PRESS RELEASE This press release includes alternative performance indicators not considered under IFRS (EBITDA, Net Debt). These terms are defined in the appendix. The Board of Directors Approves the Group s Report on Operations at March 31, 2009 TELECOM ITALIA MEDIA GROUP: Significant improvement in Ebitda and Ebit compared with the first quarter of 2008, thanks to incisive actions to reduce costs, in particular in LA7 and MTV programming and to the advertising contract with Cairo Communication with a minimum amount guaranteed for TI Media REVENUES: 48.5 MILLION; + 1.2 MILLION ( 47.3 MILLION IN Q1 2008) EBITDA: - 3.8 MILLION; + 9.6 MILLION ( - 13.4 MILLION IN Q1 2008) EBIT: - 18.6 MILLION; + 11.0 MILLION ( - 29.6 MILLION IN Q1 2008) NET RESULT: - 16.6 MILLION ( - 29.0 MILLION IN Q1 2008) NET DEBT: 322.5 MILLION ( 286.8 MILLION AT 31, DECEMBER 2008) Excellent results for LA7 which closes the first quarter with advertising sales in line with last year, in a television advertising market which is in strong crisis declining by 16% Strong improvement in Net Result in the period which is also impacted by the zeroing of losses in Payper-View which activities where sold at the end of the previous year *** As a result of the preliminary agreement, signed on the 29 April, for the sale of 60% of APCom activities to Sviluppo Programmi Editoriali S.p.A., a company controlled by the A.BE.T.E Group, the results of TM News, relating to the first quarter of 2009, have been classified, in accordance with that set out by IFRS 5, under Net (losses) profit from disposals/activities due to be disposed of. Furthermore, with the purpose of gaining a clearer understanding of the representation of the Group s economic trend, the historical data from the financial report, compared with the results at 31 March 2009, have been reconstructed under the above mentioned area. Similarly results at 31 March 2008 from Pay-per-View activities, sold on 1 December 2008, have been classified as Discontinued Operations. ***
Rome, 5 May 2009 The Board of Directors of Telecom Italia Media, chaired by Berardino Libonati, examined and approved today the Group s results at 31 March 2009. During 2008 the Group modified its organizational structure, in order to define a presence focused specifically on LA7 and MTV with regards to the specificity of the different editorial profiles. Starting from the current Report on Operations, the methods of representation of the financial reports have been revised through the identification of three specific business sectors, as follows: - Telecom Italia Media S.p.A. which includes activities relating to LA7 and the Telecom Italia Group s Digital Content, which develops and creates contents for the IPTV, DVB-H e Web platforms; - MTV Group which includes the activities relating to MTV, those relating to Playmaker production, to the musical platforms via satellite, to the Nickelodeon and Comedy Central satellite channels, MTV Mobile and multimedia (web); - Network Operator (TIMB): management of the Groups analogical and digital networks and hosting service on the digital Multiplex. Results of the Telecom Italia Media Group relating to the first quarter of 2009 The first quarter 2009 closed in significant improvement compared with the previous year. The net loss ( -17.6 million) was reduced by 12.1 million, compared with the first quarter of 2008 ( -29.7 million). The improvement is even more significant bearing in mind the strong period of crisis in which advertising sales registered a 20% fall in the market as a whole, and a 16% fall in the television market (Nielsen data, February 2009), thanks to the advertising contract with Cairo Communication with a minimum amount guaranteed for TI Media. Consolidated revenues for the first quarter reached 48. 48.5 million illion, up 2.5% ( 47.3 million in the first quarter 2008). This result is linked in particular to a good performance of LA7 and Digital Content. EBITDA was - 3.8 million, rising 9.6 million ( - 13.4 million in the first quarter 2008). This result is due to the growth in revenues as well as incisive actions to reduce costs already carried on since last year especially for LA7 programming (mainly concentrated in entertainment) and MTV. EBIT, after depreciation and amortization for the period, was - 18.6 million a rise of 11.0 million ( - 29.6 million in the first quarter of 2008). The change, as well as resulting from the rise in EBITDA, is mainly due to amortization ( - 1.3 million) relating to digital frequency rights, whose life expectancy has been extended following legal changes which came into practice in the second quarter of 2008. Net result, after the contribution from disposed activities/activities due to be disposed, is - 16.6 million ( - 29.0 million in the first quarter of 2008). 2
Net Debt amounted to 322.5 million lion, an increase of 35.7 million compared to 31 December 2008 ( 286.8 million). The change is mainly attributable to industrial investments for the period ( 13. 13.7 million), as well as to requirements for operating activities in the quarter ( 18.3 million) and other cash flow items ( 3.7 million). The significant improvement in first quarter results, which is also due specific circumstances, will be difficult to achieve in the next quarters, taking into account the requirements of the renewal of the LA7 programming as well as the actions on the way in MTV Italia. RESULTS BY BUSINESS UNI U NIT Telecom Italia Media Spa Revenues for Telecom Italia Media S.p.A. in the first quarter of 2009 amounted to 29 29.1 million, with a rise of 4.1 million compared with the first quarter of 2008 ( 25,0 million). Operating profitability saw an overall rise, as a result of the increase in revenues and a reduction in operating costs. EBITDA is therefore -6.0 million, with a rise of 12. 1 million compared with the first quarter of 2008 (- 18.1 million), while EBIT is -12. 12.8 million, a rise of 11.9 million ( - 24.7 million in the first quarter of 2008). In detail: LA7 LA7 revenues were 25 25.6 million, registering an increase of 2.2 million compared with 23.4 million in the first quarter of 2008. Advertising sales in the first quarter 2009, amounting to 31.9 million, were in line with the first quarter of 2008 and this result is significantly positive considering the current period of strong crisis, in which advertising sales recorded a 16% fall on the television market (Nielsen data). The excellent result reached by LA7 was made possible by the new contract with Cairo. Moreover LA7 has implemented actions aimed at improving profitability, particularly the revision of programming costs and their reduction of 7.9 million. Part of this improvement (around 4 million) is due to the postponement of the launch of some new programs on LA7, and will be reabsorbed during the year. During the first quarter 2009, LA7 obtained an average daily share of 2.9%, despite the early start of evening productions by other national networks, with strong programming and an important rise in the television usage, due to the increased time that Italians spend in front of the TV. Day Time maintains its strength with an average daily share of 3%; evening results fluctuate more with an average in Prime Time of 2.6% and an average in the Late-Night slot of 2.8% 8%, due to the renewing of productions, still taking off or in a trial phase. 3
Digital Content Telecom Italia Media is exclusive Advisor to Telecom Italia in the development and creation of television content offer for innovative platforms (IPTV, DVB-H, etc.). Revenues in the first quarter of 2009 amounted to 3.5 million, with a rise of 1.9 million ( 1.6 million in the first quarter of 2008). The increase of the activities is linked to the development of new offers for IPTV clients, grown if compared with same period of 2008. MTV Group MTV revenues amounted to 18. 18.8 8 million lion, a fall of - 1.9 million compared with the same period of 2008 ( 20.7 million in the first quarter of 2008). This result were affected by lower advertising revenues of 10.8 million, in reduction of 3.1 million ( 13.9 million in the first quarter of 2008), partly offset by an improvement in net revenues for the channels belonging to the multimedia platform and by MTV Mobile turnover. Revenues from satellite channels were stable compared with the same period of 2008. First quarter operating profitability was substantially in line with that of the same quarter of 2008, thanks to actions to reduce costs. EBITDA was -0.2 million in the first quarter of 2009 ( 0.2 million in the first quarter of 2008). EBIT was -2.0 million ( -1.7 million in the first quarter of 2008). Without restructuring costs, the change would be positive for 0.3 million. MTV continues to be central and relevant to the lives of young people in Italy in an increasingly complex media context. Network Operator (TIMB TIMB) Revenues from network operator amounted to 9.6 million, a fall of 2.0 million compared with 2008 ( 11.6 million in the first quarter 2008). This result is due to lower turnover for Pay-per-View Bandwidth rental, sold at the end of 2008. The agreement with the other party foresees a period of experimentation in the first months of 2009, linked to the start-up of the activities, and will begin to show its effects as the year goes on, allowing for an increase in profitability. EBITDA in the first quarter is 2.3 million, a drop of 2.1 million ( 4.4 million in the first quarter of 2008) EBIT in the first quarter of 2009 is - 3.7 million llion, a drop of 0.4 million ( -3.3 million in the first quarter of 2008). This is the result of the previously mentioned reduction in profitability partly offset by lower impact of Network Operators amortization following changes made to the law implemented from 4 August 2008 that increased the life expectancy of digital frequencies from 30 June 2018 to 31 December 2028. 4
At 31 March 2009 the two Digital Multiplex s cover 76.1% and 87.1% of the Italian population respectively. The manager responsible for the preparation of the Company s accounting documents, Paolo Serra, states, in accordance with paragraph 2 of article 154-bis of the Testo Unico della Finanza (Financial Law) that the accounts information contained in this press release corresponds to the accounts documents, books and records. The Group s results as of 31 March, 2009 will be presented to the financial community today during a conference call, starting at 15.30 (Italian time). Journalists will be able to follow the conference call by connecting to the following number: + 39 06 33 485 042. For those who are unable to follow the live conference call, a recording of the presentation will be available for 48 hours afterwards at the following number: +39 06 334 843 (access code: 244324# for the Italian version, 050509# for the English version). Telecom Italia Press Office +39 06 3688 2610 http://www.telecomitalia.it/media Telecom Italia Media Investor Relations +39 06 3558 4025 http://www.investor.telecomitaliamedia.it 5
Attachments NOTE ON ALTERNATIVE PEFORMANCE INDICATORS (NOTE-GAAP MEASURES) In this press release, to allow for a better assessment of the Telecom Italia Media Group operating and financial performance, for the closing period 31 March 2009 and 2008, in addition to the conventional financial indicators foreseen by IFRS, certain non-ifrs measures are presented; however, these indicators should not be construed as a substitute for the conventional ones prescribed by IFRS. Specifically, the non-ifrs indicators are described below: EBITDA. Telecom Italia Media uses this indicator as a financial target in internal and external presentations. It provides a useful unit of measurement for assessing the Group s operating performance, in addition to EBIT. These indicators are as follows: Income from continuing operations before taxes + Financial expenses - Financial income +/- Share of losses (profits) of associates and joint-ventures accounted for using the equity method EBIT Operating Income +/- Impairment losses/(reversals) of non-current assets +/- Losses/(Gains) on disposals of non-current assets + Depreciation and amortization EBITDA Operating result before depreciation and amortization, capital gains/(losses), and impairment reversals/(losses) on non-current assets Net Financial Debt. The Telecom Italia Media Group deems that Net Financial Debt is an accurate indicator of its ability to meet its financial obligations, measured by Gross Financial Debt minus Cash and Cash Equivalents and other Financial Assets. In this financial report, there is a table that highlights the values of the balance sheet, used to calculate the Group s Net Financial Debt. 6
The statements of income, the Balance Sheet and the Statements of Cash Flows of the Telecom Italia Media Group, herewith presented, are the same as those included in the 2009 First Quarter Results and are unaudited. Following the Group's announcement of its intention to sell its majority shareholding in TM News, the company's Q1 2009 result has been classified as Net income (loss) from discontinued operations/assets held for sale in accordance with IFRS 5. Furthermore, to provide a more meaningful representation of the Group's operating performance, prior-year results presented for comparison purposes with Q1 2009 have also been reclassified under the same heading. The results for the Group's Pay-per-View operations at March 31, 2008, which were sold on December 1, 2008, were also classified as Discontinued Operations. CONSOLIDATED STATEMENTS OF INCOME (in thousand of euro) Q1 2009 Q1 2008 Change (a) (b) (a-b) % Revenues 48,524 47,250 1,274 2.5 Other income 407 2,208 (1,801) (81.6) Total operating revenues and other income 48,931 49,458 (527) (1.1) Acquisition of goods and services (36,134) (43,350) 7,216 16.6 Employee benefits expenses (15,826) (16,430) 604 3.7 Other operating expenses (1,255) (3,003) 1,748 58.2 Changes in inventories 461 (230) 691 ns Internally generated assets 12 138 (126) (91.3) OPERATING RESULT BEFORE DEPRECIATION AND AMORTIZATION (EBITDA) (3,811) (13,417) 9,606 71.6 Depreciation and amortisation (14,798) (16,143) 1,345 8.3 Gains (losses) on disposals of non-current assets - - Impairment reversals (losses) on non-current assets - - - - OPERATING PROFIT (LOSS) (EBIT) (18,609) (29,560) 10,951 37.0 Other income (expenses) from investments (91) 160 (251) ns Finance income 389 815 (426) (52.3) Finance expenses (3,668) (3,011) (657) (21.8) PROFIT (LOSS) BEFORE TAX FROM CONTINUING OPERATIONS (21,979) (31,596) 9,617 30.4 Income tax expense 5,488 7,607 (2,119) (27.9) PROFIT (LOSS) FROM CONTINUING OPERATIONS (16,491) (23,989) 7,498 31.3 Profit (loss) from Discontinued operations/ Non-current assets held for sale (1,090) (5,730) 4,640 81.0 PROFIT (LOSS) FOR THE PERIOD (17,581) (29,719) 12,138 40.8 Of wich: - Profit (loss) attributable to owners of the parent (16,591) (29,031) 12,440 42.9 - Profit (loss) attributable to Minority interests (990) (688) (302) (43.9) - Basic earnings (loss) per share: - ordinary share (0.0052) (0.0089) - savings share (0.0052) (0.0089) Of wich: - from continuing operations - ordinary shares (0.0049) (0.0094) - savings shares (0.0049) (0.0094) - from discontinued operations/ non-current assets held for sale - ordinary shares (0.0003) (0.0017) - savings shares (0.0003) (0.0017) 7
Reconciliation of total profit (loss) for the period Profit (loss) for the period (17,581) (29,719) Other component of the Statement of Comprehensive Income: Hedging instuments: Profit (loss) from fair value adjustm ents (157) Loss (profit) on traslating foreign o perations trasferred to the Separate Income Other profit (loss) of associates and joint v entures accounted for using the equity method sub-total 0 (157) Total profit (loss) for the period (17,581) (29,876) Attributable to: - Owners of the parent (16,591) (29,188) - Minority interest (990) (688) 8
In 2008, the Group reorganized its structure with an aim to define focused, specific coverage of La7 and MTV, primarily in relation to the increase in the number of channels and products currently broadcasted over multiple platforms (Free-to- Air, Web, Satellite), and the specific nature of the various editorial profiles. It was consequently decided to draw a clearer distinction in the assignment of responsibilities between the two companies. Therefore, starting with this Interim Report on Operations, the Group's operational and financial results are being presented based on three separate business units, as follows: - Telecom Italia Media S.p.A., which includes operations relating to La7 and to the Digital Content of the Telecom Italia Group in designing and producing the content offer for the IPTV, DVB-H and Web platforms; - MTV Group, which includes operations relating to MTV, the Playmaker production unit, the satellite music platforms, satellite channels Nickelodeon and Comedy Central, MTV Mobile and multimedia (Web); - Network Operator (TIMB), which manages the Group's analog and digital networks and provides hosting services on the Digital Multiplexes. (millions of euro) TI Media S.p.A. (La7) MTV Group Network Operator Other activities and adjustments Group Total Revenues Q1 2009 29.1 18.8 9.6 (9.0) 48.5 Q1 2008 25.0 20.7 11.6 (10.0) 47.3 Change 4.1 (1.9) (2.0) 1.0 1.2 EBITDA Q1 2009 (6.0) (0.2) 2.3 0.1 (3.8) Q1 2008 (18.1) 0.2 4.4 0.1 (13.4) Change 12.1 (0.4) (2.1) 0.0 9.6 EBIT Q1 2009 (12.8) (2.0) (3.7) (0.1) (18.6) Q1 2008 (24.7) (1.7) (3.3) 0.1 (29.6) Change 11.9 (0.3) (0.4) (0.2) 11.0 Net income (loss) Q1 2009 (11.9) (2.0) (3.7) (17.6) Q1 2008 (24.8) (1.4) (3.6) 0.1 (29.7) Change 12.9 (0.6) (0.1) (0.1) 12.1 Industrial investments Q1 2009 10.1 0.9 2.7 13.7 Q1 2008 13.9 1.2 2.3 17.4 Change (3.8) (0.3) 0.4 (3.7) Personnel (units) Personnel March 31, 2009 493 268 47 105 (1) 913 December 31, 2008 480 255 46 108 (1) 889 Change 13 13 1 (3) 24 (1) TM News personnel 9
TELECOM ITALIA MEDIA GROUP CONSOLIDATED BALANCE SHEET ASSETS (in thousand of euro) 03/ 31/ 2009 12/ 31/ 2008 NON CURRENT ASSETS Intangible assets: - Goodwill 183,132 183,132 - Intangible assets with a finite useful life 205,389 204,127 388,521 387,259 Tangible assets: - Property, plant and equipment owned 58,244 60,684 - Assets held under finance leases - - 58,244 60,684 Other non-current assets: - Investments in associates and joint ventures accounted for using the equity method - - - Other investments 8,726 8,873 - Securities, financial receivables and other non-current financial assets 1,635 1,627 - Miscellaneous receivables and other non-current assets 36,432 36,435 - Deferred tax assets 14,413 8,704 61,206 55,639 TOTAL NON-CURRENT ASSETS (A) 507,971 503,582 CURRENT ASSETS Inventories 4,096 3,635 Trade and miscellaneous receivables and other current assets 169,763 172,589 Current income tax receivables 1,570 1,567 Securities - Financial receivables and other current financial assets 311 340 Cash and cash equivalents 540 420 TOTAL CURRENT ASSETS (B) 176,280 178,551 TOTAL ASSETS (A+B) 684,251 682,133 EQUITY AND LIABILITIES (in thousand of euro) 03/ 31/ 2009 12/ 31/ 2008 EQUITY - Share capital issued 100,510 100,510 Less: Treasury shares - - Less: Amounts due from shareholders for subscribed capital unpaid - - - Share capital 100,510 100,510 - Paid-in capital 143,451 143,451 - Other reserves and retained earnings (accumulated losses), including profit (loss) for the period (84,048) (67,467) Equity attributable to owners of the Parent 159,913 176,494 Equity attributable to Minority interest 10,727 11,716 TOTAL EQUITY (A) 170,640 188,210 NON-CURRENT LIABILITIES Non-current financial liabilities 100,098 105,761 Employee benefits 11,605 11,844 Deferred tax liabilities 26,242 26,573 Provisions 563 463 Miscellaneous payables and other non-current liabilities 3,000 3,000 TOTAL NON-CURRENT LIABILITIES (B) 141,508 147,641 CURRENT LIABILITIES Current financial liabilities 224,841 183,423 Trade and miscellaneous payables and other current liabilities 147,024 162,621 Current income tax payables 10 238 238 - - TOTAL CURRENT LIABILITIES (C) 372,103 346,282 TOTAL LIABILITIES (D=B+C) 513,611 493,923 TOTAL EQUITY AND LIABILITIES (A+D) 684,251 682,133
TELECOM ITALIA MEDIA GROUP - CONSOLIDATED CASH FLOW STATEMENTS (in thousands of euro) 2009 2008 CASH FLOWS FROM OPERATING ACTIVITIES Profit (loss) from continuing operations (16,491) (23,989) Adjustments for: Depreciation and amortization 14,798 16,143 Impairment reversals/ losses of non-current assets (including investments) 154 Net change in deferred tax assets and liabilities (5,646) (9,621) Gains/ losses realized on disposals of non-current assets (including investments) (63) (160) Share of losses/ gains of associates accounted for using the equity method Change in employee benefits (233) (133) Change in other operating assets and liabilities: (15,690) (10,283) Change in inventories (461) 421 Change in trade receivables and in net receivables for contract works 5,207 28,258 Change in trade payables (12,360) (13,196) Net change in miscellaneous receivables/ payables and other assets/ liabilities (8,076) (25,766) CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES (A) (23,171) (28,043) CASH FLOWS FROM INVESTING ACTIVITIES Purchase of intangible assets on an accrual basis (10,455) (14,479) Purchase of tangible assets on an accrual basis (3,249) (2,940) Total purchase of intangible and tangible assets on an accrual basis (²) (13,704) (17,419) Change in trade payables relating to investing activities 1,589 (2,884) Total purchase of intangible and tangible assets on a cash basis (12,115) (20,303) Acquisition of subsidiaries and businesses, net of cash acquired (I) - (2,000) Acquisition of investments (II) - Change in financial receivables and other financial assets (I) (6) 363 Proceeds from sale of subsidiaries, net of cash disposed of (II) - 135 Proceeds from sale/ repayment of tangible, intangible and other non-current assets (II) 63 29 CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES (B) (12,058) (21,776) CASH FLOWS FROM FINANCING ACTIVITIES Change in current financial liabilities and other (805) (8) Proceeds from non-current financial liabilities (including current portion) - Repayments of non-current financial liabilities (including current portion) (6,020) (6,020) Other changes in non-current financial liabilities 888 1,348 Proceeds from equity instruments Dividends paid to Minority Interests (including distribution of reserves) (²) - (1) CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES (C) (5,937) (4,681) Q1 Q1 CASH FLOWS FROM (USED IN) DISCONTINUED OPERATIONS/ NON-CURRENT ASSETS HELD FOR SALE (D) (406) (373) AGGREGATE CASH FLOWS (E=A+B+C+D) (41,572) (54,873) NET CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR (F) 43 (100,769) Net foreign exchange differences on net cash and cash equivalents (G) - - NET CASH AND CASH EQUIVALENTS AT END OF THE YEAR (H=E+F+G) (41,529) (155,642) (I) Net of change in payables following the related acquisition (II) Net of the change in receivables following the related disposal (²) OF WHICH TRANSACTIONS WITH RELATED PARTIES Total investments in intangible and tangible assets on an accrual basis (156) (660) Dividends paid to Minority Interests (including distribution of reserves) ADDITIONAL CASH FLOW INFORMATION: Income tax expense (paid)/ received - - Interest expense paid (3,199) (2,851) Interest income received 3 3 Dividends received - ANALYSIS OF NET CASH AND CASH EQUIVALENTS: CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR: Cash and cash equivalents - from continuing operations 2,732 2,563 Bank overdraft repayable on demand - from continuing operations (377) (101,183) Cash and cash equivalents - included between Discontinued operations 74 80 Bank overdraft repayable on demand - included between Discontinued operations (2,386) (2,229) 43 (100,769) CASH AND CASH EQUIVALENTS AT END OF THE YEAR: Cash and cash equivalents - from continuing operations 3,258 2,963 Bank overdraft repayable on demand - from continuing operations (42,069) (156,083) Cash and cash equivalents - included between Discontinued operations 102 76 Bank overdraft repayable on demand - included between Discontinued operations (2,820) (2,598) (41,529) (155,642) 11
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