The Board of Directors analyzed the consolidated results as of December 31, 2013
DESPITE THE CRISIS THA HIT HARD THE PUBLISHING SECTOR, GRUPPO ESPRESSO HAS ATTAINED A NET PROFIT €3.7M
NET INDEBTEDNESS HAS FURTHER IMPROVED, FROM €108.1M TO €73.5M, WITH A FINANCIAL SURPLUS AMOUNTING TO €34.6M
Rome, February 26th, 2014 – The Board of Directors of Gruppo Editoriale L’Espresso S.p.A. met today in Rome under the chairmanship of Carlo De Benedetti and approved the consolidated results as of December 31, 2013, presented by the Chief Executive Monica Mondardini.
Market Outlook
The economic recession persisting over year 2013 has severely affected the publishing sector, which has recorded negative performances in both advertising sales and circulation of dailies and magazines.
According to Nielsen Media Research the advertising market has recorded a 12.3% decline over year 2012.
All the traditional media have recorded considerable downturns in advertising sales: the press sector (-21.2%), television (-10.0%) and radio (-9.3%). After years of lively and steady growth, also the Internet advertising sales have suffered a setback (-1.8%, except search engines as they have not been surveyed by Nielsen).
More in particular, regarding advertising investments in the press, remarkable downturns have been recorded by both dailies and magazines (-19.5% and -23.9% respectively), with a 24.5% decline in national advertising vis-à-vis the less severe downturn recorded in local advertising (-14.7%).
In terms of circulation, the downturn trend recorded in the past has become more evident in both dailies and magazines, in a market showing a generalized crisis of consumer spending. According to internal surveys based on ADS (Accertamento Diffusione Stampa) data, the sales of daily newspapers have recorded a 10.1% decline in year 2013.
Performance of Gruppo Espresso results in year 2013
The Group’s consolidated net revenues, amounting to €711.6M, are down 12.4% over year 2012 (€812.7M), due to the crisis affecting the entire sector.
Circulation revenues, amounting to €248.0M, are down 5.8% over the previous year (€263.2M), in a market situation which – as referred to above – is suffering a persistent, considerable, decrease (-10.1%) in the circulation of daily newspapers.
The Group titles’ good performances, as compared to the reference market sectors, are confirmed in year 2013.
According to the most recent Audipress (2013/III Survey) and ADS (December 2013) data, la Repubblica confirms its leadership in the Italian daily newspapers scenario, both in terms of daily average readership (2.8 million) and for copies sold (newsstand sales, subscriptions and other).
Moreover, the good performance of the development of digital products has been confirmed (Repubblica+ and Repubblica Mobile), with over 75,000 active subscribers as of December 2013.
The latest Audipress survey also reports that the Group’s network of local daily newspapers has reached a daily average readership of 3 million and, finally, L’Espresso ranks first among the Italian newsmagazines with 2 million readers. At the end of December the digital products of all the Group’s titles, have recorded altogether more than 96,000 subscriptions.
Advertising revenues, amounting to €403.0M, have suffered a 15.4% downturn vis-à-vis the previous year.
Advertising sales by sector have recorded a 19.5% decline in the press sector, with a less sharp contraction vis-à-vis the market (-21.2%); the marked downturn recorded has been stronger in magazines and less severe in local dailies.
Likewise, the Group’s radio stations have experienced a considerable -9.5% decline, basically in line with the sector as a whole (-9.3%).
Finally, the Internet advertising revenues are basically stable (-0.9%) in a market recording a slight decline (-1.8%). In this respect, it is worth noting the very positive trend of the Group’s websites audience, which has reached an average of 1.8 million daily unique browsers, up 4% vis-à-vis year 2012 (AWDB data, except tablet and smartphone users). In particular, Repubblica.it has recorded 1.4 million average daily unique users, confirming its leadership among the Italian language news websites, and scoring +24% lead over the second-place (AWDB data); likewise, the local daily newspapers websites have attained a considerable performance with a +17% rise in audience.
Other revenues, amounting to €27.0M, have basically maintained the same steady performance vis-à-vis year 2012 (€28.6M).
Total costs show a 9.6% reduction: excluding digital edition and digital terrestrial television – whose costs have increased in order to support their own development – an 11.2% reduction has been recorded, thanks to the additional reorganization measures implemented, in particular in the Group’s industrial and administrative areas.
The consolidated Gross Operating Profit amounts to €63.5M, vis-à-vis €102.4M of year 2012; the Group has recorded reorganization expenses amounting to €16.8M.
The Gross operating profit downturn has concerned in particular the activities more severely exposed to the market outlook of the advertising, radio and national dailies sectors. In contrast, Gross operating profit of local daily newspapers has shown resilience, as the decline in revenues has been totally balanced by cost reduction.
The consolidated operating profit amounts to €31.3M, vis-à-vis €60.4M of the previous year.
The consolidated Net Profit has reached €3.7M, as compared to €21.8M of year 2012.
The consolidated net financial position has further improved from -€108.1M (end of year 2012) to -€73.5M as of December 31, 2013, with a financial surplus of €34.6M.
The Group staff – including term contracts – has decreased to reach 2,425 employees at the end of December, that is -111 people with respect to December 31, 2012. The average staff of the period is 4.7% down vis-à-vis the previous year, having decreased from 2,614 to 2,492 people.
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The Group’s Director of Administration and Accounts, Gabriele Acquistapace, manager in charge of drafting corporate and accounting records, pursuant to subparagraph 2 art. 154bis of “Testo Unico delle Finanze” (Finance Consolidation Act), states that the accounting information included in this press release corresponds to the documents results, the books and the accounting record.
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2013 financial statements of the parent company
The parent Company’s revenues amount to €342.7M (€403.9M in year 2012). The Operating Profit has reached €1.2M (€21.8M in year 2012). Net Profit amounts to €21.5M (€33.9M in year 2012).
Proposed allocation of 2013 net profit
The Board of Directors is going to propose to the Shareholders Meeting called on April 16, 2014, not to distribute any dividend for year 2013 and to allocate the Net Profit to the Retained Earnings Reserve, as the legal reserve has already reached 20% of the share capital.
verification of requisites for independence of the members of the board of directors and board of statutory auditors The Board of Directors has verified members’ requisites for independence and confirmed that the following members are entitled: Agar Brugiavini, Giorgio Di Giorgio, Silvia Merlo, Elisabetta Olivieri, Tiziano Onesti, Luca Paravicini Crespi, and Michael Zaoui. Requisite for independence and honorability were also confirmed for the members of the Board of Statutory Auditors.
Subsequent events and outlook
Over the latest five years the Italian publishing industry has recorded some severe decrease in revenues due in particular to the negative performance of advertising investments: this sector has suffered a first drastic decrease in 2009 and again an equally severe decrease in 2012; both these periods have been characterized by a heavy recession phase in the economic framework.
In order to illustrate the above scenario, one should just consider that, according to Nielsen’s assessments, in year 2013 advertising investments have decreased by 36% in nominal terms with respect to their value in year 2007 and, in the same period, investments in the press sector have recorded a 57.5% decrease.
In addition, the publishing industry has had to face further problems linked to the circulation of daily newspapers and magazines, as this sector has been involved in the more general and diffused consumer spending difficult situation, as well as in the process of digitalization.
Our Group has successfully overcome the economic crisis of year 2009, actually recovering in year 2011 its pre-crisis level of profitability, through the deep restructuring process implemented over the 2009-2010 period, thus achieving a significant debt reduction.
In order to face the second wave of crisis appeared in the last quarter of year 2011 and persisting during the subsequent two years, the Group has put in place plans aimed at accelerating its digital development on the one side, and further cost reduction on the other side.
These actions have enabled mitigating the negative impact of the economic crisis and, in year 2012, recorded positive results in a highly burdensome sector, attaining a slightly positive result also in year 2013.
The Group management is going to maintain its guidelines over year 2014: success attained with traditional products and related cost reduction, digital development and valorization of its television assets.
As regards costs, the Group has undertaken a set of new and sharper cost reduction actions.
As regards the valorization of television assets, it is worth noting that, early in October, the Group has signed an non-binding agreement concerning the possible integration of the network operator activates of its subsidiary Rete A with those of Telecom Italia Media Broadcasting (TIMB), controlled by Telecom Italia Media. This operation, currently under negotiation, which would integrate TIMB and Rete A muxes on a single digital platform, would enable to create Italy’s leading independent network.
In terms of expectations for year 2014, visibility is still limited as the results heavily depend on the performance of the advertising market, which keeps showing uncertain signals: if, on the one side the radio sector seems to be recovering, on the other side the performance of advertising in the press sector is still critical.
