CIR : Gruppo Editoriale L'Espresso: results for first quarter 2014

The Board of Directors approves the consolidated results as of March 31 2014

DESPITE THE CONTINUING CRISIS IN THE SECTOR WHICH HAS NEGATIVELY AFFECTED ITS REVENUES, THE ESPRESS0 GROUP REPORTS:

NET INCOME OF €2.1 mn, IN LINE WITH THAT OF LAST YEAR (€2.0 mn)
NET DEBT LOWER aT € 58.2 mn
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AGREEMENT CONCLUDED FOR THE DEAL INTEGRATING RETE A AND TIMB NETWORK OPERATOR ACTIVITIES
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GROUP REFINANCING PROCESS CONCLUDED (MATURITY OF CURRENT BOND IN OCTOBER 2014) WITH THE ISSUE OF A CONVERTIBLE BOND

Rome, April 16 2014 - The Board of Directors of Gruppo Editoriale L'Espresso S.p.A. met today in Rome under the chairmanship of Mr Carlo De Benedetti and approved the consolidated results as of March 31 2014 presented by the Chief Executive Officer, Ms Monica Mondardini.

Performance of the market
The publishing sector is continuing to report negative performance both in terms of advertising collected and in terms of the circulation of daily newspapers and magazines.

In the first two months of 2014 overall investment in advertising declined by 4.3% compared to the same period of 2013 (Nielsen Media Research figures), reflecting the general trend of the economy which is still critical.

As for the various media, television advertising was substantially stable (+0.2%), radio went up by 7.5%, while the indicators of the printed press were still strongly negative (-15.7%), with national advertising posting a sharper fall (-17.4%) than local advertising (-11.9%). Surprisingly a downturn of internet advertising in the first two months was also confirmed (-6.3%).

As far as circulation is concerned, ADS (Accertamento Diffusione Stampa) figures show a fall in sales of daily newspapers of 12% in the first two months of 2014.

Performance of operations of the Espresso Group in the first quarter of 2014

Despite the market trend which is still strongly negative and which is having a significant impact on revenues, the Group closed the first quarter with a slightly positive result in line with that of the same period of last year.

The consolidated net revenues of the Group came in at €157.8mn and were down by 13.3% on first quarter 2013 (€182.1mn).

Circulation revenues, totalling €57.9mn, were down by 7.1% compared to the corresponding period of the previous year (€62.4mn) in a market which, as stated above, is continuing to experience a significant decline in the circulation of daily newspapers (-12%).

On the basis of the most recent ADS figures (February 2014), la Repubblica confirms its ranking as first newspaper in terms of copies sold (newsstands, subscriptions and other channels permitted by law).

The development is also continuing of the digital products of the newspaper (Repubblica+ and Repubblica Mobile), which in March 2014 had more than 73 thousand subscribers.

Overall at the end of March the Group had more than 94 thousand subscribers to the digital editions of its published titles.
Revenues from advertising in the Group media declined by 9.7% (-14.6% if third-party concessions are included).

By sector, the printed press reported a 14.6% fall in the amount of advertising collected, although the contraction was less than that of the industry as a whole (-15.7% in February).

By contrast, the radio stations showed considerable growth, +6.3%, in line with the figure for the whole radio sector (+7.5% in February).

Lastly, internet advertising declined by 3.9%, which was less than the decline of the market (-6.3% in February).

Costsfell by12.3%, which was substantially equivalent to the fall in revenues; excluding the digital editions and digital terrestrial television the costs of which rose as these businesses are developing, there was a 14% cost reduction, thanks to the further rationalization measures in progress particularly in the industrial and administrative areas.

The consolidated gross operating margin was €16.6mn, in line with the figure of €16.7mn for the first quarter of 2013.

By business area, the printed press and the internet were substantially stable in terms of profitability, while radio reported a slight recovery.

The consolidated operating result came in at €8.6mn and was in line with the figure of €8.8mn for the same period of the previous year.

The consolidated net result was income of€2.1mn, versus €2.0mn in the first quarter of 2013.

The consolidated net financial position showed a further reduction of the net debt, which went down from -€73.5mn at the end of 2013 to -€58.2mn at March 31 2014 with a financial surplus of €15.3mn.

The Group had 2,401 employees, including temporary contracts, at the end of March and the average number of employees in the period was 4.4% lower than in the first quarter of 2013.

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The company's Director of Administration and Accounts, Mr Gabriele Acquistapace, the executive responsible for the preparation of the company's financial statements, hereby attests in compliance with the terms of paragraph 2 of Art. 154 bis of the "Testo Unico delle Finanze" (Finance Consolidation Act) that the figures contained in this press release correspond to the results documented in the company's accounts and general ledger.
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Main events which have occurred since the close of the first quarter and outlook for the rest of the year
In the first two months of the year the advertising market was still showing a recessive trend with the various media evolving in different ways.

As for the outlook for the second quarter, the advertising orders booked would seem to suggest that the negative trend is becoming less pronounced.

In this environment, the Group managed to achieve positive results in the first quarter of 2014, maintaining profitability in line with last year; as for the outlook for the whole year, this is highly dependent on the performance of the advertising market which at present still seems uncertain.

During the first quarter the Group finalized two deals of strategic importance: the joint venture with TIMedia in the network operator business and the refinancing of the Company given that the ten-year bond will mature in October of this year.

On April 9 the contracts were signed for the integration of the network operator activities of the subsidiary Rete A with Telecom Italia Media Broadcasting (TIMB), controlled by Telecom Italia Media. This deal which is subject only to obtaining AGCOM authorization, will produce the most important independent network operator in Italy, equipped with five digital multiplexes (three belonging to TIMB and two to Rete A) with national coverage, which are broad-reaching and are based on latest generation technologies. The integration will be carried out through the transfer by the Espresso Group of 100% of the shares of Rete A into TIMB; after the transfer, TIMedia and the Espresso Group will own 70% and 30% respectively of the shares of TIMB which will own the whole capital of Rete A. The agreement signed also stipulates that once the integration has been carried out, there will be a valuation process and investors interested in the combined entity will be sought out. On April 2 a five-year convertible bond for a nominal €100mn was placed with investors. It has an interest rate of 2.625% and a conversion price fixed at €2.1523 per share. The Bonds will be convertible into Shares, subject to the approval by the Extraordinary Meeting of the Shareholders of the Company, which will be held no later than July 31 2014, of a share capital increase. During the placement process requests were received for over €500mn, which confirms investor confidence in the Espresso Group.