CIR : net income for first nine months at € 5.4 mln

Board of Directors approves results as of September 30 2014

CIR GROUP: NET INCOME FOR FIRST NINE MONTHS AT € 5.4 MLN

Revenues at € 1.78 billion, down slightly (-1.5%) on 2013

EBITDA up at € 154.1 million (+9.5%) thanks to the improved margins of the parent company (negatively affected in 2013 by non-recurring charges) and to the slight increase reported by Espresso and KOS,despite the lower profitability of Sogefi

Net income for the period at 5.4 million (€ 10.7 million in 2013 but a loss of € 16.2 million excluding non-recurring items)Plan launched for buyback of own shares

Milan, October 27 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 as of September 30 2014 as presented by the Chief Executive Officer Monica Mondardini.

Foreword

On JuIy 23 2014, CIR signed an agreement with the lending banks of Sorgenia for the restructuring of the debt of  the energy company. The debt restructuring process for Sorgenia will follow the procedure "as per Art. 182 bis" and envisages that, subject to ratification of the plan, there will be a capital increase of 400 million euro, in which the current shareholders will not take part and which will be wholly subscribed to by the lending banks through the conversion of receivables into capital. Once the deal has been completed, CIR will no longer hold any shares in Sorgenia.

Given what has been stated above, the CIR group, starting from its Semi-annual Interim Report as of June 30 2014, has adopted international accounting standard IFRS 5 for the consolidation of the Sorgenia group. On the basis of this standard the Sorgenia group must be classified as an asset held for sale. Therefore the statement of financial position of  Sorgenia is included in the consolidated financial statements of CIR in the item "Assets/Liabilities held for disposal", separated out from the other assets and liabilities shown in the statement of financial position, and no longer consolidated according to the full line-by-line method. A similar presentation is used for the income statement which includes Sorgenia's results in the item "Income/Loss from assets held for disposal".

Therefore, more 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. For the purposes of comparison the consolidated income statement of the corresponding period of last year was also reclassified in the same way. The comments on the balance sheet items take this reclassification into account.

Consolidated results

The revenues of the CIR group in the first nine months of 2014 came in at €1,776.6 million (-1.5% compared to the € 1,804.5 million of the same period of 2013). The slight decline was due to the lower revenues of the Espresso group, negatively affected by the complex situation in the publishing sector and the still critical performance of the economy, which led to a further reduction in advertising investment. Sogefi reported stable revenues while KOS reported growth of 4.7%. EBITDA came to € 154.1 million (8.7% of revenues), and was up by 9.5% compared tothe figure for the first nine months of 2013 (€ 140.7 million). The growth was due mainly to the improvement in the margin of the parent company CIR S.p.A., which in 2013 had incurred non-recurring costs relating to the Lodo Mondadori case, and to the slight increase in the profitability reported by Espresso and KOS. These factors more than compensated for the decline in margins reported by Sogefi. The net result of the group was a positive figure of € 5.4 million; in the same period of last year it was € 10.7 million but would have been -€ 16.2 million excluding extraordinary items. It should indeed be remembered that the result of the first nine months of 2013 contained two non-recurring items one with a plus and one with a minus sign: on the one hand the negative effect of the Sorgenia write-downs, on the other the positive impact of the final ruling on the Mondadori case. The contribution of the operating subsidiaries to the consolidated financial statements of CIR in the nine months was a positive € 4.4 million. In the same period of last year they made a negative contribution of € 299.4 million; excluding the write-downs relating to the Sorgenia group, the contribution would still have been a negative figure of € 12.2 million. In the nine months Espresso and KOS achieved earnings substantially in line with those of the same period of last year. Sogefi reported a loss of € 5.8 million, compared to earnings of € 23.8 million in the same period of 2013:  this result was due to the negative evolution of the South American market, the slight decline in margins in Europe and to non-recurring charges for restructuring. As far as the Sorgenia group is concerned, this year its contribution to CIR's accounts were equal to zero as it was entirely offset by the write-downs made in 2013 (at September 30 2013 they amounted to € 287.2 million). The result of the parent company and of the non-operating subsidiaries was a positive € 1.1 million (versus a positive € 310.1 million in 2013 relating mainly to non-recurring gains, net of which there would have been a loss of € 4 million). The net financial position of the CIR group at September 30 2014 amounted to -€ 156.8million versus -€ 1,845.3 million at December 31 2013; the change was due to the deconsolidation of the net financial position of Sorgenia after application of accounting standard IFRS 5. The increase in the net financial position of the group compared to the figure at June 30 2014 (-€ 56.6 million) was due mainly to the expected disbursements for taxes, which were already recognized in the accounts in 2013, in relation to the Lodo Mondadori case. The net financial position of the parent company was a positive€ 391.3 million at September 30 2014.   The equity of the group amounted to €1,148.1 million at September 30 2014, up from € 1,131 million at December 31 2013. At September 30 2014 the CIR group had 13,887employees (14,111 at December 31 2013). Results of the main subsidiaries of the CIR group Media: EspressoGruppo Editoriale L'Espresso is one of the most important publishing companies in Italy. It operates in all sectors of communication: the daily and periodical press, radio, internet, television and the collection of advertising. The group is 55.9% controlled by CIR and is listed on the Stock Exchange. Despite the negative evolution of the market, which has had a significant impact on revenues, the group closed the first nine months of 2014 with a positive result in line with that of the same period of last year. It should be noted that following the integration of the network operator activities into Persidera, the consolidation perimeter has now changed. The sales revenues of Espresso in the first nine months of 2014 came in at € 471.2 million (-8.1% from € 512.6 million in 2013), while EBITDA came to € 41.5 million, up slightly from € 38.4 million in the same period of last year. The consolidated net result, with the same consolidation perimeter, was net income of € 4.9 million (€ 3.9 million in 2013). Including the businesses sold, the net result was € 4.6 million versus € 4.5 million in the same period of last year. For further information on the results of Espresso see the press release published by the company on October 22 2014 (http://goo.gl/2miIHq).   Automotive components: SogefiSogefi is one of the main world producers in the sectors of filters, engine air systems and suspension components with 42 production plants in 4 continents. The company is controlled by CIR (57.2%) and is listed on the Stock Exchange. The sales revenues of Sogefi in the first nine months of 2014 came in at € 1,010.2 million, unchanged from € 1,010.6 million in the same period of 2013 (+4.6% at the same exchange rates). EBITDA came to € 80.8 million (-25.5% from € 108.4 million in the first nine months of 2013). The results were affected above all by the continuing weakness of the South American market, where sales fell by 23.3% compared to the first nine months of 2013. Apart from Mercosur, margins were also affected by the restructuring and the resulting temporary inefficiencies in Europe. Growth continues in North America, although at a lower rate than in the recent past, and in Asia. The contraction in margins weighed on the net result for the period, which came to -€ 5.8 million (net income of € 23.8 million in the first nine months of last year). For further information on the results of Sogefi see the press release published by the company on October 21 2014  (http://goo.gl/B50JYK).    Healthcare: KOSKOS is one of the most important Italian groups in the care-home sector (managing nursing homes and rehabilitation centres, and hospital facilities). The group manages 71 facilities, mainly in the centre and north of Italy, with a total of around 6,350 beds in operation plus another 300 or so under construction. Controlled by CIR (with 51.3%), KOS also has the Ardian group as a shareholder. In the first nine months of 2014 KOS achieved revenues of € 289.7 million (+4.7% compared to € 276.8 million in 2013), thanks to the development of its three areas of activity (nursing homes, rehabilitation centres, high-tech services/hospital management). EBITDA came to € 44.2 million, posting a rise from € 41.3 million in 2013. Net income was € 10.1 million, up from € 9.6 million in 2013. Net debt stood at € 158.7 million at September 30 2014 (€ 155.7 million at December 31 2013). During the quarter two RSA facilities (nursing homes) started operating in Bergamo (120 beds) and Montecosaro (MC) (85 beds) while the RSA facility at Dorzano (68 beds) was sold. In the sector of high-tech services business is continuing in India with the joint venture ClearMedi Healthcare Ltd and in the United Kingdom with 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 September 30 2014 of € 183.7 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 September 30 2014 of € 71.4 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 September 30 2014 was € 21.2 million. Lastly, the CIR group has a portfolio of non-performing loans, the value of which was € 73.9 million at September 30 2014. Outlook for the rest of the year 2014 The performance of the CIR group in the last part of 2014 will be affected by the evolution of the Italian economic climate, which is still uncertain and has a significant impact particularly on the media sector, and also by the performance of the South American market for the automotive component sector. The net result for the year will be affected by non-recurring costs of approximately € 16.5 million for the buyback of the 2024 Notes, which will be recognized to the accounts in the fourth quarter.   Significant events that occurred after September 30 2014 On October 16 2014, CIR S.p.A. repaid its "€ 300,000,000 5.75 per cent. Notesdue 2024" (€ 210,162,000 in circulation) after the majority of the Noteholders had accepted the buyback offer announced by the company on September 9 2014 and the general meeting held on October 13 had approved the Extraordinary Resolution for early repayment. The total amount paid by CIR was € 237,147,254.28. Following the repayment of the 2024 Notes, CIR has no more bonds or notes in circulation. On October 21 2014, the Board of Directors of Sogefi announced that Chief Executive Guglielmo Fiocchi and the company had by common accord considered Fiocchi's management experience to have come to an end. At the proposal of Chairman Rodolfo De Benedetti, the Board appointed Monica Mondardini, the Chief Executive of CIR, as Executive Vice Chairman. Ms Mondardini has been entrusted by the Board of Directors with the selection of a new chief executive officer, with whom to formulate a strategic plan for the company. Share buyback plan launched CIR S.p.A. intends to start buying back its own shares in accordance with and in execution of the authorization given by the Annual General Meeting of the Shareholders on June 30 2014. As already announced to the market, the authorization of the AGM concerns the possible buyback, even a partial one, of a maximum number of 30,000,000 ordinary shares (in addition to the shares already held as treasury stock) for a period of 18 months with a maximum disbursement limit of € 50 million. The rationale behind the buyback program is given in the AGM resolution available on the Company's website www.cirgroup.it and on the authorized storage system website www.1Info.it. In the event of buyback transactions, CIR will inform the market of the deals done on a weekly basis. Where liquidity is extremely low, the Company anticipates that at some trading sessions it may exceed the limit of 25% of the average daily volume of the twenty days preceding the date of the buyback, but in any case the maximum number of own shares that can be bought back will not exceed 50% of the average daily volume. Banca Intermobiliare di Investimenti e Gestioni S.p.A. is the intermediary appointed to buy back the own shares. As of today CIR S.p.A. owns 48,703,842 of its own shares, equal to 6.13% of the share capital.

27 October 2014 | 13:53 CET