Press Releases – Results Center

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.

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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.

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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.

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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 S.p.A. met today, under the chairmanship of Marina Berlusconi, to examine and approve the interim report for the first nine months of the year to 30 September 2013, as presented by the Chief Executive, Ernesto Mauri.

HIGHLIGHTS 30 SEPTEMBER 2013

In a market that is showing no signs of improvement also in sectors of relevance for Mondadori, the Group continued to pursue activities aimed at changing the strategy, reviewing the organisation and effecting significant reductions in costs.

A business model was also defined that sees digital as a driver of development cutting across all areas in the coming years, with the inclusion of new and specific skills in order to strengthen technological know-how, digital marketing and e-commerce.

As part of the of cost reduction plan, in the third quarter further savings for a total of €80 million have been identified, confirming the target of saving €100 million by 2015. In September the effects of cost reductions in both staff (-8.6% net of restructuring costs restructuring) and other operating costs (-5.8%) were evident.

Figures to 30 September 2013 confirm the trend already evident in the first half.

The decline in economic performance, compared with the same period of the previous year, is attributable to the presence in 2012 of positive non-recurring items worth €8.9 million and in 2013 of non-recurring negative items worth €27.3 million; the latter are primarily attributable to restructuring charges: in particular, in the Magazines Area, a reduction in operating costs, together with the relaunch of leading titles, is expected to enable a recovery in profitability.

A comparison of the first three quarters of 2013 with those of 2012, shows a trend toward stabilisation in the decline in revenues and a gradual recovery of the fall in gross operating margins (before non-recurring and restructuring charges ): -17.3% in the third quarter compared with -48.9% in the first half of the year.

GROUP PERFORMANCE IN THE PERIOD TO 30 SEPTEMBER 2013

Consolidated revenues amounted to €931.2 million, a fall of 9.5% on the €1,028.4 million in 2012.

Consolidated gross operating profit net of non-recurring items came to €36.2 million, a reduction of 33.5% compared with the €54.4 million in the same period of the previous year.

Consolidated gross operating profit came to €8.9 million, a fall of 85.9% on the €63.3 million in the same period of the previous year.

The Group made a consolidated operating loss of €9.6 million, compared with a profit of €44.8 million in 2012, with amortizations and depreciations of tangible and intangible assets of €18.5 million (€18.5 million in 2012).

The Group made a consolidated loss before taxation of €26.2 million, compared with a profit of €32.2 million last year; financial charges during the period amounted to €16.6 million (€12.6 million in 2012).

The consolidated net loss for the period amounted to €32.3 million, compared with a profit of €16.3 million in the same period of 2012.

Gross cash flow in the first nine months of 2013 showed a deficit of €13.8 million, compared with a surplus of €34.8 million in the same period of 2012. The Group’s net financial position showed a deficit of €376.9 million at 30 September 2013 (-€346 million at 30 September 2012 and -€267.6 at the end of 2012).

Information regarding personnel

At 30 September 2013, permanent and temporary staff in the companies of the Group, totalled 3,539, a fall of 164 (-4.4%) compared to the end of 2012 and 204 (-5.5%) compared with September 2012, confirming the ongoing efforts at optimising the structures of the Group.

In terms of business areas, the biggest drop was in the parent company Arnoldo Mondadori Editore where, as a result of the joint effect of the early retirement of graphics staff, especially belonging to the Central Staff, and the restructuring plan of journalists of Magazines Italy, the total headcount was reduced by 8% compared with last year.

Also at the subsidiaries, the effect of the reductions in fixed costs has led to a reduction of 6% ​​compared with September 2012, a third of which in the Retail Area.

Total personnel costs benefited, net of non-recurring charges, as well as from a fall in the number of employees, also from the effects of various social safety nets, resulting in a reduction compared with the same period of 2012 of €17.3 million, or 8.6%. More specifically, the Parent Company recorded a reduction of close to 10%, the Italian subsidiaries more than 12% and Mondadori France more than 4%.

It should be noted that the restructuring plans of the Central Staff and Magazines in Italy of the parent company, as well as in the subsidiaries Mondadori Pubblicità and Press-Di, will continue, until April 2014 and May 2015 respectively, enabling further savings in the coming years.

RESULTS OF THE BUSINESS AREAS

· BOOKS
In the first nine months of 2013 the trade books market remained below the level of the same period of 2012 with a fall in terms of value of 6.3%. In this market context, the Mondadori Group confirmed its leadership in its market of reference with a market share of 26.8% in in terms of value (source: Nielsen).

During the period, revenues generated by the Books area amounted to €234.2 million, a fall of 10.5% from the €261.6 million the previous year; excluding the effect of the significant fall in revenues from the distribution of third-party publishers, the figure is 8.4%.

It should be noted that the revenues of the Group’s publishing houses were affected in the third quarter by a particularly penalising comparison with the same period of 2012 which benefitted from the great success of the EL James Fifty Shades trilogy. There was also a significant fall in revenues from third-party publishers. These effects were partially compensated by the success of Dan Brown and Khaled Hosseini and the ongoing double-digit growth in ebooks.

• MAGAZINES ITALY

The negative trend in the consumer magazine market continued in the third quarter; in particular, figures for August showed a fall in circulation of 12.4% (internal estimate), of add-on sales of 20.4% (internal estimate) and advertising sales of 24.3% (source: Nielsen, September).

In this context, in the first nine months of 2013 Mondadori recorded revenues of €253.1 million, a fall of 14.2% on the €295.1 million of the same period of 2012. This is attributable to reductions in revenues from:

• circulation (-9.9%), penalised by a fall in subscriptions and single copy sales;
• add-on sales (-12.2%), despite an increase in market share to more than 41%;
• advertising (-26.3%), in a seriously compromised advertising market and with a number of discontinuities;

and an increase in licensing revenues (+13.8%).

It should be noted that in the third quarter Casaviva, VilleGiardini, Panorama Travel and Men’s Health ceased publication, in addition to the changes of the first half (the closure of Panorama Economy and the transformation of Flair in a supplement of Panorama ).

During the period revenues generated by Mondadori titles were down 16%; on a like-for-like basis, i.e. net of the effects of the events mentioned above, the fall was 13.4%: in particular, advertising revenues were down 28.4% (22.8% on a like-for-like basis) and circulation revenues were down 9.9% (-8.2% on a like-for-like basis ).

Regarding the performance of the magazines, the excellent results of the main women’s titles were confirmed, Donna Moderna, Grazia and TuStyle all of which were relaunched in May, and performed very well during the summer, reaching, with the addition of the weekly magazine Chi, an average combined circulation of 1,200,000 copies, an increase of 37% compared with April.

During 2013, the websites of the main magazine titles of the Mondadori Group, confirmed an ability to attract a growing number of users and the interest of advertisers, with higher growth rates than the market, which fell by 2.6% (source: Nielsen).

In a still highly critical context, the Mondadori sites recorded growth of 6.2% compared with 2012, thanks to the performance of Donnamoderna.com (+5%), Grazia.it (+26%) and Panoramauto.it (+25%).

International Activities
In the first nine months of 2013, the volume of business generated by Mondadori’s international network grew by 6.3% compared with 30 September 2012. The improvement is mainly attributable to the Grazia International Network, which in February launched Grazia in Spain and Korea, and is currently working on new projects for further development. A few days ago the first international edition of Icon was launched in Spain.

Despite difficult market conditions, in the first nine months of 2013, advertising sales on behalf of international partners showed a slight improvement compared with 2012, in contrast to the local market also as a result of the expansion of the range of Mondadori’s International Business.

Mondadori is present in China with a 50% stake in Mondadori Seec Advertising Co. Ltd, the exclusive advertising sales company for the local edition of Grazia, which, in the first nine months of 2013, achieved revenue growth of 23% compared with the same period of 2012.

There was also a positive performance by the joint-venture Mondadori Independent Media, publisher of the Russian edition of Grazia, which, in the first nine months of 2013, recorded an increase in revenues of 9%.

In Greece, in an economic environment which remains extremely difficult, and an advertising market down 30%, Attica Publications in the first nine months of the year saw a fall in revenues of approximately 10.7%. Despite this, it achieved a positive result thanks to strong and consistent efforts to reduce costs and diversify revenues.

• ADVERTISING

In the first nine months of the year advertising investments in the market were down by 14.6% (source: Nielsen) compared with 2012, confirming the trend of recent years. Even the Internet which during these years of crisis, maintained a positive performance, was down (-2.6%).

Mondadori Pubblicità closed the first nine months with total sales of €105.1 million, a fall of -18.6% on the €129.1 million in the previous year.

Revenues from Magazine advertising was affected by the downturn of Mondadori titles (-28.4%), significantly affected by the closure of a number of titles, net of these changes, the fall was 22.8%.

The trend outlined, that is significantly better than the market (-24.3 %, source: Nielsen), is the result of two main phenomena: on the one hand the excellent results of the combined sale of advertising for Grazia, Donna Moderna and TuStyle, and the monthly cooking and furniture titles, and, on the other, the continuing difficulties in finding advertisers in other sectors, including in particular in the fashion industry.

With regard to sales for radio, the first nine months of 2013 closed up 32% thanks to the acquisition of the contract, starting in April, for Radio Italia Solo Musica Italiana and, from September, of Radio Subasio, which was joined in October by Radionorba, enabling Mondadori Pubblicità to strengthen its presence in the sector with an offer of a total daily average of 9.3 million listeners.

The advertising relating to the Internet, managed by the joint venture Mediamond, performed much better performance than the market, with an 18.3% increase on the same period of 2012, thanks to the excellent performance of Grazia.it (+26%) and Videomediaset.it (+42%).

• MAGAZINES FRANCE

During the third quarter of 2013 the French consumer magazine market continued to face a difficult period with a downturn in both advertising and circulation revenues.

In this context, the revenues of Mondadori France at the end of September came to €262.9 million, a fall of 7.6% from the €284.5 million in the first nine months of 2012.

Mondadori France saw a fall in advertising revenues, in terms of value, of 11.1%, while, in terms of volume, despite a decline of 3.3%, it still performed significantly better than the market which was down by 6.9% (source: Kantar Media, for August). Mondadori France confirmed its position as the second largest operator with a market share of 11.2% (source: Kantar Media), an increase of 0.4%.

Circulation revenues, including newsstand sales and subscriptions, and accounting for around 72% of total revenues, were down by 6.5% compared with the same period last year.

Newsstand sales were down 5.7%, compared to a market that saw a fall of 7% in January- September 2013 (internal source/in terms of value).

During the period brand extension efforts continued with the launch of successful new products, including Closer Teen and Vital by TopSanté.

The focus on editorial quality remains a priority pursued with the new formulas for Modes&Travaux, Sport-Auto, Science&Vie Junior, Grand Gibier, Auto-Journal and Auto Plus. In addition new titles were launched in the games and a cooking sectors.

Mondadori has continued to invest in the digital sector bringing the audience for its sites to over 5 million unique users (source: Nielsen), an increase of 20% compared with the same period of last year. Revenues were up by 19.8% in the period.

• RETAIL

Starting from the third quarter 2013, following the redefinition of the scope of the business area, the results and assets of the direct marketing activity managed by Cemit Interactive Media are shown in the Corporate and other business section. The comparable figures to 30 September 2012 have therefore been adjusted and made comparable to the figures from the current year.

Revenues generated by the Retail area in the first nine months of the year amounted to €153.4 million, a fall of 3% on the €158.1 million of the same period of the previous year.

The Retail Area manages its business across the country through a network that, on 30 September 2013, comprised 565 sales outlets, ranging from directly-owned and franchised bookshops, Multicenter stores, Edicolè and book clubs.

In view of the ongoing recession, which has resulted in a further decline in revenues, the process of rationalisation has continued and has led to the closing of 32 outlets since the beginning of the year.

Also sales generated through the web site www.inMondadori.it recorded a fall compared with the first nine months of 2012, both as a result of increased competition from the different players in the market and for the general downturn in consumer spending for non-essential goods.

• RADIO

Advertising spending in Italy has been severely affected by the general crisis with all media more or less sharply affected compared with 2012. Radio, in particular, while remaining in a negative trough (-14.4% to June), in September picked up slightly at -12.1% (source: Nielsen) and showing, in recent months, pale signs of containing the decline.

In this context, advertising sales for R101 in September were essentially in line with the trend in the market showing, in addition to the downturn in the main product sectors – in particular the automotive sector – also the typically marked seasonality of the period: total revenues came to €8.9 million, a fall of 13.6% on the €10.3 million of the first nine months of 2012.

On the content side, in addition to the appointment of a new head of content, efforts continued for the implementation of the renewal and enhancement of formats with a series of targeted actions, some of which already defined, others in progress, aimed at enabling R101 to take advantage of the opportunities that will derive from the hoped for recovery in advertising spending.

RENEGOTIATION OF CREDIT LINES FOR A TOTAL OF €570 MILLION WITH WAIVERS ON EXISTING COVENANTS

Mondadori has renegotiated the credit facilities for a total amount of €570 million.

In particular, it has signed a new loan agreement with a syndicate of five banks for an amount of €270 million with maturities, for the same sum, in 2016-2017-2018 to replace existing credit lines with short maturities for a total of around €380 million.

Existing credit lines, amounting to €300 million, comprising a loan of €200 million granted by Intesa Sanpaolo expiring at the end of 2016, and by a €100 million loan granted by Mediobanca and expiring at the end of 2017 have also been renegotiated.

The “all-in” face value cost of all credit lines is 485 bps (+Euribor).

Waivers on the existing covenants net debt/EBITDA for 2013 and 2014 have also been defined to facilitate the processes of organisational restructuring and relaunching of the Group.

EXPECTATIONS FOR THE FULL YEAR

The actions put in place by the Group regarding the change in strategy and organisation and significant cost reductions, have affected all the businesses and will have more positive effects in the latter part of the year, for which we expect a level of gross operating profit (before restructuring charges and extraordinary items) in line with that of the same period last year.

As for the full year 2013, the ongoing lack of any signs of improvement in the market means that the gross operating result will be substantially lower than last year, also as a result of marked effect of non-recurring items and restructuring charges.

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

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The interim report for the period to 30 September 2013 will be available from today at the the company’s headquarters, Borsa Italiana S.p.A. (www.borsaitaliana.it) and on the web site www.gruppomondadori.it (in the “Investor Relations” section).

Also today, the documentation relating to the analysts’ presentation of the results for the year to 30 September 2013 will be available on www.gruppomondadori.it (in the “Investor Relations” section) and www.borsaitaliana.it.

The Board of Directors of Arnoldo Mondadori S.p.A. met today, under the chairmanship of Marina Berlusconi, to examine and approve the interim report for the first half of the year to 30th June 2013, as presented by the Chief Executive, Ernesto Mauri.

THE MARKET SCENARIO

The first half of 2013 saw a continuation of the difficult recessionary period facing the country with GDP expected to be down by about 2% at year-end and unemployment, expected to reach about 12%, and the prospects are of a further deterioration in 2014.

Also France is in a difficult situation, characterised by rising unemployment, now close to 11%, and a fall in consumer confidence to the lowest level since 1987. GDP growth in the first half was close to zero and in July, the ratings agency Fitch downgraded the country’s debt rating.

HIGHLIGHTS TO 30 JUNE 2013
During the reporting period even greater emphasis was given to the relaunch of magazines, particularly in Italy where the three main women’s weeklies – Grazia, Donna Moderna, TuStyle – and Chi generated very positive results. The development of digital activities in Italy and France continued and, in Books, the company consolidated its market leadership, thanks to the publication of new bestsellers by Dan Brown (in May) and Khaled Hosseini (in June).

The cost reduction and reorganisation plan, already outlined during the presentation of results at 31 March 2013, continued with target savings of €100 million in 2015, of which approximately €76 million has already been identified.

GROUP PERFROMANCE IN THE PERIOD TO 30 JUNE 2013

The Mondadori Group’s results in the first half of 2013 broadly confirm the trend seen in the first quarter, in particular, compared with last year, revenues were down by 9.4%, resulting in a reduced operating margin, however, this was in line with budget forecasts.

The difference compared to last year is also due to the presence of positive non-recurring items of €8.2 million in 2012, while in 2013 non-recurring items have resulted in losses of €19.5 million: largely due to due restructuring costs in the Magazine area with the aim of reducing operating costs and recovering profitability.

Consolidated revenues amounted to €612.3 million, a fall of 9.4% on the €676.2 million in the first half of 2012.

Consolidated gross operating profit net of non-recurring items came to €14.2 million, a reduction of 48.9% compared with the €27.8 million in the same period of the previous year.

Consolidated gross operating profit came to -€5.3 million, compared with the €36 million in the same period of the previous year.

Consolidated operating profit amounted to –€17.7 million, compared with €23.8 million in the first half of last year, with amortizations and depreciations of tangible and intangible assets of €12.4 million (€12.2 million in 1H 2012).

Consolidated profit before taxation showed a loss of –€28.2 million, compared with a profit of €15.6 million in the same period of last year, financial charges during the period amounted to €10.5 million.

Consolidated net profit for the period showed a loss of -€27.1 million, compared with a profit of €7.5 million in the previous year.

Gross cash flow in the first six months of 2013 was negative for an amount of €14.7 million, compared with a positive level of €19.7 million in 1H 2012. The Group’s net financial position of -€367.3 million is in line with the situation at 30 June 2012 (-€370 million).

Information regarding personnel

At 30 June 2013, permanent and temporary staff in the companies of the Group, totalled 3,574, a fall of 129 (-3.5%) compared to year-end and 171 (-4.6%) compared with June 2012.

A similar trend can be seen in personnel costs (€148 million in the first six months of 2013) which, net of higher restructuring charges, was down by 5.5% compared with the first half of 2012.

The reduction in staff is comparable across the Group and is the result of the introduction, from the end of 2012, of more decisive actions to reduce fixed costs. In particular, compared with a year ago, the Parent Company has reduced its headcount by 7.1% and costs by 6.1% (net of non-recurring charges), other subsidiaries in Italy have reduced staffing levels and costs, by 5.7% and 7.5% respectively, while Mondadori France has seen a reduction of 2.9%, despite a stable structure.

In terms of cost reductions, the start of the restructuring plan in the clerical areas of Magazines and the centralised units of Arnoldo Mondadori Editore have been particularly incisive, and will continue until the spring of 2014, along with the continued the use of social welfare incentives in various areas of the Direct division. With regard to magazine journalists, where at the beginning of June an agreement was reached for 87 redundancies, it should be noted that solidarity contracts and reduced-hour layoffs have already been activated for the end of the year, as part of the decree concerning access to early retirement 2013-2015, which will generate further significant savings.

COST REDUCTION PLAN
In line with what was announced on 14 May during the presentation the results for the first quarter of 2013, actions are ongoing to reduce costs on various fronts.

In addition to what is described in the section on personnel, in terms of industrial costs we would point to the successful conclusion of negotiations with Elcograf which led to a reduction of layout and printing fees, with the expectation of significant savings from the second half of the year.

In 2014 we also expect further benefits from the direct purchase of paper.

In terms of logistics costs, we are currently reviewing expenses related to the rental agreements, also with the aim of rationalizing the Group’s offices. The is also an ongoing project aimed at improving logistical efficiency related to all of the Group’s major business activities.

Finally, in terms of operating costs, the redefinition of contracts for the provision of general services, a new strategy for Information Technology and other service activities is underway, along with a review of business processes and costs.

RESULTS OF THE BUSINESS AREAS

BOOKS

In the first half of 2013 there was a slowdown in the trade books market (source Nielsen: -2.7% in terms of copies; -4.1% in terms of value). In this market context, the Mondadori Group confirmed its leadership with a market share of 26% in in terms of value (source: Nielsen).

During the period, revenues generate by the Books area amounted to €134 million, a fall of 7.3% from the €144.6 million the previous year.

Among the Group’s publishing houses, Edizioni Mondadori saw revenues rise by 2.6% over the same period of 2012. Of particular note was the 14 May 2013 publication, simultaneously worldwide, of the highly anticipated new novel by Dan Brown, Inferno, ten years after the success of The Da Vinci Code (80 million readers around the world, including 3 million in Italy) .

With a print run of 700,000 copies, Inferno was supported by a major marketing and communication campaign, which involved all the channels, from traditional retail to digital outlets, making the book to be the most sold in the first six months of the year, with excellent results also in the e-book format.

Edizioni Piemme closed the first half of 2013 with an increase in revenues of 8.2% over the previous year. The most important event was the publication on 21 June of E l’eco rispose, the new novel by Khaled Hosseini, which went straight to the top of the best-sellers list, where it remains.

In the first half of 2013 Mondadori Electa saw sales rise by 19.6% over the same period of 2012. The main reasons for this was the great success of the exhibition area and in the excellent performance of museum bookshop sales.

On the e-book side, the market segment recorded steady growth, during the period January to June 2013, the Mondadori Group’s four trade publishing houses saw an increase of 129% of total downloads, compared with the same period of 2012.

MAGAZINES ITALY

The ongoing recession continues to have an adverse affect on the performance of consumer magazines.

The figures available in May 2013 showed a decline in newsstand revenues of 12.3% (internal source), a slump of 18.3% in add-on sales (internal source) and magazine advertising revenues down by 24.4% (source: Nielsen).

The Magazines Italy area recorded revenues in the period of €177.9 million, a fall of 15.2% from the €209.9 million in the first half of 2012. The most important part of this trend can be attributed to the magazines (-16.2%), only partly offset by strong growth in revenues from Internet sites (+9.3%) and the licensing of International Activities (+14%).

In more detail, magazines were affected by the negative trend in the reference markets and recorded, as already mentioned, an overall fall of 16.2% (-13.4%, on a like-for-like basis, i.e. net of the effects due to the transformation of Flair as a supplement of Panorama, and the closure of Panorama Economy).

This trend was characterised by important activities and significant differences:

• in May, there was the simultaneous relaunch of the three main women’s weeklies Donna Moderna, Grazia and TuStyle, a segment where Mondadori is the absolute leader;
• in June Casaviva, VilleGiardini, Panorama Travel and Men’s Health were closed, with the subsequent introduction of solidarity incentives and layoffs;
• the results of 2013 had to do without the contribution of Panorama Economy, which ceased publication in May 2012;
• Flair was transformed into a supplement of Panorama.

In particular:

• Circulation revenues fell by 13.1% compared with the previous year (-9.7% on a like-for-like basis). The relaunch operations have resulted in very positive results, both in terms of copies sold and in terms of advertising sales.
• There was a progressively positive performance in June of the three women’s magazines: compared with the last issue before the relaunch, Grazia saw an increase of 22.1% in copies; Donna Moderna a hike of 25.6%; while TuStyle was up by +39.5% (source internal; progressive April-June).
• The good performance of Chi also continues thanks to a review of the editorial content and the various exclusive news stories published during the period. The ADS figures for May showed an average circulation of 299,283 copies (up 9% compared with the same month of 2012 and 4% in the second quarter of 2013 compared with the same period last year).
• In July, to total average weekly circulation of more than 1,150,000 copies per week is expected for the three women’s titles and Chi.
• The second quarter also saw the redesign of GraziaCasa, with an enrichment of the content to talk to readers not only about furniture, but also art, style and fashion.
• TV Sorrisi e Canzoni confirmed its role as Italy’s biggest selling weekly with 647,300 copies (down 7% compared with 2012, source: ADS May 2013).

In terms of advertising revenues for Mondadori magazines, see the “Advertising” section;

The market for add-on sales in the first five months of 2013 saw significant reduction (-18.3% in terms of value, internal source); in this context Mondadori recorded a better performance with a slowdown of 10.7%. During the period the number of initiatives was rationalised, in order to minimise the economic risks and maximise margins: this strategy has resulted in a reduction in both initiatives and revenues, but a significant increase in profitability.

The websites of the main magazine titles of the Mondadori Group have confirmed in 2013, not only the ability to generate ever-increasing traffic, but also to achieve results in terms of advertising revenues, which were up 9.3% compared with the first half of 2012, significantly outperforming the market (-0.3%, source: Nielsen in May). Contributing to these results:

• Donnamoderna.com confirmed a very positive trend in the first half compared with 2012, both in advertising sales (+8%), and levels of network traffic that saw a further improvement on the already excellent results in the first quarter, with a monthly average of almost 12 million unique users;
• Grazia.it saw a sharp increase in advertising revenues (+42% over the previous year) and the audience (+34% unique visitors in June compared with the same month last year, and a +14% hike in page views), thanks to a mix of actions on the user-experience and the handling of editorial content;
• Panorama.it which showed an increase in the period of unique users of 67% and 51% in page views compared with the same month of 2012, thanks to the traffic of the male style/fashion segment in the Icon channel;
• Panorama-auto.it continued to see a high performance both in terms of unique users and page views, which now total an average of more than 11 million per month.

International Activities

The Group’s international activities, concentrated in the company Mondadori International Business S.r.l., saw a rise in first half 2013 revenues of 10% compared with the previous year.

Licensing: revenues from royalties were up by 14%, thanks to new editions launched by Grazia International Network over the last 12 months (South Africa, Poland, Spain and South Korea).

Advertising: advertising sales were in line with the previous year, with a decidedly better performance than the market of reference.

From January 2013, Mondadori International Business S.r.l. expanded its activities to include the sale of advertising for international clients also in the French and Swiss markets and began operating as exclusive agent for advertising sales in Italy for titles that are not part of the Mondadori Group.

Holdings:

• Mondadori Seec Advertising Co. Ltd, the exclusive advertising sales company for the edition of Grazia in China, launched in February 2009, in the first half of 2013 recorded a rise in revenues of 28% compared with the same period of 2012;
• Mondadori Independent Media, the joint-venture that publishes the Russian edition of Grazia, saw first-half 2013 revenues up by 9% compared with 2012.
• Attica Publications, in an economic context that continues to be very difficult, has taken a dominant position in the Greek magazine market; faced with a fall of almost 30% in the market, Attica saw a fall in advertising sales of around 8% and ended the first half with a positive net result that was beyond expectations.

At 30 June 2013 the volume of business generated by the international network for Grazia amounted to €51.6 million, an increase of 9% on the first half of 2012.

ADVERTISING
Advertising investments in the first five months of the year were down by 17.2% compared with 2012, confirming the difficulties seen in recent years. There was a slight improvement, compared with previous months, for newspapers and radio, the exceptions were magazines and internet.

Mondadori Pubblicità ended the first half of 2013 with total sales of €76.8 million, a fall of 20% compared with the €96 million of the same period of 2012.

Mondadori magazines saw a like-for-like fall of 21.9%, with a performance that was significantly better than the market (cumulative to June Fcp: -26.1%), also as a result of the simultaneous relaunch of the three main women’s weeklies, Grazia, Donna Moderna and TuStyle, and initiatives on cooking and interiors titles. If we exclude the titles no longer in the portfolio, the figure is -29,3%.

Regarding advertising sales for radio, the first half of 2013 ended with an increase of 17.6%, mainly thanks to the acquisition of the concession, from 15 April, for Radio Italia Solo Musica Italiana. This operation substantially modified the positioning of Mondadori Pubblicità in the radio market: with a daily average of 7.5 million listeners net of duplications (source: Eurisko Radiomonitor 2012) and placing the company among the top three operators in the sector, with a leadership position in the female target that permits significant synergies with the print portfolio and the web.

In the Internet segment Mediamond outperformed a market in a continuing slowdown with +19,9% compared with 2012. Of special note were the results for Grazia.it (+42%) and Videomediaset (+40%).

MAGAZINES FRANCE

Also during the second quarter of the year, the market of reference for Mondadori France saw a slowdown in both circulation and advertising sales.

Consolidated revenues in the period came to €176.9 million, a fall of 8.6% on the €193,6 million of the first half of 2012; on a like-for-like basis, a fall of 7.5% (Télé Star, Télé Poche and Autoplus benefited from an extra issue in 2012).

The downturn in the period is mainly the result of

• a lower number of weekly issues in the auto and TV segments;
• increased and significant investments for the development of digital products;
• a reduction in magazine circulation due to a strike by Presstalis, the main distributor;
• comparison with a first half in 2012 when the advertising trend was still positive, with a marked slowdown in the second half (-4.9% at year end 2012; source: Kantar Media).

Advertising sales: the market trend was in line with the first quarter, with a shortfall in terms of volume of 6.8% (source: Kantar Media, May). In this context, Mondadori France, which remains the second operator, saw a fall of 3.1% in terms of volume, outperforming the market, which resulted in a rise of its market share to 10.8%.

Revenues were down by 11.9% (-10.4% like-for-like) due to difficulties in the food, auto and clothing segments.

During the period circulation revenues, which account for 72% of the total (including add-on sales), were down by 8.2%; on a like-for-like basis the figure is 6.8%.

In particular:

• newsstand sales were down by 5.8%, in a market that lost 6.4% (January/May; internal source);
• subscription revenues were down by 5.7% compared with the same period of last year and by 2.3% excluding non-recurring items, such as the loss of the subscriber base of Pleine Vie, following contractual changes adopted by an important insurance operator.

The strategy of brand extensions continues with good results for the launch of two new products: Closer Teen (a magazine for teens) and Vital by Top Santè (a fitness and wellbeing title).

Mondadori has also developed its first “web to print” experience, publishing a print version of the cooking site 750g.com (which had 4 million unique visitors in 2012; source: Nielsen).

The focus on editorial quality remains a priority: in the first half the redesign of Modes & Travaux, Sport-Auto, Science&Vie Junior, Grand Gibier and Auto-Journal was completed while in the second half of the year it will be the turn of AutoPlus, Grazia, and Biba. Also planned in the second half of the year is the launch of two new games titles in collaboration with France Television (Slam Magazine and Fort Boyard) and a new cooking title (MasterChef, in collaboration with the famous television format, which will be broadcast in France from September).

In the first half Mondadori France continued to invest in the development of digital activities, the audience of the sites, reached 5 million unique users (source: Nielsen), an increase of 21.5% compared with 2012. Also revenues were up 19% over the previous year.

The main actions in the first six months involved the development of new sites Autoplus.fr, Closermag.fr, Science-et-vie.com, putting online 25 years of archive material, TopSante.com Diapason.com; as well as iPad and iPhone applications for Tele-Star, Auto-Journal for iPad, and a new iPad version of Grazia and Sports-Auto.

The digital newsstand platform has been completely revamped for online subscriptions (kiosquemag.com), offering bundled print and digital subscriptions, but also only digital subscriptions, with the significant target of doubling the platform’s volume business in the next two years.

NaturaBuy.fr, the classifieds site for hunting and leisure, continued to grow, increasing the number of transactions by 18% compared with the same period of 2012.

DIRECT

In the first half of 2013 Direct revenues amounted to €110.4 million, a fall of 2.4% on the €113.1 million in the first six months of last year.

The decline significantly affected the book club activity and mail order sales in general, as well as the online sales of the dedicated web site; meanwhile sales from the network of shops were stable.

During the period, the rationalisation of sales outlets continued with the closure of 28 outlets, alongside the development of private label products and services focused on the new inMondadori brand.

In order to counteract the negative trend in the first half greater emphasis was also given to the customer loyalty campaign through the use of the Mondadori Card In terms of product, development continued of the Box for You gift boxes line and the Emporio Mondadori brand.

The distribution of the e-reader Kobo in its different versions, a cutting-edge device for the use of cultural content in digital format, has been a source of great satisfaction.

In a competitive environment characterised by a progressive reduction in advertising spending and consolidation of forms of digital-based communication, Cemit Interactive Media generated first half 2013 revenues in line with 2012.

This is even more significant when compared with a market that, in the period January-May, fell by 23.5% (source: Nielsen).

RADIO
Advertising revenues for radio, like the advertising market as a whole, saw a marked downturn of 14.6%, after the first 5 months of the year.

In this difficult context, the revenues generated from advertising on R101, which was affected in particular by a decline in major market sectors, especially the auto segment, for the first half of 2013 came to €6.8 million, a fall of 10.5% on the €7.6 million of the first half of 2012.

From an editorial perspective, R101 continued actions aimed at enhancing the formats, with the introduction of new programmes, and promotional activities with the organisation and sponsorship of events around the country.

In the first half a number of digital activities were developed that enabled the R101.it site to double the number of visitors (source: Google Analytics), raising the number of page views to 3.5 million and average monthly unique users to over 200,000, with positive trends also on social networks.

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APPROVAL FOR THE PLAN TO MERGE BY INCORPORATION THE WHOLLY-OWNED SUBSIDIARY MONDADORI INTERNATIONAL S.P.A.
The Board of Directors approved the merger by incorporation of the wholly-owned subsidiary Mondadori International S.p.A., in accordance with the merger plan presented, as announced on 27 June, to the Italian Stock Exchange and at www.gruppomondadori.it (Governance section).

Completion of the merger is expected by the end of this year after the deadline for the opposition of creditors as foreseen by Article 2503 of the Civil Code.

§

EXPECTATIONS FOR THE FULL YEAR

In the first half all the activities of the Group have suffered the effects of the ongoing recession, which is not expected to improve during the year.

The actions carried out by the Group in support of the quality of magazine brands, the publishing programme for books and a range of activities aimed at cost containment are expected to show more positive effects in the second half of the year, and therefore the company also expects to post a gross operating profit in line with, or even greater that, that of the second half of 2012.

For the full year 2013, gross operating profit will in any case be less than the previous year, also on account of positive non-recurring items, present in 2012, and higher restructuring charges in the current year.

§

The documentation relating to the analysts’ presentation of the results for the first half of the year to 30 June 2013, is available in the Investor Relations section of the company’s website

§

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

The Board of Directors of Arnoldo Mondadori S.p.A. met today, under the chairmanship of Marina Berlusconi, to examine and approve the interim report for the first three months of the year to 31st March 2013, as presented by the chief executive, Ernesto Mauri.

THE MARKET SCENARIO
As in previous months, the first quarter of 2013 was characterised by a difficult and uncertain global economic situation. In Italy the prolonged recession continued, with all the main macroeconomic indicators of production, consumer spending and employment levels worsening.

Also in France, there has been a gradual deterioration of the economy, particularly in terms of GDP, which is expected to fall this year, and unemployment, which had already increased significantly in 2012.

The markets in which the Group operates were affected in the period by the current crisis, with marked declines in circulation and magazine advertising sales; also the book market in Italy saw a downturn ​​decrease, albeit to a lesser extent.

GROUP PERFORMANCE IN THE PERIOD TO 31st MARCH 2013
Consolidated revenues amounted to €292.7 million, a fall of 10.8% on the €328.1 million at 31st March 2012.

The consolidated gross operating loss amounted to €4.6 million (break even net of restructuring costs), compared with a gross operating profit of €15.2 million in the same period of the previous year, by also excluding the positive non-recurring items of 2012, the difference, on a like-for-like basis, would be -€5.2 million.

The consolidated operating loss amounted to €10.6 million, compared with an operating profit of €9.1 million in the first quarter of 2012, with amortizations and depreciations of tangible and intangible assets of €6 million (€6.1 million in 2012).

Consolidated pre-tax losses came to €15.6 million, compared with a pre-tax profit of €4.7 million in the same period of last year. During the quarter financial charges amounted to €5 million, compared with €4.4 million in 2012.

The company made a consolidated net loss in the period of €15.3 million, compared with a net profit of €2.6 million at 31st March 2012.

Gross cash flow in the first three months of 2013 amounted to –€9.3 million, compared with €8.7 million in the first quarter of 2012.

The Group’s net financial position went from -€267.6 million at the end of 2012 to -€310.6 million at 31st March 2013 (-€301.8 million at 31 March 2012).

Information regarding personnel
As of 31st March 2013, the personnel employed by companies of the Group (both on temporary and permanent contracts) amounted to 3,626, a fall of 3.7% (-138 positions) compared with the same period of last year. In the first quarter of 2013 alone, there was a reduction in the headcount of 77.

Similarly, during the first three months of 2013, personnel costs were reduced by 2.5% (-7.5% net of higher restructuring charges) to €71.2 million. The figure for 2012 has been adjusted to take account of the new measures introduced by IAS 19 that came into effect from 1st January 2013, and backdated. In particular, the principle foresees the booking of gains and losses regarding the calculation of severance indemnities in the “Comprehensive income statement”, rather than under “Personnel costs”.

The reduction in headcount and costs is due, essentially, to the effects of the restructuring processes underway, both in the Direct area and, above all, in the companies affected by the early retirement plan that began in October 2012: the parent company Arnoldo Mondadori Editore S.p.A., Mondadori Pubblicità S.p.A. and Press-Di Distribuzione Stampa and Multimedia S.r.l.

Across the Group, both in Italy and in France, the policy of reducing fixed costs through widespread efforts to improve organisational efficiency and specific actions for the simplification of hierarchical levels continues.

· BOOKS
In the first quarter of 2013, the trade books market declined both in terms of both copies (-3.1%) and value

(-4.1%) compared with the first quarter of 2012 (source: Nielsen).

In this context, the Mondadori Group confirmed its leadership with a market share of 25.7% in terms of value (source: Nielsen).

Total revenues generated by the Books Area came to €63.2 million, a fall of 1.6% compared with the first quarter of 2012.

Regarding the performance of the Group’s publishing houses, it should be noted that in the first quarter of 2013 a different editorial programme was developed for Edizioni Mondadori, with the publication in the second and fourth quarter of stronger tiles, including the highly anticipated new novel by Dan Brown, Inferno, published today across the world.

Einaudi ended the first quarter of 2013 with revenues up by 5.2% compared with the same period of last year, and a market share of 6% in bookstores.

At the end of the period Mondadori Electa recorded an increase in revenues of 24.5% compared with the first quarter of 2012: mainly thanks to the success of the exhibition Constantine 313 AD and the excellent performance bookshop revenues.

E-book revenues have doubled since last year, with an excellent performance by romantic fiction and the new book by John Grisham L’ex avvocato. Among the publishing activities was the launch of the series “Quanti” by Einaudi and the digitisation of the work of Gabriele D’Annunzio to mark the anniversary of his birth.

· MAGAZINES ITALY

The difficult macro-economic situation coupled with political uncertainty in the country continue to strongly affect the consumer magazine market, which is experiencing negative trends very similar to the last quarter of 2012. In February, the advertising market saw overall decline in value of 16.5%, with magazines suffering a 21.6% fall (source: Nielsen).

Compared with the first quarter of 2012, there was a distinct lack of homogeneity in the performance of the Mondadori Group’s Magazines Italy area, in particular, there was the closure of Economy, the transformation into a supplement of Flair and a different number of issues for Tv Sorrisi e canzoni, Telepiù and GuidaTV.

The overall decline in revenues in the Area was 14.9%, from €104.3 million in the first quarter of 2012 to €88.8 million this time.

– Circulation revenues were down compared with the previous year, albeit to a lesser degree: 14.1%

(-11% on a like-for-like basis). Among the titles in the portfolio, Chi – after a year-end and January 2013 downturn – improved its circulation in the months of February and March, to settle at a level ​​similar to the previous year.

Donna Moderna, Grazia and TuStyle, after changes, between December and early February, in their respective editors, were all re-launched at the same time last week, with the aim of reaffirming and consolidating Mondadori’s absolute leadership in women’s magazines.

Tv Sorrisi e canzoni remains Italy’s most popular weekly, with sales of 720,000 copies, despite a slight decline (-5%) compared with 2012.

Panorama saw a fall off, even due to the change underway in the circulation mix, but the basic version of the magazine has maintained a positive trend compared with the previous year.

– On the advertising side, the most affected by the current economic climate, revenues in the first quarter of the year saw a like-for-like fall of 22.1% (nominal -23.9%).

– With regard to add-on sales, Mondadori saw a fall of 11, 8%, with a performance that was better than the market which was in sharp decline (-19.1% in terms of value, internal source): the fall in revenues for Mondadori was the result of a precise decision to rationalise the initiatives to minimise the financial risks, with a strong increase in profitability.

– During the first quarter of 2013, the web sites of the Group’s main magazine titles performed very well with an increase in advertising revenue of 10.4%, a performance far superior to that of the market (+5%, source: Nielsen February), and traffic.

In particular, Donnamoderna.com, which grew strongly in March (source: Shinystat), with 11 million unique users remains at the top of women’s sites, Grazia.it, with 1 million uniques; Panorama.it, with 3.2 million unique users; and Panoramauto.it which also has 1 million unique users.

The negative trends in the magazine market, which began in 2009 and worsened in 2012, have led the company to implement a reorganisation plan for the rationalisation of the product portfolio and a review of editorial processes with the closure of 4 monthlies and the television programming unit, resulting in a total of 87 redundancies in the editorial departments of Mondadori.

To this plan should be added the project for the further rationalisation of costs, including industrial costs.

At the same time, work began on the re-launching and repositioning of some titles, including those dedicated to interiors and, after the end of the quarter, of the three most important women’s titles, with the aim of further strengthening Mondadori’s leadership.

International activities
The Group’s international activities, concentrated in the company Mondadori International Business, ended the first quarter of 2013 with an increase in revenues of 12.7% on the previous year.

Licensing: growth was driven by launch in the past 12 months in new editions in the Grazia International Network (South Africa, Poland, Spain and Korea), which contributed to an increase in revenues from royalties (+18.3%).

Advertising: in the first quarter of 2013 advertising sales on behalf of international partners was in line with the previous year thanks to the appeal of the network, which recorded a significantly better performance than the market of reference.

Investments:
– Mondadori Seec Advertising Co. Ltd, the exclusive advertising sales company for Grazia in China, recorded first quarter revenue growth of 17% over the same period of 2012;
– Mondadori Independent Media, publisher of Grazia in Russia, recorded first quarter revenue growth of 3% compared with 2012;
– Attica Publications, confirmed its leadership in Greece, despite the deepening crisis among its competitors. Despite a declining advertising market compared with 2012 (-15% in magazines, -30% in radio and TV), Attica generated results that were in line with the same period of 2012, due to the benefits from the restructuring plan put in place in 2011 (and continued in 2012), and diversification.

Total revenues generated by the Grazia International Network amounted to €27.9 million, an increase of 7.5% on the first quarter of 2012.

· ADVERTISING

Advertising expenditure in the first two months of the year was down by 16.5% compared with 2012, confirming the difficulties recorded in the previous 12 months.

Television continued the negative trend of 2012 (-16.1%), with the exception of a good performance by digital channels. In other media radio was in decline (-17.3%), despite a January almost in line with 2012, as was direct mail (-19%), while outdoor and Internet were up (+5%), even if there are now some signs of a slow down. For print media in general, the situation remains very negative and in line with the last quarter of 2012, an indication that the crisis that has hit Italy in particular shows no sign of loosening its grip. Newspapers were down by -26.1%, while magazines the decline was slightly lower (-21.6%), but with decidedly negative estimates for March and April.

The decline in advertising spending is continuing in all sectors that invest in magazines: there was a sharp drop in the fashion, interiors and auto sectors, while FMCGs, after two years of marked decline, seems to suffer less.

Mondadori Pubblicità ended the first quarter of 2013 with total revenues of €29.9 million, down 29.5% compared with the €42.4 million in the same period of 2012.

Due to the uncertain economic situation in the country, Mondadori weeklies have been affected by the downturn in revenues of its clients and a fall in advertising spending by the top spenders in the main sectors, with the exception of Tv sorrisi e canzoni and TuStyle; for Mondadori monthlies the decline was more modest, also because of the performance of magazines such as Flair, Icon and Interni, which suffered less than the market average, and the positive trend in the cooking system, also thanks to the good performance of the large-scale retail sector;

Radio advertising revenues were down by 25%, in particular R101 was down by -18.8%;

Internet advertising continued to grow (with Mediamond recording an increase of 38% compared with the first quarter of 2012), with excellent results for all the main Mondadori sites.

· MAGAZINES FRANCE

In an economic context that remains challenging, Mondadori France ended the first quarter of 2013 with consolidated revenues of €83 million. On a like-for-like basis, taking into account that the weeklies Télé Star, Télé Poche and Auto Plus benefited in the first quarter of 2012, from an extra issue compared with the first three months of 2013, revenues were down by 9.6%, rather than the nominal -12%.

Circulation revenues in the period, which account for about 72% of the total, were down by 8.1%, with the same number of issues (nominal -10.3%).

Newsstand sales, with the same number of issues, was down by 7.6%, in line with the market (-7.5%; internal source). Strikes at Presstalis, the main operator in distribution, also had an impact on sales.

The brand extension strategy hascontinued in 2013, with the entry into the portfolio of new products tested last year, including Faits Divers à la Une, Des Chiffres et des Lettres, Jeux Closer and Closer-C’est leur histoire. In addition, the Closer increased its spinoffs with the successful launch in February of Closer Teen, the first issue of which sold 58,000 copies.

Always having editorial quality as a priority, the formulas of Grazia, Modes & Travaux, Nous Deux and Sport Auto, have all been updated, and will be followed during the year by the redesign of Auto-Journal and Auto-Plus.

The monthly Science & Vie celebrated its centenary with a special issue enhanced by the re-publication of the first issue which appeared on 1st April 1913.

The last weeks of the first quarter also saw the launch of Nostalgie Jeux, a games magazine produced in collaboration with the radio station Nostalgie, and in the wellness area Vital. A new cooking magazine will be launches soon called 750g, in collaboration with the site www.750g.com.

Finally, the Syndicat des Editeurs de Presse Magazine (S.E.P.M.) awarded Biba for a distinguished “10 years of success.”

Advertising revenues, net of barters and with the same number of issues, were down by 10.3% (nominal -16.1%).

At the market level (source: Kantar Media in February) there was a 7.4% decline in volumes which for Mondadori in the same period was -5.8%.

In the first quarter, Mondadori France continued to invest in digital, where it is present with an aggregate audience of 5 million unique visitors (source: Nielsen). The volume of business rose by 20% in the first quarter, thanks, among other things, to the success of the sites Autoplus.fr, Closermag.fr and Science-et-vie.com, the launch of the new Télé Star and Auto-Journal apps for iPad, the new version of Grazia and Sport Auto for iPad.

Finally, with regard to the recent acquisitions, the site NaturaBuy.fr continued to grow with an increase in transactions of 24% compared with 2012.

· DIRECT

Total revenues generated by the Direct Area Direct in the first quarter of 2013 amounted to €55.8 million, down 4.5% from €58.4 million in the same period of 2012.

The critical economic situation, the continuing decline in consumer spending and the ongoing downturn in the book market (the Area’s main ​​activity) required continuous efforts to reduce costs, review the network and diversify the offer.

In particular, work was done to rationalise the network (now comprising 570 points of sale) with the closure of 12 stores. On a like-for-like basis the directly-controlled bookstore chain, however, saw an increase of revenues of 3%, while the multicentre stores and the chain of franchised outlets maintained an essentially stable performance compared with the previous year.

Work also continued on product diversification and the development of the inMondadori multi-channel strategy, aimed at integrating in a single online and off-line system, which will be completed during the year.

Cemit, the company that operates in direct marketing, in the first quarter of 2013 generated revenues that were in line with those of the previous year, despite operating in a market in marked and sustained decline.

· RADIO

The advertising market in Italy ended the first quarter with a sharp decline in all media (-16.5% in February, source: Nielsen) with the exception of the Internet (+5%), in particular Radio in February saw a fall of 17.3% (January -2.2% and February -27.7%).

In this context, advertising sales for R101, reflecting the heavy decline in the main sectors – Auto, Business (mostly Telecommunications and Finance) and FMCGs (which alone in the quarter account, for 85% of sales) – ended the period in line with the negative trend of the market, with revenues of €2.6 million (advertising revenues for radio, the website and other initiatives), a fall of 18.8% on the €3.2 million euro in the first quarter of 2012.

EXPECTATIONS FOR THE FULL YEAR

In the markets in which Mondadori operates the first quarter of the year confirmed a worsening trend and also at a general level there were no indications of recovery in the short term.

In this context, as already indicated in the presentation of the financial statements at 31st December 2012, the company will pursue a series of activities aimed at recovering profitability in the businesses suffering most, also with a significant process of structural reorganisation and cost reduction, with the investment of important financial and economic resources.

For these reasons the level of profitability of the Group for the year 2013 is expected to be lower than last year.

§

EXTENSION OF THE COST REDUCTION AND REORGANISATION PLAN
Starting in May, Mondadori will accelerate on the organisational review and cost reduction plan in order to achieve a level of profitability compatible with the new size of the markets of reference and to consolidate the company’s leadership in its competitive sector.

The aim of the project, which will be coordinated by a Steering Committee under the direct guidance of the chief executive Ernesto Mauri, is to improve the functioning of the organisational structures to increase the effectiveness of business operations and expand the target of savings to €100 million by 2015.

§

The board of directors also approved the 2012 Sustainability Report, in compliance with the GRI guidelines, with the application level B+.

§

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

§

The report for the first quarter of 2013, approved by the board of directors, will be available at the company’s registered office, Borsa Italiana SpA and on the web site www.gruppomondadori.it (Investor relations section) from today, as will the documentation for the presentation of the first quarter results.

§

The minutes of the Ordinary and Extraordinary Shareholders’ Meeting of 23 April 2013 are available today at the company’s registered office, Borsa Italian SpA and www.gruppomondadori.it (in the Governance section).

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 SpA met today, under the chairmanship of Marina Berlusconi, to examine and approve the interim report for the first nine months of the year to 30th September 2012, as presented by the Group’s Deputy Chairman and Chief Executive, Maurizio Costa.

THE MARKET SCENARIO
During the third quarter all the main indicators pointed to a continued worsening of the economy. Italy continues to feel the continuing effects of a deep recession and there are no signs of a turnaround in the short term.
With regard to the markets of reference for the Mondadori Group:
– book sales continued to fall (-7.8%) across all the distribution channels, with a particularly disappointing performance in the paperback segment;
– according to the figures up to the end of August, in magazines the downward trend continued both in circulation (-11.5%) and advertising (-16.2%), while in the add-ons market there was no end to the decline that began some years ago (-20.7%);
– in France newsstand magazine sales were down by -5.3%; with subscriptions stable (official figures to September are not yet available); due to a significant reduction in advertising investments in recent months advertising revenues for the period to September were down by 4.2% (-0.5% to May).

GROUP PERFORAMCE IN THE PERIOD TO 30 SEPTEMBER 2012
Consolidated revenues amounted to €1,028.4 million, a fall of 7.5% compared with €1,112 million for the same period of 2011. Excluding the consolidation of Editions Mondadori Axel Springer Snc by Mondadori France, the reduction in revenues would be of 10.3%.

Consolidated gross operating profit amounted to €63.1 million, a fall of 39.7% on the €104.6 million of the previous year. The reduction was partly due to lower non-recurring income and higher costs for restructuring sustained in 2012 compared with last year.

Consolidated operating profit amounted to €44.6 million, compared with €87.8 million last year, with amortizations and depreciations of tangible and intangible assets of €18.5 million (€16.8 million in 2011).

Consolidated profit before taxation came to €32 million, compared with €71.3 million in the same period of last year. During the period financial charges amounted to €12.6 million, an improvement of €3.9 million compared with 2011.

Consolidated net profit for the period totalled €16.1 million, (after minority interest of €1.3 million) compared with €44.1 million in the same period of the previous year.

Gross cash flow in the first none months of 2012 amounted to €34.6 million, compared with €60.9 million in 2011.

The Group’s net financial position went from -€335.4 million at the end of 2011 to -€346 million on 30 September 2012 (-€380.6 million on 30 September 2011).
Significant facts following the end of the third quarter included the signing on 5 November of the agreement for the sale to the Bertelsmann Group of the company’s 50% stake in Random House Mondadori, a book publisher based in Barcelona and operating in the Spanish and Latin American markets. The operation, with a value of €54.5 million, is subject to approval by the Spanish antitrust authorities and should be concluded before the end of the year.

Information regarding personnel
As of 30 September 2012, the personnel employed by companies of the Group (both on temporary and permanent contracts) amounted to 3,743. On a like-for-like basis, staff numbers were down by 66 (-1.7%) and the cost of labour by 3%, also taking account of start-up and restructuring costs.

With regard to the scope of consolidation, it should be noted that the figures for 2012 include the staff, and related costs, of Editions Mondadori Axel Springer Snc, which in 2011 was consolidated using the net equity method. Similarly, the total number of employees of Italian companies was reduced by 32 and the Parent Company increased due to the incorporation of Mondadori Editorial Wellness S.r.l. and a number of intercompany transfers.

It should also be noted that on 5 October 2012 a Ministerial Decree recognised and approved the “state of crisis” and the resulting restructuring plan for the companies Arnoldo Mondadori Editore S.p.A., Mondadori Pubblicità S.p.A. e Press-Di Distribuzione Stampa e Multimedia S.r.l..
The implementation of the aforementioned plan, which is expected to be completed by April 2014, involves 152 employees on printing-editorial contracts and will permit a further reduction in labour costs from November 2012.

RESULTS OF THE BUSINESS AREAS

• BOOKS

Compared with the same period of 2011, in the first nine months of the year, the trade book market saw a continuing fall in the bookstore channel, both in the number of copies sold (-7.1%, source: Nielsen) and in terms of value (-8.1%, source: Nielsen), also due to poor sales of paperbacks. The downturn also affected the large-scale retail and online channels.
In this context, the Mondadori Group confirmed its leadership in the market of reference (27.7% in terms of value, source: Nielsen), and with 6 of the top 10 best selling titles in the period and 45 of the top 100.

During the period, revenues from book sales amounted to €261.6 million, a fall of 6.7% compared with the €280.5 million of the same period of the previous year.

As regards the performance of the Group’s trade publishing houses in the third quarter, Edizioni Mondadori has reached a market share of 14.1% in terms of value (+1.3% compared with the same period of 2011), thanks also to the full effects of the success of the EL James Fifty Shades trilogy, which in just over three months sold 2,400,000 copies in Italy, and for several weeks holding the first, second and third places in the best-sellers list.
In the genre fiction area, in September Mondadori was the first company in the world to publish the highly anticipated second novel of The Century Trilogy, L’inverno del mondo by Ken Follett with an initial print run of 450,000 copies. Within a few days, the book reached the top of the best-sellers list, doubling the results of the first volume of the trilogy, La caduta dei giganti, published two years ago.
There was also great satisfaction for the victory in the two most prestigious Italian literary prizes: the Premio Strega, 2012, awarded to Alessandro Piperno with Inseparabili (80,000 copies sold) and the Premio Campiello 2012, which was won by Carmine Abate with La collina del vento (40,000 copies in September alone).
A strong publishing programme is confirmed for the final quarter with the arrival of new titles from, among others, Paolo Giordano, Valerio Massimo Manfedi, Luciana Littizzetto, Michael Connelly, Stephen King, Murakami Haruki and Ian McEwan.

On the Educational side, Mondadori is the third largest operator with a market share of 12.8%. During the period the company has developed technological solutions that allow for greater flexibility of use, regardless of the operating system or device, and a greater integration of digital products.

In the ebook market, Mondadori is the leader with a market share of around 40%. The third quarter of 2012 showed a significant increase in sales, especially in the August, which recorded average daily downloads of more than 5,000.
The E.L. James trilogy alone recorded more than 90,000 downloads in the quarter. Romantic Fiction also performed well, which includes the digital version of the “Category” titles (published in print form only for newsstands) and the series Emozione degli Oscar Mondadori. There was an excellent start for the new book by Ken Follett L’inverno del mondo. Finally, also of note was the launch of the new digital series “Mondadori XS”.

• MAGAZINES ITALY

The worsening of the economic and financial crisis and increased uncertainty over the short and medium term have had a marked influence on the dynamics of the markets in which Mondadori operates. Particularly in the last quarter, there was an additional reduction in revenues from both the sale of magazines and advertising, only partially offset by the results in the three summer months of add-on sales.

In the first nine months of 2012 the area generated revenues of €298.6 million, a fall of 15% compared to the €351.1 million euro in the first nine months of 2011.

There were varying trends among the various activities included in this aggregate.
– circulation revenues, penalised by the downturn in subscriptions and newsstand sales, and despite a reduction in average prices, were down by 10.8%;
– revenues from add-on sales (-18.3%), were down less than in the first half;
– advertising revenues were down by 20.7%, in a very difficult market with some significant changes, such as the temporary suspension of publication of Flair and the closure of Economy;
– revenues from International Activities (licensing +6.7%, advertising sales for the network +27.1%) and net revenues from Mondadori sites (around +40%, net for the publisher) performed well and are growing rapidly.

In terms of circulation, in the period Mondadori recorded a fall of 10.8%, in line with the market, excluding the additional copies of the new weeklies and monthlies (Source: internal estimate). Despite these new launches, the market recorded a downturn of more than 6%.
In particular, an analysis of circulation figures for the year showed that the usual seasonal upturn in summer sales of magazines was as marked as usual.

In a context characterised by a sharp slowdown in advertising in all media, the Internet advertising market showed a growth of 11% compared with the same period of 2011. At the same time the sites of the main Mondadori magazines ​​ performed much better than the market in terms of traffic and advertising, allowing an increase in revenues of 39.3%.

• ADVERTISING

The performance of the advertising market to August 2012 showed an overall downturn of 10.5% compared with the same period of 2011, and was also down on the first half of 2012 (-9.5%).
This negative trend affected all media: television (10.9%), radio (-7.4%), outdoor (-12.5%), cinema (-22.4%), direct mail (-15.7%), newspapers (-13.9%) and magazines (-16.2%).
The only exception was the Internet, which did not grow as fast as in previous years.

In the first nine months of 2012 Mondadori Pubblicità recorded revenues of €129.1 million, a fall of 21.8% from the €165 million of 2011.
The magazines published by Mondadori saw a downturn of 22.3%, due to a negative performance in almost all sectors, as well as the temporary suspension of the publication of Flair.
The aggregate figure, which includes revenues from third-party publishers of newspapers and joint ventures, showed an overall decline of 26.7%. This trend in revenues was due in equal measure to the contribution of both monthly and weekly titles.
With regard to the advertising sales for the two radio stations in the portfolio, the company recorded a fall of 11.3%.

During the first nine months Mondadori Pubblicità attempted to respond to the market by developing the organisation and management of events involving the company’s most important brands, and increasing revenues in this area by 85% compared with the first nine months of 2011.
As for the internet, Mediamond continued to record strong growth in revenues in the period (+63.7% compared with 2011), thanks to the positive performance of Donnamoderna.com (+16%), Grazia.it (+60%) and Panorama.it (+36%) for the RTI there was a good performance for TGcom24 (+15%) and SportMediaset (+53%) and rapidly expanding sales for VideoMediaset.

• MAGAZINES FRANCE

Mondadori France ended the first nine months of 2012 with revenues of €284.5 million, up 9.6% from the €259.6 million of the same period of 2011, on a comparable basis (i.e. excluding the effects of the change in the method of consolidation of the joint venture Editions Mondadori Axel Springer Snc), revenues were down by 2.3%.
The continued focus on editorial quality and costs made it possible to report an increase in the gross operating margin of 5.9% compared with 30 September 2011, taking it to €27 million euro.

Advertising revenues: In a market that – contrary to an essentially stable situation in the first six months of the year – saw a sudden downturn in the third quarter with an overall reduction of 4.2% over the nine months, revenues for Mondadori France titles (on a like-for-like basis) were down by 1.9% compared with the same period last year, mainly due to the trend in the upscale women’s segment, which includes the weekly Grazia (+6.6%) and the monthly Biba (+8.4%), and L’Auto Journal (+7.1%), Sport Auto (+7.2%) and Mode & Travaux (+7.1%).

Circulation revenues generated by Mondadori France, which include both newsstand sales and subscriptions (70% of total revenues), were slightly down at the consolidated level (-2.3% on a like-for-like basis). The trend in newsstand sales (-5%) was in line with the market (-5.3%) compared with the first nine months of last year, whereas for subscriptions (33.8% of revenues), Mondadori France, with a portfolio of more than three million customers, continued to grow (+0.7% compared with the same period of 2011).
Several titles saw an increase in copies sold: 351,000 copies Biba (+6.7%), L’Ami des Jardins, 159,000 copies (+7.9%), Modes & Travaux 437,000 copies (+1.4%); Grazia, launched in 2009, confirmed its success with an increase of 3.4% to 193,000 copies.

In the first nine months of the year investments in the digital sector continued, both to increase the audience for existing sites and their presence on the new devices, and to diversify the offer and explore new opportunities through new acquisitions.

International Activities
The company’s international activities, transferred to the new company Mondadori International Business, created as part of the corporate restructuring project previously announced to the market following the approval of the interim report for the period to 30 June 2012, continued their development: the Grazia International Network now has 19 editions, in addition to Italy, and will be expanded before the end of this year by Grazia Poland and in 2013 by Grazia Korea and Grazia Spain. In addition, in August the company also saw the launch of Flair Germany.

On the advertising front, in the first nine months of 2012 sales in the Italian market, in the fashion and furniture sectors, of €4.8 million euro, an increase of 27.1% compared with the same period of 2011. Of particular note was the excellent performance of Grazia France, Grazia UK, Grazia Russia and Grazia Germany (+54% compared with 2011).

As regards investments, Mondadori is present in:
– Greece, Bulgaria and Serbia through its stake in Attica Publications that, despite the serious crisis, has achieved results in line with the previous year, thanks to a strong growth in market share, cost cutting and the success of add-on sales;
– China, with the joint-venture Mondadori SEEC Advertising Co. Ltd., the exclusive advertising sales company for Grazia China, which ended the first nine months of 2012 with revenues of €7.8million (+57% compared with the same period of 2011);
– Russia, which with an edition of Grazia that in the first nine months of 2012 performed better than the market (revenues +17% compared with 2011).

• DIGITAL

Following a change in the organisational structure of the Group, the figures relating to digital activities in the first nine months of the year are booked, in line with internal reporting procedures, as follows:
– for publishing activities, e-books, properties, subscriptions and online advertising, in the business areas of reference, i.e., Books, Magazines Italy and Magazines France;
– for e-commerce activities, conducted through the web site Bol.it (from November inMondadori.it) and online Bookclubs, in Direct;
– for diversification activities and investment to support the business, gambling, applications and CRM, in Other Business.

• DIRECT

In order to counter the recessionary economic environment a process of rationalization of the network of book shops was begun in the first half, which saw the closure of the Milan Berchet store and some smaller stores, and a development plan for new sources of revenue through the expansion of the range of products.

Total revenues amounted to €169.5 million (-11% compared to the €190.4 million at 30 September 2011 (it should be noted that the main economic indicators for 2011 have been restated to include the figures for activities conducted through Bol.it attributed to the business with effect from the beginning of the year).
Revenues can be broken down as follows:
– retail sales and other revenues, down due, as well as to general market conditions, the closure of some stores, during the second half of 2011 and first half of 2012 and a new commercial approach;
– direct marketing sales, down overall as a result of cutbacks in investments by companies, a significant reduction of consumer spending and shifts in buying habits of the benefit to retailers;
– sales form e-commerce activities, managed by the site Bol.it, down as a result of the contingent market phase and changes in the competitive scenario.

In early October, following the partnership signed with Kobo Inc., Mondadori launched in Italy the series of eReaders made by the Canadian group, to be sold online and through the network of stores (350 stores which will rise to 500). Among the objectives of this operation:
– the achievement of a market share for ebooks significantly greater to that for printed books;
– to be the only operator in the world, market leader in trade publishing, with a physical and digital retail system integrated and brought together under a single brand inMondadori and high quality eReading devices on an open platform.

• RADIO

At 30 September 2012, radio advertising revenues in Italy recorded a downturn of 8.1% compared with last year, following a decline in the first half of 5.5% and an even bigger drop in the third quarter (-14.6%, Source: FCP Assoradio).
During the period advertising sales for R101 generated net revenues of €10.3 million, down 12% on the €11.7 million of the same period of 2011.

EXPECTATIONS FOR THE FULL YEAR
In the third quarter figures for production, consumer spending and investments confirmed the trend of a gradual worsening of the economic situation. Moreover, it is not at present possible to predict when or how there might be a reversal of this trend.

In the current market situation in which Mondadori operates we only not repeat what was stated in the interim financial statements, regarding:
– the Group’s priorities: i.e. the continuous improvement of product quality, the development of digital activities and the international network of magazines, and continued commitment to the review of processes and structures for the reduction of operating costs;
– the forecast of the level of operating profitability, which will be less than the previous year also in the last quarter.

ADHERENCE TO THE PROCESS OF SIMPLIFIED RULES ADOPTED BY CONSOB REGULATION N. 18079 OF 20 JANUARY 2012§
Notice is hereby given that, pursuant to art. 3 of Consob resolution no. 18079 of 20 January 2012, the Board of Directors of Arnoldo Mondadori Editore SpA resolved, in relation to the provisions of Articles. 70, paragraph 8, and 71, paragraph 1-bis of Consob Regulation no. 11971/99, to make use, with effect from today, of the possibility to waive its obligations to publish information as foreseen by the aforementioned Consob Regulation regarding significant operations such as mergers, spin-offs, capital increases by contribution in kind, acquisitions and disposals.

§

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

§

The interim report for the period to 30 September 2012 will be available at the company’s corporate headquarters, Borsa Italiana S.p.A. and on the web site www.gruppomondadori.it (Investor relations section) from today.
Also today, the company will publish on the web site www.gruppomondadori.it (Investor relations section) and www.borsaitaliana.it, the presentation made to analysts of the results for the period to 30 September 2012.

The Board of Directors of Arnoldo Mondadori S.p.A. met today, under the chairmanship of Marina Berlusconi, to examine and approve the interim report for the first half of the year to 30th June 2012, as presented by the Group’s Deputy Chairman and Chief Executive, Maurizio Costa.

THE MARKET SCENARIO
As is well known, the current market scenario continues to be difficult with all of the main indicators showing markedly negative trends. Prospects for a recovery are increasingly uncertain and remote. Meanwhile, there was a marked decline in the sectors of reference for the Mondadori Group, especially in Italy.

GROUP PERFORAMCE IN THE PERIOD TO 30th JUNE 2012
The Mondadori Group’s figures for the first six months of 2012 substantially confirm the trend highlighted in the first quarter. In particular, revenues were down by 8.5% compared with the previous year, with a consequent impact on operating margins (-39%), a third of which was due, however, to the lower contribution of extraordinary items and higher organisational restructuring costs.
The first half ended with a net profit of €7.5 million and a negative net financial position of -€370 million, Actions will continue in the second half to reduce costs, in line with new guidelines drawn up in recent months to raise previously indicated targets and with a view to dealing with difficult market conditions that are likely to last beyond expectations.

Consolidated revenues amounted to €676.2 million, a fall on the €738.7 million in 2011.

Consolidated gross operating profit (EBITDA) came to €36 million, a reduction compared with €59 million in the same period of the previous year. The difference is due to lower capital gains and higher restructuring costs.

Consolidated operating profit amounted to €23.8 million, compared with €47.9 million in the first half of last year, with amortizations and depreciations of tangible and intangible assets of €12.2 million (€11.1 million in 1H 2011).

Consolidated profit before taxation came to €15.6 million, compared with €37.5 million in the same period of last year. During the period financial charges amounted to €8.2 million, an improvement of €2.2 million compared with 2011.

Consolidated net profit for the period totalled €7.5 million (following the attribution of minority interest of €1.6 million), compared with €22.7 million in the same period of the previous year.

Gross cash flow in the first six months of 2012 amounted to €19.7 million, compared with €33.8 million in 1H 2011.

The Group’s net financial position went from -€335.4 million at the end of 2011 to -€370 million at 30 June 2012 (-€399.2 million at 30 June 2011).

Information regarding personnel
As of 30 June 2012, the personnel employed by companies of the Group (both on temporary and permanent contracts) amounted to 3,745, a reduction on a comparable basis both with respect to the figure at the end of the year and at 30 June 2011 (-51, or -1.3%).
Obviously the difference takes account of changes during 2011 following the consolidation, in January 2012, of the French company Mondadori Axel Springer Snc and the Italian start-up Glaming Srl.
There was no change, meanwhile, in the scope since the figures for the first quarter of 2012 (3,764), with the reduction being entire attributable to gains in organisational efficiency.
Consequently, the company confirms the ongoing efficiency policy for contract staff, following the restructuring processes undertaken over the last two years, aimed at prolonging the positive effects of the structural containment of labour costs (-3% on a like-for-like basis).

RESULTS OF THE BUSINESS AREAS

• BOOKS

The market for trade books in the first half of 2012 has confirmed the decline in both copies (-7.6%, Source: Nielsen) and value (-9.1%, Source: Nielsen) compared with the first half of 2011, with only a slight improvement compared with the figures reported for the first quarter of this year. The decrease affects all of the channels surveyed: bookshops, large-scale retail and online.

During the first half of 2012 the Mondadori Group, confirmed its leadership in the trade segment with a market share, in value terms, of 26.1% (Source: Nielsen), an increase compared with the first half of 2011.
Revenues in the books area amounted to €144.6 million, down 13.4% on the €166.9 million of the previous year; EBITDA and operating profit also showed a decline, with a significant improvement in the second quarter thanks to the containment of costs and extraordinary income.

Compared to the first quarter of the year trade book revenues saw a slowdown in the decline, thanks also to the Fifty Shades phenomenon, the EL James trilogy the first two volumes of which have over 30 million copies in just four months; in just three weeks, sales in Italy exceeded, 200,000 copies, immediately putting both titles at the top of the best-sellers list. There are also positive expectations for the final volume of the trilogy, published on 13 July 13, with an initial print run of 350,000 copies.
Also of note in the period are the excellent results of the new novels by John Grisham, Sveva Casati Modignani, Luciano Ligabue and Alessandro Del Piero.

In the second half, in addition to a strong publishing programme, that includes the publication of new titles by important authors, including Ken Follett and Paolo Giordano, the company expects to see the full effects of the Fifty Shades phenomenon, and sales of the new novel by Alessandro Piperno, winner of the 2012 Premio Strega.

In the e-book market, which still in its infancy, the second quarter of 2012 saw a further increase in the sales trend and the number of daily downloads, thanks to titles that have also been successful in the traditional format, including, in particular, the Fifty Shades trilogy.
Strong growth is also expected as a result of the spread of devices and, of note here, is the agreement signed in July by Mondadori with Kobo for the launch in Italy of the Kobo Touch eReader.

• MAGAZINES ITALY

In Italy the continuing economic crisis has led advertisers to cut back, postpone and reallocate their advertising investments as a result of the contraction of sales and the general climate of uncertainty. In the first five months of 2012, such behaviour has resulted in a decline in advertising spending in magazines of 14.6% (Source: Nielsen), a fall in newsstand circulation of 9.4% (-12% on a like-for-like basis; in terms of value, internal estimate) and a fall in revenues form add-on sales of 25.2% (in terms of value, internal estimate).

In such a difficult market environment, the Magazines Italy area reported revenues that were down 15.3% from €247.8 million to €209.9 million, with a consequent impact the final results, while confirming its market leadership (31.9%).
It should be noted that the figures for 2011 included a capital gain of €10.1 million, due to the sales of the company’s stake in Hearst Mondadori Publishing Srl.

In particular, revenue trends were as follows:

• circulation (-9.9%) was penalised by the decline in subscriptions, a fall in the average number of copies sold at newsstands and a drop in average prices;
• add-on sales (-23.6%) were down mainly because of differences in the scheduling of collectibles and books and a downturn in unit sales of home video products and prices that were higher than the market average;
• advertising fell (-17.6%) as a result of a number of inconsistencies – such as the temporary suspension of publication of Flair (the new version is expected to be launched in September) and the closure of Economy – and the composition of the product portfolio, which is more exposed to a slump in investments in the interiors and FMCG sectors.

Properties
During the first half of 2012 the web sites of Mondadori’s main magazine titles saw a marked improvement in traffic, along with a substantial increase in advertising revenues (+29% compared with the first half of 2011).
In particular, there were good performances in terms of traffic and advertising (as outlined below) by Donnamoderna.com, Grazia.it, Panorama.it and Panoramauto.it.

• ADVERTISING

As already mentioned, in Italy, market trends in advertising spending in the first five months of the year saw an overall decline of 9.5% compared with the corresponding period of 2011, in a context of continuing uncertainty due to the economic and financial crisis and levels of confidence that remain at a minimum. With the exception of the internet, all media were in decline: television (-10%), radio (-5.5%), newspapers (-13.5%) and magazines (-14.6%).
In the first half of 2012 Mondadori Pubblicità S.p.A. recorded total revenues of €96 million compared with €117.5 million in the same period of 2011, a fall of 18.3%.
Mondadori Magazines saw a slump in revenues of 18.3%, mainly due to the negative trends in the FMCG and interiors sectors. If account is taken of the JV titles and third party revenues the fall would have been of 23.4%, on a like-for-like basis, i.e. taking into account the closure of Economy, the temporary suspension of publication of Flair and the sale of Cosmopolitan, the decline would be about 20%.
Weeklies and monthlies have contributed in equal measure to the shortfall in revenues, in a particularly complex and competitive environment with a strong sensitivity on the part of advertisers to the price factor.
Revenues for radio advertising were down by 2.9% compared with the first half of 2011, with a similar trend for both the stations represented by the company.

On the internet the excellent recent performance of Mediamond continued, with an overall growth in revenues of 65% ​​compared with 2011, based on sales for 32 vertical sites with a total of 12 million unique users.
In particular, we would underline the positive trends for Donnamoderna.com (+14%), Grazia.it (+54.4%) and Panorama.it (+48%); the RTI Group, optimal growth for TGcom (+18%) and Sport Mediaset (+45.2%).
Particularly positive were sales for the site www.video.mediaset.it, which was added to the portfolio in January 2012.

• MAGAZINES FRANCE

In a difficult environment for the magazine market, Mondadori France performed well in the first half of 2012 with consolidated revenues which reached €193.6 million, an increase of 12.3% compared with €172.4 million in the same period of 2011.
On a comparable basis (excluding the effects of a change in the consolidation method for the joint-venture Editions Mondadori Axel Springer Snc) revenues were in line with the previous year.
The continuous improvement of the products and good results in advertising, combined with the constant monitoring of costs, have resulted in a 7.3% increase in gross operating profit, which amounted to €20 million (10.3% of revenues).

Advertising revenues: for the third consecutive year, Mondadori France, up 2.9% on the previous year, achieved a better performance than the market of reference on a like-for-like basis (-0.5% in terms of value in the first five months: Source Kantar Media). This excellent result is mainly due to the trend in upscale women’s titles, including the weekly Grazia (+11.1%) and the monthly Biba (+14.4%), but also titles such as L’Auto Journal (+9.8%), Sport Auto (+7.7%) and Mode & Travaux (+9.8%).

Circulation revenues, which include both newsstand sales and subscriptions (70% of total revenues), saw a slight fall at the consolidated level, (-1.5% on a like-for-like basis). In particular:
– Newsstand sales, although down by 4.4% compared with the first half of last year, fell less than the market of reference (-5.3%, internal estimate);
– Subscriptions continued to grow (+1.5% compared with the same period of 2011) and, with a portfolio of more than three million subscribers, accounting for 33.6% of the revenues of Mondadori France.
Among the titles growing in terms of circulation, we would underline that Grazia, launched in 2009, confirmed its success in the first half of 2012, reaching sales of 187,000 copies (+ 3.3%).

During the period new versions of Biba, Modes & Travaux and Auto Journal were launched and the brand extension policy was continued with the launch of the quarterly AutoPlus Classiques and two weekly supplements to Closer: Closer C’est leur histoire and Closer Plage.

Investments in the digital sector continued in the first half of the year, with the result that all of the Group’s French sites now share the same platform and while the dedicated structures have been reinforced.
Regarding the performance of the websites and digital versions of the titles, we would underline in particular the overall growth in both advertising revenues (+25%) and the Nielsen audience, which reached 4.8 million unique users in May 2012.
Finally, in terms of diversification, the AutoReflex portal consolidated its position in the market for small ads with a significant growth of its business customers, becoming a major player in the market.

International activities
Mondadori’s International Activities confirmed the positive trend of 2011 with further expansion of the network during the first half of the year: the volume of business generated by the Group’s international titles was around €80 million, a significant increase compared with 30 June 2011.
There was strong growth in licensing activities: in particular the editions of Grazia around the world reached twenty following the launch of the magazine in South Africa, in May.
On the advertising side, with continued growth in the fashion and interiors sectors in the Italian market, sales reached €3.1 million (+27% compared with the same period of 2011). There was an excellent performance by Grazia in France, Great Britain, Germany and, in particular, the Russian edition of the magazine, which saw sales rise by 66% compared with 2011.

Regarding its international investments, Mondadori is present in:
– Greece, Bulgaria and Serbia through its stake in Attica Publications, which, despite the continuing crisis in the Greek market, reported results in line with expectations, thanks to the effect of the restructuring plan put in place in 2011 and early 2012;
– China, with a 50% stake in Mondadori Seec Advertising Co. Ltd, the exclusive advertising sales company for the local edition of Grazia which confirmed the excellent performance recorded last year, ending the first half of 2012 with revenues of €4.8 million (+58% compared with the same period of 2011);
– Russia, with an edition of Grazia that, five years after its launch, recorded first half revenues in 2012 that were up 22% on the same period of 2011.

• DIGITAL

Digital activities in the first half can be summarised as follows:
– publishing activities, e-books, properties, subscriptions and online advertising, in the businesses of reference: Books, Magazines Italy and Magazines France;
– e-commerce activities, conducted through the site www.bol.it, and online Bookclubs, Direct;
– diversification and investment activities in support of the business, gambling, apps and CRM, Other Business.
At 30 June 2012, all of the above-mentioned activities generated total revenues of €21.4 million and an EBITDA loss of €11.5 million.

• DIRECT

Against the backdrop of an economic recession, there was a continuation of the activities begun in the first quarter designed to restore profitability and uncover new sources of revenue.
In particular, efforts continued on the streamlining of the network of bookshops while the range of products sold under the Emporio Mondadori and BoxForYou brands was expanded.

Total Direct revenues in the first half of the year amounted to €113.1 million, a fall of 11.6% on the €128 million at 30 June 2011 (it should be noted that the main economic indicators of the previous year have been restated to include, from the current year, the figures related to the activities of the website www.bol.it).

All areas were in decline, in particular:
• retail and other revenues, due to, in addition to general market conditions, the closure of some stores, in the second half 2011 and first half of 2012, and the introduction of a new commercial policy;
• direct marketing, as a result of the containment policies adopted by companies, a significant reduction consumer spending and the process of changing buying habits to the benefit of retailers;
• e-commerce activities (www.bol.it) were conditioned by the current situation in the market, a change in the competitive framework.

• RADIO

The Italian radio advertising market in the first five months of 2012 recorded a downturn of 5.5%, with a particular slump of 12.6% in May (Source: Assoradio FCP).
R101 booked first half 2012 advertising revenues of €7.6 million, a fall of 7.3% compared with the €8.2 million in the same period of last year.
Of special note was the significant reduction of operating costs recorded in the first half of the year.

From an editorial point of view, the first half was characterised by a continuous process of renewal, with new programmes, new presenters and the strengthening of the schedule, especially at weekends. With regard to marketing activities, of special note was the organisation and sponsorship of major national events.

CORPORATE RATIONALIZATION
During today’s meeting of the board of directors a proposed corporate restructuring plan – already discussed in general terms by the board at its meeting of 14 May 14 – was also approved, aimed at defining the process for the merger by incorporation with Arnoldo Mondadori Editore S.p.A. of 100% of the subsidiary Mondadori International S.p.A..

The project is part of the overall rationalisation of the various activities currently overseen by Mondadori International S.p.A., through the allocation of such activities to comparable business areas.
In particular, Mondadori International currently oversees the Group’s foreign publishing holdings in Mondadori France (100%), Mondadori Independent Media (50%) and Attica Publications (41.9%) – as part of the International Activities of Magazines – participation in the joint venture with the Bertelsmann Group, Random House Mondadori, which is active in the book markets in Spain and Latin America, as well as financial assets, in particular, 4,517,486 shares of Mondadori itself.
The project foresees in a preliminary measure – in line with the stated aim of asset allocation by areas of business – the concentration in a single corporate vehicle of all the Group’s international activities in the magazine area, with the transfer to a new company, 100% owned by Arnoldo Mondadori Editore S.p.A., of the investments held by Mondadori International S.p.A. International in companies included in the International Activities of the Magazine Area, as mentioned above, based on the carrying value on the balance sheet as at 30 June 2012.
Consistently with this approach, the new company would also absorb the business unit for the management of licensing agreements and advertising sales for international editions of Mondadori titles, currently overseen by a business unit of the parent company.
Subsequently, there would be an intercompany transfer from the subsidiary Mondadori Pubblicità S.p.A. to the new company of the 50% stake, held by Mondadori SEEC (Beijing) Advertising Co. Ltd, a joint venture under Chinese law, aimed at developing advertising sales in the magazine sector in China.

As a result of these operations and upon completion of the project, within the first half of 2013, acts relating to the merger by incorporation with Arnoldo Mondadori Editore S.p.A. of will be defined Mondadori International S.p.A. will be defined, with the consequent effects in terms of a reduction in corporate and operating costs.

EXPECTATIONS FOR THE FULL YEAR
In the last months of the period Europe in general, but particularly Italy, saw a progressive deterioration of economic figures on all fronts: consumer spending, investments and, consequently, production.
Projections by leading research institutions and the Bank of Italy on changes in GDP have recently been revised down and currently foresee an overall fall of more than 2% for 2012. Moreover, the recession is expected to continue at least for the entire second half of the year with unemployment stable at around 10%, with even further decline in 2013.
Across the Eurozone great underlying uncertainty remains, with medium term prospects closely related to developments in the sovereign debt crisis and its effects on bank lending, consumer and business confidence, domestic demand, and the economies of both the U.S. and developing countries.
Mondadori’s priorities are focused on actions to: consolidate its international activities, also through partnerships; develop digital activities; control quality and innovation in its editorial offer; reorganise processes and restructuring, in line with new guidelines identified to further increase the targets for reductions in operating costs.
Given this, an in the face of a market in ongoing difficulty, the company does not expect changes in the coming months that will make it possible to achieve the levels of operating profitability of last year.

§

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

§

The documentation relating to the analysts’ presentation of the results for the first half of the year to 30 June 2012 is available in the Investor Relations section of the company’s website (http://www.mondadorigroup.com/Investor-relations/Presentations).

The Board of Directors of Arnoldo Mondadori SpA met today, under the chairmanship of Marina Berlusconi, to examine and approve the interim report for the first three months of the year to 31st March 2012, as presented by the Group’s Deputy Chairman and Chief Executive, Maurizio Costa.

THE MARKET SCENARIO
In the first quarter of 2012 saw the full confirmation of the elements of structural crisis in the economy, especially in Europe: falling GDP, rising unemployment and the decline in consumer spending have unfortunately worsened compared with the latter part of 2011; the markets a sectors of reference for Mondadori, particularly in Italy, felt the impact of this situation, and were significantly in decline during the period.

GROUP PERFORAMCE IN THE PERIOD TO 31 MARZO 2012
Against this background, in the first three months of 2012 the Mondadori Group’s consolidated revenues were down by 7.4% compared with the same period of last year, in line with the final quarter of 2011.

In terms of profitability, despite a marked fall in consolidated operating profit due to the decline in revenues, Q1 ended with a positive net profit thanks to the lower impact of financial charges and taxation.

Over the coming months, development will continue in digital activities more closely related to the Group’s publishing identity – products, brands, communities – and the process of restructuring carried out in recent years will be extended to face a market situation in which, at present, there are no signs of recovery.

Consolidated revenues amounted to €328.1 million, compared with €354.3 million in the first quarter of 2011.

Consolidated gross operating profit (EBITDA) came to €15 million, compared with €21.8 million in the same period of the previous year.

Consolidated operating profit amounted to €8.9 million, compared with €16.3 million in the first quarter of last year, with amortizations and depreciations of tangible and intangible assets of €6.1 million (€5.5 million in Q1 2011).

Consolidated profit before taxation came to €4.5 million, compared with €10.9 million in the same period of last year. During the quarter financial charges amounted to €4.4 million, an improvement of €1 million compared with 2011.

Consolidated net profit for the period totalled €2.4 million, compared with €5 million in the same period of the previous year.

Gross cash flow in the first three months of 2012 amounted to €8.5 million, compared with €10.5 million in Q1 2011.

The Group’s net financial position at 31 March 2012 stood at -€301.8 million, an improvement of €33.6 million on the -€335.4 million at the end of 2011.

Information regarding personnel
As of 31 March 2012, the personnel employed by companies of the Group (both on temporary and permanent contracts) amounted to 3,764, compared with 3,674 in March 2011. On a comparable basis, considering that the first quarter of last year did not include the 120 employees of the companies AME Editoriale Wellness, Glaming and Emas (France), now consolidated, the overall figure would show a reduction of 30.

This, in general, confirms the ongoing efficiency policy aimed at the structural containment of labour costs, the effects of which will extend even beyond the formal end of the Restructuring Plan in 2011.

RESULTS OF THE BUSINESS AREAS

· BOOKS

For the first time, the trade book market saw a marked fall both in the number of copies sold (-10.8%, source: Nielsen) and in terms of overall value (-11.8%, source: Nielsen) in the first quarter of 2012 compared with the same period of 2011, with decline recorded in all channels: bookshops, large-scale retail and online.
Moreover, this trend is even more marked in an analysis of the bestsellers: during the period, the top ten bestsellers recorded a fall of 7.8% in terms of copies and more that double that (-16%) in terms of value; figures that confirm, among other things, the fall in the average price of the biggest selling books.
There are many reason for this situation, some of which were outlined in the Annual Report, including the current recession and the Levi Law on book pricing (which was enacted in September 2011 and places limits on discounting and the number and timing of promotional campaigns).

During the first three months of 2012, despite difficult market conditions, the Mondadori Group nevertheless confirmed its leadership in the trade book sector with a market share of 25.7% in terms of value (source: Nielsen).
During the period, revenues from book sales amounted to €64.2 million, a fall compared with the €78 million of the first quarter of 2011.

The trade books area expects to see an improvement in revenues starting in the second quarter of the year, thanks to a rich publication programme that over the coming months will include new titles by important authors such as Ken Follet, John Grisham, Luciana Littizzetto, Niccolò Ammaniti and Stephen King.

Among the Group’s publishing houses, Edizioni Mondadori maintained its leadership in the trade books sector during period leadership with a market share of 13%. Among the significant initiatives in the first quarter was the launch of the new series Libellule, high quality, short literary fiction by successful authors, sold at a standard price of €10.
Einaudi ended the first quarter of 2012 with a market share of 4.8%, down by about one percentage point compared with 31 March 2011, a period in which the company benefited from the publication of important new titles, including Libertà by Jonathan Franzen, and a longer paperback promotional campaign.
Despite tough trading conditions, Sperling & Kupfer recorded a positive result in bookshops that raised its market share from 2.3% in terms of value in 2011 to 2.9% this year, with the Sperling & Kupfer, Frassinelli and Mondadori Informatica imprints.
Piemme confirmed a total market share of 3.9%, up by 0.3% compared with the first quarter of 2011.
Revenues generated by Mondadori Electa, which were down compared with the first three months of the previous year, were affected by the general trend in most of the segments of the market in which the company operates, in particular in the cultural heritage area.
Compared with the first quarter of 2011, revenues generated by Mondadori Education were stable, in a period that, as usual, has a minimal impact on the company’s yearly sales.

In ebooks, the first quarter was extremely positive for Mondadori’s trade books publishers: the number of downloads in Q1 2012 was higher than the whole of 2011, thanks to an offer of over 3,000 catalogue titles, also including new products and not just digital versions of print editions.

· MAGAZINES ITALY

The difficult macro-economic situation continued to have a big impact on the magazine market in Italy, with a consequently negative effect on advertising revenues (-11% source: Nielsen to February), circulation (-9.1% in terms of copies, -12.5% on a like-for-like basis; internal figures) and add-on sales (-24.8% in terms of value; internal figures).

Mondadori saw an overall decline in revenues in the area, from €121.9 million in the first quarter of 2011 to €104.3 million this time.

In particular revenue trends during the period showed that:
– circulation (-9.1%), was penalised by a sharp fall in copies sold with add-ons and subscriptions, and buy a slowdown in investments in support of some titles, which had a particular impact on overall performance in the first three months;
– revenues from add-on sales (-25,8%), mainly due to a different scheduling of initiatives for collections and books, and a fall in volumes in home video;
– advertising (-11.2%), due, in particular, to a negative performance negative in weekly family and news titles, while advertising sales in the international sector and online was up by 50%.

Sales of Mondadori titles were down by 12.5%, a figure that is in line with the dynamics of the like-for-like market, i.e. excluding new titles published since the first quarter of 2011.
The particularly poor sales performance in the first quarter is explained by a series of factors, including the economic crisis, the launch of new low-cost titles, the new system for ADS certification (circulation audit) which has modified the monthly planning of publishers’ marketing investments, and the increase in postal charges.

Regarding the companies efforts to support its titles and in response to the ongoing trends, Chi was re-launched at the end of March with a new editorial formula and layout, and accompanied by a significant investment in advertising and a cut-price offer. Similar activities have also begun for Panorama, the result of which will be launched on 31 May, TV Sorrisi e Canzoni, Starbene and Grazia. By the end of 2012 the programme, begun at the end of 2010, for the complete review of Mondadori’s portfolio of titles will be completed.

Properties
During the first quarter of 2012, the web sites of the company’s main titles performed particularly well, both in terms of traffic and advertising sales (+30% compared with March 2011), in a market that grew by 12.3% first two months, compared with the same period of 2011 (Nielsen: source Fcp-Assointernet including Display, performance and classified/directories).
Of particular note was the performance of Grazia.it with revenues up by 79.1%, Panorama.it (+56.5%) and Donnamoderna.com (+16.3%).

· ADVERTISING

The advertising market in the first two months of the year fell by 5.7% (source: Nielsen) compared with 2011, confirming the downward trend of investments in all media, with the exception of the Internet, albeit at a slower rate lower than in 2011: television showed a significant decrease (-6.9%), newspapers were down by -5.3%, while for magazines the fall was even more significant (-11%) among other media, radio was down by -5.1%.

As in 2011, the reduction in space is continuing in areas such as interiors, FMCGs and cars, with an impact also being felt in fashion (-7%) and cosmetics (-8%), which in 2011 performed well, while, in contrast were the pharmaceutical, media/publishing and finance sectors, whose weighting is limited.

Mondadori Pubblicità ended the first quarter with total revenues of €42.4 million, down compared with the €49.5 million in the same period of 2011.

Mondadori magazines have closed the first quarter with a fall of 12.7%, in a very complicated and competitive environment and a strong sensitivity on the part of advertisers to the price factor.

In particular:
– weeklies were affected by the economic crisis and the high level of uncertainty in the advertising market, even in the early part of 2012, family and news titles were the most severely affected;
– monthlies saw a smaller fall, thanks to the success of Panorama Icon; Interni also had good performance despite the negative trend in the interiors segment in the first quarter of 2012.
It should be noticed that the difficulties faced by Mondadori monthly titles is mainly due to a not significant presence in women’s fashion, which, as well as being the segment by far of most value, in terms of the total market performed positively in the period.

Also in recent months Mondadori Pubblicità is attempting to maintain average prices compared with 2011, especially for Panorama, Grazia and Chi.

Advertising revenue for radio rose by 3.4%, despite a poor start to February, down by 5.1% (source: Nielsen), sales were particularly strong for Radio Kiss Kiss.

With regard to the activities by the company in the first quarter, there was great success for the first 2012 edition of Milan Fashion Design, which saw the involvement of 17 fashion brands and 12 main partners and sponsors, the initiative enabled Mondadori Pubblicità to consolidate such activities on the territory.
During 2012, the company will organise other events to attract new clients, ensuring a positive return for the initiatives.

The Internet market saw an excellent performance by the joint venture Mediamond, with overall growth of 40% compared with 2011 due to the already mentioned positive trends of Grazia.it, Panorama.it, and Donnamoderna.com, the steady growth of TgCom (+27.3%) and Sport Mediaset (+19.5%). Overall, the scope of the sites sold by Mediamond was enhanced in 2012 with the addition of RTI’s Videomediaset and Skuola.net.

· MAGAZINES FRANCE

Mondadori France ended the first quarter of 2012 with consolidated revenues of €94.3 million, an increase on the €82.6 million of the same period of the previous year (€93.3 million at 31 March 2011 on a comparable basis, taking account of the consolidation of the joint-venture EMAS).

At a consolidated level, circulation revenues, that include both newsstand sales and subscriptions, were more or less in line with those of the first quarter of 2011 (-0.6% on a like-for-like basis) and account for 71% of total revenues.
In particular, subscriptions – that are an important asset (34.3% of total revenues) – were up by 3.1% on the same period of 2011, while newsstand sales were down by 4.2%, in line with the market of reference (-4.4%).

Innovation and editorial quality continue to be the key factors in the positive performance of the magazines published by Mondadori France; in the first quarter of the year significant re-designs were completed for Biba, Modes & Travaux and Auto Journal and the brand extension policy for the titles was continued with the launch of the quarterly AutoPlus Classiques, a change in the frequency of AutoPlus Occasion, and the magazines in the Science&Vie system.

On a comparable basis, advertising sales during the period were up by 2.7% on the same period of the previous year, with a better-than-market performance (0.7%).

This excellent result is explained above all by the positive performance of “haut de gamme” women’s titles: the weekly Grazia (+14.7%) and the monthly Biba (+21.3).
Among the various initiatives of Mondadori France in the digital sector during the period, the most significant included the creation of a shared technological platform for all of the sites, the launch of an iPad version of AutoPlus and the inclusion of the company’s titles in the offer of the various digital newsstands present in the market (Relay.fr, Lekiosque.fr, Zinio.com).

International activities
Total revenues in the first three months showed a marked increase (+8%) on the same period of last year, in particular in:
– advertising, thanks to a dedicated team focused on the fashion and interiors segments, sales in Italy for the editions of Grazia published in France, the UK, Germany and Russia were up by around 20%;
– licensing, with the continuing international development of Grazia: following the launch in Slovenia (March 2012), May will see the launch of the twentieth edition (including Italy), in South Africa by Media 24, the country’s leading publisher.
During the first three months of the year revenues amounted to around €40 million, an increase of 12% on the first quarter of 2011, with forecasts for the whole of 2012 of more than €170 million.

With regard to the joint-ventures, Mondadori is present in:
– China with Mondadori Seec Advertising Co. Ltd, the exclusive licensee for advertising sales for the local edition of Grazia. The magazine, launched in February 2009, continued the excellent performance recorded in 2011 ending the first quarter of 2012 with a 55% increase in revenues compared with the same period of 2011. Given this rapid growth and the potential of the Chinese market, Mondadori is now studying new projects, the first of which should see the light of day in the coming months;
– Russia with an edition of Grazia that has just celebrated its fifth anniversary and increased its revenues in the first quarter of 2012 by 30% compared with the same period of last year;
– Greece, Bulgaria and Serbia with Attica Publications, which, despite the ongoing crisis in the Greek market, recorded a performance in line with expectations, thanks also to benefits deriving from the restructuring plan implemented in 2011.

· DIGITAL

Digital activities during the quarter can be summarised as follows:
– editorial activities, ebooks, properties, subscriptions and online advertising, within the businesses of reference Books, Magazines Italy and Magazines France;
– e-commerce activities, through the web site www.bol.it, and online bookclubs, for Direct;
– diversification and business support activities, gambling, applications and CRM, with Other Businesses.
In the first quarter of 2012 all of the above activities generated total revenues of €10.9 million.

· DIRECT

Total revenues generated by the Direct area in the first three months of 2012 amounted to €58.4 million, on the €64.1 million of the same period of 2011, adjusted to include within the scope or reference the e-commerce activities of Bol.it.

In the context of the economic recession, amplified in the book market by a generalised fall in average prices and a reduction in promotional activities, action was taken to recovery profitability and generate new sources of revenue. These included he rationalisation of the bookshop chain, the expansion of the range of products to include the Emporio Mondadori and BoxForYou brands, and the development of “corners” in partnership at large-scale retail outlets.

The proprietary bookshops generated revenues in the period that were down by more than 13%; of these, the multicenter formula held back the slide to 2.5%, on a like-for-like basis.
The franchise network, meanwhile, saw a fall of revenues of around 7%.
In the Club bookshops chain, the conversion of directly-owned sales outlets into the franchising formula continued; which explains a fall in revenues in this area of 23%.
Bookclub activities recorded revenues that were in line with those of 2011; Cemit generated first quarter revenues of 5 million, a 3.8% fall, in a market that was down by -5% (source: Nielsen).

• RADIO

In the first three months of 2012, revenues in the Italian radio market were down by 5.1% (source: Nielsen); in this context R101 performed better than the market with Q1 2012 revenues of €3.2 million, a slight fall on the €3.3 million of the first quarter of 2011.
In terms of output, the first quarter of 2012 was characterised for R101 by the ongoing process of renewal at the station with the launch of new shows, the expansion of the team of presenters and the strengthening of the schedule, particularly at weekends.

EXPECTATIONS FOR THE FULL YEAR
Unfortunately, the first three months of the year confirmed the most pessimistic forecasts on the scale of the current economic crisis and the effects of economic and financial policy measures introduced by a number of countries, particularly in Europe on production, investment, employment and consumer spending.

The time required for a market recovery is currently impossible to predict: and with regard to the businesses of the Mondadori Group, there has been a further general decline in business volumes, compared with the already markedly negative levels in the final quarter of 2011.

Regarding the activities in which the Group will be engaged in the coming months, the priorities remain those outlined in the Annual Report: to defend the leadership in Italy, consolidation in France and international growth for the brands; the development of digital activities related to the core business; actions to reduce operating costs, with even greater impact than that achieved in the previous three years.

Also in terms of the results expected for the current year, as stated during the presentation of the 2011 Annual Report, in the absence of any short term reversal in market trends, the Group does not expect to achieve the same levels of profitability as last year.

§

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

§

The report for the first quarter of 2012 will be available at the company’s corporate headquarters, Borsa Italiana SpA and on the web site www.gruppomondadori.it (Investor relations section) from today

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 interim report for the first nine months of the year to 30th September 2011, as presented by the Group’s deputy chairman and chief executive, Maurizio Costa.

THE MARKET SCENARIO
As is well known, the third quarter of the year saw a significant deterioration in markets, particularly in the eurozone. Concerns of an economic nature were heightened also by fears of a financial crisis even worse than that of the recent past.
The lack, at a European level, of an immediate and common response to market problems has resulted in an even more negative perception of the situation and a high level of pessimism about prospects for growth, employment and stability.
The magazine market in Italy saw a continuation of the decline in circulation and a was sharp downturn in advertising. The book sector remained essentially stable, despite the absence of bestsellers and falling cover prices. There was a particularly marked fall in retail sales, both in directly managed stores and the large-scale retail channel.
In France, there were no particular changes in the annual trend in the magazine sector while advertising, which remained buoyant until September, saw a downturn from the beginning of October.

GROUP PERFORMANCE FOR THE PERIOD TO 30 SEPTEMBER 2011
In the context of the situation described above, in the first nine months of the year the Mondadori Group recorded:
– revenues that were slightly down against the same period of 2010, with a growing contribution for digital activities;
– another improvement in operating profitability, thanks to essential stability in the traditional businesses while positive non-recurring elements have made it possible to compensate most of the development costs of the digital business;
– a marked increase in net profit, also due to the absence of extraordinary tax charges paid in 2010 relating to previous years.

Consolidated revenues came to €1,114.7 million, a slight fall (-1.4%) on the €1,130.2 million for the same period of 2010.

Consolidated gross operating profit amounted to €104.6 million (+1.5% on the €103.1 million for the first nine months of last year): on a like-for-like basis, excluding non-recurring items and investments for digital development, gross operating profit increased by del 3.2% compared with the same period of 2010.

Consolidated operating profit came to €87.8 million, an increase of 2.6% on the €85.6 million for the same period of 2010, with amortizations and depreciations on tangible assets of €16.8 million (€17.5 million in 2010).

Consolidated pre-tax profit amounted to €71.3 million, an increase of 5,6% on the €67.5 million of the same period of last year, with interest of €16.5 million, compared with €18.1 in 2010.

Consolidated net profit came to €44.1 million, an increase of 43.6% compared with the €30.7 million of the same period of the previous year, which was impacted by non-recurring tax charges related to previous years (net of which the increase would still have been of 11.9%).

Gross cash flow for the first nine months of 2011 amounted to €60.9 million, compared with €48.2 million for the same period of 2010.

The Group’s net financial position went from -€342.4 million at the end of 2010 to -€380.6 million on 30 September 2011 (-€369 million on 30 September 2010); and in May the company paid dividends of €40.3 million.

Information concerning personnel
On 30 September 2011 permanent and temporary contract staff employed by the companies of the Group amounted to 3,720, essentially in line with the figure for the same period of last year (3,717).

The headcount figure includes also the development activities of the new Digital Area, the start-up of a new web company (Glaming), the hiring on fixed-term contracts of a number of staff at museum bookshops and the consolidation of AME Editoriale Wellness.
Given these changes, the current headcount is in fact 52 units lower than the same period of 2010 (-1.4%).
Account should also be taken of the fact that the figure for September traditionally rises for the hiring of temporary seasonal staff related to the school textbook sector until the end of the year.

THE BUSINESS AREAS
BOOKS
Nielsen figures for the first nine months of 2011 show that the summer was characterised by a general uncertainty and weakness in consumer spending that resulted in a slowdown in sales. In this context, the Mondadori Group nevertheless confirmed its leadership in trade books with a market share of 26.1%.

Revenues generated by the Books area amounted to €280.5 million, a 4.8% fall compared with the €294.5 million of the same period of the previous year.

The editorial programme for the closing months of the year is expected to allow for a positive result in terms of market positioning, thanks to strong titles that include new novels by Fabio Volo (Le prime luci del mattino), Giorgio Faletti (Tre atti, due tempi), John Grisham (I contendenti) and Alessandro D’Avenia (Cose che nessuno sa), as well as the considerable interest generated by the only official biography of Jobs.
The quarter also saw the consolidation of growth for the new NumeriPrimi° series, which with sales of 1.6 million copies is at the top of the paperback bestsellers lists.

On the e-book front, on 30 September 2011 the Mondadori catalogue contained 2,700 trade titles, including apps. Thanks to the opening in Italy of Apple’s iBookstore, which has contributed to an increase of more than 100% in the sale of digital titles, growth forecasts for the year can be confirmed.

MAGAZINES ITALY
In a market context of generalised decline in Italian and international magazine publishing, the revenues of Magazines, Italy, which include, in addition to circulation and advertising revenues from Mondadori titles, also revenues from the distribution of titles published by third parties, amounted to €351.1 million, in fall of 3% compared with the €362 million for the first nine months of 2010.

This was the result of:
– a 4.8% fall in circulation revenues (above all due to a reduction in investments in the subscription channel) and a 5.2% slide in add-on sales, which nevertheless retained a high level of profitability in line with the previous year;
– as light reduction in advertising for Mondadori titles compared with 2010 (-0.7%), but with a better than the market trend (-1.8%; Source: Nielsen to August); a marked increase in sales for the internet and the titles of the international network, taking the overall figure to +0.8%.

Work continued in the third quarter on the re-launch and repositioning of titles, of particular note was Donna Moderna Wellness, a new title dedicated to the ecology of body and mind, and the redesign of Sale&Pepe and di Panorama Travel. Initial indications show excellent levels of appreciation prime by both readers and advertisers.
Regarding the Mondadori web sites, in the period from January to September advertising sales grew by 37%, after a particularly brilliant third quarter (+50%), and well ahead of the market (Source: Nielsen to August +13.5%), thanks to the performance of www.donnamoderna.com (+31%), www.grazia.it (+54%) and www.panorama.it (+84%).

MAGAZINES FRANCE
Mondadori France ended the first nine months of the year with revenues of € 259.6 million, a 2.8% increase on the €252.6 million of the same period of 2010.

Circulation revenues, which account for 69% of the total, rose by 2.4%; a particularly significant result given the difficult situation facing the magazine market in recent years which, also in France, has been marked by a constant decline (-4.2%; internal data, in terms of newsstand sales in September).

The total advertising market in the first nine months of the year recorded an increase, in terms of value, of 0.5% (Source: Kantar Media) before a downturn that began from October.
In the same period, Mondadori France out-performed the market with an increase of 5.7% in revenues compared with the same period of the previous year, reaching €62.7 million. This result was mainly due to the excellent performance in revenues from the women’s weekly Grazia (+52%) and the monthly Biba (+11%).
In the last 12 months (October 2010-September 2011) Grazia sold 2,436 advertising pages, an increase of 63%, putting it in second place for total pages among French magazines. The company’s upscale women’s titles now account for 33.5% of total advertising revenues (25.9% in the same period of 2010).

International activities
The positive revenues trend for the company’s international activities continued (+30% compared with the first nine months of 2010), driven by a marked increase in revenues from advertising (+60%). There was also a positive contribution from licensing revenues (+26%), in particular for Grazia Germany, Holland and China.
The number of editions of Mondadori titles published under licence also continued to grow, with three new editions in the period.
There was a decided improvement in the results of the 50-50 joint ventures in Russia and China, in particular thanks to a rise in advertising sales.
The Greek subsidiary Attica saw a fall in revenues due to the worsening financial crisis that has had a negative impact especially on advertising. Nevertheless – thanks to a good performance by the radio stations and a number of add-on initiatives, the reorganisation of the company and the renegotiation of procurement, the final result showed an improvement compared with the same period of last year.

ADVERTISING
Advertising trends in Italy in the first nine months of 2011 have largely confirmed the negative trend that characterised the first six months of the year (Source: Nielsen to August: -4%).
In particular, for the first time since the beginning of the crisis in 2008, there was a slowdown in newspapers (-8.3%), in particular the free press (-49.7%), radio (-5.5%) and television (-4.7%).
Magazines showed a limited downturn (1.8%) on the back of a good performance in the fashion, cosmetics and pharma sectors, and ongoing difficulties in other sectors. Bucking the trend was the internet (+13.5%), making it the healthiest medium at the present time.

With regard to the Group’s activities, Mondadori Magazines saw a slight fall (-0.7%), with continuing positive trends for trend Grazia, Donna Moderna and Tu Style. Monthlies were in line with 2010, with a resilient performance by titles in the interiors sector.

Efforts continued, along with the publisher, for the organisation of fashion events, including Pitti and Milano Fashion & Design, which this year involved Grazia, Interni and R101, as testimonials for an event that was notably successful with both sponsors and the public.

For radio, the new organisation of Mondadori Pubblicità, launched in May and focused on exploiting the sales potential of the company’s entire network, has made it possible to achieve greater results than in 2010, compared with a market that was down by 5.5%.

Advertising sales generated by Mediamond were very positive (+65.9%), thanks to the brilliant results of sites www.donnamoderna.com and www.grazia.it and news sites www.tg.com and www.sportmediaset.it.

The company closed the first nine months of the year with total sales of €165 million, a slight fall (-3.1%) compared with the €170.2 million of the same period of 2010. The difference was largely determined by a downturn in business for third party publishers.

DIRECT and RETAIL
In the first nine months of 2011 total revenues generated by the Direct and Retail area amounted to €182 million, a 3.8% increase on the €175.4 million of the same period of 2010 (for last year’s figures, Mondolibri S.p.A. was consolidated from 1 May 2010).

Direct
Business levels were affected by the negative economic climate and particularly by the fall in direct marketing activities by a number of operators in the large-scale retail sector, traditionally a substantial part of Cemit’s business: faced with a fall in revenues of over 20%, the company was nevertheless able to mitigate the impact on its results.

Retail
Total revenues from stores were in line with the same period of last year, thanks to new affiliations in the franchising network, which compensated for a fall in turnover at the company’s directly owned stores, the result of the closure of a number of significant locations in the centre of Rome and Turin.
The number of outlets in the network rose to 608 (compared with 570 at the end of September 2010).

Revenues generated by the franchise bookshop chain in the first nine months of 2011 rose by 12.8% compared with the same period of the previous year, thanks to new affiliations that increased the number of outlets to 499, compared with 463 in September 2010. On a like-for-like basis, revenues were in line with those of last year.

The directly owned shops saw a fall in turnover of 11.5% compared with the previous year, mainly due to the aforementioned closures. On a like-for-like basis, there was a 3.3% fall in sales.

RADIO
The Italian radio market to 30 September 2011 recorded an overall downturn of 5.5% on the previous year, with a more marked slide in the first half of the year (-8.4%), compensated by a clear recovery in the summer months (+11%), but followed by a decline in September (-6% – Source: FCP Assoradio).

Advertising sales for R101, which markedly outperformed the market, generated revenues in the first nine months of €11.7 million, a 14.7% increase on the €10.2 million of the same period of last year, with a more limited increase in the first half (+7.9%) and a more marked upswing in the last three months (+27%).

DIGITAL
Revenues in the first nine months of 2011 from direct activities amounted to €13.1 million, compared with €5.8 million in the same period of 2010, while the development of indirect digital activities, in the context of other business sectors (e-books, online book clubs, web sites, subscriptions and advertising), achieved a turnover of €19.9 million, up from the €16.4 million of the first nine months of last year. Overall, the Digital area Digital recorded total revenues of €33 million, compared with €22.2 million in the first nine months of 2010.

Among the direct activities, of note were:
– e-commerce, represented by the sale of books, editorial products and sundry goods by Bol.it, which saw a steady improvement (+50% year on year) in the number of monthly visitors (over 1 million users) and a growth in orders of 30% compared with the same period of 2010;
– the development of the applications and services for mobile phones area continued with the creation of apps that have reached the top of the iTunes best sellers list in their category. The last quarter also saw the launch of the first game for the iPad and iPhone produced by Mondadori;
– the Mondadori project for the development of a CRM (Customer Relationship Management) system, aimed at bringing together all of the Group’s various client databases is continuing in line with the forecasted plan;
– on 28 September, the company was awarded a public gaming licence by the AAMS which will enable Glaming, a company owned jointly by Arnoldo Mondadori Editore S.p.A. (70%) and Fun Gaming S.r.l. (30%), to progressively launch a series of online games by the end of November.

FORECAST FOR THE FULL YEAR
The third quarter of the year saw a sharp increase in concerns about the health of the economy, above all in the eurozone, and the resilience of the public finances of member states.
This, combined with consequent pressures on the credit system, has worsened an already difficult situation in manufacturing, consumer spending and investments; while also unemployment, especially among the young, has reached very high levels.

The markets of reference for Mondadori have not been exempt from the general economic crisis, even if the company has so far been able to deal with the situation by placing even more attention on product quality and process efficiency, also with a view to containing costs.

With regard to the prospects for the full year, we can only repeat, with even greater conviction, what we said after the first half report, about the difficulty of making any forecasts, even in the short term.
It should also be noted that the figures for October show a generalised worsening of market indicators; consequently, the evolution of markets in the closing months of the year will be fundamental in determining a level of operating profitability in line with last year.

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The interim report for the period to 30 September 2011, as approved by the board of directors, will be available from today at the company’s headquarters, Borsa italiana S.p.A. and on the corporate web site www.gruppomondadori.it (in the Investor Relations section).
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The executive responsible for the preparation of the company’s accounts, Carlo Maria Vismara, declares that, as per art. 2, 154 bis of the Single Finance Text, the accounting information contained in this release corresponds to that contained in the company’s formal accounts.