Financial results

Arnoldo Mondadori Editore S.p.A. has announced that the report for the period to 30 June 2010 is available, together with the independent auditor’s report, at the company’s corporate offices and Borsa Italiana S.p.A. The documents are also available on the Mondadori web site www.gruppomondadori.it (in the “Investor Relations” section).

The Board of Directors of Arnoldo Mondadori S.p.A. met today, under the chairmanship of Marina Berlusconi, to examine and approve the interim report for the first six months of the year to 30 June 2010, as presented by the Group’s deputy chairman and chief executive, Maurizio Costa.

THE MARKET SCENARIO

In the current economic climate signals of a recovery in investments and industrial production have yet to be matched by a turnaround in consumer spending. Figures for the sectors in which Mondadori operates do, however, show that the slight recovery, which began in the first quarter, is continuing.

A BRIEF OVERVIEW OF THE PERFORMANCE OF THE MONDADORI GROUP

Mondadori’s results at the end of the first half of the year show consolidated revenues in line with the first six months of 2009. The figures also show that the company outperformed the market in almost all sectors of reference and generated a marked improvement in profitability.

These results have been achieved thanks to a series of factors that reflect the Group’s business approach:

• the sharp focus on the product and on readers’ needs that has always been a distinctive characteristic of Mondadori.
  Magazine circulation figures, once again better than the market, underline the importance of Mondadori’s constant commitment to a portfolio of titles that are points of reference in their respective sectors, both in Italy and in France;

• a capacity to maintain, at the highest international benchmark levels, the profitability of the Book Division.
  Despite a fall in revenues, due to a publishing schedule more focused on the second half of the year, the Division remains a pillar of the Group’s business portfolio;

• determination in the development of the Group’s leading brands, through its international network.
  Since first hitting the newsstands, almost one year ago, the success of Grazia in France is a demonstration of how the market can respond to products that stand out in terms of quality and content;

• a commitment to the pursuit of simplification in processes and structures aimed at ensuring a recovery of profitability from existing businesses and freeing up resources for new projects.
  In line with the declared objectives, the restructuring plan and various cost containment actions have generated significant results.

The technological changes currently affecting the media sector, with the explosion of different platforms for the distribution of and access to digital content, are changing consumer expectations, needs and models. Publishers consequently need to provide a concrete response to such changes, both in qualitative terms and with sustainable business models.

This is why, in the first half of the year, Mondadori has been engaged in intensive efforts:

• in books, to create the basis for agreements with different operators in order to make a vast selection of the books published by the Group, both new and backlist titles, available in digital formats;
• in magazines, to develop digital versions of the titles which make the most of the characteristics and potential of the new electronic devices and to provide a fresh impulse for the sale of advertising in the digital sector.

GROUP PERFORMANCE IN THE PERIOD TO 30 JUNE 2010

The highlights of the Group’s business results for the first half of the year are provided without reclassification, even if the figures for 2010 have been impacted by higher levels of development costs (mainly for Grazia France) and increased postal charges, imposed at the beginning of April.

Consolidated revenues to 30 June 2010 came to €726.8 million, essentially in line (-0.5%) with the €730.7 million recorded for the first half of 2009.

Consolidated gross operating profit to 30 June 2010 amounted to €54.6 million, an increase of 35.8% on €40.2 million in the previous year, despite taking account of, as indicated above, increased development costs and higher postal charges.

As a proportion of revenues this corresponds to 7.5%, compared with 5.5% for the same period of 2009.

Consolidated operating profit to 30 June 2010 totalled €42.8 million, an increase of 53.4% on €27.9 million in the first six months of 2009, with amortizations and depreciations of tangible and intangible assets for a total of €11.8 million (€12.3 million in 2009).

As a proportion of revenues, a rise from 3.8% in 2009 to 5.9%.

Consolidated pre-tax profit came to €30.8 million (+75% on €17.6 million in 2009), with increased financial charges of €1.7 million.

Consolidated net profit to 30 June 2010 amounted to €15.1 million, more than double the figure of €7.3 million for the same period of last year.

Gross cash flow in the first six months of 2010 totalled €26.9 million, compared with €19.6 million in 2009.

The net financial position went from -€372.9 million at the end of 2009 to -€393 million at 30 June 2010; compared with the same period of the previous year, this represents an improvement of €80.9 million.

Information regarding personnel

As of 30 June 2010 the number of people employed by companies of the Group (both on temporary and permanent contracts) totalled 3,757. On a like-for-like basis, the figure would be 3,525, excluding the staff of Mondolibri, consolidated since May (with a headcount of 232).

Compared with 31 December 2009 (3,750) there is clear evidence of the effects of the Restructuring Plan, above all in Magazines, with a reduction, on a comparable basis, of 225 people (55 of whom are journalists in Italy or France).

The implementation of the Plan will continue for the whole of 2010 and will be completed in the second half of 2011.

Finally, it should be noted that the CCNL labour contract for employees of printing and publishing companies has expired and has not yet been renewed.

RESULTS OF THE BUSINESS AREAS

• BOOKS

The Book Division recorded revenues for the first half of 2010 of €168 million, a fall of 8% on the €186.2 million of the same period of the previous year.

This was principally the result of changes to the publishing schedule for the most important titles, including the new novel by Ken Follett, La caduta dei giganti, which should be published in September.

Nielsen figures for the first six months of 2010 confirm the Group’s leadership in trade books, with a 26.3% share. The single publishing houses in the Division also confirmed their positions among the top ten in Italy: with Mondadori at the top of the list, with a market share of 13%; Einaudi with 5.4%, Piemme with 4.2% and Sperling&Kupfer with 2.2%.

During the first half of 2010 Edizioni Mondadori generated revenues of €55.5 million (-14.9%). Successful new titles published in the period included: Canale Mussolini by Antonio Pennacchi, which was published in March and went on to win the prestigious Strega prize; Il palazzo della mezzanotte by Carlos Ruiz Zafón (with sales of over 250,000 copies), consolidating his position among our key authors in the foreign fiction area; Il fattore Scarpetta by Patricia Cornwell, which sold more than 130,000 copies; La compagna di scuola (80,000 copies) by Madeleine Wickham, better known by her pseudonym Sophie Kinsella.

Of particular note were the results achieved by first-time author Alessandro D’Avenia with Bianca come il latte, rossa come il sangue which, in nine editions, has sold more than 100,000 copies, and La Malapianta by Nicola Gratteri and Antonio Nicaso, which has reached almost 100,000 copies. Also of note was the launch of the new Strade Blu Dark series, with the first two volumes of La Trilogia di Stoccolma by Jens Lapidus.

Mention should also be made, in general books, of the enormous success of the novel by Fabio Volo Il tempo che vorrei (which sold over 120,000 copies in 2010 alone, bringing total sales to 710,000 copies), and the Oscar editions of Gomorra by Roberto Saviano and La solitudine dei numeri primi by Paolo Giordano, both already among the bestselling paperbacks. In Children’s books there was a very positive response to the launch of the new Oscar Junior series, with sales of more than 300,000 copies for the first 35 titles.

Einaudi generated revenues of €23.8 million, a fall of 2.9% compared with the first half of 2009. This was the result of promotional initiatives carried out in 2009, but not repeated this year, that particularly benefited Stile Libero, in the bookshop channel, and the Meridiani and Valla series, in the instalments channel.

Stand out new titles in the first half of 2010 included La parola contro la camorra by Roberto Saviano (with sales of 105,000 copies) and Prima di morire addio by Fred Vargas (78,000).

Mondadori Electa generated revenues during the period of €16.3 million, down 11.9% on the same period of last year. There was a marked fall in book sales (-21%), which, net of the impact of add-on sales, translates as essentially in line with the first half of 2009. In general, given the ongoing difficulties facing illustrated books and art publishing, production levels continued to be strongly contained, with another sharp fall in the number of copies distributed.

There was also a fall in revenues in the Cultural Assets sector (-9%) due to lower sales from museum bookshops resulting from the termination of concessions at the Brera Museum and the Cenacolo in Milan and the Musei Civici in Venice.

However, during the period, two important acquisitions were made: the new Museum of the Twentieth Century in Milan (due to open in November 2010) and the Maxxi Museum in Rome, which opened to the public in May. Thanks also to an increase in the number of tourists visiting the country’s principal museums and monuments, in the organisation of exhibitions area in which the company is active, Mondadori Electa saw an increase in revenues compared with June 2009.

Sperling & Kupfer recorded revenues for the period of €13.9 million (-7.3%). This fall was mainly due to a reduction in the sale of rights for add-on sales initiatives. A total of 164 new titles were published during the period, compared with 187 in 2009, in line with the ongoing focus on the selection of titles for publication. Of particular note was the publication at the end of June of the new book by Sveva Casati Modignani, Mister Gregory, which immediately entered the Italian fiction bestsellers list and the first novels by two interesting new authors, Anne Fortier and Kate Morton.

Mondadori Education generated revenues during the period of €14.3 million (+0.7%). In the primary school area almost all of the adopted texts of last year have been confirmed, integrated with digital content for teachers, and there has been an increase in the range of extra-curricular materials, from which the company expects positive results. Catalogue sales continued to suffer in the first level secondary segment, while new titles achieved reassuring results, which augurs well for the future. Finally, the company confirmed its strong positioning in a series of subjects in the humanities in the second level secondary segment.

Edizioni Piemme ended the first half of 2010 with revenues of €24.2 million, an increase of 8.5% on 2009, thanks to the success of a series of commercial initiatives in the various sales channels and across all product lines.

In the fiction and non-fiction area new titles included Il sussurro della montagna proibita by Siba Shakib (47,000 copies sold). There was a slight fall in fiction sales compared with 2009, due to a reduction in supplies of titles by Khaled Hosseini, now available in paperback; while in Religion there was an excellent performance by A un passo dal baratro by Paolo Brosio (with sales of 60,000 copies since the beginning of 2010).

The Junior area saw an increase in sales compared with 2009 with varying trends: the brand Il Battello a Vapore saw revenues in line with last year, thanks to a range of well-established series, while the Stilton line saw a rise in revenues thanks to the publication of successful new titles.

• MAGAZINES ITALY

In the first half of the year the Italian magazine market was once again conditioned by the tail end of the crisis that affected both national and international publishers in the two-year period 2008 – 2009.

The impact was felt on the advertising front – with magazines struggling more than other media to turnaround a negative trend that has now lasted for almost two years – as well as circulation – where ongoing difficulties persisted in the first half of the year – and, finally, in add-on sales – where there was a further marked downturn.

All of which makes Mondadori’s performance in the first six months quite significant, both in terms of business performance (despite the negative impact of unexpected costs resulting from the cancellation of postal subsidies for subscriptions), and revenues.

The revenues generated by the Magazine Division in Italy in the first half of 2010 amounted to €250 million (-1% on €252.4 million in the same period of the previous year).

These results, after the sharp downturn recorded in 2009, were generated by Mondadori titles thanks to a series of factors:

• circulation revenues (-4%) that clearly outperformed the market, with a strengthening of the Division’s market share;
• an increase in revenues from add-on sales (+2.8%), in marked contrast to the market trend, where there was a fall of more than 30% (in terms of value to May). Underpinning this higher level of stability compared with the competition was the organisation of the business across different product types, the strength of certain brands and a careful selection of the initiatives;
• there was also a further moderate stabilisation in advertising revenues, decidedly more resistant (-1.7%) than the most qualified competitors, in a market that was down by 9.3%;
• revenues – particularly positive in the second quarter, almost in line with 2009 – benefited from a good performance by the weekly titles, while monthlies were decidedly weaker, with the exception of those titles currently being re-launched, including Grazia Casa, Interni, Casa Facile, Cucina Moderna and Panorama Travel.

The action taken by Mondadori in response to a still difficult market was organised along two main lines: the first aimed at reaping the benefits of the restructuring plan, and the second focused on sustaining the development of the product portfolio.

In terms of circulation, in a market which saw a downturn of 9.3% (in terms of volume to May), Mondadori confirmed and strengthened its leadership, with a market share of 35.8% at the newsstands; there was a slight upturn for Tu Style, with a stable circulation of around 200,000 copies, making it one of the best-selling women’s weeklies; both Chi and Donna Moderna performed well in their markets of reference; there was significant growth for Grazia; the new editorial formulas of Casa Facile and Interni; and satisfactory results for the monthlies Salute!, Oroscopo and Giochi, all of which are supplements to TV Sorrisi e Canzoni.

International activities

Thanks to the positive performance of the UK, Dutch and German editions of Grazia, licensing revenues increased in the first half of 2010 by 42%, while advertising sales in Italy for the network doubled, both thanks to the inclusion of new editions and an increase in revenues for existing titles, in particular in Russia, China and Great Britain.

The Attica subsidiary was affected by the financial crisis in Greece and the Balkans and saw a fall in advertising revenues of around 18% (-11% on a like-for-like basis). Energetic action is currently underway on the cost side, the results of which will be seen from the second half, with a positive effect on the company’s results.

• DIGITAL

There was a marked increase in online advertising and, in particular, display advertising was up by 11.6% compared with the same period of the previous year (source: Nielsen in terms of value, to May 2010).

Mondadori has created a new sales company, Mediamond, with a sales force dedicated to online advertising in order to improve the effectiveness of the offer. The decision to focus on the women’s market has already generated encouraging results and the new site of GraziaMagazine.it and the positive performance of DonnaModerna.com have given a new impulse to the sale of advertising on Mondadori sites.

• MAGAZINES FRANCE

The strategic decisions taken in France in 2009 – the launch of Grazia, the extension of the Editions Mondadori Axel Springer joint venture, and the review of the portfolio of titles – have had a favourable impact on the first half of 2010.

Mondadori France generated revenues of €168.4 million, a slight fall (-1.2%) on €170.5 million in the same period of 2009; excluding the titles sold and the contribution of Grazia France revenues were up by 6.6%.

Circulation revenues, which account for 70% of the total, were up by 2% on a like-for-like basis. The change is due to, on the one hand, a slight fall in newsstand sales, in a market that was down by 3% in May (internal figures, in terms of volume), and, on the other, to an increase in subscriptions, which make up an increasingly significant part of circulation revenues, which are less exposed to economic cycles. These results were obtained thanks to careful portfolio management, along with an ongoing focus on product quality.

The contribution of Grazia was of particular importance, raising the rate of growth, net of titles sold or transferred, to +5.3%

There was a marked improvement in advertising sales in the first half of the year compared with 2009. Mondadori France saw advertising sales increase by 21.2%, excluding the titles no longer consolidated, and by a total of 5.8%, thanks to the contribution of Grazia.

In a market that grew by 3.1% (Source: Kantar Media, in terms of volume, to May), thanks to the contribution of important new launches in the women’s weekly segment, Mondadori recorded growth of 22.7%, with a significant increase in the company’s market share, taking it close to the level of its direct competitor.

These results are even more positive if we remember that growth was generated in the high-margin upmarket segment, which now accounts for 22.4% of the advertising revenues of Mondadori France (6.5% in 2009).

The policy of cost reductions carried out over recent years continues also this year and, in addition to the restructuring, the project for the transfer of the company’s offices to new premises has taken on increasing importance. The move, to Montrouge, in the Paris metropolitan area, will take place in January 2011 and will have a positive impact in terms of costs, organisation and efficiency.

The extension of the Editions Mondadori Axel Springer joint venture, with the contribution of all of the company’s titles in the car sector, is already producing positive results, above all with the new formula of L’Auto-Journal, which, in the first five months saw 21.4% increase in circulation and interesting further developments are in the pipeline, particularly for the digital versions of the car titles.

The results of Grazia continue to be excellent – even after the launch of two competing titles (Envy and Be) – with an average of 29.5 advertising pages per issue and newsstand sales of 177,000 copies from the launch to the present.

• ADVERTISING

Advertising investments in Italy in the first five months of 2010 (Source: Nielsen – in terms of value) were up (+3.8%), but continued to show a varied capacity to react, both in terms of the speed and scale of recovery, by the different media as they emerge from different levels of crisis during 2009.

After the second quarter, the improved state of health of online and radio advertising was underlined, there was a progressive recovery in television, while in print media, magazines continued to suffer significantly (-9.3%) while newspapers remained essentially stable. There were however cautious signals of an improvement in investments in FMCGs and cosmetics, and, to a lesser extent in fashion and interiors.

Mondadori Pubblicità ended the first half with total revenues of €119.9 million, in line with 2009 on a like-for-like basis in terms of media (i.e. excluding online and newspapers, no longer in the portfolio in 2010). The marked changes in the breakdown of revenues, including the termination of the contract with Società Europea di Edizione S.p.A. in November, and the switch of online advertising sales from January to the new sales company, Mediamond, have had a negative impact in 2010 of around 5 percentage points.

During the first six months of 2010 sales for Mondadori magazines – characterised by an intense and focused policy of re-launches and an innovative range of technologically enriching activities – recorded a marked advantage compared with the main competitors, thanks to improved sales in the second quarter, with a slight fall compared with the first half of 2009 (-1.6%).

After a clear upturn (over 4.5%) in the second quarter, Mondadori weeklies recorded growth of 2.7%. There was a convincing and progressive consolidation in the women’s segment (particularly with Donna Moderna, Chi and Tu Style); a big success in terms of advertising for the re-launch of Panorama; and a performance that was below that of 2009 for monthly titles, in a market that remained somewhat “unconvinced” by this type of product.

In the radio segment, it should be underlined that R101 closed the first six months of 2010 with growth of 8.6%, compared with the same period of last year, thanks to a second quarter that was up by more than 12%. Meanwhile, sales for Radio Kiss Kiss, which began in March 2009, continued with constant success.

• DIRECT and RETAIL

Mondadori’s Direct & Retail Division generated total first half revenues in 2010 of €111.3 million, an increase of 18.9% on the €93.6 million on the first half of 2009.

It is worth remembering that the figures for last year did not include Mondolibri. Consequently, on a like-for-like basis, growth during the period was around 4%.

Investments in direct marketing in Italy were up by 5.8% in the first five months of the year (Source: Nielsen, in terms of value). In this context Cemit grew in line with the market, developing new opportunities in all of the sectors in which it has operated for years in the role of integrating processes for direct marketing and by expanding its market through a process of internationalisation.

In May 2010 Cemit was joined in the direct sales business by Mondolibri, which, with its six thematic book clubs, has around 800,000 members. Revenues from this business were down by around 6% compared with the first half of 2009, a period when the business was not consolidated.

Mondolibri is also one of the leading national operators in e-book sales, conducted through the web site Bol.it, where revenues were up by 43%, well above the trend in the market as a whole.

The revenues of the Retail Division, which since May include those generated by the outlets of Mondolibri S.p.A., were up by 6.4% (4.1% on a like-for-like basis) compared with the same period of the previous year. This increase was, however, substantially attributable to the development of the network, which now has a total of 564 outlets.

Mondadori Retail (33 own stores, bookstores and Multicenters) towards the end of the first half placed a special emphasis on redefining the offer of the Multicenter formula, making changes to the product mix and reviewing the lay out of the stores in order to make them more accessible.

Sales (+2.5% compared with the first half of 2009) grew sharply in stationery (+19.3%), performed very well for editorial products (+6.4%) and were stable for digital goods (-0.3%). Despite the opening of three new stores in Palermo, Rome and Turin, in the second half of 2009, there was an increase in staff of just 12, in line with the rationalisation policy implemented last year.

Mondadori Franchising generated revenues in the first half of €33.1 million, an increase of 6.8%, thanks to the expansion of the number of affiliates in the chain of book shops and the Edicolè formula (250 and 206 respectively).

Mondolibri, which operates 23 book shops directly and has 52 in franchising, generated May and June revenues (the period of consolidation) of €1.9 million.

• RADIO

In the first five months of the year the radio market grew by 14.6% compared with 2009, highlighting a trend of continuous growth and distinguishing itself as one of the best-performing media (Source: Nielsen, in terms of value).

Advertising sales for R101 during the first half of 2010 came to €7.6 million (+8.6%), with fewer special initiatives than in the same period of the previous year.

In terms of ratings, the new Audiradio survey rewarded R101, which in the first quarter of 2010 had a daily average of some 2.5 million listeners and 7 million over 21 days, an important breakthrough that confirms the Mondadori Group’s radio station as one of the leading national networks.

EXPECTATIONS FOR THE FULL YEAR

In the first six months of the year the volume of the Mondadori Group’s business was in line with that of the previous year, while, at the same time, there was a significant improvement in profitability, despite ongoing investments for the development of both the products in the international network and digital content, in the book and magazine sectors.

In addition to the positive revenue performance by the businesses, the company’s was also able to count on the increasingly effective containment of operating and structural costs. The only negative impact came from higher postal charges, after exceptional increases, from the beginning of April, resulting from the cancellation of state subsidies on the cost of postage for subscriptions.

It is therefore reasonable to suppose that, net of unforeseen circumstances and with ongoing stability in the trends in the company’s markets of reference, Mondadori will be able, for the full year, to further improve the already positive levels of operating profitability recorded in the first half.

§

The executive responsible for the preparation of the company’s accounts, Carlo Maria Vismara, declares that, as per art. 2, 154 bis of the Single Finance Text, the accounting information contained in this release corresponds to that contained in the company’s formal accounts.

Comlpete text (PDF) with enclosures

The Board of Directors of Arnoldo Mondadori S.p.A. met today, under the chairmanship of Marina Berlusconi, to examine and approve the interim report for the first three months of the year to 31st March 2010, as presented by the Group’s Deputy Chairman and Chief Executive, Maurizio Costa.

The market scenario

After a protracted period of decline, in the first quarter there were still no clear signals of a turnaround. In many sectors, however, there was a slowdown in the fall in consumer spending and, in some cases, some encouraging indications of a recovery.

A brief overview of the performance of the Mondadori Group

In this context, in terms of profitability, Mondadori’s operating results continued the improvement that was recorded towards the end of 2009.

A significant part of the Group’s operating profit derived from cost reduction efforts – to which there is an ongoing commitment – making it possible to defend and, in some areas, improve the level of profitability of the businesses.

There was a slight downturn in revenues, but much less marked than in the previous year.

In terms of advertising spending, there was a sharp slowdown in the rate of decline and in some sectors there were important signs of recovery.

GROUP PERFORMANCE IN THE PERIOD TO 31 MARCH 2010

Consolidated revenues in the first quarter of 2010 amounted to €344.7 million, a fall of 2.8% on the €354.5 million of the first three months of 2009.

Consolidated gross operating profit came to €21.2 million, an increase of 49.3% on the €14.2 million of the previous year, despite increased investments for development.

Consolidated operating profit amounted to €15.7 million, up by 96.2% on the €8 million of the first quarter of 2009, with amortizations and depreciations of tangible and intangible assets for a total of €5.5 million (€6.2 million in 2009).

Consolidated profit before taxation amounted to €8.6 million, more than three times the €2.6 million of 2009 despite an increase of €1.7 million in financial charges deriving from the debt restructuring.

Consolidated net profit came to €2.4 million, compared with the loss of €1.8 million recorded in the first three months of last year.

Gross cash flow in the first three months amounted to €7.9 million, compared with €4.4 million in 2009.

In the art books segment Mondadori Electa recorded total revenues of €7.6 million, an 8.4% fall on the first three months of 2009; on a like-for-like basis, in other words net of revenues for the sale of rights for add-on sales operations, there would have been a slight increase (+0.4%) in total revenues.

There was a further improvement in the Group’s net financial position which went from -€372.9 million at the end of 2009 to -€357.2 million at the end of the first quarter of 2010. A positive balance, compared with the first quarter of last year, of €97 million.

Information regarding personnel

As of 31st March 2010, the personnel employed by companies of the Group (both on temporary and permanent contracts) amounted to 3,618 (3,750 in December 2009): a fall of 132 people, 70% of which resulting from the Restructuring and Early Retirement Plan, which is currently underway at the parent company and at Mondadori Pubblicità, and the remainder to the ongoing block on turnover and cost containment.

Compared with the first quarter of 2009 there was a reduction of 308 in the headcount.

RESULTS OF THE BUSINESS AREAS

• Books

The Book Division recorded revenues for the first quarter of 2010 of €80.1 million, a 10% fall on the €89 million of the same period of the previous year.

This shortfall was largely due to changes in the publishing schedule which, compared with 2009, foresees the publication of important titles after the end of the first quarter. These include the new book by Carlos Ruiz Zafón Il palazzo della mezzanotte, which was published in April and has already met with a good response.

During the first quarter of 2010, the Trade Books department announced a programme for the publication of more than 1,000 e-books for Christmas 2010.

Concerning the individual publishing houses, Edizioni Mondadori generated first quarter revenues of €28.7 million (-22.4%): a figure that was affected by a change in the publishing schedule which, compared with the previous year, is more concentrated in the second half.

Of note among the particularly successful titles was the new novel by Fabio Volo Il tempo che vorrei, published last year, which continued to sell extremely well in the first quarter, reaching total sales of 690,000 copies. New titles included: John Grisham’s Ritorno a Ford County (100,000 copies), Madeleine Wickham (alias Sophie Kinsella) with La compagna di scuola (75,000 copies) and the first novel by Alessandro D’Avenia, Bianca come il latte e rossa come il sangue (over 70,000 copies).

During the period the net revenues generated by Einaudi saw an increase of 7.4% compared with the previous year, reaching €13 million, despite a fall of almost 15% in the instalments channel.

Sperling & Kupfer generated revenues of €6.8 million, a fall of 17.1% compared with the first three months of 2009 which benefited from the good sales of Il gioco delle verità by Sveva Casati Modignani.

In the first three months of 2010 the revenues of Piemme amounted to €12.5 million, an increase of 4.2% compared with last year.

Mondadori Education generated in the first quarter 2010 revenues of €2.5 million, a slight improvement on the €2.3 million of the same period of the previous year, in a period of the year, which as usual has a minimal impact o annual revenues.

• Magazines Italy

In the first quarter of 2010, the Italian and international publishing world, while still conditioned by the crisis seen in 2009, began to show some pale signs of stabilising. This was mostly evident in the advertising area overall, while on the circulation front the first months of the year continued to be characterised by persistent weakness, heightened by a further marked downturn in add-on sales.

In terms of advertising sales, consumer magazines appears to be the segment that is finding it most difficult to regain growth: This was particularly true in January and February, while March and April have provided more encouraging signals.

In this context, the Magazine Division in Italy generated revenues of €123.4 million essentially in line (-0.7%) with the €124.3 million of the first three months of last year.

Performance during the period was determined by the following:

• a fall in circulation revenues (-4.3%) in a market that was down by 10.6% (in terms of copies);

• growth in revenues from add-on sales (+3.7%), in marked contrast to the market of reference (in terms of value, -32.5%);

• a limited fall (-4.1%) in advertising revenues, held up by sustained efforts by the sales staff that has added new clients to the portfolio and a range of innovative initiatives that have driven planning across integrated communication platforms including print, web and others (QR Code, Video In Print, Augmented Reality).

Of particular note during the period:

• the re-launch of Interni, Casa Facile, Panorama Travel and Grazia Casa, monthlies that have seen a positive reaction, above all on the circulation side;

• promotional support activities for a number of weeklies that contributed to stabilising circulation and advertising revenues;

• editorial revisions conceived for the re-launch of some core titles (Panorama, Tu Style and Chi), planned for the coming months.

It should be noted that at the end of March the government suspended the long-standing practice – common also in many other European countries – of allowing publishers to take advantage of reduced postal rates for subscriptions. If new measures, that all publishers are pressing for, are not introduced in the short term, this will lead to a 100% increase in postal tariffs , putting additional pressure on the subscription channel.

International activities

In the first three months of the year licensing revenues were up by 24%, thanks to the good performance of the UK and Dutch editions of Grazia and the launch of the magazine in Germany. During the period there was also a doubling of advertising revenues, thanks to new international editions and due to the very negative first quarter of 2009.

With regard to the joint ventures, the activities in Russia and China performed decidedly better than last year, particularly in terms of advertising sales.

The subsidiary Attica began to feel the effects of the financial crisis in Greece with a fall in advertising revenues of around 9% (-2.5% on a like-for-like basis); and the performance in the Balkans continued to be very negative, compared with the first quarter of 2009 in which the negative impact of the crisis had still not been felt.

Digital

In the first quarter of the year, the online advertising market expanded by 3% (in terms of value, source Nielsen). In this context, the organisation of a dedicated sales force with the new sales company Mediamond, and the launch of Graziamagazine.it have given a particular push to online ad sales (+30%); the Group’s web sites for women are also outperforming the market, in particular Donnamoderna.com and Cosmopolitan.it.

Efforts to concentrate resources specialised in digital ad sales have led to an increase in the share attributable to the sales company. This reduces net advertising revenues attributable to the publisher to +13%.

• Magazines France

Mondadori France generated first quarter 2010 revenues of €81.1 million, a 3% fall on the same period of the previous year. A correct evaluation needs to take account of changes in the business in France due to the closure and sale of some titles (some contributed to the EMAS joint venture) and the launch of Grazia, at the end of August 2009. On a like-for-like basis (excluding the titles sold or closed and the launch of Grazia France) revenues would be essentially in line with last year.

Circulation revenues, which account for around 75% of the total, were up by 1.2% (+4.5% on a like-for-like basis), thanks to good results by the magazines, including Biba, Modes&Travaux, Sciences&Vie. In addition to stable newsstand sales there was also a positive result from subscriptions, an increasingly important component of circulation revenues, which is also less exposed to economic volatility.

Revenue growth was the result of the strategic decision by the company to concentrate the portfolio on core titles, as well as a policy of continuous improvement of editorial quality. Of particular importance was the contribution of Grazia, which would up the increase, net of the titles no longer part of the portfolio, to +7.8%.

During the first quarter there was a marked upturn in advertising sales for Mondadori France titles compared with 2009: revenues were up by +4.2%, net of the titles no longer in the consolidation area and with the contribution of Grazia, also thanks to growth in the up-scale segment, which now accounts for 21% of total advertising sales (7% in 2009); total revenues were down by 9.3%.

Compared with the market of reference, which recorded growth of 3% in the first quarter, Mondadori France saw an increase in volumes of 6% (source: reclassified data from Kantar Media).

The cost reduction policy introduced by Mondadori France in recent years, continues also in the current year and, in addition to reorganisation, further savings will accrue from other actions. Among these is an important project for the transfer of all the company’s headquarters to Montrouge in the Paris metropolitan area at the beginning of 2011. This will not only lead to cost savings, but also to other organisational and operational efficiencies.

The expansion of the joint venture with Axel Springer, to which all of the titles in the auto sector have been contributed, has already brought positive results, above all for the new formula of L’Auto-Journal which, from the first issues, has seen a rise in circulation. Further interesting developments are planned in the short term, particularly for the online versions of car magazines

The results of Grazia, even after the launch of two competing titles (Envy and Be), continue to be excellent, with an average over the quarter of 27 advertising pages and newsstand sales of 175,000 copies.

• Advertising

During the first quarter of 2010, felt the weight of significant changes, including the loss, from November 2009, of the titles published by Società Europea di Edizioni (Il Giornale and its supplements) and the transfer, in January 2010, of online sales to the new joint venture Mediamond.

In this context, the revenues of the company in the first three months of 2010 amounted to €49.4 million, a fall of 4.4% on the €51.7 million of the same period of the previous year.

In the context of magazines, sales for Mondadori titles alone were down by 2.9% on the first quarter of 2009, with the weeklies proving stable thanks to the positive performance of the women’s titles.

In radio, ad sales for R101 were slightly up on those of the first quarter of 2009 and activities on behalf of Radio Kiss Kiss, begun in the first months of 2009, continued successfully.

• Direct Marketing

During the first quarter of 2010 Cemit generated revenues of €5.1 million, an increase of 6.3% on the €4.8 million of the same period of 2009, despite a market for direct mail investments that is continuing to decline. During the period the company continued its development and diversification activities for direct communication projects, also with an opening up of foreign activities, and improvements in the quality of processes.

• Retail

Total revenues from the Retail Division amounted to €44.4 million, a 6.2% increase on the €41.8 million of the first quarter of 2009, thanks to a stable performance by the network and partly due to new openings. During the period action continue to contain management costs in order to minimise the impact of a prolonged crisis in consumer spending that shows no sign of coming to an end.

The 32 stores directly managed by Mondadori Retail recorded sales in the first quarter of €27.1 million (+1.1% on the first three months of 2009).

Mondadori Franchising generated revenues of €17.3 million, a 15.3% increase on 31st March 2009, thanks to the development of the bookstore and Edicolè chain, which in the period rose to 456 outlets.

• Radio

R101 generated first quarter 2010 net revenues of €3.1 million, an increase of 3.3% on the €3 million of the same period of the previous year. In the first two months, advertising sales were up by 11.2%, in line with the market; the downturn in March was entirely due to the absence, of a significant special initiative that was a feature of 2009.

EXPECTATIONS FOR THE FULL YEAR

The situation in the markets of reference for the Mondadori Group in the first quarter of the year appear better compared with the end of 2009. In particular, advertising investments have seen improvement in the negative trend and, in some sectors, there has even been a turnaround.

Nevertheless, short-term visibility remains unclear, making it impossible to predict when a solid recovery will get underway. In any case the company is continuing with its organisational restructuring and qualitative investments on products, aimed at improving profitability and defending volumes, maintaining levels that are above the benchmarks.

As regards forecasts for the full year, in the light of the results of the first months, it is possible to restate that, provided there are no unforeseen circumstances, the company expects that the confidence already expressed during the presentation of the 2009 Annual Report, concerning the ability of Mondadori to improve its level of profitability compared with last year, to continue.

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The executive responsible for the preparation of the company’s accounts, Carlo Maria Vismara, declares that, as per art. 2, 154 bis of the Single Finance Text, the accounting information contained in this release corresponds to that contained in the company’s formal accounts.

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The report for the first quarter of 2010 will be available, as per current legislation, at the company’s corporate headquarters, Borsa Italiana S.p.A. and on the web site www.gruppomondadori.it from today

The Board of Directors of Arnoldo Mondadori Editore S.p.A. met today, under the Chairmanship of Marina Berlusconi, to examine and approve the consolidated balance sheet and management report for the year to 31st December 2009 as presented by the Group’s Deputy Chairman and Chief Executive, Maurizio Costa.

The market scenario

2009 saw the full effects of the international financial crisis that was the forerunner to a recession that has severely undermined on the real economy, with a well-documented impact on production, consumer spending and employment.

During the year economic indicators continued to worsen, with an inevitable knock-on effect on corporate decisions, not merely on costs, but also and above all on investments, penalising any possible recovery which continued to be seen as difficult and far off.

Brief outline of business trends

In the sectors in which Mondadori operates the really critical element was the trend in advertising investments in magazines, which resulted for the Group in a sharp fall in revenues, despite sales, both in France and Italy, being better than the reference markets.

In the magazine sector Mondadori in Italy, thanks to the quality of its titles, was able to hold circulation relatively steady, while the market for add-on sales continued the expected sharp fall. In France, where a review of the product portfolio was completed, positive circulation figures were confirmed, also thanks to the contribution of subscriptions. At the end of August, the weekly women’s title Grazia was launched, with better than expected results, both in terms of sales and advertising.

In a book market which in Italy showed a slight tendency to buck the prevailing trends in consumer spending, Mondadori produced results, both in terms of revenues and profitability, in line with 2008, which was a record year due to the number of bestsellers, thanks to the publication of a number of successful new titles.

There was increased attention for the activities of other business. R101, the group’s radio station, in the last months of the year saw an upturn in advertising sales, anticipating what is hoped will be a recovery in 2010. There was a particularly intense expansion of the retail sector thanks to franchising agreements and a further push was given to the digital area, both for book sales and in magazines with sites for the main titles in Italy and France, as well as advertising sales, also through new joint ventures.

Significant events during the year

In addition to a sharp focus on the business, as indicated above, Mondadori’s reaction to an extraordinarily complex and negative market situation included a number of specific operations:

• the sale of 80% of the printing business, finalised at the end of 2008, a year in which there was a marked improvement in the financial position and consistent capital gains. In 2009 the partnership generated the expected positive impact, both in terms of the maintenance of standards of printing quality and flexibility, and reductions in costs;
• the continuation, with increased commitment, of a four-year plan for operating cost reductions begun in 2008 and centred on actions on cost structures, without sacrificing product quality, and a wide-ranging restructuring programme, both in Italy and in France.

The plan, that has already generated cost savings during 2009 of around €110 million, aims, by the end of 2011, to achieve total savings, on a like-for-like basis of €170 million;

• debt restructuring, begun and completed during 2009, led in the final months of the year to an improvement in the financial flexibility of the business, with the expansion of covenants and the extension of terms on credit lines from banks.

GROUP PERFORMANCE IN THE YEAR TO 31 DECEMBER 2009

An outline of the results for the year 2009 will include the effects of some of the operations described above, particularly in the differences with 2008, in terms of capital gains and restructuring charges. Consequently, what follows is an indication of normalized operating profit, excluding the effects of the changes mentioned above.

Consolidated revenues in 2009 came to €1,540.1 million, a fall of 15.3% on the €1,819.2 million of 2008. On a like-for-like basis, excluding the printing business sold last year, revenues (€1.695,3 million in 2008) were down by 9.2% (only -2.6% in the last quarter of the year).

Consolidated gross operating profit for 2009 amounted to €106.2 million, a fall of 57.4% on the €249.2 million of the previous year.

Excluding the results from the printing business (on a like-for-like basis), capital gains and charges for organisational restructuring, normalized consolidated gross operating profit came to €133.1 million, a fall of 34.3% on the €202.7 million of 2008; a reduction essentially due to the downturn in advertising revenues and investments for the launch of Grazia in France; the impact of these two factors were mitigated by the growing results of efforts to reduce operating costs.

In this regard, it is worth underlining that in the last quarter of 2009 the fall was of 8.5% (-€4.8 million) compared with the same period of the previous year, which provides a clear indication of a significant slowdown in the downward trend.

Consolidated operating profit for 2009 amounted to €71.8 million, a 64.7% fall on the €203.5 million of 2008, with amortizations and depreciations on tangible assets of €13.4 million (€31.1 million in 2008) and intangibles of €20.9 million (€14.6 million in 2008).

Consolidated pre-tax profit came to €63.9 million, a fall of 57.8% on the €151.4 million of 2008, with an improvement of €44.2 million in net financial charges, the result of the lower cost of money, as well as lower average indebtedness and capital gains from debt restructuring activities (€14.5 million).

Consolidated net profit for 2009 amounted to €34.3 million, a 64.7% reduction on the €97.1 million (around €32 million of which from capital gains) of the previous year.

Consolidated gross cash flow (net profit plus amortizations) at 31 December 2009 came to €68.7 million compared with €142.8 million in 2008.

The consolidated net financial position went from -€490.3 million at the end of 2008 to -€372.9 million on 31 December 2009, an improvement of €117.4 million; compared with 30 September 2008 (i.e. before the sale of 80% of Mondadori Printing) the improvement was of €271.6 million.

Information concerning personnel

On 31 December 2009 permanent and temporary contract staff employed by the companies of the Group amounted to 3,750 (3,925 on 31 December 2008).

The consolidated figure, therefore, shows a fall of 175 (-4.5%), obtained through a block on turnover and efficiency policies related to the launch of the restructuring plan.

Personnel costs for 2009 came to €302.8 million, a fall of 15% compared with the previous year. However, the figure is not comparable in that the figure for 2008 includes, for ten months, the printing business. In fact, excluding the labour costs for Mondadori Printing and costs related to restructuring, the reduction was of 8%.

As already indicated, the Group will pursue, both in Italy and France, a reorganisation plan, begun in 2008, with the aim of achieving further significant efficiency gains by the end of 2011.

THE BUSINESS AREAS

· Books

The Mondadori Book Division recorded total revenues in 2009 of €425.7 million, compared with €434.3 million in the previous year (-2%); excluding add-on sales, the fall was of 1%.

During 2009 the Group published 2,449 new titles (2,695 in 2008) and 5,137 reprints (5,225 in 2008), a total of 51.6 million copies, compared with 53.4 million in previous year.

Over the year the Mondadori Group confirmed its leadership position, with a 28.4% market share in terms of value, an with a clear advantage over its competitors. The slight fall in the Group’s overall share was due to the expected downturn by Edizioni Mondadori compared with 2008, a year that was positively conditioned by the success of Paolo Giordano, winner of the Premio Strega with La solitudine dei numeri primi. Of note, compared with the previous year, was the growth in the market share of Einaudi, which, once again in 2009, was Italy’s second largest publishing house.

As regards the performance of the individual companies, Edizioni Mondadori generated revenues of €142 million, a slight fall on the previous year (-1.4%). Two new titles published in 2009 met with particular success among readers: Il simbolo perduto by Dan Brown, published in October, sold more than a million copies in just over two months (and became the year’s biggest selling title). There was also great success for Il tempo che vorrei by Fabio Volo, which in just over a month sold over 600,000 copies. Of particular note was Venuto al mondo by Margaret Mazzantini, winner of the Premio Campiello Letteratura. Published in November 2008, the novel had sold, by the end of 2009, a total of more than 500,000 copies. Remaining with Italian fiction, the exceptional sales of La solitudine dei numeri primi by Paolo Giordano continued which, two years after it was first published, has now sold more than 1,300,000 copies in Italy, and been published in 30 foreign translations.

In foreign fiction there was continued success for Marina by Carlos Ruiz Zafon (340,000 copies); of note in non-fiction was the book by Bruno Vespa, Donne di cuori, which sold more than 300,000 copies, making it the year’s top selling non-fiction title. Also the Strade Blu series saw continued success, especially with Roberto Saviano, with Gomorra and La bellezza e l’inferno.

During the period revenues at Einaudi amounted to €50.2 million (-2.9%). The fall was mainly due to a downturn in revenues for the sale of rights for add-on sales initiatives. Among the publisher’s series good performances were recorded Italian fictions (+27%), also as a result of the award of the Premio Strega to Tiziano Scarpa for Stabat Mater (over 140,000 copies), and by Economici (+5.3%). Other successful titles during the period included: Che la festa cominci by Niccolò Ammaniti (300,000 copies), Un luogo incerto and Scorre la Senna by Fred Vargas (a total of over 180,000 copies), Il museo dell’innocenza by Orhan Pamuk (55,000 copies).

Revenues at Sperling & Kupfer were up by 11.5% compared with the previous twelve months, reaching €23.2 million. Actions to re-focus the offer, begun in 2008, continued with a further containment in the number of new titles and copies produced. Among the biggest hits were Il gioco delle verità by Sveva Casati Modignani (170,000 copies).

In 2009 Piemme generated net revenues of €44.4 million (-8.8%). This result was achieved thanks to the excellent performance of the religion and paperback lines, that compensated for an expected downturn in fiction, determined by hard cover sales of Hosseini.

Revenues at Mondadori Electa during 2009 came to €40.3 million, a 5.4% fall on the previous year.

Mondadori Education generated net revenues of €81.7 million (-5.1%), maintaining a significant position in the school textbook sector, with a market share of 13.3%, and confirming its leadership position in the primary school segment.

· Magazines Italy

2009 was strongly characterised by the effects of the crisis in the second half of 2008 which continued to affect also the year just ended.

The fall in consumer spending affected all sectors of print media, impacting readers propensity to buy and, even more markedly, the level of advertising investment in traditional media. In terms of circulation, there was not so much a fall in the number of buyers as a downturn in the frequency of buying.

The fall in advertising revenues was, in turn, affected by both a fall in volumes and an inevitable reduction in ad rates. It should be noted, however, that Mondadori titles outperformed the market, in particular in the most relevant segment, that of weeklies.

In this difficult context, which in any case saw a strong reaction by Mondadori in terms of initiatives and management, the revenues of the Division in Italy came to €494.3 million, a fall of 14.1% compared with the €575.7 million of 2008.

This was largely due to the following phenomena:

• a fall in circulation revenues (-3.6%) mainly the result of a reduction in volumes and only in part compensated by cover price increases;
• a marked slump in add-on sales (-18.4%) which, while sustained by a significant increase in the number of initiatives, recorded an expected fall in average sales per single operation;
• a substantial downturn in advertising revenues (-27.1%) split across, albeit unevenly, all advertising sectors and almost all titles.

Actions taken to face this unfavourable market situation included the support and development of titles, with a priority on actions aimed at improving efficiency and reducing operating and structural costs.

In the last quarter of 2009 the Group was also engaged in the implementation of an ambitious corporate restructuring plan, made possible by agreements reached with the unions in August and October for the adoption of measures foreseen by current norms to be applied at times of crisis, as well as individual incentives, affecting both graphics/layout and journalistic staff.

In terms of circulation, in a market that was a downturn of around 7%, Mondadori confirmed its leadership with a share of around 35%.

In the women’s segment Donna Moderna maintained its circulation revenues thanks also to an increase in the cover price introduced at the beginning of the year, while in the market area Grazia more than confirmed the sales levels of 2008. Of special note were the sales of Tu Style, so radically redesigned as to be considered an authentic “launch”, that drove circulation to 190,000 copies (+45%), increasing circulation revenues by 30%.

In the newsmagazine segment Panorama underlined its position of pre-eminence by further expanding the gap from competitors.

In the TV guides segment, which has been suffering from a long-term decline in circulation, the various titles in the Mondadori portfolio resisted rather well. In particular TV Sorrisi e Canzoni which, thanks to both a cover price increase during the year and constant efforts to renew the title, saw a very contained fall in circulation (-3%).

Among monthly titles there were particular problems with titles in the interiors and design segments (-5% in circulation revenues) while cookery titles performed well, showing growth in both circulation and revenues.

There were also promising prospects for Flair which, after its July relaunch, saw an encouraging increase in newsstand sales.

In add-on sales, that have been particularly relevant in the past for the profitability of a number of publishing groups, there was a continuation of the negative trend (-22.1%). Mondadori nevertheless generated significant revenues, performing slightly better than the market (-18.4%), and confirming its position as market leader, also with respect to the leading national daily newspapers.

Digital

Mondadori is active online with 47 web sites that cover all of the Group’s activities, with 2009 revenues that recorded growth of 13%, in a market that grew by 5.1% (Source: Nielsen).

Particularly positive was the performance of the Group’s sites for women, including Donnamoderna.com, Starbene.it, Grazia.blog.it and Cosmopolitan.it. Leadership in the segment will be further strengthened in 2010 with the GraziaMagazine.it site, launched in February.

International activities

During 2009 the international activities of Mondadori magazines generated total revenues of €118.5 million.

Thanks to a good performance by titles, and in particular an excellent performance by Grazia UK, licensing revenues were up by 15.4%; there was also a sharp increase in revenues from advertising for titles in the network (+34.4%), which partly compensated the fall in syndication revenues.

During the year the intense activities for the launch of new international editions continued: Grazia arrived in China, France, Thailand and Indonesia; Flair in the Czech Republic, Slovakia, Slovenia and Hungary, and Casaviva in India. Despite the overall economic-financial crisis, and the specific difficulties facing the media, the initial indications form these new initiatives are very positive and ahead of expectations.

In February 2010 the ‘Grazia International Network’ expanded again with the launch of the German edition of the magazine.

The subsidiary Attica was affected in Greece and the Balkans by cutbacks in advertising expenditure, but a sharp focus on containing costs was able to counterbalance the fall in revenues (-16.2%).

Among the international editions produced by the Group’s joint ventures, special mention should be given to Grazia Russia and Grazia China, launched in February 2009, that achieved higher than expected levels of circulation, in the face of advertising revenues that were affected by the international economic downturn.

• Magazines France

The Magazine Division in France generated 2009 revenues of €343.5 million, a fall of 8.2% compared with the €374.1 million of the previous year. On a like-for-like basis, i.e. net of titles sold and new launches, the fall was of 6.6%.

During the period the activities of Mondadori France were characterised by the following:

• the launch, at the end of August, of the weekly Grazia France, the upscale women’s title that from its first issues was well received both by readers and by the advertising market. Average circulation reached 180,000 copies (Source: OJD 2009), compared with an initial target of 160,000; while on the advertising side, Grazia France remained at an average of 32 pages per issue (+50% on the target), with a portfolio of upscale clients (fashion and cosmetics);
• the grouping of the magazines Auto-Journal and Sport Auto in the EMAS joint venture, that publishes the weekly Auto Plus, means that it will become the leading publisher in the auto segment in France and a vital point of reference for advertisers in the sector;
• a company reorganisation plan that foresees the cessation of publication of six titles (Mixte, Caméra Video, Le Photographe, ADDX, FHM and La Nouvelle Revue du Son et du Home Cinema) in line with the policy of focusing on more mass market titles, will also make it possible to realise significant cost reductions;
• a plan to optimise costs concerning the company’s offices will be completed in 2010.

These changes, along with significant measures related to the restructuring of the company, had a negative impact at the operating level during the year of around €28 million.

Circulation revenues at Mondadori France, which include newsstand sales and subscriptions (around 70% of the total), were down by 6% (-4.9% on a like-for-like basis).

In detail, newsstand sales fell by 8.9%, while subscriptions were in line with the previous year. According to DFP (Diffusion France Payée) figures, the company saw a shortfall in terms of copies of 1.8%, outperforming the market (-3.5%). Among the best performing titles were the monthlies Biba, Science&Vie Junior, Modes et Travaux and Top Santé, and the weekly Télé Star which was the top performer in the TV guides segment.

2009 was particularly difficult for the advertising market in France, with investments down by 13% (in terms of volume, Source: TNS). Mondadori, meanwhile, performed better than the market with a fall of 10.3% in terms of volume, thanks to the aforementioned launch of Grazia and a good performance by Biba in the upscale monthly segment, recording revenues of €81.6 million (-13.8% compared with the previous twelve months).

· Advertising

Mondadori Pubblicità ended 2009 with revenues of €250.4 million, compared with the €331 million of 2008 (-24.4%), proving able to at least partially contain the slump recorded in the first months of the year, thanks to a decidedly better second half in the markets of reference. The market share in magazines covered by the advertising company in 2009 was of around 26.6% (Source: Nielsen).

The results of 2009 were also characterised by two changes:

– total sales were impacted by the absence, in the last two months of the year, of the titles published by Società Europea di Edizioni S.p.A. (Il Giornale and its supplements);

– the inclusion of sales for Radio Kiss Kiss from the month of March 2009.

The magazine portfolio, essentially unchanged with respect to 2008, recorded a performance that, while decidedly negative (-27.6%), was nevertheless better than the market of reference, despite a slump in some key sectors for the company, including fashion, furnishings, cosmetics, as well as auto, telecoms, finance and FMCGs. This result was made possible thanks to the weekly titles, while monthlies were in line with the market.

Sales for radio in 2009 were above the trend in the market, where R101 ended the year with a fall of 6.4%, but included sales for Radio Kiss Kiss, which entered the portfolio in March 2009, increasing the company’s revenues in the sector to a total of €25.5 million.

On the Internet front, there was a substantial recovery in the summer months, with the Donnamoderna.com site recording an increase in revenues of 13.8%.

Mediamond, the joint-venture between Mondadori Pubblicità S.p.A. and Publitalia ‘80 S.p.A. for online advertising online, began operations in January 2010 and currently can count on a product portfolio that every month reaches around 8 million unique users with 600 million page views.

• Direct marketing

In 2009 the market for direct marketing saw a downturn of 15.8% (Source: Nielsen in terms of value). In this context Cemit Interactive Media reacted by identifying new clients and new operations, which had greatest success among a number of important Italian companies in the consumer. financial-insurance, automotive and non-profit sectors. All of which made it possible to contain the fall in revenues to 6.3%, closing at €20.9 million, compared with €22.3 million in 2008.

• Retail

The total revenues of the Retail Division in 2009 amounted to €194 million, essentially in line (-0.3%) with the €194.5 million of 2008, with different trends in the two halves of the year: the first six months closed with a fall of 3.6%, while the second half recorded growth of 2.4%.

Mondadori Franchising recorded 2009 revenues of €74.2 million, an increase of 11.6% on the €66.5 million of 2008. During the period the company continued with its expansion programme, and the network now has the largest number of outlets for the sale of editorial products in Italy, with 249 bookshops (227 in December 2008) and 203 Edicolè (177 in December 2008).

Mondadori Retail generated revenues in 2009 of €119.8 million (-6.4%), compared with €128 million in 2008. A revenues breakdown shows that trends were different for different categories of goods. Editorial products remained essentially unchanged, stationery and gifts grew while there was a fall in IT and audio-video.

The network continued to expand in 2009 with the opening of three new outlets (Rome, Turin and Palermo), bringing the total to 23 bookstores and 9 Multicenters.

• Radio

Advertising investments in radio market during 2009 were down by 7.7% on the previous year (Source: Nielsen). The excellent performance in the last quarter went a long way to rebalancing the sharp slump in the first months of the year. It also raises hopes for 2010 and confirms the value and the credibility of radio as an effective advertising media.

2009 net revenues at R101 amounted to €13.8 million (-6.8%), compared with €14.8 million in 2008, and correspond to advertising sales of €16.9 million (-6.4% on the €18.1 million of 2008).

I terms of ratings, R101 confirmed its position as the 5th most popular commercial radio network in Italy among those who have participated in the new Audiradio diary panel, with a daily average of around 2 million listeners and around 6.2 million over 7 days, reaching a pool of around 9 million listeners over 28 days.

RESULTS OF THE PARENT COMPANY ARNOLDO MONDADORI EDITORE S.P.A.

The Annual Report of the parent company, Arnoldo Mondadori Editore S.p.A., for the year to 31 December 2010, shows a net profit of €53.2 million (€66.2 million on 31 December 2008), while gross operating profit came to €43.6 million (€97.9 million in 2008).

The last indicator was particularly affected by the negative performance of the Magazine Division, which was in difficulty in terms of circulation, saw a further fall in the market for add-on sales and for a severe downturn in advertising.

FORECAST FOR THE FULL YEAR

There were no significant changes in prevailing market trends in the first two months of the current year compared with the previous year in terms of consumer spending and , above all, in advertising investments. It is there fore reasonable to presume that there will be a continuing period of uncertainty before any solid recovery.

Given this situation, significant importance should be given to the Mondadori Group’s commitment to reducing operating costs, with the pursuit of measures additional to those that already in the fourth quarter of 2009 allowed the company to record a level of profitability close to that of the same period of the previous year.

The strategic priorities on which the company will focus during the year will include a further focus on product quality and the management of the core business, alongside investments in growth areas, above all digital.

Over the short term it remains difficult to make detailed forecasts for the markets in which Mondadori operates. It is, however, possible to estimate that, unless there is a downturn in the current trends in advertising investments, the company will be able to improve the level of operating profitability compared with last year.

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PROPOSAL FOR THE DESTINATION OF NET PROFIT FOR THE YEAR ENDED 31.12.2009

The Board of Directors agreed to propose to the Annual General Meeting of the Shareholders, called for 27 April 2009 (or 28 April on second calling), the deposit of the entire net profit for the year ended on 31 December 2009 of Arnoldo Mondadori Editore S.p.A., equal to €53,179,772.38, to the extraordinary reserve.

The proposal of the Board of Directors not to pay out a dividend for 2009 is consistent with the context indicated in the forecast for the full year and will also to allow the company to successfully complete the ongoing process of reorganisation and to pursue the activities indicated above.

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SIGNIFICANT EVENTS AFTER THE END OF THE PERIOD ALREADY COMMUNICATED TO THE MARKET

On 8 February 2010, Arnoldo Mondadori Editore S.p.A. signed a preliminary agreement with Società Holding Industriale di Grafica S.p.A. for the acquisition of 50% of the share capital of Mondolibri S.p.A., 50% of which is already owned by Mondadori in a joint-venture with Direct Group Bertelsmann.

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DECLARATION BY THE EXECUTIVE RESPONSIBLE FOR THE COMPANY’S ACCOUNTS

The executive responsible for the preparation of the company’s accounts, Carlo Maria Vismara, declares that, as per art. 2, 154 bis of the Single Finance Text, the accounting information contained in this release corresponds to that contained in the company’s formal accounts.

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The results of 2009 will be outlined by the deputy chairman and chief executive, Maurizio Costa, and the CFO, Carlo Maria Vismara, at a meeting with the financial community to be held today at 14.30 pm at the company’s headquarters in Segrate.

The Board of Directors of Arnoldo Mondadori S.p.A. met today, under the chairmanship of Marina Berlusconi, to examine and approve the interim report for the first nine months of the year to 30th September 2009, as presented by the Group’s Deputy Chairman and Chief Executive, Maurizio Costa.

THE MARKET SCENARIO

Market indicators show that also the third quarter on 2009 was negative, both at a national and international level and only in September were there some signs of confidence which had a positive impact on financial markets and real consumer spending.

In the Mondadori Group’s markets of reference, advertising investments were sharply down both in Italy and France, albeit to a lesser extent, with no clear indications about future trends.

In the magazine sector the fall in circulation was slightly less than in previous months, particularly in Italy (-7.7% in terms of volume in August); in France the greater weight of subscriptions contributed to a higher level of stability (-5.7% in terms of value in August).

In line with the first months of 2009, there was a continuation of the generalised decline in add-on sales (around -25%), an area which in Italy has seen a dramatic slump compared with recent years.

The book market recorded growth in terms of volume of 1.9%, and stability in terms of volume, with a previous year that was characterised by a greater number of bestsellers.

GROUP PERFORMANCE IN THE PERIOD TO 30 SEPTEMBER 2009

Also in the third quarter of 2009, the results of the Mondadori Group were strongly conditioned by a marked reduction in advertising revenues, the impact of which was mitigated by the increasing effects of activities aimed at containing management costs.

During the quarter the conditions were also put in place for forthcoming organisational restructuring activities, through agreements with trade unions regarding both editorial and journalistic staff.

On a like-for-like basis, excluding non-recurring elements and development and restructuring costs, profit for the third quarter amounted to €46 million, a 26.9% fall on the same period of 2008.

Consolidated revenues to 30 September 2009 came to €1,114.3 million, a fall of 18.6% on the €1,368.1 million in 2008 (-11.4% on a like-for-like basis, excluding the activities of Mondadori Printing).

Consolidated gross operating profit amounted to €68.2 million, a 59.6% fall compared with the €168.8 million of the previous year, corresponding to 6.1% as a proportion of revenues (12.3% in 2008).

Excluding the contribution of the activities of Mondadori Printing the difference in operating profit shows a fall of 55.1%: this is essentially due to a lower level of profit from the business (-€57 million, of which -€8.6 million from add-on sales); higher investments for business development (-€7.8 million); and changes from non-recurring items (extraordinary items, restructuring charges) of -€19.1 million.

Consolidated operating profit came to €50 million, a fall of 63.6% compared with the €137.5 million of the same period of 2008, with amortizations and depreciations of tangible and intangible assets for a total of €18.2 million (€31.3 million to 30 September 2008); as a proportion of revenues, a fall from the 10.1% of 2008 to 4.5% this time.

Consolidated profit before taxation amounted to €50 million, a fall of 52.2% on the €104.5 million of the first nine months of 2008, with net financial charges for 2009 at zero, compared with €33 million in the previous year; this improvement was also due to extraordinary income, as well as lower indebtedness and a fall in the cost of borrowing.

Consolidated net profit came to €27.1 million, a 53.9% reduction on the €58.8 million of the same period of last year.

Gross cash flow in the first nine months of 2009 amounted to €45.3 million, compared with €90.1 million in 2008.

The Group’s net financial position at 30 September 2009 showed a deficit of €416.9 million, an improvement on the -€490.3 million at the end of 2008.

On 30 September 2009 the personnel employed by the companies of the Group totalled 3,853 (3,925 on 31 December 2008). Compared with the first nine months of last year, on a like-for-like basis – i.e. excluding Mondadori Printing – the reduction totalled 145, essentially thanks to efficiency gains and a block on turnover.

On 24 September 2009 a meeting was held at the Ministry of Labour and Social Policy in Rome where an agreement was signed with trade unions to proceed with requests for early retirement for a maximum of 181 employees of Arnoldo Mondadori Editore S.p.A. and Mondadori Pubblicità S.p.A. with printing/editorial contracts. A similar agreement is currently being defined for journalists in the Magazine Division of Arnoldo Mondadori Editore S.p.A..

Labour costs of €217.9 million (€271.5 million to 30 September 2008) were down by 19.7%; on a comparable basis (excluding Mondadori Printing and restructuring costs) the reduction was of 7.7%.

In Italy company has put in place an important restructuring plan essentially based on the use of a range of instruments made possible by the definition of new organisational models. The plan will also benefit from the application of Law N° 416/81 concerning early retirement for all those who have matured, or will mature, in the period 2009-2011, the necessary requirements. This plan will, on a like-for-like basis, lead to a fall in the payroll at the end of 2011 of 21%.

In France the results in terms of reorganisation have been achieved both through management actions and the sale/closure of titles. Such rationalisation activities will continue in line with agreements that are currently being defined.

RESULTS OF THE BUSINESS AREAS[1]

· Books
In the first nine months of 2009, in the context of an economic recession and general slump in consumer spending, the publishing houses of the Mondadori Group recorded revenues of €306 million, a fall of 3.3% on the €316.5 million of the same period of 2008. During the period the Division confirmed its clear leadership with a market share of 28% (excluding large-scale retail).

Concerning the individual publishing houses, Edizioni Mondadori in the first nine months of 2009 recorded revenues €88.4 million, a fall of 5.5% compared with the previous year.

Significant titles published during the period included, Venuto al mondo by Margaret Mazzantini which in early September won the 47th Campiello Literary Prize (450,000 copies). There was also great success for La bellezza e l’inferno (350,000 copies) by Roberto Saviano, Marina by Carlos Ruiz Zafon (300,000 copies), the latest legal thriller by John Grisham, Il ricatto (200,000 copies).

During the period Einaudi generated revenues of €34.5 million, a fall of 6.8% compared with the same period of 2008. In particular the bookstore channel and large-scale retail saw a fall of 5.2%, due above all to a lower level of re-orders and higher levels of returns. Part-works were down by 14.9%; and the sale of rights for add-on sales was down by 19.2%.

In terms of new titles, Einaudi saw excellent results from the winner of the last Strega Prize, Stabat Mater by Tiziano Scarpa (more than 130,000 copies), and Un luogo incerto by Fred Vargas (115,000 copies).

Sperling & Kupfer recorded revenues of €19.1 million (+13% on the same period of the previous year). Significant new titles during the period included Il gioco delle verità by Sveva Casati Modignani (180,000 copies), top of the Nielsen bestsellers list for Italian fiction for five weeks.

In the first nine months of 2009 Piemme generated net revenues of €33.7 million, a fall of 9.9% on the same period of the previous year, characterised by the presence of the bestsellers by Khaled Hosseini; the first nine months of 2009 were compensated by the good performance of some new titles, including the thriller by Michael Connelly, Il cerchio del lupo (85,000 copies), and the launch in paperback of Il cacciatore di aquiloni by Hosseini (145,000 copies).

Mondadori Electa recorded revenues of €29.6 million, a slight increase (+1.4%) compared with the first 9 months of 2008. The company has felt the impact of the downturn in some of the market segments in which it operates, including the bookstore channel and add-on sales, compensated by activities in the cultural heritage sector and contract publishing.

In the first nine months of 2009 Mondadori Education generated revenues of €68 million, a fall of 4.1% on the same period of the previous year, and confirmed its position as the second player in terms of market share in the market for textbook adoptions.

· Magazines Italy

The third quarter saw a continuation of the difficulties affecting Italian and international publishing that began in the second half of 2008, albeit at a slightly reduced level. In particular, Mondadori saw an improvement in circulation in the summer months and even advertising was able to contain the downward trend thanks to a series of special initiatives.

Revenues generated by the Division in the period amounted to €368.6 million, a fall of 16.4% on the €441 million of the same period of the previous year 2008. In particular, the decline in the third quarter was of 6.7%.

The decline over the first nine months was the result of:

– a fall in circulation (-4.7%), in line with the market of reference; with a more reassuring performance in the third quarter (-2.5%);

– an ongoing downsizing of revenues from add-on sales (-26.3%), albeit less marked than for other magazine publishers and with better results in the summer period (-1.8%) compared with the same quarter of 2008.

– Continuing slump in advertising revenues (-26.9%, with a fall of 16.1% in Q3), characterised by both a reduction in volumes and a decrease in tariffs.

In terms of the circulation of its titles, Mondadori maintained both its market share and leadership: of note were the summer performances of Chi, TV Sorrisi e Canzoni and TV guides in general (Guida TV and Telepiù), Donna Moderna, Grazia; while Tu Style, relaunched at the beginning of the year, continued to grow.

On the add-on sales front, Mondadori, that covers the sector mainly with operations linked with TV Sorrisi e Canzoni, Panorama, Donna Moderna and collectable products, reported results in line with expectations, with initiatives aimed at families and younger targets, a home video series, music and, finally, a number of purely collectable operations.

There was a marked increase in revenues from Mondadori web sites compared with the previous year (+12.2%), thanks to the performance of Donnamoderna.com (+34%), which was markedly ahead of the market (+5.2%, Source: Nielsen to September), reaching, at the end of the period, 1.5 million unique users and 20 million page views (Source: Nielsen Netview).

International activities

In the first nine months of the year licensing revenues for Mondadori titles continued to grow, recording and increase of 15.1%, despite a crisis that also at an international level has had an impact on the revenues of the individual editions and relative royalties.

In October the ‘Grazia International Network’ saw the launch of a new edition of Grazia in Thailand, which will be followed up by the end of the year with a new edition in Indonesia, which will be the fifteenth edition around the world. To the success of Grazia should be added the good performance of the licences for Casaviva, Sale&Pepe, Interni and Flair, which since October is also present in The Czech Republic, Slovakia, Slovenia and Hungary, as well as Austria.

During the period the subsidiary Attica was affected in Greece and the Balkan countries by the reduction of advertising budgets, while managing to react to the substantial fall in revenues (around -30% compared with the previous year) with a detailed policy for containing costs.

· Magazines France

The Magazine Division in France generated total revenues in the first nine months of 2009 of €254.8 million, a fall of 10.4% on the €284.5 million of the same period of the previous year. On a like-for-like basis, in other words net of the titles sold in 2008, the fall was of 7.4%.

At the end of August Mondadori launched Grazia France, which, from the first issues, performed well ahead of expectations, both in terms of circulation and advertising.

After the excellent results obtained by the magazine in the launch phase, Grazia confirmed an excellent newsstand performance also in the subsequent period, with an average sale of more than 180,000 per issue for the first 11 issues. There was an average of 30 advertising pages, thanks to adhesion of a range of important up-market advertisers, not only French.

On the circulation front, in France newsstand sales saw a fall of 5.7% (Source: NMPP/TP, to the end of August). In this context the newsstand circulations of Mondadori France, which account for around 70% of the total, recorded a fall of 4.8%, almost one point better than the market; on a comparable basis the fall was of 2.4%.

Subscriptions, meanwhile, were up, confirming their role as a stable and important source of revenues.

On the advertising front, the magazine market in France remained at the negative levels recorded in the previous months, with a slight improvement in the summer (-14% in terms of volume in the first eight months; Source: TNS_MI). The advertising revenues of Mondadori France came to €59.3 million, a 20.9% fall; on a like-for-like basis the figure was 15.9%.

In an extremely difficult market, Mondadori France continued to pursue efficiencies in its industrial activities (paper and printing) and to reduce marketing, distribution and general costs. The introduction in 2009 of a number of projects, including the launch of Grazia, the reorganisation of the business and the ongoing review of the titles, are an extremely important process for Mondadori France that will enable the company to emerge from the current economic crisis with better prospects for the future.

· Advertising

Mondadori Pubblicità ended the first nine months of the year with revenues of €181.6 million, a fall of 25.8% on the €244.7 million of the previous year, thanks to a significant capacity to react more effectively than the market; the overall fall in sales in the third quarter was held at around 17%, partially closing the gap opened up in the first half, which ended down by 29.1%.

Thanks to a number of initiatives launched by Mondadori Pubblicità, the radio stations and magazines in the portfolio generated results that made it possible to contain the decline compared with its competitors. Among the weeklies, special mention should be given to the performance, in terms of pages, of Tu Style, Panorama and Grazia, a result that was obtained in a market that continues to suffer from downturns in key sectors for Mondadori (fashion, interiors, cosmetics and FMCGs).

During the first months of the year a series of projects were also developed aimed at reinforcing the company’s presence and valorising the assets in the portfolio. These included:

– the creation of a Development Network, with the precise objective of acquiring new clients;

– the incorporation of Mediamond, a new sales company for online advertising, jointly owned by Mondadori Pubblicità and Publitalia ’80, as previous announced on the last 22th July.

• Direct Marketing

In the first nine months of 2009 the Direct Marketing sector in Italy recorded a fall of 17.9% (Nielsen data to September) in line with the trend in the first half of the year.

During the period Cemit generated revenues of €13.8 million, a fall of 13.2%, which was lower than the market, compared with the €15.9 million of the same period of the previous year.

The fall was mainly due to the slowdown in investments by industry, especially the automotive sector, the impact of which was contained by careful management of costs

• Retail

The Retail Division felt the effects in the first nine months of the year of the generalised decline in consumer spending, while in the third quarter there was substantial stability compared with 2008. This allowed Mondadori to end the period with revenues for the division of €126.4 million, a slight fall of 1.7% on the €128.6 million of last year.

Mondadori Retail generated revenues of €76.9 million, down by 8.9% on the €84.4 million of the same period of last year. Despite this shortfall in revenues, profitability was improved thanks to a marked reduction in overall costs, also achieved through the renegotiation of rental contracts on 40 directly controlled sales outlets.

Mondadori Franchising recorded revenues of €49.5 million, an increase of 12% on the €44.2 million of the first nine months of 2008, thanks to the ongoing development of the chain which has become, in terms of the number of outlets, Italy’s most extensive network for the sale of editorial products with 239 bookshops (212 on 30 September 2008) and 191 Edicolè outlets (157 on 30 September 2008).

• Radio

During the first nine months of the year the radio advertising market showed an improvement, compared with the first six months of 2009 (-14% to September; -17.5% to July; Source: Nielsen), with the first tentative signs of recovery in the month of September. In this context R101 generated revenues of €9.7 million, (-12.6%) compared with the €11.1 million of the corresponding period of 2008.

In terms of ratings, R101 confirmed in the 4th two-month period of 2009 its position as the 5th national commercial network (Source: Audiradio, listeners over 28 days).

EXPECTATIONS FOR THE FULL YEAR

During the third quarter there were no significant changes to the trends in the markets of reference for the Mondadori Group. Furthermore, there are no reasons to believe that there will be any short-term turnaround in such trends, especially as far as the advertising market, the decline in which is expected to continue at a marked level until the end of the year.

The results achieved in terms of cost reductions, thanks to action taken on processes and structures, have allowed the Mondadori Group to maintain a good level of profitability in its core business and to continue to invest in development.

Of special relevance was the launch, at the end of August, of Grazia France, which, while involving significant investments, has proved rewarding in terms of results, with both circulation and advertising revenues ahead of expectations.

The final quarter of the year will also see the Group engaged in the implementation of an ambitious restructuring plan, made possible by recent agreements reached with trade unions, that will involve the editorial and journalistic structures and will lead to significant savings already in the coming year.

The effects of the decline in revenues, in particular in advertising, the area with greatest impact on profitability, ongoing investments in development and the commitment to cost reductions, involving reserves for the restructuring process, will lead to a significant reduction operating profit compared with last year.

§

The executive responsible for the preparation of the company’s accounts, Carlo Maria Vismara, declares that, as per art. 2, 154 bis of the Single Finance Text, the accounting information contained in this release corresponds to that contained in the company’s formal accounts.

§

The report for the period to 30 September 2009 is made available, as per current legislation, at the company’s corporate headquarters, Borsa Italiana S.p.A. and on the web site www.gruppomondadori.it

[1] 1 It should be noted that on 1 January 2009 IFRS principle 8 came into force, replacing IAS 14, concerning the communication of figures for each significant business in which the Group operates. The application of this new principle has led to the publication of figures pertaining to activities managed by the Mondadori France subsidiary separately from those of the Magazine Division as a whole, even though it is a part. Consequently, in order to make like-for-like comparisons, it has been necessary to re-publish also the figures for the third quarter of 2008.

Moreover, following the sale of 80% of Mondadori Printing, in November 2008, the section that included the figures relative to the Group’s printing activities is no longer significant in the terms of IFRS 8 and, as a result, such figures have been aggregated with those booked under Other business. The same classification has been applied for the figures for 2008.

The Board of Directors of Arnoldo Mondadori S.p.A. met today, to examine and approve the management report for the first half of the year to 30th June 2009, as presented by the Group’s deputy chairman and chief executive, Maurizio Costa.

The market scenario

Recent macroeconomic figures appear to reject the danger that the current recessionary phase will become even worse, but in terms of national markets there is still no sign of a turnaround in consumer spending or investments.

In the markets of reference, the trends that became evident in the first months of the year have continued.

In particular (volume figures to May):

– Magazine circulations continued to fall by about 9% in Italy; while, in France, the drop was 8%, with essential stability in subscriptions;

– There was no sign of a recovery in advertising investments and levels remained significantly lower than those of 2008, with falls of 29% in Italy (in terms of value) and 18% in France;

– Italy also saw the continuing decline in the market for add-on sales, with a drop of 19% in copies and 23% in value;

– Following essential stability in the first months of the year, the Italian book market saw a fall, starting in April, of 2.6% in the large-scale retail and non-chain bookstores.

Group performance in the period to 30 June 2009

During the second quarter actions aimed at containing costs allowed the Mondadori Group to mitigate the negative impact on profitability of a fall in revenues – especially those from advertising; if the printing business (sold at the end of 2008) is excluded, non-recurring items and investments in development, the Group’s businesses generated gross operating profits in the second quarter of €33.6 million (8.9% of revenues), €18 million less (-34.9%) than in the same period of 2008.

Consolidated revenues to 30 June 2009 came to €730.7 million, a fall of 21.4% on the €930.1 million of the same period of 2008 (-14.9% on a like-for-like basis, excluding the activities of Mondadori Printing).

Consolidated gross operating profit amounted to €40.2 million, a fall of 61.5% compared with the €104.5 million in the first six months of the previous year; as a proportion of revenues, the figure went from 11.2% in 2008 to 5.5% this time.

Excluding the activities of Mondadori Printing the variation in operating profit was down by €50.8 million (-55.7%), essentially due to lower business profits (-€40.1 million of which €5,8 for add-ons); increased investments in developing businesses (-€1.6 million); non-recurring items (extraordinary elements and restructuring costs): -€9.1 million.

Consolidated operating profit to 30 June 2009 came to €27.9 million, a fall of 66.7% compared with the €83.8 million in the first half of 2008, with amortizations and writedowns on tangible and intangible assets of €12.3 million (€20.7 million in 2008).

As a proportion of revenues, a fall from the 9% of 2008 to 3,8%.

Consolidated pre-tax profit came to €17.6 million, a fall of 72.6% on the €64.2 million of the same period of 2008, with a fall of €9.3 million in net financial charges, due to a lower level of debt and, above all, a significant reduction in the cost of borrowing.

Consolidated net profit for the period to 30 June 2009 amounted to €7.3 million, compared with the €36.7 million of the previous year (-80.1%), and a first quarter 2009 that recorded a loss of €1.8 million.

Gross cash flow came to €19.6 million compared with the €57.4 million of the first half of 2008.

The net financial position went from -€490.3 million at the end of 2008 to – €473.9 million on 30 June 2009.

As of 30 June 2009 the personnel employed, on indefinite and fixed-term contracts, by the companies controlled by the Group totalled 3,861.

Compared with the first half of the previous year, on a like-for-like basis, in other words excluding Mondadori Printing, there was a fall in the number of personnel of 194.

Personnel costs, which amounted to €143.1 million, were down by 24.1% from the €188.6 million to 30 June 2008; net of Mondadori Printing the fall would be of 6.8%.

BUSINESS AREA RESULTS [1]

• Books

In the first half of 2009 the Book Division generated revenues of €182.6 million, a fall of 5.2% compared with the €192.7 million of the same period of the previous year.

During the period the market was characterised by a general trend that, from March, was down compared with the first six months of 2008, both in terms of new titles and reprints.

In this context the Mondadori Group confirmed its leadership in trade books, with a market share, in just the medium to large-scale bookstores, of 27.8% (source: Nielsen Bookscan – period P6), markedly ahead of its main competitors. There was also an increase in the market share of Sperling & Kupfer and Einaudi, while there was a slight fall for Edizioni Mondadori and Piemme.

As regards the performance of the individual publishing houses, Edizioni Mondadori generated first half 2009 revenues of €65.2 million, a fall of 4.5% compared with the previous year. Significant titles during the period included three new titles published between the end of May and the beginning of June, both for the importance of the authors and their commercial appeal: Marina, an unpublished novel by Carlos Ruiz Zafón; La bellezza e l’inferno by Roberto Saviano; and Il ricatto, the new legal thriller by John Grisham, which benefited from the author’s presence in Italy for the launch.

In the paperback sector, sales were up by 6% compared with the previous year, with particular growth in the bookstore chains, also thanks to the Oscar Mondadori promotional campaign in the months of March and April.

Net revenues for the first six months at Einaudi amounted to €24.5 million, a fall of 7.2% compared with the same period of last year: there was a 5.9% drop in revenues from the bookstore channel, while instalment revenues were down by 10.3% and the sale of rights down by 20.4%.

Revenues from Mondadori Electa totalled €18.5 million, an 8.4% fall on the same period of the previous year, mainly due to the marked fall in add-on sales (-31%), in the context of a rapidly declining market, and an inconstant performance in higher margin businesses.

Sperling & Kupfer ended the first half of 2009 with revenues of €15 million, an increase of 15.4% compared with the first half of 2008. This result reflects good sales both through bookshops and organised distribution.

Net sales to 30 June 2009 at Mondadori Education amounted to €14.2 million, a fall of 6% compared with the first six months of the previous year.

Edizioni Piemme generated revenues in the period of €22.3 million, a fall of 17,4% on the first half of 2008, mainly due to a substantial drop in the supply of titles by Khaled Hosseini and a significant overall rise in returns.

• Magazines Italy

The publishing business, both in Italy and around the world, has been significantly affected by the crisis that began in the second half of 2008. In Italy, following an extremely difficult first quarter, the second quarter proved to be equally problematic and, above all, without, for the moment, providing any indication of a turnaround in the trend. The fall in consumer spending has impacted also on the purchase of newspapers and magazines and, in a more marked way, of add-on sales products that often involve a significant investment over time because of the nature and duration of the offers.

In the same way, the financial crisis, which has evolved in to a full-blown recession, has led companies to drastically reduce their investments in communications, which a consequent slump in advertising expenditure.

In Italy, Magazine revenues in the first half of the year amounted to €253.2 million, a fall of 20.9% compared with the €320 million of the same period of the previous year.

This downturn was determined by a series of specific phenomena:

– in a market in which circulation volumes were down by around 10%, Mondadori saw its circulation revenues fall by less than the reference market and with an overall market share of more than 35%;

– Mondadori ended the first half with a fall in add-on sales of 32.8% – despite revenue levels remaining significant and higher than other magazine publishers -, in a market that recorded a generalised fall in all segments, with the exception of music;

– a substantial resizing of advertising revenues (-30.6%) that affected all sectors: especially fashion, cosmetics and furnishings.

The action taken by Mondadori to react to this context has included efforts to sustain and develop the titles and an increased control of costs.

International activities

During the period the effects were felt of the international crisis both on the revenues of the individual editions and the relative royalties, which were, however, compensated by the increase in the number of active licences and licensing revenues (+23%).

Moreover, by the end of the year, the existing 12 editions of Grazia will be joined by three new editions in France, Indonesia and Thailand. To the success of the Grazia Network, should also be added the positive performance of the licences for Casaviva, Flair, Sale&Pepe and Interni.

The joint-ventures in Russia and China performed well: in particular the Chinese edition of Grazia, launched in February, which has outperformed expectations in terms of circulation, while advertising revenues have been affected by the international economic situation.

The Attica subsidiary in Greece recorded results in line with expectations, thanks to a detailed cost control policy.

· Magazines France

Magazines in France generated total first half 2009 revenues of €170.5 million, a fall of 12.3% compared with the €194.4 million of the same period of the previous year. On a like-for-like basis, in other words net of the titles sold in 2008, the downturn was of 8.6%.

On the circulation side, newsstand sales in France were characterised in the first half by a 7.8% fall in copies (source: NMPP/TP).

In this context, the circulation revenues of Mondadori France, which account for 70% of the total, saw a fall of 6% – which was lower than the fall in the market – (on a like-for-like basis the fall was 3.1%), helped also by a slight increase in subscriptions (+1% net of the titles sold), that represent a stable source of revenues also in this difficult economic phase.

In terms of advertising sales, the market remained depressed during the whole of the period (-17.8% in terms of volume in the first 5 months; source: TNS-MI).

The advertising revenues generated by Mondadori France totalled €40 million, a fall of 25.3% compared with the first half of 2008 (-19.2% on a like-for-like basis).

During the period Mondadori France began negociations with Axel Springer for the sale of Auto-Journal and Sport Auto to EMAS, the 50-50 joint-venture with the German publisher created in 1988 which already publishes Auto Plus, the leading weekly in the auto segment. The grouping of all of the auto titles in a single company, that has in the past recorded excellent performances, will allow EMAS to become France’s leading publisher of car magazines. A sector that has been particularly hard hit by the current market downturn.

Moreover, the launch on the French market of Grazia, a strategic female magazine for Mondadori, is now imminent and will allow the Group to strengthen its position in the up-market segment with a brand that in just a few years has become firmly established internationally as the most authoritative interpreter of Italian style and fashion.

· Advertising

Total advertising revenues generated by Mondadori Pubblicità in the first six months of the year were essentially in line with the negative trend in the market and amounted to €126.4 million, a fall of 29.1% compared with the €178.2 million of the same period of last year, and following a first quarter 2009 that ended with a fall of 34.5%.

Magazine advertising, that constitutes the largest part of the portfolio, was, in fact, marked by a second quarter in gradual recovery, thanks to detailed and specific commercial policies.

Also other media recorded lower falls than the reference markets. For the Internet, Donnamoderna.com web site further consolidated its growth, while in Radio, the acquisition, in March, of the contract for sales for Radio Kiss Kiss has made it possible to expand the offer in this sector, combining the new broadcaster with the Group’s radio station, R101, which has become a leading player in Italian commercial radio.

• Direct Marketing

The Direct Marketing, in the period to May 2009, saw a fall of 17.7% (Nielsen figures in terms of value) largely as a result of a general slump in investments in communication.

In the first six months of the year Cemit generated revenues of €10.5 million, a 12.5% fall on the €12 million of the same period of the previous year: this performance, which was better than the reference market, is even more worthy of note if note is taken of the fact that it was produced despite the lack of income deriving from the elections of 2008.

• Retail

Turnover by the Retail area in the first half amounted to €83.1 million, a fall of 3.6% compared with the €86.2 million of the same period of 2008.

The general downturn in consumer spending that characterised the first quarter of the year continued also in the second, with some slight signals of a recovery in the month of June. In this scenario, efforts were continued to reduce management costs and working capital and tighten the control of stocks.

Mondadori Retail, in its 29 directly-controlled stores, recorded revenues of €52.1 million, a 10.1% fall on the €58 million in the first half of 2008; a breakdown of revenues shows a 5% fall in the sale of editorial products; a 17% drop in the sale of IT products; a 11% fall in audiovideo; while there was a 20% increase in stationery.

Mondadori Franchising recorded revenues of €31 million, an increase of 9.6% on the €28.3 million of the first six months of last year.

The company continued with its development programme, confirming the position of the chain as Italy’s most extensive with 410 outlets (including the Edicolè format).

• Radio

In the first half of the year, the radio advertising market saw a continuation of its negative trend (-18.6% to May. Source: FCP Assoradio).

In this context R101 recorded net revenues of €7 million, a fall of 14.6% compared with the €8.2 million of the first half of last year.

According to the new metric introduced by Audiradio, in the first six months of 2009 R101 reached around 9 million listeners per month, reducing considerably the gap with the top five commercial radio stations.

It should also be noted that, from June, the new www.r101.it web site is online, which has been developed on a new technological platform aimed at strengthening the online editorial offer, achieving greater access to users/listeners and encouraging a higher level of interaction with web radio users.

SIGNIFICANT EVENTS AFTER THE CLOSE OF THE PERIOD

In July, the Group’s Human Resources Department presented to national and company trade union representatives a proposal for the reorganisation of the Magazine and Central Staff areas, with the aim of achieving significant cost reductions through the structural downsizing of journalistic and design staff.

The negotiation, which is continuing, foresees the evaluation of a range of instruments, including the use of early retirement.

Joint-venture between Mondadori Pubblicità S.p.A. and Publitalia ’80 S.p.A. for the sale of online advertising

As previously announced to the market, in July Mondadori Pubblicità and Publitalia ‘80, the advertising sales companies of the Mondadori Group and the Mediaset Group, have reached an agreement for the creation of a joint initiative for online advertising sales, through the establishment of a 50-50 new company. The new company will have the concession, or sub-concessions, to sell the advertising (with the exception of video) for the sites produced by the Mondadori Group, by RTI and by third-party publishers that are currently in the portfolios of either Mondadori Pubblicità or Digitalia 08. The joint venture will also target the online advertising investments of third-party publishers with a view to aggregating and maximising the value of the advertising opportunities on offer and to reach, in the short term, a leading position in the Italian online advertising.

EXPECTATIONS FOR THE CURRENT YEAR

In considering the evolution of the business, we think it is useful to distinguish between the short-term prospects and longer-term view.

In the short term:

– the planning of advertising investments by leading companies will largely remain inhibited by the situation of uncertainty and, despite no clear indications about the second half of the year, initial signals do not suggest a significant change in current trends;

– a recovery in magazine sales cannot be expected, neither is there likely to be a slowdown in the decline in add-on sales, that in all probability will stabilise broadly around current levels;

– the book sector will continue to be less affected than others and the publication of new bestsellers in the closing months of the year are expected to lead to satisfactory end of year results.

The company’s response to the certain reduction in revenues involves a range of actions, and over the coming months these will include:

– the continuation of efforts to simplify processes and structure, also through the introduction of an incisive restructuring plan;

– investments in the support and valorisation of company assets and the defence of positions of market leadership;

– increased investments in developing businesses and markets (digital, international network);

– the launch of the weekly women’s title Grazia in France, a fundamental step in the reinforcement of Mondadori France in the up-market segment.

2009 continues to prove to be a difficult and demanding year, both from a financial and a business perspective, with profitability levels being sacrificed, also in a bid to defend and develop the elements that underpin the entire business, a factor that is important for the success of a medium term vision. The future competitive scenario in the publishing sector has fundamentally changed and will reward those companies that are best equipped, in terms of both structures and products, to seize new market opportunities resulting from technological changes and new emerging business models.

§

The executive responsible for the preparation of the company’s accounts, Carlo Maria Vismara, declares that, as per art. 2, 154 bis of the Single Finance Text, the accounting information contained in this release corresponds to that contained in the company’s formal accounts.

§

The interim report for the period to 30 June 2009 will be made available at the company’s corporate offices, at Borsa Italiana S.p.A. and on the web site www.gruppomondadori.it (News&Media and Investor Relations section) by 30 July 2009.

The report of the external auditors will be published, in the same way, as soon as possible and within the terms of current legislation.

[1] It should be noted that from 1 January 2009, replacing IAS 14, the IFRS 8 accounting principle, that regulates the information that must be disclosed for each relevant business in which the group operates, came into effect.

The application of this new principle has involved the publication of figures relating to the activities managed by the Mondadori France subsidiary separately from the entire Magazine Division, of which it is in any case a part. Consequently, in order to make a correct comparison, it has been necessary to also include the figures for the first half of 2008.

Moreover, following the sale of 80% of Mondadori Printing in November 2008, the section that included the figures relating to the group’s printing activities is no longer significant as per the terms of IFRS 8 and, consequently, such figures have been incorporated under the item “Corporate and other business”. The same attribution has been made for the figures for 2008.

The Board of Directors of Arnoldo Mondadori S.p.A. met today, under the chairmanship of Marina Berlusconi, to examine and approve the management report for the first three months of the year to 31st March 2009 as presented by the group’s deputy chairman and chief executive, Maurizio Costa.

The scenario

The first quarter of the year has been heavily conditioned by the effects of problems in the financial sector and, subsequently, in the industrial sector and in terms of consumer spending that were already evident in 2008.

The markets in which the Mondadori Group operates were characterised by:

– in magazines, the most significant negative impact was the effects of a collapse in the advertising market, estimated at more than 30% in Italy and 20% in France; the downturn in circulation was much less marked, especially in France, thanks to essential stability in subscriptions while, as expected, there was a sharp decline in the market for add-ons;

– in books, the situation in the first three months was essentially in line in the bookstore channel, while there was a slight downturn in the large-scale retail channel.

Group performance in the period to 31 March 2009

The impact of the drastic slump in advertising investments on the profitability of the Mondadori Group in the first quarter was considerable and also the ongoing downturn in add-on sales significantly reduced their contribution to operating profit.

Actions to contain management costs, that were imposed and implemented during last year and pursued with even greater determination, have had a positive effect. Investments have also continued for the development of digital activities, the international network and the project for the launch of Grazia in France.

In the figures that follow, consolidated revenues and gross operating profit are given as totals and on a like-for-like basis, in other words excluding Mondadori Printing SpA, of which 80% was sold in November 2008.

In the first quarter of 2009 consolidated revenues came to €354.5 million (-23% on the €460.3 million of the first quarter of 2008), on a like-for-like basis the fall was of 16.4%

Consolidated gross operating profit came to €14.2 million (-70.7% on the €48.4 million in the same period of the previous year). As a proportion of revenues, the figure is 4%, compared with 10.5% in Q1 2008.

Excluding the results of Mondadori Printing, the difference in the operating margin, was a deficit of €26.4 million (-64.5%), essentially due to lower business results (€17 million), lower income from add-on sales ((€5.1 million), higher investments in business development (€1.2 million) and non-recurring items (€3.1 million).

Consolidated operating profit came to €8 million (-79.1% on the €38.2 million of Q1 2008) after amortization and depreciation of tangible and intangible assets for a total of €6.2 million (€10.2 million in 2008); 2.3% as a proportion of revenues, compared with 8.3% in Q1 2008.

Consolidated pre-tax profit came to €2.6 million (-90.7% on the €27.9 million of the first three months of last year), with a reduction of €4.9 million in financial charges, essentially due to the lower cost of debt.

During the period the group made a consolidated net loss of €1.8 million on the €17.7 million net profit of the first quarter of 2008.

Gross cash flow in the first quarter of 2009 amounted to €4.4 million compared with €27,9 million in Q1 2008.

The Group’s net financial position on 31 March 2009 showed a deficit of -€454.2 million, an improvement on the -€490.3 million at the end of 2008. A contribution to this result was also made by operations concluded at the end of 2008.

As of 31 March 2009 the personnel employed, on indefinite and fixed-term contracts, by the company, totalled 3,926.

Compared with the first quarter of last year, if the effect of the sale of Mondadori Printing S.p.A. is stripped out, the fall in the payroll is of 101 people.

BUSINESS AREA RESULTS[1]

•  Books

In the first quarter of 2009 the Book Division confirmed its market leadership (26.8%), markedly ahead of its main competitors.

Total periods for the period came to €89 million (-5.4% on the €94.1 million of the same period of the previous year). Net of add-on sales the fall was of 4.5%.

Among the different publishing houses the performance of Sperling & Kupfer and Einaudi were particularly good.

In the first quarter of 2009 Sperling & Kupfer generated revenues of €8.2 million, an increase of 32.3% on the same period of the previous year: a result that indicates a recovery in the effectiveness of the editorial plan and a refocusing of the offer in line with the positioning of the brands.

In the same period meanwhile Einaudi generated net revenues of €12.1 million, a rise of 2.5% on the same period of 2008. While there was a good performance in the bookshop and large-scale retail channels, there was a fall in instalments and a expected reduction in the sale of rights for add-on sales initiatives in a market in steep decline.

There was a slight fall in revenues for Edizioni Mondadori, which came to €37 million (-5.9% compared with Q1 2008). Among the most successful titles in the first three months were the new book by Andrea Camilleri, Un sabato, con gli amici, which sold 180.000 copies, and the latest book by Patricia Cornwell, Kay Scarpetta (over 170,000 copies).

Piemme recorded revenues of €12 million, a fall of 17.8% compared with the first quarter of 2008: there was a fall in fiction due to the predictable downturn in the sales of the two books by Khaled Hosseini.

Revenues at Mondadori Electa in the first quarter of 2009 came to €8.3 million, a fall of 16.2% compared with the same period of 2008, due to the following:

– a fall in revenues from the sale of rights for add-on sales initiatives, confirming the sharp downturn in the market and of this channel;

– the postponement of a number of important sponsored titles compared with the first quarter of 2008;

– a downturn in the heritage area due to a fall in the number of visitors and museum bookshop sales, partly compensated by exhibition organisation.

Mondadori Education recorded first quarter net revenues of €2.3 million (€2.7 million in the same period of the previous year), in a period of the year which, as usual, has a low impact on the company’s turnover.

• Magazines Italy

Like all Italian and international publishers, for Mondadori magazines the first quarter of 2009 was conditioned by the serious impact of the economic crisis that exploded in the second half of 2008.

On the one hand, the downturn in consumer spending inevitably affected also the sales of newspapers and magazines and, above all, add-on sales products: And, on the other, a financial crisis that has induced companies to drastically cut back their investments in communication with a consequent fall in advertising expenditure.

The Magazine Division Italy (which includes income and margins from international licensing activities and digital development) in the first quarter of 2009 generated revenues of €124.7 million (-23.2% on the €162.3 million of the same period of 2008). Net of add-on sales the fall was of 17.3%.

This performance was determined by the following elements:

– a fall in circulation revenues (-7.2%), affected by a generalised downturn in the market that impacted all of the sectors in which the division operates.

In terms of copies sold Mondadori, which saw a fall of 9% in a market that lost 12.1% (to February), saw an increase in its market share;

– a steep decline in add-on sales (-33.9%), continuing a progressive slide towards a more restricted dimension.

In the first quarter of the year the market recorded a further fall (to February -24.9% in terms of value), in particular for editorial and audiovisual products, while music did somewhat better. In this context, Mondadori’s performance was better than that of the magazine market in general;

– there was a significant downturn in advertising revenues (-35.7%), in particular in the fashion, cosmetics and furniture sectors, compared with a Q1 2008 that grew sharply and was particularly favourable for Mondadori.

Among the most significant facts during the period were:

– the launch of a new weekly Tu Style at the end of January, with results that, to date, have proved very promising in terms of both circulation and advertising;

– promotional support for a number of titles that has contributed to containing the negative effects of the general context;

– an extremely rigorous management approach which has made it possible to reduce, at a level directly proportionate to the fall in revenues, production, marketing and editorial costs, as well as general expenses..

On the digital front, the concentration of investments in the women’s area resulted in excellent results in the first quarter of 2009: revenues form the Donna Moderna web site grew by 25%, compared with a market that grew by 3.9% (Nielsen figure to February). Meanwhile, in March, a new version of the Cosmopolitan site was launched.

International activities

As mentioned, the international magazine market has bee affected by the same problems as those in the Italian market, with a fall in consumer spending and a downturn in advertising expenditure. Despite this, in the first quarter of 2009 Mondadori saw an increase in revenues from royalties, thanks to new launches in the Grazia network and of Casaviva: in January Casaviva India was launched, followed in February by the launch of Grazia in China, with excellent results both in terms of advertising and circulation.

In the Balkans, the Attica subsidiary felt the effects of the economic downturn, and recorded a first quarter with a fall in advertising revenues and add-on sales, largely compensated by effective cost controls.

· Magazines France

In the first quarter of 2009 Mondadori France generated total revenues of €83.6 million (-14.5% on the €97.8 million of the same period of the previous year).

On a like-for-like basis and net of add-on sales, the fall was of 8.9%.

Circulation revenues, which account for 70% of the total revenues of Mondadori France, were down by 8.4% (-5.9% on a like-for-like basis), with greater difficulties in weeklies (especially TV guides), in the people segment and in the auto area. Meanwhile subscriptions held up and continue to represent a stable source of income in a difficult phase.

During the period close attention continued to be paid to management and cost controls.

Ina particularly difficult scenario for advertising investments, the revenues of Mondadori France in this sector were down by 23.9% (-19.2% on a like-for-like basis); in terms of volume, the result was essentially in line with the market (-17.4%, source: TNS-MI).

· Advertising

Advertising investments in Italy in the first quarter of 2009, if compared with those of the first quarter of last year, got off to a very critical start, confirming the ongoing decline in the market that first became apparent in the second half of 2008.

While waiting for definite figures, on the basis of Nielsen figures to February, it is possible to foresee weak signals of growth only in the internet segment, while the downturn continues for radio, television and print, where magazines are suffering more than newspapers, that are benefiting from a less severe slump in local advertising. More precisely, magazines have seen a downturn both in terms of pages and prices, and across all sectors.

Mondadori Pubblicità ended the first three months of 2009 with total revenues of €51.7 million (-34.5% on the €78.9 million of the same period of 2008).

In order to further strengthen the commercial offer and evaluate all possible optimisation actions, the company has won the contract, valid from March 2009, for the sale of advertising for the national radio station Radio Kiss Kiss that offers new structural synergies.

• Direct Marketing

Investments in direct mail in the first quarter of the year saw a downturn of more than 20%: in this context, thanks to the quality of its offer, Cemit Interactive Media outperformed the market.

Revenues came to €4.8 million, a fall of 9.4% on the €5.3 million of the same period of the previous year, due to the absence of the electoral campaign activities that were a feature of March 2008.

• Retail

Revenues from the Retail Division came to €41.8 million (-3.5% on the €43.3 million of the same period of 2008)

During the period the division felt the effects, on the one hand, of a generalised downturn in consumer spending, and on the other, by comparison with a particularly positive Q1 2008.

Moreover, also during the period, a series of actions were taken to minimise the impact of the current downturn.

Mondadori Retail generated revenues of €26.8 million, a fall of 7.7% on the €29 million of the first quarter of 2008: the fall was less marked in the book sector, which was supported, among other things, by a range of promotional campaigns by publishers, while the fall was more marked for digital products.

During the period the number of the company’s own stores rose to 29 (28 in Q1 2008).

Mondadori Franchising recorded revenues of €15 million (+5.3%) on the €14,3 million of the same period of the previous year, thanks to the expansion of the bookshop network and Edicolè which during the period reached a total of 404 outlets (357 in Q1 2008).

• Radio

In the first quarter of the year the radio market proved not to be immune to the slump in advertising and, in the first two months, saw a fall of 27.2% (source: Nielsen) with signs of a slight recovery in March.

In this context the net revenues of R101 in the period came to €3 million (-16.7%) compared with €3.6 million in the same period of the previous year.

This is essentially the company’s share of gross advertising revenues of more than €4.4 million, a fall of 14% on the €5.1 million of the same period of last year. The figure compares with a period last year in which R101 saw an increase in revenues of 56% compared with the first quarter of 2007, in a market that grew by 9%.

Since the start of 2009 Audiradio has changed the way that it measures listeners, adding to the traditional telephone survey for average daily ratings, a research method based on panel diaries that offers participating radio operators listening figures for 7, 14, 21 and 28 days.

This new way of measuring the radio audience also makes it possible to make a more precise evaluation of advertising planning, which in most cases involves campaigns that last more than two weeks.

According to the new data, R101 reaches a monthly average of 9 million listeners, which markedly reduces the gap with the top five commercial radio stations.

EXPECTATIONS FOR THE CURRENT YEAR

The national and international economic situation in the first quarter, as outline above, has endured the expected negative impact of the crisis that began in 2008: figures for consumer spending and investments are have rapidly worsened, while forecasts for a recovery in the economy have been pushed back.

As regards the markets pertinent to Mondadori, whose revenues in any case are diversified both by business and geographic area, the impact of the collapse in advertising investments in the first quarter and a further slump in add-on sales has been significant.

Actions taken to simplify the organisation and the re-engineering of processes, already begun during the last year, have allowed the company to mitigate the negative effects of the market in the first quarter: these actions will be further intensified in the coming months, both to further reduce the negative impact on this year and, above all, to size structural assets to future needs.

Any estimates concerning the company’s results for the year can only repeat what was outlined during the presentation of the results for 2008: that forecasts about future market scenarios remain extremely difficult though it is realistic to expect for 2009 a lower level of profitability than the previous year, especially for the businesses most linked to advertising.

§

The executive responsible for the preparation of the company’s accounts, Carlo Maria Vismara, declares that, as per art. 2, 154 bis of the Single Finance Text, the accounting information contained in this release corresponds to that contained in the company’s formal accounts.

§

The interim report on the first quarter of 2009 will be made available at the company’s corporate offices, at Borsa Italiana S.p.A. and on the web site www.gruppomondadori.it by the end of today.

[1] It should be noted that from 1 January 2009, replacing IAS 14, the IFRS 8 accounting principle, that regulates the information that must be disclosed for each relevant business in which the group operates, came into effect.

The application of this new principle has involved the publication of figures relating to the activities managed by the Mondadori France subsidiary separately from the entire Magazine Division, of which it is in any case a part.

Moreover, following the sale of 80% of Mondadori Printing in November 2008, the section that included the figures relating to the activities of the group’s printing activities is no longer significant as per the terms of IFRS 8 and, consequently, such figures have been incorporated under the item “Corporate and other business”. The same attribution has been made for the figures for 2008.

The Board of Directors of Arnoldo Mondadori S.p.A. met today, under the Chairmanship of Marina Berlusconi, to examine and approve the consolidated balance sheet and management report for the year to 31st December 2008 as presented by the Group’s Deputy Chairman and Chief Executive, Maurizio Costa.

The market scenario

As is well known, there was a further worsening of the macro-economic scenario in the last three months of 2008. Indeed, the downturn was worse than the already pessimistic forecasts and the crisis that affected the financial sector at an international level had a serious impact on the productive sectors, on employment and on consumer spending in industrialised countries, as well as slowing growth in developing countries. Confirmation of the depth of the current recession comes also from the extremely negative perceptions regarding the evolution of the situation in the short to mid-term, with an inevitable impact on investments and spending. Also in Italy, where the banking system has been less exposed to assets risks than other European countries and the United States, the crisis has, nevertheless, had a serious effect on the real economy, with a fall in GDP of 1%, something not seen since 1975.

For Mondadori and its markets of reference, the following observations can be made:

– in Italy, while there was not an acceleration in the downturn in both circulation and add-on sales, the Group’s market share remained essentially unchanged. On the advertising front, investments, in the last part of the year, saw a marked fall. Meanwhile, the volume of business in the book sector, in which the Mondadori Group consolidated its position of absolute leadership, remained essentially unchanged;

– in France the downward trend in advertising continued, while magazine circulation, both newsstand sales and subscriptions, were in line with the previous year.

MANAGEMENT RESULTS AT 31 DECEMBER 2008

As communicated to the market in October 2008, Mondadori sold 80% of the share capital of Mondadori Printing S.p.A. to Gruppo Pozzoni; a comparison between the Mondadori Group’s consolidated revenues and gross operating profit in December 2008 and the figures for the previous year are consequently also represented on a like-for-like basis, excluding. Consequently, the results, both for 2007 and 2008, of printing activities sold with effect on the company’s accounts from the month of November 2008 and, therefore, consolidated for only ten months of 2008.

Consolidated revenues for 2008 came to €1,819.2 million (-7.1% on the €1,958.6 million of 2007).On a like-for-like basis, the fall was of 6%. While, net of the add-on sales, turnover recorded a fall of 2.5%.

Consolidated gross operating profit for the year amounted to €249.2 million (-7.3% compared with the €268.9 million in the previous year). As a proportion of revenues, the figure is 13.7%, in line with 2007.

Excluding the activities of Mondadori Printing, the difference in operating profit was -€2.7 million (-1.2%), essentially due to: the positive business performance (+€6.5 million); a fall in add-on sales (-€13.3 million); increased investments in business development (-€7.9 million); higher organisational restructuring costs (-€4.7 million) and increased capital gains (+€16.7 million).

Consolidated operating profit came to €203.5 million, (-9.6% on the €225.2 million of 2007), with amortizations and depreciations of fixed assets of €31.1 million (€36.5 million in 2007) and of intangible assets of €14.6 million (€7.2 million in 2007).

As a proportion of revenues, as shift from 11.5% in 2007 to 11.2%.

Consolidated profit before taxation amounted to €151.4 million (-20.1% compared with the €189.5 million of 2007). Net financial charges increased by €16.4 million due to the higher cost of debt (around €6 million), lower returns on financial assets (around €8.3 million, partly due to writedowns) and financial charges for actualization of the deferred part of the payment for Mondadori Printing (€2.1 million).

Consolidated net profit on 31 December 2008 amounted to €97.1 million (-13.8% compared with €112.6 million in the previous year).

Gross cash flow for came to €142.8 million, compared with €156.3 million in 2007.

The net financial position went from -€535.3 million at the end of 2007 to -€490.3 million on 31 December 2008; during the period payments for tax of €80.4 million and dividends of €83.8 million were made, while the positive financial effect of the sale of 80% of Mondadori Printing S.p.A. amounted to €121.4 million.

THE BUSINESS AREAS

· Books

Against a general background of falling consumer spending, the performance of the trade segment of the Italian book market in 2008 was essentially in line with that of 2007 (-0.6% in terms of value, for medium to large sized bookstores: source Nielsen Bookscan).

In this context the Mondadori Book Division confirmed, by a wide margin, its leadership, with a market share of 28.8%; total revenues amounted to €434.3 million (-2.4% on the €445 million of the previous year).

The slight downturn in revenues, largely the result of a marked fall in the sale of rights for add-on sales initiatives, would, therefore, net of add-on sales, be -1.1%.

During the period Mondadori maintained the excellent levels of profitability of the previous year, with a gross operating profit, as a proportion of revenues of 19.1%.

In 2008 the Group published 2,695 new titles (compared with 2,742 in 2007) and 5,225 reprints (5,242 in 2007), a total of 53.4 million copies, compared with 54.6 million in 2007.

Among the Group’s publishing houses, Edizioni Mondadori recorded 2008 revenues of €144 million (+4.7% compared with €137.6 million the previous year). Of note during the year was the success of two first-time authors whose books sold more than one million copies: Paolo Giordano, winner of the Strega Prize with his novel La solitudine dei numeri primi and Roberto Saviano with the long seller Gomorra, first published in 2006. Also of note was the new novel by Margaret Mazzantini, Venuto al mondo, which sold more than 300,000 copies. There were also good results for Idi di marzo by Valerio Massimo Manfredi (250,000 copies) and Storia di neve by Mauro Corona (100,000 copies).

Einaudi generated revenues for the year of €51.7 million, an increase of 3.6% on the €49.9 million of 2007. This increase was the result of excellent sales through the bookshop and large-scale retail channels, thanks to the very positive sales of numerous books with average and high print runs.

With a market share of 13.4%, Mondadori Education in 2008 maintained a significant position in the educational market and leadership in the primary school textbook segment: net sales revenues generated by the company in the period amounted to €86.1 million (-1.1% on the €87.1 million of the previous year).

· Magazines

The Magazine Division generated consolidated revenues in 2008 of €949.8 million (-9.3% on the €1,047.7 million of 2007).

Italy

Mondadori maintained in 2008 its position of absolute pre-eminence, with revenues in Italy of €575.7 million (-12.5% compared with €657.8 million in 2007); net of add-on sales, the fall was of 4.4%.

Performace during the year was characterised by the following phenomena

– A fall in circulation revenues of 5.1%, in line with the market of reference;

– A marked decline in add-on sales (-28.6%) in line with the sector, but with good levels of profitability;

– A fall in advertising revenues of 5.3%, in a market that fell by 7.1%: it is a downturn that was especially marked in the second half of the year.

Among women’s titles, Donna Moderna consolidated its leadership; in newsmagazines, Economy saw a significant increase in its newsstand sales.

In the TV listings segment, which has been hit by a generalised fall in circulation, TV Sorrisi e Canzoni bucked the trend by maintaining weekly sales of more than one million copies. In the entertainment segment, Chi remained the most vivacious magazine with sales in line with 2007. In the up market women’s segment, while Grazia and Flair recorded more limited circulation, sales were still in line with the previous year and they had a marked penetration in the advertising market. Good results were recorded by both the cooking and design titles.

France

In 2008 Mondadori France generated total revenues of €374.1 million (-4.1% compared with the €389.9 million of 2007).

Circulation revenues by Mondadori France, which account for 70% of the total, remained at the level of the previous year (+0.6% on a like-for-like basis, net of the sale of niche title in the Sport e Loisirs area), thanks also to the positive performance of the leading titles, as Closer that confirmed its leadership in its segment; there was a positive performance in the up market segment Haut de gamme, in which Mondadori has Biba, and as a consequence of re-designs on a number of titles in the Femme Grand Public segment. There was a drop, in line with the market, for TV titles.

On the add-on sales front, the initiatives launched by the company during the year generated an increase in revenues of 7.2% compared with the previous year, but with the negative contribution being the result of a market that is structurally still not ready for development.

The revenues of Mondadori France from the sale of advertising saw a downturn of 14.5% in 2008, in line with a market in considerable difficulty; on a comparable basis the fall was of 12.3%.

The company, which is also penalised by its poor presence in the up-market segment, the only sector that grew compared with the previous year, did, in any case, safeguard its market share.

In terms of profitability Mondadori France in 2008 generated a gross operating profit, as a proportion of revenues, of 10.5% (12.5% net of add-on sales), thanks also to the ongoing control and reduction of costs that have generated savings in industrial distribution and labour costs.

International activities

2008 was characterised by intense number of new launches of the Mondadori Group titles in international markets, including Flair in Austria, Casaviva in Greece, Bulgaria and Serbia, Sale e Pepe in Romania, Grazia Casa in Croatia. The Grazia network expanded during the period to include new editions in India and Australia, both of which generated positive results from the first months of publication.

During the year the stage was set for the launch of Grazia in China and Casaviva in India, which went ahead in the first quarter of 2009.

Overall, at the end of the year, the Mondadori titles in world markets numbered nineteen, with revenues from licensing and commissions from the sale of advertising up by 30% on 2007.

There were also positive results from the Greek subsidiary Attica, leader in circulation and advertising in Greece and with a significant presence also in Romania and Bulgaria.

· Advertising

Mondadori Pubblicità ended the year with revenues of €331 million (-5.3% on the €349.5 million of 2007). Thanks to a good performance in the first half of the year, the company was able to at least partially offset the marked downturn in the market in the second half.

In particular, in a magazine market that lost 7.3%, the company recorded sales on its portfolio of titles of €242.6 million (-4.8%).

In the radio market, meanwhile, which showed an overall increase of 2.3%, R101 saw its advertising revenues grow by 23.9%. There was also a significant increase in advertising sales for the Group’s web sites (+27%), in a market that grew by 13.9%.

• Grafica

As mentioned above, the consolidated revenues from the Group’s printing activities refer only to the first ten months of the year. During this period there was a marked downturn in turnover, which came to €316.3 million (-28.1% on the €439.9 million of 2007).

This fall was the result of, in addition to two fewer months of business, the loss of the contribution of Mondadori Education that had been present in 2007, a marked reduction in magazine paginations and a sharp fall in the market for add-on sales.

• Direct marketing

In 2008 Cemit Interactive Media recorded revenues of €22.3 million, a fall of 6.7% on the €23.9 million of the previous year, while maintaining an excellent level of profitability (+18.4%).

• Retail

Total revenues by the Retail Division in 2008 amounted to €194.5 million (+6.2% on the €183.2 million of 2007). During the period the Group’s network of stores reached 434 units, making it Italy’s most extensive network of sale outlets for editorial products.

Mondadori Retail S.p.A. generated 2008 revenues of €128 million (+2.7% on the €124.6 million of 2007). During the year, having completed the integration of the ex-Messaggerie Musicali, there was an increase in the number of outlets (up to 30 from the 29 in 2007) and a simultaneous rationalisation of the chain.

Mondadori Franchising S.p.A. generated revenues of €66.5 million (+13.7% on the €58.5 million of 2007). During the period there was an increase in the number of bookstores, from 212 in 2007 to 227 in December 2008, while the number of Edicolè outlets rose from 136 in 2007 to 177 in 2008. Of note was also the testing of and formats were, including a children’s bookshop and a new form of franchising that combines the traditional bookshop and the book club.

• Radio

In 2008 R101 recorded net revenues of €14.8 million (+31% on the €11.3 million of 2007), which corresponds to gross advertising sales of €21.8 million (+23.9% on the €16 million of 2007), in a market that grew by just 2.3%.

In terms of ratings, the Mondadori Group’s radio reached an average daily audience of 2.1 million listeners, an increase of 7%, confirming its position among the top six Italian commercial radio stations, with around 8.4 million listeners over the 7-days.

RESULTS OF THE PARENT COMPANY ARNOLDO MONDADORI EDITORE S.P.A.

The Annual Report of the parent company, Arnoldo Mondadori Editore SpA, for the year to 31 December 2008, shows a net profit of €66.2 million (€90 million on 31 December 2007).

FORECAST FOR THE FULL YEAR

As is known, figures for consumer spending in the first months of the current year, in all the principal economic sectors, show a further decline compared to the end of 2008 and a climate of great uncertainty means that also investments are down or, at least, postponed.

In the previous year, the Mondadori Group was able to safeguard its levels of profitability thanks to the diversification of the business and, above all, to cost cuts, in anticipation of the growing crisis.

For a 2009 that is already heavily influenced by the consequences of the general situation in the publishing sector and the impact of technological changes, the company will continue to pursue cost savings, organisational simplification and the re-engineering of processes, also through the specific allocation of dedicated investments.

The trend in revenues in the first months of the year and the objective difficulty in foreseeing developments and the evolution in consumer spending and investments, especially in advertising, over the coming months, suggest a prudent approach in forecasting the company’s performance in 2009, which, in any case, is not expected to be at the same level as the previous year.

§

PROPOSAL FOR THE ALLOCATION OF THE NET PROFIT FOR THE YEAR 2008

The Board of Directors will propose to the Annual General Meeting of the Shareholders, to be held on 29 April 2009 (on first calling, or 30 April on second calling), the allocation of the entire net profit for the year to 31 December 2008 of Arnoldo Mondadori Editore S.p.A., amounting to €66,197,031.51 to an extraordinary reserve.

Given the lack of clear signs of an improvement in the market, the Board’s proposal to not distribute a dividend for 2008 is aimed at allowing Mondadori to maintain its financial solidity, maintain the necessary levels of investment in products, finance the reorganisation process, and to ensure that the company is ready to take advantage of possible opportunities deriving from a recovery in the economic cycle.

§

PROPOSAL TO THE SHAREHOLDERS FOR A STOCK OPTION PLAN FOR THE THREE-YEAR PERIOD 2009-2011

Following the termination of the Stock Option plan for the previous three-year period 2006-2008, the Board of Directors have resolved, following the recommendations of the Remuneration Committee, to propose to the Annual General Meeting of the Shareholders, to be held on 29 April 2009 (on first calling, or 30 April on second calling) a Stock Option Plan for the three-year period 2009-2011, as per Art 114 bis of Legislative Decree, 58/1998.

The purpose of the Plan is essentially to give the company and its subsidiaries access to a tool with which to promote loyalty and render the management more directly involved in the results.

In conformity with art. 114 bis of legislative decree N°58 of 24 February 1998, the fundamental characteristics of the Plan to be approved by the shareholders are as follows:

Participants in the Plan

Participants in the Plan will be identified by the Board of Directors from: managers of the company or its subsidiaries with functions critical for the attainment of the group’s strategic objectives; directors of the company and its subsidiaries; journalists of the company and its subsidiaries with the position of editor or co-editor; managers of the holding company who carry out their function in the interest of the company.

Participants may therefore also include “relevant subjects” belonging to the categories, as at Art. 152 sexies, para. 1, C.1), C2) of CONSOB Regulation 11971/1999.

Implementation of the Plan

The Plan is organised in annual allocations to the participants of options, which are personal and non-transferable, for the acquisition of shares of the company, held in the portfolio or through subsidiary companies. Implementation of the plan is subordinate to the attainment of the company’s performance objectives as determined by the Board of directors following the recommendations of the Remuneration Committee. Exercise of the allocated options will be further subordinate to a lock-up period and will be possible only within a defined period.

Criteria for the determination of the purchase price of shares

The price of such shares will be calculated on the basis of the arithmetical average of the reference price of Mondadori ordinary shares, in the period measured by the Borsa Italiana that goes from the date of allocation to the same day of the previous month.

Subject to the approval by the AGM, Board of directors will define, in the light of the above, Regulations for the implementation of the Stock Option Plan.

§

RE-ATTRIBUTION OF POWERS AS PER ARTT. 2443 AND 2420 TER OF THE CIVIL CODE

Following the expiry of the five-year attribution of powers made by the Shareholders’ Meeting of 2004, the forthcoming AGM (the extraordinary part), to be held on 29 April 2009 (on first calling, or 30 April on second calling), will be asked to approve the re-attribution of powers to the Board of Directors to resolve capital increases and the issue of convertible bonds, as per artt. 2443 and 2420 ter of the Civil Code.

The new powers are in line with the previous expiring powers, both in terms of duration (five years, in accordance with current legislation) and for the maximum sums (a nominal €78 million and €260 million respectively).

§

The executive responsible for the preparation of the company’s accounts, Carlo Maria Vismara, declares that, as per art. 2, 154 bis of the Single Finance Text, the accounting information contained in this release corresponds to that contained in the company’s formal accounts.

§

The results of 2008 will be outlined by the deputy chairman and chief executive, Maurizio Costa, and the CFO, Carlo Maria Vismara, at a meeting with the financial community to be held today at 2.30 pm at the company’s headquarters in Segrate.

The Board of Directors of Arnoldo Mondadori S.p.A. met today, under the chairmanship of Marina Berlusconi, to examine and approve the interim report for the first nine months of the year to 30th September 2008, as presented by the Group’s Deputy Chairman and Chief Executive, Maurizio Costa.

THE MARKET SCENARIO

From the beginning of the second half of 2008, as feared, the effects on the real economy of the financial and macroeconomic problems that hade emerged in the preceding period began to be felt and had an immediate and somewhat violent impact on consumer spending. A period of recession is now almost certain, and it is difficult to forecast either the quantitative impact or duration.

In Italy that characterising element of the general situation in the market of reference for the Mondadori Group has been a further marked decline in advertising investments, while there has been a continuation, without particular variations, in the slowdown in circulation and add-on sales. The growth recorded by books in the first months of the year has also come to a halt.

In France, magazine circulation has fallen, but also here it is advertising that has been most affected by the situation of uncertainty about prospects in the short term.

GROUP PERFORMANCE IN THE PERIOD TO 30 SEPTEMBER 2008

Despite such a difficult context, the Mondadori Group confirmed its capacity on the revenue front, recording a gross operating profit – net of add-on sales – that was higher than that of the corresponding nine-month period of the previous year, notwithstanding ongoing investments in business development.

This has been made possible by paying close attention to operating costs and efficiencies in all areas of the company that has enabled the Group, also in the third quarter, despite a fall in revenues due to the economic situation, to increase its margins compared with the same period of the previous year.

Consolidated revenues for the first nine months of 2008 came to €1,368.1 million, a fall of 5.1% compared with the €1,441.7 million in the first nine months of 2007 (-1.5% net of add-on sales).

Consolidated gross operating profit at 30 September 2008 came to €168.8 million, a fall on 9.8% on the €187.1 million of the same period of the previous year (+1.8% net of add-on sales). As a proportion of revenues, a fall to 12.3% from the 13% of the same period of 2007.

Net of the impact of add-on sales (-€20.8 million) and non-recurring factors (increased capital gains: +€3 million; personnel: -€1.5 million due to the application of new regulations on leaving entitlements in 2007 and extraordinary charges), operating margin would have grown by €1 million due to improved business results (+€7.2 million) and increased investments in development activities (-€6.2 million).

Consolidated operating profit at 30 September 2008 came to €137.5 million, a fall of 11% on the €154.5 million of the same period of 2007, with amortizations and depreciations of tangible and intangible assets for a total of €31.3 million (€32.6 million in 2007); as a proportion of revenues, a fall from the 10.7% of 2007 to 10.1% this time.

Consolidated profit before taxation amounted to €104.5 million, a fall of 19.8% on the €130.3 million of the first nine months of 2007, with an increase of €8.8 million in net financial charges, essentially due to the increased cost of borrowing (around €4.7 million) and lower returns from financial investments (around €3.1 million) and the IAS regulations regarding leaving entitlements (€1 million).

Consolidated net profit at 30 September 2008 came to €58.8 million, a fall of 16.1% on the €70.1 million for the same period of the previous year.

Gross cash flow in the first nine months of 2008 amounted to €90.1 million, compared with €102.7 million in the first nine months of 2007.

The Group’s net financial position at 30 September 2008 showed a deficit of €644.5 million, compared to a deficit of €535.3 million at the end of 2007. During the period income taxes of €65.5 million and dividends of €83.8 million were paid out.

RESULTS OF THE BUSINESS AREAS

• Libri

In the first nine months of 2008 the Book Division generated revenues of €316.5 million, a fall of 3% on the €326.4 million of the same period of 2007 (-1.8% net of the contribution of the sale of rights for add-on sales initiatives).

During the period the Group confirmed its leadership in the trade segment with a marked advantage over its main competitors, despite a period of recession and a general decline in consumer spending. Particularly positive results were recorded by Edizioni Mondadori, that saw its market share increase by a full percentage point, and Einaudi, which confirmed its position as Italy’s second-largest publisher. In the first nine months of the year, the Turin-based publisher generated net revenues of €37 million, an increase of 5.4% on the same period of 2007.

Among the important events during the period was the exceptional success of La solitudine dei numeri primi, the first novel by a new writer, Paolo Giordano, which also won the 2008 Premio Strega, and has sold more than 800,000 copies; among the long sellers, of special note was Gomorra by Roberto Saviano, which reached one and a half million copies.

• Magazines

The Magazine Division generated revenues of €725.5 million in the period, a fall of 8.4% on the €791.8 million at 30 September 2007, largely due to the fall in add-on sales (net of add-on sales, the fall in the Division’s total revenues would be of just 3%).

Italy

Revenues generated in Italy in the first nine months of 2008 amounted to €440.9 million, a fall of 12.5% compared with the €504 million of the same period of 2007.

The shortfall in revenues is attributable to the following factors:

– weakness in circulation revenues (-5.2%) in line with the reference market, marked by a decline in all segments of the business;

– as already indicated, a marked fall (-29.9%) in revenues from add-on sales, in line with the main competitors. The on-going decline in this type of activity has necessitated a stricter selection of the initiatives in order to maintain significant margins while reducing the risks of failure.

– a downturn in magazine advertising (-2.1%) which, after an encouraging start in the first quarter, saw an abrupt slowdown, above all from the summer period.

On the circulation side, Mondadori consolidated its market share, maintaining its position of absolute leadership. The best performances were recorded in the news segment with Panorama, in women’s weeklies with Donna Moderna and in the up-market segment by Grazia and Flair, which also performed well on the advertising front.

France

In the first nine months of the year Mondadori France generated revenues of €284.6 million, essentially in line (-1.1%) with the €287.8 million of the same period of 2007.

Over the same period, the company continued its efforts to reduce costs, generating important savings on both the production and distribution fronts.

The circulation revenues of Mondadori France remained at the levels of the previous year (+0.1%). In particular Closer and Biba recorded excellent performances; Modes & Travaux and Top Santé held up well, as did Le Chasseur Français and Télé Star Jeux, following their re-launches, while difficulties continued in the TV guides segment. Overall, also subscription revenues remained at the levels of the previous year, thanks to marked increases for Closer and Auto Plus.

On the advertising side, France saw a continuation in the third quarter of the marked slowdown in advertising sales.

Mondadori France, while safeguarding its market share, was particularly penalised by a downturn in sales in the Femme Grand Public, TV and auto segments; while results were positive in the people and up-market segments, driven by strong growth in the circulation of Closer and Biba.

In this context, Mondadori France in the first nine months of the year recorded advertising revenues of €75 million, an 8.4% fall on the €81.9 million of the same period of the previous year.

International activities

During the period there was a continuation in the rise in revenues from the international editions of Mondadori titles. The network, which as of 30 September had reached 15 units, either licensing agreements or joint-ventures, expanded further in October with the launch of Sale&Pepe in Romania, Grazia Casa in Croatia and Casaviva in Bulgaria, followed in November by the launch of a Serbian edition.

• Advertising

Mondadori Pubblicità recorded revenues for the period of €244.7 million, a fall of 1.6% on the €248.8 million of the first nine months of the previous year.

After a positive first half, the third quarter saw a reflection, albeit to a lesser degree, of the worrying downturn in the market as a whole in the period.

As regards individual titles, there was expansion for the Grazia “system” (+9%) and a positive trend for Flair as well as TV Sorrisi e Canzoni and Panorama, despite a critical moment for the segments typically characterised as “male”. In other media, there was further consolidation in radio with a substantial (+33.3%) increase for R101, while in the Internet area, in line with the market, there was an excellent performance by the web site www.donnamoderna.com.

• Printing

The situation at 30 September 2008 saw a significant fall in revenues compared with the same period of the previous year, due to a general decline in the market.

During the third quarter there was a further marked reduction in pages due to the sudden arrest in advertising compared with the first half, and there was a confirmation of the slowdown in the market for newspaper and magazine supplements.

In the first nine months of the year the Printing Division recorded total revenues of €281.2 million, in fall of 15.6% on the €333.3 million of the same period of the previous year, mainly due to the absence of activities for Mondadori Education, that were present in 2007.

As for other areas, the market for catalogues and commercial products was stable and in line with expectations; illustrated books showed signs of recovery in the volume of printing in Europe, compared to the Far East, and interesting printing contracts for the American market.

There was a slight increase in the cost of paper in the period, in particular for the paper used in the printing of magazines. Utilisation of plant capacity was lower than the budget, despite a significant reduction in outsourcing.

• Direct marketing

In the first nine months of the year Cemit operated in an increasingly difficult market, characterised by reductions in communication investments. During the period the company recorded revenues of €15.9 million, a fall of around 7% on the €17.1 million of the same period of the previous year, while maintaining a good level of profitability thanks to an improvement in the mix, which was more focused of higher value added activities and the ongoing control of costs.

• Retail

Total revenues from the Retail Division in the first nine months of 2008 came to €128.6 million, an increase of 7.3% compared with the €119.9 million of the same period of the previous year.

Mondadori Franchising recorded revenues of €44.2 million, an increase of 13.3% on the €39 million of the same period of 2007, thanks above all to new affiliations. The company’s expansion programme continued during the period raising the number of its outlets to a total of 369, making it Italy’s largest network of outlets for the sale of editorial products, of which 212 are bookshops (205 on 30 September 2007) and 157 Edicolè newsstands (117 at the same point of 2007).

Mondadori Retail revenues in the first nine months of the year came to €84.4 million, an increase of 4.3% on the €80.9 million of the same period of 2007. During the period the number of directly controlled outlets rose to 30.

• Radio

The net revenues of R101 in the first nine months of the year amounted to €11.1 million, a 50% increase on the €7.4 million of the same period of 2007, and corresponding to gross advertising revenues of €16 million (€12 million at 30 September 2007).

The good audience ratings for the station were confirmed in the period, reaching an average daily audience of 2.1 million (+4.85% in the 5th Audiradio cycle compared to the same period of the previous year), in a slightly falling market.

SIGNIFICANT EVENTS AFTER THE CLOSE OF THE PERIOD

Sale of 80% of Mondadori Printing S.p.A.

As previously communicated on 14 October, Arnoldo Mondadori Editore signed a preliminary contract for the sale of 80% of the subsidiary Mondadori Printing S.p.A. to the Gruppo Pozzoni. The value of the transaction was defined on the basis of an enterprise value for 100% of Mondadori Printing of €145 million. The impact of the operation on the consolidated net financial position of the Mondadori Group will be of €123 million.

The operation should be seen in the context of a general trend toward consolidation and concentration among the qualified players that characterises the printing sector at an international level in response to new competitive pressures, overcapacity and a fall in demand.

The agreement gives to the Gruppo Pozzoni an option to buy the remaining 20% of Mondadori Printing, that may be exercised from December 2011, at a cost determined by the fair market value of the company on the date of the operation. Mondadori will retain an option to sell the same 20%, from January 2017, at a price to be determined by the abovementioned criteria.

The agreement also includes an 8-year printing contract – renewable on terms in line with the best market benchmarks – guaranteeing Mondadori an improvement in terms of costs and the maintenance of high standards of quality.

The terms of the operation and the signing of the preliminary contract are subject to the approval of the Italian Competition Authority.

EXPECTATIONS FOR THE FULL YEAR

The current economic and financial situation is marked by exceptional factors and consequent uncertainties that cannot be compared to the past. Both the scale and, above all, the timing with which critical factors become evident, make it difficult to make forecasts about both the medium and the short term.

What is clear is that, even in these recent difficult months, the Mondadori Group has been able to face the inevitable downturn in business with results that are in line with the best expectations, and even better than the previous year, if the add-sales are excluded. At the same time, the company has created the conditions for further improvements in efficiency through an industrial partnership in printing.

As a result, it is possible to confirm, in line with the projections made at the time of the report on the first half of the year to 30 June, that, the management results for the core business, excluding add-on sales activities, at the end of 2008 are in line with those of the previous year.

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The executive responsible for the preparation of the company’s accounts, Carlo Maria Vismara, declares that, as per art. 2, 154 bis of the Single Finance Text, the accounting information contained in this release corresponds to that contained in the company’s formal accounts.

The Board of Directors of Arnoldo Mondadori S.p.A. met today to examine and approve the management report for the first six months of the year to 30th June 2008, as presented by the Group’s Deputy Chairman and Chief Executive, Maurizio Costa.

The market scenario

The first six months of 2008 saw a sharpening of the uncertainties in the short and medium term and an acceleration in price increases for fast moving consumer goods, with a negative impact on consumer and investor confidence.

Over the last two months, in the reference market for the Mondadori Group in Italy, the downturn in magazine circulation was accompanied by a slowdown in advertising expenditure; at the same time, there was a continuation of the decline in add-on sales during the period, while the book market displayed encouraging signs of growth.

In France, magazine circulation remained essentially stable, while advertising investments were down compared to the same period of 2007.

Group performance in the period to 30 June 2008

When comparing the results for the period with those at 30 June 2007 the same considerations made at the end of the first quarter apply: the essential stability in business profitability and the growing performance of Radio R101 have made it possible to amply compensate for the investments made in development (digital and international activities), while the impact of the decline in add-on sales has been marked the effects are expected to be less significant in the second half of the year, given that at 30 June 2007 Mondadori had already generated 65% of the result for the entire year.

Consolidated revenues for the first half of 2008 came to €930.1 million, a fall of 3.2% compared with the €960.6 million in the first half of 2007. Net of add-on sales, revenues were up by 1.1%.

Consolidated gross operating profit at 30 June 2008 came to €104.5 million, compared with the €119.6 million of the same period of the previous year a fall of 12.6%. As a proportion of revenues a fall to 11.2% from the 12.4% of 2007.

Net of add-on sales (-€15.6 million compared with 30 June 2007) and discontinuous non-recurring factors (higher capital gains of €0.6 million; lower personnel costs of -€2.9 million due to the application of new regulations governing leaving entitlements in 2007 and other extraordinary charges) the difference in the operating margin at 30 June 2008 would be +€2.8 million, due to improved business performance business (+€6.8 million) and increased investments in businesses under development (-€4 million).

Consolidated operating profit at 30 June 2008 came to €83.8 million, a fall of 14.4% on the €97.9 million of the same period of 2007, with amortizations and depreciations of tangible and intangible assets for a total of €20.7 million (€21.7 million in 2007); as a proportion of revenues, a fall from the 10.2% of 2007 to 9% this time.

Consolidated profit before taxation amounted to €64.2 million, a fall of 25.3% on the €85.9 million of 2007, with an increase of €7.6 million in net financial charges, essentially due to the increased cost of borrowing (around €4.5 million) and lower returns from financial investments (around €2.7 million).

Consolidated net profit at 30 June 2008 came to €36.7 million, a fall of 20.6% on the €46.2 million for the same period of the previous year.

Gross cash flow in the first half of 2008 amounted to €57.4 million compared with €67.9 million in the first six months of 2007.

The Group’s net financial position at 30 June 2008 showed a deficit of €680.1 million compared to a deficit of €535.3 million at the end of 2007. During the period income taxes of €54 million and dividends of €83.8 million were paid out.

Results of the business areas
• Books

During the first half of 2008 the Book Division generated revenues of €192.7 million, in line with the €192.8 million of the same period of 2007. Net of add-on sales, revenues were up by 1.7%.

During the first six months of the year the Mondadori Group confirmed its leadership in the trade segment, increasing its share to 28%[1], with a marked advantage over its main competitors; in the large-scale retail channel the estimated share is more than 35%[2].

Among the various publishing houses in the Group, there were positive results for the first half for Edizioni Mondadori, which recorded revenues of €68.3 million, (+0.4%) and Mondadori Education which recorded sales of €15.1 million, (+4.9%). Einaudi confirmed net revenues for the first six months of 2008 of €26,4 million, in line with those of the same period of 2007.

• Magazines

During the period the Magazine Division generated revenues of €514.4 million, a 6.3% fall on the €549 million of the same period of 2007.

Italy

The first half of the year has seen a generalised downturn in the market in which the Division operates. A marked fall in consumer spending has consequently also affected the magazine sector, and most particularly and in a predominant manner, the add-on sales phenomenon, which is clearly well on the way to being progressively downsized. To a lesser extent, circulations in almost all segments have continued to display a certain weakness. Advertising, after an initially promising first quarter, was subject to a sharp downturn.

Revenues generated by the Magazine Division in Italy in the first half of 2008 amounted to €319.9 million, a 9.9% fall compared to the €355 million of the same period of last year.

This result was determined by the following factors:

– A sharp reduction in revenues from add-on sales (-24.4%) in a market that in the first five months of the year fell by 26%, and whose overall value has halved compared with the record levels of 2005;

– A fall in circulation revenues of 5.1%, essential due to a reduction in volumes sold (-3.3% on comparable basis);

– A growth in advertising revenues of 1.3% thanks to the performance of leader titles, in an already falling market (-0.7% to May with further falls expected in June).

During the period Mondadori has put in place a number of actions in key segments. The most important include:

– the relaunch of Panorama, in February, with good results in terms of circulation and, in particular, advertising;

– strong support, in a highly competitive market, for TV guides, the results of which have so far been satisfactory;

– the relaunch of Donna Moderna, to mark the weekly’s 20th anniversary, which has achieved wide consent from both readers and advertisers;

– the relaunch of Grazia, completed in June with very satisfactory results, aimed at focusing and further strengthening the magazine’s elements of quality in the fashion area;

– the development of internet activities that have involved a number of titles, in particular Donna Moderna, with the web launch at the end of June of a new hub dedicated to women;

– a strong and sharper control of costs in all areas, which has made it possible to reduce the impact of the fall in revenues.

As already mentioned, in the context of a general slowdown, Mondadori recorded a fall in circulation revenues of 5.1% (-3.3% on a comparable basis, considering the closure of Star+TV, Per Me and Creare). There was an improvement, however, compared with the same period of last year, of the competitive position of Grazia, Chi, Tv Sorrisi e Canzoni, Donna Moderna (with a circulation more than double that of its competitors) and Panorama, which confirmed its leadership in its segment, both in terms of circulation and, to a marked degree, in advertising sales. The positive performance of Flair, Casaviva, Casabella and Interni should also be noted.

France

In the first half of 2008 the activities of the Magazine Division in France generated consolidated revenues of €194.5 million, an increase of 0.3% on the €194 million of the same period of 2007.

In general, in a context in which circulations remained essentially in line with the previous year and advertising was affected by a period of difficulty, Mondadori France nevertheless managed to hold on to its market share.

On the circulation side, the Group’s titles acheived good results thanks to redesigns and relaunches completed during the period. Of particular note was the exceptional performance of Closer, which confirmed its leadership position in the segment.

There was a fall in the sale of advertising space in consumer magazines in France of 2.1% in terms of volume at the end of May 2008 (source: TNS-MI), while the reference market for Mondadori France saw a fall of -3.9%. Bucking this trend was the upscale segment (+5.1%), in which Mondadori is not yet present.

The advertising revenues of Mondadori France in the first six months of the year came to €53.5 million, compared with the €57.2 million of the same period of last year (-6.5%).

In particular, television titles have been affected by a reduction in investments by large-scale retailers and direct marketing. There were also difficulties for women’s titles, while those in the car segment showed signs of improvement compared to the first quarter of the year, with a result in line with the same period of 2007.

As already announced, June 30 saw the closing of an agreement for the sale to Motor Presse France, of six specialised titles published by the Mondadori France Group. This operation is part of the plan for the rationalisation of the Mondadori France portfolio, with a focus on the development of segments with high potential also in terms of advertising, such as the upscale (and activities have continued for the launch of a magazine in this segment) and the mass-market segments.

International activities

During the period there was a further improvement in the already notable performance of international activities. In particular Grazia UK confirmed its position as the publishing phenomenon of the moment, marking itself out even more in a market showing clear signs of a downturn.

Advertising planning for the first issues of Grazia Australia, launched on July 21, was way beyond expectations; while there were also excellent initial results for Grazia India (where a contract has also been signed for the launch of Casaviva, the Group’s leading interiors title) and the now consolidated joint venture with Sanoma, which publishes Grazia and Interni in Russia; excellent performances were also recorded by Flair Austria and Casaviva Greece.

• Advertising

In the first half of 2008 Mondadori Pubblicità recorded revenues of €178.2 million (+1% on the €176.4 million of the first half of 2007), with a performance above the market average, despite the significant slowdown of the second quarter.

Advertising sales for magazines were sustained by a good performance for weeklies, with significant increases being recorded above all by Grazia (up more than 10%) and Tv Sorrisi e Canzoni (+10%); Panorama performed well (+1.6%); while Donna Moderna and Chi remained stable; among the monthlies, there were stand out performances by Flair (+5%) and the specialised titles in the upscale Design and Interiors segment, which were up by around 10%.

In other media, in a difficult half year for il Giornale (-18%), there was a particularly positive performance on the internet (+15%), with an absolutely stand out performance by the new Donna Moderna site. There was also a significant increase in radio, with R101 which, with a growing audience, saw its advertising grow by 43.9% compared with the first half of 2007, and well above the market trend.

• Printing

In the first six months of 2008 the Printing Division generated revenues of €196.1 million, a 11.8% fall against the €222.4 million of the same period of the previous year. On a comparable basis, excluding the printing activities for Mondadori Education, no longer managed in 2008, the fall would be 7.4%.

The fall in like-for-like revenues was the result of a marked downturn in printing contracts for add-on sales initiatives for both the Group and third parties and the exceptional increase in the value of the euro against the dollar and the pound, while in terms of volume, the foreign market for catalogues and commercial products remained essentially stable.

During the period the cost of paper increased by between 1 and 2%, while energy costs (gas and electricity) continued to increase substantially.

The level of plant use was satisfactory and in line with the budget, having significantly reduced outsourcing activities; this was made possible also by the full use of recent investments which are now fully operational.

• Direct marketing

In the first half of 2008 Cemit Interactive Media generated revenues of €12 million, a 9.1% fall compared with the €13.2 million of the previous year. The sales mix has improved, in favour of activities with greater added value.

Continuing cost controls, along with a organisational structure review, has made it possible to safeguard levels of profitability in a difficult market context.

• Retail

Revenues from the Retail Division in the first half of 2008 rose to €86.2 million from the €77.8 million of 2007, an increase of 10.8% compared with the same period of the previous year.

Mondadori Franchising recorded first half revenues of €28.3 million (+18.7% compared with the €23.8 million in the first half of 2007). The network development programme continued during the period which, with 209 bookstores (compared with 191 on 30 June 2007) and the 152 Edicolè outlets (compared with 104 at the same point of the previous year), is now the most extensive in Italy for editorial products.

Mondadori Retail generated first half revenues in 2008 of €58 million, an increase of 7.6% on the €53.9 million of 2007, despite a difficult context for consumer spending in the non-food sector.

Following the opening of the new Multicenter store in Marcianise (CE), the company now has 29 outlets and has focused on the integration of the former Messaggerie Musicali (Mondadori Shop) stores and the rationalisation of the chain.

• Radio

During the first half of 2008 gross advertising revenues for Radio R101 amounted to €11.8 million, which corresponds to a net figure of €8.2 million, and increase of 54.7% on the €5.3 million of the same period of the previous year.

In an essentially stable market in terms of audience, in the first half of 2008 R101 reached a daily average of 2.1 million listeners, a 7% increase compared with the first half of 2007. Over the seven-day period, Radio R101 confirmed its position among the top six Italian commercial radio stations with more than 8.8 million listeners.

Expectations for the full year

In the second quarter of the year the market saw an intensification of the same critical elements that characterised the first. Of particular relevance was the negative effect of the real and perceived situation in terms of consumer spending and investment.

In this context the Mondadori Group has set in motion actions to safeguard the profitability of its core business, establishing further and significant efficiency objectives, and has continued with growing commitment, its development policy for new activities both in Italy and abroad.

Mondadori’s demonstrable managerial competence and leadership position in its reference markets are expected to allow the company, despite the difficult situation, to confirm its management results, net of the downturn ion add-on sales, a decline which shows no sign of ending in the short term.

§

As per article IA.2.9.3 n.4 of Rules for the Regulation of Markets, it should be noted that the following bonded loans are due to expire in the eighteen months subsequent to 30 June 2008:

Date of issue: 20/10/2003;

Amount: €109,900,000 corresponding to n°. 1,099 bonds of a value of €100,000 each, convertible in ordinary shares of Arnoldo Mondadori Editore S.p.A.;

Issuer: Mondadori International S.A., wholly owned by Arnoldo Mondadori Editore S.p.A.;

Guarantor: Arnoldo Mondadori Editore S.p.A.;

Date of expiry: 20/10/2008.

§

The executive responsible for the preparation of the company’s accounts, Carlo Maria Vismara, declares that, as per art. 2, 154 bis of the Single Finance Text, the accounting information contained in this release corresponds to that contained in the company’s formal accounts.