Financial results

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 2008 as presented by the Group’s Deputy Chairman and Chief Executive, Maurizio Costa.

The scenario

The first months of 2008 confirmed fears about a general slowdown in the broader economy and there were no signals of a reversal of the trend in the Mondadori Group’s reference market. In fact, Italy saw a continuation of the decline in magazine circulation, which was counterbalanced in January and February by a recovery in advertising. The add-on sales market saw a further marked slump (-26%) after the slowdown of 2007. The trade books market, meanwhile, remained essentially stable.

In France, in the same period, there was a slight fall in circulation, while there was a continued decline in the advertising market, which is compared to Q1 2007, in which the impact of regulatory changes, which made it possible for large-scale retailers to advertise on television, had not been fully felt.

Group performance in the period to 31 March 2008

During the first quarter of the year the general holding up of all the businesses – due also to a focused cost control policy – and, in particular, the excellent performance of Radio R101 more than compensated for the higher investments for the development of the international and digital activities, and despite the negative impact of the add-on sales business.

The lower contribution to margins by add-on sales (a total shortfall of €10.1 million compared with 2007) was essentially due to:

– for Magazines Italy, a comparison with Q1 2007 in which add-ons had obtained 40% of their results for the full year;

– for Magazines France, the negative impact of the launch of new initiatives in the first months of the year;

– for the Book and Printing Divisions, from the market slowdown.

In the first quarter of 2008 consolidated revenues came to €460,3 million, a fall of 1.7% on the €468.1 million of the first quarter of 2007.

Consolidated gross operating profit came to €48.4 million, compared with €54.5 million in the same period of the previous year, a fall of 11.2%. As a proportion of revenues, the figure is 10.5%, compared with 11.6% in Q1 2007.

The difference in the operating margin, net of the aforementioned effect of the performance of add-on sales, would show an improvement of €4 million, essentially due to improved results by the businesses.

Consolidated operating profit came to €38.2 million, a fall of 12.8% on the €43.8 million of Q1 2007, after amortization and depreciation of tangible and intangible assets for a total of €10.2 million (€10.7 million in 2007); 8.3% as a proportion of revenues, compared with 9.4% in Q1 2007

Consolidated profit before taxation in the period came to €27.9 million, a fall of 25.8% on the €37.6 million of the same period of the previous year, with an increase of net financial charges (€4.1 million) largely due to the effects of changing conditions in financial markets (the impact of increased interest rates for around €1.9 million and a fall in returns from financial assets for around €1.7 million).

Consolidated net profit amounted to €17.7 million, a fall of 25% on the €23.6 million of the first quarter of 2007.

Gross cash flow in the first quarter of 2008 amounted to €27.9 million compared with €34,3 million in Q1 2007.

The Group’s net financial position on 31 March 2008 showed a deficit of -€567.1 million compared with -€535.3 million at the end of 2007.

Business Area Results
• Books

In the first quarter of 2008 the Book Division generated revenues of €94.1 million (-2.5% on the €96.5 million of the same period of the previous year).

The Mondadori Group confirmed its leadership in the trade book segment, consolidating its value market share (29.7%[1]); in the large-scale retail area the figure is estimated at more than 35%.

Among the Group’s publishing houses, the performance of Edizioni Mondadori was particularly noteworthy, with revenues of €39.3 million (+1.8% on the €38.6 million of Q1 2007), as was that of Piemme, which had revenues of €14.6 million (+15% on the €12.7 million of Q1 2007).

• Magazines

First quarter 2008 consolidated revenues generated by the Magazine Division amounted to €260.2 million (-2.3% on the €266.4 million of the same period of the previous year).

Italy

Revenues generated in Italy amounted to €162.3 million (-4.7% on the €170.2 million of Q1 2007).

This result was due to the following phenomena:

– a fall in circulation revenues, the result of a negative trend in the market that has affected almost all of the segments in which the Division operates;

– a decline in the revenues from add-on sales in a rapidly declining market, in which Mondadori, nevertheless, was less affected than its competitors;

– an increase in advertising revenues, thanks also to a new organisational structure at Mondadori Pubblicità and targeted commercial policies that have led to results above the market average and to the growth in radio.

Facts of relevance affecting the Division in the period included:

– the re-launch of Panorama, in the first half of March, with results that have so far proved encouraging;

– the redesign and review of Donna Moderna;

– the development of internet activities and the re-design of a number of sites;

– the continuation of a management policy focused on efficiency gains in all areas, in particular on the industrial side (foliations and technical costs associated with product characteristics), editorial (editorial costs and staffing) and commercial (returns).

In a market in which, as already indicated, there is a continuing decline in sales, heavily influenced by the lower performance of add-ons, Mondadori saw a fall in circulation of 4.7%, also due to the exit from the portfolio of three titles: Star+TV, Per Me and Creare (on a like-for-like basis, the shortfall would be 2.9%).

Regarding add-on sales, there was a sharp fall in the market in the first quarter (-26%): and in the context of this overall decline, Mondadori’s performance was better (-12.9%) also when compared to the major newspapers that operate in the segment

France

The activities of the Magazine Division in France generated first quarter 2008 consolidated revenues of €97.9 million (+1.8% on the €96.2 million of the same period of the previous year).

In general, the good performance in terms of circulation and constant cost controls, alongside the ongoing restructuring plan, made it possible to maintain the level of profitability, net of investments for development and the launch of add-on sales new initiatives.

On the circulation side, the Group’s titles confirmed the positive results of 2007, with an increase of 1.8% compared with Q1 2007.

The redesign and re-launch of a number of titles have been well received by readers and resulted in a positive impact on sales; a positive performance in newsstand sales and subscriptions, with excellent results for Closer and Auto Plus.

Mondadori France saw a fall in advertising sales of 7.5% compared with the same period of the previous year: as already mentioned, the year is feeling the effects of an unfavourable moment in the French advertising market, which continues to decline, and in which, nevertheless, the up-market segment is bucking the trend (+5.6%).

In April, as already communicated, an agreement for exclusive negotiations was reached with Motor Presse France for the sale of a package of six titles specialised in the Sports sector. This operation is part of the often announced strategy of rationalising the portfolio: the focus and development – also through the sale of niche titles – on market areas, such as the up-scale and mass market segments, with higher potential, also in terms of advertising sales.

International activities

Of note during the period was the important launch of two up-market brands: Casaviva in Greece (February) and Flair in Austria (March), followed by the announcement of the publication from April 2008 of Grazia in India.

The positive performance of Attica in Greece and the Balkans continued, as did that of the joint-venture with Sanoma in Russia.

• Advertising

Mondadori Pubblicità ended the first quarter of 2008 with sales of €78.9 million (+6.5% on the €74.1 million of the previous year), outperforming the market average in a number of areas thanks to a new organisational model and targeted commercial policies aimed at making the most effective use of the rich portfolio available.

For Mondadori Magazines, advertising sales were up by 7.7%, thanks to a positive performance of Grazia and Chi; as well as Panorama and TV Sorrisi e Canzoni; noteworthy among the monthlies, was Flair and the up-scale specialised titles in the Design and Furinishing segment.

The performance should also be underlined in the period of Radio R101, which grew by 55% compared with Q1 2007 and the performance, higher than the market average, of Mondadori’s online activities (+41%).

• Printing

In the first quarter of 2008 the Printing Division generated total revenues of €102.7 million (-9.3% on the €113.2 million of the same period of the previous year).

This fall in sales is almost entirely due to the decline of the add-on sales market that has affected both newspapers and magazines.

There were significant increases in raw materials and energy costs, but, for the moment, these remain in line with forecasts.

Despite this fall in business, profitability has been maintained, thanks to continued production cost controls and structural adjustments, there was a satisfactory use of capacity, following a significant reduction in outsourcing and also in relation to making full use of recent investments that are now fully operative.

• Direct marketing

In the first quarter of the year Cemit Interactive Media generated revenues of €5.3 million (-11.7% on the €6 million of Q1 2007): during April, however, this shortfall was recovered.

Consequently Cemit, having implemented structural changes to adapt to a changing market scenario, is now facing the challenge of development and integration of various data bases ( the company’s principal assets) by keeping abreast of continuing technological developments and reviewing the strategic approach to the market of reference.

• Retail

The overall revenues of the Retail Division in the first quarter of 2008 amounted to €43.3 million (+13.1% on the €38.3 million of Q1 2007).

Mondadori Franchising saw a significant increase in revenues in the period, with sales of €14.3 million (+22% on the €11.7 million of Q1 2007), thanks mainly to new affiliations over the twelve-month period of reference: the number of bookstores rose from 187 to 208, and the Edicolè outlets from 86 in the first quarter of last year to 149 on 31 March 2008.

Mondadori Retail generated sales in the first three months of the year of €29 million (+9.3% on the €26.5 million in Q1), thanks also to an important development plan that was launched in 2007.

• Radio

In the first three months of 2008 gross advertising revenues of Radio R101 amounted to €5.1 million (+55% on the €3,3 million of Q1 2007), which translates into net revenues of €3.6 million.

The activities of Radio R101 during the period have been focused on continuing to improve the product and ongoing communication efforts both for the brand and the new programmes. In particular, in the first three months of the year a “local” communication campaign was conducted (using print media, outdoor and events) with the aim of reinforcing awareness in areas with the best growth opportunities.

On the frequencies side, signal distribution is now widespread across the country, thanks to the numerous acquisitions made in recent years.

www.r101.it recently generated record traffic of more than 250,000 visitors and around 3 million page views per month.

Expectations for the current year

The current economic climate has had a worse than expected impact on consumer spending in the first three months of the year and there appears to be no let up in the rise in the cost of energy and raw materials or of essential consumer goods.

The situation in the sectors of reference for the Mondadori Group remains similar to that seen in recent quarters, with a general trend fro slight falls in the circulation of magazines, and a more marked fall in add-ons. Advertising recovered to February, but slowed in March and the book market remains essentially stable.

In this context, the considerations made at the presentation of the Group’s 2007 results remain operative: a close focus on the management of the core business and recent investments (Radio), effective control of operating costs, combined with the development of activities focused on the product (Magazines and Digital) and the market (international network).

Despite the unfavourable economic situation, unless there is a further significant downturn in the area in which the company operates, it is possible to forecast a level of operating profit for the current year, net of extraordinary elements and investments in development, in line with that of the previous 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 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 2007 as presented by the Group’s Deputy Chairman and Chief Executive, Maurizio Costa.

During 2007 Mondadori consolidated its leadership position in Italy in an essentially stable market for books and a magazine market in which a downward trend continued, especially for add-on sales.

Organisational changes and improvements in efficiency across the group, combined with the integration of Mondadori France, nevertheless made it possible to record results for the overall performance and that of activities in France that were better than expected, in a market that, especially in terms of advertising investments, is going through a difficult phase.

Consolidated revenues for 2007 came to €1,958.6 million, an increase of 11.9% on the €1,750.2 million of 2006 (+16.8% with a like-for-like inclusion of the distribution business)[1].

Consolidated gross operating profit amounted to €268.9 million, compared with €240.3 million in the previous year, an increase of 11.9%, and 13.7% as a proportion of revenues, a figure in line with that of 2006.

Net of non-recurring and extraordinary items, thanks to the performance of the various divisions, there was a 16.7% increase in the group’s operating margin, despite increased investments in business development of €8.8 million.

Consolidated operating profit came to €225.2 million, an increase of 11.8% on the €201.4 million of 2006, after increased amortizations of around €4.8 million resulting from the acquisitions in France and of Messaggerie Musicali. As a proportion of revenues, the figure of 11.5% was in line with the previous year.

Consolidated profit before taxation amounted to €189.5 million, a slight rise (+0.3%) on the €189 million of 2006. This result felt the impact of higher financial charges of €23.3 million, around €13.7 million due to the higher average indebtedness during the year and the rest from increases in interest rates resulting from the general economic climate.

Consolidated net profit came to €112.6 million, an increase of 3.3% on the €109 million of 2006. There was a benefit in 2007 from lower tax charges, despite a higher level of non-taxable income in 2006 and the difference in the results of holdings consolidated on an equity basis.

This is essentially the result of the net effect of the use of deferred tax liabilities and the replacement tax applied, in line with the provisions of the last government budget regarding the taxation of certain corporate assets. There was an insignificant improvement (+€0,4 million) form the application of new IRES and IRAP rates to both deferred and advance taxes.

Gross cash flow for came to €156.3 million, compared with €147.9 million in 2006.

The overall net financial position showed a deficit of €535.3 million on 31.12.2007, compared with a deficit of €554.7 million on 1 January 2007, an improvement of €19.4 million despite net investments of €58.9 million, share buy-backs for €10.3 million, dividend payments of €84.7 million and taxes of €86 million.

THE BUSINESS AREAS

· Books

In 2007 the total revenues of the Mondadori Group’s Book Division came to €445 million, an increase of 1.3% on the €439.5 million of the previous year.

The gross operating margin, as a proportion of turnover, was 19.7%.

The Division saw a marked confirmation in 2007 of its leadership in the book market, overtaking the already excellent result of the previous year, with a value market share of 29% just in the mid-to- large bookstores; in the large-scale retail sector, the market share of the Mondadori Group’s publishing houses is estimated at more than 35%[2].

There were no significant changes during the year to the overall structure of the Division and the balance between its various sectors. The trade books sector (fiction and non-fiction, for adults and children) and accounts for 61.5% of revenues; educational publishing, which is managed by Mondadori Education (a new name adopted on 1 January 2008) accounts for 20%; while books in the Art, Architecture, along with cultural heritage activities, make up 11.7% of revenues.

During 2007 the Book Division published 2,742 new titles (2,787 in 2006) and 5,242 reprints (4,937 in 2006), a total production of 54.6 million books, compared with 56.4 in 2006.

Among the Group’s various publishing houses, the performance of Einaudi and Piemme has been particularly good.

In 2007 Giulio Einaudi Editore saw a 4.4% increase in revenues, to €49.9 million, compared with €47.8 million the previous year. This improvement was due to excellent bookstore sales as well as add-on sales operations.

Piemme generated revenues in the period of €55.7 million, an 18% increase on the €47.2 million of the previous year. This growth was mainly in the fiction area which saw an increase of around 90%, thanks to the exceptional sales of new titles published in May by Khaled Hosseini, Mille splendidi soli (which sold more than 1 million copies during the year) and Il Cacciatore di aquiloni (more than 800,000 copies in the year), both of which were at the top of the best sellers lists for 2007.

Edizioni Mondadori generated 2007 revenues of €137.6 million, essentially in line with the €137.9 million of 2006 (-0.2%); a result which remains very positive if the further reduction in the Dan Brown effect and the fall in the sale of rights for add-on sales initiatives are taken into consideration.

2007 was a particularly difficult year for Sperling & Kupfer with a 13.7% fall in revenues to €25.3 million, from the €29.3 million of 2006.

The revenues of Mondadori Electa in 2007 came to €51.1 million, a fall of 5.2% on the €53.9 million of the previous year. This was due to the sharp fall (around 40%) in add-on sales, which was partly compensated by stability in the cultural heritage and books area. In particular, book sales increased by 11.4% compared with the previous year, with an improved performance across all lines.

The net 2007 revenues of Edumond Le Monnier (as mentioned earlier, since 1 January 2008 Mondadori Education S.p.A.), came to €87.1 million (-0.7%), compared with €87.7 million in the previous year.

The company maintained its leadership in the educational market with a share of 13.9% and an analysis of the various segments shows that Mondadori Education remains the leader, among the big publishers, in the primary and middle schools sector, and is in the number two position in the high school sector.

On the distribution and logistics front, the Division’s revenues for the period amounted to €33.7 million, in line with the previous year.

The distribution of Piemme products, for the whole of 2007 (compared with just five months in 2006), had a marked impact and, over the year, saw an increase of almost 50% in the number of dispatches, while managing to keep the average days of delivery (2.1), essentially unchanged alongside further improvements in efficiency.

· Magazines

The Group’s Magazine Division generated consolidated revenues in 2007 of €1,047.7 million, an increase of 20.8% on the €867.2 million of 2006.

In a difficult market scenario, Mondadori was able to improve its levels of profitability compared with the previous year, thanks to ongoing efforts to contain costs and returns. Gross operating profit as a proportion of revenues was 14.8%.

The year was also affected by the inclusion of Mondadori France (twelve months in 2007 compared with only four in 2006) and by the contribution of distribution activities, in Italy, to Press-Di Distribuzione Stampa Multimedia S.r.l.: a reclassification on a like-for-like basis of the distribution business and net of the impact of Mondadori France, revenues for the period would be essentially in line with the previous year.

Italy

The revenues of the Magazine Division Italy came to €657.8 million, in line with the €657.9 million of the previous year, net of the effect of the abovementioned Press-Di.

The performance during the year was characterised by the following:

– a fall in circulation revenues (-3.7%) where there was a drop in the number of copies sold, also as a consequence of a number of titles being closed down;

– an excellent performance in add-on sales, in a market in marked decline (-19.4% in terms of volume), with revenues which increased by 3.4% compared with the previous year;

– a fall (-1,7%) in advertising revenues which were penalised by a reduction in the amount of space sold, and only partially compensated by rate rises;

– the launch of two titles with high advertising potential, First, a monthly supplement to Panorama, and Grazia Casa which completes Mondadori’s offer in the interiors segment;

– the closured of the monthly Per Me and the sale of the weekly Star+TV, penalised by both overcrowding in their respective segments and poor advertising sales;

– the development of internet activities which affected a number of titles. In this context, online advertising sales saw an above market average increase of 54%;

– strong operation cost controls, especially in the technical, commercial and editorial areas, which led to a marked recovery in efficiency.

On the circulation side, Mondadori’s performance was slightly better than the market, which overall saw a fall in terms of copies of around 4.7%, confirming the company’s absolute leadership in the sector (38%).

In women’s titles Donna Moderna confirmed its strength by maintaining circulation revenues. In the male lifestyle and newsmagazine area, Panorama saw a fall in circulation of around 3%, while confirming its consolidated leadership in the segment. First, meanwhile, made a significant contribution to the weekly title’s advertising revenues; positive results were also recorded by Panorama Travel, Economy and PC Professionale.

In the TV-entertainment and family segments (which saw a fall of 6% in copies) Mondadori titles had the best performance in the reference market. TV Sorrisi e Canzoni continues to sell around twice as many copies as its direct competitor and continues to generate revenues with add-on sales initiatives.

Chi maintained its circulation revenues while recording a significant increase in advertising sales.

The up market segment maintained its 2006 level, thanks to a stable performance by Grazia and growth in the design-architecture and cooking segments, which compensated for a downturn in interiors.

In terms of add-on sales, there was acceleration in the downturn in the market as a whole (-19.4%) even though the phenomenon continued to make a significant contribution to the revenues of publishing companies.

In such a difficult context, which has also affected newspapers, Mondadori was able to buck the trend with revenues that increased by 3.4% on 2006, confirming the company’s leadership with a market share of 36%.

In the distribution of editorial and multimedia products, in its first year of business Press-Di generated results that were widely ahead of expectations, thanks to the fine-tuning of the organisational structure and operations, increased efficiencies generated during the year and the expansion of services to new third-party clients.

On the digital side, the excellent performance of the Donna Moderna, Panorama, MyTech e Cosmopolitan sites made it possible to increase advertising revenues by 54%, in a market that grew by 42.7%.

France

Mondadori France ended its first full year as part of the Mondadori Group with consolidated revenues of €389.9 million.

During the year a number of actions were taken aimed at:

– carrying out a complete review of all titles, starting with the most important, and consolidating leadership positions;

– encouraging greater integration with the Italian parent company;

– redefining the area for online activities and testing the market for add-on sales;

– redefining the organisational model and cost structure.

In terms of circulation Mondadori France recorded positive results: in particular, the weekly Closer (+28% on the previous year) improved its position at the top of its segment; Auto Plus continued the positive trend with an increase of 11%; in a difficult, Télé Star performed well, thanks to the successful launch of the first add-on sales operation in the French magazine market.

The advertising market in France saw an overall slowdown in investments (-3.6%, source: Secodip) with a fall in space sold compared with the previous year, due to the election held in the first half and new opportunities for retailers to advertise on television, something that was previously not permitted by law.

In this context Mondadori France generated advertising revenues of €115 million, closing the year in line with the performance of the market, after having recovered during the summer the shortfall of the first half of the year.

International activities

On the international side the development of the “Grazia International Network” continued with the launch of Grazia in Russia and Holland: the revenues of the network grew by 35%, including not only licensing fees, but also the contribution of advertising sales in Italy for the foreign editions and syndication activities.

2007 also confirmed the prospects for other Mondadori brands in addition to Grazia:, Sale&Pepe in Serbia and Interni in Russia, as well as Casaviva, the first international edition of which was launched in Thailand in 2006.

Mondadori also formalised an agreement with SEEC Media Group Ltd. to create a joint venture in China for the launch of Grazia in 2008. During the current year the Mondadori title will also be published in Australia, following a licensing agreement reached with the Australian publisher ACP Magazines.

There was an excellent performance by Attica, thanks to a positive trend in circulation for TV guides and the exceptional performance of add-on sales of DVDs. During 2007 the expansion of the Greek company’s activities continued in the Balkans, the effects of which will be seen in this year.

· Advertising

Mondadori Pubblicità closed 2007 with revenues of €349.5 million, and increase of 1.9% on the €342.9 million of the previous year, thanks to a marked upturn in the fourth quarter compared to the same period of the previous year.

There were no significant changes to the portfolio during the period, excluding the addition of Famiglia Cristiana and the exit of the Disney titles.

Advertising sales during the period were characterised by a positive performance in the fashion sector, with a positive impact on women’s and family titles: of these Grazia (+3.5%) and Chi (+7.4%). The situation was more stable among titles for men, in which the strengths of the tried and tested Panorama “system” were confirmed, strengthened further by First and Travel; the up scale design and architecture segment also performed well (in particular Interni and Casabella), while for the magazines managed in joint-ventures, of particular note was the positive performance (+8%) of Focus (Gruner+Jahr/Mondadori).

Sales for R101, sustained by the marked increase in listeners, were up by 24.8%, decidedly ahead of the market (+8%).

· Printing

The 2007 revenues of the Printing Division came to €439,9 million, compared with €447.9 million in the previous year, a fall of 1.8%,.

Captive revenues totalled €279.2 million, and increase of 7.7%, while third-party revenues (€160.7 million) saw a fall of 14.8%, above all as a result of the decline in the add-on sale of editorial products with magazines and newspapers.

The foreign market for rotary printed commercial products was stable in terms of volume and in this context there was a positive consolidation of the company’s position with its main clients despite the European competitive scenario being affected by increased competition and price tensions.

The market for monochrome books, both hardcover and paperbacks. Linked to add-on sales initiatives by magazines and newspapers saw a marked fall compared to previous years. Meanwhile the performance of trade books was very positive, the foreign illustrated book market was stable, even though increased competition from the Far East continues to increase the pressure on prices.

Since 2007, four monthlies published by Mondadori France have been printed by Mondadori Printing; and further synergies have been developed for the supply of paper.

During the year there was a marked increase in energy costs due to the trend in oil prices, which increased by 5.7 % on 2006.

There was a slight increase in the cost of paper, continuing a trend that had been noted the previous year.

• Direct marketing

In 2007 the Direct Marketing sector, through the activities of Cemit Interactive Media S.p.A., recorded revenues of €23.9 million, in line (-0.4%) with the €24 million of the previous year.

After the fall off of business in the communication area due to the introduction of new privacy legislation in 2005, the company has brilliantly conducted a reorganisation of its structure and processes, refocusing its business on customer loyalty, an area in which Cemit continues to be the only operator able to offer a complete range of services.

• Retail

The total revenues of the Retail Division in 2007 came to €183.2 million, an increase of 33.4% on the €137.3 million of 2006.

Mondadori Retail generated revenues in the period of €124.7 million, an increase of 38.6% on the previous year, thanks to the opening of three bookstores in shopping malls in Lonato (BS), Rome and Nola (NA), the new Multicenter in Piazza Duomo in Milan and the contribution made by the incorporation of the two Mondadori Shop S.p.A. stores (formerly Messaggerie Musicali S.p.A.).

On a like-for-like basis, excluding for 2007 the revenues of Mondadori Shop S.p.A. and in 2006 the sales of big clients, the increase would be 10.6%.

Having brilliantly refocused the book offer, the performance of Messaggerie Musicali was particulalry positive, generating revenues of €35.5 million.

Mondadori Franchising saw significant growth in 2007, recording an increase in revenues of 23.7% to €58.5 million: the number of outlets rose form 266 in 2006 to 349 (of which 141 with the new Edicolè formula).

• Radio

The Radio Division’s revenues for 2007 came to €11.3 million, an increase of 21.5% on the €9.3 million of 2006.

During the year Radio R101 saw a further improvement in the quality of the product, enriching the schedule with new programmes and new presenters. At the same time brand-building and content communication efforts continued along with the significant implementation of the signal distribution for national coverage continued, thanks to frequency acquisitions made during the year (in particular in the Lazio, Campania, Emilia Romagna, Veneto and Puglia regions) increasing the level of coverage to 90%.

Audiradio figures for 2007 show a progressive increase in the number of listeners to R101 to an average daily level of more than 2 million. Compared with 2006, R101 recorded the best performance in the public and private radio market, with an increase of more than 40% in the daily average. Over the 7 days, listening figures, at more than 8.4 million, put the station among Italy’s top six commercial stations, after just two years.

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 2007, shows a net profit of €90 million, in line with the €90.2 million of the previous year.

DIVIDEND PROPOSAL

The Board of Directors agreed to propose to the Annual General Meeting of the Shareholders, called for 22 April 2008 (or 23 April on second calling), a gross dividend, before tax, of €0.35 for each ordinary share in circulation on the date of coupon detachment.

In line with the terms outlined by the regulations for markets organised and managed by Borsa Italiana S.p.A., dividends will be payable from 22 May 2007 (coupon detachment: 19 May 2008).

FORECAST FOR THE FULL YEAR

Economic forecasts for 2008 continue to evolve, with negative indicators for production, consumer spending and the industrial costs.

The situation is complicated by the ongoing liquidity crisis making it both expensive and difficult to finance development while encouraging the recourse to low risk investment. In addition, differing monetary policies in Europe and the United States have led to acceleration in the strength of the euro, with inevitable consequences for companies involved in international trade.

In this context, in which the Italian economy would appear to be among the most exposed and fragile, the Mondadori Group will pay particular attention to managing its core business, which is less susceptible to such factors, and the international activities that reduce the dependence on the domestic market. During the year the development will continue of the international network, digital activities and the product portfolio in France.

The current situation makes it especially difficult to make forecasts for companies’ 2008 results, however Mondadori’s track record in recent years makes it possible to hypothesise operating results for the current year, net of development costs and extraordinary items, in line with the positive results of 2007.

§

As per article IA.2.9.3 n.4 of Italian Market Regulations document, bonded loans expiring over the 18 months from 31 December 2007 are hereby indicated:

– date of issue: 20/10/2003;

– amount: €109,900,000, corresponding to 1,099 bonds of €100,000 each, convertible in ordinary shares of Arnoldo Mondadori Editore S.p.A.;

– issued by: Mondadori International S.A., a wholly-owned subsidiary of da 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.

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The results of 2007 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 3.00 pm at the company’s headquarters in Segrate.

[1] From 1 January 2007, following the contribution of the distribution activities for Italian magazines to Press-Di Distribuzione Stampa Multimedia S.r.l. (a wholly-owned subsidiary of Arnoldo Mondadori Editore S.p.A.) the method of accounting has changed from that of costs and revenues to a premium method.

A reclassification of such distribution activities, using the same method for 2006, shows that the increase in consolidated revenues would have been 16.8%. Excluding the effect of Mondadori France (included for the whole of 2007, compared with only four months in 2006 the volume of business would show an increase of 1.8%.

[2] Since January 2007 the measurement of sales for trade books (fiction and non-fiction) has been conducted by Nielsen Bookscan. Due to the different methodology adopted by this company and that used by Demoskopea, starting with the sample, the figures for 2007 cannot be compared with those of the previous year.