The Board of Directors of Gruppo Editoriale L’Espresso S.p.A. met today in Rome at 11:00 under the chairmanship of Mr. Carlo De Benedetti and approved the consolidated results of the first nine months of 2009.
Market outlook
The results attained by the Espresso Group over the first nine months of 2009 are to be analysed in the framework of the severe crisis that is currently weighing on the economy and the reference market. In particular, the recession has produced a significant contraction of the advertising market (-16.4% over the first eight months of 2009) that – though with different weights – has affected the entire media sector. The publishing sector, with a decline of 23.9%, has most severely suffered; the paid-for dailies decline was somehow less important (-20.2%), while the reduction recorded for the magazines (-28,8%) and the free dailies (-27,4%) was sharper. The radio sector has likewise shown a significant decline (-15.8%), still less severe than the publishing sector’s, while the performance is still positive as far as the Internet sector is concerned, with an upward performance equal to 6.2%. As far as trend is concerned, with respect to 2008 the decline in advertising investments is gradually decreasing; however, this is due to investments progressively weakening during 2008 and not to a market recovery. Alongside the general decline in consumption, circulation of daily newspapers and magazines has equally recorded a slowdown: the decline was respectively 6.5% in daily newspapers, 7.2% in weekly magazines and 9% in monthly titles (source/June ADS).
Gruppo Espresso first nine months of 2009 financial report The Group’s consolidated net profit over the first nine months of 2009 was €640.9mn, with a 15.9% decline over the corresponding period of 2008 (€762.3mn).
Circulation revenues, net of add-on products, amount to €206.9mn and show good resilience (-0.8% on the corresponding period of 2008) in an extremely critical market framework. Circulation revenues of la Repubblica show a slightly positive trend, thanks to the remarkable increase in newsstand sales recorded over the year. In contrast, circulation as a whole is declining, as a consequence of the – either eliminated or reduced – highly promotional, though unprofitable, circulation initiatives. Circulation revenues of local daily newspapers, as well as their newsstand sales, are in line with the corresponding period of 2008, thanks to this sector higher resilience vis-à-vis the other publishing sectors and to the enhanced performance of the Espresso Group titles vis-à-vis their competitors. Finally the magazines, which represent about 10% of the Group circulation revenues, suffered a decline of 8.1%, in line with the market trend. The decline of L’espresso was less severe thanks, also in this case, to the good newsstand performance recorded over the last three months of the year.
Advertising revenues, amounting to €344.7mn over the first nine months of the year, have declined by 22.3% with respect to the corresponding period of 2008. The decline recorded over the third quarter was not so sharp (-18% over -26.8% and -21.3% respectively, over the first and the second quarter), reflecting both the general market evolution and the progressively improving performance of the advertising Subsidiary. In particular, daily newspapers, with -17,7% over the whole period, are recording a significantly lower decrease with respect to the reference market’s. Finally, revenues from add-on products have decreased by 15.7% to reach €77.6 mn; anyhow this is to be considered as a positive performance as it was attained in a market which has recorded a much sharper contraction.
The Consolidated Gross Operating Profit amounts to €60.7mn vis-à-vis €125.9mn of the first nine months of 2008, showing a decline of 51.8%. It must be noticed that the impact of the drastic reduction in advertising revenues was partially offset by the significant structural reduction in the operating costs (-12.1%), attained thanks to the current reorganization plan that – at full speed – will produce a cost reduction equal to 17% (-€140mn) with respect to the previous year. It must also be noticed, however, that the implementation of the abovementioned plan entailed extraordinary expense with an impact of €23,8mn on the profit and loss account of the first nine months.
The consolidated operating profit is €29.3mn (€93.9mn in the first nine months of 2009) and the consolidated net profit amounts to €1.2mn (€43.3mn in the corresponding period of 2008).
The consolidated net financial position improved from an indebtedness of €278.9mn at the end of 2008 to an indebtedness of €218.9mn as of September 30, 2009, with a financial surplus of €60mn generated by a current cash flow of €82,3mn (vis-à-vis €103.4mn in the first nine months of 2008) and by investments amounting to €21.3mn (vis-à-vis €43.7mn of the corresponding period of 2008). At the end of September 2009 the employees of the Group – including term contracts – totalled 3,174 persons, 238 less (-7%) than at the end of September 2008 and 170 less with respect to end 2008, reflecting – even if still just partially – the effects of the ongoing restructuring plans.
Consolidated results of the third quarter of 2009 The most significant consolidated results of the third quarter, compared with the results of the corresponding period of 2008, are summarized here below: The July-September period has recorded a decline in revenues less important than the one recorded in the previous months of the year (-12,5%). On the one side, as previously reported, the advertising market contraction is not so sharp (-18%), on the other side, circulation revenues show an increase of 1.2%, thanks to the positive performance in sales of la Repubblica. The operating costs evolution, showing a reduction of 12% vis-à-vis the corresponding period of 2008, is in line with the formulated plans.
The Gross Operating Profit amounts to €20.1mn and shows a decrease (-31%) with respect to the third quarter of 2008, lower than in the first half-year; the consolidated Net Profit amounts to €1.1mn (€6.9mn in the corresponding period of 2008).
Alessandro Alacevich, Central Director of Finance and Administration, dirigente preposto alla redazione dei documenti contabili societari (manager in charge of drafting the accounting and corporate records), pursuant to subparagraph 2 article 154bis of Testo Unico della Finanza (Finance Act) states that the accounting information included in this press release corresponds to the documented results, the books and the accounting records.
Expected trend of operations Over the first nine months of 2009 the market recorded a sharp reduction in advertising investments, while the performance of the latest months doesn’t show significant improvements. In the abovementioned extremely critical framework, the Group is implementing a complex plan of measures aimed at both counterbalancing the declining revenues’ impact on profitability through a substantial reduction of costs, and granting the necessary development. In particular, a number of actions aimed at cost reduction have been started that will entail structural savings equal to around €140mn, that is (-17%) with respect to 2008, that are already showing their significant effect in the results attained over the first nine months of 2009. A new impulse was given to the commercial activities that have already enabled the Group’s titles to recover competitiveness in the advertising market. In addition, the managerial skills have been strengthened in order to better enhance the development of the Group’s contents on the new platforms. Finally, the quality of the journalistic effort of the Group’s titles is supported also by the trend of circulation that is better than the reference market’s. For the rest of the year no significant changes are foreseen vis-à-vis the reported results.
Reorganization of the existing corporate structure of the Group In the framework of the actions aimed at enhancing efficiency and efficacy in the Group’s structure at the management and organizational level, the Board of Directors has approved the proposed merger of Editoriale Metropoli S.p.A. (the subsidiary in charge of the editorial contents of "Velvet" and of parmaonline.it and metropoli.it websites, entirely owned by Gruppo Editoriale L’Espresso S.p.A.) into Gruppo Editoriale L’Espresso S.p.A..
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