ECONOMIC AND FINANCIAL RESULTS OF THE GROUP AS OF DECEMBER 31 2017
REVENUES: €633.7MN (+8.2% on 2016)
EBITDA: €53.2MN Significantly higher than in 2016 (€43.7MN) even with equivalent consolidation perimeter (€46.1MN)
NET RESULT BEFORE EXTRAORDINARY TAX CHARGE A POSITIVE €19.1MN
IMPACT OF TAX CHARGE €143.2MN
NET DEBT AT €115.1MN AFTER TAX PAYMENT OF €140.2MN
Rome, March 5 2018 – Today in Milan, under the chairmanship of Marco De Benedetti, the Board of Directors of GEDI Gruppo Editoriale S.p.A. met and approved the consolidated results for the year ended December 31 2017 as presented by Chief Executive Officer Monica Mondardini.
Economic and financial results of the GEDI Group as of December 31 2017
The results for 2017 include a an extraordinary tax charge of a significant amount because during the year the Company decided to settle a dispute pending in the Court of Cassation, which referred, as explained to the market in detail in the Company’s various Financial Reports, to disputes contesting tax avoidance in relation to tax benefits resulting from the corporate reorganization of Gruppo Editoriale L’Espresso carried out in 1991.While reiterating its certainty as to the legitimacy from the legal and fiscal standpoint of the said reorganization, which was censured by the Tax Authorities, on September 29 2017 the Board of Directors of GEDI Gruppo Editoriale SpA voted to avail itself of the right given by Art.11 of DL no. 50/2017, transposed into law no. 96/2017, to settle the tax dispute that was the subject of ruling no. 64/9/2012 of the Rome Regional Tax Commission.
This involved the Company having to pay she sum of €175.3mn, of which €140.2mn was paid in 2017 with the remaining €35.1mn payable by June 30 2018. An unfavourable outcome for the Company of the dispute pending in the Court of Cassation would have involved a charge of €388.6mn according to evaluations made at June 30 2017.
The net loss from the settlement of the dispute in the terms described above came to €143.2mn and the amount was fully covered by available equity without having to use the share capital.
Given that the Company had the requisites and the means to make the said disbursement financially and economically sustainable, the Board of Directors decided that the settlement was in the Company’s interests as it had the benefit of removing a possible financial risk with serious potential financial consequences in the medium/long term, which would certainly have had a much greater impact that the solution that was decided upon.
Economic and financial results of the GEDI Group for the year ended December 31 2017, presentation of the figures with an equivalent consolidation perimeter
June 27 2017 saw the completion of the merger into GEDI of the ITEDI Group, publisher of the newspapers La Stampa and il Secolo XIX, giving rise to the main publishing group in Italy in the daily newspaper sector.
The merger was implemented by means of a share capital increase, subscription of which was reserved for Fiat Chrysler Automobiles N.V. (“FCA”) and Ital Press Holding SpA (“IPH”), which was paid in by the latter with a contribution in kind of shareholdings the total of which represented the entire share capital of Italiana Editrice SpA.
With this transaction GEDI acquired control of the ITEDI Group, which entered its consolidation perimeter on June 30 2017; therefore the income statement of the GEDI Group for the year 2017 includes the ITEDI Group as from July 1.
As an operation paving the way for the merger, bringing the group within the concentration limits laid down by current legislation for the newspaper sector, in the fourth quarter of 2016 the Group deconsolidated 5 local newspaper titles by selling 4 of them (Alto Adige, Il Trentino, Il Centro and La Città di Salerno) and leasing out the remaining one (La Nuova Sardegna). The income statement for 2016 still contained a significant contribution by the newspapers that were transferred only towards the end of the year.
Therefore, the consolidation perimeter for the year 2017 is significantly different from that of 2016.
In order to guarantee that the figures are comparable, an income statement for 2016 was produced with an equivalent consolidation perimeter, i.e. without the results of the newspapers sold or leased and with the results for the second half of the ITEDI Group.
Performance of the market
After the slight recovery in 2016, in 2017 advertising investment showed a decline of 2.1% on the previous year (Nielsen Media Research figures).
A positive performance was reported only by radio, which posted growth of 5.4% confirming the positive trend under way since 2015, and the internet which, excluding search engines and social media, reported slightly higher advertising orders (+1.7%). Television posted a decline of 1.6% and the printed press was down by 7.1%, with newspapers reporting -7.7% (-9.0% for national and -6.7% for local advertising) and magazines -6.2%.
As for newspaper circulation figures for 2017, according to ADS figures (Accertamento Diffusione Stampa) there was a decline in sales on the newsstands and by subscription of 8.8%, a figure substantially in line with that of the previous year.
Performance of operations of the GEDI Group in financial year 2017
Consolidated revenues, totalling €633.7mn, rose by 8.2% compared to 2016 and remained substantially unchanged with an equivalent consolidation perimeter (-0.1%).
Circulation revenues came to €201.7mn and were slightly higher (+0.8%) than those of the previous year but were 7.1% lower with an equivalent consolidation perimeter, in a market that, as stated above, has continued to experience a significant reduction in newspaper circulation (-8.8%).
Advertising revenues rose by 13.7% compared to 2016. With an equivalent consolidation perimeter the growth was 5.7%, with a decline of 3.3% for the Group media and a significant increase of third-party concessions, thanks to the new concessions of Radio Italia and the newspapers La Stampa and il Secolo XIX (whose national advertising was transferred to the Group at the beginning of 2017 and for the first half of the year was classified as third-party because the merger took place half way through the year).
As for the Group media, advertising orders for radio grew by 5.0%, confirming the positive trend already seen in the previous year.
Internet sales showed growth of 9.9% (+2.3% with an equivalent consolidation perimeter), reporting a better performance than that of the market.
Lastly, orders for the printed press rose by 4.8% (-7.3% with an equivalent consolidation perimeter, in line with the general trend of newspaper advertising).
Costs, excluding optional products and third-party concessions, increased by 1.4% but fell by 5.4% with an equivalent consolidation perimeter. More specifically, fixed industrial costs were lower (-12.8%), thanks to the ongoing reorganization of the production structure of the Group, logistics and distribution costs were down (-11.0%), due to the rationalization of transportation, as were editorial costs and operating and administrative costs (by -3.3% overall), thanks to the measures adopted to contain labour costs and general expenses.
The consolidated gross operating margin came to €53.2mn, which was significantly higher than the figure for 2016 (€43.7mn), even with an equivalent consolidation perimeter (€46.1mn).
Consolidated operating income came in at €28.7mn, higher than the figure for 2016 (€22.4mn), even with an equivalent consolidation perimeter (€22.5mn).
Tax expense totalled €150.5mn because of the charge of €143.2mn incurred for settling the dispute described above.
The result of discontinued operations and those held for disposal includes €8.2mn referring to the deferred payment of consideration for the sale of All Music to Discovery in January 2015.
The consolidated net result was a loss of €123.3mn as an effect of the above-mentioned tax charge, compared to net income of €10.4mn in 2016.
Net debt stood at €115.1mn at December 31 2017, after the tax payment of €140.2mn made to settle the dispute.
The Group had 2,445 employees at the end of 2017 including temporary contracts, of which 523 from the ITEDI Group.
***
The Company’s Director of Administration and Accounts, Mr Gabriele Acquistapace, the Executive responsible for the preparation of the company’s Financial Statements, hereby attests in compliance with the terms of paragraph 2 of Art. 154-bis of the “Testo Unico delle Finanze” (Finance Consolidation Act) that the figures contained in this press release correspond to the results documented in the Company’s accounts and general ledger.
The Financial Statements for 2017 of the Parent Company
The revenues of the Parent Company came in at €237.1mn (€263.3mn in 2016). The operating result was a negative €5.0mn (-€6.5mn in 2016). The net result was a loss of €116.6mn (net income of €17.4mn in 2016).
Proposals to put before the Annual General Meeting of the Shareholders
The Board of Directors will propose to the Annual General Meeting of the Shareholders convened for April 26 2018 that the loss for the year of €116,571,802.69 be covered entirely by the available reserves recorded in the financial statements as of December 31 2017.
At the Annual General Meeting it will also be proposed that the AGM cancel and renew its authorization of the Board of Directors, for a period of 18 months, to buy back a maximum of 20 million of the Company’s own shares at a unit price that cannot be more than 10% higher or lower than the official price of the shares recorded in the trading session on the regulated market prior to that of each individual transaction or the date on which the price is fixed, and in any case when the buybacks are effected on the regulated market, at a price no higher than the higher of the price of the last independent transaction and the highest current independent bid price on the same market in accordance with what is laid down in EU Delegated Regulation no.2016/1052.
The main reasons why this authorization is being renewed are the following: to fulfill obligations from possible stock option plans or other awards of the Company’s shares to employees or members of the Board of Directors or the Board of Statutory Auditors of GEDI or any of its associated companies; to fulfill any obligations resulting from debt instruments that are convertible into or exchangeable with equity instruments; to have a portfolio of shares to use as consideration in extraordinary transactions, even those involving share exchanges, with other entities in deals of interest to the Company (as treasury stock); to engage in activities supporting the liquidity of the market; to take advantage of any opportunities to create value and to invest liquidity efficiently in relation to the market trend; for any other purposes that the competent Authorities should qualify as market practices permitted as per the terms of applicable European and domestic regulations, and following the procedures established therein.
Verification that the directors and statutory auditors have the requisites of independence
The Board of Directors verified the existence of the requisites of independence of the Directors, confirming that Mr Massimo Belcredi, Ms Agar Brugiavini, Mr Alberto Clò, Ms Silvia Merlo, Ms Elisabetta Oliveri, Mr Luca Paravicini Crespi and Mr Michael Zaoui can indeed be qualified as independent. The Board also verified the requisites of independence and integrity of the members of the Board of Statutory Auditors.
Main events that have occurred since year end and outlook for this year
As far as the evolution of the early months of 2018 is concerned, evidence available to date does not make it possible to forecast any market developments that are significantly different from those that characterized the year 2017. In this context the Group will be committed to achieving all the benefits deriving from the merger with ITEDI, to the development of its digital activities and to the implementation on a permanent basis of rationalization policies aimed at preserving profitability in a market that is structurally difficult. After the close of the year the Company received a binding offer for the acquisition of Persidera, of which it holds 30%. The offer was not considered to be in line with expectations and was thus rejected. Contacts with other investors are currently in progress and any offers made will be evaluated by the Company.
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