Board of Directors approves financial report as of June 30 2010
CIR GROUP: REVENUES OF OVER 2.3 BILLION (+6.4%),
GROSS OPERATING MARGIN OF 193.8 MILLION (+30.8%)
Net income for the first half of 42.2 million euro. Result for first six months of 2009, a positive 120.8 million euro, benefited from non-recurring income of 110 million euro.
Net of this income, first-half 2010 earnings are up on 2009
Strong rise in contribution of operating companies to group earnings
Financial surplus at holding level in excess of 100 million euro
Consolidated results of first half 2010
Revenues: € 2,343.1 million (+6.4% from € 2,202.8 million in 1H 2009
EBITDA: € 193.8 million (+30.8% from € 148.2 million in 1H 2009)
Net income: € 42.2 million (€ 120.8 million, of which 110 million of non-recurring gains, in 1H 2009)
Aggregate net financial surplus: € 101.8 million (€ 123 million at 31/03/2010)
Consolidated net debt: € 2,195.7 million (€ 2,057.1 million at 31/03/2010)
Milano, July 30 2010 – 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 2010.
The CIR group operates in five business sectors: energy (Sorgenia), media (Espresso), automotive components (Sogefi), healthcare (KOS) and financial services (Jupiter).
Performance of operations
The group closed the first half of 2010 with revenues and gross operating margin (EBITDA) up on the same period of 2009. The performance of revenues reflects the higher revenues reported by the energy, automotive components and healthcare sectors, with sales holding up in the media sector. The rise in EBITDA was due mainly to the significant improvement in profitability in the media, automotive components and healthcare sectors, which more than compensated for the lower margins in the energy sector.
The net income of the group was 42.2 million euro in the first half of the year. Last year’s result, a positive figure of 120.8 million euro, benefited from non-recurring gains of approximately 110 million euro (76.7 million of which came from the subscription of a capital increase by Verbund in Sorgenia and 33.4 million euro were capital gains on the partial disinvestment from the hedge funds held by the group). Therefore, net of non-recurring items, the net income of the group in the first half of 2010 is higher than that of 2009. The contribution of the operating companies to the net income of the first half showed a considerable improvement on the figure for last year (50.4 million euro versus 6.4 million euro in 2009).
“The good performance of the consolidated operating results of CIR in the first half of the year – commented Chief Executive Rodolfo De Benedetti – is of particular significance given the situation of uncertainty characterizing the international economy and some of the sectors in which the group operates. These figures confirm that our balanced portfolio of businesses, combined with capital and financial solidity, is one of the strengths of the CIR group, especially in unfavourable economic environments”.
Consolidated results
The consolidated revenues of the CIR group in the first half of 2010 came to 2,343.1 million euro and were up by 6.4% from 2,202.8 million euro in the first six months of 2009. The change was due to the higher sales reported by Sorgenia, Sogefi and KOS, with the revenues of Espresso substantially holding up.
The consolidated gross operating margin came in at 193.8 million euro (8.3% of revenues), up from 148.2 million euro (6.7% of revenues) in the first half of 2009, posting a rise of 30.8%. The consolidated operating result (EBIT) was 108.1 million euro, and was up by 32.8% from 81.4 million euro in 2009. The significant rise in the operating results was due mainly to the improvement in the profitability of Espresso, Sogefi and KOS, which more than compensated for the lower margins of Sorgenia, which were due in part to exceptional circumstances affecting the first quarter. Indeed in the second quarter Sorgenia reported a rise in EBITDA compared to the same period of 2009.
The financial management result, a negative 42.8 million euro, was the combination of net financial expense of 52.4 million euro, dividends and net gains from trading and valuing securities of 10.7 million euro and negative adjustments to the value of financial assets of 1.1 million euro. The change from the positive result of 78.2 million euro in the first half of 2009 was due mainly to the fact that last year there were non-recurring gains for a total of approximately 110 million euro.
The consolidated net income of the CIR group in the first half of 2010 was 42.2 million euro. The net result of the same period of 2009, a positive 120.8 million euro, benefited from non-recurring gains of approximately 110 million euro resulting from the capital increase subscribed by the shareholder Verbund in Sorgenia (76.7 million euro) and capital gains on the partial disinvestment from the hedge funds held by the group (33.4 million euro). Net of these non-recurring factors, the net income of the group is actually higher than in 2009.
The net debt of the CIR group stood at 2,195.7 million euro at June 30 2010, up from 2,057.1 million euro at March 31 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 101.8 million euro (123 million euro at March 31 2010). The decline from 121.6 million euro at December 31 2009 was due mainly to the negative fair value adjustment of securities in the portfolio and to disbursements for operating costs and financial expense;
– Total net debt of the operating companies totalling 2,297.5 million euro (2,180.1 million euro at March 31 2010). The change from the figure of 1,922.7 million euro at December 31 2009 was principally caused by the new investments made in production capacity by Sorgenia.
The net financial position includes the CIR group’s investment in shares of hedge funds (91.2 million euro at June 30 2010).
Total consolidated equity at June 30 2010 stood at 2,450.5 million euro, up from 2,332.3 million euro at December 31 2009. The group’s equity rose to 1,454.7 million euro from 1,396.7 million euro at December 31 2009. At June 30 2010 the CIR group had 12,962 employees (12,746 at December 31 2009).
Performance of the parent company of the group
The parent company CIR SpA closed the first half of 2010 with a net loss of 3.8 million euro versus net income of 2.9 million euro in the first half of 2009. The change from the figure for last year was due mainly to lower dividends received. Shareholders’ equity at June 30 amounted to 977.3 million euro (978.9 million euro at December 31 2009).
Industrial businesses
Energy: Sorgenia
The revenues of the Sorgenia group in the first half of the year came to 1,281.2 million euro, up slightly (+3%) on 2009 (1,244.2 million euro).The rise in sales volumes in both the electricity and the gas sectors offset the reduction in the unit prices of energy products. Despite the recovery reported in the second quarter (up from the same period of 2009), EBITDA came in at 65.3 million euro (82.5 million euro in first half 2009), being negatively affected in the first half by a sharp contraction of gas margins, by high congestion costs on the national electricity grid and by the exceptional occurrence of a breakdown at the Termoli power plant (Campobasso), which only started operating normally again at the end of March. In the absence of these factors, EBITDA would have been at least in line with that of the first half of last year. Net income was 55.9 million euro (26.5 million euro in the first half of 2009). The rise compared to the figure for last year was due mainly to a tax credit for investments in new production capacity made by the company.
As far as the business plan is concerned, the start-up of the new CCGT-Combined Cycle Gas Turbine power plant at Bertonico-Turano (Lodi) with an output of approximately 800 MW is confirmed for the second half of this year, while the development program of generation from renewable sources in Italy and France is continuing with plants under construction for over 50 MW.
Media: Espresso
The revenues of the Espresso group for first half 2010 came in at 445.1 million euro and were substantially in line (-0.9%) with the figure of the corresponding period of last year (449.3 million euro). Circulation revenues, with the exception of add-on products, came to 130.9 million euro versus 132.7 million euro in the same period of last year. The performance of circulation revenues, which did not benefit from any price hikes, shows that sales of the group titles held up well. In particular, sales of both la Repubblica and L’espresso on the news-stands recorded a slight rise.
In the latest Audipress readership survey, la Repubblica confirmed its ranking as the top Italian daily newspaper with over 3.2 million readers per day. Advertising revenues, totalling 264.9 million euro, rose by 7.6% compared to first half 2009. Revenues from add-on products came in at 40.3 million euro and were down by 34.1% compared to the same period of 2009, a year in which there was a strong concentration of initiatives in the first half of the year.
Total costs were cut by 9.7% compared to the first six months of last year. Considering the savings already achieved in the first half of 2009, the trend of costs is in line with the objective of the plan which involves an overall reduction of 17% compared to the year 2008.
EBITDA was 74.7 million euro, up by 84.3% from 40.6 million euro in the first half of 2009. With the exception of periodicals, all the divisions of the group showed an improvement. Net income came in at 28.6 million euro, up from 0.1 million euro in the first half of 2009.
Automotive components: Sogefi
Sogefi’s revenues for the first half came in at 457.6 million euro, up by 22.2% from 374.5 million in the same period of 2009. This result was linked to a recovery in vehicle production in the mature markets (Europa, Nafta and Japan) and to a further rise in volumes in the developing areas such as Brazil, China and India. In addition, there was also the favourable trend of foreign exchange rates following the rise in value of the main non-European currencies and the pound against the euro.
The rise in revenues together with management taking care to cut all cost factors, made it possible for the group to obtain significant growth in its margins compared to the first half of 2009. EBITDA came in at 45.3 million euro, up from 14.2 million euro in the first half of last year. The sharp recovery in profitability reported by Sogefi in the first half of the year enabled the company to return to profit, posting earnings of 9.9 million euro, compared to a loss of 10.6 million euro in the first half of 2009.
Healthcare: KOS
The revenues of KOS for the first half of 2010 totalled 159 million euro and were up by 17.9% on the same period of 2009 (134.9 million euro), thanks to the development of the three business areas (care homes for the non-self sufficient elderly, rehabilitation centres and hospital management) and to the new acquisitions made in the period.
In the first half, the company incurred costs of approximately 2.2 million euro for the IPO procedure (1.6 million euro) and for expenses relating to the acquisitions made in the period (0.6 million euro). EBITDA before the IPO and acquisition costs came to 22.4 million euro. EBITDA after the said costs was 20.2 million euro, up by 21.7% compared to the first half of 2009 (16.6 million euro).
The net result for the first half before the IPO and acquisition costs was 4.2 million euro. The net income after the said costs was 2.4 million euro, up from a result of 1.2 million euro in the first half of 2009.
The KOS group today manages 59 facilities, mainly in the centre-north of Italy with a total of over 5,500 beds in operation, plus approximately 400 more under construction.
Financial services (Jupiter) and other businesses
In the financial services sector, the CIR group is present with the company Jupiter Finance and other businesses. Jupiter Finance operates in the sector of non-performing loans. At June 30 2010 the gross book value of the loans under management was approximately 2.2 billion euro. Among the other businesses is the venture capital fund CIR Ventures (fair value at June 30 2010 of 14.5 million dollars) and a diversified portfolio of funds and minority interests in the private equity sector (fair value of 77.3 million euro).
Outlook for the year
In the second half of the year the CIR group will continue with its management efficiency actions and with the investment programs planned for the development of all sectors of the business. The group confirms that for the full year 2010, as was the case in the first half of the year, consolidated net income will be lower overall than that of 2009, since there are not expected to be any non-recurring gains as there were last year.
Bonds maturing in the 24 months following June 30 2010
The company, which has a BB rating with a negative outlook issued by Standard&Poor’s, has the following bond maturity in the 24 months following June 30 2010. 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 (ISIN code XS0169896817), listed on the Luxembourg stock exchange, pays an annual coupon of 6.375%
Conference call
The results of the first half of the year 2010 will be illustrated today at 4.30 pm 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 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 figures contained in this press release correspond to the results documented in the company’s accounts and general ledger.
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