RCS MediaGroup : Results at 30 September 2014 approved

Milan, 13 November 2014 - The Board of Directors of RCS MediaGroup, met today chaired by Angelo Provasoli, examined and approved the results at 30 September 2014. The table below shows the main consolidated figures for the nine months on a like-for-like basis compared with 2013.

The weak Italian macroeconomic situation in the second quarter of 2014 reported a decrease in GDP -0.2% compared to the previous quarter (Source: Bank of Italy), while the decrease would have been of 0.3% on an annual basis (Source: ISTAT). Signs of growth have been seen in Spain, where GDP increased 1.6% on an annual basis (Source: INE). This trend in the two countries has naturally affected the advertising market as well, which in Italy reported a drop of 5.4% in the July-September quarter (printed media -7.3%,  internet in line (Source: Nielsen), while an overall increase of 7.2% was registered in Spain in the same period (printed media +1.4%, internet +5%) (Source: I2P/ArceMedia).

The RCS Group continued its strategy based on investments and focus in the multimedia space to develop its core business. Over the first nine months of 2014 and to date the RCS Group has continued to reinforceof its editorial core business, enhancement its digital offering, strengthen the value of its publishing brands and its Books area authors and increase revenue from events, in particular sports.

In particular the strategy to reinforce and improve the publishing sector included the new berliner format of Corriere della Sera, the restyling of El Mundo, which celebrated it 25th anniversary, the launch of the Mexican edition of El Mundo, the return of the publication Abitare both to newsstands and in a digital version, the restyling of Oggi for its 75th anniversary and the special international edition of Amica. The new Rizzoli Galleriabookstore was inaugurated on 4 November in Milan, completely revamped in a record time of four months, and at the same time a new app dedicated to the book world, BOOKtoBOOK, was unveiled. MyStudio, the innovative digital suite for schools was launched in September and two months after launch it already had more than 60,000 registered users. In the advertising world a new advertising sales house for video display advertising Gold 5 began operation, while major events included the great success of the three day Il Tempo delle Donne and Color Run cycle, involving more than 60,000 fans at its six events.

The Group's consolidated net revenue at 30 September 2014 was EUR 921.5 million, compared to EUR 964.9 million for the first nine months in 2013:  this reduction is mainly attributable to the sale or suspension of some non-core magazines, as well as the effect of the disposal of companies and business units. Excluding these factors, revenue was basically in line with the same period of the previous year, as well as revenue for the third quarter of 2014. Revenue from the digital businessaccounted for 12% of the Group's total revenue (10.7% in the first nine months of 2013) and at 30 September 2014 reached EUR 110.8 million, an increase of 7.3% compared with the first nine months of 2013.

Circulation revenue totalled EUR 484.9 million (-9.9% on a like-for-like basis with 2013), reporting a drop - including in the third quarter - primarily due to implementation of a disposal plan and the circulation trend in the Spanish market.

Advertising revenue rose EUR 3.6 million compared to the same 2013 period, reaching EUR 341.5 million. This change was driven by an increase in advertising revenue generated with other publishers (EUR +25.3 million) and the inversion of the trend in Spanish Media advertising revenue (EUR +1.5 million), which rose significantly in the third quarter. The Group's advertising revenue increased by 4.7% in the third quarter, showing an inversion in the trend for the second quarter in a row.

Other publishing revenue reported a net increase of EUR 6.4 million, primarily thanks to an increase in sports events, including the Dubai Tour and Euroleague Basketball Final Four, as well as higher revenue related to the Giro d'Italia.

Efficiency and cost containment measures resulted in benefits of more than EUR 47 million, consistent with forecast for the 2014 year, which confirm the increase of forecast total benefits 2014 to EUR 70 million surpassing the originally set target of EUR 50/60 million.

EBITDA before non-recurring expenses and income is EUR 13.7 million, compared with EUR -21 million in the first nine months of 2013, reporting an improvement of EUR 34.7 million due to the positive performance of the main business areas. Starting from the third quarter of last year, EBITDA before non-recurring expenses and income reported a constant improvement compared to the same quarter of the previous year. The improvement of more than EUR 24.4 million registered in the first half of 2014 further increased by EUR 10.3 million in the third quarter of the year. Non-recurring expense for the nine months totalled EUR 30 million (EUR 100.3 million in the same 2013 period). EBITDA after non-recurring expenses and income totalled EUR -16.3 million, an improvement of EUR 105 million compared to the EUR -121.3 million of the first nine months of 2013; third quarter EBITDA was a positive EUR 12.9 million, compared with the negative result of EUR 16.5 million of the third quarter of 2013.

Group investments in property, plant and equipment and intangible assets continued, totalling EUR 43.7 million  for the nine months of 2014 with 60% invested mainly in the digital area, in particular for the new versions of the Corriere della Sera and La Gazzetta dello Sport websites and to create the new format of Corriere della Sera.

Thanks to these dynamics plus the EUR 8.7 million reduction of amortisation compared to the same period of 2013, EBIT, negative by EUR 69.2 million, represents a significant improvement compared to 30 September 2013 figure totalling EUR -178 million.  The third quarter also returned a positive change in EBIT of more than EUR 31 million, improving from the EUR -35.1 million of the third quarter of 2013 to EUR -4 million.

Net financial expenses totalled EUR 31 million, against EUR 19.8 million for the nine months in 2013, essentially due to the interest rate component; it should be noted that in the first half of 2013 the Group benefited from loan agreements at particularly favourable rates negotiated in 2007.

The net loss for the year stands at EUR 93.1 million (EUR -175.3 million at 30 September 2013), an improvement of more than EUR 82 million on a like-for-like basis. The same trend occurred in the third quarter, with an improvement of approximately EUR 27 million, moving from EUR -50 million in the third quarter of 2013 to EUR -23.1 million.

The net financial position passed from EUR - 474.3 million at 31 December 2013 to EUR -515.3 million, which is an improvement of more than EUR 31 million compared to 30 September 2013. It should be noted that compared to the nine months of 2013, cash flow from operations improved by more than EUR 60 million.

The exact headcount at 30 September 2014 totalled 3,967 employees (before the current wage guarantee fund agreement), a decrease of 227 employees compared to the same period in 2013, as a result of reorganisation plans which involved practically all Group areas. The average headcount totalled 4,036 employees, a reduction of 714, including discontinued operations.

Italian Newspapers posted revenue of EUR 384.3 million (-6.3% compared to the same period in 2013): digital revenue reached 14% of total revenue. Excluding the sold magazines from 2013 and revenue from the consolidation of the local edition of Mezzogiorno, the decrease is EUR 14 million (-3.5%), due to the decrease in advertising sales and newsstand sales, partly offset by an increase in the price of printed magazines and initiatives introduced during the period with the aim of countering the industry trend, by enhancing the publishing offer of the Group's two newspapers in Italy.

Publishing revenue totals EUR 215 million, with a slight decrease within the same area compared to the previous year (-1.9%). Specifically, publishing revenue from the Sistema Corriere and Sistema Gazzetta shows a trend basically in line compared to the nine months of 2013, sustained  by the positive effect of the increase in cover price and good performance of add-ons.

Advertising revenue totals EUR 152.9 million, with a decrease of 6.9% compared to the same period of the previous year: Income from on-line media reached 21% of the area's advertising revenue.

Other publishing revenue totals EUR 16.4 million registering a decrease compared to the same period in 2013, mainly due to fewer television subscriptions. Television, however, is in line overall with the previous year.

Corriere della Sera and La Gazzetta dello Sport confirmed their leading circulation ranking in their sectors. In the latest Ads survey in September Corriere della Sera was confirmed as overall circulation leader in contrast to the effects of an unfavourable market, reaching an average of 471 thousand distributed copies (-4.8% on an annual basis). Digital copy sales totalled 130 thousand, an increase of 31% compared to September 2013. Total circulation of La Gazzetta dello Sport in the first nine months of 2014, at 283 thousand copies, dropped by 2.4% compared to September 2013, while digital copies stood at 54 thousand, an increase of 31.7% compared to 30 September 2013. The websites corriere.it and gazzetta.it in the first nine months reached a total of 45.9 million non-duplicate average monthly unique browsers (+2% compared to the same 2013 period) and the digital editions of the two newspapers have exceeded 168 thousand active subscriptions, with a 33% growth over the nine months of 2013. During the first nine months, 2.7 million digital editions were downloaded registering a 45.3% increase compared to the same 2013 period (Source: internal).  In terms of the mobile versions of the two websites, in the first nine months of 2014 Corriere Mobile reported 6.3 million unique browsers (+105% over the same 2013 period) and Gazzetta Mobile reached 4.1 million unique browsers in the month of September (+91% compared to the same 2013 period). 

Growth of the Sistema Verticali websites continued, reporting excellent performance for the new website of Amica.it, IoDonna.it,Living.corriere.it and the renewed Oggi.it, registering leading positions. 

EBITDA for the first nine months of 2014, at EUR 28.1 million, improved EUR 75.3 million compared to the EUR -47.2 million for the same 2013 period. Excluding non-recurring expenses and income (totalling EUR 0.6 million of net income in the first nine months of 2014 and EUR 57.8 million of net expenses for the same 2013 period), EBITDA is EUR 27.5 million, a EUR 16.9 million improvement over the same 2013 period.

Spanish Newspapers posted revenue for EUR 257.1 million compared to the EUR 273.4 million of same period in 2013: digital revenue reached 13.8% of total revenue, an increase of 11.7% compared to the same 2013 period. Advertising revenue reached EUR 105.4 million, an improvement of 1.2% compared to the same 2013 period: advertising revenue increased by 18% in the third quarter. Income from on-line media performed well, reaching 25.2% of total net advertising revenue. Publishing revenue totals EUR 119.6 million (EUR 136.5 million in the same 2013 period) due to the general decrease in circulation and lower revenue from add-on products, in part offset by the digital area. Other revenue, totalling EUR 32.1 million compared to EUR 32.8 million of the same 2013 period, reflects the positive trend of revenue from the digital area and sports events.

El Mundo confirmed its position as the second national newspaper with 184 thousand daily average copies, including digital editions, while Marca - a leading sports information publication - reached 187 thousand copies, including digital editions, and Expansiòn grew 2.9%, reaching 41 thousand daily average copies. The elmundo.es website has an average of 32.2 million unique browsers on a monthly basis (+2.6% compared to the same 2013 period), the website marca.com reached an average of 38.1 million unique browsers on a monthly basis (+5.9% compared to the same 2013 period), while expansion.com reported an increase of 14.5% compared to 30 September 2013, reaching an average of 6.1 million monthly unique visitors. With the digital platform ORBYT the Group's leading position in on-line products was confirmed, with approximately 128 thousand subscribers in September. EBITDA improved by EUR 1 million, from EUR -22.5 million in the first nine months of 2013 to EUR -21.5 million at 30 September 2014; excluding non-recurring expenses and income EBITDA is EUR 5.2 million, an improvement of EUR 12.8 million compared to the same 2013 period.

Revenue from the Books area stands at EUR 155.4 million, compared to EUR 179.3 million for the same 2013 period; excluding the disposed assets of the Collectables,  equity investment Editions d'Art Albert Skira, and La Tribuna brand, revenue is basically stable, balancing the drop in the Education area, which will only reap the benefits of the reorganisation and new product launches next year. 

On a like-for-like basis,  Various revenue grew 2%, reporting a significant increase in digital revenue (+45.4%). Rizzoli further strengthened its number two position, with one of the highest levels of growth in the gross value of copies sold (+19.4%), thanks to the particularly good non fiction and fiction results, and Bompiani maintained its rising trend (+3.2%), confirming its position as one of the top ten publishers in the market. Fabbri Editori publishing company showed the results of the innovation phase started in 2012, with a 63.4% increase in gross value of copies sold. The total net revenue for Rizzoli International Publications reported in dollars exceeded by around 10% of that of the same 2013 period. Rizzoli books were in the top ten thirty times in the first nine months of 2014 thanks to particularly successful publications including The Fault in Our Stars by John Green, Ammazziamo il gattopardo by Alan Friedman, 2014 Pulitzer Prize winner The Goldfinch by Donna Tartt and La vita è un viaggio by Beppe Severgnini. Bompiani enjoyed great success with several books, including Adulterio by Paulo Coelho, Capital in the Twenty-First Century byThomas Piketty and Cuore primitivo by Andrea De Carlo.Sales of e-books amounted to 5.4% of total sales for the nine months in the Various sector, with revenue increasing more than 40%.

RCS Libri consolidated its number two market position, reaching a share of 11.7% in terms of gross value of copies sold. The RCS Groups was the only one of the three major publishing groups to see its market share in terms of value increase, with growth of 10% compared to the same period last year.

EBITDA was EUR 1.3 million, an improvement of EUR 6.2 million compared to the same 2013 period, in part thanks to the planned disposal of less profitable assets. EBITDA also improved by EUR 3.4 million before non-recurring expenses and income, reaching EUR 4.2 million.

Italy's macroeconomic context is still characterised by a multi-year recession, inspite of modest indications of recovery reported at the end of 2013 characterised by a the halt in GDP contraction to basically stable values with variations around a tenth of a percentage point (-0.2% in the second quarter of 2014 compared to the previous 2014 quarter). Spain continues to buck the trend as already reported in the first half of 2014 (+0.5% in the third quarter of 2014 compared to the second quarter of 2014; Source: INE). The performance of the global economy and international trade in 2014 was unquestionably worse than forecast. Risks of a further slowdown have increased, in part following geopolitical tension and the possible worsening of the structural imbalances in some emerging economies (Source: Bank of Italy).

The advertising market in Italy in the third quarter of 2014 (Source: Nielsen) was still decreasing (-5.4% compared to the same 2013 period) in particular reporting a drop of 7.3% for printed media. Overall the advertising market in Spain showed an increase of 7.2% in the third quarter of 2014, compared to the third quarter of 2013, +1.4% for printed media (Source: I2P ArceMedia). In this macroeconomic context, RCS forecasts revenue basically stable for 2014 compared to 2013, overall and with the same perimeter.

To respond to the unfavourable performance of its markets, the RCS Group has continued in 2014 to pursue additional new efficiency measures which have resulted in a greater impact compared to the forecasts in the 2013-2015 Development Plan.  

Taking into account EBITDA before non-recurring expenses at 30 September 2014, expectations for the results for the current fourth quarter, which, due to its seasonal nature is always the quarter with the strongest economic results of the year, greater efficiency expected compared to the previous year and, as long as another significant drop in advertising revenue does not occur in Italy, the goal of tripling EBITDA before non-recurring expenses compared to 2013 is expected to be met. Efficiency measures for 2014 are estimated at approximately EUR 70 million, higher than the annual target of EUR 50/60 million that was originally announced.

Taking into account the above, in the absence of currently unpredictable events and with the continuing concerns resulting from unstable conditions in the macroeconomic context and in particular advertising markets, a net loss is forecast for 2014 although the result should show a substantial improvement over the 2013 result.

Negotiations aimed at value generation from non-core assets continue, the positive effects of wich on NFP are expected to be felt after 2014. For this reason the forecast reduction of the Group's NFP at 31 December 2014 compared to the same 2013 period, may not be reached, but consolidated NFP at the end of 2014 is estimated to be less then EUR 500 million, an improvement over the 30 September 2014 value. This objective is mainly linked to the positive operating effects linked to the seasonal nature of the business and ensures compliance with the Loan accord covenant updated with the agreement reached with Lending Banks, aimed at a greater flexibility regarding the deadlines set for the sale of non-core assets. 

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Roberto Bonalumi, the Director responsible for drawing up the company's 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 Interim Management Statement at 30 September 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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