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

THE MARKET SCENARIO
The latter months of the period saw a confirmation of economic instability in Italy resulting from a further slowdown in industrial production and consumer spending, as well as an increase in unemployment.
With regard to the sectors of reference for the Mondadori Group:
– the book market in Italy was characterised by the absence of bestsellers but nevertheless remained essentially stable compared with the previous year;
– the economic crisis had a clear impact on magazine circulation which in the first six months, both in Italy and France, was down;
– a climate of great uncertainty in both countries; with marked volatility in the Italian advertising market, with some months going well and others less so, while in France the growth trend that had persisted for some time was interrupted in the month of May.

GROUP PERFORMANCE FOR THE PERIOD TO 30 JUNE 2011
The first half results of the Mondadori Group in particular show:
– a slight increase in revenues, thanks to the resilience of all the businesses and the contribution of the digital activities under development;
– an improvement in operating profitability, essentially due to the improved performance of the core business: profitability was up both for magazines and books thanks to sustained revenues and the positive effects of cost cutting measures;
– an acceleration in the development of digital activities, for the web sites of the main titles, applications, the development and loyalty building of communities, online book sales (both print and digital) and the launch of new businesses;
– a capital gain from the sale to the Hearst Group of the company’s 50% stake in the company that publishes Cosmopolitan.

Consolidated revenues came to €741.4 million, an increase of 2% on the €726.8 million for the first half of 2010. A substantial part of the increase in revenues (+€14.6 million) was the result of an increase in digital activities.

Consolidated gross operating profit amounted to €59 million, up by 8.1% on the €54.6 million of the corresponding period of last year: excluding extraordinary items and investments for digital activities, gross operating profit would have been up by 8.6% on the same period of 2010.

Consolidated operating profit came to €47.9 million, a rise of 11.9% on the €42.8 million to 30 June 2010, with amortizations and depreciations on tangible assets of €11.1 million (€11.8 million in 1H 2010).

Consolidated pre-tax profit amounted to €37.5 million, a 21.8% increase on the €30.8 million for the same period of last year, thanks to a reduction of tax charges resulting from efforts made in the last 12 months on the company’s debt structure.

Consolidated net profit came to €22.7 million, an increase of 50.3% compared with the €15.1 million for the same period of the previous year.

In the first six months of 2011 gross cash flow amounted to €33.8 million, compared with €26.9 million in 1H 2010.

The Group’s net financial position was essentially in line with the first half of last year (-€399.2 million on 30 June 2011 compared with -€393 million on 30 June 2010) despite the payment of €40.3 million in dividends for the 2010 financial year.

Information concerning personnel
On 30 June 2011 permanent and temporary contract staff employed by the companies of the Group amounted to 3,701, a reduction of 56 compared with the same period of last year.
On a like-for-like basis, excluding development activities, the reduction compared with the first half of 2010 would be 110. Of particular note:
– the consolidation of AME Wellness Editoriale S.r.l. (ex Mondadori Rodale S.r.l.) from 30 June 2011;
– the development of new activities in the digital area and the creation of Glaming S.r.l., as well as the activation, inside other companies of the Group, of seasonal activities in the educational publishing area and the management of museum sites.
The organisational impact of these elements, to which the efficiency gains made by Mondadori France should be added, show that rationalisation efforts and the use of early retirement incentives are proceeding in line with the company’s plans and the agreements reached.

Personnel costs to 30 June 2011 amounted to €137.7 million, compared with €134.3 million for the first half of 2010. On a comparable basis – i.e. excluding the staffing costs for the digital area and eliminating the contribution of Mondolibri S.p.A., consolidated for only two months of 2010 – the overall cost would be down by 1.3% compared with 30 June 2010. On a like-for-like basis, compared with the first half of 2009 there was a reduction of 8.7%.

THE BUSINESS AREAS
· BOOKS
Book revenues in the first half of 2011 amounted to €166.9 million, -0.6% on the €168 million of the same period of last year. This was the result in a fall in revenues from third-party distribution, with sales in the art, exhibitions and educational sectors essentially stable.

Trade book sales, the area’s main source of revenues. Were up by 1.6%, confirming the Mondadori Group’s leadership in the sector with a market share of 26.4% (source: Nielsen, first half).
Edizioni Mondadori recorded first half revenues of €60.1 million, an increase of 8.3% compared with the same period of 2010. The validity of the Mondadori offer was also confirmed by the titles that were nominated for the most prestigious Italian literary prizes, including Di Fama e di sventura by Federica Manzon, a finalist for the Campiello prize; Ternitti by Mario Desiati, short-listed for the Strega prize; and La fine del mondo storto by Mauro Corona winner of the Bancarella prize.
In Italian fiction, there was continued success for Nessuno si salva da solo by Margaret Mazzantini which has sold some 300,000 copies in the last three months. In foreign fiction the outstanding titles in the period have been Le luci di settembre by Carlos Ruiz Zafón (190,000 copies) and Autopsia virtuale, the new thriller by Patricia Cornwell (135,000 copies).
The launch in March of the new brand NumeriPrimi°, an imprint offering quality paperbacks, resulted in sales of over a million copies in just four months.
Among the Group’s other publishing houses, of particular note was the performance of Einaudi that ended the first half with revenues of €25.7 million, an increase of 8%.

In the digital market, since the beginning of the year the Group has published 2,300 trade e-book titles at the same time as the printed versions (600 more than in the first half of 2010), including a variety of products published as applications.

There are also high expectations for the editorial programme for the second half with the publication of new titles by Fabio Volo, John Grisham, Sophie Kinsella and Alessandro D’Avenia.

· MAGAZINES ITALY
In a market that in the first six months showed none of the expected signs of recovery in the Italian and international publishing sector, the revenues of Mondadori’s Magazine Italy area amounted to €247.8 million, essentially in line (-0.9%) with the €250 million of the same period of 2010.

This result is largely attributable to the fall in circulation revenues (-4.3%), while advertising was up by 1.8%, in a market that recorded a fall of 1.4%, sustained by the good performance of Mondadori titles (+0.5%), strong efforts by the sales network and numerous and innovative initiatives. On the internet front, there was an excellent performance in sales by the non-consolidated arm Mediamond (+30%).

In terms of circulation, Mondadori titles performed better than the market, which lost 5.6% in copies – despite the progressive decline in subscription copies (-14%), following the big increase in postal charges. Revenues for add-on sales in the period were stable.

Over the coming months the programme of re-launches of certain titles in the portfolio will continue, taking the total number to 10 during the year, following the launch of Panorama Icon, the re-design of Donna Moderna Panoramauto, Casaviva and Ciak, in the first half of 2011.

During the period, the web sites of Mondadori titles saw an increase in revenues of 18%, in particular Donnamoderna.com (+30%), which was re-launched with a new version in May, Panorama.it (+57%) and Grazia.it (+22%), completely renovated in April.
In terms of traffic, Donnamoderna.com recorded an excellent performance with 70 million page views (+80% on the first half of 2010) and 4 million unique users (+35% compared with the same period of last year).

· MAGAZINES FRANCE
The revenues of Mondadori France in the first half of 2011 amounted to €172.4 million, an increase of 2.4% on the €168.4 million for the same period of the previous year.

On the advertising side, Mondadori France recorded growth of 4.7% compared with the same period of last year, in a market that was up by 2.5% (source: Kantar Media, in terms of value).
This result is large attributable to the performance of Grazia, which saw advertising revenues grow by 53%, and the positive performance of the titles in the “Sciences” area.
In particular Grazia, with an average circulation of 180,000 copies in the period, confirmed its position as the most successful weekly in its segment and in second place in terms of the total number of advertising pages in the entire French market.
In fact, upscale women’s titles now account for 32.9% of the company’s total advertising revenues, up from 26% in the first half of 2010.

In terms of circulation revenues (69% of the total), Mondadori France recorded growth of 2.1% thanks to the focus on a portfolio of mass-circulation titles and constant attention to product quality and innovation. Of not during the period was the launch of the pocket version of Grazia and the growth, compared with the first half of 2010, of women’s titles, in particular Top Santé (+10.2%), Biba (+8.8%) Modes & Travaux (+7.3%), as well as Science & Vie (+2.9%).

International activities
Thanks to a recovery in the advertising market, in the first half of 2011 the positive trend first recorded in the first quarter continued, resulting in an increase of 45% in licensing revenues.
Compared with the first quarter, there was a confirmation of the performance of all editions, especially weeklies, that drive the revenues from advertising services for Italian clients for all the titles in the network.
In June, a new edition of Casaviva was launched in Ukraine, while in the second half a new edition of Interni will be published in Russia.
There was also a marked improvement in the contribution of the joint ventures in Russia and China compared with last year, and significantly better than the forecast, in particular as a result of a hike in advertising sales.
The Attica subsidiary continued to feel the impact of the ongoing financial crisis in Greece and saw its advertising revenues fall by 25% in Greece and 15% in the Balkans. Serbia meanwhile bucked the trend, with an increase of 8%. Thanks to the restructuring of the company, the detailed re-negotiation of all supply contracts and the excellent performance of the Group’s two radio stations, the final result was in line with last year.

· ADVERTISING
Total advertising investments in the first half of 2011 were affected by a slowdown of 2.8% in the first five months of the year (source: Nielsen, May).
This is mainly due to a decline in two fundamental sectors, food and telecoms, which were both down by 9.4%. There was substantial growth in the internet (+15.6%); a slight improvement compared with recent months for TV (-2.3%) and magazines (-1.4%), while newspapers continued to fall (-4%) and radio saw a sudden and marked slump (-8.4%).

Mondadori Pubblicità ended the first six months with total revenues of €117.5 million, a slight fall (-2%) compared with the €119.9 million of the first half of 2010; this result was due to the positive performance of sale fro Mondadori titles (+0.5%) and R101, while sales for third-party publishers were in decline.
Regarding the performance in the Mondadori area:
– there was a slight increase for weeklies compared with the first half of 2010, thanks to the positive performance of Grazia, Tu Style and Donna Moderna; and a slight fall for monthlies (-1.4%), despite a good performance in the interiors/furniture sector;
– despite the difficult market, R101 recorded a positive performance following the reorganisation of the network, with an increase in sales of 2.7% in May and 6.9% in June;
– in the internet, where sales are managed by the joint venture Mediamond, there was significant growth in the first half, thanks to the positive performance of Mondadori’s women’s portals and the news area of Mediaset with Tg.com and Sportmediaset.it. There was alos an expansion of the area with the acquisition of advertising sales contracts for Meteo.it and Giornale.it.

· DIRECT and RETAIL
Total first half 2011 revenues in the Direct and Retail areas came to €123.1 million, an increase of 13% on the €108.9 million in the first half of last year, thanks to the contribution of Mondolibri, consolidated in May 2010, and the performance of the franchise network.

Revenues from the Direct area, which include the activities of Cemit Interactive Media and the mail order sales of Mondolibri, saw growth of more than 26%, also due to the change in the area of consolidation.

In Retail, in the first half of the year the Mondadori chain of stores saw sales rise by 6.8% compared with the same period of the previous year, thanks to the contribution of the Mondolibri outlets (€10.5 million in 1H 2011, compared with €1.9 million in the two months of 2010) and new affiliations in the Mondadori Franchising network (+8% compared with the same period of 2010) which offset the fall in revenues from Mondadori Retail’s own stores, due to the closure of two shops in Rome, as already announced, in the second half of 2010.

· RADIO
As mentioned, there was a sharp downturn in revenues in the radio market in the first five months of 2011 (-8.4%), and a fall of 12% in the last three months (source: FCP Assoradio).
In this difficult context, the performance of R101 clearly bucked the trend, with net revenues of €8.2 million, an increase of 7.9% on the €7.6 million from the same period of last year.

This result was due to the excellent performance, following the reorganisation of the sales network and the alignment of the share of radio by the advertising sales company compared with the Group’s other businesses, made possible by a reduction in the cost of advertising sales for the radio itself.

· DIGITAL
In the first half of 2011 the Digital area of the Mondadori Group generated from direct activities total revenues of €8.8 million, while the development of indirect digital activities for other business sectors (e-books, online book clubs, internet sites, subscriptions and digital advertising) generated revenues of €14.2 million; consequently, the new Digital area generated a total of €23 million, compared with €13 million in the first six months of 2010, despite the delay in the launch of gaming activities.

Of particular not among such activities were:
– www.bol.it, which had 900,000 unique users, up by 70% compared with the same period of last year and 17% compared with the month of May 2011, and the web site www.easyshop.it, with more than 100,000 unique users;
– applications and services for mobile phones, that continue to make an important contribution to revenue and margin growth. In the apps area, after the launch of Virtual History Roma, a series of other cultural apps were developed (The Last Supper and others in collaboration with the Books area including Diabolik and Alexandros) and news (Epoca/il Papa Santo, La Patria bene o male).
With regard to Value Added Services, there was an increase in revenues of over 10% compared with 2010, thanks to the expansion of the offer and services launched with the leading telecoms operators;
– the CRM project, which aims to aggregate the Group’s various customer databases with a view to making increasingly targeted offers to customers, is in line with the programme which will enable the company to make its first moves and to develop an adequate process of innovation in the area of customer relations during the last quarter of 2011;
– during the second quarter the company also created Glaming, a company owned 70% by Arnoldo Mondadori Editore SpA and 30% by Fun Gaming, for the management of distance public gaming (an activity that is regulated by a government authority, in Italy the Amministrazione Autonoma dei Monopoli di Stato, or AAMS). Mondadori, which at the end of June was included in a provisional list of applicants, expects to be awarded a licence in July and to begin activities by the end of the year.

FORECAST FOR THE FULL YEAR
In terms of economic growth and employment, the situation in Italy, and more generally in Europe, shows little sign of improvement. There have recently been great concerns about public finances in the whole of the Eurozone, with inevitable effects on social security and fiscal policies and, as a result, on savings and household expenditure.
The climate of great socio-economic uncertainty has also had a direct impact on investments.

Given the prevailing context, with reference markets in decline, the Mondadori Group’s results for the first half of 2011 are particularly significant; where resilience in the core business and the ongoing attention to cost reductions have enabled the company to record an improved level of operating profit for the sixth consecutive quarter.

Over the coming months the commitment to the more traditional businesses will be accompanied by a greater commitment to the digital sector, with the acceleration of the offer of products and digital services and the building of customer loyalty related to the Group’s brands and communities.

Conditioned by exogenous and transnational factors, it has never been more difficult than now to make forecasts about growth.
But in spite of all these considerations, the determined and focused management of the core business and the development of new opportunities is expected to enable the Mondadori Group, in the absence of unexpected phenomena, to record an improvement in profitability also for the full year, despite ongoing investments for the development of its new digital activities.

§

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 2011, as presented by the Group’s Deputy Chairman and Chief Executive, Maurizio Costa.

The market scenario
At the macro-economic level, there were no particular signs in the first three months of 2011 of a change in the underlying trends seen in the closing months of last year. Production gains were modest, there was still no real signs of a recovery in consumer spending and unemployment levels remained high.

GROUP PERFORAMCE IN THE FIRST QUARTER OF 2011
In this market context, the Mondadori Group produced results that were up on the figures for the first quarter of last year, with an increase in revenues of 3.2%, thanks to business performances that were generally above the respective markets of reference, as well as the consolidation of Mondolibri.
In terms of profitability, there was a 2.8% increase in gross operating profit, achieved despite increase investments for the development of the international magazine network and in new digital activities. A significant contribution was also made in the period by the plan for the reduction of operating costs, which, three quarters ahead of schedule, has already reach its target saving of €170 million, on a like-for-like basis, for the three-year period 2009-2011.

Consolidated revenues in the first quarter of 2011 amounted to €355.6 million, a rise of 3.2% on the €344.7 million of the first three months of 2010.

Consolidated gross operating profit came to €21.8 million, an increase of 2.8% on the €21.2 million of the previous year, despite, as indicated, increased investments for development.

Consolidated operating profit amounted to €16.3 million, up by 3.8% on the €15.7 million of the first quarter of 2010, in both quarters amortizations and depreciations of tangible and intangible assets amounted to €5.5 million.

Consolidated profit before taxation came to €10.9 million, a 26.7% rise on the €8.6 million of Q1 2010, thanks to a reduction in financial charges resulting form a lower cost of money following the debt restructuring completed at the end of 2010, and a lower level of average indebtedness.

Consolidated net profit came to €5 million, more than double the €2.4 million of the same period of the previous year.

Gross cash flow in the first three months amounted to €10.5 million, compared with €7.9 million in 2010.

The Group’s net financial position at 31 March 2011 stood at -€320.7 million, compared with -€342.4 million at the end of 2010, an improvement over the quarter of €21.7 million.
In the period from March 2008 to March 2011, the total reductions has been of around €250 million.

Information regarding personnel
As of 31 March 2011, the personnel employed by companies of the Group (both on temporary and permanent contracts) amounted to 3,674, compared with 3,852 in March 2010 (3,649 in December 2010).

The trend in workforce numbers clearly shows the results achieved over the last 12 months following the completion of most of the restructuring plan launched in 2010 which has resulted, as of today and also considering the consolidation of Mondolibri last year, an overall reduction in the headcount of 178 (or 4.6% of the total workforce).
Compared with 31.12.2010 the change in the headcount (+0.6%) is the result, on the one hand, of reductions deriving from the reorganisation and restructuring of traditional businesses, which is still ongoing, and, on the other, an increase for the Group’s development in the web and digital areas.

In France a reorganisation plan for TV guides was recently presented that will result in a reduction of the headcount of 37, a response to the sharp fall in revenues from this sector.
In Italy, meanwhile, it should be noted that the figures presented in the report do not include the effects of the renewal of national labour contracts in the publishing and trade and services sectors. The former is still being negotiated and the latter was redefined at the beginning of April.

RESULTS OF THE BUSINESS AREAS
· BOOKS
Revenues in the Books area in the first quarter amounted to €78 million, compared with €79.8 million in the same period of last year (-2.3%).
Trade books revenues, the area’s main revenue stream (accounting for around 78% of the total), grew by 0.5%. While total revenues were affected by shortfalls in the art and exhibitions segments (-16.9%) and distribution for third-party publishers (-9%), the education area was stable.

Of note during the period was the launch of “Numeri Primi”, a new brand in the quality paperback segment, the first 13 titles of which recorded sales of almost 800,000 copies through the bookshop and large-scale retail channels.
In the still embryonic ebook market, Mondadori expanded its offer with a catalogue that, as of 30 March 2011, included around 1,700 titles (compared with 1,500 at the end of 2010).

Nielsen figures for the first three months of 2011 confirm the Group’s leadership in the Trade books segment, with a market share of around 26.1%. Compared with 2010, the single publishing houses d Edizioni Mondadori, Sperling & Kupfer and Piemme were slightly down, while Einaudi grew.

· MAGAZINES ITALY
In the first quarter of the year Magazines Italy generated revenues of €122 million, a slight fall (-1.1%) compared with the €123.4 million of the first quarter of 2010.
The trend in revenues was the combined result of a fall in circulation (-5.8%) and an increase in advertising (+4.8%), supported, as well as by the efforts of the sales network and numerous new initiatives, also by an excellent performance by the international network and sales in the digital area. Meanwhile, revenues from add-ons were stable compared with the first quarter of 2010, with an improvement in margins.

Regarding circulation, Mondadori performed better than its market of reference performance (-7.5% to February, internal figures), containing the fall in the first quarter at 6.4% in terms of volume, mainly the result of the reduction of promotional copies and the planned downsizing of the subscription channel (-11%), which was begun last year to counteract significant increase in postal charges.
Among the most significant features of the first quarter were the relaunch of Casaviva and the redesign of Ciak.

Regarding the web sites of Mondadori titles, advertising sales in the first quarter increased by more than 20% compared with the same period of 2010: particularly encouraging was www.donnamoderna.com; while also www.grazia.it and www.panorama.it performed well.
Online metrics for the titles were also very positive during the period, with donnamoderna.com and the sites of its network once again standing out with an increase in unique visitors of more than 26% (around 4 million), while there was a 25% increase in page views (around 52 million) and a 57% jump in the unique visitors for the new Grazia site.

· MAGAZINES FRANCE
Mondadori France ended the first quarter of 2011 with revenues of €82.6 million, an increase of 1.9% on the €81.1 million of the corresponding period of 2010.

The advertising market for French consumer magazines showed a volume increase in the first quarter of 2011 of 4% (Source: Kantar Media): in the same period Mondadori France recorded an excellent performance with an increase of 13% in terms of volume, raising its market share by 0.8%.

In terms of value, the advertising sales of Mondadori France saw a sharp upturn compared with the same period of the previous year (+10.2%).
This excellent result was due – in addition to the generally favourable performance of women’s “haut de gamme” titles in the portfolio, which account for 32.5% of total advertising revenues (24.6% in the first quarter of 2010) – also to a significant increase in advertising in Grazia (+68%), which with 539 pages in the first quarter is now in second place in the consumer magazine market. Also performing well in the period were Sciences, Closer and l’Ami des Jardins.

Circulation revenues, which combine newsstand sales and subscriptions, make up 71% of the total and were essentially stable at the consolidated level (+0.5%): this performance is even more positive if account is taken of the ongoing decline in the market of reference.
During the first quarter Mondadori France launched three new formulas for Science & Vie, Auto Plus and Le Film Français and a new quarterly, Guerre & Histoire. Since the end of March Grazia has also been available in a pocket-sized version at a price of €1.50, while the price of the traditional format has risen to €1.70.

International activities
In the first quarter of 2011 a recovery in the advertising market in the countries of the Group’s international network led to an increase of over 50% in licensing revenues.
The positive performance of all editions, in particular of weeklies, also helped to drive revenues from advertising sales to Italian clients for all of the titles. There was also further growth in the number of Mondadori Group editions published under licence and June will see the publication of Casaviva Ukraine; while in October, the Russian edition of Interni will be published with a new partner, Artcom Media.
There was also a decided improvement compared with last year in the results of the 50-50 joint ventures in Russia and China, thanks to a marked increase in advertising sales, while the Attica subsidiary continued in the period to be affected by the ongoing financial crisis that has resulted in a marked downturn in advertising revenues.

· ADVERTISING
Indications in Italy in the first quarter of 2001 show a slight fall in advertising investments (Nielsen figures on total ad spending show a fall of 2%). In particular, the biggest slide came, somewhat unexpectedly, from newspapers (-8.7%), which had a negative knock-on effect on magazines (-4.3%), which felt the impact of a slump in specialised titles.
Also of note was the essential stability of radio and TV, the latter showing a slight decline (-0.5%), while in the first months of the year the internet was the only medium that showed a significantly different trend (+15.5%).

Mondadori Pubblicità ended the first quarter with total revenues of €49.5 million, a slight improvement (+0.2%) on the €49.4 million of Q1 2010.
For magazines, the titles published by Mondadori saw an increase of 3%, attributable mainly to weeklies (+5.6%), in particular positive performances by Grazia (+18%), Donna Moderna (+4%), Tu Style (+46.4%) and Panorama (including supplements: +3.2%).
Among the monthlies, which in general continued to suffer in the early months of the year, there was however an excellent performance by Starbene (+23.4%) while also Flair (+4.7%) performed well.
Gross advertising revenues for R101 were in line with Q1 2010.

· DIGITAL
As is well known, at the end of 2010 the company created a business area for Digital, focused on the development of a range of activities in the area of new technology. From this quarter account will also be given in business and economic terms of a digital segment which, as a result of the matrix organisation adopted by the Mondadori Group at the beginning of 2011, also operates in support of other business units.
Consequently, while the digital segment records the performance of directly managed activities (a total of €4.4 million in the period), such as e-commerce (bol.it and easyshop.it), gaming, applications and CRM, other activities (e-books, online book clubs, web sites, subscriptions and digital advertising) are booked to the Magazines Italy and Books business areas (for a further €7.6 million), for a total of €12 million.
Direct revenues generated by the Digital area are largely from the www.bol.it site which recorded excellent results, also in terms of traffic, compared with the first quarter of 2010, with 835,000 unique visitors (+14%) and more than 6.3 million page views; the remainder of revenues derive from services and applications linked to mobile phones and services for the management of internet sites.
In addition, from the second half of the year, it is expected that a contribution will be made by the e-commerce activities of the website www.easyshop.it – with which, at the end of March, Mondadori began sales of products from leading brands in fashion, furniture, design and technology – and online games, for which the company has applied for a government licence.
Another important activity in the digital area is the elaboration and implementation of an adequate system of customer relationship management (CRM), aimed at sharing the Group’s client databases in such a ways as to make them even more exploitable.

· DIRECT and RETAIL
Total revenues generated by the Direct and Retail area in the first quarter of 2011 amounted to €61.5 million, an increase of 24.2% on the €49.5 million to 30 March 2011, also as a result of the consolidation of Mondolibri SpA from May 2010, net of which there would have been a fall, mainly due to the closure of two shops in the second half of last year.
In the network of sales outlets there was a further expansion in the number of franchise outlets, which now total 487, recording an increase in sales of around 5%. The Multicenter channel saw agreements reached with leading producers for the development of the so-called corner shop (in-store concessions).
It should also be noted that the board of directors of Mondadori Retail, Mondadori Franchising and Mondolibri approved a project to merge the companies that will, from 1 July 2011, trade under one name with the aim of pursuing greater management efficiency and facilitating the development of internal synergies.

· RADIO
R101 generated net revenues of €3.3 million (€3.1 million in Q1 2010) on gross advertising revenues of €4.4 million, in line with the previous year.
The radio market in the first quarter of 2011 saw a fall in revenues of 5% compared with the same period of the previous year (Source: FCP Assoradio).
On the ratings front, the publication of national Audiradio figures remains suspended.

EXPECTATIONS FOR THE FULL YEAR
The first three months of the year provided no clear signals of any possible short-term changes in the general economic scenario or in the markets of reference for the Mondadori Group, where there continues to be a generalised decline in business volumes.
Mondadori has, nevertheless, and for the fifth consecutive quarter, presented improved results, thanks to the close attention paid to product quality, the defence of the brands and the ongoing optimisation of the operational structure.
To all of this, the Mondadori Group has added an growing commitment to the development of its digital activities, with a view to exploiting the potential of its product portfolio and communities and to respond to new demands from consumers, also deriving from technological changes.
Assuming no particular or unexpected changes in the markets of reference, over the coming quarters Mondadori expects to confirm the improvements recorded from the beginning of 2010, which will allow the Group to maintain levels of operating profitability, despite continued investments for the development of new digital activities.

§

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 2011 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

Also available from today, at the company’s corporate headquarters, Borsa Italiana SpA and on the web site www.gruppomondadori.it (Corporate section), will be the minutes of the Ordinary and Extraordinary Meeting of the Shareholders held on 21 April 2011.

The Board of Directors of Arnoldo Mondadori S.p.A. met today, under the Chairmanship of Marina Berlusconi, to examine and approve the consolidated balance sheet and management report for the year to 31st December 2010 as presented by the Group’s Deputy Chairman and Chief Executive, Maurizio Costa.

GROUP PERFORMANCE FOR THE YEAR ENDED 31 DECEMBER 2010

In terms of profitability, 2010 showed a substantial improvement on the previous year. In addition to an increase in revenues, all of the objectives for the year relating to reorganisation and the reduction of staff and operating costs were achieved.
In particular, the personnel rationalisation plan and reorganisation activities led to a reduction of 347 people in 2010, taking to around 700 the number for the three-year period (excluding the effects of the sale of the Printing division and the consolidation of Mondolibri). Further improvements are foreseen during 2011.
There was also a reduction in personnel costs for the year of 10.3%.
The year also saw the attainment of 93% of the plan to contain operating costs, which foresaw a saving of €170 million for the three-year period 2009/2011.

Consolidated revenues came to €1,558.3 million, an increase of 1.2% on the €1,540.1 million of 2009.

Consolidated gross operating profit totalled €140.2 million, up 32% from the €106.2 million of the previous year. While benefitting from lower restructuring costs than in 2009, this item was negatively impacted, for an analogous amount, by higher postal charges and, above all, by extraordinary charges from writedowns and the results of joint ventures in countries severely affected by the recession.
As a proportion of revenues, this represented a rise from 6.9% in 2009 to 9%.

Consolidated operating profit came to €114.2 million, a jump of 59.1% compared with the €71.8 million of 2009, with amortizations and depreciations on tangible assets of €26 million (€34.4 million in 2009).
As a proportion of revenues, this represented a rise from 4.7% in 2009 to 7.3%.

Consolidated pre-tax profit came to €90.3 million, an increase of 41.3% on the €63.9 million of 2009, with higher financial charges of €16 million due largely to a capital gain in 2009 of €14.5 million following the closure of a private placement and related derivatives.

Consolidated net profit amounted to €42.1 million, a 22.7% increase on the €34.3 million of the previous year: the result was affected by the payment of €8.7 million in line with new norms regarding the definition of pending tax litigation.

Consolidated net profit for 2010, adjusted to take account of the aforementioned extraordinary item (tax charges for previous years) would amount to €50.8 million, more than double the €23.8 million net profit recorded in 2009, adjusted for capital gains.

With regard to the company’s assets, net assets as of 31 December 2010 amounted to €581 million, compared with €546.3 million at the end of 2009.
The Group’s net financial position went from -€372.9 million at the end of 2009 to -€342.4 million on 31.12.2010, an improvement of €30.5 million.
During the period 2008-2010, the level of indebtedness has been reduced by around € 200 million.

Information concerning personnel
On 31 December 2010 permanent and temporary contract staff employed by the companies of the Group amounted to 3,649.
An analysis of this figure, compared with the figure on 31.12.2009 and excluding the effects of the consolidation in April of Mondolibri (246 employees last year), clearly shows the benefits of the cost containment actions carried out.
As already indicated, there was total reduction of staff in 2010 of 347, which corresponds to 8.7% of the whole, when account is also taken of the reduction during the period at Mondolibri. Of this figure, 80% is related to the realisation of programmed reductions for the year foreseen by the restructuring plan and involving the Italian companies Arnoldo Mondadori Editore S.p.A. and Mondadori Pubblicità S.p.A., as well as the foreign subsidiary Mondadori France SA.
Significant rationalisation efforts have also involved the Direct area where, following reorganisation and a strategic review of sales outlets, a reduction of 7% in headcount was achieved.

THE BUSINESS AREAS
· BOOKS
Total revenues generated by the Books area to 31 December 2010 amounted to €413.9 million, a slight fall (-2.2%) on the €423.1 million of 2009, with the second half of the year showing an improvement compared with the same period of the previous year.

Also in 2010 the Group confirmed its leadership in the sector with a market share of 27.1% and a high level editorial offer. Special note during 2010 were the prestigious successes of the novel Canale Mussolini by Antonio Pennacchi, winner of the Premio Strega 2010, and runner-up also in the Premio Campiello 2010; and Accabadora by Michela Murgia, winner of the Premio Campiello. Also of note was the award of the Nobel Prize for Literature to Mario Vargas Llosa.
The fall in revenues recorded by the school textbooks sector is the result of recently introduced educational reforms.
Operating profit was affected by losses suffered by the Random House Mondadori joint venture in markets severely affected by the international financial crisis. Adjusted to take account of non-recurring items, operating profit for 2010 was in line with that of the previous year.
October saw the launch of e-book sales, with a catalogue that by the end of the year had reached a total of 1,500 titles, available from the principal Italian e-commerce stores, including Bol.it. Prices are, on average, 40% lower than print editions for new titles and 25% lower for backlist titles. The biggest selling titles were La caduta dei giganti by Ken Follett, Io e te by Niccolò Ammaniti and La solitudine dei numeri primi by Paolo Giordano.

· MAGAZINES ITALY
The Italian consumer magazine market in 2010 was again characterised by the recessionary trend that has affected the world’s leading economies since the second half of 2008, with a decline in circulation, advertising investments and add-on sales.
The actions which have allowed Mondadori to successfully contrast this still problematic scenario – with a performance above that of the reference market – can be identified along tow distinct lines: the first aimed at exploiting the benefits of the multi-year reorganisation plan, and the second focused on sustaining the development of the product portfolio.

Magazine revenues in Italy in 2010 amounted to €471.4 million, a fall of 4.1% on the €491.8 million of the previous year.

After the marked slump in 2009, this result was achieved, in particular with regard to Mondadori titles, the main component of the area’s business, by a series of phenomena:

• a 4% fall in circulation revenues, in line with the market of reference and the consequent maintenance of leadership and market share (34.2%);
• a fall of 8.7% in revenues from add-on sales, a markedly better performance than the market as a whole (-23.6%, in terms of value);
• a moderate slide in advertising revenues (-1.9%), which was better than the market (-5.4%, Source: Nielsen, in terms of value) and decidedly more resistant than the most qualified competitors in the magazine market;
• the particularly positive overall turnover of the Magazines area was the result of a good performance by weeklies. Meanwhile, with some significant exceptions for products involved in specific re-launches, the performance of monthlies was markedly weaker.

· DIGITAL
With the overall advertising market in 2010 showing growth (+3.8%, Source: Nielsen) compared with 2009, a very difficult year for advertising, the most dynamic medium in the year was the Internet, which grew by 20.1%.
Mondadori web sites, for which advertising is sold by Mediamond, saw a 40% increase in gross revenues, above all thanks to the performance of sites for women, in first place Donnamoderna.com, followed by Graziamagazine.it.

· ADVERTISING
The Italian advertising market ended 2010 with total growth of 3.8%, confirming the progressive improvement – compared with 2009, a particularly bad year for advertising (Nielsen -13.4%) – in line with the positive signals that were first seen in the middle of the year, above all for certain media.
Mondadori Pubblicità closed the year with revenues of €233.9 million, a fall of 6.6% on the €250.4 million of 2009. On a comparable basis in terms of media, the fall was of just 1.9%.
Among the changes that characterised the year was the interruption of sales for il Giornale from November 2009, for the internet (passed to Mediamond) and the addition to the portfolio of Radio Kiss Kiss.

In magazines, after a positive final quarter, the titles published by Mondadori ended 2010 essentially in line (-0.8%), on a like-for-like basis, with the previous year, and distinguishing themselves, in a competitive context particularly affected by uncertain forecasts and a high level of volatility in advertising investments. There was a positive performance by weeklies (+1%), which benefitted from the strength of the entire women’s segment.
With regard to radio, where there was overall growth of 16.5%, R101 sales were up (+5.1%) and sales for Radio Kiss Kiss, which began in March, were also positive.

· MAGAZINES FRANCE
Revenues generated in 2010 by Magazines in France amounted to €344.2 million, an increase of 0.2% on the €343.5 million of 2009 (+6.2% net of titles sold and the effect of the launch of Grazia).
In a magazine market in which there was a healthy recovery in advertising pages and a slight fall in circulation, the results of Mondadori France demonstrate the wisdom of focusing on the portfolio of high-circulation titles and the success of the launch of Grazia, with figures clearly better than the market.
Mondadori France recorded a increase in circulation volumes of 1.7% (Diffusion France Payée), compared with a – 2.1% by competitors.
Circulation revenues (69% of the total) – which include both newsstand sales and subscriptions – were down by 1.3% at the consolidated level.
Excluding the titles sold or closed, there was an increase of 3.9%, mainly due to the positive sales of Grazia (51 issues compared with 18 in 2009) and a marked growth in subscription revenues, which, being less exposed to economic cycles, constitute an important asset (32.5% of magazine revenues in the period).

With regard to advertising, there was an 8% increase in consolidated revenues compared with the previous year. If the titles sold or closed are excluded, the increase was of 19.1%. These excellent results are above all due to a marked increase in advertising revenues for the Mondadori France “haut de gamme” women’s titles, which now account for 27% of total advertising sales (13% in 2009).
Volume sales in the magazine advertising market in France in 2010 was up by 9.5% (Source: Kantar Media). In the same period Mondadori France recorded an excellent performance (+24.9% in terms of volume), increasing its market share by 1.2%.

· INTERNATIONAL ACTIVITIES
In the period to 31 December 2010 the international activities of Mondadori Magazines generated total revenues of €142 million.
The 50-50 joint ventures in Russia and China performed decidedly better than the previous year and budget expectations, in particular with regard to advertising sales.
The Attica subsidiary was affected by the financial crisis in Greece and the Balkans, with a reduction in advertising revenues of around 27% (-21% on a like-for-like basis). Decisive ongoing efforts to reduce costs had a big impact on containing the loss of revenues in 2010 and are aimed at further contributing to re-balancing the results of 2011.
Other figures for the period show that licensing revenues were up by 36.4%, thanks to the positive performance of Grazia UK and Grazia Holland, as well as the German and French editions of the title, that had still to be launched in the first part of the previous year.
There was also an increase in revenues from advertising services in Italy for the network, both thanks to the new editions and the positive performance of existing titles (Grazia UK +14%, Grazia Russia +67%).

· DIRECT & RETAIL
Total revenues generated by Direct and Retail at year-end came to €279.7 million, an increase of 30.2% compared with the €214.8 million of 2009, also thanks to the consolidation of Mondolibri S.p.A. from April 2010.
On a like-for-like basis, the increase would be of 6.5%, mainly thanks to new affiliations in the franchising network.

Direct
There was a slight recovery in the market for direct communications in 2010 was characterised and, in this context, Cemit Interactive Media S.p.A. identified both new clients and new operations that resulted in a 14.3% increase in revenues compared with 2009, while also maintaining high value added activities.
In the e-commerce (Bol.it) area, the company recorded strong growth (+28%) compared with the previous year. This increase, the highest in the sector among the relevant operators in the book sector, was achieved also thanks to improvements in customer service and the adoption of a more aggressive commercial policy.

Retail
During 2010 the expansion of the network in Italy continued, resulting in the generation of combined revenues of around € 202.7 million. By normalising franchising revenues (i.e. converting them from the disposal value to the retail price), the total reaches around €250 million and gives the area in a highly significant position in Italian bookselling and a predominant position in terms of the number of outlets (with a combined total of 517 outlets under the Edicolè, Librerie Mondadori, Gulliver and Mondadori Multicenter fascia).

· RADIO
In 2010 the radio market saw revenues increase by 7.7% compared with the previous year, once again making it one of the best performing media.
The trend was markedly different between the first (+14.7% compared with 2009) and second halves of the year, which while remaining positive, was markedly less so, (+0.8%; Source: FCP Assoradio).

Advertising sales for R101 generated net revenues of €14.5 million, an increase of 5.1% on the €13.8 million of 2009. Such revenues are essentially the company’s share of total gross advertising sales of around €20.5 million.
There was also a big difference in the sales for R101 between the first and second halves of the year, due to a lower number of special initiatives and a performance that was decidedly better than the market average in the latter part of the year.
With regard to ratings, publication of the Audiradio national figures has been suspended: the last published figures refer to the first quarter of 2010 where R101 notched up a daily average of 2.5 million listeners and around 7 million over 21 days).

RESULTS OF THE PARENT COMPANY ARNOLDO MONDADORI EDITORE S.P.A.
The Annual Report of the parent company, Arnoldo Mondadori Editore SpA, for the year to 31 December 2010, shows a net profit of €51.7 million (€53.2 million on 31 December 2009), while gross operating profit came to €68.1 million (€42.3 million in 2009).
The improvement in the latter was due to the positive performance recorded by the Magazines area and the effects of staff reductions resulting from the implementation of the restructuring plan introduced in 2009.
The net profit figure was impacted by the payment of extraordinary tax charges of €8.7 million, resulting from new norms for the definition of pending tax litigation introduced by law N° 73 of 22 May 2010. This operation is related to an ongoing dispute with the Milan tax office regarding the year 1991.

DIVIDEND PROPOSAL
The Board of Directors agreed to propose to the Annual General Meeting of the Shareholders, called Thursday 21 April 2010 (or Friday 22 April on second calling), the distribution of a gross dividend of €0.17 per for each ordinary share (net of treasury stock) in circulation on the ex-dividend date.
In line with the dispositions of the “Regulations for organised markets managed by Borsa Italiana SpA” dividends will be paid as follows: coupon detachment 23 May 2011, payable from 26 May 2011.

FORECAST FOR THE FULL YEAR
With the absence of any changes in the trend and with no improvements in the forecasts, figures for consumer spending in the markets of relevance to the Mondadori Group for the first two months of 2011 do not show any significant signs of improvement in the short term or for the year as a whole.

Regarding the main areas of business:
– in Magazines, some slight signs of a recovery in advertising allow for reasonable optimism in terms of a recovery in revenues, thanks to the strength of the portfolio of titles both in Italy and in France and the ongoing commitment to the quality of the offer;
– the trade books area may be able to count on an important editorial programme, while Mondadori’s commitment to the development of e-books will continue to be strong;
– over the whole year, the maximum focus will be on digital activities, both in terms of the interaction with all of the other activities of the Group and in the development of new businesses, also linked to editorial content, the brands and the Mondadori communities.

Over the year, the reorganisation plan will continue, along with ongoing efforts to contain operating costs which have so far allowed the Group to recover profitability, also in extremely difficult trading conditions.

As a result of the above, Mondadori could improve both revenues and operating profitability in 2011, with a determined commitment to the development of digital activities. Caution is, however, necessary in a period of such economic instability, heightened, as it is, by international tensions that could have a negative impact on the already weak recovery underway.

PROPOSAL TO CANCEL PART OF THE TREASURY STOCK HELD AND CORRESPONDING TO 5% OF THE SHARE CAPITAL
Arnoldo Mondadori Editore S.p.A. directly holds 17,850,101 company shares, equivalent to 6.88% of the share capital and acquired at an average price of around €6.1697 per share. With an additional 4,517,486 Mondadori shares held by the subsidiary Mondadori International S.p.A., the total number of shares held, directly or indirectly, amounts to 22,367,587, or 8.62% of the share capital.

The board of directors will propose to an extraordinary meeting of the Shareholders the cancellation of 12,971,492 shares, with a nominal value of €0.26 per share, and corresponding to 5% of the share capital, while keeping in the portfolio, also to service stock option plans, 4,878,610 shares, in addition to the 4,517,486 held by Mondadori International.
The proposal to cancel a part of the shares held as treasury stock is explained by the fact that, in recent years, there have not been opportunities to use such stock as foreseen by the authorisations made by the shareholders, such as share swaps or conversions in financial instruments.Cancellation, and the consequent reduction in the number of shares making up the share capital, would – while maintaining the necessary solidity to support future growth objectives – result in the optimisation of the company’s capital structure and have a positive impact in terms of increasing both earnings per share and dividend per share.
In terms of the impact on the company’s accounts, the “treasury stock”, in compliance with international accounting principles, as a reduction in net assets would be reduced by around €80,030,000, against a reduction in the share capital of a nominal €3,372,587.92 – corresponding to 12,971,492 shares with a cancelled nominal value of €0.26 – and a reduction of the “share premium reserve” of around €76,658,000.
If approved by the Shareholders, the reduction in the share capital would become effective, subject to no objections being submitted, only after a period of ninety days from the registration of the resolution, as foreseen by article 2445 of the Italian Civil Code.

RENEWAL OF AUTHORISATION TO BUY BACK AND UTILISE COMPANY SHARES
Following the expiry, with the approval of the annual report for 2010, of the authorisation given by the Shareholders at the AGM of 27 April 2010, and with the aim of maintaining the legal conditions for eventual buy-backs and, in consequence, the possibility of pursuing eventual investment opportunities or other treasury stock operations, the board of directors will propose to the forthcoming Annual General Meeting the renewal of authorisation to buy back company shares.
The AGM of 27 April 2010 provided authorisation to effect share buy-backs up to a limit, considering the shares already held in the portfolio, of 15% of the share capital, or 38,914,474 ordinary shares.
Given the total of 22,367,587 shares (8.62% of the share capital) already directly or indirectly held at the date of the AGM, the authorisation thereby awarded the board the faculty to acquire a maximum number of 16,546,887 additional shares. No buy backs were made on the basis of the authorisation of 27 April 2010.

The Annual General Meeting of the Shareholders will also be asked to authorise the use of shares involved in such buy back operations or already in the company’s portfolio, as per Art. 2357 of the Civil Code.
The highlights of the board of directors’ proposal are as follows:

• Underlying motivation

The underlying reason for the request for authorisation to effect buy-backs and make use of company shares is that it will allow the Board of Directors to:
– use company shares for the exercise of options for the purchase of shares assigned to participants in the stock option plans put in place by the Shareholders;
– use company shares, either bought or in the portfolio, for the exercise of rights, also conversion rights, deriving from financial instruments issued by the company, its subsidiaries or third parties;
– use company shares, either bought or in the portfolio, as part or whole payment in any eventual acquisitions or equity investments that fall within the company’s stated investment policy;
– take advantage, where and when considered strategic for the company, of investment opportunities, also in relation to available liquidity

• Duration

Until the approval of the Anuual Report for 2011.

• Cap on the number of shares that may be bought

In line with the expiring authorisation, the new authorisation would allow for the possible purchase of a maximum of 16,546,887 additional shares, given the number already directly or indirectly held by the company, as outlined above, an overall maximum of 15% of the current share capital.
If the proposed operation for the cancellation of 12,971,492 shares held in treasury stock is approved, with the consequent reduction in the share capital as outlined above, the authorisation would allow for the buy back of up to 10.52% of the share capital.

• Method of acquisition and the price range

Buy-backs would be effected on regulated markets as per art. 132 of the legislative decree of 24 February 1998 n. 58 and art. 144 bis, para. 1, B of Consob regulation 11971/99 according to operating procedures established by the regulations for the organisation and management of the markets themselves, which, does not permit the direct combination of offers to buy with predetermined offers to sell.
Consequently, the corresponding minimum and maximum price of sale will be determined at the same conditions that applied to previous authorisations agreed by the Shareholders, i.e. at a unit price not less than the official market price on the day prior to any operation, less 20%, and not more than the official market price on the day prior to any operation, plus 10%.
In terms of price and daily volumes, acquisition operations will in any case be conducted in line with the norms foreseen by the EU regulation 2273/2003.

Today at 3pm, at the company’s headquarters in Segrate, the deputy chairman and chief executive, Maurizio Costa, and the CFO, and Carlo Maria Vismara, will present the results for 2010 approved today by the board of directors, to the financial community.

During the presentation management will also provide information regarding current activities and mid-term plans relative to the business in which the Group operates.

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

The Annual Report for the year ended 31 December 2010, containing the management report and the reports of the statutory auditors and the external auditors, along with all other legally required documentation, will be made publicly available by 31 March at the company’s corporate offices, at the Borsa Italiana S.p.A., as well as on the corporate web site www.gruppomondadori.it (in the Investor Relations section).

The Board of Directors of Arnoldo Mondadori S.p.A. met today to examine and approve the interim report for the first nine months of the year to 30th September 2010, as presented by the Group’s Deputy Chairman and Chief Executive, Maurizio Costa.

THE MARKET SCENARIO IN THE THIRD QUARTER

There were no significant changes in the economic trends in the sectors of reference for Mondadori in the third quarter of the year. In particular, both circulation figures and advertising investments remained at lower levels than the previous year. Despite this unfavourable context, the company has been able to achieve in the third quarter a level of gross operating profit 73.2% higher than the same period of last year, bringing the increase for the first nine months of 2010 to 51.2%

A SUMMARY OF BUSINESS PERFORMANCE

The elements that have determined such a conspicuous improvement in profitability, with just a slight increase in revenues (+1.4%), are further confirmation of what was already stated in the report for the first six months, ie:

– a good level of stability in terms of magazine circulation, with a performance clearly ahead of the market average both in Italy and in France;

– a further increase in profitability in the book business, where revenues in the third quarter were also up on 2009;

– a constant improvement of the results from the international network and the ongoing success of Grazia France, both in terms of circulation and advertising sales;

– the increasing contribution of the plan for the reduction of operating costs – which has already realised 85% of the target savings of €170 million over the three-year period 2009-2011 – and which will continue for the whole of next year.

Activities related to digital content have continued with even greater impulse with the stipulation of agreements with operators in production, telecoms and retail; since the beginning of September the digital area has also taken on a locomotive role, both for its own activities and in support for other business sectors, above all magazines and books.

Thanks to the introduction of a new business model and the redefinition of the organisational structure – which will become fully operational from the beginning of next year – will encourage and stimulate the involvement and cooperation of all of the business areas in response to new market opportunities.

GROUP PERFORMANCE IN THE PERIOD TO 30 SEPTEMBER 2010

Il Consolidated revenues came to €1,130.2 million, an improvement of 1.4% on the €1,114.3 million of the first nine months of 2009.

Consolidated gross operating profit amounted to €103.1 million, an increase of 51.2% compared with the €68.2 million of last year, despite higher costs due to increased postal charges of €5.5 million.

This is equal to a figure of 9.1% as a proportion of revenues, compared with 6.1% for the same period of 2009.

Consolidated operating profit reached €85.6 million, a 71.2% increase on the €50 million of 30 September 2009, with amortizations and depreciations of tangible and intangible assets for a total of €17.5 million (€18.2 million in 2009). As a proportion of revenues, an increase from 4.5% in 2009 to 7.6%.

Consolidated profit before taxation amounted to €67.5 million, an increase of 35% on the €50 million of the first nine months of 2009, with net financial charges of €18.1 million. For an appropriate comparison with the previous year, account should be taken of a capital gain of €14.5 million in the third quarter resulting from the closure of a private placement and relative derivatives.

Consolidated net profit came to €30.7 million, a 13.3% increase on the €27.1 million of 30 September 2009: this result was affected by the payment of €8.7 million to clear a pending fiscal suit.

Consolidated adjusted net profit, which takes account of the net impact of the extraordinary elements outlined above (financial capital gains in 2009 and tax charges for previous years paid in 2010), was more than double that of the same period of 2009.

Gross cash flow in the first nine months of 2010 amounted to €48.2 million, compared with €45.3 million in 2009.

The Group’s net financial position went from -€372.9 million on 31 December 2009 to -€369 million. The improvement compared with 30 September 2009 was of €47.9 million and €275.5 million compared with 30 September 2008.

Personnel

On 30 September 2010 staff employed by the companies of the group, on both permanent and temporary contracts, totalled, a tempo 3,717.

On a comparable basis, in other words excluding the impact of the recent consolidation of Mondolibri S.p.A., there was a reduction of 260 (-7%) compared with 31 December 2009. This is mainly attributable to the ongoing restructuring process at the parent company, as well as constant efforts to improve efficiencies at all of the companies in the group.

There was a reduction in staff numbers of 688, which corresponds to 89% of the plan 2008/2011.

The action taken to date has been conducted in full compliance with the approved restructuring plan and has made it possible, in nine months and on a comparable basis, to reduce staff by 8% in Italy and almost 5% in France.

As a consequence, the cost of contract staff, which amounted to €198.2 million (€217,9 million on 30 September 2009) was down by 9%.

Finally, it should be noted that the national contract for printing and publishing employees, which expired in March 2010, has, to date, still not been renewed.

RESULTS OF THE BUSINESS AREAS

• BOOKS

Market data for the first nine months of 2010 (source: Nielsen) confirm the leadership of the Mondadori Group in trade books, with an overall market share of 26.7%, with Edizioni Mondadori and Einaudi in the top two places on the list of publishers.

Revenues in the Books area at 30 September 2010 totalled €294.5 million, a fall of 3.8% on the €306 million of the same period of the previous year.

Sales in the third quarter, especially in September, showed signs of a recovery in market share. Of note during the period were the awards of the Premio Strega 2010 to Antonio Pennacchi for Canale Mussolini (Mondadori), the Premio Campiello for the novel Accabadora by Michela Murgia (Einaudi), and the Nobel Prize for Literature to Mario Vargas Llosa, a historic author of Einaudi, as well as the success of the new novel by Ken Follett, and a series of other important new title that augur well for the Christmas season for all of the group’s publishing houses.

To 30 September 2010 Edizioni Mondadori generated revenues of €85.9 million, a 2.8% fall compared with the previous year.

The autumn season was characterised by the simultaneous world publication of the new novel by Ken Follett, La caduta dei giganti, which immediately entered the bestsellers list with an initial print run of 500,000 copies. Among the successful titles in foreign fiction were Sophie Kinsella’s, I love mini shopping, with sales of more than 160,000 copies and first-time author Maria Dueñas with La notte ha cambiato rumore che, that began with sales of 40,000 copies, confirming a great interest among readers for Spanish fiction.

In Italian fiction, Canale Mussolini by Antonio Pennacchi continued to perform well, selling 200,000 copies (making a total of 265,000) and the new novel by Andrea Camilleri, L’intermittenza (already in its fourth printing) has sold more than 150,000 copies.

In non-fiction there was a confirmation of the success of I segreti del Vaticano by Corrado Augias (160,000 copies), while in the unclassified segment the Fabio Volo phenomenon continued (with sales of over 160,000 copies of Il tempo che vorrei two years after it was first published, making a total of 750,000 copies). There were excellent results form the Oscar Mondadori campaign with an increase in sales of around 8% compared with the previous year. The protagonist during the summer months was the Oscar Grandi Bestsellers paperback edition of Paolo Giordano’s La solitudine dei numeri primi, which sold 280,000 copies in just three months, returning to the top of the bestsellers list with the release of the film based on the novel.

In the third quarter of 2010 Einaudi imporved its performance compared with the situation at 30 June 2010, with total net revenues of €33.8 million (-2% compared with the first nine months of 2009).

Among the best performing titles were: Accabadora by Michela Murgia (120,000 copies in 2010); Tre secondi by Roslund-Hellstrom (51,000); Per l’alto mare aperto by Eugenio Scalfari (51,000); Il giovane Holden by J.D. Salinger (77,000) and the recent Mia suocera beve by Diego De Silva with sales of more than 40s000 copies, La vendetta by Anne Holt (35,000). There was confirmed success for La parola contro la camorra by Roberto Saviano and Prima di morire addio by Fred Vargas. It should also be noted that the editorial plan of Einaudi foresees the publication of numerous titles in the last quarter of the year.

In the first nine months of 2010, Sperling & Kupfer recorded revenues of €18.4 million, a fall of 3.7% compared with the first nine months of 2009, mainly due to a fall in revenues from the sale of rights for add-on initiatives. Of particular note was the great success of Sveva Casati Modignani’s Mister Gregory, published at the end of the first half, which has sold almost 190,000 copies.

Cumulative revenues at Piemme to 30 September 2010 amounted to €34.9 million, an increase of 3.6% compared with the same period of last year.

Fiction and non-fiction lines saw an overall fall of 5.1% compared with 2009, mainly due to a different editorial programme for new titles.

The Junior sector continued its positive trend, in the Stilton line the most significant new titles were Sesto viaggio nel Regno della Fantasia (126,000 copies) and Viaggio nel tempo 3 (79,000 copies). Also of significance during the period was the publication of a celebrative volume to mark the tenth anniversary of Stilton, Caccia al libro d’oro (45,000 copies).

Total revenues by Mondadori Electa were down by 17.6% on the same period of 2009, this was due to the effects of a slowdown in all of the segments in which the company operates. The fall of revenues in the bookshop channel (-29.7%) and the substantial disappearance of add-on sales were not, unlike other years, compensated by revenues on the Cultural Heritage area (-12% compared with 2009) mainly due to the loss of certain museum bookstore concessions (Brera and Cenacolo in Milan, and the Musei Civici in Venice) and Sponsorship sales (-16%). There was, however, a recovery in co-editions (sales of foreign rights), penalised by the strength of the euro against the dollar and the pound.

During the first nine months 2010 Mondadori Education generated revenues of €66.8 million, a fall of 1.8% on the same period of the previous year, essentially confirming its share of the textbook adoptions market. The primary school segment confirmed the results of the previous year, thanks to the five-year rule on adoptions. The first level secondary segment saw an overall fall, despite good results for new titles and new editions.

The second level secondary segment saw a slight fall but confirmed excellent results in the subjects in which Mondadori Education is the market leader. There were good results in the scientific subjects affected by the reforms in high schools. Note should also be made of trend for price reductions in both secondary levels.

• MAGAZINES ITALY

Magazine sales during the summer months, traditionally positive for the magazine market, were positive and resulted in a recovery in terms of circulation.

In this context Mondadori performed better than the market, both in terms of advertising sales and single copy sales through the different channels.

The revenues of Magazines Italy in the first nine months of the year came to €362 million, a slight fall (-1.2%) on the €366.5 million of the same period of the previous year.

Even more significant with respect to the market of reference was the increase in profitability, despite the impact of the cancellation of postal subsidies.

This encouraging performance was based on the following factors:

– a 2.9% fall in circulation revenues, markedly better than the performance of the competitors in a market that lost around 5% (around 9% in terms of copies);

– essential stability in revenues from add-on sales (+1.4%), in absolute contrast to a market that slumped by 22%;

– a moderate re-balancing in advertising revenues (-2.4%), even more contained on a like-for-like basis.

Among the most significant factors during the period were:

– the re-launch at the end of July of Tu Style, supported throughout August by a big advertising campaign and promotional initiatives: to date the weekly has achieved notable results (with sales of over 200.000 copies);

– strong support for weeklies, that made it possible in the summer season to grow newsstand revenues close to the levels of 2009;

– the launch of an intensive campaign of launches of add-on sales, some of which are achieving much better than expected results;

– the ongoing programme of reorganisation in editorial and management structures;

– the reinforcement of the activities of Press-Di, the wholly-owned Mondadori subsidiary operating in distribution and subscription management for the group’s titles and third-party publishers. In addition to the numerous contracts for the distribution of newspapers and magazines acquired in recent years, since 1 October the company will also distribute the products of Sergio Bonelli Editore, leader in comic books;

– the conclusion, at the end of July, of the negotiation between Fieg and the Italian postal for an agreement on postal charges, following the cancellation from 1 April of subsidies which for many years compensated publishers for the inefficiencies of the service. The agreement will make it possible to reduce by around 50%, from 1 September, the charges resulting from the application of the new conditions for the delivery of subscription products.

Circulation

As already mentioned, the market saw an overall drop in newsstand circulation of 9% in terms of copies and around 5% in terms of value, compared with the above indicated -2.9% by Mondadori.

Among the group’s weekly titles, there was a marked improvement in the performance of Tu Style; TV guides held up well, as did Chi, Grazia and Donna Moderna. For monthlies, there was an increase in circulation revenues for the titles in the interiors and cooking segments.

Add-on sales

The add-on sales market, which saw a big slump (-22%), was characterised during the period by some particular phenomena, including an increase in the number of initiatives, the maintenance of relatively high prices and a strong downturn in average sales.

In this context Mondadori confirmed also in the third quarter a performance in marked contrast to the market that is expected to continue for the rest of the year.

The various initiatives in the home video segment and collectables were markedly up on 2009; those in music and editorial products, while less brilliant, were nevertheless satisfactory. In a portfolio of articulated activities, the operations linked to the major titles, including TV Sorrisi e Canzoni and Panorama, remain fundamental

International activities

The international activities of Mondadori Magazines generated excellent result to 30 September 2010, with licensing revenues up by 46%, following the good performance of Grazia UK, Grazia Olanda and the contribution of Grazia Germania and Grazia Francia launched during the period.

Revenues for the sale of advertising in Italy for the international network more than doubled, both on account of new editions and for growth in revenues for existing titles (Grazia UK +10%, Grazia Russia +67%).

The performance of 50-50 joint ventures in Russia and China was decidedly better than last year and markedly better than the budget, particularly in terms of advertising sales.

The Attica subsidiary has felt the effects of the financial crisis in Greece and the Balkans with a fall in advertising revenues of around 22% (-20% on a like-for-like basis). A strong cost reduction programme is already being implemented in order to at least partially compensate for the fall in revenues by the end of the year.

Digital

The online advertising market grew significantly, with, in particular, an increase in display advertising of 17.7% compared with the same period of the previous year (source: Nielsen in terms of value, August 2010).

Advertising sales for Mondadori sites, managed by Mediamond, in the first nine months of 2010 saw an increase of 36%, thanks to a significant push by DonnaModerna.com, the positive results of which confirm the validity of the group’s decision to focus on the women’s market.

• MAGAZINES FRANCE

Mondadori France ended the first nine months of the year with total revenues of €252.6 million (-0.9% on the €254.8 million of the same period of last year). Excluding the operations that have affected the consolidation area (the sale of titles to the joint venture Editions Mondadori Axel Springer S.n.c., the launch of Grazia and the restructuring of the magazine portfolio), revenues would be up by 6.7% compared with 2009.

Circulation

Circulation revenues totalled €175.8 million, a 2.1% fall (+4,5% on a like-for-like basis, compared with the same period of last year, thanks mainly to the launch of Grazia and a significant increase in subscriptions). Being less exposed to economic cycles, the subscription channel, which makes up around 33% of circulation revenues, is an important asset for the group.

This positive performance demonstrates the appropriateness of the strategy of repositioning the portfolio of titles towards the “grand public” market that the group has been pursuing since 2007 and has been accompanies by a constant improvement in the editorial quality of the titles. These results are even more remarkable given the current situation in the magazine sector and have been recognised by the market which has, over the last two years, awarded ten prizes for editorial excellence to our products.

In terms of copies Mondadori France recorded an increase of 3% in circulation, while the market as a whole saw a fall of 1.8%. In addition to the effect of Grazia, the excellent performance of other titles in the portfolio should be underlined, in particular Modes et Travaux (+6.2%), Science et Vie Découverte (+5.7%), Biba (+5.1%), Science et Vie Junior (+4.8%), L’Ami des Jardins et de la Maison (+2.5%), Science et Vie (+2.4%) and Closer (+1.7%).

Advertising

Advertising sales were up 5.5% on the previous year, an improvement that was even more significant on a like-for-like basis (+19.1%).

This excellent performance is above all explained by the growth in advertising sales for the up market (haut de gamme) women’s titles (the weekly Grazia and the monthly Biba) that now account for 26% of total advertising revenues.

The magazine advertising market to the end of September recorded an increase of 8.8% in page numbers (source: Kantar Media). In the same period Mondadori France recorded a very positive performance with an increase of 25.8% in pages and a 1.2 percentage point increase in market share.

Activities during the period

The strategic decisions taken in 2009, the launch of Grazia, the concentration in the joint venture with Axel Springer of the auto sector titles and the closure of marginal titles, have had a positive impact of the accounts in 2010.

Despite strong competition from two new titles (Be and Envy, which, however, interrupted publication at the end of September) the positive performance of Grazia continued with an average of 30 advertising pages in 2010 and newsstand circulation of 177,000 copies.

The activities of the joint venture Editions Mondadori Axel Sprinter, following the concentration of the auto sector titles, continued to show positive results, increasing newsstand sales; the editorial structure is evaluating new formulas for Sport Auto and Auto Plus and working on the development of digital activities.

The policy of cost reduction, began in recent years, continued, with particular attention on industrial costs and general expenses.

• ADVERTISING

Advertising investments in the first nine months of 2010 continued the generally positive trend noted in the first half of the year (+4.8% to August, source: Nielsen) showing, on the one hand, a progressive recovery in “healthy” media, including internet, radio and television, while on the other, ongoing difficulties for print media, within which newspapers (with the exception of the free press) and national commercial advertising remained essentially stable.

Magazine advertising, meanwhile, saw a fall of 8.4%, with the positive changes recorded in certain sectors, FMCGs, fashion, cosmetics and lately even furniture, only partially compensating the downturn in other segments. Despite positive August sales, a general uncertainty continues to hang over the medium in the latter part of the year characterised by different client behaviour on different titles, some of which have bucked the general trend in the market.

Mondadori Pubblicità ended the first nine months of the year with total revenues of €170.2 million, essentially in line, on a comparable basis, with 30 September 2009 (€181.6 million).

Marked changes in the revenue breakdown, such as the termination in November 2008 of the contract with Società Europea di Edizioni S.p.A. and the shift of online advertising sales, from January, to Mediamond, have had a negative impact on 2010 of around 7 percentage points.

After a third quarter in slight decline, the Mondadori titles have remained essentially in line with the first nine months of 2009 (-1.2%): on a like-for-like basis -2.4%.

Weeklies have held up well (+1.2%), thanks mostly to the performance of women’s titles, particularly Donna Moderna, Chi and Tu Style, that was supported by a targeted sales campaign that resulted in a total increase in sales of 35%, coinciding with the re-launch in July (+50% in the third quarter alone). The monthlies remained below the levels of 2009.

In concert with the publisher, activities have continued in the development of digital projects, including the launch of iPad versions of Panorama and Grazia, and the realisation of new events with innovative promotional formats. These include “Fashion & Design 2.0”, organised by Grazia and Interni during the Milan Fashion Week and “Milano Design Weekend”, an event dedicated to the interiors sector that took place in October.

In radio, the positive trend of R101 continued, up 6.2% in the first nine months of the year, and progressively recovering compared with the trend in the market in recent months. The figure is even more significant when account is taken of the comparison with an excellent first quarter in 2009, 7 percentage points ahead of the market. Sales were also good for Radio KissKiss, which began in March of last year.

• DIRECT and RETAIL

The Direct and Retail area generated revenues in the first nine months of 2010 of €181.2 million, a 29.2% increase on the €140.2 million of the same period of 2009.

It should be pointed out that the figures for last year did not include Mondolibri S.p.A., which has only been consolidated since April 2010; on a comparable basis, the increase was of around 7%.

Direct

Cemit saw a 25% increase in revenues, in a market that grew by just 2%.

Since May 2010, Cemit has been joined by Mondolibri, which with its seven thematic book clubs operates in mail-order sales with around 800,000 members.

The revenues of the book clubs were down by 6% compared with 2009; though this was compensated by growth in the e-commerce channel through the Bol.it web site (+34%).

Retail

Retail sales which, from May also include sales from the Mondolibri book shops, grew by 12.1% (5% on a like-for-like basis) compared with the same period of last year.

This increase in turnover was largely due to the expansion of the network, which now totals 570 book shops and multicenters, including both directly owned and franchised stores and Edicolè outlets

• RADIO

Advertising for R101 generated total net revenues in the period of €10.2 million (+5.2% on the €9.7 million in the first nine months of 2009). These are essentially the company’s share of the gross advertising revenues of around €14.7 million, up by 6.2% on the same period of last year.

In particular, in September, R101 recorded growth in advertising sales of 5.3% compared with 2009, in a market of reference that was down (-0.5%; +11.2% cumulative to the end of September: source FCP Assoradio).

The figure, overall lower than the market average, is however positive when account is taken of the fact that in the period display advertising on R101 (which makes up 91% of the radio station’s advertising) grew by 10% on 2009. The fall is therefore entirely attributable to a lower number of special initiatives compared with the first nine months of last year.

R101 is currently examining new projects to be introduced in the early part of next year aimed at further improving the station’s positioning in its targets, revamping the schedule and continuing to build the audience.

EXPECTATIONS FOR THE FULL YEAR

The third quarter saw a confirmation of the indications outlined in the half yearly report: all of the businesses achieved better revenue performance than the market benchmarks and, at the same time, continued to pursue the development of new activities.

Reorganisation objectives were also achieved, both in terms of simplifying processes and reducing operating costs.

These have resulted in a substantial recovery of profitability, which, failing any particular changes in market trends, we expect to continue during the last months of the year, allowing the company to significantly increase its operating profit for 2010, despite higher costs resulting from increased postal charges.

Also the estimate for net profit for the year, the improved operating performance should compensate for the impact of extraordinary items (positive in 2009 and negative in 2010) making it possible to post a significantly better final result than last year.

§

SHAREHOLDERS MEETING: APPROVAL OF THE APPOINTMENT OF THREE NEW DIRECTORS

A Shareholders’ Meeting, held prior to the board of directors meeting, approved the enlargement of the board from 11 to 14 members, appointing as directors Roberto Briglia, as an executive director given his role as Group Editorial Director, and Angelo Renoldi, professor of economics and business administration at the University of Bergamo and Carlo Sangalli, chairman of Confcommercio (the Italian association of retailers) as independent non-executive directors.

The board of directors verified the requisites of independence, foreseen by the Code of Conduct for listed companies, of both Renoldi and Sangalli. The other independent non-executive directors already in office are Martina Mondadori, Marco Spadacini, Mario Resca and Umberto Veronesi.

The appointments, approved by the Shareholders, therefore will result in the enlargement of the independent component of the board, in line with the progressive reinforcement of the role of the same, as defined, in particular, by soon to be introduced Consob regulations regarding operations with related parties. These appointments will also further consolidate and support respect for the functions and activities of the board of directors’ internal committees.

The board of directors itself has consequently redefined the composition of the Internal Control Committee and the Remuneration Committee. In particular, the Internal Control Committee is entirely made up of independent non-executive directors, Marco Spadacini, Angelo Renoldi and Mario Resca; and the Remuneration Committee by the independent directors Marco Spadacini and Carlo Sangalli and the non-executive director Bruno Ermolli.

§

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

§

The report for the period to 30 September 2010 is made available, as per current legislation, at the company’s corporate headquarters, Borsa Italiana S.p.A. and on the web site www.gruppomondadori.it

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

THE MARKET SCENARIO

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

A BRIEF OVERVIEW OF THE PERFORMANCE OF THE MONDADORI GROUP

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

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

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

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

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

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

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

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

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

GROUP PERFORMANCE IN THE PERIOD TO 30 JUNE 2010

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

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

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

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

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

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

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

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

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

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

Information regarding personnel

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

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

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

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

RESULTS OF THE BUSINESS AREAS

• BOOKS

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

• MAGAZINES ITALY

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

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

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

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

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

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

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

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

International activities

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

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

• DIGITAL

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

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

• MAGAZINES FRANCE

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

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

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

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

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

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

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

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

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

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

• ADVERTISING

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

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

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

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

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

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

• DIRECT and RETAIL

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

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

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

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

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

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

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

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

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

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

• RADIO

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

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

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

EXPECTATIONS FOR THE FULL YEAR

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

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

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

§

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

Comlpete text (PDF) with enclosures

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

The market scenario

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

A brief overview of the performance of the Mondadori Group

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

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

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

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

GROUP PERFORMANCE IN THE PERIOD TO 31 MARCH 2010

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

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

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

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

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

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

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

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

Information regarding personnel

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

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

RESULTS OF THE BUSINESS AREAS

• Books

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

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

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

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

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

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

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

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

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

• Magazines Italy

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

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

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

Performance during the period was determined by the following:

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

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

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

Of particular note during the period:

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

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

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

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

International activities

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

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

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

Digital

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

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

• Magazines France

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

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

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

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

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

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

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

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

• Advertising

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

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

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

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

• Direct Marketing

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

• Retail

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

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

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

• Radio

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

EXPECTATIONS FOR THE FULL YEAR

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

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

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

§

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

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

The market scenario

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

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

Brief outline of business trends

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

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

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

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

Significant events during the year

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

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

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

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

GROUP PERFORMANCE IN THE YEAR TO 31 DECEMBER 2009

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

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

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

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

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

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

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

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

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

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

Information concerning personnel

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

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

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

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

THE BUSINESS AREAS

· Books

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

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

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

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

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

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

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

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

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

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

· Magazines Italy

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

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

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

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

This was largely due to the following phenomena:

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

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

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

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

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

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

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

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

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

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

Digital

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

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

International activities

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

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

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

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

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

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

• Magazines France

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

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

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

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

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

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

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

· Advertising

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

The results of 2009 were also characterised by two changes:

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

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

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

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

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

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

• Direct marketing

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

• Retail

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

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

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

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

• Radio

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

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

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

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

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

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

FORECAST FOR THE FULL YEAR

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

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

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

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

§

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

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

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

§

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

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

§

DECLARATION BY THE EXECUTIVE RESPONSIBLE FOR THE COMPANY’S ACCOUNTS

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

§

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

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

THE MARKET SCENARIO

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

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

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

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

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

GROUP PERFORMANCE IN THE PERIOD TO 30 SEPTEMBER 2009

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

RESULTS OF THE BUSINESS AREAS[1]

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

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

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

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

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

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

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

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

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

· Magazines Italy

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

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

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

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

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

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

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

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

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

International activities

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

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

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

· Magazines France

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

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

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

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

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

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

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

· Advertising

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

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

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

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

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

• Direct Marketing

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

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

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

• Retail

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

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

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

• Radio

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

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

EXPECTATIONS FOR THE FULL YEAR

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

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

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

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

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

§

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

§

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

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

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

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

The market scenario

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

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

In particular (volume figures to May):

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

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

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

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

Group performance in the period to 30 June 2009

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

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

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

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

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

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

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

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

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

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

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

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

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

BUSINESS AREA RESULTS [1]

• Books

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

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

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

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

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

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

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

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

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

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

• Magazines Italy

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

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

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

This downturn was determined by a series of specific phenomena:

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

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

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

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

International activities

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

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

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

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

· Magazines France

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

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

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

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

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

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

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

· Advertising

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

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

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

• Direct Marketing

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

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

• Retail

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

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

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

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

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

• Radio

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

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

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

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

SIGNIFICANT EVENTS AFTER THE CLOSE OF THE PERIOD

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

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

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

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

EXPECTATIONS FOR THE CURRENT YEAR

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

In the short term:

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

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

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

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

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

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

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

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

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

§

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

§

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

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

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

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

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

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

The scenario

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

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

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

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

Group performance in the period to 31 March 2009

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

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

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

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

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

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

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

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

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

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

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

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

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

BUSINESS AREA RESULTS[1]

•  Books

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

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

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

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

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

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

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

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

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

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

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

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

• Magazines Italy

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

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

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

This performance was determined by the following elements:

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

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

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

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

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

Among the most significant facts during the period were:

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

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

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

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

International activities

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

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

· Magazines France

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

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

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

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

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

· Advertising

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

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

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

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

• Direct Marketing

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

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

• Retail

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

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

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

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

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

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

• Radio

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

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

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

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

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

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

EXPECTATIONS FOR THE CURRENT YEAR

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

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

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

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

§

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

§

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

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

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

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