CIR : net income for first half at € 5.3 m

Board of Directors approves results as of June 30 2014

CIR GROUP: NET INCOME FOR THE FIRST HALF AT € 5.3 M

Sorgenia classified as an asset held for sale, in application of IFRS 5 (it is included only in the net result)

Revenues at € 1.21 billion, down slightly (-2.2%) on 2013

EBITDA at € 107.7 million (-12.2%), negatively affected by the lower margins of Sogefi (due to non-recurring charges), although Espresso and KOS held up well

Sharp reduction in the loss of Sorgenia, the impact of which was however absorbed at consolidated level by the write-downs made at December 31 2013. The earnings of the remaining businesses of the group were substantially stable

Milan, July 28 2014 - The Board of Directors of CIR-Compagnie Industriali Riunite S.p.A., which met today under the chairmanship of Rodolfo De Benedetti, approved the Interim Financial Report of the Group at June 30 2014 presented by the Chief Executive Officer Monica Mondardini.

Foreword

On July 23 2014, CIR signed an agreement with the lending banks of Sorgenia functional to the restructuring of the debt of the energy company.

The debt restructuring process for Sorgenia will follow the "ex 182 bis" procedure which will involve, subject to ratification of the plan, a capital increase of 400 million euro in which the current shareholders will not take part and which will be subscribed entirely by the lending banks through the conversion of their receivables into capital.Once the deal has been completed, CIR will no longer hold any shares in Sorgenia.

In view of what is stated above, the CIR group, in application of international accounting standard IFRS 5, is required to change the consolidation method for the Sorgenia group as from this Interim Financial Report as of June 30 2014. On the basis of this standard, the Sorgenia group must be classified as an asset held for sale.Therefore the financial position of Sorgenia is included in the consolidated financial statements of CIR in the item  "Assets/Liabilities held for sale", separated out from the other assets and liabilities shown in the statement of financial position, and thus is no longer fully consolidated on a line-by-line basis.

A similar procedure was followed for the income statement, which shows the results of Sorgenia in the item "Income/Loss from assets held for sale".Therefore, specifically, the revenues, EBITDA and EBIT of the consolidated income statement of CIR do not include the contribution of Sorgenia, which is however included in the net result. Moreover, for the purposes of comparison,  the consolidated income statement for the same period of last year was re-stated in the same way. The comments on the items of the financial statements take this reclassification into account.

Consolidated results

The revenues of the CIR group for the first half of 2014 came to €1,213 million (-2.2% versus € 1,240.3 million in the same period of 2013). The slight decline was due to the lower sales of the Espresso group, which was negatively affected by the complex situation in the publishing sector and by the performance of the economy which is still critical and which led to a further decline in advertising investment. Sogefi reported stable revenues while KOS reported growth of 3.5%. Revenues generated abroad accounted for 53% of the total, thanks to Sogefi's international development. EBITDA came to € 107.7 million (8.9% of revenues), and was down by 12.2% compared to the figure for the first half of 2013 (€ 122.6 million). The decline, despite the fact that the EBITDA of Espresso and KOS held up, was caused by the lower margin of Sogefi, which incurred extraordinary restructuring costs in Europe (€ 14.1 million), and suffered the effects of the unfavourable exchange rates and the negative performance of the Brazilian market.

The net result was a positive € 5.3 million which compares with a loss of € 164.9 million in the same period of last year. This change was attributable to the subsidiary Sorgenia, whose contribution to the consolidated net result of CIR was a negative € 170.7 million in the first half of 2013 and which in the first half of 2014 was zero.

The Sorgenia group, in the first half of 2014, reported a loss of € 18.4 million, with a negative contribution of € 9.8 million to the CIR consolidated result; this contribution was offset in its entirety by the write-downs made in the financial statements at December 31 2013 at consolidated level.

Excluding Sorgenia, the consolidated net income figure of CIR in the first half of the year was in line with that obtained in the same period of last year (€ 5.3 million in 2014 versus € 5.8 million in 2013). Espresso and KOS obtained results in line with those of the corresponding period of last year, while Sogefi reported a lower net result due mainly to non-recurring charges; lastly financial management by the parent company and the non-operating subsidiaries reported a better result than that of last year.

The net financial position of the CIR group stood at -€ 56.6million at June 30 2014. The consolidated net financial position at December 31 2013 (-€ 1,845.3 million) included Sorgenia's debt as well. This amount, however, is no longer included in the net debt of the group but in the item liabilities associated with assets held for sale.
The equity of the group amounted to €1,137.6 million at June 30 2014, up from € 1.131 million at December 31 2013. At June 30 2014 the CIR group had 13,905employees (14,111 at December 31 2013).

Results of the main subsidiaries of the CIR group

Media: Espresso

Gruppo Editoriale L'Espresso is one of the most important Italian publishing companies. It operates in all sectors of communication: newspapers and magazines, radio, internet, television and advertising. The group, which is 55,8% owned by CIR, is listed on the Stock Exchange. The revenues of Espresso came in at € 332.5 million in the first half of 2014 (-10% from € 369.4 million in 2013) while EBITDA came to € 33.7 million (in line with the figure of € 33.3 million in 2013). In a general economic environment that remains critical and with the publishing sector continuing to show negative performance, the company closed the first half with a positive net result of € 3.8 million (€ 3.7 million in 2013). For further information on the results of Espresso reference should be made to the press release issued by the company on July 23 2014 (http://www.cirgroup.com/press/press-releases/document/gruppo-espresso-the-board-of-directors-approves-the-consolidated-results-as-of-june-30-2014.html).

Automotive components: Sogefi

Sogefi is one of the main producers worldwide in the sectors of filtration, engine air systems and suspension components with 42 production plants in four continents. The company is controlled by CIR (57.2%) and is listed on the Stock Exchange.
Sogefi's revenues for the first half of 2014 totalled € 683 million and were unchanged from the figure of € 681.7 million for the first half of 2013 (+5.9% with the same exchange rates). In the period the company accelerated its efficiency actions in Europe, while growth has been continuing in Asia and North America. EBITDA came to € 51.7 million (€ 71.2 million in the first half of 2013); the reduction was due for € 14.1 million euro to non-recurring restructuring charges. The net result, which was also affected by non-recurring charges, came to -€ 7.3 million (net income of € 16.2 million in the first half of last year). For further information on the results of Sogefi reference should be made to the press release issued by the company on July 22 2014 (http://www.cirgroup.com/press/press-releases/document/sogefi-cir-group-board-of-directors-approves-results-as-of-june-30-2014.html).

Healthcare: KOS

KOS is one of the most important groups in Italy in the sector of healthcare and care homes (managing care homes, rehabilitation centres, and hospital facilities). The group manages 70 facilities mainly in the centre and north of Italy, for a total of around 6,200 beds in operation plus a further 500 or so under construction. Controlled by CIR (51.3%), KOS also has the Ardian group as a shareholder.

In the first six months of 2014 KOS reported revenues of € 193 million (+3.5% from € 186.5 million in 2013), thanks to the development of the three areas of activity (nursing homes, rehabilitation centres, hi-tech services/hospital management). EBITDA came in at € 28 million, up slightly from € 27.4 million in 2013. Net income came to € 6 million, substantially unchanged from € 6.1 million in 2013. Net debt stood at € 158.6 million at June 30 2014 (€ 155.7 million at December 31 2013).

On May 30 2014, the KOS group acquired the entire capital of Villa Azzurra S.p.A., the company that manages an accredited private hospital specializing in neuropsychiatric medicine at Riolo Terme (Ravenna). This deal was part of the strategy adopted by KOS in 2004 of developing a range of services to offer in psychiatric rehabilitation. In the area of high-tech services, activities are continuing in India through the joint venture ClearMedi Healthcare Ltd and in the United Kingdom through the subsidiary Medipass Healthcare Ltd.

Non-core investments

The non-core investments of the group consist of private equity initiatives, minority shareholdings and other investments for a total value at June 30 2014 of € 178.7 million (€ 179.9 million at December 31 2013). More specifically, the CIR group has a diversified portfolio of funds in the private equity sector (with a fair value at June 30 2014 of € 64.9 million). It should also be noted that there is an interest of around 20% in the company Swiss Education Group, a world leader in managerial training in the hospitality sector: the value of this investment at June 30 2014 was € 21.6 million. Lastly, the CIR group has a portfolio of non-performing loans: the net value of the investment in this business at June 30 2014 was € 74.6 million.

Energy: Sorgenia

Sorgenia, founded in 1999, operates in the electricity sector in Italy with generating facilities of approximately 5 thousand Megawatts. The company is controlled by CIR (53.1%) and also has the main Austrian utility VERBUND as a shareholder. In the first half of 2014 Sorgenia reported revenues of € 960 million, down by 17.9% from € 1,169.3 million in the same period of 2013 because of the continuing contraction of national thermoelectric production (-10% on the first half of 2013). EBITDA came in at € 82.1 million versus -€ 27.8 million in the same period of 2013. The net result was a negative figure of € 18.4 million compared to a loss of € 206.3 million in the first half of 2013, of which € 190.5 million were write-downs.
It should be noted that the financial statements of Sorgenia are still included in the consolidated financial statements of CIR, but now follow the criteria in force for assets held for sale (IFRS 5), and no longer the principle of full line-by-line consolidation.

Results of the parent company CIR S.p.A.

The parent company of the group CIR S.p.A. closed the first half of 2014 with a net loss of € 2.5 million, compared to net income of € 21.2 million in the corresponding period of 2013.

The lower result was entirely due to the lower dividends received from the subsidiaries. The equity of the company at June 30 2014 totalled € 1,096.6 million versus € 1,097.8 million at December 31 2013.

Outlook for the year 2014

The performance of the CIR group in the second half of 2014 will be affected by the evolution of the Italian economic climate, which is still uncertain and has a significant impact on the media sector, and also by the performance of the Brazilian market for the automotive component sector.

Significant events that occurred after June 30 2014

On July 23 2014, the current direct and indirect shareholders of Sorgenia - CIR, Sorgenia Holding and VERBUND AG - signed an agreement with the lending banks of the energy company functional to the restructuring of the debt of the latter. At the same time Sorgenia signed a standstill agreement with the same lending banks. Once this deal has completed, specifically with the subscription of the capital increase by the new shareholders after ratification ex 182 bis, CIR, Sorgenia Holding and VERBUND AG will no longer hold any shares in Sorgenia.

Bonds maturing after June 30 2014

The company, which has a BB rating with a stable outlook issued by Standard&Poor's, has no bonds maturing in the 24 months following June 30 2014.

During the first half of the year CIR S.p.A. bought back further amounts of its own bond (CIR S.p.A. 2004/2024, issued by the company on 16/12/2004) for a nominal amount of € 78.8 million (of which € 48.8 million from third parties and  € 30 million from companies of the group) which it subsequently cancelled. As of today, the nominal value of the Bonds in circulation is € 210.2 million. Regarding a possible early repayment of the Bond following an event of default of which notice was given on January 3 2014, the company has not for the moment received any communication from the Trustee.

28 July 2014 | 13:10 CEST