Milan, July 31 2009 – 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 of the group as of June 30 2009.
Performance of operations
In the first half of 2009 CIR reported a positive consolidated net result of 120.8 million euro, despite the repercussions of the deep economic recession on the business sectors of the group, especially automotive components and media.
The decline in the result compared to the first half of 2008 (-16.3%) was solely due to lower non-recurring gains from the capital increases which affected both years. In the first half of 2009 these gains amounted
to 76.7 million euro and were the result of the subscription by Verbund of a 150 million capital increase in Sorgenia. In the same period of 2008, the group had benefited from a higher amount of non-recurring gains (117.8 million euro) due to the subscription of capital increases in HSS and Sorgenia by minority shareholders. The value generated for the company and its shareholders by these deals confirms the validity of the industrial and investment strategy pursued by CIR in recent years.
“In the first six months of 2009 – commented Rodolfo De Benedetti, chief executive of the CIR group – we have worked alongside the management of our subsidiaries to tackle rapidly and decisively the new scenarios brought about by the current deep economic recession. More specifically, in the media and automotive components businesses, the hardest hit by the crisis, we have continued and consolidated the action taken to improve efficiency that was started in the second half of 2008. In both sectors structural cost cutting plans have been put in place, but without sacrificing investment in new initiatives. Maximum attention to costs and to the sustainability of investments has been applied even in the energy and
healthcare sectors which succeeded in improving their results significantly in the first half, despite the crisis. At the same time, at group level, we have been focusing on strengthening our financial structure. Our objective is to preserve and in the future to increase the competitive positioning of all our businesses in order to foster their development in the longer term”.
Consolidated results
The consolidated revenues of the CIR group in the first half of the year amounted to 2,202.8 million euro, down from 2,358.7 million euro in the first six months of 2008 (-6.6%). The decline, despite the growth of
Sorgenia and HSS, was due to the fall in sales of Sogefi and Espresso.
The consolidated gross operating margin (EBITDA) was 148.2 million euro (6.7% of revenues), compared to 249.5 million euro in the first half of 2008 (-40.6%). The consolidated operating income figure (EBIT)came in at 81.4 million euro, down from 183.4 million euro in 2008. The contraction in operating income, which did however show significant growth in the second quarter of 2009 compared with the first quarter,
was due essentially to the decline in the profitability of Sogefi and Espresso, which was in part offset by the rise in the margins of Sorgenia and HSS.
The consolidated net income of the CIR group in the first half of 2009 was 120.8 million euro, down from 144.3 million in the same period of the previous year (-16.3%). The decline was due solely to lower nonrecurring
gains from capital increases, which were present in both years (76.7 million euro in the first half of 2009, 117.8 million euro in the same period of 2008). The net result of the first half of 2009 also benefited from the earnings of Sorgenia and from the higher contribution of the financial companies, achieved particularly thanks to the capital gains on further disinvestment made by Medinvest and to the rise in the value of securities in the portfolio valued at fair value.
Consolidated net invested capital stood at 3,943.3 million euro at June 30 2009, up from 3,764.3 million at the end of 2008, with a rise of 179 million euro due mainly to investment in production capacity made by Sorgenia.
The net debt of the CIR group at June 30 amounted to 1,678.1 million euro, down from 1,837 million euro at March 31 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 93.8 million euro (72.1 million euro at March 31 2009). The change from the figure of 44.2 million euro at December 31 2008 was due mainly to tax credits from previous periods repaid by the Inland Revenue, to the receipt of dividends of 9.3 million euro and to the positive fair value adjustment of bonds in the portfolio for 21.5 million euro;
– Total net debt of the operating companies of 1,771.9 million euro (1,909.1 million euro at March 31 2009). The rise from 1,729.6 million euro at December 31 2008 was mainly the result of the investment made by Sorgenia in new production capacity partly offset in the second quarter by the effect of the capital increase subscribed by Verbund in Sorgenia and by the reduction of Sogefi’s debt.
The net financial position includes the pertinent part of CIR’s investment in Medinvest, which amounted to 116.8 million euro at June 30 2009. In the first half the partial disinvestment by Medinvest led to realized net gains of 36.3 million euro. This disinvestment strategy has the aim of rebalancing the portfolio with a view to optimizing the financial structure of the group. The performance of Medinvest since its inception (April 1994) until December 31 2008 gave a weighted annual return on the portfolio of 7.7%. In the first six months of 2009 performance was positive (+5.5%).
Total consolidated equity at June 30 2009 stood at 2,265.2 million euro, up from 2,078.9 million euro at December 31 2008. The group’s equity amounted to 1,355.7 million euro, up from 1,264.9 million euro at December 31 2008.
At June 30 2009 the CIR group had 12,936 employees (12,969 at December 31 2008).
The parent company of the group CIR SpA closed the first half of 2009 with net income of 2.9 million euro (126.4 million in the first half of 2008, including the extraordinary dividend paid out by the subsidiary Sogefi).
Industrial businesses
Energy: Sorgenia
The Sorgenia group closed the first half of 2009 with higher revenues and net income compared with the same period of 2008, despite the repercussions that the current economic recession has had on the energy sector.
In the first six months of the year the domestic market was characterized by lower demand for gas (-12.6% on first half 2008) and electricity (-8.2%), especially for thermoelectric generating (-20.1%), and by a sharp
fall in electricity prices on the exchange. In this environment the results of Sorgenia were mainly due to the fact that electricity sales volumes held up (4.8 Twh in the half) and to the company’s limited exposure to
the price fluctuations on the exchange.
Regarding its business plan, during the first half of the year work was completed on the combined cycle power plant (CCGT) at Modugno (BA), which will start commercial operations by the end of the year. The
construction process is also proceeding on the other two CCGTs included in the plan: work on the Bertonico-Turano Lodigiano plant (LO) is almost at the half-way point, while after the close of the first half the go-ahead was obtained for construction of the Aprilia plant (LT). In the sphere of renewable sources, construction was completed of the wind park at San Gregorio Magno (SA), Sorgenia’s largest in Italy in terms of output (39 MW).
In the first half of 2009, the Sorgenia group reported revenues of 1,244.2 million euro, up by 9.1% from 1,140.5 million euro in the same period of 2008. EBITDA came in at 82.5 million euro, compared to 82 million euro in first half 2008 (+0.6%). The slight increase was due mainly to three factors: the good performance of sales in the electricity sector in a particularly difficult market, the contribution of the investee Tirreno Power and the lower exposure of Sorgenia to fluctuations in electricity prices on the exchange because the company’s production was used entirely for sale to end-user clients. Net income came in at 26.5 million euro, up 4.3% from 25.4 million in the same period of 2008. The rise in earnings, net of the rise in the Robin Hood Tax compared to first half 2008, would have been 8.6%.
Media: Espresso
The results of the Espresso group in the first six months of 2009 should be seen in the light of the context of profound crisis affecting the economy and the media sector in particular. From autumn 2008 onwards the deeply recessive evolution of the economy caused the advertising market to contract significantly. After January 2009 the contraction became considerably worse: according to Nielsen Media Research figures, in the first five months of the year advertising investment declined overall by 17.5% and by 25.1% in the press segment. This contraction even affected radio (-18.6% for advertising revenues). Only internet advertising bucked the trend, with a rise (+7.8%) which did however slow somewhat. At the same time, in a context of declining consumption, there was also a slowdown in the circulation of daily newspapers and periodicals.
The revenues of the group in first half 2009 amounted to 449.3 million euro, down by 17.3% on the same period of the previous year (543.2 million euro). Advertising revenues, totalling 246.2 million euro, posted an overall decline of 23.8%. Circulation revenues, excluding optional products, came to 132.7 million euro, holding up well compared to the previous year (-1.9%). Specifically, revenues of the daily newspapers were
in line with the figures for 2008 thanks to the stability of sales of local papers and to the rise in sales of Repubblica on the news-stands in the last few months of the first half. By contrast, the periodicals showed
a decline in line with market trends. EBITDA came in at 40.6 million euro, down by 58.1% on the first half of 2008 (96.7 million euro). The impact on profit margins of the drastic reduction in advertising collected
has already been partly offset by the significant structural reduction in operating costs (-12.1%), made possible by the reorganizational program in progress which, when fully implemented, will give a cost reduction of 17% (140 million euro) compared to 2008. This program involves extraordinary expense which already affected the income statement in the first half of the year. The consolidated net result was a positive 0.1 million euro (36.4 million euro in first half 2008).
Automotive components: Sogefi
In the first half of 2009 the results of the Sogefi group were affected by the sharp contraction in car production worldwide which started in the last quarter of 2008. Despite a recovery in demand by end users especially in the second quarter as a result of the incentive packages being offered, production levels are still lower than those of 2008 partly because manufacturers have been running down their huge stocks of unsold vehicles. However, thanks to efficiency measures put in place at the first sign of crisis in the sector, the results obtained by the Sogefi group in the second quarter, although lower than in the same period of 2008, were significantly better than in the period January-March 2009.
During the first half the Sogefi group reported revenues of 374.5 million euro (199.6 million euro in the second quarter), down by 32.7% from 556.3 million in the same period of 2008. Non-recurring restructuring costs in the first half came to 9.9 million euro (6.9 million euro in the first half of 2008). Consolidated EBITDA was a positive 14.2 million euro, with 11.9 million euro of this figure recorded in the second quarter (EBITDA in first half 2008 was 61 million euro). The consolidated net result was a negative 10.6 million euro, of which 1.8 million reported in the second quarter (earnings of 20.2 million euro in the first six months of the previous year).
Healthcare: HSS – Holding Sanità e Servizi
The HSS group closed the first half of 2009 with double-digit growth of its main economic indicators (revenues, EBITDA and net income) compared to the same period of 2008, despite the difficult general economic environment. During the half, the group continued in its strategy aimed at strengthening its operating subsidiaries and seeking new development opportunities to consolidate its presence in the Italian private healthcare sector. During the first half of the year the management business of two residences for the elderly was acquired, in Ancona and in the Cuneo area. With these deals, HSS now has more than 5,000 beds in operation and has further strengthened its position in the business of managing residences for the elderly.
In the first half-year the HSS group reported consolidated revenues of 134.9 million euro, up by 13.8% on the first six months of 2008 (118.5 million), thanks to the development of all areas of the business. EBITDA came in at 16.6 million euro, with a rise of 17.3% on the first half of 2008 (14.1 million). The consolidated net result was a positive 1 million euro, up from 0.7 million euro in the same period of 2008.
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 segment of non-performing loans. Collections obtained since 2005, the year in which the company was founded, up to and including June 30 2009, amounted to 76.7 million euro and are above the targets envisaged when the portfolios were acquired. CIR is also a shareholder of Ktesios and Pepper, companies of the KTP Finance group (formerly Oakwood), the former of which is active in the sector of loans secured on one fifth of borrowers’ salaries while the latter is engaged in servicing on behalf of mortgage originators. In the first half of 2009 Ktesios made loans of approximately 370 million euro (315 million euro in the first half of 2008). CIR’s remaining investment in the KTP group stood at 20 million euro at June 30 2009.
Outlook for the year
In 2009 the current period of deep recession will affect the results of the different business sectors in which CIR operates with varying intensity, particularly the automotive components and media businesses. To counter the difficult international economic scenario, the group has already in the last few quarters put in place a rigorous financial strategy as well as cost cutting measures and has been repositioning the subsidiaries most hit by the crisis, without however sacrificing new investment for the development of all businesses, especially those with higher growth potential. The action taken should produce further effects
in the second half of the year.
Bonds maturing in the 24 months following June 30 2009
2The company, which has a BB rating with a stable outlook issued by Standard&Poor’s, has the following bond, issued by the subsidiary CIR International SA and guaranteed by CIR SpA, maturing in the 24 months following June 30 2009:
– January 10 2011, maturity of the bond with a residual principal of 148 million euro (originally 300 million euro). The bond (ISIN code XS0169896817), listed on the Luxembourg stock exchange, pays an annual coupon of 6.375%.
Conference call
The results of operations in the first half of 2009 will be illustrated today at 4.30 CEST by the Chief Executive Officer of CIR SpA, Rodolfo De Benedetti, in a conference call. Journalists can follow the presentation on the phone, in listen-only mode, by dialling +39 0683360400, or as 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 figures contained in this press release correspond to the results documented in the company’s accounts and general ledger.
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