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Arnoldo Mondadori Editore S.p.A. hereby informs that the Half-Year Financial Report at 30 June 2024, comprising the Independent Auditors’ report, is now available at the Company’s registered office, at the authorized storage mechanism 1info (www.1info.it) and on the website www.gruppomondadori.it (Investors section).

Today, the meeting of the Board of Directors of Arnoldo Mondadori Editore S.p.A., chaired by Marina Berlusconi, reviewed and approved the Half-Year Report at 30 June 2024 presented by CEO Antonio Porro.

“The first half of 2024 ended with solid operating and financial performance, which allows us to confirm our forecasts for FY 2024. The growth recorded by the Trade Books and Retail business units was higher than that of the Book market, with a consequent increase in the market shares in the respective areas. We also continued to develop our core businesses, focusing in particular on consolidating the Mondadori Group’s leadership in book publishing, thanks to the finalisation of the acquisition of 51% of Star Shop and the conclusion of the acquisition of 100% of Chelsea Green Publishing, which strengthens our presence in the United States and the United Kingdom”, commented Antonio Porro, Chief Executive Officer and General Manager of the Mondadori Group. “During the period, the Group also launched the PLAI, the start-up accelerator with which we aim to play a leading role in the ecosystem of generative artificial intelligence in the publishing industry”, concluded Porro.

Performance at 30 June 2024

Net consolidated revenue in the first half of 2024 amounted to € 387.2 million and showed growth of 6.8% compared to € 362.4 million in the first half of 2023. Net of the change in consolidation scope between the two periods under review, resulting from the consolidation of the company Star Shop (from 1 February 2024) and of Chelsea Green Publishing (from 1 May 2024), organic revenue growth was 3.8%.

Adjusted EBITDA for the first half of 2024 was € 40.9 million, up 7% compared to € 38.2 million in the first half of 2023, mainly thanks to the Trade Books, Retail and Media areas.

EBITDA in the first half of 2024 amounted to € 42.4 million, compared to € 40.3 million in the first half of 2023, which had benefited from the net capital gain (€ 2.9 million) linked to the sale of the brands Grazia and Icon. The improvement shown of around € 2.1 million is attributable to the favourable trend in the operating components and the recognition in the current year, in the Media area, of the release of certain provisions for risk allocated to cover liabilities that did not ultimately arise.

The Mondadori Group’s EBIT for the first half of 2024 was positive for € 12.7 million, a slight decrease (€ -1.2 million) compared to the same period in 2023, caused by higher amortisation and depreciation recorded in the period in question, for approximately € 3 million.

Neutralising extraordinary items and the impact of the Purchase Price Allocation (PPA) process, the adjusted EBIT for the period was € 15.4 million, up by approximately 5% compared to € 14.7 million in the first half of the previous year.

Financial charges recorded an overall increase of € 0.2 million, despite a reduction in bank expenses, caused by higher IFRS 16 debt.

The consolidated result before tax in the first half of FY 2024 was positive for € 9.4 million, compared to € 12.3 million in the corresponding period of 2023. The decrease of approximately € 3 million is attributable to the above dynamics, as well as the lower contribution – approximately € 1.6 million – from the earnings of associates, which in the first half of 2023 had benefited from the fair value revaluation (€ 1.3 million) of the investment in the company A.L.I. and the net capital gain (€ 0.4 million) arising from the sale of the investment in SEE (publisher of il Giornale).

The Group’s net profit in the first half of 2024, after minority interests, was positive for € 7.1 million, down by approximately € 5 million compared to the € 12.2 million in the first half of 2023. This decrease is attributable for approximately € 3 million to the non-ordinary dynamics described previously and, for the remaining € 2 million, to a greater share of the profit attributable to minority interests (€ +0.7 million) and higher tax expense.

The tax component for the first half of 2024 amounted to € -1.4 million compared to € +0.1 million in the same period of 2023: the result from the first half of 2023 had benefited from the recognition of non-taxable income or income subject to reduced taxation such as the capital gains arising from the sales of magazines and of the investment in SEE, as well as the contributions in the Media area (in FY 2023 not subject to taxation).

The Adjusted Net Profit, having neutralised extraordinary items (including capital gains) and the impacts deriving from the PPA process, was € 9 million, approximately 6% higher than € 8.5 million in the first half of 2023.

Net Financial Position excluding IFRS 16 at 30 June 2024 was € -211.9 million (net debt), an improvement of approximately € 3 million compared to € -215.2 million in the first half of 2023, due to significant cash generation by the business and despite the recognition of about € 31 million in dividends – of which 50% has already been distributed – and the cash-out for the acquisitions of Star Shop and Chelsea Green Publishing.

Net Financial Position gross of IFRS 16 at 30 June 2024 stood at € -293.3 million (net debt), from € -285.5 million at 30 June 2023, due to an IFRS 16 debt component of € -81.4 million, up by approximately € 11 million due to the renovation and development of the network of directly-managed bookshops in the Retail area, as well as acquisitions (particularly with reference to the Star Shop comic shops) finalised in 2024.

Cash flow from ordinary operations (after cash-out for financial expense and tax) in the twelve months prior to 30 June 2024 amounted to approximately € 67 million and allows the Group to continue to strengthen its financial structure.

At 30 June 2024, extraordinary cash flow was negative by approximately € 28 million, mainly due to net cash-outs related to merger & acquisition activities (around € 15 million), restructuring costs (around € 6 million) and the renovation of the Segrate headquarters (approximately € 3 million).

Free Cash Flow LTM at 30 June 2024, positive for € 39 million, confirmed the ongoing efficiency of the Group’s structures and resulting capacity of the Group to finance its growth policy by external lines.

Outlook for the year

In light of the results achieved in the first six months, the outlook for 2024 remains confirmed.

Income Statement

• low single-digit revenue growth;
• mid single-digit growth in the Adjusted EBITDA, with margins expected to remain stable at around 17%, thanks to targeted pricing policies and the further reduction of paper and printing costs.

Financial data

In the financial year 2024, the Group is expected to confirm the significant cash generation capacity and therefore an Ordinary Cash Flow of around € 70 million, despite higher investments for approximately € 4 million allocated to the renovation and energy efficiency measures of a printing facility of the Group, including from a sustainable perspective.

Performance of Business Areas

Trade BOOKS Area

The first six months showed a substantially stable trend on the book market in terms of value compared to the previous year (-0.1%): following the drop in the first part of the year, attributable to the comparison with 2023 which had benefited from the publication of “Spare. Il minore” (Spare) (Mondadori), the second quarter of 2024 recorded 4.1% growth in terms of value.

In this context, the publishing houses of the Mondadori Group recorded, in the second quarter, growth of 7.6%, nearly twice as much as the reference market: thanks to this performance, the Group reported growth across the entire six months of 1% and strengthened its national leadership with a market share in June 2024 of 27.7% (27.4% in June 2023).

As proof of the quality of the publishing plan and its catalogue, during the first six months of the year, the Mondadori Group was able to place 6 titles in the classification of the top ten bestsellers. We also note that in July the Mondadori Group, through Einaudi, won the 78th edition of the Strega Prize with “L’età fragile” by Donatella Di Pietrantonio.

Revenue in the first half of 2024 in the Trade BOOKS area amounted to € 188.5 million, recording growth compared to the previous year of approximately 9% (+3.4% on a like-for-like basis).

Adjusted EBITDA in the first six months of FY 2024 stood at € 27.7 million, an increase of € 1.5 million (+5.6%) compared to the first six months of 2023, largely due to the improved profitability of the publishing houses, deriving in particular from higher digital revenues and lower industrial costs (primarily paper).

Education BOOKS Area

School textbook publishing experiences a typical seasonal performance that sees sales squeezed into the second half of the year following the adoption campaign: as a result, the relating market shares for 2024 are unavailable at this time.

In the first six months of 2024, the school textbooks business reported overall revenue of € 61.1 million (€ 57.9 million in the corresponding period of 2023), increasing by 5.7% due to the advance on supplies to top accounts.

Adjusted EBITDA in the Education BOOKS area in the first half of 2024 stood at € 1.9 million, down on the € 2.3 million recorded in the first half of 2023, mainly due to the advanced production of the new textbooks made available to the sales network to support their promotion.

RETAIL Area

The RETAIL area showed 2.3% growth in the sell-out of the Book product in the first half of 2024, outperforming the market; as a result, the market share of Mondadori Retail rose to 12.7% (+0.3% compared to 30 June 2023), driven by an excellent performance of the direct and franchised retail outlets and a good performance of the online channel.

The renovation and development of the network of direct bookshops continued, numbering 47 units at the end of June 2024. For the franchised stores the progressive focus on the Bookstore format continued – with medium-sized bookshops offering considerable turnover – as did and the opening of new shops and the refitting of existing ones.

In the first six months of the year, the RETAIL area recorded revenue for € 91.4 million, with an 8.9% increase (€ +7.5 million), which is 3.6% net of the revenue of the Star Shop comic shops, consolidated from 1 February 2024. The organic growth would have been 4.9%, without the negative effect of the temporary closure of the Bookstore in Marcianise (CE) – subject to renovations, but already reopened by mid-July – which accounted for over € 1 million in lost sales in the first half of the current year.

An analysis of sales by channel in the first six months of 2024 shows a further increase in revenue from directly managed bookstores (+6.6% compared to the same period in the previous year) and from franchised bookstores (+4% compared to the first half of 2023) and, at the same time, a substantial stability in the online channel.

The Book area, which is the Mondadori Group’s core business, was the main component of product revenue (more than 80% of the total), up comprehensively by 3.9% on the first half of 2023.

The RETAIL area posted a positive Adjusted EBITDA for € 5.3 million, + 25.5% compared to the first half of 2023.

MEDIA Area

The advertising market (excluding searches, social networks, classified and OTT) in the first five months of 2024 showed an increase of 4.5% compared to the previous year. The magazine circulation market dropped by 6% and the add-ons market by 12.3%.

In the first half of 2024, revenue in the MEDIA area amounted to € 72 million, and posted an increase of 5% since the previous year, stemming from the strong growth in the digital component, which, for the first time, more than offset the structural downturn of the component linked to traditional activities.

Digital activities, which account for approximately 43% of the area’s total revenue, showed a 26.5% growth in advertising revenues, resulting in particular from the positive performance of the MarTech segment and the excellent results of the agencies and Webboh, operations for which began at the start of 2023; the traditional print business declined by 7%, mainly due to the structural drop during the six months in add-on sales and readership, which nevertheless showed an improvement in the second quarter compared to the trend of the first quarter.

The Adjusted EBITDA for the MEDIA area in the first half of 2024 amounted to € 10.1 million and showed approximately 12% growth compared to the corresponding period in 2023 attributable to the segment of digital activities. The EBITDA margin for the area rose from 13.1% to 14.1%.

The presentation of the results at 30 June 2024, approved today by the Board of Directors, is available on www.1info.it and on www.mondadorigroup.com (Investors section). A Q&A session will be held in conference call mode at 4.00 pm for the financial community, attended by the CEO of the Mondadori Group, Antonio Porro, and the CFO, Alessandro Franzosi. Journalists will be able to follow the meeting in listening mode only, by connecting to the following phone number +39.02.8020927 or via web at: https://hditalia.choruscall.com/?calltype=2&info=company. 

The Financial Reporting Manager – Alessandro Franzosi – hereby declares, pursuant to Article 154 bis, paragraph 2, of the Consolidated Finance Law, that the accounting information contained herein corresponds to the Company’s records, books and accounting entries. 

Annexes (in the complete pdf): 

1. Consolidated Statements of Financial Position
2. Consolidated Income Statement
3. Consolidated income statement – II quarter
4. Group cash flow
5. Glossary of terms and alternative performance measures used

Changes in the reports were calculated on amounts expressed in Euro thousands

Today, the meeting of the Board of Directors of Arnoldo Mondadori Editore S.p.A., chaired by Marina Berlusconi, reviewed and approved the Half-Year Report at 30 June 2023 presented by CEO Antonio Porro.

“The first six months of the current year show a general growth in revenues assisted by the excellent performance of our core businesses, which are outperforming estimates made at the beginning of the year”, underlined Antonio Porro, CEO of Mondadori Group. “Careful operational management has also allowed us to increase overall profitability and cash flow generation. The result is an improvement in financial performance and a strengthening of the Group’s capital which, together with the favourable trend in the prices of the main production factors, have created the conditions for an upward revision of the targets for the 2023 financial year”, concluded Porro.

PERFORMANCE AT 30 JUNE 2023

Consolidated net revenue for the first half of 2023 amounted to € 362.4 million, compared to € 355.1 million in the previous year, an increase of 2.1%. Like-for-like, organic revenue growth came to 2.7%.

Adjusted EBITDA for the first half of 2023 was € 38.2 million, an increase of almost € 11 million on the € 27.6 million recorded for the first half of 2022.

Netting the results for the two half-years in question of the reliefs and contributions paid, the growth recorded by Group’s EBITDA would exceed € 14 million.

All business areas contributed to the result, especially the Trade BOOKS Area, due in particular to the effect of the consolidation of the results of the recently acquired companies, among other factors, and the Educational BOOKS Area, which benefited from a favourable timing effect compared to last year. These results were achieved despite the increases in the cost of raw materials and the rates charged for printing and logistics services in the first part of the year compared to the previous year.

Group EBITDA for the first six months of 2023 amounted to € 40.3 million, compared to € 26.8 million in the corresponding period of 2022, an improvement of approximately € 14 million, attributable to the favourable dynamics of the aforementioned operations and the recognition in the current year, in the MEDIA Area, of the net capital gain resulting from the sale of the publications Grazia and Icon (and the related international network) amounting to approximately € 2.8 million.

Thanks to the positive performance of all business areas, the Mondadori Group’s EBIT for the first half of 2023, positive for € 14 million, showed an improvement of € 10.7 million compared to 2022, despite the booking of approximately € 3 million in depreciation/amortisation resulting from the greater investments made in the last 12 months, the consolidation of new companies and the accounting effects of the PPA (Purchase Price Allocation) process.

Neutralising the extraordinary components and the impact of the PPA process related to the companies acquired in the last 12 months (amounting to € 2.5 million in the half-year under review), Adjusted EBIT would amount to € 14.4 million, up by more than € 8 million compared to the same period of 2022.

Financial expense grew by approximately € 0.5 million as a result of the higher cost of debt.

The consolidated result before tax was positive at € 12.3 million, an improvement of about € 12 million compared to € 0.5 million in the first half of 2022. The € 1.7 million improvement in the profits of investee companies contributed to this performance, particularly as a result of the update in the fair value measurement of the investment in the company A.L.I. and the recognition of a capital gain, net of the negative result of the first four months, of € 0.4 million from the sale of the residual investment in SEE, the publishing company of Il Giornale, which took place in April 2023.

As at 30 June 2023, the Group’s net profit, after minority interests, came to € 12.2 million, a significant improvement of approximately € 9 million on the € 2.8 million recorded in the first half of 2022.

The tax burden for the period is positive by € 0.1 million (€ 1.8 million as at 30 June 2022) due to higher income, such as capital gains, taxed to a lesser extent.

The Net Financial Position excluding IFRS 16 as at 30 June 2023, which as usual reflects the seasonal nature of the school textbooks business, came to € -215.2 million (net debt), a slight increase compared with the € -205.7 million of 30 June 2022, due to the cash-out related to acquisitions made during the last twelve months and the € 29 million distribution of dividends to the shareholders.

The IFRS 16 Net Financial Position at 30 June 2023 stood at € -285.5 million from € -285.1 million at 30 June 2022, including an IFRS 16 component of € -70.3 million.

Cash flow from ordinary operations in the last 12 months, after cash-out for financial expenses and taxes, amounted to € 63.6 million, and allows the Group to continue strengthening its financial structure.

At 30 June 2023, the extraordinary cash flow of the previous 12 months was negative by € 48 million, mainly due to the effect of the net balance of acquisitions and divestments for approximately € 31 million and cash-out for approximately € 5 million for restructuring costs.

LTM Free Cash Flow at 30 June 2023 was positive for € 15.8 million, confirming the Group’s capacity to finance its growth policy by external lines.

PERFORMANCE OF BUSINESS AREAS

Trade BOOKS AREA

In the first half of 2023, after the consolidation experienced in 2022, there was a new growth phase in the book market, which increased in value by 2.7%, with a substantial stability in volume (source: GFK).

In this context, the Mondadori Group’s publishers recorded growth of 5.7% in the period under review, thanks in particular to the sales of new titles published at the beginning of the year. Thanks to these results, the Mondadori Group has consolidated its national leadership position, with a market share that in June 2023 was 27.4%, showing an improvement on June 2022 (26.6%).

The Trade component recorded revenues in the first half of 2023 of € 175.5 million, having grown by around 18% on the previous year (+4% on a like-for-like basis).

The Adjusted EBITDA of the Trade Books Area, amounted to € 26.2 million in the first half of 2023: net of reliefs relating to Electa’s museum activities, amounting to € 6.4 million, which had benefited the first half of 2022, the area recorded growth of 32% (€ 6.4 million), largely attributable to the contribution of the newly acquired companies.

Educational BOOKS AREA

School textbook publishing experiences a typical seasonal performance that sees sales squeezed in the second half of the year following the adoption campaign: as a result, the relating market shares for 2023 are unavailable at this time.

In the first six months of 2023, the school textbooks business recorded overall revenues of € 57.9 million (€ 49.6 million in the corresponding period of 2022), an increase of 16.8% which is not representative of the real performance as mostly due to an early supply to top accounts compared to last year.

Adjusted EBITDA of the Educational BOOKS Area in the first half of 2023 was positive and stood at € 2.3 million, a clear improvement compared to the € -2.4 million loss recorded in the first half of 2022, mainly due to the different timing of revenues linked to some supplies.

RETAIL AREA

In the first six months, the Retail Area posted revenue of € 83.9 million, up by € 6.3 million (+8.1%) versus the same period of the prior year.

Thanks to this overperformance driven by the excellent performance of physical stores, Mondadori Retail’s market share stood at 12.4% (up 0.7% compared to 30 June 2022) and almost reached the 20% threshold of the physical channel.

The ongoing development and renovation of existing stores and the focus on the core business of books have enabled the Mondadori Store network to consolidate its role in the market, as demonstrated by the solid growth in revenue from Books (€ +5.5 million, +9.1%) which is over 80% of the total.

An analysis of sales in the physical channel shows a further increase in revenues from directly-managed bookstores (+17.3% compared to the same period in the previous year) and franchisee bookstores (+6.1% compared to the first half of the previous year); and, at the same time, a decline in the Online and Bookclub channels.

The RETAIL Area has a positive and significantly growing Adjusted EBITDA of € 4.2 million, a value that has almost tripled compared to the figure for the first six months of 2022 (up by € 2.8 million).

MEDIA AREA

In the first half of 2023, the Mondadori Group retained its position as Italy’s top multimedia publisher:

• in print with 13 titles and 9 million readers;
• on the web with 12 brands and approximately 28.7 million average unique users per month;
• in social media with a fan base of over 86 million and around 100 profiles.

In the magazine segment, Mondadori Group’s market share (in terms of circulation) stood at 20.5%, up slightly – with a like-for-like portfolio of titles – versus the figure in the same period of 2022 (20.0% in May 2022), due to improved performance on that of the reference market.

In the first half of 2023, the MEDIA Area recorded revenue of € 68.7 million, a reduction of approximately 30% on the same period of the previous year. On a like-for-like basis (thus excluding the effect of the deconsolidation of the titles sold at the beginning of 2023 and of Press-di’s distribution activities), this reduction is smaller by around 8% and shows different trends in the two digital and print components. In particular, on a like-for-like basis, digital activities, which account for over a third of total revenues in the area, recorded a growth in advertising revenues of around 14%; traditional print activities were down by approximately 17%, in particular due to the significant contraction in joint sales recorded in the period.

Adjusted EBITDA for the MEDIA Area came to € 9 million, having grown by approximately 16% compared with the first half of 2022, mainly due to traditional businesses. In the print area in particular, the increase is mostly due to the recognition of a contribution to offset the costs incurred by the publisher for the distribution of periodicals (€ 2.8 million), which made it possible to offset the greater industrial costs, especially paper, and the contraction of the margin from the sale of add-ons; in the digital area, Adjusted EBITDA was substantially stable compared to the same half of the previous year, despite the higher costs incurred for the launch of new initiatives related to the influencer marketing segment, thanks to higher advertising revenues.

OUTLOOK FOR THE YEAR

As already announced to the market on 29 June 2023, given the more favourable evolution compared to previous estimates of both the business during the first half of the year and the prices of the main production factors – the Group has revised its forecasts for 2023 upwards.

Currently, the estimates predict:

• Income Statement
  • Single-digit revenue growth;
  • High single-digit/low double-digit growth in Adjusted EBITDA, with margins expected to range between 16% and 17%;
  • approximately 20% growth in the net result, despite the higher amortisation/depreciation deriving from both the increasing investment policy implemented by the Group and the effects of the Purchase Price Allocation process related to the recently-acquired companies, thanks to the operational improvement and the positive effects of the sale of the investment in Il Giornale.
• Cash Flow and Net Financial Position
  • Ordinary Cash Flow is expected to fall within a range of € 65 to 70 million, showing growth of up to 15% on the 2022 figure (which had come to approximately € 60 million net of the one-off impact of derivative instruments related to rate risk hedging).
  • the Group’s net financial debt (IFRS 16) is confirmed to come in, at end FY 2023, as 1.0x adjusted EBITDA, down from 1.3x at end 2022.

The solid financial and equity position that characterises the Mondadori Group allows it to continue to pursue the virtuous development path started some years ago, characterised by the constant recourse to M&As whereby the Mondadori Group seeks to seize opportunities for growth through external lines, mainly in the book and digital businesses.

The presentation of the results at 30 June 2023, approved today by the Board of Directors, is available on 1Info (www.1info.it), on www.borsaitaliana.it and on www.gruppomondadori.it (Investors section). A Q&A session will be held in conference call mode at 4.00 pm for the financial community, attended by the CEO of the Mondadori Group, Antonio Porro, and the CFO, Alessandro Franzosi. Journalists will be able to follow the meeting in listening mode only, by connecting to the following phone number +39.02.8020927 or via web at: https://hditalia.choruscall.com/?calltype=2&info=company.
The Financial Reporting Manager – Alessandro Franzosi – hereby declares, pursuant to Article 154 bis, paragraph 2, of the Consolidated Finance Law, that the accounting information contained herein corresponds to the Company’s records, books and accounting entries.

Annexes (in the complete pdf):

1. Consolidated Balance Sheet
2. Consolidated Income Statement
3. Consolidated Income Statement – II quarter
4. Group cash flow
5. Glossary of terms and alternative performance measures used.

Arnoldo Mondadori Editore S.p.A. hereby informs that the Half-Year Financial Report at 30 June 2022, comprising the Independent Auditors’ report, is now available at the Company’s registered office, at the authorized storage mechanism 1info (www.1info.it) and on the website www.gruppomondadori.it (Investors section).

Today, the meeting of the Board of Directors of Arnoldo Mondadori Editore S.p.A., chaired by Marina Berlusconi, reviewed and approved the Half-Year Report at 30 June 2022 presented by CEO Antonio Porro.

“In the first half of the year, our performance was highly positive, and all the business areas contributed to the result, with revenue gaining momentum especially in the second quarter”, emphasized Antonio Porro, Chief Executive Officer of the Mondadori Group. “These results, as well as a continually meticulous management of operations, have allowed us to increase overall profitability and cash generation. Improved operating performance, coupled with the Group’s continued capital strengthening, have laid the groundwork for confirming the 2022 targets and continuing the path of strategic reshaping, despite the uncertain economic and political scenario on a domestic and international level”, concluded Porro.

PERFORMANCE AT 30 JUNE 2022
In first half 2022, consolidated revenue amounted to € 355.1 million, increasing by 10.8% versus € 320.4 million in the prior year; net of the consolidation of D Scuola, Group revenue recorded a like-for-like growth of 5.7%, thanks to the contribution of all business areas, of the Retail and Books areas in particular.

Adjusted EBITDA came to a positive € 27.6 million versus € 21.5 million in first half 2021; excluding the result for the period of D Scuola, adjusted EBITDA came to a positive € 28.4 million as the company, which operates in the school textbooks segment, recorded a loss in the first part of the year due to the seasonal nature of the business; on a like-for-like basis, the Group improved profitability by € 6.9 million versus first half 2021, driven by the positive performance of all business areas, by the Books and Media areas in particular.

Group EBITDA stood at € 26.8 million versus € 19 million in first half 2021; on a like-for-like basis, the figure of € 27.6 million shows a strong improvement, attributable to the abovementioned phenomena, as well as to the positive dynamics of non-ordinary components.

 EBIT came to a positive € 3.2 million (€ 8.5 million on a like-for-like basis). The comparison with 2021 shows:

• an improvement in the overall scope of € 3 million, impacted by the consolidation of D Scuola’s amortization/depreciation and the effects of the Purchase Price Allocation process;
• an improvement on a like-for-like basis of € 3 million.

Financial expense increased by € 1.3 million, due mainly to the recognition in 2021 of a one-off income from the application of IFRS 9 to the terms of the pool loan signed by the Group in May 2021.

Consolidated profit before tax amounted to € 0.5 million; on a like-for-like basis, the figure shows a profit of € 5.8 million, improving by € 10.9 million versus € -5.1 million in first half 2021.
Also contributing to this increase was the improvement of over € 3 million in the results of the investees attributable to the sale on 1 January 2022 of the investment in Monradio (which usually recorded losses), the improved results for the period of Attica, as well as the start of the accounting for the share of profits of A.L.I., of which the Group completed the acquisition of 50%.

Group net profit, after minority interests, amounted to € 2.8 million; on a like-for-like basis, it amounted to € 6.7 million, improving by € 2.3 million versus € 4.4 million in first half 2021, despite the fact that last year had benefited from net non-recurring positive tax components of approximately € 9 million, resulting from the realignment of the tax amounts of trademarks and goodwill to their respective statutory amounts.

The Net Financial Position before IFRS 16 stood at € -205.8 million (€ -285.1 million including IFRS 16). On a like-for-like basis, it stood at € -48.4 million, improving strongly by € 20 million versus the net debt of € 68.3 million recorded at 30 June 2021, despite the cash out from the payment of dividends and the acquisition of A.L.I.

On a like-for-like basis, the LTM cash flow from ordinary operations (after outlays for financial expense and tax) amounted to € 70.6 million, allowing the Group to continue to strengthen its financial structure through the continued and growing ability of the businesses to generate cash.
D Scuola reported a negative cash flow of € 25.2 million in the first half, reflecting the seasonal nature of the school business which, in the first half of the year, records the costs and expenditure for the development and publication of texts marketed in the second half.

LTM Free Cash Flow on a like-for-like basis came to € 41.9 million and includes mainly outlays for restructuring costs of € 10.6 million and approximately € 14 million for acquisitions.

At 30 June 2022, Group employees amounted to 1,917 units, up by 4.8% versus the 1,829 units at 30 June 2021, following the inclusion of the workforce of D Scuola and of De Agostini Libri. Excluding the contribution of companies consolidated from 2022 and the effects of the disposal of titles in the Media area that took place in December 2021, the decline would be approximately 1.7%.

BUSINESS OUTLOOK
In light of the positive operating-financial trend recorded in the first half of the year, and thanks also to the relief received by Electa for its museum activities^[1], the Group believes that it can confirm, for the full year 2022, the previously disclosed estimates at the consolidated level, despite the geopolitical uncertainty and the persisting problems arising from the increase in costs both in the procurement of raw materials, paper in particular, and for energy consumption.

The Group thus expects:

• Earnings: continued resilience of the business model
  – mid-single-digit growth of revenue
  – adjusted EBITDA up by more than 20%
  – double-digit growth of the net result, thanks also to significantly lower restructuring costs and to the improved results of investees versus 2021.

• Cash Flow/Net Financial Position: continued strong cash generation
  – Cash flow from ordinary operations in line with 2021;
  – Free Cash Flow in the region of € 10/15 million (including outlays for the announced acquisitions and before dividend payout);
  – Group net financial debt (IFRS 16) at 1.3x Adjusted EBITDA.

The Mondadori Group continues to prioritize sustainability issues and to pursue its efforts to achieve the ESG goals set.

PERFORMANCE OF BUSINESS AREAS

• BOOKS

Following the remarkable growth seen in 2021, first half 2022 witnessed a consolidation phase of the books market, with a slight drop in terms of value (-1.8%) and volume (-1.4%) versus the same period of 2021^[2].
Excluding from the scope of the books market the comic books segment – still untapped by the Group in the first half of the year and whose growth rate in the period stood at 27.1% – the decline versus first half 2021 is 3.4% (in terms of value).

Against this backdrop, the Mondadori Group’s performance steadily improved, thanks to a publishing plan that concentrated the publication of the most successful titles in the second quarter, and enabled the Group to retain its domestic leadership with a 24.3% market share (26.1% considering the consolidation of Edizioni Star Comics, whose acquisition was completed last 1 July)

Additionally, on 7 July, thanks to Einaudi, the Group won the 76th edition of the Strega Prize with Spatriati by Mario Desiati and placed three other titles from 2nd to 4th place: Quel maledetto Vronskij by Claudio Piersanti for Rizzoli; E poi saremo salvi by Alessandra Carati, a debut fiction writer for Mondadori; Niente di vero by Veronica Raimo for Einaudi.

In first six months 2022, revenue in the Books area stood at € 196 million, up by 16% versus           € 168.9 million in first six months 2021, driven by the positive performance of the trade publishers (+2.2%), which grew by 9% in the second quarter, the sharp increase of Rizzoli International Publications (+10.7%), the upswing in Electa’s activities, as well as the consolidation of D Scuola.
Considering the scope of the Books area on a like-for-like basis alone, excluding the contribution of D Scuola, revenue grew by 6.1%.

Revenue from the school textbooks business amounted to € 49.6 million, up by 38.5% versus € 35.8 million in first half 2021, due to the abovementioned change in the scope following the consolidation of the D Scuola publishing house.
On a like-for-like basis, revenue was down by € 3 million (-8.2%), as a result of the delay in supplies to a number of top accounts, whose recovery is expected in July.

Adjusted EBITDA in the Books area stood at € 23.8 million including the continued negative contribution of € 0.8 million at 30 June of D Scuola, owing to the seasonal nature of the school textbooks business: net of this effect, adjusted EBITDA on a like-for-like basis stood at € 24.7 million, an improvement of € 4.8 million versus € 19.8 million in first half 2021.
The result can be attributable to the abovementioned positive trend of Trade publishers and the performance of Electa, which benefited from the upswing in museum and concession-related activities and higher relief (€ 6.3 million versus approximately € 3 million in first half 2021), which more than offset lower revenue in the Education segment.

• RETAIL

In the first six months, the Retail area posted revenue of € 77.6 million, up by € 7.8 million (+11.2%) versus € 69.8 million in the same period of the prior year.
The ongoing development and renovation of existing stores and the focus on the core business of books have enabled the Mondadori network of bookstores to consolidate its role in the market, as shown by the solid growth in revenue from the Book product (€ +7.7 million), which is higher at the end of the first half even than in the pre-COVID period.

A breakdown of the main channels of Mondadori Retail shows the following:

• directly-managed stores reported a sharp increase in revenue (+45.7% versus the prior year), due to the abovementioned strategy of focusing on the book product and network development activities, and to the restrictions on activities in 1° half 2021 brought by the anti-COVID measures;
• the franchised channel, composed mainly of proximity stores located in small towns, continued its progression, increasing by +3.8% versus the same period of the prior year.

Thanks to the remarkable performance of physical stores, the market share of Mondadori Retail in the Italian books market grew to 11.8%.

In the first half of the year, adjusted EBITDA came to a positive € 1.4 million, up strongly versus approximately € 1 million in first six months 2021, as a result of revenue growth and continued cost containment, renovation and development of the physical network of stores, and despite higher rental and utility costs incurred by directly-managed stores in the six months under review.

• MEDIA

The Media area recorded revenue of € 98.2 million in first six months 2022, increasing by approximately 1% versus € 97.4 million in the same half of the prior year; on a like-for-like basis of portfolio of brands (excluding the effect of the deconsolidation of the titles sold at end 2021), the growth was 10%:

• digital activities, which now account for 22% of the area’s total revenue, rose sharply in the second quarter by 22% (+27.5% on a like-for-like basis of brands). Thanks to this growth, digital revenue as a percentage of total advertising revenue stood at 67% of the total (up from 63% in first half 2021);
• traditional print activities, excluding the titles sold at end 2021, grew by 5%.

The Group’s market share in terms of circulation, as a result of a performance – on a like-for-like basis of portfolio of titles – that outdid the relevant market, stood at 21.3%, up versus 20.5% in May of the prior year.

The Media area’s adjusted EBITDA stood at € 7.8 million, up strongly versus first six months 2021, thanks to the remarkable performance of the print area which, in the second quarter, in addition to benefiting from the continued cost-curbing measures, was able to account for both the margin from the FuoriSalone event (which in 2021 took place in the second half of the year) and for a tax credit recognized on paper consumption that allowed it to offset the increase in the related cost incurred in the period.

With regard to the Warning Notice to listed issuers published by CONSOB on 19 May 2022, concerning the effects on the operating and financial situation resulting from the Russia-Ukraine war, the Mondadori Group clarifies:

• to have no “direct” impacts, as it has no production sites in the affected area, nor does this area represent an outlet market for publishing production or services offered by the Group;
• to have “indirect” impacts, due to the increase in prices of raw materials, energy and transportation.

With regard to such increased costs, the Group has taken measures to alleviate their impact, and has put in place further remedies to achieve efficiencies, such as to achieve in the first half of the year in all business areas growing results versus the relevant forecast figures and to confirm the outlook for the entire year.

The presentation of the results at 30 June 2022, approved today by the Board of Directors is available, on 1Info (www.1info.it), on www.borsaitaliana.it and on www.gruppomondadori.it (Investors section). A Q&A session will be held in conference call mode at 4.30 pm for the financial community, attended by the CEO of the Mondadori Group, Antonio Porro, and the CFO, Alessandro Franzosi. Journalists will be able to follow the meeting in listening mode only, by connecting to the following  phone number +39.02.8020927 or via web at: https://hditalia.choruscall.com/?calltype=2&info=company.

The Financial Reporting Manager – Alessandro Franzosi – hereby declares, pursuant to Article 154 bis, paragraph 2, of the Consolidated Finance Law, that the accounting information contained herein corresponds to the Company’s records, books and accounting entries.

Annexes (in the complete pdf):

1. Consolidated balance sheet;
2. Consolidated income statement;
3. Consolidated income statement – II quarter;
4. Group cash flow;
5. Glossary of terms and alternative performance measures used.

 * The operating and financial figures at 30 June 2022 are also shown on a like-for-like basis excluding D Scuola for greater comparability versus the prior year. Additionally, as already seen for the first quarter, at 30 June 2022, the contribution of D Scuola, fully consolidated as from 16 December 2021, was heavily marked by the seasonal nature of the Education business which, in the first half of the year, records the costs of creating editorial content, as well as the expense from the promotional activities to support the adoption campaign, postponing the recognition of the most significant portion of revenue from the sale of school textbooks to the second half of the year. 

^[1] Emergency Fund for Enterprises and Cultural Institutions for the Relief of Art Exhibition Organizers, decree published on 27 May 2022 granting the subsidies provided by Ministerial Decree 428 no. 227 of June 2021.

^[2] GFK, June 2022

Today, the meeting of the Board of Directors of Arnoldo Mondadori Editore S.p.A., chaired by Marina Berlusconi, reviewed and approved the Half-Year Report at 30 June 2021, presented by the CEO of the Mondadori Group, Antonio Porro.

“In the first half of the year, the Mondadori Group achieved remarkable results on the revenue and profitability front. All our areas, from Books to Retail to Media, played their part in this performance and grew versus the prior year, the digital component in particular. The Books area improved significantly and increased its margins versus 2019,” stressed Antonio Porro, CEO of the Mondadori Group. “The greater operating efficiency and improved financial performance we achieved in the second quarter too – continued the CEO – together with highly reassuring signs from the books market, give us reasons to confirm our year-end estimates and to look forward with confidence to the evolution of the Group in future years. Against this backdrop, the acquisition of De Agostini Scuola is further proof of our will to focus on the core business of books, in line with the medium-term strategic guidelines set”, concluded Porro.

HIGHLIGHTS OF FIRST HALF 2021

With regard to the core markets of the Mondadori Group, in first half 2021 books witnessed a buoyant trend, growing by 36.8%[1] versus the same period of 2020.
This performance consolidates the positive trend that had started in the first quarter of the current year, driven again by a greater propensity to read and purchase.
The growth of the books market is even more extraordinary if compared to the first six months of 2019[2], still totally unaffected by the pandemic and increasing by 23% versus this period.

PERFORMANCE AT 30 JUNE 2021

At 30 June 2021, consolidated revenue of the Mondadori Group amounted to € 320.4 million, up by 10.9% versus € 288.9 million of the prior year, thanks in particular to the strong growth in the Books and Retail areas, driven by the buoyancy of the market.

Adjusted EBITDA in first half 2021 amounted to € 21.5 million, up by approximately € 10.6 million versus € 11 million in the first six months of 2020: this positive performance reflects, on the one hand, the good trend of revenue recorded in the period by all business areas and, on the other, the ongoing efforts to curb operating and structural costs that enabled the Group to achieve a significant improvement in its margins (from 3.8% to 6.7%).

Group EBITDA came to € 19 million, more than double the € 8.4 million recorded in the prior year, showing a clear improvement attributable to the abovementioned phenomena and trends. In the period under review, non-recurring expense amounted to € 2.5 million, in line with the figure for the same period of the prior year.

In first half 2021, EBIT came to operating breakeven (€ 0.2 million), an improvement of over € 17 million versus € -17.2 million in the same period of 2020, attributable to the trend of the above ordinary components, to lower amortization and depreciation for a total of € 1.3 million, and to the presence in the result at 30 June 2020 of write-downs of € 5.8 million, relating to certain publications in the Media area.

The consolidated result before tax amounted to € -5.1 million versus € -30.9 million in first half 2020.
The significant improvement is also explained by:

• the reduction of approximately € 2 million in financial expense, due to a lower average interest rate, in addition to the reduction in ancillary expense;
• the effects of the sale of the investment in Reworld Media, completed in February 2021, which resulted in the recognition of a capital loss of € 0.4 million[3] in first quarter 2021, with a positive change of € 6.2 million versus a capital loss of € 6.6 million recorded at 30 June 2020;
• the result for the period of associates (consolidated at equity), which closed at € -3.1 million.

Tax items for the period came to a positive € 9.4 million (€ 5.9 million at 30 June 2020), despite the increase in taxable income, due to net non-recurring income of € 9 million deriving from the start of the process of realigning the tax amounts of trademarks and goodwill to their respective statutory amounts.

The Group’s net profit, after minority interests, came to € 4.4 million, a significant recovery versus the loss of € -25 million in first half 2020 (and also versus the loss of € 1.9 million at 30 June 2019), following the operational improvement and the abovementioned positive tax components.

The net financial position before IFRS 16 at 30 June 2021 stood at € -68.3 million, down drastically by 47.5% versus € -130.1 million at 30 June 2020, as a result of the significant generation of cash flow from ordinary operations recorded in the last 12 months, amounting to € 68.5 million, which confirms the positive path taken to strengthen the Group’s financial structure.
The IFRS 16 net financial position amounted to € -155.1 million and includes the recognition of the financial payable from the application of IFRS 16 equal to approximately € 87 million.

Group employees at 30 June 2021 amounted to 1,829 units, down by 5.2% versus 30 June 2020, despite the workforce absorbed following the acquisition of Hej! (net of which the reduction in the workforce would be -5.8%), due primarily to the efficiency measures that continued across all the business areas.

BUSINESS OUTLOOK

The positive performance recorded in the first half of the year, driven in particular by the strong growth trend of the Books area, as well as the continued cash flow generation, allow the Group to be optimistic about its operating performance and to confirm at a consolidated level – and on the basis of the current scope of consolidation – the previously disclosed estimates.

Performance targets:

• consolidated revenue for 2021 is forecast to grow slightly (low single-digit);
• adjusted EBITDA – in percentage terms – is estimated at around 12% of revenue;
• the net result for 2021 is confirmed on a sharp rise, propelled by the improvement in operations as well as the tax realignment of intangible assets, which in the first half enabled the recognition of an initial non-recurring positive tax component; additionally, mention should be made that the result for 2020 was negatively impacted by the write-down of certain balance sheet items.

Cash Flow and Net Financial Position
Additionally, with regard to the Group’s financial debt, one can reasonably confirm the estimates of cash flow from ordinary operations ranging between € 50 and € 55 million, therefore the achievement – before the impacts from the adoption of IFRS 16 – of a positive consolidated net financial position at year end.
As previously anticipated, the financial strength achieved by the Group has paved the way for a possible return to a shareholder remuneration policy from 2022, applied to the net result of 2021.
The above forecasts, drawn up on the basis of the current scope, may be updated upon completion of the acquisition of De Agostini Scuola, subject to the authorizations of law from the Antitrust authority.

PERFORMANCE OF THE BUSINESS AREAS IN FIRST HALF 2021

• BOOKS

As previously indicated, in the first half of the year the Trade books market posted a sharp growth of 36.8%[4] versus the same period of 2020, strengthening the trend that had started in the second half of the prior year, driven also by limited access to other forms of entertainment.

Against this backdrop, the Books area saw an increase in sell-out in terms of market value of 30.7%, enabling the Mondadori Group to confirm its undisputed leadership in the Trade segment (market share of 23.7%).

As proof of the quality of the publishing plan, mention should be made that during the first six months of the year, the Group placed 4 titles in the top ten bestsellers in terms of value[5]: Il sistema. Potere, politica, affari: storia segreta della magistratura italiana by Alessandro Sallusti and Luca Palamara (Rizzoli), which was the chartbuster in the opening months of the year, ranking firmly at the top; La disciplina di Penelope by Gianrico Carofiglio (Mondadori); Io sono Giorgia by Giorgia Meloni (Rizzoli); Insieme in cucina. Divertirsi in cucina con le ricette di «Fatto in casa da Benedetta» by Benedetta Rossi (Mondadori Electa). Additionally, Donatella Di Pietrantonio’s Borgo Sud, published by Einaudi in 2020, came second in the Strega in 2021.

Revenue in the Books area in first half 2021 amounted to € 168.9 million, up by 15.8% versus € 145.9 million in first half 2020.

The Trade segment gave a strong push to the result, with revenue of € 109.5 million, a significant increase versus both first half 2020 (+21.7%) and first half 2019 (+2.5%), unaffected by the pandemic.

During the period, revenue from the sale of e-books and audiobooks amounted to approximately 7.3% of total Trade revenue, with a catalogue of over 28,300 digital titles.

In first half 2021, revenue in the Educational segment amounted to € 55.8 million, up by 5.7% versus the same period of 2020: the positive sales performance of Rizzoli International Publications (+39.3%) and the increased turnover from school products (up by 3.9% versus 30 June 2020) allowed a recovery from the effects of the contraction of Electa’s revenue, caused by the closure during the pandemic of exhibitions and archaeological sites.

Adjusted EBITDA in the Books area came to € 19.8 million versus € 10.9 million in first half 2020, an improvement of € 8.9 million thanks to the positive trend in revenue, as well as to the relief received by Electa in the museum segment (approximately € 3 million, net already of certain provisions).
Profitability was up also versus first half 2019 (€ 16.2 million), making the performance of the Books area even more remarkable.

• RETAIL

Overall, in the first six months of the year the Retail area was able to benefit from the strong growth trend in the books market, although overall performance was negatively impacted by the government measures that caused severe restrictions on sales activities at least until mid-May.
As a result of the easing of restrictions, the physical market witnessed a recovery, and consequently Mondadori Retail saw its revenue grow: specifically, June also saw an increase versus June 2019 (approximately +3%), with a positive performance of the Book product of over 11%, despite a reduction in the network of stores versus June 2019.

At 30 June 2021, the Retail area recorded revenue of € 69.8 million, up by € 10.8 million (+18.3%) versus € 59 million in the same period of the prior year, driven by the positive performance of Book product sales (approximately +22% versus the same period of 2020).
Revenue in second quarter 2021 alone increased by approximately +30% versus second quarter 2020.

A breakdown of the various business segments of Mondadori Retail shows the following:

• directly-managed stores experienced a more modest growth (+12%) versus the prior year, affected by their location mainly in large populated areas, which are particularly exposed to both competition from online sales and the reduction in tourist flows;
• on the other hand, the franchised channel, composed mainly of proximity stores located in small towns, grew strongly by approximately 42%, boosted again by the excellent performance of the book product;
• the online channel posted revenue of € 7.3 million versus € 10.4 million in first half 2020, down due to the easing of restrictions on the operation of the physical market.

Adjusted EBITDA of Mondadori Retail amounted to € 0.4 million, a strong improvement versus € -2.8 million in the same period of 2020.
This improvement is the result of the company’s strong efficiency measures, the ongoing renewal and development of its network of physical stores, as well as careful cost management and a thorough review of the organization and processes.

• MEDIA

In the first five months of 2021, the core markets of the Media area showed, versus the same period of the prior year:

• a significant increase in advertising investments in the digital segment, amounting to +27.2%, versus -2.9%[6] on the magazine front;
• an 8.1% drop[7] in the magazine circulation market;
• a 22.1% decline[8] of add-ons bundled with

Against this backdrop, the Mondadori Group’s circulation market share stood at 23.7%, up slightly versus May of the prior year,1³ due to a slightly better performance than the core market.

In the first six months of 2021, the Media area of the Mondadori Group, which confirmed its position as Italy’s leading multimedia publisher, generated revenue of € 97.4 million, up by 1.7% versus € 95.8 million in the same period of the prior year. Specifically:

• advertising revenue reached € 28.8 million, up by approximately 28% overall (+16% excluding the contribution of the acquisition of Hej!).
  Considering the second quarter alone, the increase is over 50% versus the same period of 2020 (+41% on a like-for-like basis):
  – digital activities grew by 25.7% on a like-for-like basis while, including the contribution of the newly-acquired Hej!, the increase stands at approximately 48% versus the first half of the prior year. A point worth mentioning is that digital revenue now accounts for 63% of total advertising revenue (from 54% in first half 2020).
  – print advertising sales increased by approximately 5%.

• circulation revenue was down by 4%, with television titles and the CasaFacile brand performing better.
• revenue from add-on products fell by approximately 27%, but with a more moderate decline in the second quarter (-16.6%), a trend due primarily to the success of musical initiatives last year and the reduced availability of film releases on DVD.
• other revenue, which includes revenue from distribution activities, rose by 1%.

Adjusted EBITDA in the Media area amounted to € 4.5 million, up sharply versus the first six months of 2020 (€ 2 million), thanks in particular to the development of digital activities and the continued efforts to curb operating costs, which contributed to the increase in profitability of print activities: the overall EBITDA margin stood at 5%, improving versus 2% in first half 2020.

2021-2023 PERFORMANCE SHARE PLAN: ASSIGNMENT OF RIGHTS
The Board of Directors, having heard the Remuneration Committee, resolved on the assignments to the beneficiaries of the rights relating to the 2021-2023 Performance Share Plan, established by resolution of the Shareholders’ Meeting of 27 April 2021.
Information regarding the beneficiaries and the number of rights assigned are shown – by name, for the beneficiaries who are members of the Board of Directors, and in aggregate form for the other beneficiaries – in the table attached, prepared in compliance with Box 1, Schedule no. 7 of Annex 3A of the Issuer Regulation.
The terms and conditions of the Plan are set out in the Directors’ Explanatory Report to the Shareholders’ Meeting of 27 April 2021 and in the Information Document prepared pursuant to Article 84-bis, paragraph 1 of the Issuer Regulation, available on the website www.gruppomondadori.it Governance section and on the storage mechanism www.1info.it to the contents of which reference should be made.

SIGNIFICANT EVENTS AFTER FIRST HALF 2021
On 12 July 2021, the Mondadori Group signed an agreement with De Agostini Editore S.p.A. – following the negotiations disclosed on 1 July – for the acquisition of 100% of De Agostini Scuola S.p.A., one of Italy’s top school textbook publishers.
The transaction is consistent with the strategy – repeatedly announced by Mondadori – of focusing on the core business of books, in which the Group boasts a longstanding leadership in Trade and is one of the top school textbook players.
The value of the transaction has been defined on the basis of an Enterprise Value of € 157.5 million, equal to 7.4 times the reported EBITDA recorded by De Agostini Scuola in 2020. The price will be defined on the basis of the average normalized net financial position over the 12 months before the closing date.
De Agostini Scuola posted in 2020 revenue of € 70.8 million, reported EBITDA of € 21.4 million, with a margin of 30%, and net profit of € 12.2 million. At 31 December 2020, the net financial position (net cash) stood at a positive € 20.8 million.
Completion of the transaction is subject to the authorizations of law from the competent Antitrust authority.

The results at 30 June 2021, approved today by the Board of Directors, will be presented to the financial community by the Mondadori Group CEO Antonio Porro and CFO Alessandro Franzosi at a conference call scheduled today, 29 July 2021, at 3pm.

The relevant documentation will be concurrently available on the website www.gruppomondadori.it (Investors section) and on 1Info(www.1info.it).

Journalists will be able to follow the presentation, in listening mode only, by connecting to the dedicated number +39.028020927, and via the web in audio mode by registering at the link https://hditalia.choruscall.com/?calltype=2&info=company.

The Financial Reporting Manager – Alessandro Franzosi – hereby declares, pursuant to Article 154 bis, paragraph 2, of the Consolidated Finance Law, that the accounting information contained herein corresponds to the Company’s records, books and accounting entries.

Annexes (in the complete pdf):

1. Consolidated balance sheet;
2. Consolidated income statement;
3. Consolidated income statement – II quarter;
4. Group cash flow;
5. Glossary of terms and alternative performance measures used.
6. Information pursuant to Schedule 7 of Annex 3a to CONSOB Regulation no. 11971/1999

[1] GFK, June 2021 (figures in terms of market value)

[2] The comparison with 2020 is affected by the closure enforced on all bookstores from March: from 12 March until the end of April, the government measures applied to contain the pandemic led in fact to the closure of bookstores across the Country; in the early stages, the online channel too had to apply restrictions on book deliveries due to the need to prioritize the distribution of staple goods.

[3] The monetization of this investment generated a total gain (2019-2021) of € 1.1 million versus the original subscription value.

[4] GFK, June 2021 (figures in terms of market value)

[5] GFK, June 2021 (ranking in terms of cover value)

[6] Nielsen, May 2021

[7] Internal source: Press di, May 2021, in terms of value

[8] Internal source: Press di, May 2021, in terms of value

Today, the meeting of the Board of Directors of Arnoldo Mondadori Editore S.p.A., chaired by Marina Berlusconi, reviewed and approved the Half-Year Report at 30 June 2020, presented by CEO Ernesto Mauri.

Highlights of first half 2020
The first half of 2020 was inevitably marked by the effects of the COVID-19 emergency.

Starting from the first ten days of March, in fact, the gradual and increasingly widespread application of restrictive measures has significantly curtailed most of the activities related to the businesses where the Group operates as a leader.

From 12 March up to the end of April, the government measures to contain the pandemic led to the closure of bookstores throughout Italy, with the resulting suspension of the activities related to the Group’s Retail business.

Parallel to that and over the same period, the Trade Books business had to tackle the shutdown of the physical channel for the marketing of its products and, consequently, could only rely on the online channel.

The emergency measures concurrently led to the closure of museum sites, archaeological parks and relating bookstores across all Italian regions, with the resulting interruption of the Group’s activities in managing services for museums and cultural heritage.

Lastly, the Media business[1] too recorded declines following closure of part of the newsstands in Italy and the reduction of advertising investments.

In order to tackle this situation, the Mondadori Group has set up and implemented a series of actions and measures aimed, first and foremost, at guaranteeing the safety of its people, enabling them, where possible, to perform their work remotely (smart working), and at alleviating the impacts of the measures adopted by the authorities, in order to safeguard the company’s operating and financial profile.

To this end, the Group has:

• taken steps to contain and cut operating costs also by renegotiating contracts and reviewing rates, with total savings estimated at € 13 million for the entire year;
• implemented actions to reduce the cost of personnel, estimated at approximately € 15 million for the entire year, by using outstanding holidays and resorting to social safety nets, as well as resolving to reduce the variable remuneration of the Group’s Management for 2020 and, lastly, suspending remuneration and hiring policies;
• placed particular emphasis on the Group’s working capital (with specific actions on customers and suppliers);
• implemented a policy of deferred payments in favour of the book chains, independent and franchised bookstores of the Retail Area, aimed at safeguarding the strength of the distribution channels and supporting the production chain in the Group’s area of operation.

For the different business activities:

• in the Trade Area, the editorial plans have been reshaped and rescheduled;
• in the Educational Area, school textbooks were affected only to a small extent, while actions have been taken to curb or eliminate the costs related to the stoppage and canceling of museum and archaeological park activities;
• in the Media Area, a different scheduling of magazines at newsstands and a strict policy has been adopted to reduce production costs;
• in the Retail Area, a plan has been implemented to streamline the units of the area and the points of sale.

Performance at 30 June 2020
Starting from May, with the lifting of lockdown restrictions, the Trade Books market has shown stronger and stronger signs of recovery with double-digit growth rates that marked the last six weeks of the half-year period and still in progress.

The recovery has propelled the growth of the Trade and Retail businesses, allowing them to partly regain the revenue lost in the March-April period.

As a result of the outlined context, the Group’s operating and financial profile at 30 June 2020 is as follows:

• consolidated revenue amounted to € 288.9 million, down by -24% versus € 380 million in the same period of 2019. Net of the changed scope of consolidation of the Media Area in 2019, the drop stands at -22.2% and is attributable mainly to the effects of COVID-19;

• IFRS 16 adjusted EBITDA amounted to € 11 million versus € 21.8 million in the prior year (down by approximately € 10.9 million versus the same period of 2019).

Also at the adjusted EBITDA level, the decline basically reflects the consequences of COVID-19 as well as the first positive effects of the countermeasures adopted by the Group.

The cost reduction measures for € 31.8 million have contained the impacts from the contraction in revenue and margins caused by the COVID-19 emergency;

• IFRS 16 EBITDA amounted to € 8.4 million versus € 20.6 million at 30 June 2019;

• IFRS 16 EBIT amounted to € -17.2 million, down by € -19.3 million versus 30 June 2019, due mainly to the trend of the abovementioned components and the write-down and start of the amortization process of a number of titles;

• The consolidated result before tax amounted to € -30.9 million versus € -1.6 million in first half 2019, due also to financial expense (€ 4 million), the adjustment of the investment in Reworld Media (€ -6.6 million) and the loss of the associates consolidated at equity (€ -3.4 million);

• The result from continuing operations amounted to € -25 million versus € -4.6 million at 30 June 2019 (€ -20.4 million). The decline was strongly affected by the above non-operating and extraordinary cost components, which total approximately € 22 million, only partly offset by tax income of approximately € 5.9 million recorded by the Group during the year;

• The Group’s net result amounted to € -25 million versus € -1.9 million in first half 2019 (which had also included € 2.7 million from discontinued operations);

• Net debt (before IFRS 16) amounted to € -130.1 million, improving strongly versus € -204.2 million at 30 June 2019 (€ +74.1 million), due also to the proceeds (€ 62.8 million) from the disposal completed in July 2019 of Mondadori France and the positive cash generation from ordinary operations in the last 12 months (€ 36.7 million net of discontinued operations), despite the highly deteriorated context.

The IFRS 16 Net Financial Position stood at € -219.5 million and includes the IFRS 16 impact of
€ -89.4 million.

At 30 June 2020, the number of employees in the context of the Mondadori Group’s continuing operations amounted to 1,928 units, down by approximately -9% versus 2,117 units at 30 June 2019, as a result of the disposal of a number of titles in the Media Area (in December 2019) and activities aimed at increasing the efficiency of the individual business areas.

Despite the significant stress put on the global economic system at this moment in time, the Group’s financial situation and medium-term prospects allow it to maintain a positive attitude towards business developments, even in an economic framework inevitably affected by the COVID-19 emergency.

Business outlook
To date, Group forecasts reflect, on the one hand, the encouraging signs coming from the market, particularly in the Group’s main business areas of operation and, on the other, do not include any effects from a fresh outbreak of the pandemic, such as new lockdown measures on a national scale.

Based on the current scenario, the Group estimates a drop in revenue by between 16% and 18% versus 2019, due also to the trend of the various businesses; a solid double-digit (adjusted) EBITDA margin (approximately 11%-12%) and positive cash generation, albeit down versus the past.

The trend of the Group’s financial debt at the end of the period will depend on the amount of restructuring costs that will be financed through the cash flow from ordinary operations, with an estimate of the Group’s net financial position in any case no higher than € -55.4 million at 31 December 2019.

Performance of business areas

• BOOKS

At the beginning of May, the gradual reopening of independent bookstores and book chains allowed the Trade Books market to make a strong recovery: in the last six weeks of the half-year period, book sales grew double-digit, reaching +13.5% in June alone versus the same period of the prior year.

This upswing allowed the market to mitigate and make up for the fall recorded in March (-29.2%) and April (-45.8%), bringing the overall contraction in terms of value at 30 June 2020 to -10.1%.

Against this backdrop, the Mondadori Group retained its leadership position with an overall market share of 24.8%[2] in Trade, outstripping the market performance by more than six percentage points in the last six weeks of the half-year period.

Revenue in the Books Area amounted to € 145.9 million at 30 June 2020, down by 20.6% versus € 183.8 million in first half 2019. Specifically:

In the Trade Area, revenue amounted to € 90 million, down by -15.8% versus € 106.8 million at 30 June 2019, due to the abovementioned COVID-19 effects.

To cope with the closure of the distribution channel, the Group has revised its publishing schedule, pushing back the launch of new works by some of the most prestigious and successful authors to the second half of the year.

E-books and audiobooks (9% of total publishing revenue) bucked the trend versus physical books, with revenue up sharply during the lockdown period (+37%) versus the prior year.

Listening hours of the audiobook catalogue jumped by over 75% versus 2019, while downloads of e-books increased by 45%.

Revenue in the Educational Area amounted to € 52.8 million, down by -27.1% versus € 72.4 million in the same period of 2019.

School textbooks suffered a low impact from the pandemic, given the typical seasonal performance of the business that sees sales squeezed in the second half of the year following the adoption campaign.

The decrease in revenue in the Educational Area is attributable mainly to the closure of museums and archaeological sites under concession due to the health emergency, which prevented the museum business from achieving the expected results.

IFRS 16 adjusted EBITDA in the Books Area amounted to € 10.9 million versus € 16.2 million in 2019, a deterioration attributable to the negative trend in revenue, only partly mitigated by the cost containment actions implemented by Management.

IFRS 16 EBIT amounted to € 3.9 million versus € 9.7 million in 2019.

• RETAIL

As mentioned, in the first six months of 2020 the Trade Books market (which accounts for over 80% of Retail revenue^[3]) fell sharply versus the same period of the prior year (-10.1%^[4]) as a result of the COVID-19 emergency.

The gradual reopening of bookstores has allowed the market to rebound strongly, with an increase in June alone of +13.5%.

Revenue in the Retail Area in the first six months of the year amounted to € 59 million, down by 27.5% versus € 81.4 million in the same period of the prior year, due to the government measures to tackle COVID-19.

The market share stood at 10.9% in the first half of the year, as the Group’s performance was hindered by the fact of being able to operate only through its online channel during the lockdown period.

In June, the Group followed the same strong trend of the market: revenue in the Area, versus the same month of the prior year, dropped by only -4.1%, and the market share – in the month – stood at 12.1%, thanks, in particular, to the positive performance of the franchised stores.

Mention should particularly be made of the performance of the online channel, whose sales in the first 6 months grew by +71.6% versus first half 2019, and by as much as approximately 190% during the lockdown period.

IFRS 16 adjusted EBITDA amounted to € -2.8 million versus € -0.6 million in the same period of 2019.

Despite the drastic drop in revenue, the impact in terms of EBITDA was contained thanks to careful cost management and a deep organizational and process revision, involving both the central units and the points of sale, carried out in the second half of 2019 and continued even during the harshest period of COVID-19.

Excluding the lockdown months, Mondadori Retail improved margins both in the first two months of the year (€ +0.3 million versus the same period of the prior year) and in June alone (€ +0.7 million versus the same period of the prior year).

IFRS 16 EBIT amounted to € -8.2 million (versus € -6 million in first quarter 2019).

• MEDIA

The May surveys show that the advertising market was heavily impacted by COVID-19, with declines reported across all channels, including digital down by -17.2% and magazines by -41.5%[5].

In terms of circulation, the Italian magazines market fell by 11.3% during the period[6].

Against this backdrop, the Mondadori Group retained its position as market leader with a share in terms of value of 23.7%[7] and as the leading multimedia publisher in Italy on the web, with a reach of 84% (approximately 33 million unique users in May)[8], and in social media with an aggregate fan base of 33.5 million spread across 100 social profiles[9].

At 30 June 2020, revenue in the Media Area amounted to € 95.8 million (-26.8% versus € 130.9 million in 2019). Net of the disposal of a number of titles, the decrease came to -21.5%.

Specifically:

• circulation revenue fell by approximately -23%, a performance affected by both the COVID-19 impact and the disposal of a number of titles in 2019; net of these discontinuities, the decline is estimated at approximately -9%.
• advertising revenue, of which the digital component accounts for over 50%, was down by approximately -42% overall.

This is the class of revenue most affected by COVID-19 and the lockdown, which led to the cancellation of such a significant event as the Salone del Mobile, and a decrease in proximity marketing solutions (AdKaora). On a like-for-like basis and net of COVID-19 impacts, the change in advertising revenue would be approximately -4, -5%.

• other revenue, which includes distribution activities, fell by -9.6% versus the prior year, reflecting both the performance of the circulation market and the drop in royalties generated by the international editions of Grazia.

Adjusted EBITDA stood at € 2 million, down by approximately € -5 million only versus first half 2019, as the marked slippage in revenue was offset by effective measures to contain operating costs.

IFRS 16 EBIT, which reflects the write-down and the start of the amortization process of a number of titles (for a total value of € 7.3 million), amounted to € -7.9 million versus € 3.7 million in first half 2019.

The documentation relating to the presentation of the results at 30 June 2020, is made available through the authorized storage mechanism 1Info (www.1info.it) and in the Investors section of the Company website www.gruppomondadori.it.

The Financial Reporting Manager – Alessandro Franzosi – hereby declares, pursuant to Article 154 bis, paragraph 2, of the Consolidated Finance Law, that the accounting information contained herein corresponds to the Company’s records, books and accounting entries.

Annexes (in the complete pdf):

• Consolidated balance sheet
• Consolidated income statement
• Consolidated income statement – II quarter
• Group cash flow
• Glossary of terms and alternative performance measures used

[1] As from 1 January 2020, the activities referring to Mondadori Group magazines and websites, as well as the investments in the Magazines Italy Area, were transferred to the wholly-owned subsidiary Mondadori Media S.p.A.

[2] GFK (in terms of value at June)

^[3] Product revenue excluding Club revenue

^[4] GFK (in terms of value at June)

[5] Nielsen, cumulative figures at May 2020

[6] Internal source: Press-di, figures at May 2020 (newsstands + subscriptions channel) in terms of value

[7] Internal source: Press-di, figures at May 2020 (newsstands + subscriptions channel) in terms of value

[8] Comscore (May 2020)

[9] Shareablee (June 2020)