Board of Directors approves results for financial year 2010
CIR GROUP: REVENUES AT 4.8 BILLION (+12.6%), MARGINS UP,
NET INCOME OF 56.9 MILLION AND RETURN TO DIVIDENDS
Net income of 2009 (143.4 million) included non-recurring gain of 106.7 million.
Net of this, the result for 2010 is up due to the higher contribution of the operating companies
Sharp rise in revenues and margins thanks to the growth of all the main subsidiaries
Financial surplus at holding level of over 120 million euro
The Board of Directors will propose that the Shareholders’ Meeting distribute a dividend of 0.025 euro per share even in consideration of the better result of the operating companies
Consolidated results for financial year 2010
Revenues: € 4,805.5 million (+12.6% from € 4,266.8 million in 2009)
EBITDA: € 400.1 million (+35.8% from € 294.6 million in 2009)
Net income: € 56.9 million (€ 143.4 million, of which 106.7 million of non-recurring gains, in 2009)
Aggregate net financial surplus: € 123.6 million (€ 111.7 million at 30/09/2010)
Consolidated net debt: € 2,166.8 million (€ 2,222.7 million at 30/09/2010)
Milan, March 10 2011 – 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 2010.
The CIR group operates in five business sectors: energy (Sorgenia), media (Espresso), automotive components (Sogefi), healthcare (KOS) and financial investments.
Performance of operations
The group closed 2010 with revenues and gross operating margin (EBITDA) sharply higher than in 2009 thanks to the improvement in the operating results of all the main operating subsidiaries. The net income of the group came in at 56.9 million euro. Last year’s result, a positive 143.4 million euro, included non-recurring gains of 106.7 million euro. Net of these, therefore, the net income of the group in 2010 was higher than that of 2009, benefiting from the fact that the contribution of the operating companies substantially doubled (64.9 million euro versus 32.7 million euro in 2009).
"2010 – commented Rodolfo De Benedetti, Chief Executive of the CIR group – was a positive year overall for the group despite the difficult economic environment. Our main subsidiaries reaped the benefits of the cost cutting and business development action taken over the last two years, increasing their contribution to the results of the group. At the same time, at holding level, we have worked hard to strengthen our financial solidity even further. Having reached these objectives means we can today propose to the AGM a return to distributing a dividend to our Shareholders. In 2011 in an economic situation that is still uncertain, we will keep our focus on the main activities of the group seeking the maximum efficiency while continuing to invest and improve the growth potential of our businesses".
Consolidated results
The consolidated revenues of the CIR group in 2010 amounted to 4,805.5 million euro, posting a rise of 12.6% on the figure of 4,266.8 million euro for 2009. The change was due to the higher sales reported by Sorgenia, Sogefi and KOS, with those of Espresso holding up on last year.
The consolidated gross operating margin came in at 400.1 million euro (8.3% of revenues), up from 294.6 million euro (6.9% of revenues) in 2009, with a rise of 35.8%. This change was determined by the growth in the EBITDA of all the main operating subsidiaries. The consolidated operating result (EBIT) came to 215.8 million euro and was up by 45.8% from 148 million euro in 2009.
The financial management result, a negative 79.8 million euro, was due to net financial expense of 110.9 million euro, dividends and net gains from trading and valuing securities of 37 million euro and negative adjustments to the value of financial assets of 5.9 million euro. The change from the positive result of 37.1 million euro in 2009 was mainly due to the non-recurring gains present last year.
The consolidated net income of the CIR group in 2010 was 56.9 million euro. The net result for 2009, a positive figure of 143.4 million euro, included non–recurring and capital gains of approximately 106.7 million euro. Net of these, the net income of the group is higher than in 2009.
The net financial debt of the CIR group stood at 2,166.8 million euro at December 31 2010, versus 2,222.7 million euro at September 30 2010 and 1,801.1 million euro at December 31 2009. The consolidated net debt figure was the result of the following:
– An aggregate net financial surplus at holding level of 123.6 million euro, up from 111.7 million euro at September 30 2010 and 121.6 million euro at December 31 2009;
– The total net debt of the operating companies of 2,290.4 million euro (2,334.4 million euro at September 30 2010). The rise from 1,922.7 million euro at December 31 2009 was mainly the result of investments in new production capacity by Sorgenia, partly offset by the reduction in the debt of Espresso and Sogefi.
The net financial position includes the CIR group’s investments in shares of hedge funds (84 million euro at December 31 2010).
Total consolidated equity stood at 2,522.9 million euro at December 31 2010, up from 2,332.3 million euro at December 31 2009. The group’s equity rose to 1,487 million euro from 1,396.7 million euro at December 31 2009.
At December 31 2010 the CIR group had 12,911 employees (12,746 at December 31 2009).
Industrial businesses
Energy: Sorgenia
The revenues of the Sorgenia group totalled 2,668.5 million euro in 2010, with a rise of 14.7% on the figure for 2009 (2,325.8 million euro). The significant rise in electricity sales volumes compensated for the decline in unit prices of energy products caused by the difficult economic situation. EBITDA came in at 151.1 million euro and was up by 28.2% on the figure for the same period of 2009 (117.8 million euro).
Sorgenia’s EBITDA benefited in particular from the rise in electricity sales volumes, from the contribution of the Modugno power plant and from the higher margins on generation from renewable sources.
These factors, together with the action put in place to preserve margins, more than compensated for the contraction in sales margins on natural gas, higher provisions made for client receivables and high congestion charges on the electricity grid.
Net income was 50.4 million euro (66.9 million euro in 2009). Compared to the previous year, the result was affected by higher financial expense due to the rise in the average level of debt for the period.
On February 28 2011 Sorgenia presented its Business Plan 2011-2016 to the financial community. The plan contains the following detail: the entry into the residential market and the launch of a dual fuel supply of electricity and gas with a target of 2 million clients by 2016; investment in the period of 1.2 billion in the three business areas (power market, renewable sources, hydrocarbon exploration and production); continuing growth of revenues and margins, a gradual reduction of the net debt and the net debt/EBITDA ratio.
Media: Espresso
The revenues of the Espresso group totalled 885 million euro in 2010, in line with the figure for 2009 (886.6 million euro). Net of optional products, revenues rose by 4.1%. Circulation revenues, which did not benefit from any selling price rises, came in at 267.9 million euro versus 274.2 million euro in the previous year (-2.3%). All the main titles of the group performed significantly better than those of their respective markets. On the basis of the most recent data published by ADS and Audipress, La Repubblica confirms its ranking as the top Italian newspaper both in terms of number of copies sold on the news-stands and in terms of number of readers. Advertising revenues came to 528.4 million euro, posting a rise of 6.3% compared to 2009. Internet was the medium that showed the most positive evolution (+21.8%). Revenues from optional products amounted to 66.3 million euro and were down by 34% on 2009.
Total costs were down by 6.7% compared to 2009 and recurring costs, net of extraordinary charges, by 5.2%. During the last two years a company reorganization plan was implemented with the aim of obtaining savings of 140 million euro when fully up and running (in 2011), which is equal to 17% of the costs incurred in 2008. Costs reported in 2010 were 16.7% lower than those of 2008 and therefore the savings target has already been fully met and will be overtaken with the completion of the measures put in place. This has happened without reducing the the group’s product range or portfolio and without jeopardizing quality in any way.
EBITDA came in at 147.2 million euro and was up by 38% from 106.7 million euro in 2009. All the main businesses of the group posted a sharp rise in profitability which was due, for the newspapers, to the drastic cost cutting action resulting from the reorganization plans and for the radio and internet businesses to the significant rise in revenues. Net income came in at 50.1 million euro versus 5.8 million euro in 2009.
Automotive components: Sogefi
Sogefi’s revenues totalled 924.7 million euro in 2010, with a rise of 18.4% on the figure for 2009 (781 million euro). The recovery was particularly significant in the original equipment sector which made up approximately 66% of total revenues. Almost 30% of the consolidated revenues of the group came from non-European markets. In 2010 for the first time ever the sales obtained in Mercosur were higher than those of France, which had been Sogefi’s top market for years. Revenues generated in China and India almost doubled compared to 2009, while those from the US rose by approximately 25%.
EBITDA was 86.7 million euro and was up by 83.6% on 2009 (47.2 million euro). The significant rise in all the operating results enabled the company to return to profit and post net income of 18.8 million euro which compares with a loss of 7.6 million euro in 2009.
Healthcare: KOS
The revenues of KOS came in at 325.4 million euro in 2010, with a rise of 19% on 2009 (203.5 million euro), thanks to the development of the three business areas (care-homes, rehabilitation centres, hospital management) and to the acquisitions made during the year.
EBITDA was 42.1 million euro, and was up by 27.5% on 2009 (33 million euro). During the year the company incurred costs of around 3 million euro for the IPO procedure and expenses relating to the acquisitions made in the period.
Net income came in at 4 million euro whereas it substantially broke even in 2009 (-0.4 million euro). Today the KOS group manages over 5,600 fully operational beds plus another 900 under construction.
Financial investments
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 December 31 2010 of 75 million euro) and the venture capital fund CIR Ventures (with a fair value at December 31 of 15 million dollars). Among its other investments, Jupiter Finance operates in the segment of non-performing loans. At December 31 2010 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 59.1 million euro at December 31 2010.
Results of the parent company CIR SpA
The parent company CIR SpA closed the year 2010 with a loss of 14.7 million euro, compared to a loss of 2 million euro in 2009. The change was due to the lower flow of dividends received from subsidiaries in the year. Shareholders’ equity stood at 968.5 million euro at December 31 2010, down from 978.9 million euro at December 31 2009.
Outlook for the year 2011
The performance of the CIR group in 2011 will be affected by the evolution of the macroeconomic scenario characterized by a recovery that is still weak with unclear prospects for the future. In this scenario, in view of the positive results obtained in 2010, the main operating subsidiaries of the group will continue to take action to improve their operating efficiency while at the same time engaging in business development initiatives.
Proposed dividend
The Board of Directors has decided to propose to the Shareholders’ Meeting the distribution of a dividend of 0.025 euro per share in view of the higher contribution to the earnings of the group made by the operating companies and, in particular, the return to a dividend of the listed subsidiaries Espresso and Sogefi. The dividend will be paid out as from May 26 2011 against coupon no. 20 of May 23 2011. In the last two years the company did not distribute any dividends.
Shareholders’ Meeting
The Shareholders’ Meeting (AGM) has been convened for April 28 at the first call and for April 29 if a second call is necessary. The Board approved the following resolutions:
To put before the Shareholders’ Meeting, at an extraordinary meeting of the same, the proposal that some amendments be made to the Company Bylaws to bring them into line with Legislative Decree no. 27 of January 27 2010;
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 unit 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.
To put before the Shareholders’ Meeting a stock grant plan for 2011 aimed at directors and/or executives of the company, its subsidiaries and its parent company for a maximum of 4,500,000 conditional rights, each of which will give the beneficiaries the right to be assigned free of charge 1 CIR share. The shares thus assigned will be made available from the own shares that the company holds as treasury stock.
To put before the Shareholders’ Meeting the proposal that the Rules for Shareholders’ Meetings be amended to bring them into line with the amendments to the Company Bylaws approved by the Board of Directors on October 28 2010 as well as those being submitted to the approval of the Shareholders at the extraordinary meeting of the same.
The coming Meeting of the Shareholders will be called upon to approve the renewal of the Board of Directors and the Board of Statutory Auditors.
Bonds maturing in the 24 months following December 31 2010
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 December 31 2010. On January 10 2011 the maturing bond for a remaining amount, including interest, of 157.4 million euro was repaid. As of today the only bond still outstanding is the one issued by CIR SpA maturing on December 16 2024 for a principal amount of 300 million euro. The bond (ISIN code XS0207766170), listed on the Luxembourg Stock Exchange pays an annual coupon of 5.75%.
Conference call
The results of financial year 2010 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 02 805 88 27, 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 figures contained in this press release correspond to the results documented in the company’s accounts and general ledger.
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