Gruppo Editoriale L’Espresso: the Board of Directors approves consolidated financial statements as of March 31, 2011

“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 results as of March 31, 2011

CONSOLIDATED REVENUES, GROWING BY 4%, AMOUNT TO € 222,2MN OPERATING PROFIT, GROWING BY 30%, AMOUNTS TO €27.6 MN

NET INDEBTEDNESS REDUCED TO
€108,4 MN (€ 135MN AT END 2010)

Espresso Group financial results as of march 31, 2011

(€mn) Consolidated data

Jan-Mar

2010

Jan-Mar

2011

Delta%

2011/2010

Revenues, of which:

213.6

222.2

+4.0%

·          circulation

88.1

88.2

+0.1%

·          advertising

121.6

127.6

+5.0%

·          other revenues

3.9

6.3

+62.1%

Gross operating Profit

30.4

36.8

+20.9%

Operating Profit

21.2

27.6

+30.0%

Pre-tax Profit

20.4

23.8

+16.8%

Net Profit

12.1

13.1

+8.1%

(€mn)

December 31

2010

March 31

2011

Net Financial Position

(135.0)

(108.4)

Shareholders’ Equity including minority interests

543.3

557.1

·          Shareholders’ Equity

539.4

553.2

·          Minority interests

3.9

3.9

Employees

2,789

2,792


Rome, April 20, 2011
– The Board of Directors of Gruppo Editoriale L’Espresso S.p.A. met today in Rome under the chairmanship of Mr. Carlo De Benedetti and approved the Consolidated Financial Statements as of March 31, 2011.

Market outlook
The Italian economy scenario of year 2010 was characterized by weak signs of growth and scarce visibility over the macro-economic perspectives, and this situation is stretching over year 2011.
This framework reflected over the advertising market that, in the first two months of year 2011, has recorded a 2% decline vis-à-vis the corresponding period of 2010 (Nielsen Media Research).
Performance – even if still of very little meaning as this is the first two-month-period of the year – has resulted quite uneven in the various economic sectors and media: the Internet is the only medium which has markedly increased (+15.5%), while radio and TV have substantially confirmed their performances of the corresponding period of year 2010 (+1% and -0.5%, respectively), and the publishing sector has still suffered a decline (-7.4%).
More specifically, daily newspapers sales have recorded an 8.7% decline, both in national (-12.8%) and in classified advertising (-4.5%); a more limited, still noticeable, decline has involved the periodicals sector (-4.3%).
As regards circulation, the only data (Fieg) available on daily newspapers show that, in the first two months of 2011, total circulation has confirmed a substantially stable situation (-0.4%).

Comments on the Espresso Group results in the first quarter of 2011
The Group’s consolidated revenues amount to €222.2mn, increasing by 4% vis-à-vis the first quarter of 2010 (€213.6mn).
Circulation revenues
amount to €88.2mn, in line with the corresponding period of the previous year (+0.1%).
The performance of circulation revenues shows that sales of la Repubblica, periodicals and add-on products have confirmed their stable resiliency; circulation of local daily newspapers has recorded a more limited result, still, its impact on revenues has been more than largely offset by the price increase applied, early in the year, to 7 of the Group’s 18 local titles.
Advertising revenues
, equal to €127.6mn, have increased by 5% over the first quarter of year 2010, bucking the trend with respect to the critical market  performance.
The publishing sector, as regards both daily newspapers and periodicals, has shown good resistance (+0.3%), in an area that is still suffering (-7.4% in February); the improved situation reflects the good performance of la Repubblica and the successful relaunch of L’Espresso.
The Internet advertising sector has realized a very positive evolution, recording a 15% increase in line with this sector dynamics. After substituting All Music tv station at the end of year 2009, and attaining a definite increase (+29.4%), DeejayTv has maintained its lively trend, confirming that the channel repositioning has proved valuable.
Lastly, radio advertising sales, including third-party sales, were up 3.6%
Other revenues
, equal to €6.3mn, have increased by over 50% with respect to the first quarter of 2010, thanks to the first outcomes of the renting of terrestrial digital frequency bands to third operators.
Total operating costs
have recorded a 1% increase, fully ascribable to the development of digital editions and terrestrial digital network; costs of the traditional core business (publishing and radio), after a 17% reduction realized at December 31, 2010, are showing a further 1% decline, as structural reductions of costs have offset increases in paper costs, postal service, and higher promotion costs aimed at supporting products.
The consolidated Gross Operating Profit amounts to €36.8mn, increasing by 20.9% vis-à-vis €30.4mn of the first quarter of 2010.
The consolidated Operating Profit amounts to €27.6mn, increasing by 30% with respect to €21.2mn of the corresponding period of the previous year, and shows profitability equal to 12.4% (9.9 % in the first quarter of 2010). All the Group’s main activities have improved.
Net financial expense
is €3.8mn vis-à-vis €0.8mn in the first quarter of 2010, which had recorded capital gains from disposal of investments equal to €3.5mn.
The consolidated Net Profit has realized a €13.1mn profit, as compared to €12.1mn in the first quarter of 2010.
The consolidated financial position
shows further considerable improvement, from -€135mn at the end of 2010, to -€108.4mn as of March 31, 2011, with a €26.6mn net cash flow (€8.2mn in the first quarter of 2010). A the end of March 2011, the Group staff – including term contracts – totaled 2,792 people, in line with end of 2010 results. The average staff of the period is 5.9% lower than in the first quarter of 2010.

*****
Alessandro Alacevich, Central Director of Finance Administration, dirigente preposto alla redazione dei documenti contabili societari (manager in charge of drafting accounting and corporate records), pursuant to subparagraph 2 article 154bis of Testo Unico delle Finanze (Fianance 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
The first months of 2011 are again disclosing a difficult market situation for the publishing sector, characterized by stagnation of the advertising sector, and circulation dynamics that are confirming the same slight erosion experimented over the latest years, even if mitigated by a renewed interest in print products. The persistence of a low growth of economy and the scarce visibility over the macro-economic perspectives do not enable to foresee any market trend which could be notably different from the present ones.
In this framework, as the improving results of the first quarter are showing, the Group is going on with the activity aimed at fighting against any unfavorable trend of the reference sector, through a series of interventions to be carried out on the traditional products, developing the digital sector, good dynamics of the concessionaire and uninterrupted attention to cost reduction.
All along the first quarter of 2011, a totally new version of L’Espresso was launched; the vast program to renew the Group’s 18 local daily newspapers was launched starting with Il Piccolo and Il Messaggero Veneto, with interventions on formats, graphics, and full color. Finally, the launch of the new edition of Velvet has been implemented.
As regards the digital sector development, in the classic web was launched the new brand “D” site dedicated to the women on Tablets, while new versions of L’Espresso and Velvet have been especially conceived for these platforms.
Moreover, consistently with the plan to switch off towards terrestrial digital transmission, the Group is carrying out its development of network infrastructure for its two multiplexes, and the commercialization of the available transmission capability.
All the above-mentioned activities, together with the foreseen cost reduction interventions, should enable the Group – in the absence of market evolutions markedly different from the hypothesized ones – to realize a performance in revenues and results, which are improving with respect to the previous year.

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