FY

Today, the meeting of the Board of Directors of Arnoldo Mondadori Editore S.p.A., chaired by Marina Berlusconi, reviewed and approved the draft Parent Company and Group consolidated financial statements at 31 December 2023 presented by CEO Antonio Porro.

“In the financial year just ended, the Mondadori Group continued to develop its core business, focused on strengthening its presence in book publishing as well as on promotion and distribution for third-party publishers. The Group achieved excellent consolidated earnings, significantly higher than the previous year. The Group’s current configuration, also in light of the economic and financial results achieved in 2023, allows us to predict further improvement for 2024 of results even with the same consolidation scope”, underlined Antonio Porro, CEO of the Mondadori Group.

PERFORMANCE AT 31 DECEMBER 2023

Consolidated revenues for 2023 amounted to € 904.7 million, a slight increase (+0.2%) on the € 903 million recorded in 2022. Net of the changes in consolidation scope between the two financial years, the organic growth in revenues rose to 1.1%.

The Adjusted EBITDA for 2023 of € 152.1 million (compared to € 136.3 million in 2022) shows an increase of almost € 16 million (+11.5% and consistent with the guidance, which estimated a high single/low double-digit increase) to which all business areas contribute.

Netting the results for the two periods in question of the reliefs and contributions respectively paid, the growth recorded by Group’s Adjusted EBITDA would exceed € 19 million (+14.2%). Two thirds of this result is derived from the operating performance of the original consolidation scope (thanks, in particular, to the Education and Retail Books areas) and the remaining part is mainly attributable to the consolidation of the new companies acquired in the Trade Books area.

Overall, profitability stood at 16.8%, up by almost 2 percentage points from around 15% in the 2022 financial year and in the upper part of the target range previously communicated to the market.

The Group EBITDA for the 2023 financial year was € 148.9 million, compared to € 130.7 million in 2022, highlighting an € 18.2 million improvement (+13.9%) attributable to the favourable trend in some operating components and the recognition in the 2023 financial year, in the Media area, of the net capital gain resulting from the sale of the Grazia and Icon magazines (and the related international network).

The 2023 EBIT was positive in the amount of € 84.2 million, showing an improvement of € 11.5 million compared to 2022 (+15.8%). Neutralising the extraordinary items and the impacts of the PPA and impairment processes, the Adjusted EBIT would stand at € 102 million, up by approximately € 12 million (+13.1%) compared to the previous year.

Financial charges recorded an overall increase of over € 2 million, with approximately € 0.5 million resulting from the higher cost of debt – despite a reduction in average exposure – and the remaining € 1.6 million resulting from higher costs arising from the accounting effects of IFRS 16 which, in the 2022 financial year, had allowed non-recurring income (approximately € 1.4 million) linked to the early closure of the old rental contract for the Segrate headquarters to be recognised.

Consolidated result before tax were positive at € 80.5 million, up by about € 14 million (+20.4%) from € 66.9 million in 2022. Also contributing to this performance was an improvement of over € 4 million in the earnings of associates, resulting in particular from: the updated fair value measurement of the investments in A.L.I. and Adgage for a total of approximately € 2 million; the recognition of a capital gain – net of the negative result for the first four months – of € 0.4 million relating to the sale in April 2023 of the residual investment in SEE, the publishing company of Il Giornale, which reported a loss of approximately € 1.8 million in the previous year; the absence of the write-down of the equity investment in Attica, which had a € 1.7 million impact on the 2022 financial year.

The Mondadori Group’s net profit for the year to 31 December 2023, after minority interests, amounted to € 62.4 million, a significant improvement of about 20%, in line with expectations and despite the impairment, equivalent to € 10.3 million, compared to € 52.1 million in 2022. The net profit for 2023 triples the value of the 2019 financial year.

Tax costs in the period totalled € 17.9 million versus € 15.3 million in 2022 due to the higher pre-tax result.

Adjusted net profit for the 2023 financial year, neutralising all non-recurring items previously mentioned, would amount to about € 71 million, up by around 11% on the previous year (€ 63.9 million).

The Net Financial Position excluding IFRS 16 as of 31 December 2023 was € -86.1 million (net debt), an improvement of € 20 million compared to € -106 million in 2022, due to significant cash generation by the business and despite the dividend distribution cash-out. In the financial year 2023, the Group distributed dividends totalling approximately € 29 million, equivalent to a pay-out of 55% of the 2022 net profit.

The IFRS 16 Net Financial Position as of 31 December 2023 amounted to € -158.6 million (net debt), from € -177.4 million in 2022, due to an IFRS 16 debt component of € -72.5 million. The Adjusted NFP/EBITDA ratio is 1.0x, exactly in line with the target communicated to the market and down from 1.3x at the end of 2022.

At € 68.7 million, cash flow from ordinary activities (after cash-outs due to financial expenses and taxes) for the financial year 2023 is 15.1% higher than the figure for 2022 and is at the high end of the guidance (EUR 65-70 million).

As of 31 December 2023, the extraordinary cash flow was negative by € 15.3 million, mainly due to net cash-outs related to merger & acquisition activities of around € 5 million and restructuring costs of around € 5 million.

Free Cash Flow as of 31 December 2023 was positive at € 53.5 million and confirms the Group’s ability to finance its inorganic growth policy and the distribution of significant dividends to shareholders.

As of 31 December 2023, the Mondadori Group employed 1,945 people, an increase of 2.4% compared to the 1,900 employed at 31 December 2022 (+45 people).

PERFORMANCE OF BUSINESS AREAS

Trade BOOKS AREA

Following the consolidation phase in 2022, in 2023 the book market showed further growth in value of 3.4% and a substantial stability in volume. In the fourth quarter, the value increased by 5.7% thanks to the excellent earnings recorded during the Christmas season.

In this context, the Mondadori Group’s publishing houses grew by 3.7% across 2023, outperforming the market of reference – particularly thanks to the excellent earnings achieved in the first and fourth quarters from the publication of titles such as Spare – Il minore (“Spare”). by Prince Harry, Le armi della luce (“The Weapons of Light”) by Ken Follett, published by Mondadori, and La vita intima by Nicolò Ammaniti, published by Einaudi -, and consolidate their leadership nationally with a market share of 27.6% at the end of 2023.

Revenues for 2023 amounted to € 374.3 million, having grown by around 10.4% compared to the previous year, also due to the consolidation of the recently acquired companies (A.L.I. and Star Comics).

Adjusted EBITDA was € 59.2 million: net of the reliefs relating to Electa’s museum activities, amounting to € 6.4 million, from which the 2022 financial year had benefited, the area recorded an increase in its margin of around 22% (+ € 10.5 million), largely attributable to the contribution of the new companies consolidated from 2023, despite the negative impact of the higher cost of paper compared to the previous period. The profitability achieved by the Trade Books area was 15.8% in 2023, showing improvement on 2022, excluding the contribution of the reliefs (14.4%).

Education BOOKS AREA

The Schools market (primary and secondary schools) in Italy in 2023 is estimated to have grown by around 3.5% on the previous year to approximately € 618 million.

In the 2023 financial year, the Mondadori Group’s publishing houses confirmed their leadership at national level, with a 32% share of the set texts market, substantially stable compared to 2022, due to growth in the secondary school segment (middle and high schools) and a decline in primary schools.

Revenues in the area were € 237.5 million (€ 237.3 million in 2022), stable compared to the previous year. In particular, lower and upper secondary school revenues, which account for over 80% of the area’s revenues, grew by around 5%, versus a fall in primary school revenues (-6.5% compared to 2022). In addition to the above, there was a decline of approximately 6% in the distribution and sale of third-party products by Rizzoli Education (dedicated to the teaching of foreign languages) and a contraction in sales of non-set text products.

The area’s Adjusted EBITDA in 2023 was € 67.7 million, a distinct improvement on the € 63.5 million recorded in 2022 (+6.7%), thanks to the contribution of all publishing houses and the full completion of the synergies resulting from the integration of D Scuola.

The 28.5% profitability in 2023 was higher than that recorded in 2022 (26.7%) thanks to the lower incidence of industrial costs – as a result of the lower cost of paper purchases, down by around € 4 million – and promotional costs.

RETAIL AREA

In a context of growth in the Italian market, there was an improvement in the physical channel (+4.3%) and a recovery in the online channel, which saw a gradual recovery in the fourth quarter, closing the year with an increase of 2%.

In 2023, Mondadori Retail grew by 5.6%, outperforming the market of reference for the third consecutive year. Thanks to this result, which was due to the excellent performance of physical shops, Mondadori Retail’s market share grew to 12.8% (+0.3% compared with 31 December 2022) of the total market and was close to 20% of the physical market. The ongoing development and renovation of existing stores and the focus on the core business of books enabled the Mondadori bookshop network to consolidate its role in the market.

The transformation process launched over the past years has made for an improvement in operating and management performance, as shown in the income statement for 2023, which highlights strong growth in revenue and margins of the Retail area.

Revenues amounted to € 199.5 million, up 5.4% (+ € 10.3 million) on the previous year, the highest value recorded since the pre-pandemic year 2019.

An analysis of sales by channel shows further growth in revenues from direct bookshops (+10.3% compared with the previous year), franchised bookshops (+4.5% compared with 2022) and the online channel (+3.1% compared with the previous year).

Books, the Mondadori Group’s core business, provided the greatest revenues (over 80% of the total), having grown overall by 6.1% compared with 2022, driven by the excellent performance of physical stores; the non-book turnover recorded a positive trend (+14.4% compared with 2022), thanks to growth in the impulse sector (stationery and gifts).

The area shows a positive Adjusted EBITDA of € 14 million, up by more than 50% compared to 2022 (+ € 4.9 million), confirming a gradual improvement in performance (in 2019, Adjusted EBITDA was € 5 million).

It is important to note that the area’s 2023 income statement returned to profit after more than a decade, closing with a positive net profit of € 1.5 million, an improvement of € 3 million compared to the loss of € -1.4 million in 2022.

MEDIA AREA

In 2023, the Mondadori Group confirmed its position as Italy’s leading multimedia publisher: in print, with 13 magazines and 9 million readers and a market share (in terms of circulation) of 20.3%, slightly up – on a like-for-like portfolio of titles – compared with December 2022 (19.8%); online, with 12 brands and an average of around 28 million unique users/month; in social media, with more than 110 profiles and a fanbase of around 103 million as of 31 December 2023.

In the financial year 2023, revenues in the Media area amounted to € 141 million, down by 20.6% compared to the previous year. On a like-for-like basis, this contraction was reduced to 2.7% by the positive performance achieved in the fourth quarter of the year (+7% approximately) and highlights different trends in the two components: digital and print.

Digital activities, which account for around 40% of total turnover for the area, recorded an increase in advertising revenues of around 23%, mainly due to the positive performance of the MarTech segment; print activities fell by 14.8%, mainly due to the decline in add-on sales for the entire year caused by the decision to reduce releases in low-margin products such as music and home video.

Adjusted EBITDA amounted to € 16.4 million, about +16% year-on-year, attributable to both business segments. The EBITDA margin recorded an increase of almost 4 percentage points, from 7.9% to 11.7%. Specifically: in the print area, the increase was due to the rationalisation of the portfolio of activities with more stable profitability, the constant attention being paid to the development and rationalisation of costs, as well as the recognition of a tax credit to partially offset the costs incurred by the publisher for magazine distribution activities; in the digital area, adjusted EBITDA increased by approximately € 1 million compared to the previous year, thanks to higher revenues and the contribution of new initiatives, despite the earnings from the digital activities of the magazines sold being removed from the consolidation scope.

OUTLOOK FOR THE YEAR

The Group’s current configuration, economic performance and cash generation capacity, also demonstrated in 2023, point to a further improvement in results for 2024, even on a like-for-like basis.

From a strategic point of view, the Group intends to continue the process of strengthening its core business in the Trade Books area, both in publishing, by emphasising the identity and specialisation of the various publishing houses, and by continuing the process of vertical integration in the various stages of the book chain, particularly in the comics segment, by taking full advantage of the distribution synergies arising from the acquisition of Star Shop.

In the Education Books area, it will continue to focus on the most profitable segments of the textbook market and consolidating its domestic leadership, strengthening and renewing its editorial offer and taking full advantage of the digital convergence process (through the development of a new single digital platform for all three publishing houses).

In the Retail area, the Mondadori Group will continue with the selective development of its network of shops, both direct – by opening around ten new outlets – and franchised, as well as with improving the sales surface area, maximising the efficiency of the network and enriching its range of publications, which is essential both to increase the profitability of the area and to improve its effectiveness in conveying the Group’s editorial offer to the market.

In the Media area, the Mondadori Group will at the same time continue to strengthen its competitive positioning by developing its skills and offer in the digital area, in particular through initiatives in the content creator, Food and MarTech segments.

Income Statement

The following are the Group’s economic and financial targets for the financial year 2024, based on a consolidation scope that includes only completed extraordinary transactions (Star Shop):

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

At the end of the next three-year period, i.e. in the financial year 2026, with the consolidation scope described above and therefore with the only organic growth, the Group estimates that it will be able to achieve consolidated revenues in the region of € 1 billion and a proportional growth in margins that will enable it to confirm profitability approximately at 17%.

Cash Flow and Net Financial Position

In the three-year period 2024-2026, the Group is expected to confirm the significant cash generation capacity shown in 2023 and therefore cash flow from ordinary operations of no less than € 70 million.

DIVIDEND POLICY

The Group’s significant cash generation over the next three years will be allocated to maximising the company’s value creation, through an active investment policy in its core and adjacent businesses aimed at seizing opportunities to strengthen its leadership, expand geographically and/or expand its presence within the book value chain. This development strategy will be accompanied by an increasing shareholder remuneration policy, through a more consistent Dividend Policy that provides for, each year of the three-year-period, the distribution of 50% of the Ordinary Cash Flow per share (from the previous 40%) or the Dividend per Share of the previous year increased by 10%, whichever is the greater.

Each year, the Board of Directors, when proposing the distribution to the Shareholders’ Meeting, will take account of the general macroeconomic scenario, as well as the expected cash flows and the Group’s equity and financial structure.

PERFORMANCE OF ARNOLDO MONDADORI EDITORE S.P.A.

The Parent Company’s income statement at 31 December 2023 shows the same profit as in the consolidated financial statements of € 62.4 million (€ 52.1 million in 2022), due to the fact that the Company has chosen to use the equity method to measure its investments in the separate financial statements.

Revenues, which consist of the costs of central structures charged back to the subsidiaries, amounting to € 43.1 million, increased by about 3% compared to the previous year, due to higher charges (related to IT services and occupied space) resulting from the expansion of the Group’s consolidation scope and the respective offices.

Adjusted EBITDA in 2023 was € -5.6 million, essentially stable compared to 2022 (€ -5.7 million in 2022).

Reported EBITDA for 2023 was € -7.5 million, down from 2022 (€ -6.7 million), mainly due to higher allocations related to restructuring costs.

DIVIDEND DISTRIBUTION PROPOSAL OF € 0.12 PER ORDINARY SHARE

Based on the results of the 2023 financial year, the Board of Directors will submit a proposal to the next Shareholders’ Meeting, convened on 24 April 2024, for the distribution of a dividend per share of € 0.12, gross of withholding taxes, for each ordinary share (net of treasury shares) outstanding at the record date.
The total dividend amounted to approximately € 31 million, up by 9% compared to the previous year: this amount corresponds to a pay-out of 50% of the net profit for 2023 and a dividend yield of almost 6% (as of 31 December 2023). The amount will be paid by drawing on the distributable portion of the extraordinary reserve (included in the equity item “Other reserves profit/loss carried forward”).
In compliance with the provisions of the “Regulations for markets organised and managed by Borsa Italiana S.p.A.” and as already announced, the dividend will be paid in two equal tranches:

• unit amount of € 0.06 for each ordinary share (net of treasury shares) outstanding at the record date stated below, from 22 May 2024 (payment date), with ex-dividend date no. 23 on 20 May 2024 (ex date) and with the date of entitlement to payment of the dividend, pursuant to Article 83-terdecies of the TUF (record date), on 21 May 2024;
• unit amount of € 0.06 for each ordinary share (net of treasury shares) outstanding on the record date stated below, from 20 November 2024 (payment date), with ex-dividend date no. 24 on 18 November 2024 (ex date) and with the date of entitlement to payment of the dividend, pursuant to Article 83-terdecies of the TUF (record date), on 19 November 2024.

SIGNIFICANT EVENTS AFTER YEAR-END 2023

On 1 February 2024, through its subsidiary Mondadori Libri S.p.A., the Mondadori Group finalised the acquisition of 51% of the share capital of Star Shop Distribuzione S.r.l., which operates in the comic book and gadget segment and is particularly active in the distribution of third-party publishers in the comic book shop channel and in the management of sales outlets – direct and affiliated – in the same segment. As communicated to the market on 29 June 2023, following authorisation by the Italian Antitrust Authority pursuant to Law 287/1990 – as previously announced on 3 November 2023 -, the transaction is effective from 1 February 2024, as of which Mondadori will also proceed with the line-by-line consolidation of the company.

PROPOSED RENEWAL OF THE AUTHORIZATION TO PURCHASE AND DISPOSE OF TREASURY SHARES

Following expiry of the previous authorization resolved upon by the Shareholders’ Meeting on 27 April 2023, with the approval of the financial statements at 31 December 2023, the Board of Directors will propose to the next Shareholders’ Meeting, called for 24 April 2024, the renewal of the authorization to purchase and dispose of treasury shares with the aim of retaining the applicability of law provisions in the matter of any additional buyback plans and, consequently, of seizing any investment and operational opportunities involving treasury shares.
Below are the main elements of the Board of Directors’ proposal, which are consistent with those of the expired authorization:

• Motivations

The motivations underlying the request for the authorization to purchase and sell treasury shares refer to the opportunity to attribute to the Board of Directors the power to:

• use the Treasury Shares purchased or already in the Company portfolio as compensation for the acquisition of interests within the framework of the Company’s investments;
• use the treasury shares purchased or already held in portfolio against the exercise of option rights, including conversion rights, deriving from financial instruments issued by the Company, its subsidiaries or third parties and to use the treasury shares for lending, exchange or transfer transactions or to support extraordinary transactions on the Company’s capital or financing transactions that imply the transfer or sale of treasury shares;
• undertake any investments, directly or through intermediaries, including for the purpose of containing abnormal movements in share prices, stabilizing share trading and prices, supporting the liquidity of the share on the market, in order to foster the regular conduct of trading beyond normal fluctuations related to market performance, without prejudice in any case to compliance with applicable statutory provisions;
• rely on investment or divestment opportunities, if considered strategic by the Board of Directors, also in relation to available liquidity;
• dispose of treasury shares to service share-based incentive plans set up pursuant to Article 114-bis of the TUF, and plans for the free allocation of shares to employees or members of the governing bodies of the Company or to Shareholders.

• Duration

The authorization to purchase treasury shares runs from the date of any resolution approving the proposal by the Shareholders’ Meeting, until the Shareholders’ Meeting called to approve the financial statements at 31 December 2024 and, in any case, for a period no more than 18 months after that date. The authorization to dispose of treasury shares is requested for an unlimited period, given the absence of time limits pursuant to current regulations and the opportunity to allow the Board of Directors to make use of the maximum flexibility, also in terms of time, to carry out any disposal of shares.

• Maximum number of purchasable treasury shares

The authorisation would allow the purchase, on one or more occasions and in one or more tranches, of a maximum number of ordinary shares with a nominal unitary value of € 0.26, which – considering the treasury shares already held by the Company and the shares that may possibly be acquired by subsidiaries – shall not exceed a total of 10% of the share capital.
Pursuant to article 2357(1) of the Italian Civil Code, the purchase transactions will be carried out within the limits of the distributable profits and available reserves resulting from the last regularly approved financial statements at the time of each potential purchase transaction. The authorisation would include the right to subsequently dispose of the treasury shares acquired, in whole or in part, on one or more occasions and even before having exhausted the maximum number of purchasable shares.

• Criteria for purchasing treasury shares and indication of the minimum and maximum purchasing cap

Purchases would be made in accordance with articles 132 of the TUF, 144-bis(1)(b) and d-ter) of the Issuers’ Regulation, and thus:
(i) on regulated markets or multilateral trading systems, according to the operating criteria established in the organisation and management regulations of the same markets, which do not allow the direct matching of purchase trading proposals with predetermined sales trading proposals, as well as in compliance with any other legislation in force, including European ones.
(ii) by the methods established by the market practices permitted by Consob, pursuant to the combined provisions of article 180(1)(c) of the TUF and article 13 of Regulation (EU) no. 596 of 16 April 2014 (“Permitted Market Practices”).
Additionally, share purchase transactions may also be carried out in the manner envisaged in Article 3 of EU Delegated Regulation no. 2016/1052 in order to benefit, if the conditions are met, from the exemption under Article 5, paragraph 1, of EU Regulation no. 596/2014 on market abuse with regard to inside information and market manipulation.
The disposal of treasury shares may be made, on one or more occasions and even before having terminated the maximum number of purchasable treasury shares, either by selling them on regulated markets or according to other trading methods in compliance with the law, including EU law, in force and with the Admitted Market Practices, if applicable. The authorisation proposal provides that purchases are made at a unit price, compliant with any regulatory requirements, including European ones, or permitted market practices in force at the time, where applicable, without prejudice to the fact that the minimum and maximum purchase price will be set at a unit price no lower than the official stock market price of the Mondadori stock on the day prior to the day on which the purchase transaction is carried out, decreased by 20%, and no higher than the official stock market price on the day before the day on which the purchase transaction will be carried out, increased by 10%. In any event – except for any different price and volume determinations resulting from the application of the conditions set forth in the Admitted Market Practices – such price shall be identified in accordance with the trading conditions set forth in Delegated Regulation (EU) no. 1052 of 8 March 2016 and, specifically:

• no shares may be purchased at a price higher than the higher between the price of the last independent trade and the price of the highest current independent bid on the trading venue where the purchase is carried out; and
• in terms of volumes, daily purchase amounts will not exceed 25% of the daily average volume of Mondadori shares traded as recorded in the 20 trading days before the dates of purchase or in the month prior to the month of the disclosure required by Art. 2, paragraph 1, of Regulation (EU) no. 1052/2016.
• In terms of consideration, sales transactions or other acts of disposition of treasury shares shall be carried out:
• if executed in cash, at a price no lower than 10% of the reference price recorded on the MTA – Euronext Milan – organized and managed by Borsa Italiana S.p.A. in the trading session prior to each single transaction;
• if executed as part of any extraordinary transactions in accordance with financial terms to be determined by the Board of Directors on the basis of the nature and characteristics of the transaction, also taking account of the market performance of Mondadori shares;
• if executed to service the Performance Share Plans in compliance with the terms and conditions set out in the resolutions of the Shareholders’ Meeting that establish the Plans and the related regulations.

To date, Arnoldo Mondadori Editore S.p.A. holds a total of no. 1,277,802 treasury shares, equal to 0.488% of the share capital.

For further information on the proposed authorization for the purchase and disposal of treasury shares, reference should be made to the Directors’ Explanatory Report, which will be published within the time limits and in the manner prescribed by applicable regulations.

GRANTING OF SHARES UNDER THE 2021-2023 PERFORMANCE SHARE PLAN: INFORMATION PURSUANT TO ART. 84-BIS, PARAGRAPH 5 CONSOB REGULATION NO. 11971/1999

The Board of Directors, based on the final assessment of the achievement of the Performance Targets underlying the Plan, and having heard the Remuneration and Appointments Committee, resolved to allocate a total of no. 729,331 Arnoldo Mondadori Editore S.p.A. shares to a total of 13 beneficiaries, implementing the provisions of the “2021-2023 Performance Share Plan” adopted by the Shareholders’ Meeting on 27 April 2021 (the “2021-2023 Plan”).

Mention should be made that the 2021-2023 Plan takes the form of a share granting plan and grants its beneficiaries the right to receive, free of charge, shares in the Company held as treasury shares provided that, at the end of a reference period of three financial years, the performance targets set in the same Plan have been achieved.

The beneficiaries of the 2021-2023 Plan are the Chief Executive Officer, the CFO and 11 managers identified by name by the Chief Executive Officer, as delegated by the Board of Directors.

The characteristics of the Plan are explained in detail in the Directors’ Report to the Shareholders’ Meeting of 27 April 2021 and in the information document drawn up pursuant to article 84-bis of CONSOB Regulation no. 11971/1999 available at www.gruppomondadori.it, Governance section, to which reference should be made.

Attached is the information required by Schedule 7 of Annex 3A to CONSOB Regulation no. 11971/1999 to account for the allocation of shares in the context of the 2021-2023 Performance Plan.

PROPOSED ADOPTION OF A PERFORMANCE SHARE PLAN COVERING THE THREE-YEAR PERIOD 2024-2026

The Board resolved, on a proposal from the Remuneration and Appointments Committee, and continuing to apply the performance share instrument for the medium-long term remuneration of executive directors and strategic executives, as per Legislative Decree 58 of 24 February 1998, art. 114-bis, to submit for approval by the Shareholders’ Meeting, convened for 24 April 2024, the establishment of a Performance Share Plan for the three-year period 2024-2026, reserved for the Chief Executive Officer, the CFO – Executive Director and a number of Company Managers who have an employment and/or directorship relationship with the Company or with its subsidiaries on the granting date of the shares.
With the adoption of the Plan, the Company aims to encourage Management to improve medium to long-term performance, in terms of both industrial performance and growth in the value of the Company.
The Plan envisages the assignment to the beneficiaries of rights to the free allocation of company shares, subject to the achievement of specific performance targets set and measured at the end of the three-year performance period.
These targets are structured to include both shareholder remuneration indicators and management indicators functional to raising the share value, ensuring maximum alignment of Management remuneration and the creation of value for the Company, as well as indicators of a non-operating/financial nature linked to ESG issues.
For details on the proposed adoption of the 2024-2026 Performance Share Plan, the beneficiaries and the characteristics of said Plan, reference should be made to the Information Document approved by the Board of Directors, pursuant to Article 84-bis and annex 3A of the Issuer Regulation, and to the Explanatory Report, which will be published within the time limits and in the manner prescribed by applicable regulations.

PROPOSAL TO THE SHAREHOLDERS’ MEETING TO ADOPT A SHORT-TERM INCENTIVE PLAN (MBO) 2024

On a proposal from the Remuneration and Appointments Committee, the Board resolved to submit the adoption of a Short Term Incentive Plan (MBO) for the year 2024 to the Ordinary Shareholders’ Meeting for approval, pursuant to Article 114-bis of Legislative Decree no. 58 of 24 February 1998. The Plan, which is reserved for the same beneficiaries as the 2024-2026 Performance Share Plan, governs the determination, subject to the achievement of specific individual and Group performance objectives, of the annual Variable Remuneration (MBO) for the year 2024. In particular, the Plan envisages a voluntary mechanism for the conversion into Mondadori shares of a percentage component equal to 15% or 30% of the Variable Remuneration itself, as well as the disbursement of an additional “bonus” component in shares, equal to the number of shares resulting from the conversion.

Any allocation of the total component in shares would take place at the end of a 24-month deferral period with respect to the MBO vesting date.

For details on the proposed adoption of the 2024 Short-term Incentive Plan (MBO), the beneficiaries and the characteristics of said Plan, reference should be made to the Information Document approved by the Board of Directors, pursuant to Article 84-bis and annex 3A of the Issuer Regulation, and to the Explanatory Report, which will be published within the time limits and in the manner prescribed by applicable regulations.

PROPOSAL TO RENEW THE POWERS OF THE BOARD OF DIRECTORS PURSUANT TO ARTICLES 2443 AND 2420-TER OF THE ITALIAN CIVIL CODE

The Board of Directors will propose the Shareholders’ Meeting, called on 24 April 2024, also in extraordinary session, to adopt the resolutions referred to in articles 2443 and 2420 ter of the Italian Civil Code, relating to the renewal of the Board’s powers to increase the share capital and issue convertible bonds.
Specifically, the Board will propose to the Shareholders’ Meeting:

– the renewal of the proxies already granted to the Board of Directors by the Extraordinary Shareholders’ Meeting of 17 April 2019 and terminating due to expiry of the related five-year term, which, pursuant to Articles 2443 and 2420-ter of the Italian Civil Code, grant the Board of Directors the power to increase the share capital, reserved as an option to those entitled thereto, by a maximum nominal amount of € 75,000,000 and to issue convertible bonds for a maximum nominal amount of € 250,000,000.

– the renewal of the proxy already granted to the Board of Directors by the Extraordinary Shareholders’ Meeting of 17 April 2019 and also terminating, granting the Board of Directors, for the same period of five years, the power to increase the share capital within the limit of 10% of the pre-existing share capital and in any case within the limit of a nominal amount of € 20,000,000, with the exclusion of option rights pursuant to Articles 2443 and 2441(4) of the Italian Civil Code.

The renewals are proposed under the same conditions of the terminating proxies unused by the Board and for a further period of five years corresponding to the maximum term allowed by the law.

The proposals for the renewal of proxies are motivated by the advisability of maintaining the general power of the Board of Directors to implement any capital transactions through faster and more streamlined procedures than the resolutions adopted by the Extraordinary Shareholders’ Meeting.

CONSOLIDATED NON-FINANCIAL STATEMENT PURSUANT TO LEGISLATIVE DECREE 254/2016

Under Legislative Decree 254/2016, the Board of Directors’ 2023 Report on Operations of the Mondadori Group is also composed of the Consolidated Non-Financial Statement (NFS), a qualitative-quantitative description of the non-financial performance of the Company, associated with environmental, social, and staff-related issues, as well as those regarding respect for human rights, and the fight against corruption and bribery, which are relevant given the activities and characteristics of the Company.

The NFS was prepared in accordance with GRI Standards: In accordance option, and includes benchmark KPIs related to GRI G4 “Media Sector Disclosure”.
With regard to 2023, the Mondadori Group has updated its materiality analysis, consistent with the principles set out by the GRI Sustainability Reporting Standards (GRI Standards) and the reporting scopes laid down by Legislative Decree 254/2016.
In 2023, stakeholder engagement was pursued through the involvement of employees, teachers, bookshop customers, suppliers and financial analysts and investors, with more than 4,500 responses to the engagement questionnaire.

The document also includes the references required by Regulation (EU) 2020/852 related to the introduction of the European Taxonomy.

SUSTAINABILITY PLAN

Actions and initiatives in the ESG area are highlighted as part of the reporting activity. In 2023, constant monitoring of the goals set in the Sustainability Plan was carried out, which made it possible to provide a timely image of the degree to which they were achieved and to identify new future actions for the 2024-2026 Plan.
Below are the objectives achieved and reported for 2023.

Social

1. Preparation of the documentation for the Gender Equality Certification (UNI PDR 125/2022), with Audit scheduled for 2024.
2. Development and implementation of a training plan specifically for D&I with half-yearly seminars for all Mondadori Group people.
3. Launch of the “Care” project for all Group employees and families, with particular focus on the “Parenthood” project to promote more inclusive models of access to maternity/paternity leave, eliminate existing biases and facilitate the return to work, enhancing acquired skills.
4. Review of internal procedures governing selection with the introduction of blind CVs.
5. Review of the internal procedures governing recruitment and career development, with particular attention to D&I matters.
6. Extension of training in digitalisation/new forms of work to all Group employees.
7. Implementation of a training plan accessible to all Group personnel regarding sustainability issues.
8. Establishment of a new Group Charter of Values.
9. Extension to 100% of the school offer of contents/insights relating to Sustainability, the 2030 Agenda for Sustainable Development, diversity, equity and inclusion and civic education.
10. Expansion of ESG training activities for the Group’s school publications departments and for teachers.
11. A growing number of initiatives/services to promote reading.

Governance

1. Setting and measurement of quantitative and measurable ESG-related LTI objectives for top management (Impact Inclusion Index in the 2023-2025 Performance Share Plan).
2. Strengthening of the set of procedures and coverage of the areas of Privacy, Information Management and Cyber Security.
3. Strengthening of the programmes aiming to protect intellectual property/copyright.
4. Strengthening of stakeholder engagement activities through the gradual expansion of engagement initiatives.

Environment

1. Extension of the electricity supply from renewable sources to sites (Segrate) and stores (Mondadori Duomo and Turin).
2. Energy efficiency actions through improved management of electrical and mechanical systems at the Segrate site.
3. Energy efficiency actions as part of direct book store renovation/opening initiatives and obtaining LEED certification (gold) for Mondadori Duomo.
4. Finalisation of the “Book environmental footprint” project study: Life-Cycle Assessment (LCA) study for measuring environmental impacts and establishing data-based objectives for reducing atmospheric emissions and achieving continuous improvement along the entire value chain.
5. Maintenance of the commitment to purchase ≈100% of paper from certified PEFC/FSC sources for Mondadori Group products with extension to newly acquired companies.
6. Extension to 100% of the School proposition of insights and fact sheets dedicated to environmental culture of the entire school offer and promotion of such content in the Trade proposition.

No legal action was initiated or concluded against the Group or its employees for cases of corruption during the year, nor were any reports made within the whistleblowing system.

The results for the year ended 31 December 2023, approved on today’s date by the Board of Directors, will be presented by the Mondadori Group Management to the financial community at a presentation scheduled for 3:30 p.m. today in person and via webcast. The corresponding documentation will be available on 1Info (www.1info.it), at www.borsaitaliana.it and at www.gruppomondadori.it (Investors section). Journalists will be able to follow the proceedings of the presentation via webcast, by dialling +39 02 802 09 27 and via web https://www.c-meeting.com/web3/join/MKRA9NDNUBPJNA.

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

Annexes (in the complete pdf):

1. Consolidated Statements of Financial Position
2. Consolidated Income Statement
3. Consolidated income statement – fourth quarter
4. Group cash flow
5. Arnoldo Mondadori Editore S.p.A. Statements of financial position
6. Arnoldo Mondadori Editore S.p.A. income statement
7. Arnoldo Mondadori Editore S.p.A. statement of cash flows
8. Glossary of terms and alternative performance measures used
9. Information pursuant to Schedule 7 of Annex 3a to CONSOB Regulation no. 11971/1999.

Today, the meeting of the Board of Directors of Arnoldo Mondadori Editore S.p.A., chaired by Marina Berlusconi, reviewed and approved the draft Parent Company and Group consolidated financial statements at 31 December 2021 presented by CEO Antonio Porro.

2021 HIGHLIGHTS
In 2021, the Group was able to open a new chapter in its growth path, while achieving a stronger operating and financial standing.
As proof of its ability to pursue development opportunities, in 2021 Mondadori completed the acquisition of D Scuola – together with Rizzoli Libri the biggest investment in the last 15 years -, which has enabled the Group to gain a leadership position also in the school textbook publishing market and to give substance to its strategy of increasing focus on the core business of books.
This strategic approach also includes further transactions announced during the year: the acquisition of 50% of A.L.I. – Agenzia Libraria International – and DeA Planeta Libri, as well as a further reduction in the exposure to print magazines.

“In 2021 the soundness of our choices rewarded the Mondadori Group with consolidated results above guidance, even though already revised upwards during the year”, pointed out Antonio Porro, Chief Executive Officer of the Mondadori Group. “The buoyant trend of the relevant markets has in fact allowed us to seize an important growth opportunity and, together with greater operating efficiency, has led to a strong increase in both profitability and cash generation. This has brought us the best net result of the last 10 years and a net financial position that has returned to positive again after more than 15 years. The favourable economic backdrop and the financial strength of our Group have therefore paved the way for a return, after 10 years, to a shareholder remuneration policy”, concludes Porro.

PERFORMANCE AT 31 DECEMBER 2021
In 2021, consolidated revenue amounted to € 807.3 million, up by 8.5% versus € 744 million in the prior year, driven by the positive trend that permeated all areas of business, the Books and Retail areas specifically, which benefited in particular from the buoyancy of the Books market.

Adjusted EBITDA in 2021 came to € 105.7 million, up by € 7.7 million versus 2020 (€ 98.1 million); this performance reflects, on the one hand, the positive trend in revenue recorded by all business areas and, on the other, the ongoing efforts to curb operating and structural costs implemented by Management.
The reduction versus 2020 in the ratio of fixed costs (overheads and payrolls) on consolidated revenue enabled the Group to confirm its margins to over 13%: net of the relief received to aid museum activities in both years, the Group’s margin would have increased to 12.7% from 12.1%.

EBITDA, amounting to € 91.1 million versus € 84.6 million in 2020, improved by € 6.5 million, despite higher non-recurring expense of € 1.1 million, attributable mainly to restructuring costs recognized in the Media and Corporate & Shared Services areas.

In 2021, EBIT amounted to € 45.2 million, improving strongly – by over € 30 million – versus 2020, thanks to the mentioned operating dynamics, but mostly to the presence in the result at 31 December 2020, of higher write-downs for a total of approximately € 22 million.

Consolidated profit before tax came to € 38.6 million versus € 1.6 million in 2020.
On top of that, the following items also contributed to the significant improvement of approximately € 37 million:

• the reduction of approximately € 1.6 million in financial expense, due mainly to lower average debt and a lower average interest rate as a result of the renegotiation of the lines of credit completed in May 2021, as well as the recognition of certain impairments of receivables at 31 December 2020;
• the strong improvement in the results of associates (consolidated at equity).

The Group’s net profit, after minority interests, came to € 44.2 million, a sharp increase of approximately € 40 million versus € 4.5 million recorded in 2020.

Despite the sharp increase in taxable income, tax components for the year close at a positive € 5.6 million: this is attributable to net non-recurring tax income – deriving from the process of realigning the tax amounts of trademarks and goodwill to their respective statutory amounts – of approximately € 19 million.

The Mondadori Group’s net financial position (before IFRS 16) at 31 December 2021, before outlays for the acquisition of D Scuola, after more than 15 years has returned to positive territory and is equal to € 37.4 million, a strong improvement – by over € 50 million – versus € -14.8 million at 31 December 2020.

Considering the effects of the extraordinary transaction – completed on 16 December 2021 – and the equity and financial consolidation of the acquiree, the Group’s net financial position (before IFRS 16) stood at € -94.8 million, beating expectations that had estimated net financial debt at year end at approximately € 100 million.
IFRS 16 NFP stood at € -179.1 million (IFRS16 impact € -84.3 million) versus € -97.6 million at 31 December 2020.

At 31 December 2021, the cash flow from operations for the last twelve months came to a positive € 79.3 million; the cash flow from ordinary operations (after outlays for financial expense and tax), equal to € 68.2 million (+33.3% versus 2020), allows the Group to continue on the path of strengthening its financial structure, confirming the business’s continued and growing ability to generate cash.
The total free cash flow generated by the Mondadori Group in 2021 exceeded € 52 million, up by 28% versus € 40.7 million in 2020.

At 31 December 2021, Group employees^[1] amounted to 1,810 units, down by approximately -2% versus 1,847 units at December 2020, despite the increase in the workforce following the acquisition of Hej! (net of which the reduction would be -2.5%); this decrease is the result of continued efforts to increase the efficiency of the individual business areas.

BUSINESS OUTLOOK
The positive results, the good business outlook and the further improvement in operating performance and cash generation capacity, paint a picture of a very solid Group, allowing it to look forward with greater confidence to the results achievable in the new year, despite the recent challenges posed by the increase in energy prices and the purchase of raw materials, paper first and foremost.

From a strategic point of view, the Company will continue to strengthen its core business and therefore its leadership in the Books area, increasing its relevance and impact on the overall business.

This path will see the Mondadori Group both expand horizontally through entry into new segments of book publishing, including contiguous areas, and continue and consolidate the process of vertical integration launched through the recent acquisitions in the field of book promotion and distribution.

The Group will concurrently continue to develop its digital skills and range of products, and to rationalize its non-strategic activities.

From an operating point of view, the Group’s business-financial targets that follow refer to a scope that includes the transactions concluded in 2021, therefore the consolidation of D Scuola^[2] and the deconsolidation of the activities referring to the titles sold; these forecasts, instead, do not include any negative impact from the current context of geo-political instability, and are based on the absence of significant changes in the developments of the health emergency and resulting further discontinuities and slowdowns in economic activities and consumption at a global level.

Income Statement
Against this backdrop, reasonable estimates point to a mid-single digit increase in revenue in 2022
and adjusted EBITDA up by more than 20%.
On a like-for-like basis, these estimates would translate into a top-line and low single-digit margin growth, confirming the ongoing cost containment actions aimed also at offsetting in 2022 the negative impact of the increase in costs relating to raw materials and energy consumption.

Net profit in 2022 is expected to grow double-digit, despite the absence of the significant tax component^[3], amounting to approximately € 19 million, which had benefited net profit in 2021, thanks also to non-recurring expense much lower than the figure recorded in 2021.

Cash Flow and Net Financial Position
In 2022, the Group is expected to confirm the significant cash generation capacity shown in recent years:

• Cash Flow from ordinary operations is reasonably expected to be basically in line with the 2021 figure due, on the one hand, to the positive contribution of D Scuola, and, on the other, to a “one-off” increase in the Group’s capital expenditure deriving:
  – in the school segment, from a stronger and richer product range and publishing catalogue;
  – in the Retail area, from the project on the renovation of the flagship store in Piazza Duomo, Milan, which will see the light in the second half of the year;
• this points to an estimate of a Free Cash Flow for 2022 – before payout of the dividend but net of the forecasts on cash outflows from the extraordinary transactions announced – in the region of € 40/45 million and a Group net debt (IFRS16) of less than 1.1x Adjusted EBITDA (0.6x before IFRS16).

The financial solidity reached allows the Group to continue its path of virtuous development, especially in the book business, also through M&As: therefore, the Group will continue, also in the current year, to pursue further growth opportunities through acquisitions, in a resolute and active way.

After more than 10 years, the Group has seen a return to solid conditions for a renewed shareholder remuneration policy with the intent – for the next three years – of distributing 40% of Cash Flow from Ordinary Operations per year, maintaining a minimum floor equal to the Dividend Per Share of 2021. During this period, the Board of Directors, when proposing the distribution to the Shareholders’ Meeting, will in any case take account of the general macroeconomic scenario, any business plans and investment requirements, as well as the expected cash flows that will affect the Group’s equity and financial structure.

PERFORMANCE OF BUSINESS AREAS

• BOOKS

2021 showed a book market growth of 14.7%^[4] versus 2020 and 18.5% versus 2019, a year still unscathed by the distorting effects of the pandemic.

The Group was able to benefit from this market buoyancy: the Trade Books area saw an increase in sell-out in terms of value of approximately 10% versus 2020, and was once again able to retain its leadership at national level, with a market share of 23.7%^[5], also confirmed by the presence of 5 titles in the list of the 10 bestselling books of the year.

In the school textbooks segment, the Group achieved a steady adoption market share (22.1%^[6]), proof of the excellent results achieved and the quality of the editorial offering of the Mondadori Education and Rizzoli Education publishing houses. Including the acquisition of D Scuola, the pro forma 2021 market share would stand at 32.9%, giving the Group a leadership position also in the school textbooks publishing market.

In 2021, revenue from the Books area amounted to € 465 million, up by approximately 10% versus € 422.9 million in the prior year, broken down as follows:

• +10.6% in the Trade area, which published 2,495 titles in the period (versus 2,193 in 2020), returning production to pre-pandemic levels.
• +9.4% in the Educational segment, which benefited from increased revenue from both the school textbooks segment (+4.2%) and Rizzoli International Publications (+24.1%).
• +5.2% in the distribution of third-party publishers.

Adjusted EBITDA in the Books area came to € 92.6 million in 2021, improving by approximately € 5 million versus € 87.5 million in 2020, thanks to the strong revenue growth that more than offset the lower relief paid to Electa (approximately € 5 million) in the museum segment versus the prior year.
Profitability achieved by the Books area in 2021 was approximately 20%.

• RETAIL

As mentioned earlier, the books market grew by 14.7%^[7] in 2021 versus 2020, driven mainly by the physical channel. Against this backdrop, Mondadori Retail’s market share stood at 11.4%, propelled by the outstanding performance of the physical network of directly-managed stores and franchises.

The 2021 income statement figures show a strong growth in revenue and margins in the area, thanks to the renewal and development process launched in recent years, which improved operating and management performance.

Revenue amounted to € 173.9 million, up by € 20.2 million (+13.1%) versus € 153.7 million in the prior year, as a result of the positive performance of the book product (+16.7%), which now accounts for more than 80% of revenue^[8] in the area. Specifically:

• directly-managed stores saw a strong recovery in revenue (+20.2% versus the prior year), thanks to the strategy of focusing on the core business of books and the abovementioned network development and maintenance activities;
• the franchised channel, composed mainly of proximity stores located in small towns, continued its progression, increasing by +9% versus the prior year;
• revenue from the Bookclub returned to growth (+5.3%), while revenue from the online channel settled at € 15.6 million, down versus the prior year but improving by approximately 12% versus 2019.

In 2021, the area recorded significant growth in adjusted EBITDA, which stood at € 5.1 million (€ +3.9 million versus 2020 and up also versus 2019).

This improvement is attributable to the strong ongoing renewal and development of the network of physical stores, to careful cost management and a thorough review of the organization and processes, as well as the constant work on product innovation and enrichment of the editorial offer, accompanied by new services and communication formats for customers and partners.
The structural actions adopted over the past few years have brought a strong turnaround in the company’s operating and financial performance, with results that are on the rise also versus 2019.

• MEDIA

The Media area reported revenue of € 206.6 million in 2021, up by 4.5% versus € 197.6 million in the prior year.
Specifically:

• circulation revenue was down by 7.1%, showing a performance in line with the relevant market, with a market share of 1%, steady versus 2020 (approximately 20% net of the two titles sold at end 2021) ²¹;
• revenue from add-on products was down by 15.8% versus 2020, hit by the negative impact of the lower availability of DVD titles due to the absence of significant film releases caused by the ongoing pandemic;
• advertising revenue grew by approximately 27% overall (+15% excluding the contribution of the acquisition of Hej!):
  – digital activities grew by 40%, thanks also to the contribution of AdKaora and the consolidation of Hej! (+18% excluding this acquisition);
  – advertising sales on print magazines rose by approximately 10%, thanks also to the rebound in advertising investments.
  Mention should be made that the percentage of digital revenue on total advertising revenue is over 62% (from 57% in 2020), confirming Mondadori Media’s leadership position in digital and social media and the decreasing dependence of the business unit’s revenue on print advertising sales.
• Other revenue, which includes revenue deriving from distribution activities, posted a 10% increase versus the prior year, reflecting growth in the distribution activities of third-party publishers in the newsstand channel.

Adjusted EBITDA in the Media area amounted to € 12.4 million, up by more than 50% versus 2020 (€ 7.9 million), and also higher than the € 11.3 million recorded in 2019, driven by the development of digital activities and, in the print area, the recovery of advertising sales and the continued measures to contain operating costs, which brought an increase in profitability: in fact, the overall EBITDA margin improved by two percentage points, rising from 4% in 2020 to approximately 6%.
Specifically, digital activities, including Hej!, contributed approximately € 10 million to the overall result, also as a result of a percentage margin of over 20%.

PERFORMANCE OF ARNOLDO MONDADORI EDITORE S.P.A.
The Parent Company’s income statement for the year ended 31 December 2021 shows the same profit as the consolidated financial statements, amounting to € 44.2 million (€ 4.5 million in 2020), due to the adoption of the equity method to measure the Company’s investments in the separate financial statements.

Revenue, amounting to € 41.1 million, was down by approximately € 4 million versus the prior year, due primarily to a changed scope of the costs of the central units charged back to subsidiaries.

Adjusted EBITDA deteriorated from € -0.9 million to € -5.4 million, attributable mainly to the abovementioned reduction in chargebacks to subsidiaries.
2021 includes negative non-ordinary items totaling € 6 million, attributable mainly to provisions for restructuring costs.
Amortization and depreciation in 2021, amounting to € 9.5 million, was basically steady versus 2020 (€ 9.9 million).
2021 includes lower net financial expense for a total of € 0.7 million.

The positive contribution from the equity measurement of investments amounted to € 65.3 million, a sharp increase versus € 13.2 million in the prior year, due mainly to the write-back of the subsidiaries Mondadori Libri S.p.A. and Mondadori Media S.p.A..

The Parent Company’s net profit, amounting to € 44.2 million (versus € 4.5 million in 2020), benefited from the tax income of € 3.2 million recognized in 2021 (€ 8.6 million in 2020 following recognition of the “Patent box” relief for € 5.2 million).

DIVIDEND DISTRIBUTION PROPOSAL OF € 0.085 PER ORDINARY SHARE
As repeatedly mentioned, the favourable economic backdrop and the financial solidity achieved by the Group have paved the way for a return to a shareholder remuneration policy: based on the results of 2021, the Board of Directors has proposed to the next Shareholders’ Meeting, convened on 28 April 2022, the distribution of a unit dividend of € 0.085 for each ordinary share (net of treasury shares) outstanding at the record date, for a total of approximately € 22.1 million^[9], equal to a pay-out of 50% of the consolidated net profit and a dividend yield of 4.2% (at 31 December 2021).
The dividend will be paid, in accordance with the provisions of the “Regulation of the markets organized and managed by Borsa Italiana S.p.A.”, from 25 May 2022 (payment date), with ex-coupon (no. 21) date on 23 May 2022 (ex date) and with the date of entitlement to payment of the dividend, pursuant to Article 83-terdecies of the TUF (record date), on 24 May 2022.

SIGNIFICANT EVENTS AFTER YEAR-END 2021
On 25 February 2022, the Mondadori Group announced that it had received notice from the Antitrust Authority of the authorization to acquire from De Agostini Editore S.p.A. a 50% stake in the share capital of DeA Planeta Libri S.r.l..
The Authority’s go-ahead triggered the fulfilment of the suspensive condition of the agreement on the sale of the stake; the sale will therefore be fully implemented on the closing date, scheduled by March, as from which the company will be known as De Agostini Libri S.r.l..
On 7 March 2022, the Mondadori Group announced that it had received notice from the Antitrust Authority of the authorization to acquire a 50% stake in A.L.I. S.r.l. – Agenzia Libraria International, specialized in the distribution of books.
Following authorization from the above Authority, the transaction will be fully implemented on the closing date, which is scheduled to take place by April.

PROPOSED RENEWAL OF THE AUTHORIZATION TO PURCHASE AND DISPOSE OF TREASURY SHARES
Following expiry of the previous authorization resolved upon by the Shareholders’ Meeting on 27 April 2021, with the approval of the financial statements at 31 December 2021, the Board of Directors will propose to the next Shareholders’ Meeting the renewal of the authorization to purchase and dispose of treasury shares with the aim of retaining the applicability of law provisions in the matter of any additional buyback plans and, consequently, of seizing any investment and operational opportunities involving treasury shares.
Below are the key elements of the Board of Directors’ proposal:

• Motivations
  The motivations underlying the request for the authorization to purchase and sell treasury shares refer to the opportunity to attribute to the Board of Directors the power to:
  – use the Treasury Shares purchased or already in the Company portfolio as compensation for the acquisition of interests within the framework of the Company’s investments;
  – use the treasury shares purchased or already held in portfolio against the exercise of option rights, including conversion rights, deriving from financial instruments issued by the Company, its subsidiaries or third parties and to use the treasury shares for lending, exchange or transfer transactions or to support extraordinary transactions on the Company’s capital or financing transactions that imply the transfer or sale of treasury shares;
  – undertake any investments, directly or through intermediaries, including for the purpose of containing abnormal movements in share prices, stabilizing share trading and prices, supporting the liquidity of the share on the market, in order to foster the regular conduct of trading beyond normal fluctuations related to market performance, without prejudice in any case to compliance with applicable statutory provisions;
  – rely on investment or divestment opportunities, if considered strategic by the Board of Directors, also in relation to available liquidity;
  – dispose of treasury shares to service share-based incentive plans set up pursuant to Article 114-bis of the TUF, and plans for the free allocation of shares to employees or members of the governing bodies of the Company or to Shareholders.
• Duration
  The authorization to purchase treasury shares runs from the date of any resolution approving the proposal by the Shareholders’ Meeting, until the Shareholders’ Meeting called to approve the financial statements at 31 December 2022 and, in any case, for a period no more than 18 months.
  The authorization to dispose of treasury shares is requested for an unlimited period, given the absence of time limits pursuant to current regulations and the opportunity to allow the Board of Directors to make use of the maximum flexibility, also in terms of time, to carry out any disposal of shares.

• Maximum number of purchasable treasury shares
  The authorization would allow the purchase, including in more than one tranche, of ordinary shares of Arnoldo Mondadori Editore S.p.A., with a par value of € 0.26 each, in one or more tranches in an amount freely determinable by the Board of Directors – up to a maximum number of shares – also taking into account of the ordinary shares held, directly and indirectly, in the portfolio from time to time – of no more than 10% overall of the share capital, in accordance with Article 2357, paragraph 3, of the Italian Civil Code.

• Criteria for purchasing treasury shares and indication of the minimum and maximum purchasing cap
  Purchases shall be made in compliance with Article 132 of the TUF, 144-bis, paragraph 1 letter b) of the Issuer Regulation, and on regulated markets or multilateral trading systems, according to the operating criteria established in the organization and management regulations of the same markets, which do not allow the direct matching of buy orders against predetermined sell orders, and also in compliance with any other applicable law, including EU law. Additionally, share purchase transactions may also be carried out in the manner envisaged in Article 3 of EU Delegated Regulation no. 2016/1052 in order to benefit, if the conditions are met, from the exemption under Article 5, paragraph 1, of EU Regulation no. 596/2014 on market abuse with regard to inside information and market manipulation.
  Regarding the disposal of treasury shares, disposals may be made, on one or more occasions and even before having terminated the maximum number of purchasable treasury shares, either by selling them on regulated markets or according to other trading methods in compliance with the law, including EU law, in force and with the Admitted Market Practices, if applicable.

  Under the proposed authorization, the minimum and maximum purchase price shall be determined at a unit price not lower than the official Stock Exchange price of Mondadori shares on the day preceding the purchase transaction, reduced by 20%, and not higher than the official Stock Exchange price on the day preceding the purchase transaction, increased by 10%.
  In any event – except for any different price and volume determinations resulting from the application of the conditions set forth in the Admitted Market Practices – such price shall be identified in accordance with the trading conditions set forth in Delegated Regulation (EU) no. 1052 of 8 March 2016.

  In terms of consideration, sales transactions or other acts of disposition of treasury shares shall be carried out:
  – if executed in cash, at a price no lower than 10% of the reference price recorded on the MTA – Euronext Milan – organized and managed by Borsa Italiana S.p.A. in the trading session prior to each single transaction;
  – if executed as part of any extraordinary transactions in accordance with financial terms to be determined by the Board of Directors on the basis of the nature and characteristics of the transaction, also taking account of the market performance of Mondadori shares;
  – if executed to service the Performance Share Plans adopted by the Company in compliance with the terms and conditions set out in the resolutions of the Shareholders’ Meeting that establish the Plans and the related regulations.

To date, Arnoldo Mondadori Editore S.p.A. holds a total of no. 1,049,838 treasury shares, equal to 0.402% of the share capital.

For further information on the proposed authorization for the purchase and disposal of treasury shares, reference should be made to the Directors’ Explanatory Report, which will be published within the time limits and in the manner prescribed by applicable regulations.

GRANTING OF SHARES UNDER THE 2019-2021 PERFORMANCE SHARE PLAN: INFORMATION PURSUANT TO ART. 84-BIS, PARAGRAPH 5 CONSOB REGULATION NO. 11971/1999
The Board of Directors, based on the final assessment of the Performance Targets underlying the Plan, and having heard the Remuneration and Appointments Committee, resolved to allocate a total of no. 311,848 Arnoldo Mondadori Editore S.p.A. shares to 8 beneficiaries, in implementation of the provisions contained in the “2019-2021 Performance Share Plan” established by the Board of Directors on 14 March 2019 and subsequently adopted by the Shareholders’ Meeting on 17 April 2019 (the “2019-2021 Plan”).
Mention should be made that the 2019-2021 Plan takes the form of a share granting plan and grants its beneficiaries the right to receive, free of charge, shares in the Company provided that, at the end of a reference period of three financial years, the performance targets set in the same Plan have been achieved.
The 8 beneficiaries of the 2019-2021 Plan are the Chief Executive Officer and 7 managers identified by name by the Chief Executive Officer, as delegated by the Board of Directors.
The characteristics of the 2019-2021 Plan are explained in detail in the Directors’ Report to the Shareholders’ Meeting of 17 April 2019 and in the information document contained therein, available on www.gruppomondadori.it, Governance section, to which reference should be made.
Attached is the information required by Schedule 7 of Annex 3A to CONSOB Regulation no. 11971/1999 to account for the granting of shares in the context of the 2019-2021 Performance Plan.

PROPOSED ADOPTION OF A 2022-2024 PERFORMANCE SHARE PLAN
The Board resolved, on a proposal from the Remuneration and Appointments Committee, and in keeping with the introduction of the performance share approved last year for the medium/long-term remuneration of executive directors and key management personnel, to submit to the approval of the Ordinary Shareholders’ Meeting, the adoption of a 2022-2024 Performance Share Plan, in accordance with Article 114-bis of Legislative Decree no. 58 of 24 February 1998, intended for the Chief Executive Officer, the CFO – Executive Director and a number of Company managers who have an employment and/or directorship relationship with the Company or with its subsidiaries on the granting date of the shares.

With the adoption of the Plan, the Company aims to encourage Management to improve medium to long-term performance, in terms of both industrial performance and growth in the value of the Company.
The Plan envisages the assignment to the beneficiaries of rights to the free allocation of company shares, subject to the achievement of specific performance targets set and measured at the end of the three-year performance period.
These targets are structured to include both shareholder remuneration indicators and management indicators functional to raising the share value, ensuring maximum alignment of Management remuneration and the creation of value for the Company, as well as indicators of a non-operating/financial nature.
For details on the proposed adoption of the 2022-2024 Performance Share Plan, the beneficiaries and the main characteristics of the Regulations of the Plan, reference should be made to the Information Document drawn up by the governing body, pursuant to Article 84-bis and annex 3A of the Issuer Regulation, and to the Explanatory Report, which will be published within the time limits and in the manner prescribed by applicable regulations.

CONSOLIDATED NON-FINANCIAL STATEMENT PURSUANT TO LEGISLATIVE DECREE 254/2016
Under Legislative Decree 254/2016, the Board of Directors’ 2021 Report on Operations of the Mondadori Group is also composed of the Consolidated Non-Financial Statement (NFS), a qualitative-quantitative description of the non-financial performance of the Company, associated with environmental, social, and staff-related issues, as well as those regarding respect for human rights, and the fight against corruption and bribery, which are relevant given the activities and characteristics of the Company. The NFS was prepared in accordance with GRI Standards: Core option, and includes benchmark KPIs related to GRI G4 “Media Sector Disclosure”.
With regard to 2021, the Mondadori Group has updated its materiality analysis, consistent with the principles set out by the GRI Sustainability Reporting Standards (GRI Standards) and the reporting scopes laid down by Legislative Decree 254/2016.
With a view to continuous improvement of the process, in 2021 the stakeholder engagement activity was expanded by involving employees and teachers, who were given a specific online questionnaire on sustainability issues.
The document also contains relevant information in line with ESMA’s recommendations for the 2021 reporting year, and includes references required by Regulation (EU) 2020/852 related to the recent introduction of the EU Taxonomy.

The findings from the reporting include a number of tangible actions regarding social, governance and environmental issues. These include: the creation of the position of Chief Diversity Officer for the implementation of strategies and projects aimed at promoting diversity, equity and inclusion; in keeping with the measures adopted to combat the spread of COVID-19, the possibility offered to employees and associates to carry out and repeat diagnostic screenings free of charge; access, as part of the New Competencies Fund (NCF), to a training and professional development path intended as a strategic lever to encourage and strengthen internal skills and competencies and the attraction of young talents.
During the year no cases of corruption or bribery involving the Company or its employees were reported, and no legal action was initiated or concluded against the Group or its employees for cases of corruption or reports made within the whistleblowing system.
In 2021, the Mondadori Group once again paid special attention to environmental issues and the specific impacts associated with the life cycle of paper products, energy efficiency measures and the reduction of climate-changing emissions: an approach that guides the Company in the implementation of its business activities, from the purchase of certified paper to the efficient management of points of sale. As for the sourcing of raw materials for the printing of publishing products, the Group opts for the use of paper certified under the two main schemes applied worldwide, PEFC and FSC, whose percentage reached 99.9% of the total during the year.

SUSTAINABILITY PLAN GUIDELINES
The Mondadori Group has launched its first-ever Sustainability Plan, which identifies short, medium and long-term targets and actions to improve performance in social, governance and environmental terms.
The reflection process led to the identification of the areas and strategic lines of sustainability on which the Group intends to work in the future through the achievement of targets set on an annual basis and periodically updated.
The 3 relevant macro areas – defined below – and the respective guidelines identified for 2022, reflect the Group’s identity, its mission and its role as a publisher:

Social: enhancing people, content and places for education and culture

• To become a role model in the field of diversity, equity and inclusion, enhancing and contributing to the well-being of our people, through welfare tools and skills development.
• To promote culture and quality, equitable, and inclusive education that fosters pathways to lifelong learning.
• To create, conceive and develop valuable content and affordable, ESG-friendly products.
• To support cultural outposts for social development through the enhancement of bookstores, schools, museums, social channels, events and partnerships.

Governance: promoting sustainable business success

• To pursue sustainable business success by promoting the integration of ESG issues in governance, business plans and the operating model, also by strengthening the mechanisms for listening to stakeholders to develop paths of ongoing improvement.
• To maintain the highest standards for protecting and managing risks and opportunities along the value chain.

Environment: disseminating environmental culture and mitigating impacts on ecosystems

• To spread environmental culture, also through education aimed at an increasingly sustainable development and lifestyle.
• To mitigate environmental impacts throughout the product life cycle, by fostering the protection of biodiversity and reducing climate-changing emissions.

The results for the year ended 31 December 2021, approved on today’s date by the Board of Directors, will be presented by the Mondadori Group Management to the financial community in a webcast presentation scheduled today at 3:30 PM.

The corresponding documentation will be available on 1Info (www.1info.it), www.borsaitaliana.it and www.gruppomondadori.it (Investors). Journalists will be able to follow the presentation in listening mode only, by connecting to the following telephone number +39028020911 and via web https://www.c-meeting.com/web3/join/M37DCPDPQUB3KL. At the end of the meeting, a dedicated session is scheduled where questions may be submitted to management.

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

Annexes (in the complete pdf):

1. Consolidated balance sheet;
2. Consolidated income statement;
3. Consolidated income statement – fourth quarter;
4. Group cash flow;
5. Arnoldo Mondadori Editore S.p.A. balance sheet;
6. Arnoldo Mondadori Editore S.p.A. income statement;
7. Arnoldo Mondadori Editore S.p.A. statement of cash flows;
8. Glossary of terms and alternative performance measures used;
9. Information pursuant to Schedule 7 of Annex 3a to CONSOB Regulation no. 11971/1999

[1] The workforce at 31 December 2021 does not include D Scuola’s headcount, but does include employees from the two titles, the sale of which became effective on 1 January 2022.

[2] Excluded are the transactions that were under Antitrust scrutiny at 31 December 2021 (acquisition of 50% of A.L.I. and 50% of DeA Planeta, sale of 51% of Press-di).

[3] Derived from the tax realignment of intangible assets.

[4] GfK, December 2021 (figures in terms of market value; 52-week survey in 2021 vs. 53 weeks in 2020)

[5] GfK, December 2021 (figures in terms of market value)

[6] ESAIE, 2021 (number of adopted sections)

^[7] GFK (in terms of value)

^[8] Product revenue excluding Club revenue

[9] Rough estimate based on the number of shares outstanding at the date of this Report.

Today, the meeting of the Board of Directors of Arnoldo Mondadori Editore S.p.A., chaired by Marina Berlusconi, reviewed and approved the draft Parent Company and Group consolidated financial statements at 31 December 2020 presented by CEO Ernesto Mauri.

2020 HIGHLIGHTS
2020 was marked by the effects of the COVID-19 health emergency and the resulting application from March of containment measures that greatly curtailed economic activities and the businesses in which Mondadori operates and is a leader^[1], leading to a severe economic crisis.

Against this backdrop, the Mondadori Group was able, on the one hand, to benefit from the resilience shown by the Books market – today the major business component, contributing 92% to the Group’s profitability – and, on the other, to take a series of targeted actions in a timely and effective manner.

These actions were aimed both at guaranteeing its employees safe working conditions – also by encouraging smart working – and at allowing business continuity.

In order to protect Group profitability, an effective plan was launched to contain operating and structural costs of approximately € 48 million, which enabled the company to increase efficiency and sustain profitability even in a severely deteriorated context.

The measures adopted by Management included social shock absorbers, further actions to contain payroll costs – such as a freeze on pay policies, the use of holidays, a hiring freeze -, significant savings on discretionary spending, such as marketing and advertising, as well as the renegotiation of lease agreements on the network of bookstores.

More specifically, mention should be made that the books market in 2020 showed an extraordinary resilience: following the gradual reopening of bookstores after the first lockdown, the segment witnessed a steady recovery, peaking in an approximately 17% growth in the fourth quarter (versus the same period of 2019); with regard to the full year, the market increased by 3.3%.

A strong contribution to the buoyancy of the books market came from the development of the e-commerce channel, which saw double-digit growth in 2020, and from the increased penetration of digital books (e-books and audio-books), which made for 7.4% of total segment revenue.

PERFORMANCE AT 31 DECEMBER 2020
Taking account of the situation of general crisis surrounding the Group, the results achieved in 2020 are far higher than those initially indicated and forecast and are truly outstanding, in the face of the restrictions imposed by the emergency situation.

Consolidated revenue amounted to € 744 million, down by 15.9% versus € 884.9 million in 2019. Net of the change in the scope of consolidation of the Media area from the disposal of the five titles at end 2019, revenue fell by approximately 14%, due mostly to the effects of COVID-19.

Adjusted EBITDA amounted to € 98.1 million, down by € 12.3 million versus 2019 (€ 110.4 million). This performance reflects both the significant effects of the quick response and countermeasures implemented by the Group to tackle the consequences of COVID-19 – which enabled it to curb operating and structural costs by approximately € 48 million – and the grants acknowledged for the exhibitions suspended, cancelled or postponed due to the pandemic.

With regard to the Group as a whole, special mention should be made of the profitability percentage, amounting to 13.2% versus 12.5% recorded in 2019, proof of the effectiveness of the operational efforts made.

EBITDA amounted to € 84.6 million, down by approximately € 18 million versus € 102.9 million in the prior year, due to the above trends and higher non-recurring negative items totaling € 6 million.

EBIT amounted to € 14.8 million, down by approximately € 48 million versus 2019, due to higher amortization, depreciation and write-downs for a total of approximately € 30 million: mention should be made of the write-down of TV Sorrisi e Canzoni, other brands and goodwill for a total of € 26.5 million, in addition to the start of the amortization process of TV Sorrisi e Canzoni (€ 3.5 million). The write-off, resulting from the impairment test, is attributable mainly to the strong discontinuity in the relevant markets of the magazines business, which accelerated the downward trend in advertising sales, relating in particular to traditional print activities, and to circulation trends in the newsstands and subscriptions channels.

Consolidated profit before tax came to € 1.5 million versus € 50.6 million in 2019. In addition to the above, the drop was affected also by the greater financial expense (from € 2.2 million to € 4.1 million) from the recognition of two positive components in 2019: income related to the adjustment of amortized cost under IFRS 9 and a substitute tax refund.

The adjustment of the amount of the remaining investment in Reworld Media to the stock market price at 31 December 2020 (€ 3.17 versus € 2.75 at 31 December 2019), together with the sale of the company’s shares in the fourth quarter of the year, resulted in the recognition of a capital gain of € 0.6 million.

The result of the associates (consolidated at equity) came to a negative € 7.3 million, improving however versus 2019, thanks also to the halved investment in the company that publishes Il Giornale (SEE), although largely offset by the further deterioration in the result of the other investments in the Media area (Attica Publications, SEEC) and of Mediamond, due to the economic trend.

The Group’s net profit, after minority interests, came to € 4.5 million^[2] versus € 28.2 million in 2019 (which included € -2.6 million from the discontinued operations of Mondadori France).

The net financial position before IFRS 16 at 31 December 2020 stood at € -14.8 million, a sharp improvement versus € -55.4 million at end 2019, due to the significant cash generation recorded in the year.

The IFRS 16 net financial position stood at € -97.6 million and includes the financial payable from the application of IFRS 16, totaling € 82.8 million.

Cash flow from ordinary operations amounted to € 51.2 million, up versus € 48.4 million in 2019 (continuing operations), due also to the grants^[3] received, confirming the ability of the business to steadily generate cash, even in a highly deteriorated context.

Group employees amounted to 1,845 units, down by approximately 9% versus 2,018 units at 31 December 2019, as a result of the continued efforts to increase the efficiency of the individual business areas.

BUSINESS OUTLOOK
The ability demonstrated by the Mondadori Group in 2020 to react promptly to a strongly deteriorated context, as well as the financial solidity shown by the capital position at year end, give reasons, from an operational point of view, to be optimistic all in all on the future development of the business and the results that the Group can achieve in the new year.

From a strategic point of view, the Group has all the managerial and financial resources required to continue along the path of strengthening its core businesses, of expanding into new segments in or adjacent to publishing, and of rationalizing, if possible, non-strategic activities consistently pursued in recent years, including through M&A operations.

More specifically, in 2021 the Mondadori Group intends to continue to consolidate its leadership in the Books area – both in the school textbooks and Trade publishing segments, increasing its relevance and impact on the Group’s overall activities – and to complete its skills and solutions in the digital area.

As for the Group’s operating-financial targets, referring to a business scope unchanged from today’s:

• Revenue and EBITDA

In line with the outlined strategy and in light of the relevant context, the operating targets for 2021 envisage estimates pointing to a slight growth in revenue (low single-digit) and an adjusted EBITDA that reflects margins between 11% and 12%, in a context – in the absence of the grants received in 2020 – that shows a substantial stability of the Group’s operating profit.

This is the result of a renewed effort to contain costs aimed at countering the lack of temporary measures, relating primarily to payroll costs, which brought benefits to the Group last year.

• Net profit

The net result in 2021 is expected to grow strongly due also to two “one-off” effects:

• the impact on the 2020 results of the write-down of certain balance sheet items, which is currently not expected to repeat in the new year;
• the likely resort by the Group to tax redemption on part of the intangible asset, which would give rise to recognition of a positive tax component.
• Business Units

The outlook for the individual Business Units is as follows:

• Trade books: the area is expected to operate in a low growing market with a competitive publishing plan that should enable it to achieve higher growth rates than the market and, therefore, to increase its market share. The increase in operating costs attributable, as mentioned, mainly to the lack of social shock absorbers, cannot be totally neutralized by the efficiency measures planned by Management, consequently, eating away, albeit moderately, the operating profit generated by the business unit;
• School textbooks: the forecast of greater changes in book adoptions authorizes expectations on market and revenue growth for the business unit. The more subdued growth (versus the Trade area) in operating costs is neutralized by the cost-cutting policies implemented by Management, allowing the area to keep profitability basically steady;
• Museums: the easing of COVID-19 restrictions on the management of museum activities gives reasons to suggest a modest “restart” and a moderate improvement in revenue and profitability, net of compensation and grants received in 2020;
• Retail: the deep organizational and process review, the rationalization strategy on the portfolio of stores, the continued focus on the book product as part of a broader streamlined offering are expected to bring a sharp increase in profitability;
• Media: recovery of both the print and digital advertising market versus 2020; with overall revenue of the area in slight decline, percentage profitability basically steady thanks to the continued optimization of the structures, and the continued strengthening of the digital area.
• Cash Flow and Net Financial Position

In 2021, the Group is expected to confirm the cash-generating capacity shown in recent years, in a 2020 year marked by adverse events. Specifically, forecasts on the new year indicate that cash flow from ordinary operations will range between € 40 million and € 45 million.

These forecasts suggest, in the absence of transformational acquisitions and excluding the impacts of the adoption of the accounting standards under IFRS 16, a positive consolidated net financial position at year end.

Conversely, taking account of the impact of IFRS 16, indications point to a Group financial debt no greater than 0.8x adjusted EBITDA.

As already mentioned, financial strength gives reasons to believe that during the year the Group will be able to firmly and actively pursue any acquisition opportunities that may arise, as well as to pave the way for a return to a shareholder remuneration policy from 2022, applied to the net result of 2021.

PERFORMANCE OF BUSINESS AREAS

• BOOKS

Owing to the COVID-19 emergency and the relating health measures adopted, at the end of the first half, the Trade Books market had lost 10.1% in terms of value versus 2019, the result of a reduction generated mainly in March (-29.2%) and April (-45.8%).

The strong growth witnessed in the third quarter (+8.4% versus 2019) and especially in the fourth quarter (+16.8% versus 2019) helped the market make a strong recovery, materializing at the end of the year in a 3.3% increase in terms of value^[4], driven mainly by the double-digit growth of the e-commerce channel.

Against this backdrop, the Mondadori Group retained its leadership position with a 24.8% market share.

In 2020, 4 titles from the Group’s publishing houses ranked among the top ten bestselling books in terms of value of the year, and 10 titles among the top twenty^[5].

In particular: “Fu sera e fu mattina” by K. Follett (Mondadori) in first position overall, “Insieme in cucina” by B. Rossi (Mondadori Electa), sixth, “Come un respiro” by F. Ozpetek and “La misura del tempo” by G. Carofiglio (Einaudi), ninth and tenth respectively.

In the school textbooks segment, whose market suffered an estimated 7% decline due to the pandemic^[6], the Mondadori’s Group publishing houses achieved a market share of 22.1%, higher than in 2019, thanks to the positive results of the 2020 adoption campaign.

Revenue in the area in 2020 amounted to € 422.9 million, down by 11.6% versus € 478.4 million of the prior year. Specifically:

• the Trade area fell by 5.6%;
• the Educational area dropped by 16.7%, due to the interruption of museum activities: owing to the restrictions to contain the pandemic, the area saw its operations severely impacted by the closure of sites and exhibitions, and by the virtual collapse of tourist travel also throughout the summer season.

In the last quarter of the year, however, museum activities were able to benefit from grants which partly offset, at the margin level, the effects of the closures of archaeological sites and the suspension of exhibitions, and other measures to contain the contagion.

Revenue from the sale of e-books and audiobooks, which accounted for 7.8% of total publishing revenue in 2020, rose sharply (+27.1%), driven by the lockdown period (March-May) which curtailed operations of the physical channel. Listening hours of the audiobook catalogue jumped by over 87% versus 2019, while downloads of e-books increased by 21.9%.

Adjusted EBITDA in the Books area stood at € 87.5 million versus € 94.5 million in 2019, down mainly as a result of the negative trend of revenue from the Trade area and museum activities, only partly offset by the grants received which, net of the related provisions made, amounted to approximately € 8 million.

Reported EBITDA amounted to € 84.8 million versus € 94 million in 2019, with a trend consistent with the above dynamics.

EBIT amounted to € 69.4 million versus € 81.4 million in 2019, dropping more due partly to higher amortization and depreciation recognized in 2020 resulting from higher investments related to the creation of school textbooks in the Educational area.

• RETAIL

As previously mentioned, the books market (which generates over 80% of revenue^[7] in the area) showed significant growth in 2020 versus 2019 (+3.3%^[8]), driven mainly by the double-digit increase in sales in the e-commerce channel, which benefited from the restrictions imposed on the physical channels by the COVID-19 emergency: during the year, the authorities imposed the closure from 12 March 2020 until early May (first lockdown) of physical bookstores throughout the Country, as well as the points of sale located in shopping centres, for several public holidays and pre-holidays and on weekends in the last quarter of the year (second lockdown).

In 2020, as a result of the above government measures, the Retail area reported revenue of

€ 153.7 million, down by € 33.2 million (approximately -18%) versus € 186.9 million in 2019, of which approximately half related to products other than Books.

If in the first six months of the year, sales were 27.5% lower than in the same period of 2019, in the second half of the year, Mondadori Retail saw its performance improve (-10.2% versus 2019), due in particular to the strong rebound of the Book product. This rebound was achieved mostly in the third quarter, which recorded basically steady revenue versus the prior year, while the final months of the year were affected by the introduction of new restrictions.

With regard to the trend of revenue by channel, mention should be made of the improved performance of franchised stores versus the network of directly-managed stores, whose operations were impacted more by the restrictive measures imposed by the authorities, and the significant growth of online operations (+47.7% versus 2019).

Despite the sharp decline in revenue, Mondadori Retail’s adjusted EBITDA in 2020 came to a positive € 1.3 million, down only by € 3.8 million versus 2019.

A result achieved thanks to heightened maintenance and renewal of the network of physical stores (opening of 18 franchised stores and 2 directly-managed stores), careful cost management and a deep organizational and process revision carried out in the second half of 2019 and continued even during the harshest period of the health emergency.

Reported EBITDA amounted to € –2.7 million (versus € +2.9 million in 2019), due to extraordinary items, which mainly include restructuring costs and closure of a dispute related to IMU tax for 2013 – 2019.

EBIT (which includes, under IFRS 16, among the cost components, imputed depreciation relating to directly-managed stores) amounted to € -13 million (versus € -7.7 million in 2019) and was equally impacted by the above extraordinary components.

• MEDIA

In 2020, the advertising market posted an overall 15.3% decline, heavily affected by the impact of the COVID-19 health emergency. All channels fell during the period, including digital -0.8% and magazines -36.6%^[9].

The digital advertising segment alone showed a clear reversal from third quarter 2020, growing by approximately 12% in the fourth quarter versus the same period of the prior year.

In 2020, the magazines circulation market the in newsstands and subscriptions channels, dropped by 11.8%^[10]. The add-on segment reported a negative -17.5% for add-ons bundled with magazines^[11].

Against this backdrop, the Mondadori Group retained its position as Italy’s leading multimedia publisher: in print, with a circulation market share of 24.2%^[12] and 10.2 million readers (6.8 million of whom women)^[13]; on the web, with a reach in December of 83.5% and approximately 34 million unique users in December 2020^[14]; in social media, with an aggregate fan base of 36.5 million people and 106 profiles^[15].

In 2020, the Media area recorded revenue of € 197.6 million (-23% versus € 256.6 million in 2019; -17.5% net of the titles sold at end 2019).

In the fourth quarter of the year, the drop was 18.2% (approximately -12.8% on a like-for-like basis), with a strong upswing in digital operations which grew by 17.3% (+20.8% on a like-for-like basis) versus fourth quarter 2019.

Specifically, in 2020:

• advertising revenue was down by a total of approximately 28%; this is the form of revenue most affected by the ongoing health emergency, which led to the cancellation in 2020 of an important event such as the Salone del Mobile. Net of scope discontinuities, the reduction would be 23%, with the print segment down -41% and digital advertising sales basically steady (+0.3% versus 2019).

In the last quarter of the year, against the persisting decline, albeit mitigated, in revenue from print media (down by approximately -22% on a like-for-like basis), revenue from digital advertising grew by approximately 21%, as already mentioned.

• circulation revenue (newsstands and subscriptions) was down by approximately 24%, due both to the disposal of the above five titles and the impact of COVID-19; on a like-for-like basis, the fall would be approximately 14%.
• revenue from add-on products fell by approximately 26% versus 2019 (down by approximately -24% net of the disposal of the five titles).

In 2020, digital revenue as a percentage of the business unit’s total advertising revenue amounted to 57% (from 42% in 2019).

Adjusted EBITDA in the Media area amounted to € 7.9 million in 2020, down by approximately € 3.3 million versus € 11.3 million in 2019.

The sharp drop in revenue was alleviated by the effective measures to contain operating costs, which curbed their negative impact on profitability, and by the excellent result of digital operations, which generated higher margins than in 2019.

Against slightly declining revenue, digital operations in fact recorded a growth in adjusted EBITDA, up from € 7 million to € 7.2 million, with a margin of over 20%.

In the last quarter of 2020, Mondadori Media recorded adjusted EBITDA of € 4.7 million, down by € 1.1 million versus the same period of the prior year, but recovering versus the trend seen in the first nine months of the year due to the combined effect of:

• the positive performance of digital advertising, which contributed in the quarter under review to an increase in margins of approximately € 1 million versus fourth quarter 2019
• the abovementioned continued cost containment actions, which partly offset the decline in profitability of print operations versus fourth quarter 2019.

Reported EBITDA amounted to € 3.7 million versus € 9.4 million in 2019.

EBIT came to € –30.6 million versus € 1.1 million, due to the start of amortization of TV Sorrisi e Canzoni (for a total annual amount of € 3.5 million) and the concurrent non-recurring write-downs of the title, other brands and goodwill for a total of € 26.5 million, which impacted only on this area.

PERFORMANCE OF ARNOLDO MONDADORI EDITORE S.P.A.
As from 1 January 2020, all the activities referring to the print and digital magazines, as well as the investments in the Magazines Italy area, were transferred to Mondadori Media S.p.A. (100% owned by Arnoldo Mondadori Editore S.p.A.). For a clearer understanding and comparison of results, the Company’s income statement at 31 December 2020 is also compared with the income statement of the prior year, which is presented pro forma to take account of the changed scope due to the contribution of assets and the disposal of titles in December 2019.

The Parent Company’s income statement at 31 December 2020 shows the same profit as in the consolidated financial statements of € 4.5 million (€ 29.6 million in 2019), due to the fact that the Company has chosen to use the equity method to measure its investments in the separate financial statements.

Revenue, amounting to € 45.1 million, was up versus € 38.5 million of the prior year, due mainly to the accounting of revenue recognized for services provided to the company set up in 2020, Mondadori Media S.p.A. (the Corporate and Shared Services business area and the Magazines area were included in the same company, Arnoldo Mondadori Editore S.p.A. in 2019).

Adjusted like-for-like EBITDA dropped slightly from € -0.4 million to € -0.9 million, resulting mainly from higher costs related to labour management during the COVID-19 pandemic.

The year 2020 includes net negative extraordinary items of € 3.3 million, attributable mainly to M&A costs versus € 3 million in 2019.

The Company’s net profit, after tax income of € 8.6 million recognized in 2020, which includes the tax receivable arising from the use of the “Patent box” facility of € 5.2 million, amounted to € 4.5 million (versus € 29.6 million in pro forma 2019).

The Board of Directors of Arnoldo Mondadori Editore S.p.A. has convened the Ordinary Shareholders’ Meeting on Tuesday 27 April 2021 in first call to approve the financial statements for the year ended 31 December 2020 and, if required, in second call for Wednesday 28 April 2021.

PROPOSED ALLOCATION OF THE PARENT COMPANY’S NET PROFIT TO THE EXTRAORDINARY RESERVE
The Board of Directors will propose to the Shareholders’ Meeting, called on Tuesday 27 April 2021 in first call (in second call on Wednesday 28 April 2021), to fully allocate to the extraordinary reserve the net profit resulting from the financial statements for the year ended 31 December 2020 of Arnoldo Mondadori Editore S.p.A., equal to € 4,502,600.02.

SIGNIFICANT EVENTS AFTER YEAR-END
On 29 January 2021, with a view to further strengthening its foothold in the digital world, the Group completed the acquisition of Hej!, a company that specializes in tech advertising, a sector where Mondadori already operates successfully through AdKaora, a leading media agency in the field of mobile advertising and proximity marketing.

On 15 February 2021, the Group completed the sale of its investment in Reworld Media (from the original 16.3% stake to 3.2% at 31 December 2020), realizing an overall gain of approximately € 1.1 million.

PROPOSED RENEWAL OF THE AUTHORIZATION TO PURCHASE AND DISPOSE OF TREASURY SHARES
Following the expiry of the previous authorization resolved upon by the Shareholders’ Meeting on 22 April 2020, with the approval of the financial statements at 31 December 2020, the Board of Directors will propose to the next Shareholders’ Meeting the renewal of the authorization to purchase and dispose of treasury shares with the aim of retaining the applicability of law provisions in the matter of any additional buyback plans and, consequently, of seizing any investment and operational opportunities involving treasury shares.

Below are the key elements of the Board of Directors’ proposal:

• Motivations

The motivations underlying the request for the authorization to purchase and sell treasury shares refer to the opportunity to attribute to the Board of Directors the power to:

• to use the treasury shares purchased as consideration in the acquisition of interests as part of the Company’s investment policy;
• to use the treasury shares purchased against the exercise of option rights, including conversion rights, deriving from financial instruments issued by the Company, its subsidiaries or third parties and to use the treasury shares for lending, exchange or transfer transactions or to support extraordinary transactions on the Company’s capital or financing transactions that imply the transfer or sale of treasury shares;
• to undertake any investments, directly or through intermediaries, including for the purpose of containing abnormal movements in share prices, stabilizing share trading and prices, supporting the liquidity of the share on the market, in order to foster the regular conduct of trading beyond normal fluctuations related to market performance, without prejudice in any case to compliance with applicable statutory provisions;
• to rely on investment or divestment opportunities, if considered strategic by the Company, also in relation to available liquidity;
• to dispose of treasury shares as part of share-based incentive plans pursuant to Article 114-bis of the TUF, and of plans for the free allocation of shares to employees or members of the governing or supervisory bodies of the Company or of an associate or to Shareholders.
• Duration

The authorization to purchase treasury shares is set to last until the approval of the financial statements for the year ending 31 December 2021, while the authorization to sell is requested to last for an unlimited period, given the absence of provisions in this regard pursuant to the provisions in force and the opportunity to allow the Board of Directors to make use of the maximum flexibility, also in terms of time, to carry out the acts of disposal of the shares.

• Maximum number of purchasable treasury shares

The new authorization would allow the purchase, including in more than one tranche, of ordinary shares of Arnoldo Mondadori Editore S.p.A., with a par value of € 0.26 each, in one or more tranches in an amount freely determinable by the Board of Directors – up to a maximum number of shares – also taking into account the ordinary shares held, directly and indirectly, in the portfolio from time to time – of no more than 10% overall of the share capital, in accordance with Article 2357, paragraph 3, of the Italian Civil Code.

• Criteria for purchasing treasury shares and indication of the minimum and maximum purchasing cap

The purchases would be made in compliance with the principle of equal treatment of shareholders under Article 132 of the TUF, in accordance with any of the procedures set out in Article 144-bis of the Issuer Regulation, to be identified from time to time, and any other applicable regulations, as well as, where applicable, the market practices allowed from time to time in force.

Additionally, share purchase transactions may also be carried out in the manner envisaged in Article 3 of EU Delegated Regulation no. 2016/1052 in order to benefit, if the conditions are met, from the exemption under Article 5, paragraph 1, of EU Regulation no. 596/2014 on market abuse with regard to inside information and market manipulation.

As far as disposal transactions are concerned, the authorization would allow the adoption of any appropriate method to fulfill the purposes pursued – including the use of treasury shares to service stock incentive plans and/or the transfer of real and/or personal rights and/or stock lending – to be carried out either directly or through intermediaries, in compliance with the relevant laws and regulations in force.

Without prejudice to the fact that purchases of treasury shares would be made in accordance with the time limits, conditions and requirements established by the applicable Community legislation and by the Admitted Market Practices, the minimum and maximum purchase price would be determined for a unit price not lower than the official Stock Exchange price of Arnoldo Mondadori Editore S.p.A. shares on the day preceding the purchase transaction, reduced by 20%, and not higher than the official Stock Exchange price on the day preceding the purchase transaction, increased by 10%.

However, in terms of purchase prices, the additional conditions set forth in Article 3 of the above EU Delegated Regulation 2016/1052 would apply.

With regard to the provisions of Article 2357, paragraph 1, of the Italian Civil Code, purchases would in any case be made within the limits of the available “extraordinary reserve” as shown in the last duly approved financial statements.

In any case, purchases would be made, in terms of definition of volumes and unit prices, in accordance with the conditions governed by Article 3 of EU Delegated Regulation 2016/1052, and in particular:

• no shares shall be purchased at a price higher than the higher between the price of the last independent trade and the price of the highest current independent bid on the trading venue where the purchase is carried out;
• in terms of volumes, no more than 25% of the average daily trading volume of Arnoldo Mondadori Editore S.p.A. shares shall be purchased in the 20 trading days prior to the dates of purchase.

Purchases instrumental in the support to market liquidity shall also be made in accordance with the conditions provided by the admitted market practices.

To date, Arnoldo Mondadori Editore S.p.A. holds a total of no. 1,838,326 treasury shares, equal to 0.703% of the share capital.

For further information on the proposed authorization for the purchase and disposal of treasury shares, reference should be made to the Directors’ Explanatory Report, which will be published within the time limits and in the manner prescribed by applicable regulations.

GRANTING OF SHARES UNDER THE 2018-2020 PERFORMANCE SHARE PLAN: DISCLOSURE PURSUANT TO ARTICLE 84-BIS, PARAGRAPH 5 OF CONSOB REGULATION NO. 11971/1999
The Board of Directors, on the proposal of the Remuneration and Appointments Committee, resolved to grant, effective from 14.5.2021, a total of no. 878,347 Arnoldo Mondadori Editore S.p.A. shares to 8 beneficiaries, in implementation of the provisions contained in the “2018-2020 Performance Share Plan” established by the Board of Directors on 13 March 2018 and subsequently approved by the Shareholders’ Meeting on 26 April 2018 (the “2018-2020 Plan”).

Mention should be made that the 2018-2020 Plan takes the form of a share granting plan and grants its beneficiaries the right to receive, free of charge, shares in the Company provided that, at the end of a reference period of three financial years, the performance targets set in the 2018-2020 Plan have been achieved.

The 8 beneficiaries of the 2018-2020 Plan are the Chief Executive Officer and 7 managers identified by name by the Chief Executive Officer, as delegated by the Board of Directors.

The characteristics of the 2018-2020 Plan are explained in detail in the Directors’ Report to the Shareholders’ Meeting of 26 April 2018 and in the information document contained therein, available on mondadori.it, Governance section, to which reference should be made.

Attached is the information required by Schedule 7 of Annex 3A to CONSOB Regulation no. 11971/1999 to account for the granting of shares in the context of the 2017-2019 Performance Plan.

The Board of Directors, on the favourable opinion of the Remuneration Committee, approved the granting of an accelerated vesting schedule on the 2019-2021 Performance Share Plan to the Chief Executive Officer, who has decided to end office, as a more favourable condition in line with the provisions of the relevant Regulation in the event of good leaving for the specific case. Accordingly, the Chief Executive Officer will be granted no. 770,142 shares effective 14.5.2021. A return condition applies in the event that the overall results of the Plan, upon approval of the 2021 financial statements, are not in line with the targets set out in the Plan.

With regard to the prior notice of 10 November on Ernesto Mauri’s decision to end his experience as Chief Executive Officer of the Mondadori Group, the Board of Directors resolved to integrate, in terms of duration and territorial scope of application, a non-compete agreement already established during his office, in reason of the protection of Group interests, also on an international level, taking account of the priority and confidentiality needs regarding the revision of strategic priorities also following the impact of the pandemic on the relevant markets.

A supplementary agreement was finalized on a gross consideration of € 800,000, with a non-compete clause extended to the territory of the European Union and until April 2023, approved by the Board of Directors on the favourable opinions of the Remuneration Committee and the Related Party Committee.

The above agreement complies also with the parameters and limits payable of consideration for the assumption of non-compete obligations governed by the Remuneration Policy for 2021 approved by the Board of Directors.

In accordance with the above, the effectiveness of the agreement is subject to approval, pursuant to Article 123 ter of the TUF, of Section One of the Remuneration Policy by the Shareholders’ Meeting called on 27 April.

PROPOSED ADOPTION OF A 2021-2023 PERFORMANCE SHARE PLAN
The Board resolved, on a proposal from the Remuneration and Appointments Committee, and in keeping with the introduction of the performance share approved last year for the medium/long-term remuneration of executive directors and key management personnel, to submit to the approval of the Ordinary Shareholders’ Meeting, the adoption of a 2021-2023 Performance Share Plan, in accordance with Article 114-bis of Legislative Decree no. 58 of 24 February 1998, intended for the Chief Executive Officer who will be appointed by the Board of Directors after the Shareholders’ Meeting, the CFO – Executive Director and a number of Company managers who have an employment and/or directorship relationship with the Company or with its subsidiaries on the grant date of the shares.

With the adoption of the Plan, the Company aims to encourage Management to improve medium to long-term performance, in terms of both industrial performance and growth in the value of the Company.

The Plan envisages the right for beneficiaries to receive a bonus in the form of Company shares, subject to the achievement of specific targets set and measured at the end of the three-year performance period from 2021 to 2023.

These targets are structured to include both shareholder remuneration indicators and management indicators functional to raising the share value, ensuring maximum alignment of Management remuneration and the creation of value for the Company.

For details on the proposed adoption of the 2021-2023 Performance Share Plan, the beneficiaries and the main characteristics of the Regulations of the Plan, reference should be made to the Information Document drawn up by the governing body, pursuant to Article 84-bis and annex 3A of the Issuer Regulation, and to the Explanatory Report, which will be published within the time limits and in the manner prescribed by applicable regulations.

COMPLIANCE WITH THE CORPORATE GOVERNANCE CODE
The Board of Directors resolved to comply with the Corporate Governance Code for Listed Companies published by the Corporate Governance Committee in line with the best practices of listed issuers.

The Board also resolved to transpose the Code by the end of the current year and will provide disclosure to the market in the corporate governance report to be published during 2022.

The Board of Directors also approved on today’s date the Guidelines on the qualitative and quantitative composition deemed optimal of the Board of Directors (hereinafter the “Guidelines”), as well as the Policy on the criteria for assessing the independence requirements of directors, including the quantitative and qualitative criteria for assessing the relevance of the relationships indicated in Recommendation 7 letters c) and d) of the Corporate Governance Code.

The above documentation is made publicly available on the website www.mondadori.it Governance section. The Guidelines are also made publicly available on the authorized storage mechanism 1info (www.1info.it).

REGULATION ON INCREASED VOTING RIGHTS
Notice is given that the Regulation on increased voting rights, as amended by the Board of Directors’ meeting held today, in order to bring the Regulation in line with the amendments to the Bylaws adopted by the company on 4 March 2021, as well as with the legislative and regulatory changes regarding Post Trading, is publicly available on the website www.gruppomondadori.it Governance section.

PUBLICATION OF DOCUMENTS
Arnoldo Mondadori Editore S.p.A. hereby announces that the notice of call of the Annual General Meeting, to be held on Tuesday 27 April 2021 in first call and, if required, in second call on Wednesday 28 April 2021, will be made publicly available at the registered office, at the authorized storage mechanism 1info (www.1info.it) and on the website www.gruppomondadori.it (Governance section), together with the Directors’ explanatory reports, in accordance with Article 125-ter of the TUF, on the following items on the agenda to be discussed in ordinary session: financial statements at 31 December 2020 and resolutions relating to the allocation of the result for 2020 of Arnoldo Mondadori Editore S.p.A.; authorization to purchase and dispose of treasury shares pursuant to the combined provisions of articles 2357 and 2357-ter of the Italian Civil Code; appointment of the Board of Directors; appointment of the Board of Statutory Auditors; resolutions, pursuant to Article 114-bis of the TUF on the granting of financial instruments

Also made available, in the above manners, the Information Document on the 2021-2023 Performance Share Plan, prepared in accordance with Annex 3A, under the provisions of art. 84-bis of the Issuer Regulation.

The notice of call of the AGM was published today also in the daily newspaper indicated in the notice.

The additional AGM documentation will be made available, in the manners above, within the time limits of current laws.

CONSOLIDATED NON-FINANCIAL STATEMENT PURSUANT TO LEGISLATIVE DECREE 254/2016
Under Legislative Decree 254/2016, the Board of Directors’ 2020 Report on Operations of the Mondadori Group is also composed of the Consolidated Non-Financial Statement, a qualitative-quantitative description of the non-financial performance of the Company, associated with environmental, social, and staff-related issues, as well as those regarding respect for human rights, and the fight against active and passive corruption, which are relevant given the activities and characteristics of the Company.

With regard to 2020, the Mondadori Group has updated its materiality analysis, in accordance with the principles set out by the GRI Sustainability Reporting Standards (GRI Standards), including the “Media Sector Disclosures”, defined in 2016 and 2014 respectively by the Global Reporting Initiative (GRI).

With a view to continuous improvement of the process, in 2020 the stakeholder engagement activity was expanded by involving the customers of Mondadori Store bookstores, who were given an online questionnaire.

In accordance with the recommendations of ESMA and CONSOB, the document presents an analytical description of the actions readily taken by the Mondadori Group for the necessary prevention to protect the health of its employees and associates, to guarantee its customers access to products and services during the lockdown period and to support the bookstores and newsstands chains.

The results for the year ended 31 December 2020, approved on today’s date by the Board of Directors, will be presented by the Mondadori Group Management to the financial community in a webcast presentation scheduled today at 3:30 PM.

The corresponding documentation will be available on 1Info (www.1info.it), www.borsaitaliana.it and www.gruppomondadori.it (Investors).

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

Annexes (in the complete pdf):

• Consolidated balance sheet;
• Consolidated income statement;
• Consolidated income statement – fourth quarter;
• Group cash flow;
• Arnoldo Mondadori Editore S.p.A. balance sheet;
• Arnoldo Mondadori Editore S.p.A. income statement;
• Arnoldo Mondadori Editore S.p.A. statement of cash flows;
• Glossary of terms and alternative performance measures used;
• Information pursuant to Schedule 7 of Annex 3a to CONSOB Regulation no. 11971/1999

[1] From 12 March up to the end of April, the adoption of government measures to contain the pandemic led to the closure of bookstores throughout Italy, with the resulting suspension of most of the activities related to the Group’s Retail business.
[2] It should be noted that the 2020 result benefited from the recognition of tax income of € 5.5 million related to the tax receivable from the “Patent box” facility.
[3] Pursuant to Decree M.D. 521 16/11/2020 “further allocation of a portion of the emergency fund for companies and cultural institutions”, intended to provide grants to art exhibition operators.
[4] GFK, December 2020 – sell-out figures in terms of market value (53 Weeks in 2020 vs. 52 Weeks in 2019)
[5] GFK, December 2020 (ranking in terms of cover value)
[6] Databank, June 2020 (revenue in terms of value net of channel discount)
[7] Product revenue excluding Club revenue
[8] GFK (in terms of value)
[9] Nielsen, December 2020, net of search, social, classified and OTT
[10] Internal source: Press-di, December 2020 (in terms of value)
[11] Internal source: Press-di, December 2020 (in terms of value)
[12] Internal source: Press-di, December 2020 (newsstands + subscriptions channel) in terms of value
[13] Press-di, December 2020 (newsstands + subscriptions channel) in terms of value; Audipress 2020/III
[14] Comscore, December 2020
[15] Shareablee, December 2020 + internal processing on Pinterest and TikTok figures

Today, the meeting of the Board of Directors of Arnoldo Mondadori Editore S.p.A., chaired by Marina Berlusconi, reviewed and approved the draft Parent Company and Group consolidated financial statements at 31 December 2019 presented by CEO Ernesto Mauri.

PERFORMANCE AT 31 DECEMBER 2019
In 2019, the Mondadori Group strengthened its business and financial standing even further, completing the second step in its strategic repositioning with the disposal of the Magazines France activities and the sale of a number of titles in the Magazines Italy Area.

At a consolidated level, the results achieved in 2019 confirm the indications disclosed to the market at the beginning of the year[1].

Consolidated revenue was basically steady at € 884.9 million versus € 891.4 million in 2018
(-0.7%), despite the change in the consolidation scope of the Magazines Italy Area following the disposal of Inthera S.p.A. and Panorama (+1% on a like-for-like basis).

Adjusted EBITDA before IFRS 16 amounted to € 94.5 million, up by € 4.4 million (+4.9%) versus the prior year (€ 90.1 million).

As a percentage of revenue, the item rose from 10.1% to 10.7%, with different trends shown by the various businesses:

• in line with the revenue trend, the Books Area reported an increase in the period, as a result of the positive performance of both the Trade and Education areas;
• the Retail Area retreated, as a result mainly of the drop in revenue on a like-for-like basis and less positive non-recurring items versus the prior year;
• the Magazines Italy Area fell versus 2018, as a result of the declining market trend, despite the continuing cuts in operating and structural costs, the further significant improvement in the digital area and the positive effects of the disposals made.

IFRS 16 adjusted EBITDA amounted to € 110.4 million and includes the IFRS 16 impact of approximately € 16 million.

EBITDA before IFRS 16 was up sharply versus the prior year from € 77.5 million to € 87 million (+12.2%). The improvement includes the increase in adjusted EBITDA and the strong reductions in restructuring costs recorded in the period.

IFRS 16 EBITDA amounted to € 102.9 million and includes the IFRS 16 impact of approximately
€ 16 million.

EBIT before IFRS 16 amounted to € 61.1 million, improving sharply (+8.4%) versus € 56.3 million at 31 December 2018, as a result of the dynamics of the above components, and includes amortization, depreciation and write-downs of € 25.9 million.

IFRS 16 EBIT amounted to € 62.3 million and includes the IFRS 16 impact of € +1.2 million.

Consolidated profit before tax came to € 51.7 million, improving sharply versus € 35.2 million in 2018 and includes:

• the decrease in financial expense (from € 2.9 million to € 2.2 million) as a result of lower average net debt;
• improved performance by associates (consolidated at equity) at € -8.1 million versus
  € -18.2 million in 2018.

The net result from continuing operations improved by € 12.8 million to € 33.1 million, up sharply by +62% versus € 20.3 million in 2018.

While still part of the Group (until 31 July 2019), Mondadori France generated net revenue of
€ 163.2 million (€ 178.6 million in the 7 months of 2018) and adjusted EBITDA of € 11.6 million
(€ 13.5 million in the 7 months of 2018). The net result from discontinued operations came to € -2.6 million and includes the net result for the seven months of Mondadori France and the fair value adjustment of French assets at the closing on 31 July 2019.

The Group’s net result before IFRS 16 amounted to € 29.3 million versus € -177.1 million in 2018, which included approximately € -200 million from the fair value adjustment of Mondadori France.

The net financial position before IFRS improved by € 91.8 million, with a resulting reduction in net financial debt at € -55.4 million versus € -147.2 million at 31 December 2018, as a result of the disposal of Mondadori France, equal to € 62.8 million, as well as the significant generation of cash flow from ordinary operations in the year, equal to € 48.5 million, from continuing operations.

The debt/adjusted EBITDA ratio stands at 0.7x (1.6x in 2018).

Considering the effect of the application of IFRS 16 (€ -95.9 million), the Group’s net financial position at 31 December 2019 stood at € -151.3 million.

At 31 December 2019, with regard to continuing operations, Group employees amounted to 2,018 units, down by -6% versus 2,137 units at December 2018 (net of the 743 employees of Mondadori France at 31 December 2018), as a result of efficiency gains across all areas of the Group.

CONSOLIDATED FINANCIAL RESULTS FOR FOURTH QUARTER 2019[2]
Consolidated revenue in fourth quarter 2019 amounted to € 225.9 million, down by -3% versus
€ 232.9 million in the prior year, due partly to the change in the consolidation scope of the Magazines Italy Area following the disposal of Panorama.

Adjusted EBITDA before IFRS 16 amounted to € 23.2 million versus € 27.3 million in the prior year.

IFRS 16 adjusted EBITDA came to € 27 million and includes the IFRS 16 impact of approximately € 4 million.

EBITDA before IFRS 16 amounted to € 20.7 versus € 24.5 million in 2018.

IFRS 16 EBITDA amounted to € 24.5 million and includes the IFRS 16 impact of approximately € 4 million.

BUSINESS OUTLOOK^[3]
In 2020, the Mondadori Group will continue along the path of strategic repositioning and focus on its core businesses of Books and Retail and on brands with greater potential for multimedia development.

In line with the outlined strategy, the operating targets for 2020, based on the current scope, allow the Group to estimate, at a consolidated level, a slight decrease in revenue (steady on a like-for-like basis) and a single-digit growth of adjusted EBITDA before IFRS 16 versus 2019.

The net result from continuing operations for 2020 is expected to increase versus the prior year (in the range of € 35-38 million), while continuing the dividend distribution policy.

Cash flow from ordinary operations in 2020 is forecast to improve at € 55 million.

This forecast refers to the current scope of the Group’s business: owing to the current
Covid-19-related emergency, no reliable forecasts can be made at this time on the duration and on the impacts, if any, on operations and results in 2020; the current events are, however, believed not to change the Group’s solid medium-long term prospects.

PERFORMANCE OF BUSINESS AREAS

BOOKS
The Trade Books market, following the slight decline in 2018 (-1.1%), recorded significant growth in terms of value (+5.5%) versus the prior year (+4% in terms of volume). In absolute terms, the increase amounted to € 65 million[4].

Against this backdrop, the Mondadori Group retained its leadership position with a 26.2% market share and 5 books appearing in the top 10 best-selling titles of the year: Una gran voglia di vivere by Fabio Volo (Mondadori); La misura del tempo by Gianrico Carofiglio (Einaudi), La versione di Fenoglio by Gianrico Carofiglio (Einaudi), Entra nel mondo di Luì e Sofi. Il Fantalibro di Me contro Te by Me contro Te (Mondadori Electa), In cucina con voi! by Benedetta Rossi (Mondadori Electa).

In the school textbooks market, the Mondadori Group retained its strong foothold, with a 21.7% share, adoptions-wise[5].

In Italy, this segment showed an overall growth trend in 2019 (+2.2%), with increases in the lower and upper secondary segments and stability in the primary[6]segment.

In 2019, revenue from the Books Area amounted to € 478.4 million, an overall increase of 6% versus € 451.3 million in 2018. Specifically:

• in the Trade Area, revenue increased by +7.6%;
• in the Educational Area, revenue grew by +5.9%.

Adjusted EBITDA before IFRS 16 amounted to € 93.2 million, improving sharply versus the same period of the prior year (€ 84.7 million), as a result of a vigilant management policy focused on the ongoing optimization of operating processes, which allowed the Group to lift profitability above 19%.

IFRS 16 adjusted EBITDA came to € 94.5 million and includes the IFRS 16 impact of € 1.3 million.

EBITDA before IFRS 16 amounted to € 92.8 million, improving versus € 82.9 million at 31 December 2018.

IFRS 16 EBITDA amounted to € 94 million and includes an impact of € 1.2 million.

RETAIL
In 2019, the Group continued to implement strategic actions to align the organization and the sales channels of the Retail Area with market developments, focusing on steady format and network revision.

In the Books segment, making for 82% of revenue, the market share of Mondadori Retail stood at 12.9%.

In 2019, Mondadori Retail recorded revenue of € 186.9 million, down by 2.6% versus
€ 191.8 million in the prior year, attributable to the performance of consumer electronics and the rationalization of the direct sales network.

The analysis by channel shows the following:

• a basic stability (+0.3%) of direct bookstores (-1.5% on a like-for-like basis in terms of stores);
• a decline in Megastores (-12.1%), attributable to the drop in consumer electronics sales and as a result of the rationalization of the sales network (-9.9% on a like-for-like basis in terms of stores);
• a slight improvement (+0.5%) in franchised bookstores (-1.1% on a like-for-like basis in terms of stores), despite the reduction in the number of points of sale;
• a slight drop in sales in the e-commerce channel (-0.5%);
• a drop by the Bookclub, albeit less than in prior years.

Adjusted EBITDA before IFRS 16 amounted to € -2.9 million versus € +1.4 million at 31 December 2019. The decrease is due mainly to lower revenue on a like-for-like basis, less positive non-recurring items and higher write-downs in consumer electronics.

IFRS 16 adjusted EBITDA amounted to € +5 million and includes the IFRS 16 impact of approximately € +8 million.

EBITDA before IFRS 16 amounted to € -5 million, down from the breakeven in 2018.

IFRS 16 EBITDA amounted to € +2.9 million and includes an impact of approximately
€ +8 million.

MAGAZINES ITALY
Once again, in 2019 the magazines market witnessed a continued drop in both print advertising[7] (versus a growth in the digital channel[8]) and in circulation[9] and add-on sales[10].

In the reporting period, the Magazines Italy Area recorded revenue of € 256.6 million, down by 10.6% versus € 287 million in 2018.

Net of the disposal of Inthera and Panorama, the decline was -5.4%, in particular:

• circulation revenue (newsstands + subscriptions) was down by -12.8%, in line with the performance of the relevant market (-16.6% considering Panorama in 2018);
• revenue from add-on products was up by 0.9% (-6.5% considering Panorama in 2018);
• advertising revenue (print + digital) fell by an overall -4.8% (-9.1% considering Panorama in 2018) with:
  • the digital channel up by approximately +12.5%, as a result in particular of the good performance of the food and health segments and the strong contribution of AdKaora’s proximity marketing solutions;
  • the print channel down by -14.8%, basically in line with market dynamics
    (-20.2% considering Panorama in 2018).

In 2019, digital revenue as a percentage of total advertising revenue in the Area amounted to approximately 42% (34% in 2018).

In 2019, the Mondadori Group retained its position as Italy’s top multimedia publisher in:

• print, with a 9% share of the circulation market^[11] in terms of value and 15.5 million readers per month;
• digital, with a 77% reach and over 30 million unique users per month;
• social, with an aggregate fan base of 31 million followers and 120 profiles.

Adjusted EBITDA before IFRS 16 in the Magazines Italy Area amounted to € 11.2 million, a slight fall versus the prior year (€ 11.9 million). This was attributable to actions that alleviated the impact from the drop in volumes, in turn influenced by the negative performance of the relevant markets, including the ongoing reduction in operating and structural costs; the further improvement in profitability of the digital area (€ 7 million); the disposal of Inthera S.p.A. and Panorama.

IFRS 16 adjusted EBITDA amounted to € 11.3 million.

EBITDA before IFRS 16 amounted to € 9.2 million, improving sharply versus € -0.2 million in 2018, as a result of less extraordinary items

IFRS 16 EBITDA amounted to € 9.4 million.

PERFORMANCE OF ARNOLDO MONDADORI EDITORE S.P.A.
The Parent Company’s income statement at 31 December 2019 shows the same net result as in the consolidated financial statements of € 29.3 million before IFRS 16 (€ 28.2 million IFRS 16), due to the fact that the Company has opted to use the equity method to measure its investments in the separate financial statements.

Revenue amounted to € 228 million and was down versus € 256.6 million in the prior year, due mainly to the reduction in print activities in the Magazines Italy Area (-16.4%, in line with the performance of the relevant markets and as a result also of the disposal of Panorama).

Revenue from the digital operations of the Magazines Italy Area, on the other hand, increased (+1.5%) thanks to the positive results from advertising sales. The Parent Company also recognizes revenue from services provided to other Group companies, equal to € 39.1 million.

Adjusted EBITDA before IFRS 16 increased slightly to € +0.3 million versus € -0.4 million in 2018, due in particular to the positive contribution of the digital operations of the Magazines Italy Area, achieved through efficiency gains and cost revision implemented by Management, which offset the lower margins of print magazines.

SIGNIFICANT EVENTS AFTER YEAR-END

Approval of Draft Law S.1421 containing provisions to promote and support reading

Following approval by the Chamber of Deputies in July 2019, on 5 February 2020 the Senate passed D.L. S.1421 containing provisions to promote and support reading. Pending the implementing decrees that will set out the terms and timing of application of these provisions more explicitly, the decree introduces – alongside a series of measures aimed, among other things, at disseminating the habit of reading, promoting the attendance of libraries and bookshops, enhancing and supporting the Italian language and the diversity of editorial production – a range of limitations (in terms of value and period) to promotional discount policies.

Specifically, the decree has introduced a reduction in the maximum ordinary discount applicable to books in bookshops, online stores and large retailers from 15% to 5% (15% for school textbooks); points of sale may organize promotions once a year with a 15% discount limit; publishers may apply a maximum discount of 20% (instead of the previous 25%), except for the month of December.

The effects of the introduction of these provisions on book purchasing trends are currently hard to forecast.

Law no. 160/2019 (2020 Budget Law) on early retirement
Under Article 1, paragraph 500, of Law 160/2019 (2020 Budget Law), from 1 January 2020 to 31 December 2023, print workers from newspaper and magazine printing companies, and from publishers of newspapers and magazines and press agencies with national circulation, which have submitted to the Ministry of Labour and Social Policies, from 1 January 2020 to 31 December 2023, crisis-related reorganization or restructuring plans, may apply for early retirement with a contribution period of 35 years only (instead of 38 years under the regulations currently in force).

During the relevant time period, early retirement could potentially affect a total of 116 employees of Arnoldo Mondadori Editore S.p.A., Mondadori Media S.p.A. and Press-di covered by graphics publishing collective labour agreements.

The Board of Directors of Arnoldo Mondadori Editore S.p.A. has convened the Ordinary Shareholders’ Meeting for Wednesday 22 April 2020 in first call to approve the financial statements for the year ended 31 December 2019 and, if required, in second call for Wednesday 20 May 2020.

DIVIDEND DISTRIBUTION PROPOSAL OF € 0.06 PER ORDINARY SHARE
The Board of Directors will propose to the next Shareholders’ Meeting, convened for Wednesday 22 April 2020 in first call and, if required, in second call for 20 May 2020, the distribution of a unit dividend, gross of tax, of € 0.06 for each ordinary share (net of treasury shares) outstanding on the ex-coupon date.

The total value is € 15.6 million.

The dividend will be paid, in accordance with the provisions of the “Regulations of the markets organized and managed by Borsa Italiana S.p.A.”, from 10 June 2020 (payment date), with ex-coupon date on 8 June 2020 (ex date) and with the date of entitlement to payment of the dividend, pursuant to Article 83-terdecies of the TUF (record date) on 9 June 2020.

PROPOSED RENEWAL OF THE AUTHORIZATION TO PURCHASE AND DISPOSE OF TREASURY SHARES
Following the expiry of the previous authorization resolved upon by the Shareholders’ Meeting on 17 April 2019, with the approval of the financial statements at 31 December 2019, the Board of Directors will propose to the next Shareholders’ Meeting the renewal of the authorization to purchase and dispose of treasury shares with the aim of retaining the applicability of law provisions in the matter of any additional buyback plans and, consequently, of seizing any investment and operational opportunities involving treasury shares.

Below are the key elements of the Board of Directors’ proposal:

• Motivations

The motivations underlying the request for the authorization to purchase and dispose of treasury shares refer to the opportunity to attribute to the Board of Directors the power:

• to use the treasury shares purchased as consideration in the acquisition of interests as part of the Company’s investment policy;
• to use the treasury shares purchased against the exercise of option rights, including conversion rights, deriving from financial instruments issued by the Company, its subsidiaries or third parties and to use the treasury shares for lending, exchange or transfer transactions or to support extraordinary transactions on the Company’s capital or financing transactions that imply the transfer or sale of treasury shares;
• to undertake any investments, directly or through intermediaries, including for the purpose of containing abnormal movements in share prices, stabilizing share trading and prices, supporting the liquidity of the share on the market, in order to foster the regular conduct of trading beyond normal fluctuations related to market performance, without prejudice in any case to compliance with applicable statutory provisions;
• to rely on investment or divestment opportunities, if considered strategic by the Company, also in relation to available liquidity;
• to dispose of treasury shares as part of share-based incentive plans pursuant to Article 114-bis of the TUF, and of plans for the free allocation of shares to Shareholders.

• Duration

The authorization to purchase treasury shares is set to last until the approval of the financial statements for the year ending 31 December 2020, while the authorization to sell is granted to last for an unlimited period, given the absence of provisions in this regard pursuant to the provisions in force and the opportunity to allow the Board of Directors to make use of the maximum flexibility, also in terms of time, to carry out the acts of disposal of the shares.

• Maximum number of purchasable treasury shares

The new authorization would allow the purchase, including in more than one tranche, of ordinary shares of Arnoldo Mondadori Editore S.p.A., up to a maximum number of shares – also taking into account the ordinary shares held, directly and indirectly, in the portfolio from time to time – of no more than 10% overall of the share capital, in accordance with Article 2357, paragraph 3, of the Italian Civil Code.

• Criteria for purchasing treasury shares and indication of the minimum and maximum purchasing cap

The purchases would be made in compliance with the principle of equal treatment of shareholders under Article 132 of the TUF, in accordance with any of the procedures set out in Article 144-bis of the Issuer Regulation, to be identified from time to time, and any other applicable regulations, as well as, where applicable, the market practices allowed from time to time in force.

Additionally, share purchase transactions may also be carried out in the manner envisaged in Article 3 of EU Delegated Regulation no. 2016/1052 in order to benefit, if the conditions are met, from the exemption under Article 5, paragraph 1, of EU Regulation no. 596/2014 on market abuse with regard to inside information and market manipulation.

As far as disposal transactions are concerned, the authorization would allow the adoption of any appropriate method to fulfill the purposes pursued – including the use of treasury shares to service stock incentive plans and/or the transfer of real and/or personal rights and/or stock lending – to be carried out either directly or through intermediaries, in compliance with the relevant laws and regulations in force.

Without prejudice to the fact that purchases of treasury shares would be made in accordance with the time limits, conditions and requirements established by the applicable Community legislation and by the admitted market practices, the minimum and maximum purchase price would be determined for a unit price not lower than the official Stock Exchange price of Arnoldo Mondadori Editore S.p.A. shares on the day preceding the purchase transaction, reduced by 20%, and not higher than the official Stock Exchange price on the day preceding the purchase transaction, increased by 10%.

However, in terms of purchase prices, the additional conditions set forth in Article 3 of the above EU Delegated Regulation 2016/1052 would apply.

With regard to the provisions of Article 2357, paragraph 1, of the Italian Civil Code, purchases would in any case be made within the limits of the available “extraordinary reserve” as shown in the last duly approved financial statements.

In any case, purchases would be made, in terms of definition of volumes and unit prices, in accordance with the conditions governed by Article 3 of EU Delegated Regulation 2016/1052, and in particular:

• no shares shall be purchased at a price higher than the higher between the price of the last independent trade and the price of the highest current independent bid on the trading venue where the purchase is carried out;
• in terms of volumes, no more than 25% of the average daily trading volume of Arnoldo Mondadori Editore S.p.A. shares shall be purchased in the 20 trading days prior to the dates of purchase.

Purchases instrumental in the support to market liquidity shall also be made in accordance with the conditions provided by the admitted market practices.

To date, Arnoldo Mondadori Editore S.p.A. holds a total of no. 2,938,293 treasury shares (1.124% of the share capital).

For further information on the proposed authorization for the purchase and disposal of treasury shares, reference should be made to the Directors’ Explanatory Report, which will be published within the time limits and in the manner prescribed by applicable regulations.

GRANTING OF SHARES UNDER THE 2017-2019 PERFORMANCE SHARE PLAN: DISCLOSURE PURSUANT TO ART. 84-BIS, PARAGRAPH 5 OF CONSOB REGULATION NO. 11971/1999
The Board of Directors, on the proposal of the Remuneration and Appointments Committee, resolved to grant, effective from 1.6.2020, a total of no. 1,649,965 Arnoldo Mondadori Editore S.p.A. shares to 10 beneficiaries, in implementation of the provisions contained in the “2017-2019 Performance Share Plan” established by the Board of Directors on 21 March 2017 and subsequently approved by the Shareholders’ Meeting on 27 April 2017 (the “2017-2019 Plan”).

Mention should be made that the 2017-2019 Plan takes the form of a share granting plan and grants its beneficiaries the right to receive, free of charge, shares in the Company provided that, at the end of a reference period of three financial years, the performance targets set in the 2017-2019 Plan have been achieved.

The 10 beneficiaries of the 2017-2019 Plan, identified by name by the CEO, as delegated by the Board of Directors, are the CFO – Executive Director and selected managers.

The characteristics of the 2017-2019 Plan are explained in detail in the Directors’ Report to the Shareholders’ Meeting of 27 April 2017 and in the information document contained therein, available on mondadori.it, Governance section, to which reference should be made.

Attached is the information required by Schedule 7 of Annex 3A to CONSOB Regulation no. 11971/1999 to account for the granting of shares in the context of the 2017-2019 Performance Plan.

PROPOSED ADOPTION OF A 2020-2022 PERFORMANCE SHARE PLAN
The Board resolved, on a proposal from the Remuneration and Appointments Committee, and in keeping with the introduction of the performance share approved last year for the medium/long-term remuneration of executive directors and executives with strategic responsibilities, to submit to the approval of the Ordinary Shareholders’ Meeting, the adoption of a 2020-2022 Performance Share Plan, in accordance with Article 114-bis of Legislative Decree no. 58 of 24 February 1998, intended for the CFO – Executive Director and a number of Company managers who have an employment and/or directorship relationship with the Company or with its subsidiaries on the granting date of the shares.

With the adoption of the Plan, the Company aims to encourage Management to improve medium to long-term performance, in terms of both industrial performance and growth in the value of the Company.

The Plan envisages the right for beneficiaries to receive a bonus in the form of Company shares, subject to the achievement of specific targets set and measured at the end of the three-year performance period from 2020 to 2022.

These targets are structured to include both shareholder remuneration indicators and management indicators functional to raising the share value, ensuring maximum alignment of Management remuneration and the creation of value for the Company.

For details on the proposed adoption of the 2020-2022 Performance Share Plan, the beneficiaries and the main characteristics of the Regulations of the Plan, reference should be made to the Information Document drawn up by the governing body, pursuant to Article 84-bis and annex 3A of the Issuer Regulation, and to the Explanatory Report, which will be published within the time limits and in the manner prescribed by applicable regulations.

CONSOLIDATED NON-FINANCIAL STATEMENT PURSUANT TO LEGISLATIVE DECREE 254/2016
Under Legislative Decree 254/2016, the Board of Directors’ 2019 Report on Operations of the Mondadori Group is also composed of the Consolidated Non-Financial Statement, a qualitative-quantitative description of the non-financial performance of the Company, associated with environmental, social, and staff-related issues, as well as those regarding respect for human rights, and the fight against active and passive corruption, which are relevant given the activities and characteristics of the Company.

With regard to 2019, the Mondadori Group has updated its materiality analysis, in accordance with the principles set out by the GRI Sustainability Reporting Standards (GRI Standards), including the “Media Sector Disclosures”, defined in 2016 and 2014 respectively by the Global Reporting Initiative (GRI).

With a view to continuously improving the process, in 2019 the stakeholder mapping was updated and stakeholder engagement activities were expanded: in addition to external interviews, carried out by involving suppliers of the main utilities and franchisees of Mondadori Store bookshops, an online questionnaire was administered to all Group employees.

The results for the year ended 31 December 2019, approved on today’s date by the Board of Directors, will be presented by the Mondadori Group Management to the financial community in a conference call scheduled today at 3:30 PM.

The corresponding documentation will be available on 1Info (www.1info.it), www.borsaitaliana.it and www.gruppomondadori.it (Investors).

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

Annexes (in the complete pdf):

• Consolidated balance sheet;
• Consolidated income statement;
• Consolidated income statement – fourth quarter;
• Group cash flow;
• Arnoldo Mondadori Editore S.p.A. balance sheet;
• Arnoldo Mondadori Editore S.p.A. income statement;
• Arnoldo Mondadori Editore S.p.A. cash flow statement;
• Glossary of terms and alternative performance measures used;
• Information pursuant to Schedule 7 of Annex 3a to CONSOB Regulation no. 11971/1999

[1] 2019 outlook disclosed to the market prior to application of IFRS 16
[2] Before application of IFRS 16
[3] Before application of IFRS 16
[4] GFK, December 2019 (in terms of value)
[5] ESAIE, 2019 (number of adopted sections)
[6] Databank, 2019
[7] Magazines: -13.9% (Nielsen, cumulative figures at December 2019);
[8] Digital: +3.5% (Nielsen, cumulative figures at December 2019);
[9] -12.4% in terms of value (Internal source, figures at December 2019, newsstands + subscriptions channel)
[10] -11.9% in terms of value (Internal source, figures at December 2019, newsstands + subscriptions channel)
[11] -12.4% in terms of value (Internal source, figures at December 2019, newsstands + subscriptions channel)

Today, the meeting of the Board of Directors of Arnoldo Mondadori Editore S.p.A., chaired by Marina Berlusconi, reviewed and approved the draft Parent Company and Group consolidated financial statements at 31 December 2015[1] presented by CEO Ernesto Mauri.

2015 was a truly important year in the history of the Mondadori Group, a year in which we laid the structural foundations to address the challenges of our new phase of growth.
We confirmed the positive outcome of the path taken for some years now which, thanks to the steadfast commitment to the reduction in operating and overhead costs, brought a sharp improvement in our results, with a positive profitability touching all business areas, and in Mondadori’s ability to generate financial resources.
We continued to successfully focus on our core businesses, through the strategic rationalization of the portfolio of activities: the extraordinary transactions for the disposal of a number of non-strategic assets completed in 2015 (transfer of the majority interest in R101, a property in Rome, and 50% of the Harlequin Mondadori joint venture) have further increased available financial resources.
These positive results were used to reduce consolidated debt – which was almost halved in less than 24 months – and to provide adequate resources to the strategic lines of the Group’s development.
2015, in fact, was a year of transition to a new phase for Mondadori, in which the Company has returned to investing in order to strengthen its competitive edge in the Group’s strategic businesses and sustain the growth process.
In July, Mondadori increased its investment in Gruner+Jahr/Mondadori to 100%, adding even further value to its portfolio with a successful brand such as Focus, in line with its strategy to strengthen Group leadership in the magazine market by focusing on the key titles with the highest growth potential in the digital segment.
In October, the Group took a crucial step in its strategic development, signing the agreement to acquire RCS Libri, which will allow Mondadori, from 2016, to extend its foothold in the Italian trade books and school textbooks market, and in the international illustrated books business (United States in particular).

GROUP PERFORMANCE AT 31 DECEMBER 2015

In 2015 consolidated net revenue came to 1,122.8 million euro, down by 4% versus 1,169.5 million euro in 2014. The Magazines Italy area includes revenue generated by Gruner+Jahr/Mondadori, consolidated since 1 July 2015 (9 million euro) – now Mondadori Scienza; net of this change, at the Group level, the drop in revenue would amount to 4.7%.

In 2015 consolidated EBITDA improved strongly (+14%), reaching 81.6 million euro versus 71.5 million euro in 2014, due also to the benefits from non-recurring items such as the gain from the disposal of a property in Rome and of 50% of the Harlequin Mondadori joint venture.
Even net of non-recurring items, EBITDA grew by 7.5%, from 67.9 million euro in 2014 to 73 million euro in 2015, increasing its percentage on revenue from 5.8% to 6.5%. The consolidation of Gruner+Jahr/Mondadori contributed a positive 0.4 million euro, while the disposal of the Harlequin Mondadori joint venture contributed a negative 0.2 million euro.

The quarter-by-quarter results confirm the Group’s increasing efficiency, achieved despite the difficult market scenario in which it operates, deriving from the industrial revision actions and re-organization launched and implemented over the last two years, while maintaining continuous improvement in the quality of the publishing programme as a key objective.
Profitability (net of non-recurring items) recovered thanks to the lower percentage of the cost of items sold by over 2 percentage points (from 41.1% to 38.8% of revenue, improving across all business areas), and to the reduction in fixed costs (from 11% to 10.4% of revenue), higher than the reduction in revenue, partly alleviated by the rising percentage of variable costs on revenue (from 23.3% to 24.9%).

At 31 December 2015, the headcount dropped by 1.5% (3,076 units versus 3,123 in 2014), as a result of the ongoing review of the organizational process both in Italy and in France (like-for-like: -3%, or 94 units); net of non-recurring restructuring costs, the cost of personnel in 2015 fell by 3.4% versus 2014 (-5.3% like-for-like).

In 2015 consolidated EBIT amounted to 54.5 million euro, up by approximately 13% versus 48.2 million euro in 2014, as a result of the abovementioned growth in EBITDA, despite increased amortization, depreciation and impairment mainly from the impairment of the interest held in the Greek Attica Publications subsidiary (4 million euro), and from the impairment of goodwill of Kiver and Mondadori UK (3 million euro).
Depreciation of tangible assets (6.9 million euro versus 9.8 million euro in 2014) and amortization of intangible assets (13.1 million euro versus 13.5 million euro in 2014) continued to fall as a result of lower capital expenditure.

Consolidated profit before taxes came to a positive 38.3 million euro, up by 52% versus 25.2 million euro in 2014; financial costs in 2015 amounted to 16 million euro, falling sharply versus 23 million euro in 2014, as a result of reduced average net debt and average total cost of debt, and of the contribution of 1.6 million euro from the derecognition of a number of put options.
Tax costs in the reporting period came to 20.4 million euro (16.7 million euro in 2014), and include the impairment of deferred tax assets on prior-years’ losses, following the tax rate reduction introduced by the 2016 Stability Law (IRES rate from 27.5% to 24% from 1 January 2017).

The consolidated net profit from continuing operations, net of minority interests, almost tripled versus 31 December 2014, and came to 15.1 million euro versus 5.3 million euro in 2014.
The result from discontinued operations, which came to a negative 8.7 million euro in 2015, includes the period net result of the Radio Business area (improving from -4.7 million euro at 31 December 2014 to -3.1 million euro), as well as the loss of 5.6 million euro from the impairment of Monradio operations, disposed of in September 2015.

The Group’s net profit at 31 December 2015, net of the result from discontinued operations, came to a positive 6.4 million euro, up by 5.8 million euro versus 0.6 million euro in 2014, despite the inclusion of the depreciation of Monradio operations.

The Group’s net financial position at 31 December 2015 came to -199.4 million euro, improving sharply (92.4 million euro) versus -291.8 million euro at 31 December 2014, as a result of the Group’s twelve-month cash generation, deriving both from improved ordinary operations and extraordinary operations.

At 31 December 2015, cash flow from operations came to a positive 70 million euro; ordinary cash flow (after the cash-out for financial charges and taxes for the year) amounted to 45.4 million euro, continuing the improvement witnessed in the previous five quarters.

Cash flow from extraordinary operations came to a positive 47 million euro, mainly as a result of the gain generated by the disposals completed in the period, totalling 54.8 million euro, from the transfer of 80% of Monradio and 50% of the Harlequin Mondadori joint venture, previously recognized at 30 September 2015, as well as a property in Rome completed in December.

BUSINESS AREAS

• BOOKS

In 2015, after years of constant decline, the Books market rose by 0.9% versus 2014 (GFK, December): against this backdrop, the Mondadori Group retained its leadership in the trade segment with a 24% market share (versus 25.3% in 2014).
In the school textbooks market, Mondadori Education held to its third place in the segment, with a 12.5% share, adoptions-wise (AIE).

In 2015, the Books Area revenue amounted to 320.8 million euro, down by 5.7% versus 340.1 million euro in 2014, with a good performance achieved by the Educational area, and a drop reported by the Trade segment.

• Trade Books: the reduction in revenue witnessed in trade in 2015 versus the previous year (from 182.4 million euro to 160.4 million euro) is attributable to the selective publishing policy focused on improving efficiency, therefore, profitability; specifically, in 2015, the amount of new titles and average print run was cut to reduce future unsold stock. These targeted actions have and will be taken maintaining the priority objective of research and ongoing improvement of the quality of the publishing schedule, as shown by the ranking of the top ten bestselling titles in 2015, with 5 of the Group’s titles in the charts (Grey, La ragazza del treno, È tutta vita, After and Cinquanta sfumature di grigio);
• Educational Books: in this segment, the Group grew by 2.8% versus 2014, driven by the good performance of Mondadori Electa (+17.5%), as part of the management of museum concessions and the organization of exhibitions, and by EXPO Milano 2015, which more than offset the decline in revenue in the school textbooks segment (-4.3%).

Revenue from the download of e-books, amounting to 10 million euro, rose by 15% versus 2014, with digital sales accounting for 6.2% of total trade (4.8% at 31 December 2014).

Reported EBITDA for the Area came to 45.9 million euro, up from 45.1 million euro in 2014, and includes the 7.6 million euro gain from the transfer of the interest held in the Harlequin Mondadori joint venture (completed on 30 September 2015), and a higher percentage of restructuring costs versus 2014 (4.3 million euro in 2015 versus 0.9 million euro in 2014).

EBITDA, net of non-recurring items, fell from 46 million euro to 42.7 million euro, parallel to the drop in revenue.
The figure was basically steady as a percentage on revenue (13.3% versus 13.5% in 2014), as a result of the good performance in the Educational area, and of greater efficiency in managing operating processes, achieved thanks to the deep organizational and product review implemented in the Trade segment.

• MAGAZINES ITALY

In 2015, the Mondadori Group retained its leadership with a market share of 31.2% at 31 December 2015 (internal source Press-di; December 2015).

In 2015, Magazines Italy posted revenue totalling 296.3 million euro, down by 2.1% versus 302.7 million euro in 2014 (-4.9% like-for-like, net of the 50% acquisition of Gruner+Jahr/Mondadori), outperforming the relevant segment in terms of advertising, while being in line circulation-wise:

• circulation revenue dropped by 1.7%; on a like-for-like basis, the drop was 7.5%, in line with the market, due also to the decline in the subscription channel caused by the rationalization of low-profit subscriptions;
• revenue from add-on products dropped by 8.8% versus 2014, as a result of the rationalization process implemented, which targeted increased project profitability (-10.6% like-for-like);
• total advertising revenue fell by 1.8%; on a like-for-like basis, gross advertising sales on Mondadori brands in Italy (print + web) were down by 3.7%.

International activities, through Mondadori International Business, increased revenue by 2.4% versus 2014, thanks mainly to the performance of the Grazia International Network and the launch of the international editions of Il mio Papa.

EBITDA for the Magazines Italy area, net of non-recurring items, posted a remarkable improvement, rising from -0.7 million euro to a positive 5.8 million euro, despite the decline in revenue caused by the market conditions and by the implementation of targeted project selection policies, as a result of the effective review of the publishing and operating organization, and the containment of promotional activities, while retaining the traditional focus on the publishing quality of the titles.

Reported EBITDA confirmed the growth trend, rising from -1 million euro to a positive 2.6 million euro, as a result of the abovementioned actions and of the lower reduction in advertising sales, despite higher restructuring costs and non-recurring items of approximately 1 million euro in 2014, deriving from the contribution of advertising operations to Mediamond.

Traffic data of Mondadori websites showed an overall audience rate of 9.5 million unique users (Audiweb, December 2015), up by 16% versus 2014, due also to the inclusion in the scope of the Nostrofiglio.it brand (Gruner+Jahr/Mondadori), which boasted over 1.3 million unique users in December 2015 (+19% versus 2014).

MAGAZINES FRANCE
In the reporting period, Mondadori France revenue came to 334.6 million euro, down by 1.9% versus 2014 (340.9 million euro), halving last year’s decline (-3.7% in 2014).
Revenue from print activities was down by 2.9%, while digital activities stepped up their growth (+27%), thanks to the development of the digital activities on the properties (+26%: advertising revenue and revenue from the sale of digital copies) and of NaturaBuy (+31%).

Against a sliding market backdrop and despite a rather poor start to the year following the January terrorist attacks, Mondadori France’s advertising revenue (print + digital) dropped by 3.3% versus 2014. Specifically:

• print advertising sales were down by 5% in value versus 2014, outperforming the market (-6.3%; Kantar Media, December); Mondadori France retained its position as the second player in the magazine advertising market, with its share in terms of volumes at 10.9%.
• digital advertising revenue rose by almost 30% (versus the market’s 5.5% increase; SRI-Udecam-PwC), making for almost 15% of total advertising revenue, as a result of the sharp increase in audience (+20%).

Circulation revenue (newsstands and subscriptions), which accounts for more than 70% of the total, showed an overall 1.8% decline, slightly improving versus 2014, thanks to the performance of subscriptions, which make for over half the total.
Specifically:

• newsstand channel revenue dropped by 5.8%; the comparison with 2014 results is affected, on the one hand, by the poor start of the market in 2015, as a result of the challenging national environment and, on the other, by the outstanding performance in January 2014, driven by the publication of the “Hollande scoop” on Closer;
• on the other hand, subscription channel revenue posted a 0.8% growth versus 2014, thanks to the good trend in volumes, propelled by the ongoing promotional initiatives and steady prices, confirming the strategic opportunity to further invest in this channel.

These positive performances were made possible thanks to the constant attention paid to publishing quality and innovation.

EBITDA, net of non-recurring items, was basically steady versus 2014, totalling 36 million euro, with margins on revenue again above 10% (10.8% in 2015 versus 10.5% in 2014). A positive result achieved by Mondadori France, which continued to rationalize structures and curb editorial costs, while retaining its ability to invest in publishing quality and in diversification, with a view to further adjusting the organization to market changes and to sustaining profitability.
Specifically, two projects were launched in 2015, critical to countering the market downturn and to transforming the company into a truly digital organization: a restructuring plan based on voluntary staff leaving, launched in May; and the reorganization of the editorial teams, to be fully completed from end 2016.
As forecast, digital activities achieved a positive EBITDA in 2015.

Reported EBITDA, amounting to 32.4 million euro, was down by 7.5% versus 2014 (35 million euro), due to higher restructuring costs of approximately 2.8 million euro resulting from the above plan in effect.

Digital and diversification activities (over 8% of total revenue) grew by 14% thanks mainly to the growth of digital activities (+26.9%), regarding both the titles (+26.2%) and the NaturaBuy website (+30.9%).
The total number of readers of Mondadori France magazines reached 8.8 million unique users (Mediamètre Net Ratings MNR, average figure January-December 2015), up by approximately 23.8% versus 2014, also as a result of the steady digitization of the editorial teams.

• RETAIL

In the Retail area, the Group continued to implement strategic actions to align the organization and the sales channels to the developments of the market, which showed the first signs of recovery in 2015, focusing on operating costs reduction, on gradual network revision and format.

In 2015, the Retail area’s revenue fell by 7.2% to 196 million euro versus 211.2 million euro in 2014, mainly as a result of the disposal of the flagship store in corso Vittorio Emanuele in Milan (which had contributed 14.2 million euro in 2014). In the Books segment, which made for 77% of store revenue, Mondadori Retail has a 14.2% market share.

The analysis by channel showed the following:

• the growth of directly-managed book stores: +2.0% on a like-for-like basis;
• franchised bookstores: slight downturn of revenue in the books segment, but a slight increase overall with stores like-for-like (+0.8%);
• net of the disposal of the flagship store in corso Vittorio Emanuele in Milan, books in Megastores posted a good performance (+6.8%), while consumer electronics returned to growth (+2.3%);
• in the online segment, revenue was down by 5.7% overall (-1.8% in the books segment);
• book clubs performed in line with the structural reduction expected in the medium term development plan (-14.3%).

In 2015, Mondadori Retail posted a positive EBITDA, net of non-recurring items, of 2.2 million euro, improving sharply versus 0.2 million euro in 2014. The recovery of one percentage point of profitability is due largely to the improved product margins, specifically in the Books segment and in consumer electronics, and to the extended implementation of cost reduction measures, which led to a lower percentage of fixed and personnel costs.

Reported EBITDA in 2015 amounted to 1.8 million euro versus 8.9 million euro in 2014, which included the contribution of 9.3 million euro from the gain generated by the disposal of the flagship store in corso Vittorio Emanuele in Milan.

PERFORMANCE OF ARNOLDO MONDADORI EDITORE S.P.A.
The financial statements of the Parent company, Arnoldo Mondadori Editore S.p.A., for the year ended 31 December 2015, show a loss of 32 million euro (12.9 million euro in 2014).
As a result of the transfer of the business unit relating to publishing and distribution activities in the Books area, effective 1 January 2015, the two years are not comparable. The net profit in 2014 included operating profit of 11.7 million euro from the transferred BU, in addition to over 20.1 million euro in dividends received from a number of subsidiaries in the Books area.
The net profit was also affected by:

• EBITDA before non-recurring items amounting to -7.5 million euro, as a result of the structural costs of the Digital and Corporate area (-12.2 million euro), offset by the positive result in the Magazines Italy area (4.8 million euro);
• the adjustment to equity of the measurement of subsidiary and associated companies, amounting to 24.7 million euro versus 28.2 million euro in 2014, in addition to the charges from the disposal of Monradio and resulting exit from the radio business, amounting to 1.9 million euro;
• positive non-recurring items of 7.2 million euro, as a result of the gain from the disposal of the property in Rome, net of restructuring costs for incentives granted to employees and contractors.

SIGNIFICANT EVENTS AFTER YEAR END
On 22 January 2016, the Antitrust Authority announced the opening of an investigation into the acquisition of RCS Libri. The investigation will be completed within 45 days from 21 January 2016. An additional 30 days will be needed to receive an opinion from the Communications Authority.

2016 OUTLOOK
In 2015, the Group continued to vigorously implement its efficiency measures, consistent with the dynamics of its relevant markets, and the strategic rationalization of its portfolio of activities. The success of these strategies, coupled with the improvement of business performance, allowed it to achieve EBITDA of over 80 million euro and a positive net profit, on the rise versus 2014, as well as a strong reduction in the net financial position.

In 2016, the Group will continue to strengthen its core businesses – this also includes the mentioned agreement on the acquisition of RCS Libri – through constant focus on publishing quality and on the optimization of operating processes and cost structure, in order to further strengthen its competitive position and implement the development plan in the digital segment.

In light of the current relevant context and the Group’s positive performance in the opening months, it is reasonable to expect for the current year basically steady revenue (on a like-for-like basis) versus 2015 and a “high-single digit” growth of operating EBITDA (on a like-for-like basis), with a resulting increase in marginality.

In line with the above and notwithstanding a recovery in investments, the net financial position (on a like-for-like basis) is expected to further improve versus 31 December 2015.

To date, these projections do not include the consolidation of RCS Libri and the relating synergies from the integration, the impact on the outlook for the current year of which will be readily disclosed to the market once the transaction is completed.
§

The Board of Directors of Arnoldo Mondadori Editore S.p.A. also aligned financial and non-financial disclosures by approving its 2015 Sustainability Report, drafted according to the GRI Guidelines, standard G4, based on the “in accordance” – core rating.
A summary of the Sustainability Report in line with the provisions contained in the 2014/95/EU directive adopted by the EU Parliament and Council on 22 October 2014 will be supplemented in the Annual Report; the complete document will be made available at the Shareholders’ Meeting.

§

The Board of Directors of Arnoldo Mondadori Editore S.p.A. called the Shareholders’ Meeting on Thursday 21 April 2016 in first call.

PROPOSAL TO COVER THE LOSS OF THE PERIOD BY USING AVAILABLE RESERVES
The Board of Directors will propose to the Shareholders’ Meeting to entirely cover the loss of the year of 31,981,679.37 euro at 31 December 2015 by using the available reserves as follows:

• 1,100,690.02 euro by fully resorting to the stock option reserves under item “Other reserves and profit (loss) carried forward”;
• 30,880,989.35 euro by partially resorting to the available portion of the extraordinary reserve under item “Other reserves and profit (loss) carried forward”;

§

RENEWAL OF THE AUTHORIZATION TO PURCHASE AND SELL TREASURY SHARES
Following the expiry of the preceding authorization resolved upon by the Shareholders’ Meeting on 23 April 2015, with the approval of the financial statements at 31 December 2015, the Board of Directors will propose to the next Shareholders’ Meeting the renewal of the authorization to purchase Treasury Shares with the aim of retaining the applicability of law provisions in the matter of any additional re-purchase plans and, consequently, of picking up any investment and operational opportunities involving Treasury Shares.
The Shareholders’ Meeting of 23 April 2015 authorized the purchase of Treasury Shares up to a maximum of 10% of the share capital made up of No. 26,145,834 ordinary shares.

In relation to the authorization of 23 April 2015, Arnoldo Mondadori Editore S.p.A. did not proceed, either directly or indirectly through its subsidiaries, to purchase any Treasury Shares.

On the occasion of the next Shareholders’ Meeting the proposal for the renewal of the authorization to sell the treasury shares acquired by the Company will also be made pursuant to article 2357 ter of the Italian Civil Code.
Here below are the main elements of the proposal made by the Board of Directors:

• Motivations

The motivations underlying the request for the authorization to purchase and sell treasury shares refer to the opportunity to attribute to the Board of Directors the power to:

• to use the treasury shares purchased as compensation for the acquisition of interests within the framework of the Company’s investments;
• to use the treasury shares purchased against the exercise of option rights, including conversion rights, deriving from financial instruments issued by the Company, its subsidiaries or third parties and to use the treasury shares for exchange or transfer transactions or to support extraordinary transactions on the Company’s capital or financing transactions that imply the transfer or sale of treasury shares;
• to possibly rely on investment or divestment opportunities, if considered strategic by the Company, also in relation to available liquidity;
• To sell treasury shares against the exercise of option rights for the relevant purchase granted to the beneficiaries of the Stock Option Plans established by the Shareholders’ Meeting.

• Duration

Until the Shareholders’ Meeting called to approve the financial statements at 31 December 2016 and, in any case, for a period not exceeding 18 months from the effective date of the resolution made by the Shareholders’ Meeting.

• Maximum number of purchasable Treasury Shares

The renewed authorization will enable the Company to reach the cap of 10% of its share capital, in line with the previous authorization.
Considering that, as indicated above, the Company does not hold any treasury shares, either directly or indirectly, the authorization would refer to the purchase of maximum No. 26,145,834 treasury shares (10% of the share capital).

• Criteria for purchasing Treasury Shares and indication of the minimum and maximum purchasing cap

Purchases shall be made on the regulated markets pursuant to article 132 of Italian Legislative Decree n. 58 of 24 February 1998 and article 144 bis, paragraph 1, letter B of Consob Regulation n. 11971/99 according to the operating criteria established in the organization and management regulations of the same markets, which do not allow the direct combination of the purchase negotiation proposals with pre-determined sale negotiation proposals, and also in compliance with any additional applicable regulations
The minimum and maximum purchase price would be determined under the same conditions established by the preceding Shareholders’ Meeting authorizations, i.e. at a unit price not lower than the official Stock Exchange price of the day preceding the purchase transaction, reduced by 20%, and not higher than the official Stock Exchange price of the day preceding the purchase transaction, increased by 10%.
In terms of daily prices and volumes the purchase transactions would be completed in compliance with the conditions established in EC Regulation n. 2273/2003.

§

The 2015 results, approved today by the Board of Directors, will be presented by the Mondadori Group Management to the financial community today, 3.30 PM, at the Mondadori Megastore in piazza Duomo, Milan.
The corresponding documentation will be made available on 1Info a twww.1info.it, www.borsaitaliana.it and www.gruppomondadori.it (Investor Relations).

§

The Executive Manager responsible for the drafting of the corporate accounting documentation – Oddone Pozzi – hereby declares, pursuant to Art. 154 bis, par. 2, of the Finance Consolidation Act, that the accounting documentation contained in this press release corresponds to the Company’s accounting entries, books and results.

[1] On 30 September 2015 the transfer of 80% of the share capital of Monradio S.r.l. to R.T.I. S.p.A. was completed for a consideration of 36.8 million euro. Pursuant to IFRS 5 (“Non-current assets held for sale”), the Group’s radio business was listed as “discontinued operations” and as such entered in these consolidated financial statements. As a result, in the income statement of 2015 and of 2014 included for comparison purposes, the results achieved in the radio business area in the period, along with the depreciation of operations made in order to bring their value in line with the fair value resulting from the offer, were classified under “Result from discontinued operations”.

The meeting of the Board of Directors of Arnoldo Mondadori Editore S.p.A., held on today’s date and chaired by Marina Berlusconi, examined and approved the draft Parent Company and Group consolidated financial statements at 31 December 2014 presented by the CEO Ernesto Mauri.

2014 proved a turning point for Mondadori, with the confirmation of the positive outcome of the actions implemented in 2013 relating to the strategic rationalization of the portfolio of activities and the renewed definition of the Group’s industrial and organizational structure. Combined with the ongoing commitment on the reduction of operating and overhead costs these actions resulted in a significantly improved economic performance, giving Mondadori again the possibility to generate a positive cash flow with the objective, on one hand, to reduce the Group’s indebtedness and, on the other, to support the Group’s growth with appropriate resources.

GROUP PERFORMANCE AT 31 DECEMBER 2014

In 2014 consolidated net revenues totalled euro 1,177.5 million, down 7.7% against euro 1,275.8 million in 2013. On a like-for-like basis and considering the transfer of the advertising sales business unit to Mediamond S.p.A. completed in January 2014, consolidated revenues dropped by 4.6%.

Consolidated EBITDA was sharply up at euro 67.1 million against a negative value of euro 12.8 million recorded in the previous year. Also net of non-recurring items (which in 2013 impacted for approximately euro 62 million, mainly relative to restructuring costs), EBITDA was sharply up, by approximately 30%, climbing from euro 49.1 million in 2013 to euro 63.5 million in 2014. Group performance confirms recovered profitability and better efficiencies.

Consolidated net profit amounted to euro 42.4 million (euro -183.1 million in 2013).

The negative result recorded in 2013 referred to impairment losses for a total of euro 145.4 million following the alignment of assets and investments with currently applicable market values.

Consolidated profit before taxes was positive for euro 19.4 million against a negative result of euro -207.3 million in the previous year; in 2014 financial costs equalled euro 23 million (euro 24.2 million in 2013).

Consolidated net profit, after minority shareholders’ result, is positive for euro 0.6 million against a loss of euro 185.4 million in the past year.

The Group net financial position at 31 December 2014 was considerably up at euro -291.8 million against euro -363.2 million of 31 December 2013.

In 2014 the cash flow from operations was positive for euro 47.2 million (euro -28.7 million at 31 December 2013); the cash flow from core business operations (net of the payment of financial costs and taxes for the period) totalled euro 18.8 million (against a negative value of euro 64.1 million in 2013) as a result of improved profitability and optimized management of working capital.

Cash flow from extraordinary operations was positive for euro 52.6 million despite restructuring cost outlays (euro 20.3 million) and is attributed mainly to the increase in the Company’s capital and capital gain deriving from the transfer of a retail asset.

BUSINESS AREAS

• BOOKS

In the Book area the Group confirmed its leadership in Italy with a 26.5% market share in the trade market. The publishing schedule enabled the Group publishers to position four titles in the top ten bestseller rankings, including the first place of Storia di una ladra di libri by Markus Zusak (Frassinelli).

In the school textbook market Mondadori Education confirmed its third place with a market share equal to 13%, in line with the previous year.

Revenues in 2014 totalled euro 336.6 million, up 0.7% against euro 334.3 million recorded in 2013 as a result of the positive performance of the Educational area (+1.6%) and logistics activities on behalf of third publishers despite the reduction in the sales of trade products.

In 2014 EBITDA for the Book area amounted to euro 45.1 million, down 2.4% against the previous year, with a 13% margins on revenues.

In the Educational area profitability increased both in absolute terms and in percentage points, while the Trade area registered a reduction as a result of dropping revenues deriving from a different publishing schedule (the shifting of a more significant portion of the publishing schedule to the second half of the year did not compensate for the losses recorded in the first six months) and a different revenue mix resulting from a significant increase in logistics activities on behalf of third publishers, characterized by lower margins.

• MAGAZINES ITALY

Magazines Italy continued on the same positive trend of the first half of 2014, posting an even better performance in the segment of reference in terms of circulation and advertising sales. Mondadori is market leader with a market share currently equal to 31.3%.

In 2014 revenues totalled euro 297 million, down 8.9% against euro 326.1 million in 2013 (-7.6% on a like-for-like basis).

In particular:
– revenues from circulation (newsstands + subscriptions) decreased by 7.2% (-5% on a like-for-like basis); as to the newsstand channel only, the performance was better than the market of reference, which was down 8.2% ;
– revenues from advertising sales (print) decreased by 5.4%, but net of terminated and transferred magazines the reduction would be equal to 3.4% (against -6.5% of the market of reference; source: Nielsen); considering the positive performance of the digital area, advertising sales on Mondadori brands (print + web) dropped by 2.8% on a like-for-like basis;
– revenues from add-on sales (DVDs, CDs, books and gadgets distributed in attachment to magazines) dropped by 24.3% but showed increased margins mainly as a result of the implemented rationalization strategy and accurate selection of more profitable initiatives;
– revenues from advertising sales on Mondadori websites were up 4.1% on a year on year basis as a result of the positive performance recorded in particular by Grazia.it (+43.7%) despite a market of reference that increased by +2.1% against the previous year (source Nielsen, December).

EBITDA of Magazines Italy was slightly up in 2014 despite dropping revenues, increasing from a negative value of euro 20.6 million to euro +3.1 million, mainly as a result of the actions undertaken with reference to publishing products (including the focus on leading segments: Interior Design, Current News, Wellness, Cuisine, women’s magazines and TV; the launch of a new magazine and the restyling of other magazines), cost reduction policies targeting industrial, publishing and organizational costs and lower restructuring costs compared to 2013. If the positive effects of the re-organization of advertising activities are included, EBITDA improved by euro 39.5 million.

International activities (Mondadori International Business) generated increased revenues by approximately 4.1% against 2013, mainly as a result of the performance of Grazia International Network and Icon in Spain.

• MAGAZINES FRANCE

In terms of circulation, Magazines France again outperformed the market of reference, in particular thanks to the success of the sales of the magazines Top Santé, Pleine Vie and Closer.

Digital activities posted significant growth (+32% on a like-for-like basis) against the previous year; both revenues from on-line advertising sales (over 10% of total revenues from advertising sales) and web and mobile traffic data have increased significantly against the previous year.

In 2014 revenues of Mondadori France totalled euro 340.9 million, down 3.7% against euro 353.9 million in 2013; on a like-for-like basis, considering the transfer of Le Film Français completed at the end of 2013, the reduction would be equal to 2.8%.

In particular:
– revenues from circulation (newsstands and subscriptions) made for 70% of the total and posted a 1.7% reduction (-1% on a like-for-like basis); revenues from the newsstand channel were down by 5.1%, outperforming the -6.6% reduction registered by the market of reference (internal source), mainly as a result of the positive performance of the weekly magazine Closer (+3.8% in volume) and the monthly magazines Top Santé (+10% in volume) and Pleine Vie (+6.6%); revenues from subscriptions remained essentially in line with 2013 (-0.8%), confirming the need for strategic decisions for additional investments to be made in this channel;
– in line with the continuing downturn in the market, Mondadori France posted aggregate revenues from advertising sales (print + web) down by 9.1% against 2013 (-7.7% on a like-for-like basis). In this context, revenues from the digital area (over 10% of revenues from advertising sales) grew by 38% as a result of increased audience and a new commercial cross-media organization.

EBITDA was equal to euro 35 million, up by over 30% against euro 26.7 million of the previous year (impacted by restructuring costs for approximately euro 8 million), increasing margins on revenues from 7.5% to 10.3% in 2014.

Also in the period of reference actions targeting the reduction of organizational, industrial and logistic costs were continued and the resulting savings enabled the unit to entirely absorb the reduction in revenues and sustain company investments in publishing, digital and diversification activities.

• RETAIL

In the Retail Area, the Group continued to implement strategic actions to counter the negative market trend, targeting cost reduction and format and network revision in order to develop a new concept of bookstore for the future. The book category (making for 76% of in-store revenues) outperformed the market by over 7% with a market share equal to 15% (14% in 2013) and positive operating margins in 2014.

In 2014 the Retail area posted revenues totalling euro 211.2 million, down 6.1% against euro 225 million of the previous year.

The analysis by channel highlighted the following:
– the positive performance of directly managed bookstores (+4.5%) and the substantial stability of franchised bookstores (-1.2%) with increasing sales in the book category;
– some difficulties were registered by the megastores (-7%) mainly in relation to the reduction in consumer electronics;
– growth in the online channel (+4.1%) with particular reference to books, which posted a positive delta of over 10% against the market: +12.1% against -0.3% registered by the market (source: Nielsen).

In 2014 EBITDA for Mondadori Retail totalled euro 8.9 million against euro -8.5 million of the previous year. The yearly increase equal to euro 17.4 million is attributable to three main factors:
– the capital gain generated by the transfer of a store in Milan (equal to euro 9.3 million);
– increased operations which resulted in an EBITDA before non-recurring charges of euro 0.2 million, registering a positive value that, in addition to an improvement in net working capital, is evidence of the Group’s renewed ability to finance itself;
– lastly, reduced restructuring costs contributed an additional euro 7.7 million.

• RADIO

Despite the impact of the negative performance of advertising sales, the Radio area generated total revenues amounting to euro 11.7 million, up 3.3% against euro 11.3 million of the previous year, following the launch of the R101 TV channel last June, with a view to integrating TV activities with the radio and providing broad-spectrum entertainment programming.

In addition to the unfavourable performance of advertising sales, EBITDA (euro -4.4 million against euro -4.3 million in 2013) reflected higher promotion and communication costs borne for the restyling of the radio station started in the first months of 2014 and the costs sustained for the launch of the television channel, which were only partially mitigated by the implemented cost reduction actions targeted to the technical and artistic areas.

• DIGITAL

As to Digital Activities, actions continued to increase the team dedicated to business development. In this context reference should be made to the acquisition of Kiver, a digital marketing company, to enhance the Group’s presence in the segment of marketing services. Particularly significant in the view of the development of the digital activities was the acquisition of the LondonBoutiques.com marketplace, targeted to the launch, completed in November, of Graziashop.com, the global integrated e-commerce fashion platform of the Grazia brand.

Total revenues from purely digital activities aimed at increasing the value of the Group’s publishing products were up by 13% against 2013 with a 4.3% incidence on the Group’s total revenues. (3.9% in 2013).

PERSONNEL
Employees with a fixed-term or permanent labour contract employed by the Group companies at 31 December 2014 totalled 3,123 people, were down by 9.1% against December 2013 (-8.3% on a like-for-like basis.

Excluding non-recurring charges regarding the restructuring process and on a like-for-like basis, cost of personnel decreased by 6.2% against the previous year.

***

PERFORMANCE OF ARNOLDO MONDADORI EDITORE S.P.A.

The Annual Report of the parent company, Arnoldo Mondadori Editore SpA, for the year ended at 31 December 2014 shows a loss of euro 12.9 million, lower than the loss of the previous year (euro 315 million in 2013).

EBITDA, positive for euro 5.4 million (euro -59.2 million at 31 December 2013), benefited from a better business performance and lower restructuring costs compared to those sustained in 2013, following the organizational changes that led to the recognition of significant non-recurring charges.

***

FORSEEABLE EVOLUTION
Since 2013 the Company has implemented important optimization measures aimed at reducing operating costs and strategically rationalizing the portfolio of activities. The resulting positive outcomes – along with the improved performance of the business – enabled to achieve an EBITDA of €67.1 million and a positive net profit in 2014.

Based on the current market scenario and the actions mentioned above, which are expected to be continued in 2015, it is reasonable to expect a significant growth in the Group operating EBITDA in 2015; in parallel, the activities focused on non-core asset disposals will be carried on, which are estimated to generate an extraordinary contribution, basically in line with the value registered in 2014.

Consistently with the actions described above and notwithstanding the higher investments and eventual changes in the Digital Area, the Net Financial Position is also projected to improve against 2014 year end.

Based on the market trend and the latest performance of the business areas, it is reasonable to expect that revenues will grow by 0.5% to 1.5% in the 2015-2017 three-year span, an increase that is proportional to profitability (average annual growth of between 10% and 15%).

***

The Board of Directors of Arnoldo Mondadori Editore S.p.A. also aligned financial and non-financial disclosures by approving its 2014 Sustainability Report, drafted according to the GRI Guidelines, standard G4, based on the “in accordance” – core rating.

A summary of the Sustainability Report in line with the provisions contained in the 2014/95/EU directive adopted by the EU Parliament and Council on 22 October 2014 will be supplemented in the Annual Report; the complete document will be made available at the Shareholders’ Meeting.

***

RELEVANT EVENTS AFTER CLOSUREAppointments to the Board of Directors of Mondadori Libri S.p.A.
On 21 January 2015 the Board of Directors of Mondadori Libri S.p.A., composed of Ernesto Mauri, in his capacity as Chairman, Enrico Selva Coddè, Gian Arturo Ferrari, Antonio Porro and Oddone Pozzi, made the following appointments: Enrico Selva Coddè was appointed Managing Director of the Trade area; Antonio Porro was confirmed Managing Director of the Educational area and Gian Arturo Ferrari was appointed Vice President.

It should be noted that the following companies operating in the trade book, art and school text segments merged into Mondadori Libri S.p.A., which started operations on 1 January 2015: Edizione Piemme (100%), Giulio Einaudi editore S.p.A. (100%), Mondadori Education S.p.A. (100%), Mondadori Electa S.p.A. (100%), Sperling & Kupfer Editori S.p.A. (100%), Harlequin Mondadori S.p.A. (50%) – and the logistics company Mach 2 Libri S.p.A. (34.91%)

Non-binding expression of interest for RCS Libri S.p.A.
On 18 February 2015 the Company informed that RCS MediaGroup S.p.A. had been subjected to a non-binding expression of interest relative to a possible acquisition transaction of the entire interest owned by RCS MediaGroup S.p.A. in RCS Libri S.p.A. equal to 99.99% of the company capital as well as the additional assets and activities making up the RCS MediaGroup book repertoire.

On 6 March 2015 RCS MediaGroup S.p.A. granted the Company a period of exclusivity until 29 May 2015 in order to conduct an in depth analysis of the transaction terms and conditions.

***

The Board of Directors of Arnoldo Mondadori Editore S.p.A. called the Shareholders’ Meeting on Thursday 23 April 2015.

PROPOSAL TO COVER THE LOSS OF THE PERIOD BY USING AVAILABLE RESERVES
The Board of Directors will propose to the Shareholders’ Meeting called on 23 April 2015 in first call (on 24 April in second call) to entirely cover the loss of the period at 31 December 2014 equal to euro 12,888,013.64 by using the available reserves as follows:
– for euro 12,000,000.00 through the entire utilization of the share premium reserve built up as a result of the capital increase underwritten in the past year;
– for euro 888,013.64 by partially resorting to the available portion of the extraordinary reserve under item “Other reserves and result carried forward”;

***

RENEWAL OF THE AUTHORIZATION TO PURCHASE AND SELL TREASURY SHARES
Following the expiry of the preceding authorisation resolved upon by the Shareholders’ Meeting on 30 April 2014, with the approval of the financial statements at 31 December 2014, the Board of Directors will propose to the next Shareholders’ Meeting the renewal of the authorization to purchase Treasury Shares with the aim of retaining the applicability of law provisions in the matter of any additional re-purchase plans and, consequently, of picking up any investment and operational opportunities involving Treasury Shares.

The Shareholders’ Meeting of 30 April 2014, considering the shares already in portfolio, authorized the purchase of Treasury Shares up to a maximum of 10% of the share capital made up of No. 24,645,834 ordinary shares.

Considering the total of No. 14,953,500 shares already owned at the date of the Shareholders’ Meeting of 30 April 2014, the authorization enables the Company to purchase up to maximum another No. 9,692,334 Treasury Shares.

In relation to the authorization of 30 April 2014, Arnoldo Mondadori Editore S.p.A. did not proceed, either directly or indirectly through its subsidiaries, to purchase any Treasury Shares.

On 17 June 2014 the Board of Directors approved – by partially exercising the power attributed to it by the Shareholders’ Meeting of 30 April 2014 regarding the paid increase of the share capital – the allocation transaction on a total of maximum No. 29,953,500 ordinary shares with a nominal value of euro 0.26 each, which was completed through a private placement exclusively reserved to “Qualified Investors” in Italy and institutional investors abroad pursuant to currently applicable regulations.

The transaction described above – which was completed on 18 June 2014 – resulted also in the placement of No. 14,953,500 shares, equal to 6.07% of the share capital, owned by the company as treasury shares pursuant to article 2357 of the Italian Civil Code and, therefore, upon its completion the Company no longer owned treasury shares either directly or indirectly through its subsidiaries.

On the occasion of the next Shareholders’ Meeting the proposal for the renewal of the authorization to sell the treasury shares acquired by the Company will also be made pursuant to article 2357 ter of the Italian Civil Code.

Here below are the main elements of the proposal made by the Board of Directors:

• Motivations

The motivations underlying the request for the authorization to purchase and sell treasury shares refer to the opportunity to attribute to the Board of Directors the power to:
– use the Treasury Shares purchased as compensation for the acquisition of interests within the framework of the Company’s investments;
– use the Treasury Shares purchased against the exercise of option rights, including conversion rights, deriving from financial instruments issued by the company, its subsidiaries or third parties;
– possibly rely on investment opportunities, if considered strategic by the Company, also in relation to available liquidity;
– sell Treasury Shares against the exercise of option rights for the relevant purchase granted to the beneficiaries of the Stock Option Plans established by the Shareholders’ Meeting.

• Duration

Until the approval of the 2015 financial statements.

• Maximum number of purchasable Treasury Shares

The renewed authorization will enable the Company to reach the cap of 10% of its share capital, in line with the previous authorization.

Considering that, as indicated above, the Company does not hold any treasury shares, either directly or indirectly, the authorization would refer to the purchase of maximum No. 26,145,834 treasury shares (10% of the share capital).

• Criteria for purchasing Treasury Shares and indication of the minimum and maximum purchasing cap

Purchases shall be made on the regulated markets pursuant to article 132 of Italian Legislative Decree n. 58 of 24 February 1998 and article 144 bis, paragraph 1, letter B of Consob Regulation n. 11971/99 according to the operating criteria established in the organization and management regulations of the same markets, which do not allow the direct combination of the purchase negotiation proposals with pre-determined sale negotiation proposals.

The minimum and maximum purchase price would be determined under the same conditions established by the preceding Shareholders’ Meeting authorisations, i.e. at a unit price not lower than the official Stock Exchange price of the day preceding the purchase transaction, reduced by 20%, and not higher than the official Stock Exchange price of the day preceding the purchase transaction, increased by 10%.

In terms of daily prices and volumes the purchase transactions would be completed in compliance with the conditions established in EC Regulation n. 2273/2003.

***

Today the management of the Mondadori Group will illustrate to the financial community the 2014 results, which have been approved by the Board of Directors on today’s date at 3:30 p.m. at the Four Seasons Hotel in Milan.

The corresponding documentation will be made available on 1Info a twww.1info.it, www.borsaitaliana.it and www.gruppomondadori.it (Investor Relations).

The Executive Manager responsible for the drafting of the corporate accounting documentation – Oddone Pozzi – hereby declares, pursuant to Art. 154 bis, par. 2, of the Finance Consolidation Act, that the accounting documentation contained in this press release corresponds to the Company’s accounting entries, books and results.

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 2013 as presented by the chief executive, Ernesto Mauri.

MARKET SCENARIO
The macroeconomic situation in Italy in 2013 was once again characterised by a marked downturn in the main economic indicators that were even worse than the already dramatic decline recorded in 2012.

Only in the final quarter of the year were there some signs of a modest recovery in economic activity, albeit in an unfavourable climate due also to the lack of dynamism in some emerging countries’ economies.

This recessionary situation, combined with significant technological and structural changes in the sectors in which the Group operates had a significant impact, in particular in Italy where:

– the book market saw a fall in terms of value of -6.2% (-13.8% in the last two-years);
– the magazine market was severely affected by the ongoing slump in advertising expenditure, down by 23.9% (-38% in the period 2012-2013) while also circulation was down in value terms by 11.2% (-23.3% in the last two-years); while the decline in add-on sales was even more marked: -23.4% (-35.2% in the last two-years).

Also in France the economic picture was affected by the general crisis in the Eurozone: specifically:

– the magazine market in which Mondadori France operates recorded a marked fall compared with the previous year, especially in advertising -9.2% (-13.7% in the last two-years); while also circulation was down in terms of value by 6,7% (-11.7% in the period 2012-2013).

2013 AT MONDADORI

2013 was a year of change for the Mondadori Group as, in response to the market scenario outlined above, the Group embarked on a series of fundamental operations, both in terms of organisation and operating processes, aimed at bring the cost structure into line with the revenues trends of the traditional businesses and to ensure adequate resources to the excellence of the products and for businesses in development.

Organisational changes have affected almost the whole of the Group, with the redefinition of the responsibilities of both central and business functions and the renewal of most of the first line management.

As part of efforts to reduce operating costs, the “change of pace” plan, which foresees overall savings of €100 million by the end of 2015, touched on all cost items: among the most significant among the many measures introduced have been reductions in industrial costs (paper and printing), editorial costs and logistics (office space, retail outlets and distribution).

During the year total headcount (3,436 at year end), both permanent and temporary contracts, was down by 267 (-7.2% of the total on 31 December 2012) both through the ongoing review of organisational structures and extraordinary restructuring initiatives in all of the companies of the Group: excluding non-recurring costs related to restructuring, total personnel costs in 2013 were 10.1% lower than the previous year.

GROUP PERFORMANCE FOR THE YEAR ENDED 31 DECEMBER 2013
The consolidated financial statements for 2013 also feature:

– restructuring costs and other non-recurring charges of €61.9 million, mostly attributable to reorganisation activities;

– write-downs of €145.4 million, following the impairment process that has aligned assets and holdings to values that conform to the current market situation.

Below, are the consolidated results for the year 2013, compared with the figures for the previous year, that have been adjusted as a result of the application of the new IAS 19: the income statement to 31.12.2012 shows an improvement in gross operating profit of €1.6 million and in net profit of €1.2 million compared with the previous year.

Consolidated net revenues came to €1,275.8 million, a fall of 9.9% on the €1,416.1 million in 2012.

Consolidated gross operating profit, net of non-recurring items came to €49.1 million, a 32.2% reduction on the €72.4 million of the previous year: non-recurring items not included refer to restructuring costs of €50.4 million (€18.8 million in 2012) and other charges of €11.5 million (income of €14.5 million in 2012).

Consolidated gross operating profit showed a loss of €12.8 million, compared with a profit in the previous year of €68.1 million.

The consolidated operating loss for the year came to -€183.1 million (-€149.9 million in 2012) following impairments of €145.4 million (€194.3 million in 2012).

The impairments refer to Mondadori France for €99.3 million (€140 million in 2012), R101 for €31.1 million (€46.3 million in 2012) and related investments and other assets for €15 million (€8 million in 2012). Amortizations in the year amounted to €24.9 million (€25 million in 2012).

Consolidated pre-tax losses for the year amounted to -€207.3 million (-€172.1 million in 2012) with financial charges of €24.2 million (€22.2 million in 2012).

The consolidated net loss came to -€185.4 million, compared with -€166.1 million in 2012.

The Group’s net financial position showed a deficit of -€363.2 million, compared with a deficit of -€267.6 on 31 December 2012, a result of the impact of financial outlays related to the restructuring process carried out during the year.

It should be pointed out that in November 2013 all of the Group’s credit lines were renegotiated.

THE BUSINESS AREAS

• BOOKS

The 2013 revenues of the Book Area amounted to €334.3 million, a 9.8% fall on the €370.6 million of 2012.

Trade books confirmed their leadership with a market share of 27%, with an editorial programme that enabled the Group’s brands (imprints) to have an average of 10 titles among the top 20 bestselling books of the year and to be in the top position for 23 weeks out of 52.

In terms of profitability, comparison with 2012 was particularly tough due to the “Fifty shades” phenomenon, which significantly stimulated margins; there was a very positive trend in the development of e-books (+70%) with 2 million downloads and the number of titles available in a digital format has now risen to almost 6,000 with a market share of over 40%.

It was a successful year for the educational and art books sector: with the educational area increasing its market share, after years of decline, to 13%, thanks to an extensive and appealing offer at all school levels while in the art publishing segment, thanks to the management and organisation of exhibitions, there was an increase in revenues in the year of 12.7%.

The importance of the Group’s activities in these sectors is underlined by the increase in profitability, despite a difficult market environment.

• MAGAZINES ITALY

The Magazines Italy area saw the biggest concentration of reorganisation and cost reduction activities during the year. These were focused on industrial costs and all the items that come under editorial costs, as well as personnel reductions.

In terms of the products, with the closure of 4 titles the Group’s portfolio was strengthened while the reorganisation of the editorial departments for TV guides and the wellness segments made it possible to confirm the Group’s leadership market (38%) through the re-launch of the main titles.

2013 revenues for the area amounted to €326.1 million, a 15.1% reduction on the €383.9 million of 2012 (-13.7% on a like-for-like basis). In particular:

– circulation revenues (-7% on a like-for-like basis) were penalised by a fall in newsstand sales and subscriptions;
– revenues from add-on sales (-13.7%) – while down, for a strategic decision to focus on the rationalisation of the initiatives – maintained their market leadership, with a more than 40% share and a high level of profitability;
– advertising revenues for Mondadori titles (-24.5% on a like-for-like basis) were affected by a decline in both weeklies and monthlies.

The performance of the Group’s leading web sites was very positive with revenues rising by 7.3% in a market that was down by 1.8%. In particular, Donnamoderna.com confirmed its position as the second most popular web site for women in terms of unique users (an annual average of 4.5 million, an increase of 20%), Grazia.it also saw its audience grow by 28% while the percentage growth of other sites were even higher.

With regard to the Group’s international activities, which continue to grow significantly, Mondadori International Business recorded revenues of €10.2 million, an increase of around 10% on 2012.

The number of editions of Grazia rose to 23 following the launch of the magazine during the year in Spain, Korea and Mexico. The year also saw the launch of Icon in Spain, distributed with El Pais.

Despite the difficult market conditions, the aggregate revenues generated by the international network came to €154.8 million, a fall of 4.2% compared with 2012.

In this context, advertising revenues came to €10.6 million, a rise of 14%, thanks also to an expansion of the international client portfolio.

Regarding the investments, there was an excellent revenue performance by the joint venture in China (+18%) while the Russian JV was essentially stable. Meanwhile, despite a negative performance during the year (-11%), Attica Publications recorded a reversal in the trend in the final quarter.

• ADVERTISING

The most important organisational change for the Group, implemented in 2013 and effective from the beginning of 2014, was the contribution of the advertising sales for magazines and radio (R101 and other radio stations under licence) to Mediamond, the joint venture with Publitalia ’80, that already managed the sale of advertising for the Mondadori web sites, as well as those of R.T.I. and a number of third parties

As a result of this operation, Mediamond is now Italy’s most complete advertising sales company, able to offer an integrated commercial package for print, web and radio, with the creation of a radio network that is the leader in the market with an daily average of 9.7 million listeners.

Thanks to this operation the Group will have a greater capacity to face a market that is expected to continue to decline, also in 2013, and in which all segments have shown negative trends.

2013 revenues generated by Mondadori Pubblicità amounted to €141.6 million, a fall of 18.1% on the €172.9 million of 2012. In Particular:

– advertising sales for magazines of the Mondadori Group were down by 29.7% on 2012; the figure was -23.6% on a like-for-like basis, essentially in line with the market;
– advertising sales for radio in 2013 were up by 41.8% thanks mainly to the acquisition of the sales contract for Radio Italia, to which were added Radio Subasio and Radio Norba;
– with regard to the Internet, the joint venture Mediamond generated revenues of €45.4 million (+21.6% on 2012) with results that were substantially better than the market.

• MAGAZINES FRANCE

Despite a market that has been in decline for two years, the Magazines France area continued and intensified efforts in brand extensions and to reduce costs that resulted in the maintenance of a still good level of profitability, with total revenues in 2013 amounted to €353.9 million, a fall of 7.3% on the €381.6 million of 2012.

In an advertising scenario strongly conditioned by the economic crisis (-6.2% in terms of volume, Source: Kantar Media), the sales company of Mondadori France performed better than the market (-4.5% in terms of volume) and saw its market share rise to 11% (+0.2%), confirming its position as France’s second magazine advertising sales company. The women’s haut de gamme titles (Grazia and Biba) remained the most important advertising segment for the Group, with revenues that were 32.9% of the total.

Circulation sales from newsstands and subscriptions, which account for around 70% of total revenues, were down by 6.1%. In particular, newsstand revenues fell by 6.8%, in line with the market of reference.

In the digital sector, there was a significant increase in the average audience of the Group’s sites (+25%), with unique users in December totalling 6.3 million, while at the same time revenues grew by 23.8%.

For the future, the company is pursuing further reductions in costs and during 2013 a project was launched to the digitisation of the editorial teams which will enable the editorial staffs to work with a single production flow and to make use of content produced across all platforms, print and digital.

• RETAIL

The retail area in 2013 generated revenues of €225 million, a fall of 8.2% on the €245.2 million of 2012. The year was characterised by a number of important changes:

– in terms of management, with the arrival of significant professional figures with established experience in the sector, followed by an extensive review of the structure;
– the closure of outlets and the development of higher potential locations;
– the expansion of the “non-book” assortment (stationery, toys, own label) and IT products also related to reading (e-readers), along with an ever-more complete offer of books (160,000 titles);
– the loyalty project, with the development of the Mondadori Card, of which 1,150,000 had been issued by the end of the year.

Particular attention has also been given to cost reductions through a simplification of the corporate and organisational structures, the renegotiation of rental agreements and a review of the logistical chain (offices and warehouses).

• RADIO

Also at R101 2013 was a year of change with a market in continuous decline (-9.3%) during which the reduction in budgets in important sectors (auto, large-scale retail, telecoms) had a significant impact.

In this context R101 recorded revenues of €11.3 million, a fall of 18.7% on the €13.9 million of 2012.

Confirming the strategic role R101 has for the Mondadori Group, the alliance with radio Italia has been consolidated and reinforced. Following the launch of the advertising concessions, in 2014 the relationship was extended to cover also programming and marketing, which has been entrusted to professionals from the sector in order to further enhance the identity of R101 in the Italian radio market.

On 25 March the creation of the new R101 was announced, with the presentation to the market of a completely revised editorial line, new commercial policies and partnerships with television programmes and important sporting events.

• DIGITAL

Similarly important in structural terms, a business model was defined in 2013 that envisages Digital as the cross-company driver for all of the Group’s activities, and consequently led to the hiring of specific new competencies aimed at enhancing the Group’s technological know-how, editorial content and the development of new activities.

Digital-based revenues at the end of 2013 amounted to €60.2 million (-4.3% compared with the €63 million in 2012), and included activities in the various areas of the Group, including the e-books published by the Trade Books area (+70%), the Group’s main sites in Italy (+7.3%), and in France (+23.8%) and the e-commerce site inMondadori.it (which saw a slowdown in sales).

RESULTS OF THE PARENT COMPANY ARNOLDO MONDADORI EDITORE S.P.A.
The Annual Report of the parent company Arnoldo Mondadori Editore S.p.A. on 31 December 2013 shows a loss of €315 million, higher than that of the previous year, which came to €39.6 million, essentially due to:

– the results of the Group’s businesses, in the difficult market environment of reference;
– organisational changes, involving the top management, editorial structures – in particular for magazines – and central functions, that resulted in significant non-recurring costs;
– the non receipt of dividends from the companies of the Group due to the poor results of the previous year;
– as well as the process of evaluation of the recoverable value of subsidiary and associated assets which, for the second consecutive year, resulted in significant impairment losses for a total of around €275 million.

FORECAST FOR THE FULL YEAR
In a market that is still not showing clear signs of a reversal in the trend, the performance of the Group’s businesses in the first months of 2014 is ahead of expectations: in addition to the positive results of the businesses and editorial products, there is also evidence of the effects of the reorganisation efforts and cuts in operating costs made in 2013.

This, and the substantial reduction of non-recurring charges in the current year, make it possible to estimate for the end of the year substantial growth in gross operating margins and higher than in 2012.

Among the most important new initiatives in the first three months of 2014 were:

– the launch of Il mio Papa, the world’s first weekly entirely dedicated to the Holy Father which, after the great success of the first issue, sold over 300,000 copies of the second;
– the acquisition of the brand and assets of the social reading service of Anobii Ltd, a platform with over a million users around the world, of which more than 300,000 in Italy;
– the scoop by the French weekly Closer about President François Hollande that sold a record number of more than 600,000 copies. The magazine has confirmed its position as the main point of reference among people titles in the country;
– the launch of the new R101, with a completely new editorial line and the presentation of new commercial partnerships;
– the launch of a revamped Panorama the first issue of which had 110 advertising pages, 40 of which for the fashion sector.

GUIDELINES OF THE 2014-2016 PLAN: CONSOLIDATED GROSS OPERATING PROFIT AT THE END OF THE PERIOD OF MORE THAN €100 MILLION
The macroeconomic scenario for the current year doesn’t appear to offer much that is different from last year, if not an inversion of the trend in GDP. Meanwhile, an improvement, in a situation that remains volatile, is expected in 2015-2016.

With regard to the trends in the main markets in which the Mondadori group operates, it is possible to foresee a further downturn, albeit at a slower pace than in the last three years.

In this context Mondadori – thanks to the action taken in 2013 – aims to achieve a level of profitability at the end of 2016, in terms of consolidated gross operating profit (EBITDA), of more than €100 million, with all businesses showing an improving trend and in profit.

Further efficiency measures, the revision of processes and cost reductions affecting all areas of the Group’s business will be of fundamental importance.

For the core businesses, the focus will concern:

• Books:

– Trade: confirmation of undisputed leadership in printed books;
– Education: a continuation of the upward trend in market share.

There will also be a big development in digital thanks to the strength of the catalogue of the Group’s publishing houses: in terms of revenues, there will be a rise from the current 5% to 16% of the total of the area and with higher margins on e-books than those on the physical product.

• Magazines & Advertising:

– continued efforts to renew the product portfolio aimed at consolidating leadership in all segments;
– rationalisation of editorial structures and integration with digital;
– Properties: profitable in both Italy and France from 2016;
– full effect of the integration of advertising sales in Mediamond, with a consequent recovery of market share.

• International Network:

– increase in the number of editions of Grazia and other titles in emerging markets;
– possibility of developing e-commerce activities for all 23 editions around the world of Grazia;
– activities in China: in April 2014 Grazia goes weekly, with significant effects on circulation growth and, particularly, advertising sales;
– brand extension activities built around the Grazia brand.

• Retail:

– big development of the franchising network and a process of rationalisation of sales outlets;
– optimisation of logistics (office space and distribution);
– diversification of the offer with an expansion of the assortment to include stationery, toys and food.

• Radio:

– full effects of the change of management at R101 and the capitalising, in terms of a further increase in advertising revenues, of the radio network of Mediamond that today has a daily average of over 9.7 million listeners.

With regards to digital:

the Digital Innovation area will be a cross-company driver for all of the Group’s businesses with the aim of tripling the proportion of digital revenues to 13% at the end of 2016.

In addition to completing the organisation with the most suitable professional skills and the transformation of the Group through the inclusion and integration of new businesses and technologies, the focus will be on:

– growth and the reinforcement of digital activities in existing businesses: e-books, properties and e-commerce;
– diversification and development of new revenue streams in non-traditional activities (marketing services);

– searching for partnership with third parties and acquisitions that are strategic and synergic with the core business.

***

THE RESIGNATION OF THE CFO CARLO MARIA VISMARA EFFECTIVE FROM 31 MAY 2014

The Board of Directors has accepted the resignation submitted by Carlo Maria Vismara from his position as chief financial officer, and director of procurement and information systems, as well as the manager in charge of preparing the corporate accounts, and his position as a member of the board.

The decision by Vismara is related needs of a personal and family nature no longer compatible with the continuation of the full professional commitment required by a management role of such primary importance.

In order to ensure proper coordination and completion of activities related to the approval of the 2013 Annual Report and the interim report for the first quarter of 2014, the resignation will be effective from the Board of Directors already scheduled for the coming 13 May to approve the management report for the period to 31 March 2014 and, in any case, by the 31 May of this year.

The Directors expressed deep regret for the decision of Carlo Maria Vismara and expressed their gratitude and appreciation for the highly professional contribution made by him in more than eight years with the Mondadori Group.

***

PROPOSAL TO COVER OF THE LOSS OF THE YEAR FROM AVAILABLE RESERVESThe Board of Directors will propose to the Shareholders’ Meeting convened for 30 April 2014 on first calling (2 May, on second calling), to settle in full the loss for the year to 31 December 2013 of €314,970,500.44 through the use of reserves as follows:

• for €170,624,621.21 entirely through the use of the share premium reserve, following the allocation from the share premium reserve to the extraordinary reserve of the restriction on the availability of the amount corresponding to the book value of the treasury shares, defined in line with the provisions of art. 2357 I, final para. of the Civil Code;
• for €5,334,814.39 entirely through the use of the reserve for capital grants, included under “Other reserves and retained earnings”;
• for a total of €51,132,983.35 entirely through the use of the following retained earnings, included under “Other reserves and retained earnings”:

Legal Reserve 675 of 12/08/1977 equal to €351,348.61;
Legal Reserve 904 of 16/12/1977 equal to €750,738.83;
Legal Reserve 124/1993, art. 13 equal to €159,607.90;
Merger reserve equal to €43,998,556.21;
Reserve for waived dividends equal to €5,872,731.80;

• for a total of €10,802,729.52 through the partial use of the available resources of the IAS/IFRS Reserve, included under “Other reserves and retained earnings”;
• for €77,075,351.97 through the partial use of the available resources of the Extraordinary Reserve, included under “Other reserves and retained earnings”.

PROPOSAL FOR THE RENEWAL OF AUTHORISATION FOR THE BUY-BACK AND UTILISATION OF COMPANY SHARES
Following the expiry on 31 December 2013 of the term fixed by the authorisation issued at the Annual General Meeting of 23 April 2013, the board of directors resolved to ask the forthcoming Annual General Meeting of the shareholders to renew authorisation to effect share buy-backs, giving the board the possibility of seizing eventual investment opportunities or operations based on the company’s shares.

It should be noted that, taking account of the shares previously in the portfolio, at the AGM of 23 April 2013, the shareholders authorised the acquisition of up to 10% of the share capital, which amounts to 24,645,834 ordinary shares.

Given the total of 14,953,5000 shares already directly or indirectly held at the date of the AGM – of which 10,436,014 are held directly in the portfolio of Arnoldo Mondadori Editore SpA and 4,517,486 by the subsidiary Mondadori International SpA – the authorisation consequently provided an option to buy an additional maximum of 9,692,334 shares.

Subsequent to the authorisation issued on 23 April 2013, Arnoldo Mondadori Editore SpA made no acquisitions or use of said shares, either directly or indirectly.

Consequently the number of shares held remains unchanged at 14,953,5000, or 6.067% of the share capital. It should also be noted that, as a result of the merger, by incorporation of Mondadori International SpA, completed during 2013, the total number of shares held are now in the portfolio of Arnoldo Mondadori Editore SpA.

The Shareholders will also be asked to authorise, pursuant to Art. 2357 ter of the Civil Code, the use of shares acquired or already in the company’s portfolio.

What follows is an outline of the proposal to be put to the Shareholders:

• Underlying motivation

The motivation for the request for authorisation to buy and use company shares is to provide the board of directors with the possibility:

– to use company shares, either bought or in the portfolio, for the exercise of rights, including conversion rights, deriving from financial instruments issued by the company, its subsidiaries or third parties;
– to use company shares, either bought or in the portfolio, as part or whole payment in any eventual acquisitions or equity investments that fall within the company’s stated investment policy;
– to take advantage, where and when considered strategic for the company, of investment opportunities, also in relation to available liquidity;
– to use company shares for the exercise of options for the purchase of shares assigned to participants in the stock option plans put in place by the shareholders.

• Duration

Until the approval of the Annual Report for the year 2014.

• Cap on the number of shares that may be bought

The authorisation refers to a limit of 10% of the share capital, in line with the previous authorisation that is about to expire. Given, as indicated above, that the company currently holds, directly or indirectly, a total of 14,953,500 shares, the new authorisation consequently foresees the possible acquisition of an additional 9,692,334 ordinary shares, or 3.933% of the share capital.

• Method of acquisition and price range

Buy backs would be effected on regulated markets as per art. 132 of Legislative Decree n. 58 of 24 February 1998 and art. 144 bis, para. 1,B of Consob Regulation 11971/99 according to operating procedures established by the regulations for the organisation and management of the markets themselves, which, does not permit the direct combination of offers to buy with predetermined offers to sell.

The corresponding minimum and maximum price of sale will therefore be determined at the same conditions that applied to previous authorisations agreed by the Shareholders, i.e. at a unit price not less than the official market price on the day prior to any operation, less 20%, and not more than the official market price on the day prior to any operation, plus 10%.

In terms of price and daily volumes, acquisition operations will in any case be conducted in line with the norms foreseen by the EU regulation 2273/2003.

***

PROPOSED RENEWAL AND ATTRIBUTION OF POWERS TO THE BOARD OF DIRECTORS PURSUANT TO 2443 AND 2420 TER OF THE CIVIL CODE

The board of directors will propose to the Shareholders’ Meeting called for 30 April 2014, in extraordinary session, the adoption of the resolutions referred to in Articles 2443 and 2420 of the Civil Code, relating to powers of the board to increase the share capital and to issue convertible bonds.

Specifically, the board will ask the Shareholders to:

– renew the powers already granted to the board of directors by the Extraordinary Shareholders’ Meeting of 29 April 2009, which is due to expire at the end of the five-year term, in accordance with Art . 2443 and 2420 of the Civil Code, of attribution for the board of directors to increase, without excluding option rights, the share capital by a maximum nominal amount of €78,000,000 and to issue convertible bonds for a maximum nominal amount of €260,000,000 . The renewal is proposed under the same conditions as the authorisation about to expire and not used by the board, for a further period of 5 years, which corresponds to the maximum term foreseen by law.
– attribute to the board of directors, for the same five-year period, additional power to increase the share capital within a limit of 10% of the existing share capital and excluding the right of option, as per Articles 2443 and 2441, paragraph 4, second sentence, of the Civil Code.

The proposals for the renewal and granting of such powers are motivated by the opportunity to maintain and attribute to the board of directors the authority to implement, with greater speed and flexibility with respect to the resolutions of an Extraordinary Shareholders’ Meeting, any capital transactions aimed at strengthening the financial structure of the company in support of the development objectives of the Group, represented, as previously disclosed to the market, both in terms of the consolidation of the business lines with higher added value and improved profitability in the magazine sector, as well as growth in particular in the digital area.

With specific reference to the powers exercisable for any eventual capital increase with exclusion of option right to a limit of 10% of the existing share capital, it should be noted that any offer made to a third party may be a valuable tool to increase the free float and enable the company to maintain an adequate level of liquidity of the shares, or be functional for the entry into the capital of accredited investors, while limiting the dilutive effects for existing shareholders.

_______

Today at 3pm, at the company’s headquarters in Segrate, the management of the Mondadori Group will present the results for 2013 approved today by the board of directors, to the financial community.

All relative documentation is available on the web site www.mondadorigroup.com (in the Investor Relations section) and from Borsa Italiana S.p.A. (www.borsaitaliana.it).

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 Editore S.p.A., chaired by Marina Berlusconi, met on today’s date to examine and approve the consolidated financial statements and the parent company financial statements as at December 31, 2012. Following to Maurizio Costa’s resignations from the post of Vice-President and CEO – as already disclosed to the market on last February 28 – the Board of Directors coopted Ernesto Mauri, appointing him CEO.

“Mr. Mauri has a complex but clear mission: giving further thrust to reorganize and improve our activities, and introduce strong elements of innovation and change”, said the President Marina Berlusconi. “In the name of the entire Board, I extend to him my best wishes to continue the excellent job he has accomplished so far within Mondadori at the highest level of responsibility”, she concluded.

THE MARKET SCENARIO

As we know, global economy and, in particular, the economy in the euro zone, continued to worsen also in the second half of 2012.

In Italy GDP posted a further drop (-2.4%) on an annual basis, unprecedented in the last twenty years. Also the unemployment rate, which rose from 8.4% to 10.7% in just one year, hit a peak since 1993, while consumer spending decreased by 3.8%.

In France, where the economic situation seems less difficult though also showing a rising unemployment rate (from 9.4% in 2011 to 10.2%) and consumer spending and GDP equal to zero growth, the values of Mondadori activities in the markets of reference proved less negative.

GROUP PERFORMANCE FOR THE YEAR ENDED AT DECEMBER 31, 2012

The Mondadori Group closed 2012 with a 6% reduction in revenues and EBITDA 49% lower than in the previous year; impairment on assets equaled euro 194.3 million, thus showing a negative result in the income statement at euro -167.3 million, which net of impairment would have instead been positive for euro 12 million.

Net consolidated revenues amounted to euro 1,416.1 million, down 6% against euro 1,507.2 million of 2011. Net of the consolidation of the EMAS joint venture (Editions Mondadori Axel Springer S.n.c.) in Mondadori France, the revenue reduction would have been equal to 8.6%.
Consolidated EBITDA amounted to euro 66.5 million, down 49% against euro 130.4 million of the previous year.
Excluding non-recurring items and restructuring costs, the reduction in EBITDA would have been equal to 38.9%.

Consolidated EBIT was negative for euro 151.6 million (against euro +103.8 million in 2011) after impairments for euro 194.3 million, mainly attributable to the goodwill of Mondadori France (euro 140 million) and the R101 radio station (euro 46.3 million). Amortizations and depreciations for the year totaled euro 25.1 million (euro 23.3 million in 2011).

Consolidated pre-tax profit was equal to euro -173.8 million, (euro 82.7 million in 2011) with financial charges amounting to euro 22.2 million (euro 20.5 million in 2011).

Consolidated net profit was negative at euro -167.3 million against euro + 49.6 million in 2011; net of impairments, 2012 would have closed with a consolidated net profit equal to euro 12 million.

As for balance sheet items, consolidated net equity equaled euro 433.8 million against euro 608.9 million of the previous year; the Group’s net financial position posted euro -267.6 million, up euro 67.8 million against 2011 also as a result of the transfer, completed in November, of the 50% interest owned in Random House Mondandori to Bertelsmann for a price equal to euro 54.5 million.

Information on personnel

At December 31, 2012 the Group employees with a permanent or temporary employment contract amounted to 3,703 people and the cost of personnel amounted to euro 290.4 million.

On a like for like basis, that is, net of the integral consolidation of the French joint venture Editions Mondadori Axel Springer S.n.c., personnel values dropped by 1.3%.

In fact, the final cost of personnel takes into account the already mentioned transaction with Emas, the merger into Arnoldo Mondadori Editore S.p.A. of the former joint-venture Mondadori Rodale, and a higher fund allocation for the restructuring started in the year of reference and is lower than 1.4%.

In addition to the ongoing rationalization and efficiency actions constantly implemented since 2009 in all Group companies, the results obtained are mainly attributable to specific re-organization actions started in the Direct area and, specifically, to the approval of a new restructuring plan that is expected to be completed by April 2014 for 152 redundant graphic-publishing workers belonging to Arnoldo Mondadori Editore S.p.A., Mondadori Pubblicità S.p.A. and Press-Di Distribuzione Stampa e Multimedia S.r.l..

Since, for bureaucratic reasons, they were implemented only in the second half of the year, these actions had only a limited economic and quantitative impact on the financial year of reference.

These efficiency actions have been combined with company development and rationalization actions aimed at favoring the Group’s growth strategy, with a view to enhancing the Group’s presence in the digital segment and internationally. In this respect, the establishment of Mondadori International Business S.r.l. is particularly relevant.

In the Direct area, where a rationalization process was started long ago on all points of sale, a negotiation table was opened last December 2012 for the definition of job security agreements for the employees of the offices of Mondadori Direct S.p.A. in Milan, Brescia and Rimini, for a total of 239 people. A similar job security agreement was reached for Mondadori Iniziative Editoriali S.p.A..

For Cemit Interactive Media S.p.A., an agreement was reached to reduce the number of jobs through redundancy payments and mobility.

In addition, it should be noted that in December 2012, also in Arnoldo Mondadori Editore S.p.A. Magazines area, negotiations were opened with the trade unions representing the journalists, for the purpose of examining the consequences of the shutting down of five magazines and the re-organization of the publisher’s remaining editorial staff. Negotiations are still underway.

RESULTS BY BUSINESS AREA

· BOOKS

In 2012 the trade book market decreased both in terms of copies (-6.9%) and value (-7.8%) against 2011 (source Nielsen) with a lower improvement than expected in the last month of the year. This reduction hit all the channels cross-sectionally: bookstores, hypermarkets and e-commerce.

In this context, the Mondadori Group increased its market share in terms of value (27.6%), confirming its leadership in the trade book segment.

In 2012 revenues from the Mondadori Books segment amounted to euro 370.6 million, down 4.8% against euro 389.1 million in the previous year.

Among the Group’s trade book publishers, in 2012 Edizioni Mondadori increased its market share in terms of value (14.1% against 13.3% in 2011), thanks to the excellent performance of a few publications: four titles ranked among the ten best sellers in 2012 and 43 were in the top 100.

Particularly important to Mondadori was the increase in foreign fiction, with the erotic trilogy by E.L. James, Cinquanta sfumature di grigio, Cinquanta sfumature di nero and Cinquanta sfumature di rosso, which exceeded 3,300,000 copies sold in Italy and 130,000 e-book downloads, the first, third and fourth, respectively, in the best seller lists for the year.

Mondadori also won the most prestigious Italian literary prizes, including the Strega Prize in July 2012 with Inseparabili by Alessandro Piperno, and the Campiello Prize, in September 2012, with La collina del vento by Carmine Abate.

Ken Follett’s new book, L’inverno del mondo, posted an excellent performance, coming in sixth in the 2012 general ranking, with over 300,000 copies sold and over 40,000 e-book downloads, as did the long-awaited second book by Paolo Giordano, Il corpo umano, printed in 300,000 copies.

In the educational segment, in 2012 Mondadori maintained a significant position in the school text book segment with a 12.8% market share.

During the year of reference Mondadori Education made massive investments: from a publishing perspective to update text books, and from a technological standpoint to produce books in digital format.

E-Book
Mondadori is market leader in the e-book segment with a market share of approximately 40%. In 2012 1.2 million books of the Group’s trade publishers were downloaded, with a 2% incidence on the net revenues of the hard copy product.

Among the most successful e-books, included in a catalogue of 4,000 titles in total, in addition to the trilogy Cinquanta sfumature, the following are worth noting: L’inverno del mondo by Ken Follett, La Dieta Dukan by Pierre Dukan, Steve Jobs by Walter Isaacson, 1Q84 by Haruki Murakami, the Hunger Games trilogy and the first book of the Diabolik series.

In relation to store performance, we should not overlook the sales results achieved by the Kobo platform in just a few months from its launch in the Italian market at the beginning of the last quarter of 2012.

· MAGAZINES ITALY
In an extremely dire economic scenario (the market is showing a 13.6% drop in value on a like for like basis), Mondadori magazines in 2012 posted revenues equal to euro 383.9 million in Italy, down 16.3% against euro 458.8 million of the previous year.

This result does not only reflect the negative economic performance, but also the effects of the structural changes that the segment of periodic publications has gone through in recent years, mainly linked to the evolution of the digital media and the different use of information and content, especially by the younger target.

Investments in advertising, decreasing in all channels with the exception of Internet (+5.3%), posted heavier reductions in printed magazines and papers (-17.6% for newspapers, -18.4% magazines), despite the introduction of new magazines compared to the previous year (source Nielsen)..

The circulation market was characterized by the launch of low cost products, addressed to a mass target, with relevant effects on the estimated reduction of the overall value of sales of magazines at newsstands (-10.5%, -13.6% compared with an equal number of magazines, internal source).

The results obtained in the Magazines Italy Area show different performances:

• revenues from circulation (-13.5%) were penalized by a significant drop both in the newsstand segment and subscriptions, as well as a lower number of copies sold in on-pack activities;
• revenues from the sales of add-ons, including co-editions, (-18,3%) were penalized by a drop in the sales of home videos, publishing products and gadgets, though still maintaining a good margin and the market leadership (34%);
• revenues from advertising in Mondadori magazines registered a 21.2% decrease despite the ongoing growth of Internet (+37.4%) and international (+17.1%).

International activities

International activities, concentrated since October 31, 2012 in the newly established Mondadori International Business S.r.l., carrying out licensing, syndication and advertising activities.

Licensing: in 2012 the aggregate revenue result generated by Grazia International Network- with over 20 editions all over the world – rose 8% against 2011, with a further possible increase expected in 2013 following the launch of Grazia Korea (bi-monthly) and Grazia Spain (weekly) in February 2013. As to the other international editions of Mondadori magazines, the launch of the German edition of Flair is worth noting, published by the Klambt Group in August 2012.

Syndication and photorights: this activity includes the sale of images produced by Mondadori and/or third parties, for which Mondadori acts as an agent, to a hundred of different publishers in more than forty countries.

Advertising: revenues from advertising grew by 17.1% against 2011 thanks also to the expansion of the activities in the French and Swiss markets, extending the company’s reach also to other product categories.

The Mondadori Group also owns interests in Greece, China and Russia:

– Attica Publications posted dropping revenues by 3% against 2011: considering the extremely difficult economic scenario, the performance was satisfactory and allowed the company to post a positive pre-tax result. The crisis in Greece and competitors’ difficulties enabled Attica to considerably increase its market share, obtaining benefits deriving from its leadership position.

– Mondadori Seec Advertising Co Ltd, exclusive concessionaire for the collection of advertising for the Chinese edition of Grazia, launched in 2009, posted a 56% revenue growth in 2012 against the previous year. This result enabled it to close the financial year with profits one year ahead of schedule.

– Mondadori Independent Media LLC, publisher of Grazia in Russia, closed 2012 at break-even thanks to the good performance of investments in advertising, which registered a 21% growth against the previous year.

Revenues generated from the international network of the magazines under licensing agreement and investments amounted to more than euro 160 million, up 9% against 2011.

· ADVERTISING
The continuing deterioration of the general economic situation has had a predictable impact on investment in advertising, which closed out the worst year in the past two decades (-14.3%). The market, in fact, dropped well below a value of euro 8 billion for the first time since 2003 at current prices and in real terms, down to the levels of 1991.

As already mentioned, the sharpest decline was seen in the print media, with newspapers (-17.6%) and magazines (-18.4%, reaching -21.4% if comparing the same number of publications to 2011), the sectors in which Mondadori Pubblicità S.p.A. mainly operates.

Advertising on the radio channel was also down considerably: after a positive start in 2012, advertising volumes dropped 10.2% compared to the previous year.

Internet was the only channel posting positive numbers (+5.3%), though showing signs of a sharp slowdown in the last months of the year.

In this scenario, every single segment has suffered a sharp cut in advertising investments.

Though facing increasingly aggressive competition in terms of prices, Mondadori Pubblicità paid close attention to pricing, in an attempt to reinforce the value of the publications it represents in concession.

In 2012, the company posted revenues at euro 172.9 million, down 21.4% against euro 219.9 million of 2011: all sectors were hit by the crisis, including Cosmetics, Interior Design and Automotive.

In particular:
– revenues from advertising for the Mondadori magazines were down 22.6% as a result of the negative performance of both monthlies and weeklies;
– revenues from advertising on the Radio channel dropped by 14.9%. This was largely due to cost containment policies on the part of clients from the sectors that had historically been the most important, such as Automotive, Consumer Goods and Telecommunications.

Increases in both volume and revenues from clients in the Fashion and Design sectors were not enough to counterbalance the reduction in investments by the traditional radio advertisers.

In 2012, the Mediamond S.p.A. joint venture registered an overall increase in revenues equal to 63.4%; the main web sites of the Mondadori Group are in constant growth: www.donnamoderna.com (+22%), www.grazia.it (+43%) and www.panorama.it (+22%), while RTI, TgCom (+10.5%) and Sport Mediaset (+53%) are also growing. Advertising for the www.videomediaset.it web site, which was added to the portfolio in January 2012, also posted strong growth figures.

· MAGAZINES FRANCE

The magazines market in France posted a reduction of 5.4% in value for circulation at newsstands (internal source) and lower investments from advertising by 4.9% in value (source: Kantar Media).

In this difficult scenario, Mondadori France obtained good results in 2012: revenues totaled euro 381.6 million, up 9.6% against euro 348.1 million in the previous year. On a like for like basis, excluding the integral consolidation of the Editions Mondadori Axel Springer S.n.c. joint venture, revenues would have shown a 2.2% drop in the period.

The ongoing improvement of products, combined with constant attention to cost containment policies, enabled the company to post a 16.5% increase in EBITDA against 2011, topping euro 38.9 million with a 10.2% incidence on revenues.

However, impairments amounting to a total of euro 140 million, including impairment on magazines and goodwill, had a strong impact on EBIT.

Revenues from advertising: from this standpoint, revenues on a like for like basis registered a 2.4% reduction against the previous year; in terms of volume, the decrease amounted to 1.4% in a market that showed a 5.7% overall drop (source: Kantar Media).

In the second half of the year, the advertising market showed a downturn against the first half, which had closed with results essentially in line with 2011.

In this context, Mondadori advertising revenues increased for the fourth consecutive year in terms of volume, consolidating its second position.

This excellent result reflects the growing trend of women’s magazines, including Grazia (+7.2%), Biba (+10.8%) and Pratique Modes & Traveaux (+9.1%), and the steady performance of the other publications despite the definitely unfavourable market scenario.

Revenues from circulation: revenues from circulation (newsstands and subscriptions), making for approximately 70% of the total revenues of Mondadori France, registered a reduction (-2.2% on a like for like basis).

Based on circulation audits DSH, the circulation of magazines in 2012 decreased by 4.3% in terms of copies. Mondadori registered a 3.6% reduction. For the third consecutive year Mondadori France outperformed the market.

In terms of value, sales at newsstands dropped 5% in the period. This reduction is in line with the market trend (-5.4% in the period; internal source).

Subscriptions, which rose by 0.5% against 2011, have increased by 10% over the last five years, making for 33.6% of Mondadori France revenues with over three million subscribers.

The key factors underlying the good performance of magazine circulation are ongoing innovation and publishing quality including product restyling and the launch of brand extension initiatives on the magazines.

Digital: in 2012, Mondadori France accelerated its investments in this area, targeting a 28% increase in revenues and a 67% increase in the audience, reaching 4.5 million single hits in 2012, against 2.7 million hits of 2011 (source: Nielsen).

It should be noted that at the end of August 2012, Mondadori France acquired a 60% interest in Naturabuy.fr, a leading web site for classifieds and personals, auction sales and a boutique for products associated with free time and, specifically, hunting and fishing. Last year Mondadori France also acquired the majority stake in AutoReflex.com, a web site featuring car ads.

· DIRECT

In 2012 the main products offered by the Mondadori Direct S.p.A. network registered sharp drops in revenues: books (-8%), dvd-films (-18%) and music (-14%) were all down, with the exception of gift boxes and consumer electronics, which grew respectively by 6.5% and 6% (source: GFK).

Advertising investments by companies in the traditional direct marketing channels, like door to door, mailings, inserts and telemarketing, have been in decline for several years, a logical consequence of technological innovation and the progressive replacement of these channels with web-based communication, mainly e-mail marketing and social media.

In this context, the revenues of the Direct area dropped by 5.8% to euro 261.8 million against euro 278 million of 2011.

In 2012 the top management concentrated on the following areas:
– activities related to the rationalization of sale points, which diminished by 31 units to a total of 597 sale points, in line with company policies targeting the integration of the various formats;
– further development of customer loyalty initiatives using the Mondadori Card, whose numbers have more than doubled in a year (units 700,000);
– redefinition of the strategies for retail, both hard copy and digital, with the creation of the inMondadori trademark as an umbrella brand, comprising all product and service sale formats offered, including e-commerce;
– signing of a partnership agreement with Kobo Inc. for the exclusive Italian distribution rights to the new Kobo e-reader, in various versions and formats.

· RADIO

In 2012, advertising revenues from the Radio channel, certified by Nielsen, decreased by 10.2%, with a downward trend that worsened over the course of the year (in June -5.5%, in September -8.1%, in December -10.2%).

In this context, R101 closed 2012 with a drop in advertising revenues of -13.7% compared to 2011, ascribable to a significant cut in investments by the key clients in the Automotive, Consumer Goods and Telecommunications sectors, which together accounted for more than 50% of its total revenues. Including revenues from the web site and other initiatives launched during the course of the year, total revenues were down 14.7% from euro 16.3 million in 2011 to euro 13.9 million in 2012.

EBIT reflected the effects of the reduced value of the frequencies assigned for a total of euro 46.3 million as a result of the impairment process and based on the opinion drafted by an independent professional consultant.

In terms of listeners, R101 is one of the leading commercial radio stations in Italy, with about 2.1 million listeners on an average day (source: Eurisko Radio Monitor, January-December panel) and more than 11.3 million per week (source: Eurisko Radio Monitor, February-December panel); the data on the average fifteen-minute segment for the last quarter were also very positive, posting an 18% increase over the first half of 2012 (source: Eurisko Radio Monitor).

The digital growth of R101 in 2012 was also significant: the web site reached an average of 200,000 single users per month and averaged more than 1.4 million page views per month.

§

RESULTS OF PARENT COMPANY ARNOLDO MONDADORI EDITORE S.P.A.
The Annual Report of the parent company, Arnoldo Mondadori Editore SpA, for the year ended at December 31, 2012 shows a net loss of euro 39.6 million against net profits of euro 55.3 million in 2011.

The decrease was due to dropping revenues from publishing activities, particularly in the magazines area, where revenues plummeted, both in terms of number of copies sold and the sale of add-ons, as well as in the sale of advertising space.

EBITDA reflected the business trend, down from euro 48.5 million in 2011 to euro 3.9 million in 2012.

This reduction aggregates trademark depreciation for euro 1.4 million and the depreciation of Monradio (R101 frequency) for euro 46.3 million. The net balance of profits and losses from investments, including dividends received and impairments in 2011 was equal to a positive euro 35.4 million and a negative euro 30.8 million in 2012.

§

PROPOSAL TO COVER THE LOSSES FROM THE FISCAL YEAR BY UTILIZING A PORTION OF THE SHARE PREMIUM RESERVE

The Board of Directors will submit to the Shareholders’ Meeting, called on April 23, 2013 on first call (April 24 on second call) a proposal to entirely cover the losses of the 2012 fiscal year, equal to euro 39,574,943.13, through the utilization of the share premium reserve for the corresponding amount.

§

PREDICTABLE EVOLUTION

The trend in the first months of 2013 continues to be strongly negative, with an impact on the company’s main sectors of activity.
Cost reduction measures implemented in recent years have allowed Mondadori to post positive results in 2012, before impairments. However, given the difficult scenario in which the Group is currently operating in all sectors of activity, for the purpose of recovering profitability in the medium term, the Group intends to implement the following measures with even greater emphasis:

• rationalization of the structure and reduction of industrial costs, resulting in greater flexibility in responding to the changing levels of demand;
• actions necessary to consolidate high value added business lines and the recovery of profitability in the area of Italian Magazines, with the ultimate aim of further reinforcing the Group’s competitive position and make the most of any new opportunities, also in the digital area.

Realization of the above objectives will require massive financial and economic investments; for 2013 a lower EBITDA than in 2012 is expected.

RENEWAL OF THE AUTHORIZATION TO PURCHASE AND DISPOSE OF TREASURY SHARES

Following expiry of the previous authorization resolved by the Shareholders’ Meeting on April 19, 2012, upon the approval of the financial statements at December 31, 2012, the Board of Directors will submit to the next Shareholders’ Meeting the proposal for the renewal of the authorization to purchase Treasury Shares for the purpose of maintaining the legal requirement for possible buyback plans applicable and, consequently, the possibility of taking advantage of investment opportunities on its Treasury Shares.

It should be noted that the Shareholders’ Meeting of April 19, 2012 had authorized purchases, also taking the shares already in portfolio into account, up to a cap equal to 10% of the company’s share capital, represented by n. 24,645,834 ordinary shares.

Considering the total of n. 13,555,209 shares already directly or indirectly owned as at the date of the Shareholders’ Meeting, the authorization provided for the possibility of purchasing max. another n. 11,090,625 Treasury Shares.

In relation to the authorization of April 19, 2012 Arnoldo Mondadori Editore S.p.A. purchased a total of n. 1,398,291 Treasury Shares, corresponding to 0.56% of the company’s share capital on the Mercato Telematico Azionario (screen-based stock exchange).

Following completion of the aforementioned transactions, the total number of Treasury Shares comprehensively owned by the company, either directly or indirectly, is equal to n. 14,953,500 corresponding to 6.067% of the company’s share capital, of which n. 10,436,014 directly in Arnoldo Mondadori Editore S.p.A.’s portfolio and n. 4,517,486 owned by its subsidiary Mondadori International S.p.A.

Pursuant to article 2357 ter of the Italian Civil Code, the Shareholders’ Meeting will also be submitted an authorization to dispose of Treasury Shares purchased or already in the Company’s portfolio.

Here below are the main items underlying the proposal made by the Board of Directors:

• Reasons

The reasons underlying the request for the authorization to purchase and dispose of Treasury Shares make direct reference to the opportunity of giving the Board of Directors the power to:

– use the Treasury Shares purchased or already in the Company’s portfolio in relation to the exercise of rights, including conversion rights, deriving from financial instruments issued by the Company, its subsidiaries and third parties;
– use the Treasury Shares purchased or already in the Company’s portfolio to pay for the acquisition of interests within the framework of the Company’s investment policy;
– possibly dispose, if considered strategic for the Company, of investment opportunities also in relation to the Company’s available liquidity;
– dispose of Treasury Shares in relation to the exercise of options for the purchase of the same shares attributed to the beneficiaries of the Stock Option Plans established by the Shareholders’ Meeting;

• Duration

Until the approval of the 2013 financial statements.

• Maximum number of repurchasable shares

The renewed authorization refers to the purchase of max. another n. 9,692,334 shares (3.933% of the Company’s share capital) which, taking into account the Treasury Shares already owned either directly or indirectly by the Company as above indicated, would enable the Company to reach the cap of 10% of the Company’s share capital, in line with the previous authorization coming to expiry.

• Criteria for purchasing Treasury Shares and indication of the minimum and maximum purchasing cap

Purchases shall be made on the regulated markets pursuant to article 132 of Italian Legislative Law n. 58 of February 24, 1998 and article 144 bis, paragraph 1, letter B of Consob Regulation n. 11971/99 according to the operating criteria established in the organization and management regulations of the same markets, which do not allow the direct combination of the purchase negotiation proposals with pre-determined sale negotiation proposals.

The minimum and maximum purchase amount would be determined under the same conditions established in the previous Shareholders’ Meetings and, therefore, at a unit price not lower than the official Stock Exchange price of the day preceding the purchase transactions, decreased by 20%, and not higher than the Stock Exchange price of the day preceding the purchase transactions, increased by 10%.

In terms of prices and daily volumes, the purchase transactions would in any case be completed in compliance with the conditions established in EC regulation n. 2273/2003.

Today at 3pm, at the Company’s headquarters in Segrate, the Mondadori Group top management will present the results for 2012, approved on today’s date by the Board of Directors, to the financial community.

The entire documentation is available on the web site www.gruppomondadori.it (Investor Relations Section) and from Borsa Italiana S.p.A..

The CV of Mr Ernesto Mauri is available in the Governance section of our website www.gruppomondadori.it.

The executive manager responsible for the preparation of the company’s accounts, Carlo Maria Vismara, declares that, pursuant to aricle. 2, 154 bis of the Finance Consolidation Act, 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 2011 as presented by the Group’s Deputy Chairman and Chief Executive, Maurizio Costa.

MARKET SCENARIO

In the second half of 2011 the global economic situation, and in particular in the countries in the euro zone, continued to shown strong signs of difficulty. In Italy the economy outlook deteriorated significantly during the autumn, marking the beginning of recession. This has had a negative impact on industrial production and investment, resulting in a consequent decline in consumer spending. Also in France the main macroeconomic indicators in 2011 showed a negative trend compared with the previous year.
The macroeconomic performance in the markets of reference for the Mondadori Group, in Italy and France, was affected by these negative trends, with a significant deterioration in the final quarter.

GROUP PERFORMANCE FOR THE YEAR ENDED 31 DECEMBER 2011

In this context, the Mondadori Group ended 2011 with consolidated net revenues of €1,509.8 million, a fall of 3,1% on the €1,558.3 million of 2010.

Consolidated gross operating profit came to €130.4 million, a fall of 7% compared with the €140.2 million of the previous year, as a proportion of revenues 8,6% compared with 9% in 2010. Excluding non-recurring positive items and investments in the development of the digital business, the reduction in gross operating profit was 3.3%.

Consolidated operating profit amounted to €103.8 million, down 9.1% from the €114.2 million in 2010, with depreciation and amortization of tangible and intangible assets of €26.6 million (€26 million in 2010).

Consolidated pre-tax profit came to €82.7 million, down 8.4% on the €90.3 million in 2010, with lower borrowing costs of €3.4 million and higher investment charges of €0.6 million.

Consolidated net profit came to €49.6 million, up 17.8% compared with the €42.1 million for the previous year, during which, however, there was an additional tax charge for previous years’ taxes of €8.7 million.

Gross cash flow for 2011 amounted to €76.2 million, compared with €68.1 million in 2010.

The Group’s net financial position showed a deficit of €335.4 million, an improvement of €7 million from the end of 2010, after dividend payments of €40.3 million during the year.

Information concerning personnel
On 31 December 2011 employees, permanent and determined, pursuant to the Group companies, consists of 3,664 units compared to 3,649 at the end of 2010.
2011 saw the conclusion of early retirement plans authorised by the government, which have seen the exit over two years of 233 employees, including both publishing and journalistic staff. There was a similar situation in France where the implementation of the so-called “social plan” has resulted, over two years, in the departure of 74 employees.
Overall, the restructuring plan announced in 2009, of which the above-mentioned ministerial programme was an important but not exclusive part, has been successfully completed.

THE BUSINESS AREAS

• BOOKS

In 2011, the trade book market in Italy has remained stable in terms of copies sold, while there was a decline of 1.4% in terms of value (source: Nielsen).
As regards the distribution channels, the slowdown of large-scale retailers was particularly critical, where the shortfall over the year was -7.9%, with a peak -20.3% in December. This figure is even more striking when one considers the performance of the ten best-selling titles: in terms of value in 2011 saw a decline of 48% in the top ten compared with the same figure as recorded in 2007.

In this context, Mondadori confirmed its leadership in the trade book market with a market share of 26.5% in terms of value (source: Nielsen).
In particular, 43 titles featured among the top 100 bestsellers of the year. Among these, Le prime luci del mattino by Fabio Volo, Nessuno si salva da solo by Margaret Mazzantini, the Steve Jobs biography by Walter Isaacson, published by Mondadori, and Tre atti e due tempi by Giorgio Faletti, published by Einaudi, respectively, were first, fourth, eighth and tenth in the overall rankings of the year.

Revenues generated by the Books area amounted to €389.1 million, a fall of 6% compared with the €413.9 million in the previous year.
Gross operating profit, despite the lower revenues cited above, was substantially in line with the high level of 2010, thanks to a focused policy of costs controls and the positive contribution of subsidiaries.
In the Paperback sector the most significant initiative was the launch of new series called NumeriPrimi °, which involved all the publishing houses of the Group – Edizioni Mondadori, Einaudi, Piemme, Sperling & Kupfer – and the publication of the most successful titles in large format and quality paperbacks.
In the first ten months, NumeriPrimi° achieved sales of two million copies, with particularly success in the large-scale retail channel.

2011 was undoubtedly important for Books in terms of digital publishing, with the normal operation of Mondadori’s digital distribution platform and, in the second half of the year, the arrival in the Italian market of the major international e-book retailers. During 2011 Mondadori introduced over 3,000 e-books, recording quarter of sales from the Mondadori platform.
The Christmas period saw the highest average sales of the year with peaks of more than 4,000 downloads per day. Among the best sellers, also in the digital format, were new titles by Walter Isaacson, Fabio Volo, Giorgio Faletti and Margaret Mazzantini, as well as backlist titles such as Miglio 81 by Stephen king.
The objective is to digitise the entire catalogue of the group, around 15,000 titles by 2014.
In the school textbooks segment, the digitization programme of the catalogue is already 90% complete, with about 1,300 titles already available in e-book format.

• MAGAZINES ITALY

The current challenging macroeconomic environment continues to have a strong impact on the consumer magazine market in Italy, adversely affecting advertising revenues (-3.7% magazines; source: Nielsen), circulation (- 5% in terms of copies and -7.2% on a comparable basis; internal figures) and add-on sales (-0.5% in terms of value; internal figures). In addition to the effects of the economic situation are the structural changes, related to the digital evolution that is underway, which is having a negative impact on print products, to which especially younger readers are showing less and less interest.
Mondadori has acted to address the situation and has to achieved a performance that is better than the competition and strengthened its position as market leader (33.3%), as can be seen from the continued growth of the number of readers of the Group’s weekly and monthly titles that total some 35 million, or 82% of the total (Audipress 2011/III). In particular, the latest Audipress survey shows that Mondadori’s “audience” was up by 1.6% on the previous period.
In a markedly recessive context, the performance of the Magazines Italy area saw a fall in total revenues of 2.7%, from €471.40 million to €458.8 million.
In particular, Mondadori titles suffered most from the recessive phase in the market and ended the year with a shortfall in revenues of around 5%, due to a reduction in:
– circulation revenues (-4.7%), the effect of a sharp decline in subscriptions (-15%) and fewer copies sold with add-ons (-11%);
– revenues from sales of add-ons (-2.4%), mainly because of a decline in sales of music products. However, the Group’s leadership in the segment (35%) was maintained, with continued high level of profitability and in line with the previous year;
– advertising revenues were down by 3.8%, with a particularly poor performance in the weekly family titles and newsmagazines.This was partly offset by a positive trend in women’s magazines.
The results show, however, a significant increase that is also attributable to the capital gain realized on the sale of the stake in Hearst Mondadori Editoriale Srl. Even excluding the aforementioned non-recurring items, there was still growth in gross operating profit.

Properties
During 2011, Mondadori took a series of important steps with the Group’s web properties associated with the main magazine titles, achieving significant results, both in terms of advertising sales and traffic.
The results for 2011 should therefore be considered positive, with an improvement in all indicators at rates higher than the market, in particular advertising (+47.7% compared with +12.3% for the market as a whole; Nielsen) and growth in the number of unique users, over 6.6 million, an increase of 23.5% on the previous year. This trend benefited from positive performances by www.grazia.it (+73%), www.panorama.it (+63%) and www.donnamoderna.com (+27%). Also of note was the rapid growth of www.panoramauto.it, which was launched in the second half of the year.

• ADVERTISING

Market trends in advertising spending in Italy in 2011 saw an overall fall of 3.8% (source: Nielsen), confirming that the global financial crisis and the downturn in GDP have had a noticeable effect on all media with the sole exception of the internet.
Television was down by 3.1%. There was a significant decline in Radio (-7.8%) and newspapers (-7.7%), while magazines saw a smaller decline of -3.7%, with a particularly bad performance in the final quarter (-8.2%).
The slowdown in advertising has involved all the main sectors of the magazine advertising market except cosmetics and fashion.

In 2011 Mondadori Pubblicità recorded an overall fall in sales compared with 2010, ending the year with revenues of €219.9 million, compared with €233.9 million in 2010.
In terms of the magazine advertising, the fall in sales was due to the particularly negative performance in certain sectors such as FMCGs and interiors. In particular, the weeklies were hit hard, despite the good performance of Grazia (+3.2%) and Tu Style (+11.1%) and the substantial stability of Donna Moderna, the other weeklies of the Group were down on the previous year.
For monthlies meanwhile, the decline was less marked (-1.2%), thanks to the resilience of interiors and cooking titles and to the success of Panorama Icon, which was launched in April 2011 and enabled the Group to strengthen its position in the male fashion segment and Mondadori Pubblicità to offer a product which meets the needs of companies operating at the high-end of the market.
During 2011 Mondadori Pubblicità maintained a continuous focus on the trend in average prices compared to 2010, with stability for Donna Moderna, Grazia and Tu Style among the weeklies, and growth in the interiors and cooking monthlies, sometimes at the expense of volume.

Radio advertising revenues (R101 and Radio Kiss Kiss) grew by 0.7% due largely to the performance of the new organisational model of Mondadori Pubblicità from May 2011; there was a particularly positive trend for R101 in a market that saw a fall in spending of 7.8% (source: Nielsen).

In the Internet market the excellent results achieved by Mediamond, with overall growth of 56% compared to 2010, was the result of a positive performance by the main sites of the Group and the considerable success of TgCom (+59%) and Sport Mediaset (+30.2%) of the RTI Group.
Overall, the Mediamond portfolio was enhanced in 2011 with the addition of www.ilgiornale.it with sales that were above expectations.
After just two years Mediamond now sells advertising for vertical 30 sites, with 11.5 million unique users per month, as well as a considerable number of case studies with leading companies in its sectors of reference.

• MAGAZINES FRANCE

The magazine market in France, both in terms of circulation and advertising revenues, suffered a marked slowdown in the last part of the year, although less significant than in Italy. During the year, advertising, in terms of value was, essentially unchanged compared with the previous year while circulation saw a fall of 4.2%.
In this contexts, Mondadori France recorded growth in earnings thanks to positive performances by all of its titles.

The consolidated revenues for the year came to €348.1 million, up 1.1% on the €344.2 million of the previous year.
Gross operating profit was up by 16.8% on the previous year, thanks to a good performance in magazines and, in particular, the improvement of Grazia, as well as lower manufacturing costs and overheads.

Advertising revenues were up 3.3% to €85.4 million. This excellent performance is due mainly to strong growth in the upscale women’s titles, in particular the weekly Grazia (+34%) and the monthly Biba (+10%), which now account for 33.6% of total advertising revenues (27.2% in 2010).
It should also be noted that Grazia is now the second largest magazine in the market in terms of advertising pages (2,495 pages, up 39%). Even in terms of circulation, Grazia confirmed its success since the launch, growing by 3.1% to 184,000 copies.

In terms of circulation, which accounts for 69% of the total, revenues increased by 1.3%, to €239.5 million,, of particular relevance was the subscription channel, which accounted for 32.5% of total sales.
During the year a number of activities were launched focused on innovation and quality, key factors in the positive performance achieved in terms of circulation: in particular the launch of new formats for seven titles and the launch of the quarterly Guerres & Histoire.
The most successful titles include Modes & Travaux, which has become the leading title in its segment; among women’s magazines, Top Santé and Closer, which have strengthened their positions; in the popular science segment, Science & Vie and Science & Vie Junior continue to grow.
Mondadori France is the leader in the car sector with the weekly magazine Auto Plus and the bimonthly Auto-Journal.
Biba recorded the strongest growth among all of its competitors, with 326,000 copies (+4.5% compared with 2010).

International Activities
Despite some signs of a slowdown due to the ongoing global economic situation, the International Activities area confirmed the positive trend of previous years. Despite difficulties in terms of both consumer and advertising spending, the Group has responded with continuous expansion and geographic diversification and consolidating its position in major emerging markets such as China, Russia and the Asian market. The annual turnover of International Activities was over €160 million. Spearheading this growth is Grazia, a brand with a strong international success that now forms a network of twenty editions with editions in four continents.

Licensing: the end of 2011, there was a total of 27 international editions: seventeen of Grazia, seven of Casaviva, one of Flair, one of Interni, and one of Sale&Pepe. The different editions of Grazia generated a combined revenues of €107 million (+20% compared with 2010) with expectations of further growth for 2012, also thanks to the launch of new editions.

Advertising: thanks to a dedicated team focused on the fashion and interiors segments, in 2011 on the Italian market Mondadori generated advertising revenues of €6.8 million (+49% compared with 2010).

With regard to investments, Mondadori in active in China with its joint venture Mondadori SEEC Advertising Co Ltd: Grazia China, launched in February 2009, has already proved a great success (with revenues of €7.1 million, +87% compared with 2010). Given the rapid growth and potential of the Chinese market, Mondadori has several new projects currently under consideration, the first of which should be announced in the coming months.
Grazia Russia, which celebrated its fifth anniversary in March, during 2011 recorded revenues of €4.1 million, up 20% on an already positive 2010.
Despite the dramatic economic crisis in Greece, Attica Publications expects to be able to derive competitive advantages over its competitors.

• DIRECT

The Direct Area, which manages the retail and direct marketing businesses, conducts its activities through:
– a network of outlets across the country, comprising at the end of 2011 of 628 outlets (22 directly operated and 307 franchised book shops; 9 Multicenters; 213 Edicolè franchises, 18 directly managed Book club and 59 franchised stores):
– Cemit, the market leader in diversified strategies for the design and development of one- to-one communication and CRM.

Revenues in 2011 came to €265.5 million, a fall of 1.4% compared with the €269.2 million of 2010. The figures are not comparable due to changes in the scope, including the acquisition of the whole of Mondolibri SpA. On a like-for-like basis, the shortfall would be around 5% compared with the previous year.

The Multicenter outlets and bookshops, clubs and directly managed outlets, were all penalised by marked downturns that were as high as 12%, only the franchises and Edicolè outlets maintained a positive trend in revenues.
Also Cemit, which suffered significantly from the overall decline in investments in direct marketing, ended the year with a fall in revenues of 24%.
Faced with these difficulties, the company has increased its focus on costs, which explains the merger of Mondadori Franchising S.p.A. and Mondolibri S.p.A. with Mondadori Retail S.p.A., which changed its name to Mondadori Direct SpA, in the middle of the year.

• RADIO

R101, the Group’s radio station, generated revenues of €16.3 million, up by 12.4% compared with the €14.5 million of 2010, thanks to the performance of the car, food, media/publishing and telecommunications sectors, which account for approximately 50% of total turnover.
The market figures for total Radio advertising in 2011 however showed a fall of 7.8% compared with 2010 (source: Nielsen).

The increase in revenues for R101, as well as the alignment of the publisher’s share with other businesses of the Group, is also attributable to the performance of the sales network, which passed from a dedicated network to the more general representation of the entire sales force of Mondadori Pubblicità, which facilitated the entry of many new clients.

• DIGITAL

Revenues generated by the Digital Area came to €17.2 million, an increase of 63.8% compared with the €10.5 million of 2010. The turnover from digital publishing, e-commerce, diversified activities and IT infrastructure development and databases, amounted to €44.2 million, an increase of 23.5% on 2010.
The digital publishing activities primarily refer to e-books, self-publishing, online bool clubs, properties and digital advertising.

In e-commerce in 2011, the business was mainly through www.bol.it sites, which are focused on the sale of books, CDs, DVDs and e-books, which recorded growth in the number of orders (+23%) and the number of unique users (+42%), and www.abbonamenti.it, which manages both print and digital subscriptions.
CRM activities in 2011 saw the creation of the Mondadori Customer Data Base, a single structure which brings together all of the customers of the different business units and the development of information processes for the reconciliation of customers of the different companies of the Group.

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 2011 shows a net profit of €55.3 million (€51.7 million on 31 December 2010), while gross operating profit came to €48.5 million (€70.8 million in 2010).
These economic indicators show a contrasting trend; gross operating profit was affected by the significant decline in sales in both books and magazines, where both revenue from sales of copies and from advertising was down compared with 2010.
Also of significance, in absolute terms, was the total investments in digital activities that are still in the start-up phase.
Net profit, meanwhile, benefited from higher returns from the management of investments that, in 2011, included a capital gain of around €10 million from the sale of the company’s stake in Hearst Mondadori Editoriale Srl and a reduction in taxes including, in 2010, a non-recurring charge of €8.7 million, resulting from the adherence to the definition of pending tax disputes, established by Law N° 73 of 22 May 2010, and regarding a dispute with the tax authorities in Milan for the year 1991.

PROPOSAL FOR THE DESTINATION OF NET PROFIT FOR THE YEAR ENDED 31.12.2011
The Board of Directors agreed to propose to the Annual General Meeting of the Shareholders, called for 19 April 2012 (or 20 April on second calling), to devolve to the extraordinary reserve the full amount of the net profit for the year ended 31 December 2011, which amounted to €55,342,667.63
Given the current market scenario and despite the increase in net profit for 2011 compared with that for 2010, the proposal of the Board of Directors not to distribute a dividend for 2011 is aimed at strengthening the financial structure.

FORECAST FOR THE FULL YEAR
In the first two months of the year trends related to consumer spending in general, and in particular in the markets of interest to Mondadori, remain significantly negative, in line with the closing months of 2011.
There are currently no signals of a turnaround that could significantly alter the trend, at least in the first half of the year. Similarly, there is also reduced visibility, also in the short term, with regard to the advertising market.
During 2012 the company’s priorities will be to maintain a firm hold on the Group’s leadership in magazines and books in Italy, the consolidation of the successes in France, the development of digital activities, both in books (e-books) and other areas, the expansion and diversification of the international activities, and the continuation of efforts to reduce operating costs in order to contain the negative impact of rising production costs.
In such a problematic scenario, and despite the abovementioned actions, it is currently difficult for the Group to achieve the same levels of profitability as in 2011.

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 2010 as presented by the Group’s Deputy Chairman and Chief Executive, Maurizio Costa.

GROUP PERFORMANCE FOR THE YEAR ENDED 31 DECEMBER 2010

In terms of profitability, 2010 showed a substantial improvement on the previous year. In addition to an increase in revenues, all of the objectives for the year relating to reorganisation and the reduction of staff and operating costs were achieved.
In particular, the personnel rationalisation plan and reorganisation activities led to a reduction of 347 people in 2010, taking to around 700 the number for the three-year period (excluding the effects of the sale of the Printing division and the consolidation of Mondolibri). Further improvements are foreseen during 2011.
There was also a reduction in personnel costs for the year of 10.3%.
The year also saw the attainment of 93% of the plan to contain operating costs, which foresaw a saving of €170 million for the three-year period 2009/2011.

Consolidated revenues came to €1,558.3 million, an increase of 1.2% on the €1,540.1 million of 2009.

Consolidated gross operating profit totalled €140.2 million, up 32% from the €106.2 million of the previous year. While benefitting from lower restructuring costs than in 2009, this item was negatively impacted, for an analogous amount, by higher postal charges and, above all, by extraordinary charges from writedowns and the results of joint ventures in countries severely affected by the recession.
As a proportion of revenues, this represented a rise from 6.9% in 2009 to 9%.

Consolidated operating profit came to €114.2 million, a jump of 59.1% compared with the €71.8 million of 2009, with amortizations and depreciations on tangible assets of €26 million (€34.4 million in 2009).
As a proportion of revenues, this represented a rise from 4.7% in 2009 to 7.3%.

Consolidated pre-tax profit came to €90.3 million, an increase of 41.3% on the €63.9 million of 2009, with higher financial charges of €16 million due largely to a capital gain in 2009 of €14.5 million following the closure of a private placement and related derivatives.

Consolidated net profit amounted to €42.1 million, a 22.7% increase on the €34.3 million of the previous year: the result was affected by the payment of €8.7 million in line with new norms regarding the definition of pending tax litigation.

Consolidated net profit for 2010, adjusted to take account of the aforementioned extraordinary item (tax charges for previous years) would amount to €50.8 million, more than double the €23.8 million net profit recorded in 2009, adjusted for capital gains.

With regard to the company’s assets, net assets as of 31 December 2010 amounted to €581 million, compared with €546.3 million at the end of 2009.
The Group’s net financial position went from -€372.9 million at the end of 2009 to -€342.4 million on 31.12.2010, an improvement of €30.5 million.
During the period 2008-2010, the level of indebtedness has been reduced by around € 200 million.

Information concerning personnel
On 31 December 2010 permanent and temporary contract staff employed by the companies of the Group amounted to 3,649.
An analysis of this figure, compared with the figure on 31.12.2009 and excluding the effects of the consolidation in April of Mondolibri (246 employees last year), clearly shows the benefits of the cost containment actions carried out.
As already indicated, there was total reduction of staff in 2010 of 347, which corresponds to 8.7% of the whole, when account is also taken of the reduction during the period at Mondolibri. Of this figure, 80% is related to the realisation of programmed reductions for the year foreseen by the restructuring plan and involving the Italian companies Arnoldo Mondadori Editore S.p.A. and Mondadori Pubblicità S.p.A., as well as the foreign subsidiary Mondadori France SA.
Significant rationalisation efforts have also involved the Direct area where, following reorganisation and a strategic review of sales outlets, a reduction of 7% in headcount was achieved.

THE BUSINESS AREAS
· BOOKS
Total revenues generated by the Books area to 31 December 2010 amounted to €413.9 million, a slight fall (-2.2%) on the €423.1 million of 2009, with the second half of the year showing an improvement compared with the same period of the previous year.

Also in 2010 the Group confirmed its leadership in the sector with a market share of 27.1% and a high level editorial offer. Special note during 2010 were the prestigious successes of the novel Canale Mussolini by Antonio Pennacchi, winner of the Premio Strega 2010, and runner-up also in the Premio Campiello 2010; and Accabadora by Michela Murgia, winner of the Premio Campiello. Also of note was the award of the Nobel Prize for Literature to Mario Vargas Llosa.
The fall in revenues recorded by the school textbooks sector is the result of recently introduced educational reforms.
Operating profit was affected by losses suffered by the Random House Mondadori joint venture in markets severely affected by the international financial crisis. Adjusted to take account of non-recurring items, operating profit for 2010 was in line with that of the previous year.
October saw the launch of e-book sales, with a catalogue that by the end of the year had reached a total of 1,500 titles, available from the principal Italian e-commerce stores, including Bol.it. Prices are, on average, 40% lower than print editions for new titles and 25% lower for backlist titles. The biggest selling titles were La caduta dei giganti by Ken Follett, Io e te by Niccolò Ammaniti and La solitudine dei numeri primi by Paolo Giordano.

· MAGAZINES ITALY
The Italian consumer magazine market in 2010 was again characterised by the recessionary trend that has affected the world’s leading economies since the second half of 2008, with a decline in circulation, advertising investments and add-on sales.
The actions which have allowed Mondadori to successfully contrast this still problematic scenario – with a performance above that of the reference market – can be identified along tow distinct lines: the first aimed at exploiting the benefits of the multi-year reorganisation plan, and the second focused on sustaining the development of the product portfolio.

Magazine revenues in Italy in 2010 amounted to €471.4 million, a fall of 4.1% on the €491.8 million of the previous year.

After the marked slump in 2009, this result was achieved, in particular with regard to Mondadori titles, the main component of the area’s business, by a series of phenomena:

• a 4% fall in circulation revenues, in line with the market of reference and the consequent maintenance of leadership and market share (34.2%);
• a fall of 8.7% in revenues from add-on sales, a markedly better performance than the market as a whole (-23.6%, in terms of value);
• a moderate slide in advertising revenues (-1.9%), which was better than the market (-5.4%, Source: Nielsen, in terms of value) and decidedly more resistant than the most qualified competitors in the magazine market;
• the particularly positive overall turnover of the Magazines area was the result of a good performance by weeklies. Meanwhile, with some significant exceptions for products involved in specific re-launches, the performance of monthlies was markedly weaker.

· DIGITAL
With the overall advertising market in 2010 showing growth (+3.8%, Source: Nielsen) compared with 2009, a very difficult year for advertising, the most dynamic medium in the year was the Internet, which grew by 20.1%.
Mondadori web sites, for which advertising is sold by Mediamond, saw a 40% increase in gross revenues, above all thanks to the performance of sites for women, in first place Donnamoderna.com, followed by Graziamagazine.it.

· ADVERTISING
The Italian advertising market ended 2010 with total growth of 3.8%, confirming the progressive improvement – compared with 2009, a particularly bad year for advertising (Nielsen -13.4%) – in line with the positive signals that were first seen in the middle of the year, above all for certain media.
Mondadori Pubblicità closed the year with revenues of €233.9 million, a fall of 6.6% on the €250.4 million of 2009. On a comparable basis in terms of media, the fall was of just 1.9%.
Among the changes that characterised the year was the interruption of sales for il Giornale from November 2009, for the internet (passed to Mediamond) and the addition to the portfolio of Radio Kiss Kiss.

In magazines, after a positive final quarter, the titles published by Mondadori ended 2010 essentially in line (-0.8%), on a like-for-like basis, with the previous year, and distinguishing themselves, in a competitive context particularly affected by uncertain forecasts and a high level of volatility in advertising investments. There was a positive performance by weeklies (+1%), which benefitted from the strength of the entire women’s segment.
With regard to radio, where there was overall growth of 16.5%, R101 sales were up (+5.1%) and sales for Radio Kiss Kiss, which began in March, were also positive.

· MAGAZINES FRANCE
Revenues generated in 2010 by Magazines in France amounted to €344.2 million, an increase of 0.2% on the €343.5 million of 2009 (+6.2% net of titles sold and the effect of the launch of Grazia).
In a magazine market in which there was a healthy recovery in advertising pages and a slight fall in circulation, the results of Mondadori France demonstrate the wisdom of focusing on the portfolio of high-circulation titles and the success of the launch of Grazia, with figures clearly better than the market.
Mondadori France recorded a increase in circulation volumes of 1.7% (Diffusion France Payée), compared with a – 2.1% by competitors.
Circulation revenues (69% of the total) – which include both newsstand sales and subscriptions – were down by 1.3% at the consolidated level.
Excluding the titles sold or closed, there was an increase of 3.9%, mainly due to the positive sales of Grazia (51 issues compared with 18 in 2009) and a marked growth in subscription revenues, which, being less exposed to economic cycles, constitute an important asset (32.5% of magazine revenues in the period).

With regard to advertising, there was an 8% increase in consolidated revenues compared with the previous year. If the titles sold or closed are excluded, the increase was of 19.1%. These excellent results are above all due to a marked increase in advertising revenues for the Mondadori France “haut de gamme” women’s titles, which now account for 27% of total advertising sales (13% in 2009).
Volume sales in the magazine advertising market in France in 2010 was up by 9.5% (Source: Kantar Media). In the same period Mondadori France recorded an excellent performance (+24.9% in terms of volume), increasing its market share by 1.2%.

· INTERNATIONAL ACTIVITIES
In the period to 31 December 2010 the international activities of Mondadori Magazines generated total revenues of €142 million.
The 50-50 joint ventures in Russia and China performed decidedly better than the previous year and budget expectations, in particular with regard to advertising sales.
The Attica subsidiary was affected by the financial crisis in Greece and the Balkans, with a reduction in advertising revenues of around 27% (-21% on a like-for-like basis). Decisive ongoing efforts to reduce costs had a big impact on containing the loss of revenues in 2010 and are aimed at further contributing to re-balancing the results of 2011.
Other figures for the period show that licensing revenues were up by 36.4%, thanks to the positive performance of Grazia UK and Grazia Holland, as well as the German and French editions of the title, that had still to be launched in the first part of the previous year.
There was also an increase in revenues from advertising services in Italy for the network, both thanks to the new editions and the positive performance of existing titles (Grazia UK +14%, Grazia Russia +67%).

· DIRECT & RETAIL
Total revenues generated by Direct and Retail at year-end came to €279.7 million, an increase of 30.2% compared with the €214.8 million of 2009, also thanks to the consolidation of Mondolibri S.p.A. from April 2010.
On a like-for-like basis, the increase would be of 6.5%, mainly thanks to new affiliations in the franchising network.

Direct
There was a slight recovery in the market for direct communications in 2010 was characterised and, in this context, Cemit Interactive Media S.p.A. identified both new clients and new operations that resulted in a 14.3% increase in revenues compared with 2009, while also maintaining high value added activities.
In the e-commerce (Bol.it) area, the company recorded strong growth (+28%) compared with the previous year. This increase, the highest in the sector among the relevant operators in the book sector, was achieved also thanks to improvements in customer service and the adoption of a more aggressive commercial policy.

Retail
During 2010 the expansion of the network in Italy continued, resulting in the generation of combined revenues of around € 202.7 million. By normalising franchising revenues (i.e. converting them from the disposal value to the retail price), the total reaches around €250 million and gives the area in a highly significant position in Italian bookselling and a predominant position in terms of the number of outlets (with a combined total of 517 outlets under the Edicolè, Librerie Mondadori, Gulliver and Mondadori Multicenter fascia).

· RADIO
In 2010 the radio market saw revenues increase by 7.7% compared with the previous year, once again making it one of the best performing media.
The trend was markedly different between the first (+14.7% compared with 2009) and second halves of the year, which while remaining positive, was markedly less so, (+0.8%; Source: FCP Assoradio).

Advertising sales for R101 generated net revenues of €14.5 million, an increase of 5.1% on the €13.8 million of 2009. Such revenues are essentially the company’s share of total gross advertising sales of around €20.5 million.
There was also a big difference in the sales for R101 between the first and second halves of the year, due to a lower number of special initiatives and a performance that was decidedly better than the market average in the latter part of the year.
With regard to ratings, publication of the Audiradio national figures has been suspended: the last published figures refer to the first quarter of 2010 where R101 notched up a daily average of 2.5 million listeners and around 7 million over 21 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 2010, shows a net profit of €51.7 million (€53.2 million on 31 December 2009), while gross operating profit came to €68.1 million (€42.3 million in 2009).
The improvement in the latter was due to the positive performance recorded by the Magazines area and the effects of staff reductions resulting from the implementation of the restructuring plan introduced in 2009.
The net profit figure was impacted by the payment of extraordinary tax charges of €8.7 million, resulting from new norms for the definition of pending tax litigation introduced by law N° 73 of 22 May 2010. This operation is related to an ongoing dispute with the Milan tax office regarding the year 1991.

DIVIDEND PROPOSAL
The Board of Directors agreed to propose to the Annual General Meeting of the Shareholders, called Thursday 21 April 2010 (or Friday 22 April on second calling), the distribution of a gross dividend of €0.17 per for each ordinary share (net of treasury stock) in circulation on the ex-dividend date.
In line with the dispositions of the “Regulations for organised markets managed by Borsa Italiana SpA” dividends will be paid as follows: coupon detachment 23 May 2011, payable from 26 May 2011.

FORECAST FOR THE FULL YEAR
With the absence of any changes in the trend and with no improvements in the forecasts, figures for consumer spending in the markets of relevance to the Mondadori Group for the first two months of 2011 do not show any significant signs of improvement in the short term or for the year as a whole.

Regarding the main areas of business:
– in Magazines, some slight signs of a recovery in advertising allow for reasonable optimism in terms of a recovery in revenues, thanks to the strength of the portfolio of titles both in Italy and in France and the ongoing commitment to the quality of the offer;
– the trade books area may be able to count on an important editorial programme, while Mondadori’s commitment to the development of e-books will continue to be strong;
– over the whole year, the maximum focus will be on digital activities, both in terms of the interaction with all of the other activities of the Group and in the development of new businesses, also linked to editorial content, the brands and the Mondadori communities.

Over the year, the reorganisation plan will continue, along with ongoing efforts to contain operating costs which have so far allowed the Group to recover profitability, also in extremely difficult trading conditions.

As a result of the above, Mondadori could improve both revenues and operating profitability in 2011, with a determined commitment to the development of digital activities. Caution is, however, necessary in a period of such economic instability, heightened, as it is, by international tensions that could have a negative impact on the already weak recovery underway.

PROPOSAL TO CANCEL PART OF THE TREASURY STOCK HELD AND CORRESPONDING TO 5% OF THE SHARE CAPITAL
Arnoldo Mondadori Editore S.p.A. directly holds 17,850,101 company shares, equivalent to 6.88% of the share capital and acquired at an average price of around €6.1697 per share. With an additional 4,517,486 Mondadori shares held by the subsidiary Mondadori International S.p.A., the total number of shares held, directly or indirectly, amounts to 22,367,587, or 8.62% of the share capital.

The board of directors will propose to an extraordinary meeting of the Shareholders the cancellation of 12,971,492 shares, with a nominal value of €0.26 per share, and corresponding to 5% of the share capital, while keeping in the portfolio, also to service stock option plans, 4,878,610 shares, in addition to the 4,517,486 held by Mondadori International.
The proposal to cancel a part of the shares held as treasury stock is explained by the fact that, in recent years, there have not been opportunities to use such stock as foreseen by the authorisations made by the shareholders, such as share swaps or conversions in financial instruments.Cancellation, and the consequent reduction in the number of shares making up the share capital, would – while maintaining the necessary solidity to support future growth objectives – result in the optimisation of the company’s capital structure and have a positive impact in terms of increasing both earnings per share and dividend per share.
In terms of the impact on the company’s accounts, the “treasury stock”, in compliance with international accounting principles, as a reduction in net assets would be reduced by around €80,030,000, against a reduction in the share capital of a nominal €3,372,587.92 – corresponding to 12,971,492 shares with a cancelled nominal value of €0.26 – and a reduction of the “share premium reserve” of around €76,658,000.
If approved by the Shareholders, the reduction in the share capital would become effective, subject to no objections being submitted, only after a period of ninety days from the registration of the resolution, as foreseen by article 2445 of the Italian Civil Code.

RENEWAL OF AUTHORISATION TO BUY BACK AND UTILISE COMPANY SHARES
Following the expiry, with the approval of the annual report for 2010, of the authorisation given by the Shareholders at the AGM of 27 April 2010, and with the aim of maintaining the legal conditions for eventual buy-backs and, in consequence, the possibility of pursuing eventual investment opportunities or other treasury stock operations, the board of directors will propose to the forthcoming Annual General Meeting the renewal of authorisation to buy back company shares.
The AGM of 27 April 2010 provided authorisation to effect share buy-backs up to a limit, considering the shares already held in the portfolio, of 15% of the share capital, or 38,914,474 ordinary shares.
Given the total of 22,367,587 shares (8.62% of the share capital) already directly or indirectly held at the date of the AGM, the authorisation thereby awarded the board the faculty to acquire a maximum number of 16,546,887 additional shares. No buy backs were made on the basis of the authorisation of 27 April 2010.

The Annual General Meeting of the Shareholders will also be asked to authorise the use of shares involved in such buy back operations or already in the company’s portfolio, as per Art. 2357 of the Civil Code.
The highlights of the board of directors’ proposal are as follows:

• Underlying motivation

The underlying reason for the request for authorisation to effect buy-backs and make use of company shares is that it will allow the Board of Directors to:
– use company shares for the exercise of options for the purchase of shares assigned to participants in the stock option plans put in place by the Shareholders;
– use company shares, either bought or in the portfolio, for the exercise of rights, also conversion rights, deriving from financial instruments issued by the company, its subsidiaries or third parties;
– use company shares, either bought or in the portfolio, as part or whole payment in any eventual acquisitions or equity investments that fall within the company’s stated investment policy;
– take advantage, where and when considered strategic for the company, of investment opportunities, also in relation to available liquidity

• Duration

Until the approval of the Anuual Report for 2011.

• Cap on the number of shares that may be bought

In line with the expiring authorisation, the new authorisation would allow for the possible purchase of a maximum of 16,546,887 additional shares, given the number already directly or indirectly held by the company, as outlined above, an overall maximum of 15% of the current share capital.
If the proposed operation for the cancellation of 12,971,492 shares held in treasury stock is approved, with the consequent reduction in the share capital as outlined above, the authorisation would allow for the buy back of up to 10.52% of the share capital.

• Method of acquisition and the price range

Buy-backs would be effected on regulated markets as per art. 132 of the legislative decree of 24 February 1998 n. 58 and art. 144 bis, para. 1, B of Consob regulation 11971/99 according to operating procedures established by the regulations for the organisation and management of the markets themselves, which, does not permit the direct combination of offers to buy with predetermined offers to sell.
Consequently, the corresponding minimum and maximum price of sale will be determined at the same conditions that applied to previous authorisations agreed by the Shareholders, i.e. at a unit price not less than the official market price on the day prior to any operation, less 20%, and not more than the official market price on the day prior to any operation, plus 10%.
In terms of price and daily volumes, acquisition operations will in any case be conducted in line with the norms foreseen by the EU regulation 2273/2003.

Today at 3pm, at the company’s headquarters in Segrate, the deputy chairman and chief executive, Maurizio Costa, and the CFO, and Carlo Maria Vismara, will present the results for 2010 approved today by the board of directors, to the financial community.

During the presentation management will also provide information regarding current activities and mid-term plans relative to the business in which the Group operates.

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 Annual Report for the year ended 31 December 2010, containing the management report and the reports of the statutory auditors and the external auditors, along with all other legally required documentation, will be made publicly available by 31 March at the company’s corporate offices, at the Borsa Italiana S.p.A., as well as on the corporate web site www.gruppomondadori.it (in the Investor Relations section).