Economic and financial results of the Espresso Group as of December 31 2016
POSITIVE NET RESULT AND A SIGNIFICANT FINANCIAL SURPLUS, DESPITE THE CRISIS IN THE PUBLISHING SECTOR
REVENUES AT €585.5MN (-2.7% WITH SAME BASIS OF CONSOLIDATION, WITH DECREASE IN ATTENUATION COMPARED TO PREVIOUS YEARS)
NET INCOME: €10.4MN (€17.0MN IN 2015 INCLUDING A CAPITAL GAIN OF €10.3MN)
FINANCIAL POSITION POSITIVE FOR €31.7MN (DEBT OF €10.7MN AT 31/12/2015)
Milan, February 27 2017 – Today in Milan the Board of Directors of Gruppo Editoriale L’Espresso S.p.A. met and approved the consolidated results for the year ended December 31 2016 as presented by Chief Executive Officer Monica Mondardini and the proposal for a capital increase to service the contribution of Italiana Editrice SpA’s entire share capital in Gruppo Editoriale L’Espresso SpA.
PERFORMANCE OF THE MARKET
In 2016 total advertising investment (Nielsen Media Research figures) showed growth of 1.7% compared to 2015.The recovery in investment involved television and radio, which grew by 5.4% and 2.3% respectively.
Internet, excluding search and social, reported a decline in advertising orders of 2.3% compared to 2015.
Lastly, as far as advertising in the printed press is concerned, the trend was negative (-5.6%), with national and local advertising posting a similar decline.
As for newspaper circulation, according to ADS figures (Accertamento Diffusione Stampa) in 2016 there was a fall in sales on the newsstands and by subscription of 8.0%.
PERFORMANCE OF OPERATIONS OF THE ESPRESSO GROUP OPERATIONS IN THE YEAR 2016
Foreword
The General Agreement signed by Gruppo Espresso and ITEDI and announced to the public on August 1 2016 involves the integration of the two companies with the aim of creating the leading publishing Group in Italy as well as one of the most important groups in Europe in the sector of daily and digital news. Within the scope of the deconsolidation plan to guarantee compliance with the print run thresholds laid down in current regulations, with a view to the future integration with La Stampa and Il Secolo XIX, during 2016 the Espresso Group completed the following transactions:
– The sale on November 1 2016 of the business arm including the newspaper titles Il Centro, plus its printing centre, and La Città di Salerno;
– The sale on October 28 2016 of the 71% interest in Seta SpA, publisher of the newspapers Alto Adige and Il Trentino;
– The lease from December 1 2016 of the business arm including the newspaper “La Nuova Sardegna” to the company DB Information SpA.
For all the newspapers advertising orders continue to be channelled through the concessionaire A.Manzoni&C.
Results of the Group
The Group closed 2016 with a positive net result of €10.4mn.
The consolidated revenues of the Group, amounting to €585.5mn, underwent a decline of 3.2% compared to 2015 (-2.7% with the same consolidation basis).
Circulation revenues (including sundry revenues), totalling €242.5mn, were down by 6.4% on the previous year (-5.5% with the same consolidation basis), in a market that, as stated above, has continued to report a significant fall in the sale of newspapers.
Advertising revenues remained substantially in line with those of the previous year (-0.9%). Orders for radio and the internet showed a slight increase compared to 2015, while the printed press was affected by the critical performance of the market.
Costs fell by 2.4%, a decline substantially in line with the decline in sales; in particular, industrial fixed costs were down (-11.9%), thanks to the ongoing reorganization of the production structure of the Group, as were logistics and distribution costs (-5.2%), due to the rationalization of transportation. Editorial costs and management and administration costs were also down (by -5.4% overall), thanks to the measures adopted to contain labour costs and general expenses.
The consolidated gross operating margin was €44.7mn (€47.5mn in 2015), and included €7.7mn of reorganization costs. It should also be noted that as from the year 2016 the Espresso Group’s share of the result of Persidera includes the amortization of the fair value of the digital terrestrial frequencies recognized when the equity interest was acquired, for an amount of €4.3mn.
The consolidated operating result came in at €23.4mn (€30.5mn in 2015), including €4.4mn from the writedown of the goodwill of the published titles after application of the impairment test. Profitability by business area showed a decline in the results of the daily newspapers and an increase in radio, the internet and the concessionaire.
The sale at the end of January 2015 of the television channel DeejayTV to Discovery Italia generated capital gains, classified under discontinued operations, amounting respectively to €10.3mn in 2015 and €2.0mn in 2016.
The consolidated net result was income of €10.4mn, down from €17.0mn in the previous year; the difference was due to the above-mentioned capital gain recognized in 2015.
The net financial position was positive for €31.7mn at December 31 2016 as there was a financial surplus in the year of €42.4mn.
The Group had 1,940 employees, including temporary contracts, at the end of 2016, posting a reduction of 282 persons from December 31 2015, of whom 223 were due to the deconsolidation of the businesses described above. The average number of employees in 2016 was 5.1% lower than in the previous year.
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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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THE FINANCIAL STATEMENTS FOR 2016 OF THE PARENT COMPANY
The revenues of the Parent Company of the Group came in at €263.3mn (€283.2mn in 2015). The operating result was negative for €6.5mn (-€0.7mn in 2015). The net result was income of €17.4mn (a loss of €4.0mn in 2015)
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The Board of Directors will propose to the Annual General Meeting of the Shareholders convened for April 27 2017 that no dividend be distributed for the year 2016 and that the earnings for the year of Euro 17,402,406.63 be posted to retained earnings as the legal reserve has already reached 20% of the share capital.
At the Annual General Meeting it will also be proposed that the AGM cancel and renew its authorization of the Board of Directors, for a period of 18 months, to buy back a maximum of 20 million of the company’s own shares at a unit price that cannot be more than 10% higher or lower than the official price of the shares recorded in the trading session on the regulated market prior to that of each individual transaction or the date on which the price is fixed, and in any case when the buybacks are effected on the regulated market, at a price no higher than the higher of the price of the last independent transaction and the highest current independent bid price on the same market, in accordance with what is laid down in EU Delegated Regulation no.2016/1052.
The main reasons why this authorization is being renewed are the following: to fulfill obligations from possible stock option plans or other awards of the Company’s shares to employees or members of the board of directors or the board of statutory auditors of GELE or any of its subsidiaries companies; to fulfill any obligations resulting from debt instruments that are convertible into or exchangeable with equity instruments; to have a portfolio of shares to use as consideration in extraordinary transactions, even those involving share exchanges, with other entities in deals of interest to the Company (as treasury stock); to engage in activities supporting the liquidity of the market; to take advantage of any opportunities to create value and to invest liquidity efficiently in relation to the market trend; for any other purposes that the competent Authorities should qualify as market practices permitted as per the terms of applicable European and domestic regulations, and following the procedures established therein.
VERIFICATION THAT THE DIRECTORS AND STATUTORY AUDITORS HAVE THE REQUISITES OF INDEPENDENCE
The Board of Directors verified the existence of the requisites of independence of the Directors, confirming that Mr Massimo Belcredi, Ms Agar Brugiavini, Mr Alberto Clò, Ms Silvia Merlo, Ms Elisabetta Oliveri, Mr Luca Paravicini Crespi and Mr Michael Zaoui can indeed be qualified as independent. The Board also verified the requisites of independence and integrity of the members of the Board of Statutory Auditors.
MAIN EVENTS THAT HAVE OCCURRED SINCE THE CLOSE OF THE YEAR AND OUTLOOK FOR THIS YEAR
In 2016 the evolution of the sector remained critical: the circulation of newspapers and magazines once again reported a significant decline (-8.0%) and advertising orders for the printed press were down by 5.6% even though there was a slight recovery at global level.
In this still difficult climate, the Group obtained a decidedly positive result, maintaining its profitability in line with that of the previous year, once non-recurring items were excluded. The Group has also continued to develop in the digital sector, confirming the leadership of Repubblica.it and launching the new website Business Insider on the Italian market in a joint venture.
The agreement reached with FCA and Ital Press and cited above will make it possible to unite the strength of respected historic newspapers such as la Repubblica, La Stampa and Il Secolo XIX and the numerous local newspapers of the Espresso Group.
As far as the evolution of the early months of 2017 is concerned, evidence available to date does not make it possible to forecast any market developments that are significantly different from those that characterized the year 2016.
CAPITAL INCREASE TO SERVICE CAPITAL CONTRIBUTION
The Board of Directors further resolved to submit the proposal for a capital increase –with the exclusion of the option right, pursuant to Article 2441, paragraph 4, of the Italian Civil Code – (the “Capital Increase”), to the Shareholders’ meeting. The Capital Increase will be paid in by means of the contribution in kind of shares representing the entire share capital of Italiana Editrice S.p.A. (“ITEDI”) by its shareholders, i.e. Fiat Chrysler Automobiles N.V. (“FCA”) and Ital Press Holding S.p.A. (“Ital Press”), insofar as each of them is concerned.
The ITEDI Group, one of the main Italian operators in the publishing and news sector, closed the year 2016 reporting a value of production of €131.3mn, an EBITDA of €13.0mn and a net financial position of €5.4mn.By virtue of the Capital Increase, the proposed integration of the activities of GELE and ITEDI, contemplated by the framework agreement announced on 1 August 2016 (the “Framework Agreement”), will be implemented.
Completion of the merger , which is subject to authorization by the competent authorities and to conditions precedent typical of deals of this kind (such as obtaining the necessary corporate authorizations), is scheduled to take place in the first half of 2017.
By virtue of the Capital Increase – to be approved by the shareholders’ meeting – GELE’s share capital will be increased by the aggregate amount of Euro 79,969,000.00, of which Euro 14,497,678.65 will be attribuited to nominal share capital and Euro 65,471,321.35 will be attribuited to share premium. The Capital Increase will be executed by means of the issuance of No. 96,651,191 GELE ordinary shares, having a nominal value of Euro 0.15 (the “New GELE Shares”), No. 74,421,417 GELE New Shares will be allotted to FCA and No. 22,229,774 GELE New Shares will be allotted to Ital Press.
Upon completion of the transaction CIR – Compagnie Industriali Riunite S.p.A. will hold 43.40% of GELE’s share capital; FCA will hold 14.63% and Ital Press will hold 4.37%.
GELE New Shares will be listed on the “Mercato Telematico Azionario” organized and managed by Borsa Italiana S.p.A. and will carry the same rights embodied in GELE outstanding shares.
The Board of Directors further resolved to convene the Extraordinary Meeting of Shareholders – for the approval of the Capital Increase – by means of a subsequent resolution, to be adopted upon the satisfaction of the conditions precedent set out in the Framework Agreement. Such conditions precedent include (i) clearance by the Italian antitrust authorities, and (ii) the assessment – excluding that a dominant position in the editorial and publishing sector will be achieved by GELE upon completion of the transaction pursuant to Art. 3 of Law 25 February 1987, No. 67 or, alternatively, the evidence – with reasonable certainty – of GELE’s compliance with the concentration’s according to the abovementioned provision.
For further information about the merger transaction described in this press release, reference should be made to what was announced by the company to the public on August 1 2016. The documentation required by applicable laws – including, inter alia, the report prepared in accordance with Article 2441, paragraph 6, of the Italian Civil Code and Article 70, paragraph 4, of Consob resolution no. 11971/99, will be made available to the public within the time limits prescribed by law.
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