“Price sensitive” press release in compliance with the Finance Act and Consob Regulations
GRUPPO EDITORIALE L’ESPRESSO S.P.A.
The Board of Directors approves the consolidated financial results as of September 30, 2011
CONSOLIDATED REVENUES GROWING BY 2.2%, AT € 653.7 MN
OPERATING PROFIT GROWING BY 9.7%, AT € 84.3 MN
NET INDEBTEDNESS DECREASING AT € 112.4 MN
(€ 135.0 MNAT DECEMBER 2010)
Espresso Group financial statements as of SEPTEMBER 30, 2011
| Consolidated data (€mn) | Jan – Sept 2010 | Jan – Sept 2011 | D % 2011/2010 |
| Revenues, of which: | 639.5 | 653.7 | +2.2% |
| · circulation | 255.7 | 252.9 | -1.1% |
| · advertising | 369.3 | 380.7 | +3.1% |
| · other | 14.6 | 20.1 | +37.5% |
| Gross operating profit | 104.0 | 112.0 | +7.7% |
| Operating profit | 76.8 | 84.3 | +9.7% |
| Pre-tax profit | 67.0 | 73.5 | +9.7% |
| Net profit | 36.3 | 41.4 | +14.0% |
| (€mn) | September 30 2010 | December 31 2010 | September 30 2011 |
| Net financial position | (136.9) | (135.0) | (112.4) |
| Shareholders’ Equity including minority interests | 534.4 | 543.3 | 550.4 |
| · Shareholders’ Equity | 524.1 | 539.4 | 548.6 |
| · Minority interests | 10.2 | 3.9 | 1.8 |
| Employees | 2,828 | 2,789 | 2,723 |
Rome, October 19, 2011 – The Board of Directors of Gruppo Editoriale l’Espresso S.p.A. met today in Rome, under the chairmanship of Carlo De Benedetti, and approved the consolidated financial statements as of September 30, 2011.
Market outlook
The weak signs of growth, which characterized the economic scenario in the first half 2011, have reflected over the advertising market that, up to August, has recorded a 4% decline vis-à-vis the corresponding period of year 2010 (Nielsen Media Research).
The negative performance has affected all the traditional media: TV has recorded a 4.7% overall decline, despite the development of digital channels; radio and print media have decreased respectively by 5.5% and 6%. Definitely bucking the trend, the Internet is the only medium which could realize, once again, a sharp increase (+13.5%).
More specifically, as far as print media are concerned, daily newspapers advertising sales have recorded a 8.3% contraction, that is equal to -5.6% in paid newspapers and a sharp decline in free press; periodicals have recorded a fairly moderate -1.8% fall.
In terms of circulation, ADS data (moving average over 12 months to June 2011, on a like-for-like basis) show a fall in newsstand sales equal to 5.3% for dailies, 1.9% for weeklies and 6% for monthlies.
Comments on the Espresso Group results in the first nine months of year 2011
In spite of the above scenario, over the first nine months of year 2011 the Espresso Group has recorded a positive evolution, showing an increase in revenues and profit.
The Group’s consolidated revenues amount to €653.7mn, growing by 2.2% vis-à-vis the corresponding period of the previous year (€639.5mn).
Circulation revenues amount to €252.9mn, that is equal to -1.1% with respect to €255.7mn of the first nine months of year 2010. The performance of circulation revenues, sensibly improved with respect to the general market evolution, confirms the relative stability of the sales of the Group’s titles (dailies, periodicals and add-on products). Circulation of local daily newspapers has recorded a weaker performance, however, revenues have benefited from the price increase applied, in particular early in the year, to 7 out of the Group’s 18 local titles.
Advertising revenues, equal to €380.7mn, have increased by 3.1% over the corresponding period of year 2010, markedly bucking the trend with respect to the negative market performance.
Advertising sales of the Group’s print sector are in line (+0.1%) with the performance recorded over the corresponding period of year 2010, in a sector which has suffered a serious downturn (-6% in August); this stability has been recorded in all the Group’s titles (la Repubblica, local dailies and periodicals) and attained also thanks to the successful renewall realized in particular with L’Espresso and a number of local dailies.
Internet advertising sales have realized a positive evolution, recording a 14.1% increase, supported by the dynamic development of the Group’s website audience (+32.4% to 1.9 million average daily unique users – AUDIWEB/AWDB), the confirmed success of the leadership of Repubblica.it (+32.6% to 1.6 million daily unique users), growth of local media (local edition of la Repubblica and local titles) and launch of a new women’s website.
Finally, radio advertising sales, including third-party sales, have recorded a 3.8% decrease, that is lower than the market decline (-5.5%, end of August). Other revenues, equal to €20.1mn, have increased by 38% with respect to the first nine months of year 2010, thanks to the outcomes of the renting of digital terrestrial television frequency bands, and to the first positive results of the digital product sales.
Total operating costs have recorded a 1.2% increase, fully ascribable to the sectors that are undergoing a vigorous development (digital editions and digital terrestrial television network); costs of the traditional core business (print and radio), after the 17% reduction realized on December 31, 2010, show a further 1.1% cost-saving, as structural reduction of costs has offset increases in paper costs and in higher promotion costs aimed at supporting products.
The consolidated Gross Operating Profit amounts to €112mn, increasing by 7.7% vis-à-vis €104mn of the first nine months of year 2010.
The consolidated Operating Profit amounts to €84.3mn, increasing by 9.7% with respect to €76.8mn of the corresponding period of the previous year, and shows a margin of 12.9% (12% in the first nine months of year 2010).
Improvement regards the print media sector, tanks to good revenue performance and to a further decline in total operating costs, in spite of the increase in production material costs and promotion costs aimed at supporting products. Moreover, the digital sector contribution keeps increasing, as determined by revenue increase, even if with higher operating costs linked to product development and promotion.
TV is likewise improving; radio, still keeping high profitability (38.4%), is recording a slight downturn in operating profit, as a consequence of a reduction in revenues ascribable to the advertising sector weakness.
The consolidated Net Profit has reached €41.4mn, as compared to €36.3mn of the corresponding period of year 2010.
At the end of September 2011, before dividend distribution and purchase of own shares, net cash flow was equal to €56.2mn, vis-à-vis €56.4mn of the corresponding period of the previous year (plus €15mn of capital gains from disposal of investments). Taking into account dividends amounting to €29.8mn and purchase of own shares equal to €3.9mn, the consolidated net financial position – amounting to -€135mn at the end of year 2010 – has attained -€112.4mn as of September 30, 2011.
The Group staff – including term contracts – totaled 2,723 people at the end of September 2011, and the average staff of the period is 5.3% lower with respect to the first nine months of year 2010.
Most significant economic results of third quarter 2011
| Consolidated quarterly results (€mn) | 3rd Quarter 2010 | 3rd Quarter 2011 | D % 2011/2010 |
| Revenues | 194.4 | 196.3 | +1.0% |
| Gross Operating Profit | 29.2 | 30.5 | +4.3% |
| Operating Profit | 20.1 | 21.3 | +5.9% |
| Pre-tax Profit | 15.6 | 17.8 | +14.0% |
| Net Profit | 7.7 | 9.9 | +28.5% |
The consolidated revenues show a 1% increase: advertising revenues having recorded a 1.9% increase, and circulation revenues, including add-on products, a 1.8% decline, while other revenues show a 25.6% progression.
The consolidated operating profit amounts to €21.3mn vis-à-vis €20.1mn of third quarter 2010; the consolidated net profit is equal to €9.9mn (€7.7mn in the corresponding period of year 2010).
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Alessandro Alacevich, Central Director of Finance 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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Subsequent events and outlook
In year 2011, the publishing sector has faced a difficult market situation, characterized by a significant fall in advertising sales, while circulation dynamics have confirmed the same erosion suffered over the latest years.
During the third quarter of the year, the worsening global situation, and uncertainty still pervading the macro-economic perspectives, make any improvement expectation – regarding the market performance with respect to the recorded performances – unpredictable for the final part of the year, besides further hampering visibility on the medium term evolution of the advertising market. In this framework, as demonstrated by the improved performance of the first nine months of the year, the Group has been successful in fighting against any unfavorable trend of the reference sector, by improving its traditional products, developing the digital sector, enhancing the concessionaire’s good dynamics, and further developing cost-saving measures.
In year 2011, a totally new version of L’Espresso was launched, together with the new edition of Velvet.
Moreover, an ambitious program was launched to renew the Group’s 18 local daily newspapers, through interventions on formats, graphics, and full color. This program has been realized for the following titles: Piccolo, Messaggero Veneto, Provincia Pavese, Sentinella del Canavese, Gazzetta di Mantova, Gazzetta di Modena, Gazzetta di Reggio, Nuova Ferrara, Mattino di Padova, Tribuna di Treviso, Nuova di Venezia e Mestre, Corriere delle Alpi, and is going to be extended to all the Group’s titles within the first half 2012.
As regards the digital sector development, the new site dedicated to the women has been launched with the brand “D” and, jointly with Bloomberg, the economic section of Repubblica.it has been totally renewed. Development on tablets has been pursued with new ad hoc versions expressly conceived for L’Espresso and Velvet.
Moreover, consistently with the national plan to switch off towards digital terrestrial television, the Group is carrying out the network infrastructure development of its two multiplexes, and further commercialization of the available transmission capacity. In view of the above, though the further worsening of the economic scenario and in absence of strong sectorial discontinuity, at the end of the current year, the Group should presumably be in a position to register improvements of results with respect to the previous year.
