The Board of Directors approves the 2013 draft financial statements Turnover at 84.0 million euros Gross operating profit (EBITDA) up 18% Milan, 21st March 2014 The Class Editori SpA Board of Directors today approved the consolidated and parent company financial statements. - Consolidated results Total revenues amounted to 84.0 million euros compared with 88.3 million in the same period of 2012 (- 4.9%). This reduction was caused by the major recession that has particularly affected advertising revenues and partly affected distribution revenues. Operating costs fell from 104.9 million euros to 97.5 million euros, a fall of 7%. The decrease in operating costs is due to containment and savings operations performed in all areas of operations. The gross operating margin (EBITDA) showed a loss of 13.5 million euros against the 16.5 million euro loss during the same period of the previous year, an improvement of around 18%. The net result of Class Editori and subsidiaries at 31st December 2013 compared with that of 2012 has been affected by extraordinary provisions and write-downs dictated by the desire for prudent management. Other positive extraordinary operations of 2012 are missing in 2013. After the negative extraordinary operations, minority interest and taxes, the result is a loss of 22.8 million euros compared with a net loss of 12.9 million euro in 2012. The net financial position shows net borrowing of 65.6 million euros (42.7 million at 31st December 2012). The trend is due mainly to the negative results for the period and the difference is due to the extension of mean payment times. The parent company financial statement closes with a net result after taxes showing a loss of 23.7 million euros, compared with a net loss in the previous financial year of 13.9 million euros. Primary economic - financial events of the period During the period various write-downs and provisions were made as a result of the worse macroeconomic reference context, reducing the value of the assets (mainly receivables, publications and goodwill) to their prudent fair value. The overall value of extraordinary operations charges led to a worsening of the income statement, compared with the previous year, of around 11.4 million. Around 8 million euro of this are due to the fall in the Extraordinary income and charges item (which changed from +4.8 in 2012 to -3.2 in 2013), and about 3.4 for impairment of intangible fixed assets with an indefinite life, included in the amortisation, depreciation and impairment item in accordance with IAS 36. The effects of the changes can be summarised as follows: 1
In 2012 the capital gain of 3.2 million euros arising from the sale of 31.2% of Class Digital Service was included in the accounts, with a one-off positive effect on the income statement for 2012 The worse economic context also led to the need for greater write-downs on receivables as a result of customer bankruptcies or business closures, which were not foreseeable during 2012, over and above the provisions allocated in the financial statements, for around 2 million euros The transaction made with a major international counterparty for the early closure of a content delivery contract, which will generate considerable savings in 2014, for which prepaid expenses of 0.8 million were counted as a loss, relating to content that had become unusable The write-down of receivables from the sales network, for which settlement agreements were closed or which were considered non-payable, for around 0.8 million euros Reimbursement of damages, transactions and contingent liabilities partly related to the closure of disputes, costs not entered for the period, or other extraordinary items not part of normal operations, for a total of 0.9 million euros The effect of the impairment tests in accordance with IAS accounting principle 36 generated negative differences between the book values and the fair values of 3.4 million euros, which were not included in the previous year s financial statements; whereas, again in accordance with the aforementioned principles and the directors prudence, the positive difference which in many cases emerges between the impairment values and the book values is not highlighted: to give one example, the share in Milano Finanza Editori, had an impairment value of 45 million and a book value of 10 million. The operations result, which therefore excludes the extraordinary items, is noticeably better than that of the previous year. In particular, EBITDA in the second half of 2013, despite being -5.3 million, showed an improvement on the EBITDA of the first half of 2013 (-8.2 million). The reference context suffered considerable falls in turnover during 2013. Nielsen data for 2013 shows an overall contraction in the advertising market of 12.4%, which must be added to the fall of 14.3% in 2012 and to that of previous years. However, the trend in the second half of the year is positive, as the contraction in the advertising market was 5.9%, compared with a reduction in the first half-year of 17.5%. In particular, in 2013, printed publications fell by 21.2%, with performance of magazines worse (-24%) than for newspapers (-19.5%) while television advertising market data showed a reduction of 10%. Web media also fell for the first time with advertising sales falling by 1.8%. In this context, advertising sales for the publishing house's publications fared better than the market as they fell, for the same scope of consolidation, by 8.3%. In detail, in terms of advertising revenues, magazines fell by around 16.4%, newspapers by 8.4% and TV advertising by 2.7%. Web sales grew by 13.4%. Average circulation in 2013 fell significantly, like the whole market, with a resulting reduction in production costs: Milano Finanza had average circulation (ADS data) of 76,000 copies, compared with 89,000 in 2012; Class had average circulation of 78,000 copies (86,500 in 2012) whereas Capital maintained its average circulation (72,000 copies in 2013 compared with 72,000 in 2012). Internet traffic data, however, had the totally opposite trend: at the end of the fourth quarter of 2013, traffic on the publishing house s websites had a further jump, reaching 988,000 individual monthly users in December 2013, a growth of 95.6% on an annual basis, in a context marked by a double digit contraction for its main competitor (source AudiWeb). From mid-december, the Milano Finanza site had a completely new format and now offers a better layout for tablet and touchscreen devices, with even more information. The 2
number of individual daily users also grew significantly, rising to 84,000 in December 2013 compared with 76,000 in December 2012 (+11.3%). As proof of how readers like the new format of the Milano Finanza site, and in general the publishing house s sites including that of associated company Italia Oggi, which also saw significant growth, the average duration of visits on an average day rose from 3:49 to 4:15 minutes, an increase of 11.4%. Readers can also follow news in real time on their smartphones through the Milano Finanza mobile site, which can be consulted from every platform, while the number of readers following site news in real time via Twitter has exceeded 75,000 units for MF/Milano Finanza and over 19,000 for Italia Oggi. The publishing house is also completing the overhaul of its entire technology infrastructure. This will be complete by the first half of 2014and will make it possible to provide leveraging on digital media to increase the flexibility of content delivery, especially on mobile devices. Even if there are encouraging signs from digital activities, in the context of continuing market weakness, the publishing house has implemented a cost containment plan concerning all cost areas and all sectors of activity. Many of the cost containment measures were implemented during the year that has just finished and their full effects were seen in the second half of the year. Apart from measures concerning staff, other manoeuvres implemented include: Reduction in publishing and industrial costs (especially paper and printing) thanks to increased on-line sales and the optimisation of formats and printing centres Optimisation of the costs of technological platforms connected with financial services areas Reduction in sales costs, with the renegotiation of expenses and the progressive containment of the fees and commission paid Reduction in general expenses, with cuts and limitations at all possible levels Activity, which was strengthened and made more rigorous during the second half of the year, to constantly control page numbers and layout and the cost of magazines, calibrated for each issue according to revenues received in order not to have to close any publications. During 2013, for many companies, the gradual use of welfare support provisions was begun in 2013, with the use of solidarity contracts and, in exceptional cases, the special redundancy pay fund. The main publishing and corporate initiatives in the period include: The confirmed success of Eccellenza Italia, the first multimedia system (magazine-site-app) developed to guide Chinese tourists visiting Italy and Chinese people at home who are interested in Italian products and lifestyle. Produced by Class Editori in partnership with Xinhua (New China News Agency) and Fondazione Italia Cina, Eccellenza Italia allows Italian companies to contact and communicate directly with the 500,000 Chinese interested in visiting Italy and buying Italian products Gentleman s Style, the volume published by Class Editori to mark the tenth anniversary of the magazine, was presented in February, with very positive feedback from sales In March, a letter of intent was signed by Class Editori and NABA/Domus Academy (Laureate group, the largest private university in the world, presided by Bill Clinton) for the production of multimedia content and contexts connected with design and the world of art 3
In March, 31.25% of Class Digital Service, the company in which the publishing house's activities in the field of the digital distribution of financial data and information are concentrated, was sold to Intesa Sanpaolo for 5 million euros. The operation sets out to make the distribution of data and information relative to the Italian and international financial markets more efficient and, therefore, more cost effective for customers, in the context of the deregulation that has opened up the market to new negotiation platforms and the fixing of prices of alternative securities to those of Borsa Italiana SpA. The economic effect of the sale was recorded in the 2012 accounts In the early months of 2013, the publishing house was invited by the Chinese authorities to participate with an installation at CHIC, the largest clothing and fashion trade fair in China. The installation, comprising over 300 garments representing the best of Italian production, attracted a great deal of interest and was invited to other Chinese trade fairs and fashion weeks From October, the audience data for the out-of-home channels (underground, airport, Autogrill and bus TV) has been available in the Kubik software system ( SoftMedia probability ) as well as the data for Class TV (terrestrial digital channel 27), used by all the media centres. For the first time it is possible to calculate the benefits of an integrated media plan, capable of reaching audiences at home and while travelling, estimating the communication results and additional cover. This result seems to be extremely important for commercial purposes and in order to support the publishing house s development strategy, which is focused strongly on digital. Balance sheet highlights after 31st December 2013 As of 8th January, Angelo Sajeva, formerly Chairman and Managing Director of Mondadori, as well as Vice Chairman of Mediamond, became director for strategy and development of Class Editori and, at the same time, Chairman of Class Pubblicità, a post temporarily filled by the general manager and executive director of Class Editori, Andrea Mattei. On 9th January the Board of Directors approved the five-year industrial plan, drawn up with the assistance of a leading international merchant bank, which expects the publishing house to achieve an EBITDA/turnover ratio of more than 17% in the fifth year. While the plan was being drawn up, the need emerged, in order to give long-term continuity and effectiveness to corporate activity, to strengthen the financial structure, which the management started to implement before the end of 2013. On 4th and 6th March, the new Class TV platform was presented to the advertising world, agencies and media centres: terrestrial digital channel 27, showing the most popular Italian dramas and the most famous Hollywood films, together with high-quality and useful information to meet the need for intelligent entertainment and practical updating of the high-level target to which the channel programming is dedicated. I Cesaroni and Distretto di Polizia are two of the many titles with widespread appeal, broadcast from Sunday 9th March. On 10th March the new special issue of MF International China Italy was published, dedicated to business people and opportunities from and with China. Returns from advertising revenue have been very positive. At the end of March distribution started in China and Italy of the new issue of the magazine Eccellenza Italia in Mandarin, which also had very encouraging returns from advertising revenue. Future prospects Taking account of the publishing house s performance in recent years and of the prospects of the publishing and advertising market, the Board of Class Editori examined the various options available to the company in the future, aimed at strengthening the financial and equity structure, assuming the industrial plan approved by the Board on 9th January is put into practice. These options can be pursued using instruments available under the current regulations and in the current market context, including with significant support from historical shareholders. 4
The latter have manifested their willingness, under specific conditions, to evaluate proposals for financial and equity strengthening that might be formulated by the company at the conclusion of the examination in progress of the various possible alternatives. To this end, the Board decided to meet again before 14th April, when a significant capital increase may be proposed to the shareholders meeting subject to the possible formalising of the relative commitment by the historical shareholders to guarantee its subscription, and the possible share capital not taken up. 2014 began with some encouraging signs from the markets, particularly in the advertising sector. In this context, investors still mainly tend to adopt a wait-and-see approach, with major clients reducing or delaying their plans. Therefore, visibility currently remains quite limited. In this situation of uncertainty, the publishing house is continuing with its rational cost containment and turnover development efforts, consistent with the industrial plan. Impairment procedure Before the draft financial statements and the Reports, the Board approved the impairment test procedure for checking any impairment of goodwill, other assets with an indefinite useful life and equity investments, in accordance with IAS principle 36. Report on Remuneration The Board approved the Report on Remuneration pursuant to Article 123-ter of the Consolidated Financial Act and the provisions issued by Consob. The Board will propose at the next Shareholders Meeting that they approve the first section of the Report, setting out the company policy on remuneration of board members and directors with strategic responsibility, in accordance with the provisions of Article 123-ter of the Consolidated Financial Act. Convocation of the Shareholders Meeting The shareholders meeting has been convened in ordinary session on 29th April 2014 at 9:30 a.m., in Milan, Via Marco Burigozzo 5, in first convocation, and, if necessary, in second convocation on 30th April 2014, same time and same place, to act upon the following Agenda 1. Presentation of the annual and consolidated financial statements at 31.12.2013 and the Reports of the Board of Directors, Board of Statutory Auditors, and Independent Auditors. Related and consequent resolutions 2. Appointment of a Director 3. Remuneration report pursuant to Article 123-ter of Legislative Decree no. 58/1998 4. Authorization for the purchase and placement of own shares; simultaneous cancellation for the unused portion of the shareholders resolution of 29 April 2013, relative to the authorisation, purchase and the placement of own shares. 5
For additional information, please contact: Gian Marco Giura Communications Director Class Editori Tel: +39 02-58219395 Mob: +39 334-6737093 Email: gmgiura@class.it Pursuant to Para. 2 of Art. 154 bis of the Italian Financial Consolidation Act, the Manager of Corporate Accounting Documents, Emilio Adinolfi, states that the accounting information included in this announcement corresponds to the documentary records, books and accounting entries. The Income Statement and Balance Sheet schedules follow below. The Annual Report will be available to the public on the website of the publishing house, www.classeditori.it, in accordance with the law Consolidated income statement at 31st December 2013 uro/000 31/12/12 31/12/13 Change (%) Sales revenues 82,305 78,462 (4.7) Other revenues and income 6,038 5,571 (7.7) Total revenues 88,343 84,033 (4.9) Operating costs (104,860) (97,553) (7.0) Gross operating profit (EBITDA) (16,517) (13,520) 18.1 % of revenues (18.70) (16.09) Extraordinary income and charges 4,809 (3,249) n.a. Depreciation, amortisation and write-downs (4,821) (8,244) (71.0) Operating profit (EBIT) (16,529) (25,013) (51.3) % of revenues (18.71) (29.77) Net financial income and charges (1,619) (3,095) 91.2 Pre-tax profits (18,148) (28,108) (54.9) Income taxes 4,749 6,421 35.2 Minority profit/(loss) 455 (1,095) (340.6) Net group profit (12,944) (22,782) (76.0) 6
Revenues can be broken down as follows: uro/000 31/12/12 31/12/13 Change (%) Revenues from subscriptions and copies 35,767 31,222 (12.7) Advertising revenues 46,250 47,240 2.1 Other revenues 5,962 5,211 (12.6) Total revenues 87,979 83,673 (4.9) Contributions for operating expenses 364 360 (1.1) Total 88,343 84,033 (4.9) Extraordinary income 5,986 1,926 (67.8) Total revenues 94,329 85,959 (8.9) Net consolidated financial position at 31st December 2013 (thousands) 31/12/2012 31/12/2013 Changes 2012/2013 Change % Securities 5,000 -- (5,000) (100.0) Cash and cash equivalents 15,953 11,943 (4,010) (25.1) Short-term financial receivables 21,123 10,821 (10,302) (48.8) Long-term financial payables (1,276) (6,671) (5,395) (422.8) Short-term financial payables (83,474) (81,696) 1,778 2.1 Net financial position (42,674) (65,603) (22,929) (53.7) 7
Table showing the consolidated balance sheet-financial situation a of 31st December 2013 ASSETS (thousands of euros) 31st December 2012 31st December 2013 Intangible fixed assets with an indefinite life 35,517 41,868 Other intangible fixed assets 6,209 9,124 Intangible fixed assets 41,726 50,992 Tangible fixed assets 5,244 4,965 Equity investments valued at net equity 4,483 4,440 Other equity investments 3,210 763 Non-current trade receivables 17,067 16,178 Advance tax receivables 4,461 5,128 Other receivables 2,973 2,997 NON-CURRENT ASSETS 79,164 85,463 Inventory 1,700 2,698 Trade receivables 62,343 70,369 Financial assets held for trading 5,000 -- Financial receivables 21,123 10,821 Tax receivables 16,554 23,774 Other receivables 25,073 19,760 Cash and cash equivalents 15,953 11,943 CURRENT ASSETS 147,746 139,365 TOTAL ASSETS 226,910 224,828 8
LIABILITIES (thousands of euros) 31st December 2012 31st December 2013 Share capital 10,561 10,561 Share premium account 31,329 31,329 Legal reserve 2,544 2,544 Other reserves 35,302 19,335 Profit (loss) for the period (12,944) (22,782) Group net equity 66,792 40,987 Minority capital and reserves 5,001 5,785 Minority profit (loss) (455) 1,095 Minority net equity 4,546 6,880 NET EQUITY 71,338 47,867 Financial payables 1,276 6,671 Deferred tax payables 2,325 2,421 Provisions for liabilities and charges 1,150 490 Severance indemnities and other payroll provisions 5,004 5,786 NON-CURRENT LIABILITIES 9,755 15,368 Financial payables 83,474 81,696 Trade payables 44,444 56,516 Tax payables 1,664 3,456 Other payables 16,235 19,925 CURRENT LIABILITIES 145,817 161,593 TOTAL LIABILITIES 155,572 176,961 LIABILITIES AND NET EQUITY 226,910 224,828 9
Income Statement of the parent company at 31st December 2013 INCOME STATEMENT 31/12/2012 31/12/2013 REVENUES Revenues 17,474,845 15,451,926 Other operating income 17,279,802 14,190,816 TOTAL REVENUES 34,754,647 29,642,742 Purchase costs (1,549,337) (1,364,670) Service costs (42,197,432) (47,338,417) Payroll costs (2,703,532) (2,130,521) Other operating costs (2,209,665) (1,277,364) Gross operating profit - EBITDA (13,905,319) (22,468,230) Extraordinary income/(charges) 415,555 (2,968,992) Depreciation, amortisation and write-downs (2,329,062) (3,769,218) Operating profit - EBIT (15,818,826) (29,206,440) Net financial income (charges) (3,836,926) (1,459,705) Pre-tax profit (loss) (19,655,752) (30,666,145) Income taxes 5,674,369 6,947,641 NET PROFIT (13,981,383) (23,718,504) 10
Table showing the balance sheet-financial situation (assets) as of 31st December 2013 ASSETS 31/12/2012 31/12/2013 NON-CURRENT ASSETS Intangible fixed assets with an indefinite life 2,872,464 2,572,464 Other intangible fixed assets 1,467,277 1,477,427 Total intangible fixed assets 4,339,741 4,049,891 Tangible fixed assets 2,352,524 2,411,089 Equity investments 33,720,028 41,035,939 Financial receivables 133,294 -- Trade receivables 17,066,688 16,177,861 Advance tax receivables 612,716 777,348 Other receivables 2,889,208 2,879,208 TOTAL NON-CURRENT ASSETS 61,114,199 67,331,336 CURRENT ASSETS Inventory 397,018 233,316 Trade receivables 37,970,140 41,197,631 Securities 5,000,000 -- Financial receivables 47,949,459 35,306,171 Tax receivables 12,779,569 19,651,734 Other receivables 20,390,896 16,951,703 Cash and cash equivalents 14,933,638 5,297,013 TOTAL CURRENT ASSETS 139,420,720 118,637,568 TOTAL ASSETS 200,534,919 185,968,904 11
Table showing the balance sheet-financial situation (liabilities) as of 31st December 2013 EQUITY AND LIABILITIES 31/12/2012 31/12/2013 NET EQUITY Share capital 10,560,751 10,560,751 Share premium reserve 31,329,259 31,329,259 Legal reserve 2,543,881 2,543,881 Other reserves 39,667,935 25,489,644 Retained earnings (accumulated losses) -- 113,925 Profit (loss) for the year (13,981,383) (23,718,504) TOTAL NET EQUITY 70,120,443 46,318,956 NON-CURRENT LIABILITIES Financial payables 52,233 6,026,806 Provisions for liabilities and charges 838,001 143,025 Severance indemnities and other payroll provisions 254,815 284,168 TOTAL NON-CURRENT LIABILITIES 1,145,049 6,453,999 CURRENT LIABILITIES Financial payables 84,166,130 71,131,321 Trade payables 40,037,748 56,359,086 Tax payables 151,786 500,767 Other payables 4,513,763 5,204,775 TOTAL CURRENT LIABILITIES 129,269,427 133,195,949 TOTAL LIABILITIES 130,414,476 139,649,948 TOTAL NET EQUITY AND LIABILITIES 200,534,919 185,968,904 12