RCS MediaGroup : Results at 30 June 2014 approved

Milan, 31 July 2014 - The RCS MediaGroup Board of Directors, meeting today chaired by Angelo Provasoli, examined and approved the results at 30 June 2014. The table below shows the main consolidated figures for the half year on a like-for-like basis with 2013.

In line with the Group's new strategic organization, the structure of the operating segments was revised as of 1 January 2014, with the new Media Italy segment encompassing the Italian Newspapers, Magazines and Television businesses with the aim of further strengthening the vertical and integrated publishing products. The new structure is shown in the PDF attached.

Group operations in the first half of 2014

In the first half of 2014 the macroeconomic environment confirmed the modest signs of recovery already reported in late 2013, with the drop in GDP partially slowing: -0.1% in Italy and +0.5% in Spain (figures at the first quarter of 2014 - Source: Bank of Italy, INE). The economic recovery in Italy, though showing signs of greater business confidence, is still struggling to take off, and the main support to the gross domestic product continues to derive from the performance of international trade. In the two months of April and May 2014, the Italian advertising market posted a 4.7% drop on a like-for-like basis with 2013, with the printed media segment still showing strong negative performance (-8.7%) (Source: Nielsen), while the Spanish advertising market was up 4.3% in the second quarter, with the printed medium segment decreasing by 6% (Source: I2P/Arcemedia).

In this scenario, the RCS Group has continued with its strategy of investing in and focusing on multimedia, in order to continuously develop core business, increasing the weight of revenue from digital business and keeping significant attention on costs and organisational efficiency. Specifically, during the first half of 2014, the RCS Group continued to vigorously pursue the strengthening of its core publishing business, enrichment of the digital offering, enhancement of the value of imprints and authors in the Books segment and the increase in revenue from events, especially in the sporting area. During the half year and the subsequent month, efforts for the editorial strengthening and to step up digital offerings took the form of the launches of the newCorriere della SeraandLa Gazzetta dello Sport websites, as well as the new digital edition of La Gazzetta dello Sport, Gazzetta GOLD. Also note the special initiatives Corriere - ItaliaVoltaPagina and Gazzetta Azzurra and the successful Corriere Innovazione initiative, which reached Campania, Apulia, Lombardy and Tuscany in the last few months. There were numerous projects aimed at enhancing vertical systems: specifically, the launched of the redesigned website Oggi.it, with new positioning of people&news, was highly successful. In May, the innovative portal www.rcslibri.it was launched, and in July the Rizzoli Temporary Bookstore opened, pending the re-opening of the long-standing Rizzoli Galleria store in the autumn. July also saw the presentation of Gold 5, the new video display advertising concessionaire which brings together Manzoni, Banzai Media, Italiaonline, Mediamond and RCS MediaGroup. Lastly, the events also included the highly successful 97th Giro d'Italia, which began in Ireland this year, providing great returns for the image of RCS Sport and for all of Italy, as well as the highly popular Milano City Marathon and the 2014 cycle of the Color Run.

The Group's consolidated net revenue was Euro 611.1 million in the first half, compared to Euro 647.5 million for the same period of 2013 (-5.6%): The change is attributable to the downturn in circulation revenue, only partially offset by other publishing revenue, which grew by 9.2%. Revenue from digital business rose by 8.8% to Euro 79.5 million, or 13% of the Group's total revenue (this ratio increased by about 2 percentage points compared to the first half of 2013).

Circulation revenue totalled Euro 288.1 million (330.1 million in the same period of 2013): the drop is essentially attributable to the changes in scope due to the sales/suspensions of a number of magazines and the sale of certain operations in Books, including the Collectibles branch.

Advertisingrevenue remained stable at Euro 250.8 million compared to Euro 251.3 million in the first half of 2013, mainly due to the growth in revenue from third-party publishers (+19.6 million) and revenue from sporting events and activities (+1 million).

Other publishing revenueincreased by Euro 6.1 million, mainly attributable to the increase in sporting events, which specifically also included the Dubai Tour and the Euroleague Basketball Final Four.

Efficiency and cost containment actions resulted in benefits of over Euro 31 million in terms of EBITDA in the first half compared to the same period in 2013, which should result in overall efficiency benefits for 2014 exceeding the annual Euro 50/60 million target originally set, bringing it to over Euro 70 million.

EBITDA before non-recurring income and expense was a negative Euro 4.2 million, compared to -28.6 million in the first half of 2013, up 24.4 million due to the positive performance of all business segments, and the Media Italy and Media Spain segments in particular. It is also noted that since the third quarter of the previous year EBITDA before non-recurring income and expense has improved steadily on the same quarters of the year before: the improvement of over Euro 10 million recorded in the first quarter of 2014 increased to +14 million in the second quarter of the year. Non-recurring expense for the half year totalled Euro 25 million (76.3 million in the same period of 2013) mainly in relation to the staff restructuring plan for Media Spain. EBITDA after non-recurring income and expense was Euro -29.2 milliongrowing by 75.6 million on Euro -104.8 million in the first half of 2013.

The Group continued to invest in tangible and intangible and financial fixed assets, with investments during the first half of 2014 totalled Euro 24 million, over half of which in the digital business, specifically for the new versions of the Corriere della Sera e La Gazzetta dello Sport websites.

Due to the dynamics described above as well as lower depreciation and amortization from Euro 35.4 million in the first half of 2013 to Euro 29 million, EBIT, negative for Euro 65.1 million, significantly improved compared to 30 June 2013 (-142.8 million).

Net financial expenses amounted to Euro 20.9 million, compared to Euro 11.8 million in the first half of 2013, essentially due to the interest component.

The net loss for the period came to Euro 70 million (-125.4 million at 30 June 2013), an improvement of Euro 55.4 million compared to the same period of 2013.

The net financial position went from Euro -474.3 million at 31 December 2013 to Euro -518.2 million, in line with the Group's usual seasonal trend: it must, however, be noted that compared to the first half of 2013, the typical cash flows are improving, while higher outlays were recorded than last year due to restructuring costs, new technical investments and strategic acquisitions in multimedia and the acquisition of the entire share capital of Editoriale Mezzogiorno. Furthermore, as a result of the receipts generated from the conversion of shares in May, amounting to Euro 47 million, the net financial position remained under the level of 31 March 2014, with an increase of Euro 3 million.

The head count as at 30 June 2014 of 4,001 employees (gross of the current redundancy scheme and solidarity agreements) fell by 756 versus the same period of 2013, as a result of the reorganisation plans essentially involving all Group areas. The average head count was 4,038, down by 795, including discontinued operations.

Comments on operations in the first half of 2014

Media Italy posted revenue of Euro 260.6 million (-7.6% compared to the same period in 2013). Digital revenue reached 15% of total revenue, increasing slightly on the same period of 2013. Excluding the magazines sold and revenue deriving from consolidation of the local edition of Mezzogiorno from 2013, the downturn would come to Euro 11.3 million (-4.2%), due to the decrease in advertising revenue and newsstand sales, partially offset by the development of the digital segment, the increase in price of printed publications and the initiatives introduced during the period to combat the sector trend by expanding the publishing offering of the Group's two daily publications in Italy.

Publishing revenue totalled Euro 138.3 million, down slightly on a like-for-like basis compared to the previous year (-2.6%). Specifically, publishing revenue from the Corriere publications and the Gazzetta publications showed un trends substantially in line with the first half of 2013, boosted both by the development of revenue in the digital business and the positive impact of the increase in cover prices.

Advertising revenue totalled Euro 111 million, down 8.3% compared to the same period of the previous year. On a like-for-like basis, the decrease would be reduced to 7% on the same period of 2013. Income from on-line media,reached 22% of the area's advertising revenue.

Other publishing revenue came to Euro 11.3 million, in line with the same period of 2013, mainly due to the growth in revenue from digital products and the good performance of La Gazzetta dello Sport add-on products. Television grew slightly on the previous year.

Corriere della Sera and La Gazzetta dello Sportmaintained their leading circulation ranking in their sectors. According to the last ADS survey in May Corriere della Sera maintained its leadership in overall circulation, countering the adverse market effects, with an average number of copies circulated of 480 thousand (-4.6% or 23 thousand copies - internal source). Digital editions totalled 126 thousand, up 34% compared to the first half of 2013. The total circulation of La Gazzetta dello Sport in the first half of 2014, amounting to 271 thousand copies, was down 2.2% compared to the first half of 2013, but the growth in digital editions made up for the decline in printed copies. The corriere.it andgazzetta.it websites reached 45.5 million unduplicated unique visitors in the half year (-2% compared to the first half of 2013) and the digital editions of the two newspapers exceeded 162 thousand active subscribers, with growth of 25% versus the first half of 2013. A total of 2.5 million digital editions were downloaded during the first six months of the year, up 44.1% compared to the same period of 2013 (internal source). With regard to the mobile version of the two websites, in the first six months of 2014, Corriere Mobile recorded 5.1 million unique visitors (+66% compared to the same period in 2013) and Gazzetta Mobile million also reached 3.2 million unique visitors in June (+53% versus the first half of 2013).

Vertical System websites continued their growing trend, with excellent performances recorded for Amica.it, IoDonna.it, Living.corriere.it and the restyled Oggi.it, which achieved leadership positions.

EBITDA for the first six months of 2014 was a positive Euro 12 million, an improvement of Euro 71 million compared to -59 million in the first half of 2013. Excluding non-recurring income and expense (or Euro 2.9 million net expense in the first half of 2014 and 57.2 million net expense in the same period of 2013), EBITDA amounted to a positive 14.8 million, an improvement of 9.6 million compared to the same period of 2013, also reflecting the sale or suspension of a number of publications.

Media Spain recorded revenue for Euro 176.6 million versus Euro 194.5 million in the first half of 2013. Digital revenue reached 14.5% of total revenue, up by 14.3% compared to the same period of 2013. Advertising revenue totalled Euro 75.2 million (-4.2 million compared to the same period of 2013), reflecting the excellent performance of income from on-line media, which reached 25.4% of total net advertising revenue. Publishing revenue came to Euro 81 million (Euro 93.8 million in the same period of 2013), due to the general downturn in circulation and lower revenue from add-on products (Euro -7.8 million), partly offset by the digital business. Other revenue, amounting to Euro 20.4 million, decreased by 1.8 million over the same period of 2013, primarily due to revenue in the TV business.

El Mundowas once again the second leading national newspaper with 184 thousand copies on average daily, including digital editions, while Marca- a leading sports information publication - reached 185 thousand copies, including the digital editions. The elmundo.es website reached an average of 32.2 million monthly unique visitors (+1.9% compared to the first half of 2013), marca.com reached an average of 37.7 million unique monthly visitors (+5.2% compared to the same period of 2013), while expansion.com recorded a 15.3% increase compared to 30 June 2013, achieving an average of 6.1 million monthly unique visitors.

With regard to the on-line business, with the digital platform ORBYT, the group confirmed its leadership in the on-line offer, reaching a share of around 134 thousand subscribers in June.

EBITDA was a negative Euro 16.6 million (negative by 2.4 million in the same period of 2013); excluding non-recurring income and expense, EBITDA would be a positive Euro 4.1 million compared to Euro -0.6 million in the same period of 2013.

Revenue from Books reached Euro 72.1 million, compared to 90.4 million in first half of 2013. Net of Collectables operations of the investee Editions d'Art Albert Skira and the La Tribuna trademark, which were disposed of, the decline in revenue would have been reduced to Euro 2 million. Thanks to the on-going actions to reduce costs and optimize processes, the EBITDA was substantially stable on a like-for-like basis compared to 2013. On a like-for-like basis, Varia revenue was broadly stable, showing significant growth in digital revenue (+59%). Rizzoli further strengthened its number two ranking on the market (+17.3%, one of the sharpest increases in value in the entire market), driven by very good results in non-fiction and fiction, with Bompiani ranking again among the top ten growing publishers in terms of value (+9.7%) in the first half of 2014. The publisher Fabbri Editori completed the turnaround started in 2012, recording growth of 62.7% in value and 76.3% in the number of copies. Revenues of Rizzoli International Publications, expressed in USD, were the same as those for the second quarter of 2013. Revenue from the Education area decreased by Euro 1.9 million compared to the first half of 2013, due to the postponement of the timing for adoption of school textbooks, as a result of the numerous editorial changes deriving from the freeing up of the adoption system. This decline will be fully recovered in the second half of the year. The sales value of e-books accounted for 5.2% of the Group's total in the first half of 2014. RCS Libri strengthened its position as the second largest operator in the market, reaching an 11.5% market share in terms of value. Among the three leading publishing groups, the RCS Group is the only group whose market share increased in value, growing by 9% on the first half of the previous year, bucking the trend of its two main competitors, which both declined.

EBITDA was a negative Euro 11 million, up by Euro 7.6 million compared to the first half of 2013, also reflecting the planned sale of lower margin operations.

Significan't events occurred after the end of the first half 2014

Today, RCS MediaGroup announced that it has agreed with the editor of Il Corriere della Sera, Mr Ferruccio de Bortoli, to end of his long experience in running the Corriere della Sera.  Mr de Bortoli will remain at the helm of Il Corriere della Sera until the next ordinary shareholders' meeting called to approve the 2014 financial statements (spring of 2015). The termination of the contract will result in non-recurring charges of approximately 2.5 million for RCS MediaGroup in 2014.

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RCS MediaGroup announces that it has reached an agreement, not yet formalised, pending the positive conclusion of the necessary authorisation process by the decision-making bodies of several of the Financing Banks, to amend several terms and conditions of the Loan Agreement (the "Loan Agreement") signed on 14 June 2013 with Intesa Sanpaolo S.p.A., UBI Banca (Banca Popolare di Bergamo and Banca Popolare Commercio e Industria), UniCredit S.p.A., BNP Paribas Succursale Italia, S.p.A., Banca Popolare di Milano S.c.a r.l. and Mediobanca - Banca di Credito Finanziario S.p.A. (the "Financing Banks") and Banca IMI S.p.A. as Agent Bank, with an original maximum amount of Euro 600,000,000.

More in detail, by the first ten days of August, the parties to the Loan Agreement  shall enter into an agreement amending the Loan Agreement, for the purpose of formalising:

-          the reduction in the margins currently applicable to the Loan, and specifically, the application of the following new values:

• 387.5 bps p.a. (instead of the original 425 bps p.a.), for Credit Facility A;
• 397.5 bps p.a. (instead of the original 435 bps p.a.), for Credit Facility B; and
• 375 bps p.a. (instead of the original 400 bps p.a.), for the Revolving Credit Facility;

to allow for greater flexibility in terms of the timing envisaged for the sale of so called non-core assets:

°         the extension to 30 September (originally set for  31 December 2014) within which the programme initiated to sell off non-core assets should have generated revenue totalling 250,000.000;

• an amendment to financial covenants on the  Company's net financial position, to be reported on 31 December 2014, the limit of which was increased to Euro 530,000.000 (opposed to Euro 470,000.000)];

-                     the right of the Company and/or other companies in the RCS Group to take on further medium-long term debt, up to a maximum total of Euro 200,000,000 (instead of the original Euro 100,000,000 envisaged in the Loan Agreement), not only in the form of medium/long-term bank loans, but also through bond loans and/or negotiable instruments, (the proceeds of which will be used for the compulsory early repayment of the loan for an amount of 50% - in line with the original contractual provisions).

The Company will provide for the optional early repayment of the Loan, a total amount of Euro 23,000,000, a portion of the Euro 46,000,000 deriving from the optional conversion of the preferred shares into common shares of the Company. In this regard, further benefits will be provided to the Company through the priority use of that amount to repay Credit Facility B of the Loan, allocating it to the related instalments freely determined by the Company instead of the original provisions of the Loan Agreement requiring the allocation of the related payment to instalments due, starting with the instalment with the farthest due date in the future.

From the economic standpoint, the above reduction in margins will result in lower financial expenses of approximately Euro 1.6 million on an annual basis, while the objectives remain confirmed to reduce the net financial position and improve the NFP / EBITDA ratio of the Company under the 2013-2015 Plan.

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Considering that the Financing Banks Intesa Sanpaolo S.p.A. and Mediobanca - Banca di Credito Finanziario S.p.A. and of Banca IMI S.p.A. as Agent Bank, which are related parties of RCS, the planned amendments to the Loan Agreement were previously examined by the Related Party Committee who are in favour of it.

Outlook

The Spanish and Italian macroeconomic environment continued to be affected by the recession of recent years, which also continued in 2013, despite modest signs of recovery already reported in late 2013. The GDP stopped falling in Italy, with values substantially stable, showing changes of around one-tenth of a percentage point (-0.1% in the first quarter of 2014 compared to the previous period), while in Spain there was a slight turnaround (+0.4% in the first quarter of 2014 compared to the fourth quarter of 2013); Source: Bank of Italy and INE). The outlook for 2014 points to GDP growth in both countries (lower growth for Italy): +1.3% in Spain and +0.2%, with downside risks, in Italy (Source: Bank of Spain and Bank of Italy). These forecasts were recently confirmed by the IMF. Specifically, growth in the two countries has been forecast at +1.2% and +0.3% in 2014, respectively. Similarly, the estimated trend in the advertising market in Italy was revised downwards, from -5.5% to -9.7% (Source: Nielsen Media Search, June 2014 forecasts). The advertising market in Spain is expected to grow by 1.6% (Source: Arce Media, July 2014 forecasts), though driven only by the Internet and Television segments, while newspapers and magazines confirmed their sharp decline (-5.5% and -8.1%, respectively).

In this macroeconomic scenario, with regard to the Media sector (specifically, the Printed media segment) RCS forecasts that revenue for 2014 as a whole will be substantially stable compared to 2013 and changing the previous outlook for slight growth.

In reaction to this trend in revenue, in the first months of 2014 the RCS Group continued to vigorously pursue further new efficiency measures, which resulted in a greater impact than those envisaged in the 2013-2015 Development Plan. Therefore, in the absence of an additional, sharp downturn in advertising revenue, the target of tripling EBITDA before non-recurring expense compared to 2013 is confirmed, also thanks to efficiency measures of over Euro 70 million, exceeding the previously announced annual target of Euro 50/60 million.

In view of the foregoing, in the absence of currently unforeseen events and in light of continued concern for the still unstable macroeconomic environment and the advertising markets in particular, results for 2014, while expected to improve over 2013, should continue to post a loss.

The negotiations aimed at leveraging non-core assets are on-going. In relation to the possibility that negotiations may, in certain cases, continue and be concluded in 2015, an agreement has been reached with the financing banks to amend the contracts. In addition to a reduction of the spread applied, these amendments provide greater flexibility in the timing of the sale of non-core assets as well as in the level of the covenant relating to the net financial position at the end of 2014. In that scenario, the Company shall allocate Euro 23 million deriving from the conversion of preferred shares to the voluntary repayment of one of the credit facilities included in the Loan.

The Group's net financial position benefited from the unexpected, non-recurring receipt of Euro 47 million due to the optional conversion of preferred shares, mentioned above. The contribution of operations was in line with expectations while, as indicated above, the changed timing of the positive effects of leveraging the non-core assets must be taken into consideration. Therefore, the forecast decrease in the net financial position at the end of 2014 may not be reached, though the NFP will continue to comply with the updated covenant in the Loan Agreement.

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Roberto Bonalumi, the Director responsible for drawing up the company's accounting statements, hereby declares, pursuant to article 154-bis, paragraph 2 of the Consolidated Law on Finance (Testo Unico della Finanza, TUF), that the information contained in this press release accurately represents the figures contained in the Group's accounting records.

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The Half-Year Report at 30 June March 2014 will be made available to the public at the Company's registered office and at Borsa Italiana S.p.A., as well as published on the Company's website www.rcsmediagroup.it, within the required deadlines.

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