The increase compared to 2008 was due mainly to the recovery of the financial markets. Financial structure strengthened at holding level: aggregate net financial surplus at 121.6 million euro (44.2 million at the end of 2008)
Revenues and margins lower due to the impact of the recession on the main subsidiaries of the group, but KOS (healthcare) showed growth. Thanks to the management action taken, the group recouped profitability during the year
In view of the uncertain macroeconomic scenario, the Board will propose to the Shareholders that no dividend be distributed, with the aim of further strengthening the equity structure of the company
Consolidated Results of financial year 2009
· Revenues: € 4,266.8 million (-9.7% from € 4,727 million in 2008
· EBITDA: € 294.6 million (-36.2% from € 461.5 million in 2008)
· Net income: € 143.4 million (+50.2% from € 95.5 million in 2008
· Aggregate net financial surplus: € 121.6 million (€ 44.2 million at 31/12/2008)
· Net financial debt: € 1,801.1 million (1,685.4 million at 31/12/2008)
Milan, March 11 2010 – The Board of Directors of CIR-Compagnie Industriali Riunite SpA, which met today under the chairmanship of Stefano Micossi, approved the proposed statutory financial statements and the consolidated financial statements of the group for financial year 2009. Performance of operations
The CIR group closed 2009 with consolidated net income of 143.4 million euro, up by over 50% compared to 2008. The rise was due especially to the significant improvement in the result of the financial activities of the group (a gain of 47.3 million euro compared to a loss of 32.3 million euro in 2008), which benefited from the recovery of the markets.
The net result was also determined by the positive contribution of the operating companies, amounting to 32.7 million euro, and by realized non-recurring gains of 63.4 million euro (64.2 million euro in 2008). However the performance of revenues and the gross operating margin reflect the repercussions of the deep economic recession on the main operating subsidiaries, despite the growth reported by activities in the healthcare sector (KOS, the new name of the former Holding Sanità e Servizi).
“The rise in net earnings obtained by the CIR group in such an extraordinarily difficult year as 2009 – commented Rodolfo De Benedetti, Chief Executive Officer of CIR – confirms the validity of our strategy of investing in a balanced portfolio of businesses over the long term. During the year we pursued and intensified the action started in the second half of 2008 to counter the effects of the economic downturn rapidly. In particular, we cut costs to adjust them to the new levels of business and we put in place new business development initiatives. The management of the subsidiaries showed great competence in dealing with complex situations. The road we have been following in these last 18 months is enabling all the companies of our group to face up to the currently uncertain economic climate in conditions of solidity and with a better competitive positioning.”
Consolidated results
The CIR group is active in five business sectors: energy (Sorgenia), media (Espresso), automotive components (Sogefi), healthcare (KOS), and financial services (Jupiter Finance).
Consolidated revenues of the CIR group in 2009 amounted to 4,266.8 million euro, down from 4,727 million euro in 2008 (-9.7%).
The consolidated gross operating margin (EBITDA) was 294.6 million euro (6.9% of revenues), down from 461.5 million euro in 2008 (-36.2%). The consolidated operating result (EBIT) came in at 148 million euro (3.5% of revenues), down from 320.1 million euro in 2008. The decline in the consolidated operating results was due essentially to lower revenues, to the restructuring costs incurred by Espresso and Sogefi and to the lower margins of Sorgenia.
The financial management result was a positive 37.1 million euro (negative for 44.2 million euro in 2008). The improvement compared to 2008 was due essentially to lower net financial expense (104.1 million euro versus 129.7 million) and to positive adjustments to the value of financial assets (12.2 million euro compared with a negative figure of 58 million euro in the previous period).
The consolidated net income of the CIR group in 2009 came in at 143.4 million euro, up from 95.5 million in 2008 (+50.2%). The growth in earnings was due to the significant improvement in the result of financial activities, a positive 47.3 million euro compared to a negative figure of 32.3 million euro in 2008. The contribution of financial activities benefited from the recovery of the markets, which determined a rise of approximately 42 million euro in the value of the securities in the portfolio. Another benefit came from the further disinvestment from Medinvest, which led to the realization of capital gains of approximately 44 million euro.
The net result of the group also contained the contribution of the operating companies (32.7 million euro, down from 63.6 million euro in 2008) and net non-recurring gains of 63.4 million euro (64.2 million euro in 2008), resulting mainly from the subscription by the shareholder Verbund of a capital increase in Sorgenia.
The net financial debt of the CIR group stood at 1,801.1 million euro at December 31 2009, compared to 1,728.1 million euro at September 30 2009 and 1,685.4 million euro at December 31 2008.
The consolidated net debt figure was the result of the following:
– An aggregate net financial surplus at holding level of 121.6 million euro. The rise from 44.2 million euro at December 31 2008 was due mainly to tax credits from prior periods paid out by the Inland Revenue Office (29.9 million euro), to the receipt of dividends (9.3 million euro) and to the positive fair value adjustment of securities in the portfolio (44 million euro);
– Total net debt of the operating companies totalling 1,922.7 million euro, up from 1,729.6 million euro at December 31 2008. The rise, which was caused essentially by Sorgenia’s investments in new production capacity, was partly offset by the reduction in the debt of Sogefi (87 million euro) and Espresso (70.7 million euro).
The net financial position includes CIR’s investment in the shares of hedge funds held by Medinvest (79.8 million euro). In 2009 the performance of this investment was positive (+9.8%). In November 2009, the shares of hedge funds held by Medinvest were concentrated in the company CIR International, as part of a process of simplifying international assets at holding level.
Total consolidated equity at December 31 2009 stood at 2,332.3 million euro, up from 2,078.9 million euro at December 31 2008. The group’s equity amounted to 1.396,7 million euro, up from 1,264.9 million euro at December 31 2008.
At December 31 2009 the CIR group had 12,746 employees (12,969 at December 31 2008).
Industrial businesses
Energy: Sorgenia
In an extremely difficult market environment due to the economic recession and the resulting sharp fall both in demand for energy and in prices in the sector, Sorgenia’s revenues and margins in the electricity business substantially held up in 2009, thanks to a rise in electricity sales volumes (approximately 10.2 TWh) and to the integration of generation and sales, which enabled the company to limit its exposure to price fluctuations on the Electricity Exchange. Sales volumes and margins of the gas business, however, were lower, albeit less than the market. The repercussions of the negative trend of the economy also led to greater provisions being set aside on client receivables. As far as the business plan is concerned, between the end of 2009 and the beginning of 2010 the Modugno combined cycle CCGT plant, with an output of approximately 800 MW, started operating. And in wind generating, during 2009 the 39 MW wind park at San Gregorio Magno (SA) and the 12 MW park at Plainchamp (France) also started operating.
In 2009, Sorgenia reported revenues of 2,325.8 million euro, which were down by 4.4% from 2,432 million euro in 2008. EBITDA came in at 117.8 million euro, substantially holding up from the previous year net of non-recurring items. The decline from 189.6 million euro in 2008 was in fact due mainly to the following extraordinary items which had been present the previous year: the receipt of penalties for the late delivery of the Modugno power plant (27 million euro) and contingent gains relating to prior periods (15 million euro). Compared to the previous year, 2009 was also affected by a negative differential of approximately 21 million euro on the fair value adjustment of “differential contracts” with the Sole Purchaser (Acquirente unico). Consolidated net income came in at 66.9 million euro, compared to 66.7 million in 2008 (+0.3%), partly thanks to a tax benefit relating to investments in new production capacity.
Media: Espresso Group
The results of the Espresso group in 2009 were impacted by the deep crisis that affected the economy and the market in which the group operates. The economic recession caused a significant contraction in the amount of advertising collected: according to a Nielsen Media Research survey, advertising investment fell by 13.4% and the decline affected practically all media, albeit with a varying intensity.
The revenues of the group at December 31 2009 came in at 886.6 million euro, posting a decline of 13.5% compared to the previous year (1,025.5 million euro). Circulation revenues, excluding optional products, came to 274.2 million euro, holding up well (-0.8% on 2008). The circulation revenues of la Repubblica in particular actually showed a positive trend (+1.4%). Advertising revenues, at 496.9 million euro, posted a decline of 18.3%, while the revenues from optional products went down by 12.4% to 100.6 million euro. Operating costs were reduced by 11.9%, with savings of 97.6 million di euro resulting from the company reorganization plan which, when fully up and running, should give a reduction of 140 million euro. EBITDA came in at 106.7 million euro and was down by 25.2% on 2008 (142.5 million euro). Net income was 5.8 million euro (20.6 million euro in 2008).
Automotive components: Sogefi
In 2009 Sogefi, European leader in the production of filters and suspension components, suffered the effects of an unprecedented contraction in the vehicle production of mature markets. The crisis in the financial markets and the resulting slowdown of the world economy particularly dampened demand for new vehicles. In Europe, the main market of the Sogefi group, the decline in production was 18% for cars and over 60% for industrial vehicles. From the beginning of the crisis in the sector, Sogefi has acted rapidly and effectively to limit this impact. The actions undertaken were the following: a structural reduction of cost factors, the reorganization of production facilities, the enhancement of centres of competence and service (research, development and purchasing), product and process innovation, and cash flow generation by managing working capital and focusing investments.
Revenues came in at 781 million euro and were down by 23.2% from 1,017.5 million euro in 2008. EBITDA, after restructuring costs of 17.2 million euro, came to 47.2 million euro, down from 104.9 million in 2008 (-55%). The net result was a negative 7.6 million euro, compared to earnings of 28.5 million euro in the previous year. Thanks to the action undertaken, the company has recouped profitability and returned to profit already in the third quarter.
Healthcare: KOS
In 2009 KOS consolidated its position in the Italian market, especially in the care-home sector (managing nursing homes for the non self-sufficient elderly) and in the healthcare sector (managing hospitals and rehabilitation centres). During the year KOS continued in its growth strategy with the acquisition of two nursing homes in the Marche and in Piedmont. At the beginning of 2010 the company further strengthened its position in nursing homes and rehabilitation with two acquisitions in Lombardy and the Marche respectively, after which it has now reached 5,555 beds in operation. To these should be added a further 388 under construction.
In 2009, the KOS group reported revenues of 273.4 million euro, up by 11% on 2008 (246.3 million), thanks to the development of all area of the business and to the new acquisitions made during the year. EBITDA came in at 33 million euro, up by 14.9% compared to 2008 (28.7 million euro). The company closed 2009 with a consolidated net result of break-even (-0.4 million euro excluding minority interests), compared to a loss of 1.2 million euro in 2008 (-1.5 million euro excluding minority interests). The net result was affected by non-recurring costs of 3.3 million euro due, apart from provisions and write-downs, to a corporate reorganization that in the future will make it possible to further improve the efficiency of the company.
Financial services: Jupiter and other businesses
In the financial services sector, the CIR group is present with the company Jupiter Finance and other minor businesses. Jupiter Finance operates in the sector of non-performing loans. At December 31 2009 the gross book value of the loans under management amounted to approximately 2.2 billion euro. Approximately 60% of the portfolio was acquired through securitization vehicles, while the remaining 40% is managed on behalf of other investors. CIR is also a shareholder of Ktesios and Pepper, companies of the KTP Finance group active in the sector of loans secured on one fifth of borrowers’ salaries and in servicing on behalf of mortgage originators respectively. CIR’s remaining investment in the KTP group, following a value adjustment of 16 million euro made during the year, amounted to 4 million euro.
Performance of the parent company of the group
The parent company CIR SpA closed financial year 2009 with a net loss of 2 million euro (net income of 33.3 million euro in 2008), caused by the reduction of the dividend flow from the subsidiaries. Shareholders’ equity stood at 979.7 million euro at December 31 2009, up from 974.5 million euro at December 31 2008.
Outlook for the year 2010
The performance of operations of the CIR group in 2010 will be affected by the evolution of the economic scenario during the year. Despite expectations of a weak recovery in Europe, the macroeconomic scenario is still somewhat uncertain. The automotive components sector and healthcare should see an improvement on 2009 whereas the performance of the energy and media sectors will depend on variables that cannot easily be forecast yet – energy consumption and the advertising market. Moreover, for 2010 at present no non-recurring income like that of the previous two years can be predicted.
Shareholders’ Meeting
In view of the current situation of uncertainty in the economy and the financial markets, the Board of Directors will put forward the proposal to the Shareholders’ Meeting that no dividend be distributed for the year 2009, in order to strengthen further the capital structure of the company and give it greater resources to support its business development. The Shareholders’ Meeting (AGM) has been convened for April 29 at the first call and for April 30 if a second call is necessary.
Proposal to cancel and assign new powers to buy back own shares
The Board of Directors voted to put before the Shareholders’ Meeting a motion to cancel and renew the Board’s authorization for a period of 18 months to buy back a maximum of 30 million own shares, with a maximum disbursement limit of 50 million euro, at a price that cannot be more than 10% higher or lower than the benchmark price recorded by the shares on regulated markets on the trading day preceding each single buyback transaction.
The main reasons why this authorization is being renewed are, on the one hand, the possibility of investing in shares of the company at prices below their actual value based on the real economic value of its equity and its income generating prospects, and on the other hand, the possibility of reducing the company’s average cost of capital.
As of today CIR is holding 43,074,000 ordinary shares, corresponding to 5.44% of share capital.
Stock option plans and powers to the Board of Directors
The Board of Directors voted to put before the Shareholders’ Meeting a stock option plan for 2010 aimed at executives of the company, its subsidiaries and its parent company for a maximum of 8,300,000 options.
The Board will also put before the Shareholders, at an extraordinary meeting of the same, the proposal that an addition be made to the Board’s authorization to issue convertible bonds or bonds with warrants attached within the limits of the law, even with the exclusion of the option right.
Significant events which have taken place since December 31 2009
On February 23 2010 the first hearing was held in Milan of the civil appeal proceedings of the “Lodo Mondadori” case. On October 3 2009 the Court of Milan in its first degree hearing upheld the right of CIR to compensation from Fininvest, for patrimonial damages, for the sum of approximately 750 million euro. Following this ruling, Fininvest delivered to CIR a guarantee at the first request for an amount of 806 million euro of the payment should the ruling of the Court of Appeal confirm this payment as being due to CIR.
Bonds maturing in the 24 months following December 31 2009
The company, which has a BB rating with a stable outlook issued by Standard&Poor’s, has the following bond maturity in the 24 months following December 31 2009. The bond was issued by the subsidiary CIR International SA with the guarantee of CIR SpA:
– January 10 2011, maturity of the bond with a residual principal of 148 million euro (originally 300 million euro). The bond (code ISIN XS0169896817), listed on the Luxembourg stock exchange, pays an annual coupon of 6.375%
Conference call
The results of financial year 2009 will be illustrated today at 4.30 pm CET by the Chief Executive Officer of CIR, Rodolfo De Benedetti, in a conference call. Journalists can follow the presentation on the phone, in listen-only mode by dialling +39 0683360400, or in a webcast on the website www.cirgroup.com.
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