Proposed allocation of net profit
The Board of Directors proposed to the Shareholders Meeting, called on April 22, 2009, not to distribute any dividend for the year 2008, and to destinate the net profit to the Retained Earnings Reserve.
PRESS RELEASE
Comments on the 2008 Consolidated Financial Statements
The Espresso Group 2008 results have to be considered within the very critical framework affecting the world economies in general and the reference market in particular.
The publishing sector, already critical over the first half-year, suffered from a deeply negativeevolution over the second half-year as a consequence of the drastic decline of advertisinginvestments related to the worsening of the worldwide scenario of economic recession.
According to Nielsen Media Research data, the entire advertising market has recorded in 2008a down-turn of 2.8% over the previous year (-7.1% in the press sector). In the fourth quarterthe reduction has been of 9.5% and of 13.4% in the press sector.
The above trends have affected the Espresso Group results, which have suffered a significantcontraction in the advertising revenues. In order to face both the situation and the markettrends, the Group has adopted cost improvement measures addressed to the productpromotion and labor cost areas and the set up of reorganization plans.
Savings derived from the abovementioned measures are expected to reach €47mn on a yearlybasis, entailing extraordinary expense equal to €25.6mn (€22.1mn in terms of Ebitda); year2008 bears the entire burden of the extraordinary expense and only partially the expected costreduction (€15.7mn).
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The Group consolidated total revenues as of 31 December 2008 amounted to €1,025.5mn,declining by 6.6% over the previous year (€1,098.2mn).The Group advertising revenues, equal to €608.2mn, showed a decline of 7.4%, which wasparticularly due to the downturn of la Repubblica and the magazines as well as the radio/TVsector.
Advertising in local daily newspapers was quite resilient and in the Internet it keptshowing a significant growth.
Circulation revenues, excluding optional products, totaled €276.3mn, in line with 2007. Circulation of la Repubblica and L’espresso have recorded remarkable drops over theprevious year; they mainly occurred as a number of promotional initiatives, with a marginalimpact on revenues, were either eliminated or reduced.
Revenues from optional products have decreased by 10.2% to €114.9mn, which has to beconsidered very positive as it was attained in a severely contracted market.
Consolidated gross operating profit was equal to €142.5mn against €223.4mn in 2007,declining by 36.2%.
This evolution reflects the decline of the advertising market and the €22.1mn of extraordinary expense related to reorganization, only partially balanced by savingsobtained over the year through the first impacts of the cost reduction measures adopted. The decline was registered by all the operations as it was produced by a drop in advertisingrevenues which affected all the Group’s media.
The Group’s consolidated net profit, net of extraordinary provisions for taxes equal to€13.3mn, amounts to €20.6mn (€95.6mn in 2007).The consolidated Net financial indebtedness as of December 31, 2008 was €278.9mn,increased by €14.1mn vis-à-vis €264.9mn of end 2007. The operating cash flow of €111.4mnhas been more than absorbed by the financial expenditure related to the payment of dividends(€68.8mn), investments (€47.2mn) and purchase of n. 4,385,000 own shares (€9.1mn).
At the end of December the Group staff totaled 3,344 employees, with a reduction of 70employees with respect to 3,414 staff at the end of 2007, thus showing the first effects of thereorganization plans.
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Mr. Oliviero Maria Brega, “dirigente preposto alla redazione dei documenti contabili esocietari” (manager in charge of drafting the corporate and accounting documents) -pursuant to subparagraph 2 article 154bis of Testo Unico della Finanza (Finance Act) -states that the accounting information included in this press release corresponds to thedocumented results, the books and the accounting records.Comment on the outstanding bond loan issue
The company, with the BBB- with negative outlook rating awarded by Standard&Poor’s, hasan outstanding bond loan issue of € 300 million, expiring in October 2014. The bond issue islisted on the Luxembourg Stock Exchange and pays an annual coupon equal to 5.125%.
2008 Financial Statements of the Parent Company
The Parent Company revenues were €573.7, -7.3% vis-à-vis € 618.8 of 2007.
The operating profit, amounting to € 36.5mln in decline vis-à-vis € 70mln of 2007, has beenaffected by the downturn of advertising revenues, only partially counterbalanced by the costimprovement actions implemented.
The net profit, due to lower dividends received by subsidiaries, which have declined from€135.5mln to €55.3mln, and to extraordinary provisions for taxes of €13.3mln, amounted to€49.7mln (€166.2mln in 2007).
Subsequent events and outlook
The deep economic crisis and the serious worsening of the perspectives for 2009 havedetermined the drastic drop of advertising investments since autumn 2008.
The Group’s activities in the first months of 2009 confirm the negative trend of advertisinginvestments and do not show any sign of possible recovery. For this reason there is novisibility on the evolution of the forthcoming year.
The heavy deterioration of the results and the critical conditions of the perspectives impose theadoption of new and more effective measures to reduce costs, in order to grant continuity and development conditions for the Group’s media, whose strategic importance keeps beingconfirmed by the key positions that they occupy in the reference markets.
On this respect management is at present engaged in implementing all cost improvementplans already started, as well as in outlining new actions to be based on a more efficient andstreamlined new organization and company structure.
Management is also committed to strengthen the managerial competences of the Group, andparticularly of the more critical areas, having already done so as regards the AdvertisingSubsidiary.
Verification of requisites for independence of the members of the Board of Directorsand Board of Statutory Auditors
The Board of Directors has verified its members’ requisites for independence and confirmedthat the following members are entitled: Prof. (Ms) Agar Brugiavini, Mr. Mario Greco and Mr.Luca Paravicini Crespi. Requisite for independence and honorability were also confirmed forthe members of the Board of Statutory Auditors.
Proposal submitted to the Shareholders’ Meeting to revoke the existing proxy andauthorize a new proxy for share buyback
The Board of Directors, acknowledging that own shares in portfolio are as of today no.7,245,000 equal to 1.77% of the Share Capital, deliberated to propose to the Shareholders’Meeting to revoke, for the time left and for the non-utilized part, the existing proxy for sharebuyback and simultaneously confer a new proxy. Also considering the capital structure of theGroup, the buyback could be a good lever to create value in favor of the shareholders. Therequested proxy shall comply with the following requirements: a) duration: 18 months after thefirst day subsequent to approval by the Shareholders’ Meeting; b) maximum number ofordinary shares that may be purchased: 20,000,000, equal to about 4.9% of Share Capital; c)the price of each share buyback must neither be 10% higher nor 10% lower of the referenceprice registered by ordinary shares in the regulated market trading session prior to eachoperation.
Proposal of stock option plans to the Shareholders’ Meeting
Considering the recent modifications of the legislation regarding the benefits based onfinancial instruments addressed to employees, the Board of Directors has decided to proposeto the Ordinary Shareholders Meeting to transform the existing 2007 and 2008 phantom stockoption plans into a “2009 extraordinary stock option plan” as well as to approve a new stockoption plan for year 2009.
Call for Ordinary Shareholders Meeting
The Ordinary Shareholders’ Meeting has been called to be convened on April 22 2009, at 11a.m in Rome, via Piemonte 64, by the seat of F.I.E.G. and, if necessary, in second call on thesubsequent day, same venue and time, to discuss and vote the following agenda:Financial statements for the year ended 31 December 2008; proposal not to distribute anydividend on the 2008 net profit; appointment of the Board of Directors and Board of StatutoryAuditors; proposal to revoke and to confer a new proxy to the Board of Directors to purchaseown shares; 2009 stock option plans.
Company’s contacts
The text of this press release is also available on the company’s website www.gruppoespresso.it.
Contact for additional information: Stefano Mignanego, Direttore Centrale Relazioni Esterne,(General Director for External Relations) telephone number 06/84787434, e-mail addresss.mignanego@gruppoespresso.it
Roma, February 25, 2009
