Board of Directors approves results as of June 30 2011
CIR GROUP: REVENUES AT 2.2 BILLION IN THE FIRST HALF (-1.8%), MARGINS HIGHER (EBITDA +16.8%)
Net income at 19.4 million euro. Result of 42.2 million euro in first half 2010 benefited from non-recurring income from Sorgenia.
Earnings of Espresso, Sogefi and KOS are all higher
Contribution of all the main operating companies to group EBITDA is up.
Net financial surplus at holding level at over 100 million euro, consolidated net debt down from end of March
Consolidated results of first half 2011
Revenues: € 2,205.6 million (-1.8% from € 2,246.6 million in 1H 2010)
EBITDA: € 226.3 million (+16.8% from € 193.8 million in 1H 2010)
Net income: € 19.4 million (from € 42.2 million in 1H 2010)
Aggregate net financial surplus: € 104 million (€ 112.6 million at 31/03/2011)
Consolidated net debt: € 2,184.3 million (€ 2,198 million at 31/03/2011)
Milan, July 29 2011 – The Board of Directors of CIR-Compagnie Industriali Riunite SpA, which met today under the chairmanship of Stefano Micossi, examined and approved the Semi-annual Financial Report as of June 30 2011.
The CIR group operates in four main business sectors: energy (Sorgenia), media (Espresso), automotive components (Sogefi), and healthcare (KOS).
Performance of operations
Despite the difficult economic environment in the main markets in which it operates, the CIR group closed the first half of 2011 with higher margins than in the same period of 2010 thanks to the improvement in the profitability of its four main operating subsidiaries – Sorgenia, Espresso, Sogefi and KOS. Revenues recorded a slight decline due to the lower sales of Sorgenia, which were partly offset by the higher sales reported by Espresso, Sogefi and KOS.
The net income of the group in the first half was 19.4 million euro, down from 42.2 million euro in the same period of 2010. The decline was due to the lower result of Sorgenia, which in the first half of 2010 had benefited from a tax credit for investment in new production capacity. The other main operating companies of the group reported a rise in net income.
The consolidated revenues of the CIR group for first half 2011 came in at 2,205.6 million euro, down slightly (-1.8%) from 2,246.6 million euro in the first six months of 2010. The change was due to the reduction in the revenues of Sorgenia, due in particular to lower gas sales, which was partly offset by the rise reported by Espresso, Sogefi and KOS.
The consolidated gross operating margin (EBITDA) was 226.3 million euro (10.3% of revenues), up from 193.8 million euro (8.6% of revenues) in the first half of 2010, posting a rise of 16.8%.
The consolidated operating result (EBIT) was 128.6 million euro, up by 19% from 108.1 million euro in the same period of 2010. The rise in operating results was due to the improvement in the profitability of the four main subsidiaries (Sorgenia, Espresso, Sogefi and KOS).
The net result of financial management for the period was a negative figure of 52.3 million euro (a negative 42.8 million euro in the first half of 2010), and was due to a combination of net financial expense of 62.4 million euro, partly offset by dividends and net gains of 7.7 million euro from trading and valuing securities, and positive adjustments of 2.4 million euro to the value of financial assets.
The consolidated net income of the CIR group for first half 2011 was 19.4 million euro, down from 42.2 million euro in the same period of last year. The decline, despite the rise in the earnings of Espresso, Sogefi and KOS, was linked to the lower net result of Sorgenia, which had in 2010 benefited from a non-recurring item in the form of a tax credit for investments made in new production capacity.
The net debt at June 30 2011 of the CIR group totalled 2,184.3 million euro, down from 2,198 million euro at March 31 2011 (2,166.8 million euro at December 31 2010). The consolidated net debt figure is the result of the following factors:
– An aggregate net financial surplus at holding level of 104 million euro (112.6 million euro at March 31 2011). The reduction compared to the figure of 123.6 million euro at December 31 2010 was due mainly to the investments made in the period and to disbursements in the form of operating costs and financial expense;
– Total net debt in the operating companies of 2,288.3 million euro (2,310.6 million euro at March 31 2011). The decline from 2,290.4 million euro at December 31 2010 was due to the deconsolidation by Sorgenia and KOS of debt relating to assets held for disposal of approximately 121.8 million euro, partly offset by investments in new production capacity and by the rise in the net working capital of Sorgenia, net of the cash flow generated by operations.
The net financial position includes the CIR group’s investments in shares of hedge funds (77.3 million euro at June 30 2011).
Total consolidated equity stood at 2,544.4 million euro at June 30 2011, up from 2,522.9 million euro at December 31 2010.
The equity of the group rose to 1,493.9 million euro from 1,487 million euro at December 31 2010.
At June 30 2011 the CIR group had 13,257 employees (12,910 at December 31 2010).
Result of the parent company
The parent company of the group CIR SpA closed the first half of 2011 with net income of 14.2 million euro, compared to a loss of 3.8 million euro in the same period of 2010, thanks to a higher inflow of dividends from the main operating subsidiaries. Shareholders’ equity stood at 967.3 million euro at June 30 2011 (968.5 million euro at December 31 2010). There were 43,074,000 own shares (equal to 5.43% of capital) held as treasury stock at June 30 2011, unchanged from December 31 2010.
Despite the uncertain economic environment and the difficulties in the market, in the first half of 2011 Sorgenia reported significant growth in its margins compared to the same period of 2010. The start of commercial operations at the Turano-Bertonico Lodigiano power plant (Lodi) made it possible to counter the unfavourable situation in the market, characterized in particular by a reduction in generating margins. The adjusted net result for the first half, a slightly positive figure, was impacted by the higher amortization and financial expense reported in the period under examination due to the near completion of the plan of investment in combined cycle power plants.
At the end of the first half, the company Sorgenia Green was established as the new company of the group wholly devoted to renewable energies. The aim of this was to further strengthen the presence of the Sorgenia group in renewable sources, concentrating all the personnel, plant and development projects in the sector in a single 100% owned company.
The revenues of the Sorgenia group for the first half came in at 1,043.1 million euro and were down by 12% on the figure for the same period of 2010 (1,184.7 million euro). The change was due mainly to a decline in the volumes of natural gas sold – partly because of temporary reductions in availability under existing sourcing contracts – and to a different client mix.
Adjusted EBITDA was 77.7 million euro, up by 30% compared to the figure for the same period of 2010 (59.8 million euro). EBITDA was 76.3 million euro, up by 16.9% from 65.3 million euro in the first six months of 2010. The adjusted net income of the group was 0.5 million euro while the net income of the group came in at 0.3 million euro. The results of the first half of 2010 (52 million euro of adjusted net income and 55.9 million of net income) were mainly determined by an item of extraordinary income in the form of a tax credit for investments made in new production capacity by the company.
The net debt at June 30 2011 came to 1,767.5 million euro, down from 1,791.5 million at March 31 2011.
The situation of weak growth in the economy and uncertain prospects was reflected in the performance of advertising investments, which in the first five months of 2011 declined by 2.8% compared to the same period of 2010 (Nielsen Media Research figures). This negative trend affected all the traditional media from television (-2.3%) to radio (-8.4%) and the press (-5%). Paid-for daily newspapers reported a decline of 4%, while periodicals held up better (-1.4%). Only the internet bucked the trend, reporting yet again a very significant rise (+15.6%). As for circulation, ADS figures (moving average of the last 12 months as of March 2011, on the same consolidation) show a decline in sales on the news-stands of 5.3% for daily newspapers, 1.5% for weeklies and 7.2% for monthlies. Despite this environment, the performance of the Espresso group in the first half of 2011 was positive with a rise in both sales and earnings.
Revenues came in at 457.4 million euro, up by 2.8% on the figure for the same period of last year (445.1 million euro). Circulation revenues were 170 million euro, substantially in line with the figure of 171.2 million euro in the first half of 2010. The performance of circulation revenues shows that the sales of la Repubblica, the periodicals and add-on products held up well. The circulation figures for local newspapers were weaker, but revenues benefited from the rise in price at the beginning of the year of 7 out of the 18 local titles of the group. Advertising revenues totalled 274.4 million euro, posting a rise of 3.6% on the first half of 2010, thanks to the development of the business of renting out digital terrestrial television bandwidth to third-party operators. EBITDA was 81.5 million euro, up by 9% compared to 74.7 million euro in the first half of 2010. Net income came in at 31.5 million euro versus 28.6 million euro in the first half of 2010 (+10.1%). The net debt figure stood at 150.7 million euro at June 30 2011 (108.4 million euro at March 31 2011).
Automotive components: Sogefi
In the first half of the year the Sogefi group continued the trend of significant growth in its economic indicators thanks to the improvement of production levels in all of its most important markets and for all kinds of vehicles. The rise in selling prices and the control of the dynamics of structure costs made it possible to contain the effect of the increase in the cost of commodities in the market. Furthermore, in the period Sogefi signed an agreement to acquire the car components group Mark IV Systèmes Moteurs, one of the main world producers of air intake and engine cooling systems, seizing an important opportunity for international development and technological integration.
Revenues for the first half came in at 526.6 million euro, posting a rise of 15.1% on the figure of 457.6 million for the same period of 2010. The greatest increase was reported in the United States (+72.8%), thanks to the fact that the production plants launched in 2010 are now fully up and running. Revenues also posted double-digit growth in Brazil (+13.9%), China (+18.4%), Europe (+13.2%) and India (+29.9%).
EBITDA was 52.8 million euro, up by 16.6% from 45.3 million in the first half of 2010.
Net income was 15.3 million euro and was up by 54.6% from 9.9 million euro in the same period of 2010. Consolidated net debt at June 30 2011 totalled 167.6 million euro (166.6 million euro at March 31 2011).
In the first six months of 2011 KOS reported an improvement of all its main economic indicators compared to the same period of 2010 thanks to the development of all the companies of the group and to the extension of the consolidation area.
The KOS group today manages around 60 facilities, mainly in the centre and north of Italy, for a total of over 5,600 beds in operation, plus more than 900 under construction.
Revenues came in at 176.9 million euro and were up by 11.2% on the same period of 2010 (159 million euro). EBITDA was 27.5 million euro, up by 22.8% on the figure for the first half of 2010 (22.4 million euro) before non-recurring costs. Last year the company incurred extraordinary costs of around 2.2 million euro for the IPO process and the acquisitions made. Including these costs, EBITDA for first half 2010 was 20.2 million euro. The net income of the group was 6.2 million in the first six months, up from a result of 2 million euro in the same period of 2010 (3.8 million euro before non-recurring costs).
The consolidated net debt of the KOS group at June 30 2011 stood at 159.8 million euro (199.3 million at March 31 2011). The improvement was due to the deconsolidation of properties held for disposal and to the subscription of a capital increase of 20 million euro made in June by the shareholder AXA Private Equity, in line with the terms of the agreement between the shareholders of the company finalized in December 2010. Following this capital injection, the shareholding structure of KOS is as follows: CIR holds 53.6%, AXA Private Equity 44.2%, management and other shareholders the remaining 2.2%.
Financial investments and other activities
Regarding the financial investments of the group, CIR has a diversified portfolio of funds and minority shareholdings in the private equity sector (with a fair value at June 30 2011 of 76.5 million euro) and the venture capital fund CIR Ventures (with a fair value at June 30 2011 of 15 million dollars). Among its other investments, Jupiter Finance operates in the segment of non-performing loans. At June 30 2011 the nominal value of the loans under management amounted to approximately 2.3 billion euro. The value of CIR’s investment in these activities totalled 65 million euro at June 30 2011.
Outlook for the year
In the second part of the year the CIR group will continue to focus on the development and efficiency of its main businesses, while continuing to implement the successful action taken over the last two years.
Events subsequent to the close of the first half: Lodo Mondadori
On July 9 2011 the ruling of the Milan Court of Appeal was filed in the civil proceedings brought by CIR, assisted by legal counsel Vincenzo Roppo and Elisabetta Rubini, against Fininvest for damages caused by the corruption of a judge in the Lodo Mondadori case. The ruling sentences Fininvest to pay CIR approximately 540.1 million euro, plus interest at the legal rate since October 3 2009 and costs, as compensation for the immediate and direct damage suffered by the latter. As an effect of this ruling, on July 26 2011 CIR received from Fininvest a total of approximately 564.2 million euro, inclusive of legal costs and interest. Since the dispute is not yet concluded as the other party has announced its intention to file an appeal to the Court of Cassation (Supreme Court), the amount, in accordance with international accounting standards (IAS 37), will have no impact on the income statement of the group until the final level of judicial action has terminated.
Bonds maturing in the 24 months following June 30 2011
The company, which has a BB rating with a negative outlook issued by Standard&Poor’s, has no bonds maturing in the 24 months following June 30 2011.
The operating results for the first half of 2011 will be illustrated at 14.00 hours CEST by the Chief Executive of CIR, Rodolfo De Benedetti, during a conference call. Journalists may follow the presentation on the phone, in listen-only mode, by calling the number +39 028058827, or in a webcast on the website www.cirgroup.com.
The executive responsible for the preparation of the company’s financial statements, Alberto Piaser, hereby declares, in compliance with the terms of paragraph 2 Article 154-bis of the Finance Consolidation Act (TUF), that the accounting figures contained in this press release correspond to the results documented in the company’s accounts and general ledger.
CIR group: 1H 2011 results
Board of Directors approves results as of June 30 2011