Gruppo Espresso: the Board of Directors approves the consolidated results as of June 30 2014





Rome, July 23 2014 – Today in Rome, under the chairmanship of Mr Carlo De Benedetti, the Board of Directors of Gruppo Editoriale L’Espresso S.p.A. met and approved the consolidated results as of June 30 2014 as presented by the Chief Executive Officer, Ms Monica Mondardini.

Performance of the market

In the first half of 2014, in a general economic climate that remains critical, the publishing sector continued to report negative performance, which affected both advertising orders and the circulation of newspapers and magazines.

In the first five months of this year, the negative trend that has characterized advertising investment for the last five years continued, albeit at a less intense rate: according to Nielsen Media Research figures, overall advertising investment in the period from January to May declined by 3.9% compared to the same period of 2013, but still with more significant reductions in advertising expense particularly in the sectors of telecommunications, fashion and cosmetics.

The evolution of advertising differed according to the various categories: advertising orders for television and radio were substantially in line with the same period of 2013 (-0.7% and -0.3% respectively), while that of the printed press suffered a further double-digit decline (-12.4%), which affected both newspapers and magazines (-12.8% and -11.6%) and advertising both at national and at local level (-13.2% and -10.0%). The slight downturn in internet advertising seen in the early part of the year has, surprisingly, continued (-2.1%).

As for circulation, ADS (Accertamento Diffusione Stampa) figures for the period from January to May 2014 show a decline in the sale of newspapers of 11.7%; it should be noted that at the same time digital subscriptions to the newspapers have been rising, but this increase does not compensate at present for the fall in the number of copies sold in the traditional format through the traditional channels.

Performance of operations of the Espresso Group in the first half of 2014

Despite the negative evolution of the market, which has had a significant effect on revenues, the Group closed the first half of the year with a slightly positive result that was in line with that of the same period of last year. The consolidated net revenues of the Group came in at €332.5mn, posting a decline of 10.0% compared to the first half of 2013 (€369.4mn).

Circulation revenues, which came to €114.8mn, showed a decline of 6.8% compared to the same period of last year (€123.2mn), in a market that, as stated earlier, is continuing to experience a significant reduction in the circulation of newspapers (-11.7%).

On the basis of the latest ADS figures (May 2014), la Repubblica confirms its ranking as number one newspaper in terms of copies sold on the newsstands, subscriptions and other.

Growth is also continuing in the number of subscriptions to the digital products of the newspaper (Repubblica+ e Repubblica Mobile): the average number of subscribers in the first half rose by 16.1% compared to the same period of 2013 and at the end of June were in the region of 80 thousand.

The local papers performed better in terms of circulation than the sector in general and they too saw a gradual increase in the number of digital copies, although to a less significant extent than the national newspaper. Overall the Group at the end of June had more than 100 thousand subscribers to the digital editions of its publications. The advertising revenues from the Group’s media reported a decline of 7.8% (-10.2% including third party concessions, following changes to the perimeter).

By sector, the printed press reported a decline in adverting orders of 11.2%, with a slightly lower contraction that that of the whole segment (-12.4% in May).
The radio stations, however, substantially held up, +0.1% (-0.3% for the market in May).

Lastly, internet advertising orders declined by 0.9%, which was less than the market (-2.1% in May). On this subject it should be noted that performed excellently, its average Total Digital Audience in the period January – March, according to a new Audiweb survey, amounting to 1.6 million unique users per day, confirming its leadership among the Italian news sites with a 35% lead over the second ranking site. Growth in the audience of the local newspaper websites was also significant (+18% just for PC access), with an average Total Digital Audience in the period January-March of 380 thousand unique users per day.

Costs fell by 8.3% which was substantially equivalent to the fall in revenues. More specifically there was a decline in industrial overheads, thanks to the continuing of the reorganization of the production structure of the Group, a decline also in distribution costs due to the rationalization of transport, and a reduction in operating and administrative costs mainly as a result of the measures adopted to cut labour costs.

The consolidated gross operating margin came in at €33.7mn, in line with the €33.3mn reported in the first half of 2013.

By area of activity, the newspaper and magazine sector held up in terms of profitability, internet substantially maintained its result despite the weakness in the advertising market and the investments made to develop it, while radio showed a slight recovery. The consolidated operating result was €17.9mn, in line with the €17.8mn of the same period of last year.

The consolidated net result was net income of €3.8mn, versus €3.7mn in the first half of 2013.
The consolidated net debt, which amounted to €66.8mn at June 30 2014, showed a further reduction from the €73.5mn reported at the end of 2013 and the €86.1mn at June 30 2013; the financial surplus for the period was €6.7mn.

The Group had 2,391 employees, including temporary contracts, at the end of June and the average number of employees in the period was 4.5% lower than in the first half of 2013.


The company’s Director of Administration and Accounts, Mr Gabriele Acquistapace, the Executive responsible for the preparation of the company’s financial statements and corporate documents, 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.


Main events  which have occurred since the close of the first half and outlook for the rest of the year

In the first five months of the year the publishing sector has once again been showing signs of recession in relation to both circulation and advertising.

Regarding circulation, the decline in hard copy sold on the newsstands has been continuing; at the same time a good development can be seen in digital subscriptions, the revenues from which are however insufficient to compensate for the decline in revenues from the traditional channel. As for advertising, the fall in total investment by the market has become less pronounced for television and radio in particular; while the performance of orders for the printed press remains extremely critical.
In this context, the Group managed to achieve a slightly positive net result for the first half of 2014, maintaining its profitability in line with that of last year, thanks to the continuing reduction of structure costs. Regarding the outlook for the whole year, this will be strongly dependent on the trend of the advertising market, which still appears to be uncertain. During the first half of the year the Group successfully completed two deals of strategic importance: the integration with Telecom Italia Media of its network operator activities and the refinancing of the Company, in view of the maturity of the ten-year bond in October of this year. On June 30, after receiving the authorizations required by the regulations applicable, the integration was completed of the digital terrestrial network operator activities of the subsidiary  Rete A and Telecom Italia Media Broadcasting (TIMB), controlled by Telecom Italia Media. This deal gives rise to the largest independent network operator in Italy, equipped with five digital multiplexes (three belonging to TIMB and two to Rete A) with an infrastructure with national coverage, which is very broad-reaching, and is able to supply services of a very high standard in terms of quality. On April 2 a five-year Convertible Bond was placed with investors for a nominal €100mn. It has an interest rate of 2.625% and a conversion price set at €2.1523 per share. The Bonds will be convertible into Shares subject to approval by the Extraordinary General Meeting of the Shareholders, which has been convened for July 23 2014, of a share capital increase. During the placement process requests were received for over €500mn, which confirms the confidence that investors have in the Espresso Group. With the completion of this deal, the Group has refinanced its business activity not only through the above-mentioned issue of Convertible Bonds, but also through programs for the sale of the receivables of A. Manzoni & C. involving both factoring deals (already entered into) and securitization deals (which are currently being finalized), being able also to count on significantly lower interest expense from 2015 onwards compared to that of today.

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