease in the distribution revenue of the Media Italy segment is attributable to the decline in circulation. In particular, the average daily circulation of both El Mundo and Marca (including digital copies) recorded a decrease of 13.4% compared to the same figure in the first half of 15

16 2014, with both, nonetheless, retaining their respective market positions. Digital revenue in the first half of 2015 accounted for 16.4% of the segment s total revenue, up 3% with respect to the same period in The 7 million increase in the distribution revenue of the Media Italy segment is mainly due to the growing publishing revenue of the Corriere publications and the increase in the cover price of Corriere della Sera as from January 2015 ( 1.5) and of La Gazzetta dello Sport with two increases in August 2014 ( 1.4) and on June 12, 2015 ( 1.5), and the strong performance of sales of add-on products. The growth in the distribution revenue of the Books segment (up 3.7 million) is attributable, for 2.5 million, to the Fiction and Non-Fiction segment and, in particular, to the publishing products of the third party publishing houses Marsilio and Adelphi, as well as to digital publishing products, no book products and special projects for Illustrated Books Italy, in addition to higher revenue generated by the US investee Rizzoli International Publications (up 1.4 million compared to the first half of 2014) and the appreciation of the dollar and higher sales, which made it possible to offset the lower revenue generated by the temporary closure of the historic Rizzoli bookstore in New York, which re-opened recently (at the end of July 2015). Education revenue remained essentially stable (down 0.2 million). The change in EBITDA before non-recurring income and expense with respect to June 30, 2014 is presented below. M 1, , , , ,2 EBITDA first half of 2014 Media Italy Media Spain Books Other EBITDA first half of 2015 EBITDA was a negative 3 million, an improvement of 26.2 million with respect to the first half of Excluding 8.1 million in net non-recurring expense in the first half of 2015, EBITDA would be a positive 5.1 million, and would be compared with negative EBITDA of 4.2 million in the first half of 2014 before nonrecurring expense, marking a 9.3 million increase, over 6 million of which generated in the first quarter and 2.6 million in the second quarter, EBITDA before non-recurring income and expense, was affected, in the first half of 2015, by costs relating to the launch of the channel Gazzetta TV and the comparison with a second half of 2014 which benefitted from the effect of the World Cup and the special editions of Corriere della Sera and La Gazzetta dello Sport. Excluding these aspects and the positive impact of the Expo on EBITDA in the first half of 2015, EBITDA before non-recurring income and expense would register an improvement of more than 20 million compared to the first half of Net non-recurring expense in the first half of 2015, amounting in total to 8.1 million, is attributable for around 6.3 million to the personnel restructuring plans relating mainly to Media Italy ( 2.7 million) and to Media Spain ( 2.6 million), also including the expense incurred for the change of management of the publication El Mundo), as well as, for 3 million to non-recurring expense linked mainly to the television activities of Media 16

17 Spain ( 2 million) and the withdrawal of the Advertising and Events sales network from some geographic areas ( 0.4 million). Non-recurring income of 1.2 million was also recorded, relating to the release of provisions relating to the process of rationalisation of some printing centres. The improvement in EBITDA before non-recurring income and expense, with respect to the first half of 2014, was 9.3 million and regards: The trend in EBITDA before non-recurring income and expense of the Media Italy segment was stable on the whole (up 0.3 million). Also excluding from the comparison the costs incurred in the first half of 2015 for the launch of GazzettaTV, and the positive impacts on the first half of 2014 of the World Cup and special projects, EBITDA in the first half of 2015, excluding the positive effects of the Expo, would record an improvement of 10 million. EBITDA before non-recurring income and expense in the Media Spain segment rose by 3.7 million. Excluding the negative effects of the closure of two television channels, this increase would be 4.6 million, due to the constant cost reduction initiatives and recovery of efficiency, as well as higher digital revenue. These initiatives more than offset the drop in circulation. The increase in EBITDA before non-recurring expense of the Advertising and Events segment (up 3.2 million) is mainly due to the cost efficiencies achieved and the growth in margins related to the organisation of sporting events by RCS Sport. The increase of 3.9 million in EBITDA before non-recurring expense compared to the first half of 2014 recorded by the Books segment, due to both the higher sales of digital products and the publishing products of Adelphi and Marsilio, and the greater revenue deriving from the sales of copyrights and the launch of special projects in relation to Italian Illustrated Books. A positive contribution was also made by the EBITDA before non-recurring expense of the Education segment and of Rizzoli International Publications, up 1.7 million and 0.3 million respectively. In particular, greater investments of 1.9 million were recorded in the half compared to the same period in 2014, incurred for the conception and production of school non-fiction books, linked to the recent development in publishing products and 1.6 million incurred for the re-opening of the historic New York bookstore at a new address. The decrease in EBITDA before non-recurring expense of Corporate Functions and Other Activities (down 1.8 million) was mainly associated with Corporate Functions, as a result of the full effect, in 2015, of the rental expenses resulting from the transfer of the historic Corriere della Sera building completed on March 6, 2014, as well as lower revenue generated by Childhood Verticals in China. Group capital expenditure in property, plant and equipment and intangible assets continued. During the first half of 2015, such expenditure amounted to 24.2 million, 4.2 million of which as the development costs of the publishing products of the Education segment. Around half of the remaining investments was incurred in the digital and Information Technology area. In particular, during the half and in the subsequent months, actions continued to enhance publishing and enrich the digital offer for the Corriere della Sera and La Gazzetta dello Sport newspapers, with a view to increasing the total audience and strengthening vertical channels with the launch of new subject areas and initiatives, linked in particular to the Expo The Corriere della Sera offered a rich programme of events in the last few months at the #CasaCorriere@Expo, the only daily newspaper stand present at the Expo and the special issue of Corriere della Sera on May 1, with 4.5 million free copies distributed at the opening of the event, as well as the app dedicated to the universal event City1Tap. In February, La Gazzetta dello Sport revolutionised its offer, enriching its products with the launch of Gazzetta Tv, which - also due to the exclusive acquisition of the rights to the 2015 Copa América, Serie A volleyball and basketball - registered good results in terms of audience shares in the half (average share of 0.52% all day and 1.15% in late evening, with a peak share above 18% - Auditel - June 2015). At the Expo 2015, La Gazzetta dello Sport, together with Aic (Associazione italiana calciatori - Italian Footballers Association) staged the Football Heroes event, a must-see for sports fans and a place for subject specific meetings. 17

18 March saw the launch of the new Expansiòn site, the leading business newspaper in Spain, while the following month saw the debut of Marca Buzz, Marca s new sports and entertainment portal dedicated to young people. Several initiatives were also implemented on the magazines front, with the restyling of iodonna.it, the launch of the Dove and Style Magazine, the launch of AIR, Abitare Instagram Residency, the new on-line residence project on-line Abitare for Instagram, and several successful events took place, like the 2015 edition of the The Art of Living exhibition, the renewal of the system connected with the publication OGGI, with the new release of oggi.it and OGGI Cucino and the launch of the new monthly Oggi Cucino FREE The art of living gluten-free. As regards advertising, RCS Communication Solutions was formed on February 11, 2015, a new Group concessionaire set-up, as well as NuMix Agency, which revolutionise the offering of marketing services for businesses, and can already bank on agreements and partnerships with Madai, Blurum, Mosaicoon and Warner Music Italia, with whom the RCS Group has signed an exclusive agreement for the sale of the advertising spaces of the video channel YouTube of the latter throughout Italy. The major mass events included the successful races, the Milan City Marathon, Color Run and Electric Run, which will see the addition of the Edenred Ekirun in September, the Italian version of the famous relay race on Japanese roads, plus non-sporting events such as Bimbinfiera 2015, the largest Italian trade fair dedicated to families. In addition, in cycling, the 98th edition of the Giro d Italia was hugely successful, and abroad, the second Dubai Tour, in anticipation of the first Abu Dhabi Tour in October. As regards the world of books, two authors published in Italy by Rizzoli won the 2015 Pulitzer Prize: Il patto col diavolo. Mussolini e Papa Pio XI ( The pact with the devil. Mussolini and Pope Pius XI ) by David Kertzer for best biography and Tutta la luce che non vediamo (All the Light We Cannot See) by Anthony Doerr for best novel. At the end of July, the new Rizzoli bookstore was opened to the public in New York, in the new site in the centre of Manhattan, in the heart of the NoMad district. BooktoBook Magazine was also created, RCS Libri s blog dedicated to readers. Lastly, as regards social responsibility, the RCS Group, with Corriere della Sera, La Gazzetta dello Sport, GazzettaTV and the Fondazione Candido Cannavò, was a media partner in the Giochi Senza Barriere 2015 exhibition, organised with the onlus (non-profit organisation for social welfare) art4sport to promote sport as a tool for integration between young able-bodied and disabled people. On June 14, 2015, the Open Day dello Sport (Open day of sport) event was organised at the San Vittore prison in Milan, during which the inmates had the chance to take part in various sporting activities, including the football tournament organised in memory of Candido Cannavò. Huge success was achieved by the new reading formula, the Corriere della Sera supplement, enriched and now on a paid format, selling out on its first release on Sunday July 19. In the first half of 2015 the cost reduction activities set forth in the Plan continued, whose benefits in the first half of 2015 amounted to 25.6 million, of which 20.1 million in Italy and 5.5 million in Spain. Personnel expense decreased by 20.6 million. That change, excluding from that item net non-recurring expense in the first half of 2015 totalling 6.3 million, and in the first half of 2014 totalling 24.2 million, would have been an overall decrease of 2.7 million, as a result of decreases relating mainly to Media Italy (down 3 million) and Corporate Functions and Other Activities (down 1.9 million), only partially offset by the increase recorded by the other segments, primarily including Media Spain. The overall decrease in the average headcount of 29 compared to the first half of 2014, was driven by the reduction in the headcount of Corporate Functions (down 57). The operating loss amounted to 85.5 million, compared with an operating loss of 65.1 million in the first half of The decrease of 20.4 million not only reflects the phenomena described above but higher amortisation, depreciation and impairment losses. The increase in amortisation relates to intangible assets (up 3.3 million compared to the first half of 2014), partly offset by a reduction in the depreciation of property, plant and equipment and investment property (total decrease of 0.6 million). The increase in the amortisation of intangible assets relates, for 1.6 million to the Books segment, for development costs incurred by the Education segment and capitalised starting from the final quarter of 2014, as a result of the lifting of the block on adoptions; the remaining amount of 1.6 million relates to Media Italy, Media Spain and Corporate Functions, essentially due to greater investments incurred in the digital and television segment. The impairment losses in the first half of 2015 amounted to 50.8 million and compare with the impairment losses of 6.9 million in the same period of the previous year. They refer, for 34.7 million, to the impairment loss resulting from the impairment test of the publications of the Unidad Editorial Group (net of the reversal of the impairment loss of the publication Expansion amounting to 1.1 million) and for 14.9 million to the 18

19 impairment losses on the intangible assets in the Books segment, and in particular on the Education segment ( 14.1 million) and the Fiction and Non-Fiction segment ( 0.8 million), as a result of the fair value measurement of the associated cash-generating units. Lastly, goodwill in the Sfera segment of Corporate Functions was impaired by 1.2 million as a result of impairment testing. Revenue, EBITDA and operating profit (loss) by operating segment are summarised below, illustrated in the Operating segment performance section, to which reference should be made for more details. ( /millions) Jun Jun Revenue EBITDA BEFORE NON- RECURRING ITEMS % of revenue EBITDA % of revenue OPERATING PROFIT (LOSS) % of revenue Revenue EBITDA BEFORE NON- RECURRING ITEMS OPERATING % of revenue EBITDA % of PROFIT revenue (LOSS) Media Italy % % % % % (2.5) (1.0)% Media Spain % % (42.0) (26.2)% % (16.6) (9.4)% (26.2) (14.8)% Books (1) 76.6 (6.0) (7.8)% (6.9) (9.0)% (24.1) (31.5)% 72.1 (9.9) (13.7)% (11.0) (15.3)% (11.6) (16.1)% Advertising and Events % % % % % % Corporate Functions and Other Activities 36.9 (16.2) (43.9)% (16.3) (44.2)% (29.2) n.a 37.8 (14.4) (38.1)% (14.4) (38.1)% (25.5) n.a Other and eliminations (119.1) 0.0% (0.0) 0.0% 0.0 n.a (130.0) 0.0% - n.a 0.0 n.a Consolidated % (3.0) (0.5)% (85.5) (14.4)% (4.2) (0.7)% (29.2) (4.8)% (65.1) (10.7)% % of revenue (1) The Casa Editrice La Tribuna business unit and trademark were sold on March 1, This change led in total to lower consolidated revenue for 0.3 million and an improvement in the EBITDA of 0.4 million. Net financial expense decreased by 2.6 million, passing from 20.9 million in the first half of 2014 to 18.3 million in the first six months of There was an improvement of 1 million due to lower interest expense on loans granted by the banking system, essentially associated with the reduction in interest rates applied following the renegotiation in August 2014 of the applicable conditions of the Loan Agreement governing medium and long-term loans. This was augmented by a decrease of 1.4 million, mainly relating to net expense deriving from the discounting of the financial statement items. Losses on financial assets and liabilities amounted to 8.1 million, include estimated ancillary charges relating to the application of the fair value less cost to sell to the cash generating units of the Books segment, the settlement expense of certain investees, the impairment loss on a financial receivable from a printing centre and the impairment loss on financial assets held for sale. These losses were only partially offset, primarily by the capital gain realised on the transfer of Accademia Holding and the reversal of the impairment loss on financial assets available for sale. In the first half of 2014, this item amounted to zero. The share of profits of equity-accounted investees amounted to 0.7 million, compared with a loss of 1.7 million in the first half of The increase of 2.4 million is essentially attributable to the better net result realised in the first half of 2015 by the companies m-dis Distribuzione Media S.p.A. and Corporation Bermont (compared to the first half of 2014), augmented by the increase deriving from a comparison with the figures for the first half of 2014 adversely impacted by the impairment loss on the investee (zero in the first half of 2015). Profit from assets held for sale and discontinued operations came to 1.1 million and is composed of the realignment of the company amount of the investee Finelco Group to the price agreed in the preliminary sale agreement signed on July 30, In the first half of 2014, profit from assets held for sale and discontinued operations amounted to 3.4 million, different from the profit of 7.1 million reported in the Half-year Report at June 30, In fact, the profit from assets held for sale and discontinued operations at June 30, 2014 was restated to also take account of the profit (loss) accrued in the first half of 2014 and relating to the investees IGPDecaux and Finelco Group, classified under assets held for sale and discontinued operations starting from the end of Income taxes registered an income of 14.5 million in the first half of 2015, compared to a tax income 13.9 million in taxes in the first half of This item includes positive taxes of 16.1 million, partially offset by IRAP of 1 million, taxes on foreign companies and the taxes of previous year totalling 0.6 million. The change in income taxes relates mainly to the lower IRAP taxes, partially offset by lower prepaid taxes. The loss for the first half of 2015 was 95.4 million (loss of 70 million in the first half of 2014), and reflects the trends described above, adjusted by loss attributable to non-controlling interests ( 0.2 million). 19