“Price sensitive” according to Testo Unico della Finanza (Finance Consolidation Act) and CONSOB Regulations
GRUPPO EDITORIALE L’ESPRESSO S.P.A.
The Board of Directors examines the consolidated financial results as of December 31, 2011
CONSOLIDATED REVENUES AT €890.1 MN (+0.6%)
CONSOLIDATED OPERATING PROFIT GROWING AT €119.8 MN (+9.8%)
NET INDEBTEDNESS DECREASING AT € €110.2 MN
PROPOSED DISTRIBUTION OF DIVIDEND OF €0.0629 PER SHARE
Espresso Group financial results as of December 31 2011
Consolidated data (€mn) | Year 2010 | Year 2011 | Δ% 2011/2010 |
Revenues, of which: | 885.0 | 890.1 | +0.6% |
· circulation | 334.2 | 326.9 | -2.2% |
· advertising | 528.4 | 534.7 | +1.2% |
· other | 22.4 | 28.5 | +27.0% |
Gross operating Profit | 147.2 | 157.0 | +6.6% |
Operating Profit | 109.1 | 119.8 | +9.8% |
Pre-tax Profit | 95.0 | 104.8 | +10.2% |
Net profit | 50.1 | 58.6 | +17.0% |
(€mn) | December 31 2010 | December 31 2011 |
Net Financial Position | (135.0) | (110.2) |
Shareholders’ Equity including minority interests | 543.3 | 565.0 |
· Shareholders’ Equity | 539.4 | 563.3 |
· Minority interests | 3.9 | 1.7 |
Employees | 2,789 | 2,673 |
Market outlook
The weak signs of economic growth recorded in year 2011 and the increasingly negative expectations matured all along the year, have induced a 3.8% contraction of advertising investments vis-à-vis year 2010 (Nielsen Media Research).
This negative performance has affected all the traditional media: TV has experienced a 6.1% decline –which, however, has neither affected the digital channels nor the satellite TV – and radio and publishing have respectively decreased by 7.8% and 6.3%. In contrast, advertising revenues have increased in the new media, with a decisive growth of the Internet (+12.3%) and digital terrestrial channels, which have substantially doubled revenues. More specifically, as far as print media are concerned, daily newspapers advertising revenues have recorded a 7.7% contraction, that is -5.8% in paid newspapers, and a sharp decline in free press; periodicals have experienced a more limited (-3.7%) decline, also to be ascribed to the fashion sector satisfactory performance.
In terms of circulation, ADS data (moving average over 12 months to November 2011 on a like-for-like basis) show a downturn in newsstand sales equal to 4.7% for dailies, 3.6% for weeklies and 6% for monthlies.
Comments on espresso group results in 2011
In spite of the above scenario, in 2011 Espresso Group has recorded a positive performance, confirmed by an increase in revenues and financial results. The Group’s consolidated revenues amount to €890.1mn – slightly increasing (+0.6%) vis-à-vis year 2010 (€885mn) – thanks to both advertising and digital product revenues.
Circulation revenues amount to €326.9, that is -2.2% with respect to €334.2mn of the previous year.
According to sectorial data, la Repubblica confirms its supremacy as Italy’s most-read information daily, in newsstand sales (ADS November 2011) and in number of daily readers (Audipress).
Circulation of local daily newspapers has recorded a weaker performance, thus reflecting the general market evolution which has produced a more severe decline in this sector than in the national dailies sector, also in connection with the key role that economic issues play when it comes to select information. Revenues have, anyhow, benefited from the price increase applied to 10 out of the 18 Group’s local titles.
Advertising revenues, equal to €534.7mn, have increased by 1.2%, as compared to year 2010, bucking the trend with respect to the negative market performance.
Advertising sales of the Group’s print media sector have suffered a slight decline (-1.9%), however, the market has experienced a far more severe downturn (-6.3%); all the Group’s titles (la Repubblica, local dailies and periodicals) have proved their resiliency, also thanks to the publishing initiatives adopted in particular with L’Espresso, Velvet and various local daily newspapers.
Internet advertising sales have realized a positive evolution, recording a 14.4% increase, supported by the dynamic growth of the Group’s website audience (+20.9%, with a yearly average of 1.8 million daily unique users – Audiweb/AWDB); in particular, la Repubblica.it has confirmed its leadership (+20.8%, with a yearly average of 1.6 million daily unique users) while the development of local websites and the launch of the new women’s website have been successful.
Finally, radio advertising sales, including third-party sales, have recorded a 6.8% decrease that is lower that the market downturn (-7.8%).
Other revenues, equal to €28.5mn have increased by 27% with respect to year 2010, thanks to the outcomes of the renting of digital terrestrial television band, and to the first positive growth of subscriptions to digital products.
Total operating costs have recorded a 0.6% increase, fully ascribable to the sectors experiencing a vigorous development (digital editions and digital terrestrial television network); costs of the traditional core business (print media and radio), after a 17% decrease attained as of December 31, 2010, show a further 1.2% cost-saving: in fact, structural cost reduction has largely offset increases in both paper costs and higher promotion expense, essential to support products.
The consolidated Gross Operating Profit amounts to €157mn, increasing by 6.6% with respect to €147.2mn of year 2010.
The consolidated Operating Profit amounts to €119.8mn, increasing by 9.8% with respect to €109.1mn of the previous year, and shows a margin of 13.5% (12.3% in year 2010).
The print media sector performance has been stable, in spite of the unfavorable scenario: further cost reduction has almost totally offset both the slight downturn in revenues and the cost increase in production material and product promotion.
The digital media sector – which is facing cost increases linked to the Group’s efforts made for product development and promotion – is recording a positive evolution in operating profit, thanks to the vigorous growth in revenues. The radio sector, still keeping high profitability (37.1%), is recording a slight downturn in operating profit, as a consequence of the decrease in revenues ascribable to the weak advertising sector.
The consolidated Net Profit has reached €58.6mn, as compared to €50.1mn of year 2010.
In 2011, before dividend distribution and share buyback, net cash flow was equal to €60.5mn, vis-à-vis €58.3mn of the previous year (plus €15mn of capital gains from disposal of investments).
Taking into account dividends amounting to €29.8mn and share buyback equal to €6mn, the consolidated net financial position – amounting to -€135mn at the end of year 2010 – has attained -€110.2mn as of December 31, 2011. The Group staff – including term contracts – has decreased to 2,723 people at the end of December 2011, and the average staff of the period is 5.1% lower with respect to year 2010.
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Alessandro Alacevich, Central Director of Finance and Administration, Manager in charge of drafting corporate and accounting records, pursuant to subparagraph 2 article 154bis of Testo Unico delle Finanze (Finance Act) states that the accounting information included in this press release corresponds to the documented results, the books and the accounting records.
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2011 Financial statements of the parent company
The Parent Company revenues amounted to €459.6mn, basically in line with €462.7mn of year 2010 (-0.7%). Operating Profit reached €63.6mn (€48.3mn in the previous year) with 13.8% profitability. Net Profit amounted to €64.5mn (€58.3mn in year 2010).
Proposed distribution of dividend
The Board of Directors has deliberated to propose to the Shareholders’ Meeting, to be held on April 23, 2012, to distribute a dividend of €0.0629 per share, gross of withholding tax, corresponding to a total amount of €24,985,379.28. Dividend ought to be paid on May 24, 2012, against detachment of coupon n. 14 that should be performed on May 21, 2012.
Subsequent events and outlook
In year 2011, the publishing sector has experienced unfavorable conditions: circulation has confirmed the same erosion suffered over the latest years and advertising sales, after a slight recovery recorded in year 2010, have experienced a new downturn.
In view of the worsening global situation and uncertainty still pervading the macro-economic perspectives, the recent market performance will most likely persist and probably further deteriorate, in particular as regards advertising sales.
The Group is prepared to face the challenges of year 2012; in fact, it can rely upon a sound profitability and a significantly decreased indebtedness, produced by the reorganization, cost reduction and product development measures implemented over the last three years.
Moreover, the Group has already planned a number of new measures that in year 2012 will produce important improvements in products and efficiency. As regards investments in products, in the first two months of 2012 the Group has implemented a number of initiatives: launch of a completely revamped version of Il Tirreno, agreement with Huffington Post Media Group in order to realize the website Italian edition, launch of the English version of “D” (the women’s website), revamping of the Deejay Tv editorial content, implemented through an agreement with Disney’s Abc Family.
In order to realize cost reduction, the Group has adopted since 2011 a number of measures which will enable to attain €25mn cost-savings within year 2012. Despite all the foregoing the economy is experiencing severe criticalities, and their heavy impact on the activities of Gruppo Espresso lead to foresee a significantly positive net profit for year 2012, though markedly lower with respect to year 2011.
Moreover, the structural nature of the ongoing crisis requires the Group to adopt additional measures aimed at safeguarding its economic soundness over the short and medium term.
Finally, it should be noted that in January 2012, as part of the measures adopted to optimize its financial management, the Group has finalised a partial buy-back of bonds for a total nominal value of €28.8mn, at 99.85% of the nominal value.
