Board of Directors approves results as of September 30 2012
CIR GROUP: REVENUES OF OVER 3.6 BLN (+9.8%), EBITDA DOWN TO 253 MLN
In a climate characterized by a slowdown of the global economy and deep recession in Italy, the group reports a rise in sales but a contraction in operating results due to the lower contribution of the companies most active in the domestic market, especially Sorgenia and Espresso
Despite the net income reported by three of its main operating subsidiaries (Espresso, Sogefi and KOS) in a difficult economic environment, the group closed the first nine months with a loss of 10 million euro due to the negative result of Sorgenia, which was affected by the slowdown in electricity demand and by the economic crisis in Italy
Worldwide growth continues in the automotive components sector (Sogefi).
Positive, in the first nine months, the contribution of the financial investments of the group.
Financial surplus at holding level of over 20 million euro
***
Carlo De Benedetti completes the succession process in the group:
after leaving his executive positions at the beginning of 2009,
in coming weeks he will transfer control of the group to his three sons without return consideration
Following this transaction, at the next Annual General Meeting of the Shareholders, Rodolfo De Benedetti will be appointed executive chairman of CIR. As an effect of this appointment, in agreement with his family, Rodolfo De Benedetti will propose that Monica Mondardini be appointed as chief executive officer which will also have the aim of further strengthening the managerial structure of the group.
Monica Mondardini will keep the position of chief executive officer of Gruppo Editoriale L’Espresso SpA
Consolidated results for the first nine months of 2012
Revenues: € 3,625.8 million (+9.8% from € 3,300.9 million in 9M 2011)
- EBITDA: € 253 million (-25.7% from € 340.3 million in 9M 2011)
- Net result: -€ 10 million (net income of € 15 million in 9M 2011)
- Aggregate net financial surplus: € 20.3 million (€ 25.6 million at 30/6/2012)
Consolidated net financial debt: € 2,593.6 million (€ 2,551.5 million at 30/6/2012)
Milan, October 29 2012 – The Board of Directors of CIR-Compagnie Industriali Riunite SpA, which met today under the chairmanship of Stefano Micossi, approved the Interim Financial Report of the Group as of September 30 2012.
The CIR group operates in five sectors: energy (Sorgenia), media (Espresso), automotive components (Sogefi), healthcare (KOS) and non-core investments (private equity and minority shareholdings, venture capital and other investments).
Performance of operations
The CIR group, in a scenario of a slowing world economy and deep recession in Italy, closed the first nine months of the year with revenues up almost 10% to over 3.6 billion euro and a gross operating margin of over 250 million euro but which was lower than in 2011 because of the lower contribution of the companies most active in the domestic market, Sorgenia and Espresso.
The net result, despite the net income posted by three of the four main operating subsidiaries of the group (Espresso, Sogefi and KOS) in a difficult environment, was negative because of the loss reported by Sorgenia. The contribution of the financial investments of the group was positive in the nine month period.
Consolidated results
The revenues of the CIR group in the first nine months of 2012 came to 3,625.8 million euro, and were up by 9.8% from 3,300.9 million euro in the same period of 2011 thanks especially to the higher sales reported by Sorgenia, Sogefi and KOS.
EBITDA came to 253 million euro (7% of revenues), down by 25.7% compared to 340.3 million euro (10.3% of revenues) in the first nine months of 2011. The operating margin (EBIT) was 76.2 million euro versus 189.5 million euro in 2011. The contraction in margins, despite the increase reported by Sogefi, was due mainly to the lower profitability of Sorgenia and Espresso as a result of the negative economic situation in Italy.
The net result of financial management, a negative figure of 70.2 million euro (an improvement on the negative figure of 95 million euro in the first nine months of 2011), was determined by net financial expense of 91.3 million euro partly offset by dividends and net gains from trading and valuing securities for of 21.1 million euro.
The net result of the CIR group in the first nine months was a negative 10 million euro, compared to net income of 15 million euro in the same period of 2011. The change from last year, despite the higher earnings of Sogefi, was due mainly to the lower contribution of the other operating subsidiaries and of Sorgenia in particular, which closed the first nine months with a net loss of approximately 77.1 million euro because of the slowdown in electricity demand, the high cost of gas for its power plants and the recession in Italy. The result of the first nine months benefited from the positive adjustment made to the fair value of the securities portfolio (10.7 million euro) and from gains on private equity investments (5.6 million euro).
The net financial debt of the CIR group stood at 2,593.6 million euro at September 30 2012, up from 2,551.5 million euro at June 30 2012 (2,335.1 million euro at December 31 2011). The consolidated net debt figure is a combination of the following factors:
– An aggregate net financial surplus at holding level of 20.3 million euro (25.6 million euro at June 30 2012). The increase from 10.8 million euro at December 31 2011 was due mainly to the positive adjustment of the fair value of the securities portfolio;
– Total net debt in the operating companies of 2,613.9 million euro (2,577.1 million euro at June 30 2012). The increase from 2,345.9 million euro at December 31 2011 was due essentially to the investments made by Sogefi and Sorgenia and to the rise in working capital of Sorgenia.
Total consolidated equity stood at 2,424.8 million euro at September 30 2012 versus 2,479 million euro at December 31 2011. The equity of the group totalled 1,416.3 million euro down from 1,437.7 million euro at December 31 2011. The change was due mainly to the payment of dividends and the result for the period.
At September 30 2012 the CIR group had 14,175 employees on the payroll (14,072 at December 31 2011).
Industrial businesses
Energy: Sorgenia
Sorgenia is the main private operator in the electricity sector in Italy with some 500 thousand clients and a generating capacity of approximately 5 thousand Megawatts. The company is controlled by CIR (52.9%) with the main Austrian utility VERBUND also holding an interest.
The revenues of the Sorgenia group in the first nine months of 2012 came in at 1,758.2 million euro and were up by 13.2% on the figure for the same period of 2011 (1,552.7 million euro) thanks to the higher volumes of electricity sold. EBITDA was 49.6 million euro, down by 60.6% from 125.7 million euro in 2011. The sharp decline in operating results compared to last year was due mainly to the following factors: the contraction of thermoelectric generating margins essentially because of the high costs of gas for the power plants and the competition of renewable energy at peak times of day; the lower contribution of the subsidiary Tirreno Power; the higher congestion charges on the electricity grid in the Southern region; the reduction in the contribution of renewables following the change in the scope of the consolidation; the decline in sales volumes of natural gas and lower margins on the same.
The net result of the group was a loss of 77.1 million euro (net income of 13.5 million euro in 2011). Apart from the lower EBITDA, the result for the first nine months was negatively affected by higher amortization, a rise in financial expense and asset writedowns of 13 million euro, mainly in hydrocarbon extraction and production. To counter the deep recession in Italy and the difficulties in the Italian energy market, Sorgenia has begun a series of actions (renegotiating its gas supply contract, reducing operating costs and possibly selling off non-strategic businesses) which should give the first results in economic and financial terms between the end of this year and 2013.
Media: Espresso
Gruppo Editoriale L’Espresso is one of the most important publishing companies in Italy. It operates in all sectors of communication: daily newspapers and periodicals, radio, internet, television and the collection of advertising. The group is 55.8% controlled by CIR and is listed on the Stock Exchange.
The revenues of the Espresso group came to 594 million euro in the first nine months of 2012 and were down by 9.1% on the figure for 2011 (653.7 million euro) because of the contraction in advertising revenues due to the performance of the market, and reduced activity in the add-on sector. Circulation revenues, excluding add-ons, came to 199.3 million euro with a decline compared to 2011 (-3%) but holding up reasonably well in a market where consumption is falling and the printed press is gradually declining. Based on the latest ADS and Audipress figures, La Repubblica still ranks as the number one daily newspaper in Italy in terms of sales on the news-stands and the top information newspaper in terms of number of readers per day. In September 2012 the number of subscriptions to the newspaper’s digital products topped 50 thousand.
Advertising revenues totalled 342.4 million euro and were down by 10.1% on 2011, which was slightly less than the market decline (-10.5% in the first eight months according to Nielsen Media Research figures). Internet advertising was extremely positive (+14.3%), confirming the excellent performance of recent years despite the particularly unfavourable climate. Revenues from add-on products came in at 34 million euro, posting a significant decline (-35.1%) compared to the first nine months of 2011, while other revenues came to 18.3 million euro and were up by over 20% thanks to the growth in the business of leasing out digital terrestrial bandwidth to third parties.
EBITDA came to 82.8 million euro, down by 26.1% from 112 million euro in the first nine months of 2011. About half of this decline was due to lower margin on add-on products and the rest was from the print and radio businesses, hit by the contraction in advertising revenues, while the results of the internet and television businesses showed an improvement. Net income came in at 26.4 million euro versus 41.4 million euro in 2011 (-36.2%).
Automotive components: Sogefi
Sogefi is one of the main world producers in the sector of filters, engine air and cooling systems and suspension components with 44 production sites in 16 countries. The company is controlled by CIR (58.3%) and is listed on the Stock Exchange.
The revenues of Sogefi for the first nine months of 2012 came in at 1,005.1 million euro and were up by 21.1% from 829.8 million euro in the same period of 2011 thanks to growth in the North American market and to the contribution of the businesses of Systèmes Moteurs, consolidated as from August 1 of last year. This result was obtained in a difficult market context at global level with a gradual reduction in production levels and sales of motor vehicles which became even more acute in September. In geographical terms, the highest growth in revenues took place in NAFTA countries (+182.1%), India (+52.8%), China (+25.3%) and Europe (+16.3%). By contrast, sales in Mercosur countries fell by 6.3%. With the same consolidation as last year Sogefi’s revenues would have been slightly down (-4.3%).
The action taken by management to offset the impact of the decline in volumes of activity, together with substantial stability in the prices of the commodities that most affect product cost, enabled the group to achieve better profits overall, while they were only slightly down on a comparable basis. EBITDA for the first nine months came to 98.1 million euro (9.8% of revenues), up by 22.8% from 79.9 million euro in 2011 (9.6% of revenues).
Net income was 22.4 million euro, posting growth of 19% on the figure for the previous year (18.8 million euro).
Healthcare: KOS
KOS is one of the major Italian groups active in the healthcare and care-home sector (managing nursing homes and rehabilitation centres, and hospital management). KOS is controlled by CIR (51.3%), with the AXA Private Equity group also holding an interest.
The revenues of KOS in the first nine months of 2012 totalled 265.3 million euro and were up by 1.3% on the figure for the same period of 2011 (261.9 million euro), thanks to the development of its three areas of activity (nursing homes, rehabilitation centres and hospital management). EBITDA was 37.9 million euro, down on the figure for the first nine months of 2011 (41.3 million euro) partly because of higher leasing costs following the sale of three properties in the third quarter of last year. Net income came in at 8 million euro versus 8.9 million euro in the previous year. Net debt stood at 152.8 million euro at September 30 2012 compared to 151.7 million euro at June 30 2012 (165.1 million euro at December 31 2011).
KOS currently manages 63 facilities, mainly in the centre and north of Italy with a total of over 5,800 beds, plus approximately 1,000 more under construction. Start-up activities are continuing in India where in the second half of 2011 the KOS group set up the joint venture ClearMedi Healthcare LTD. 51% controlled by the KOS group and 49% by a local operator, the company is active in the supply of diagnostic and therapeutic technologies in outsourcing to Indian hospitals.
Non-core investments
The non-core investments of the group consist of private equity initiatives and minority shareholdings, venture capital and other investments. More specifically, CIR has a diversified portfolio of funds and direct minority shareholdings in the private equity sector (with a fair value at September 30 2012 of 105.8 million euro) and the venture capital fund CIR Ventures (with a fair value at September 30 of 14 million dollars). Among the other investments, it should be noted that there is a 20% interest in the company Swiss Education Group, a world leader in managerial training in the hospitality sector. Lastly, the CIR group has a portfolio of non-performing loans. The net value of the investment in this business at September 30 2012 was 62.7 million euro.
Outlook for the year 2012
The performance of the CIR group in the last quarter of 2012 will continue to be affected by the evolution of the macroeconomic environment, which is currently characterized by a recessionary scenario. In this scenario the main operating subsidiaries of the group have boosted their action to improve their operating efficiency while at the same time engaging in business development initiatives.
Securities maturing in the 24 months following September 30 2012
The company, which has a BB rating with a stable outlook issued by Standard&Poor’s, has no bonds maturing in the 24 months following September 30 2012.
Waiver of the obligation to publish information documents
The Board of Directors voted to adopt the opt-out regime as per Articles 70, paragraph 8, and 71, paragraph 1-bis, of the Rules for Issuers, thereby availing itself of the right to waive the obligation to publish information documents in the event of significant mergers or demergers, capital increases through the contribution of assets in kind, acquisitions and disposals.
Corporate governance and amendments to the Company Bylaws
The Board also approved a series of amendments improving its Corporate Governance in order to comply with the new rules introduced by Italian Exchange’s Code of Conduct for Listed Companies.
Lastly, in the extraordinary part of the meeting the Board of Directors approved amendments to Articles 8 and 19 of its Company Bylaws to bring them into line with the new rules introduced by Law 120/2011 on the subject of balance between the genders in the administrative and control bodies of companies.
***
At the meeting of the Board of Directors, Mr Carlo De Benedetti announced the final steps in completion of the succession process in the group which began three and a half years ago. After leaving his executive positions at the beginning of 2009, in the coming weeks he will transfer control of the group to his three sons without return consideration.
Following this decision, Carlo De Benedetti proposed to the Board of Directors that at the next Shareholders’ Meeting they appoint Rodolfo De Benedetti as executive chairman of CIR. At the same time Rodolfo De Benedetti, in agreement with his family, will propose that Monica Mondardini be appointed as chief executive officer of CIR, which also has the aim of further strengthening the managerial structure of the group. Monica Mondardini will keep the position of chief executive officer of Gruppo Editoriale L’Espresso SpA.
Carlo and Rodolfo De Benedetti have asked the current chairman of CIR, Stefano Micossi, to remain on the Board even after the Shareholders’ Meeting as a director. Carlo De Benedetti will remain honorary chairman and a director of the company.
Rodolfo De Benedetti, Chief Executive Officer of CIR, made the following statement: “I would like to thank my father, on behalf of my brothers too, for his confidence and for the opportunity that he has with such generosity given us. We will exercise our role as shareholders with responsibility valuing his teachings and his experience with the aim of continuing and honouring an entrepreneurial tradition begun almost a century ago by our grandfather and which he consolidated significantly 36 years ago with the establishment of CIR. I am proud to take on the role of executive chairman of CIR and to be able to count on a management team of excellence, to be further strengthened with the imminent arrival of Monica Mondardini, with whom I have worked for four years and been able to appreciate her extraordinary qualities at both a human and a professional level. I will devote myself with even greater commitment to developing our companies and ensuring that they are competitive in the long term, in the interest of all our shareholders and the over 14 thousand employees of the group”.
The executive responsible for the preparation of the company’s financial statements, Gerardo Benuzzi, 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.
