1Q

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 quarter of the year to 31 March 2014, as presented by the Chief Executive, Ernesto Mauri.

THE MARKET SCENARIO

At the macroeconomic level, there were still no signs of an improvement in Italy or France, the countries of reference for the Mondadori Group, in the first months of the year.

In particular, there was a continued downturn in both the book and consumer magazine markets compared with the same period of the previous year.

In Italy:
– the trade books market was down both in terms of copies sold and value (-6.8% and -5.3% respectively);
– in the two-month period January-February the magazine market was affected by a further decline in advertising spending (-14.7%): and both circulation and add-on sales were also down, by -12.8% and -19.3% respectively.

In France:
– circulation, only in the newsstand channel, was down by 8.1%;
– advertising was down by 10% (internal data).

MONDADORI IN THE FIRST QUARTER 2014

The consolidated revenues of the Mondadori Group were down by 8.3% to €268.3 million: on a like-for-like basis, taking account of the attribution from 1 January 2014 of the advertising sales to Mediamond, consolidated on a net equity basis, the reduction was of -6.5%.

Despite the difficult context, all of the Mondadori businesses – in particular Magazines Italy – performed better than in the corresponding period of the previous year, with the single exception of books that will have a much stronger editorial programme in the second half of the year.

The activities carried out in the period on the products and the results of actions taken to cut operating costs have resulted in an improved consolidated EBITDA that was up €10.2 million on the same period of 2013 (+€ 5.6 million in 2014 compared with -€4.6 million in 2013).

Moreover, net of non-recurring items, there was also an improvement in gross operating profit, which rose from €0.1 million to €5 million.

The results achieved to date with the marked reductions in operating costs, which have focused on industrial, logistical and editorial costs, make it possible to forecast an improvement in the savings objectives indicated in the plan (€100 million by the end of 2015). In terms of personnel, in the first quarter there was a further reduction of 166 people (-4.8%) and the total headcount is currently 356 down on the figure at 31 March 2013 (-9.8%).

GROUP PERFORMANCE IN THE PERIOD TO 31 MARCH 2014

The following table presents an overview of the figures for the first quarter of 2014. It should be remembered that the figures are not comparable due to the contribution of the advertising sales business activity of Mondadori Pubblicità S.p.A. to Mediamond S.p.A., which became effective from 1 January 2014.

Consolidated net revenues came to €268.3 million, a fall of 8.3% on the €292.7 million of Q1 2013; net of the effects of the contribution of the advertising sales business the fall was of 6.5%.

Consolidated gross operating profit net of non-recurring items showed an improvement of €5 million, compared with the €0.1 million of the previous year.

Consolidated gross operating profit rose to €5.6 million, compared with a loss in the same period of the previous year of €4.6 million.

Consolidated profit before taxation showed a loss of -€5.8 million (-€15.6 million in 2013) with amortisations of €5.5 million (€6 million in 2013) and financial charges of €5.9 million (€5 million in 2013).

There was a consolidated net loss for the period of €6.4 million, compared with -€15.3 million in 2013.

The Group’s net financial position shows a deficit of €396.5 million, compared with -€363,2 million at 31 December 2013, but in any case lower than the same period of last year. The period was significantly affected by the restructuring costs of the previous year and investments in the educational area.

Information regarding personnel

At 31 March 2014 permanent and temporary staff in the companies of the Group, totalled 3,270 and total labour costs for the period amounted to €59.3 million (-16.7% million compared with €71.2 million on the same period of 2013).

Total like-for-like headcount, taking account of the integration of advertising sales in Mediamond (that involved the transfer of 45 employees), was down by 8.7% (or 311 units); labour costs, also net of the impact of restructuring, was down by 11% (or €7.7 million).

These reductions are the result of a range of reorganisation and restructuring operations, begun between 2012 and 2013, the effects of which are being felt month by month.

Two other operations, finalised in March, should also be noted: the sales of the magazine titles Ciak and PC Professionale and the closure of the Mondadori Direct logistics centre in Brescia with the consequent concentration of operations at the Mondadori book depot in Verona.

· BOOKS
In the first quarter of 2014, there was a downturn in the trade books market, both in terms of copies sold and revenues (-6.8% and -5.3% respectively; Source: Nielsen), compared with the same period of 2013.

The Mondadori’s market share remained stable, confirming the Group’s market leadership.

First quarter revenues for the area came to €56.8 million, a 10.1% fall on the €63.2 million in Q1 2013.

In trade books, the Group’s first quarter performance, with revenues down by 9.6% on 2013, was affected by evident difficulties in certain channels, in particular large-scale retail, and in the paperback segment, as well as an editorial programme that was not especially strong.

In any case, the list of the top selling 2,500 titles in the quarter, which accounts for 42% of the market in terms of copies, saw the Mondadori Group accounting for over a third, thanks to positive results in both bookstores and large-scale retail. In the top 10 bestsellers list for the quarter, the Mondadori Group was responsible for the publication of 4 titles.

Also of significance in the trade area was the launch, at the beginning of May, of the first ten titles in the Flipback format, a new book product that is one of the most important new editorial initiatives of the year thanks to the particularly innovative characteristics: the size, the paper and the way in which it is read.

In e-books, the growing trend in download revenues continued (+57% on the previous).

As regards educational books, the first quarter was characterised by the seasonality of the business and consequently revenues in the period were not significant.

The trend in the market of reference and the consequent trend in revenues of the Book Area resulted in a fall in gross operating margins compared with the first quarter of 2013. However, the effect of the downturn was mitigated thanks to specific efforts to reduce costs in a number of areas, in particular production and logistics. The figures for the first quarter were significantly affected also by the investments to reconfigure the Mondadori Education catalogue, that markedly increased the number of new titles produced during the period.

· MAGAZINES ITALY
The first three months of 2014 saw the evident effects of the rationalisation policy for the magazine portfolio (the closure of the titles published by the joint-venture ACI-Mondadori and the sale of PC Professionale and Ciak), continuing improvements to product quality (the relaunch of CasaFacile and redesign of Panorama) and the launch of a new weekly Il mio Papa.

All of this, along with the cost reductions made in recent years and, in particular, in 2013, resulted in a marked improvement in gross operating profit, which rose from €2.6 to €7.5 million compared with the first quarter of 2013, despite the fall in revenues.

The Magazines Italy Area generated Q1 2014 revenues of €81.3 million, an 8.4% fall on the €88.8 million of Q1 2013.

In particular:
– circulation revenues for Mondadori titles were affected by the negative scenario and, despite out-performing the market (-12.8%: internal data: Press-Di), were down by 5.6%, net of titles closed or sold;
– advertising revenues were down by 7.4%, in a market that lost 14.7% (Source: Nielsen, February);
– there was substantial growth in advertising sales for the web sites of the magazine brands (+24%), despite a market that was down by 6.3% (Source: Nielsen, February);
– add-on sales contained the decline in revenues to 14.4%, in a market that lost 19.3% (internal data: Press-Di).

International activities

Mondadori International Business ended the first quarter of 2014 with revenues that were in line with those of the previous year. The slight fall in revenues from royalties related to licensing was compensated by bigger commissions on advertising sales made on behalf of foreign partners in the Italian market (total sales in the quarter were up by 9% on the same period of 2013).

Among the editions launched in the last year, of particular note is the performance of the first edition of Icon, distributed in Spain in partnership with Gruppo Prisa since last November. In terms of advertising sales, Mondadori International Business has expanded the number of foreign publishers for which it operates as an agent.

In terms of investments, Mondadori Seec Advertising Co. Ltd, the advertising sales company for Grazia China, recorded a 12% growth in advertising revenues in the first three months of 2014 compared with the same period of 2013 and from April the frequency has been increased to weekly; Mondadori Independent Media, the joint-venture that publishes Grazia in Russia, recorded first quarter revenues in line with the previous year, despite the difficult political situation in the country that in part had an impact on advertising spending; Attica Publications, Greece’s leading magazine publisher and a major radio broadcaster, benefitted in the first quarter in advertising sales that were up compared with 2013 (+5% in print and +4% on radio).

· MAGAZINES FRANCE
The Magazines France Area generated Q1 revenues of €81.7 million, a slight reduction (-1.6%) on the €83 million of Q1 2013; given the change of scope, due to the sale of Le Film Français in December 2103 and an additional issue in 2014, compared with the previous year, of Télé-Star, Télé-Poche and Auto-Plus, the fall in revenues is steady at 2.2%.

In the first quarter of the year circulation revenues, which account for around 73% of the total for the period, were stable (-0.1% on a like-for-like basis). Like-for-like newsstand sales were down by 1.4%, an excellent result given the current state of the market (-8.1% at the end of March; Source: Mondadori France Diffusion): of particular note were the sales of the weekly Closer (+25% in terms of volume) and the monthlies Pleine Vie (+24%) and Top Santé (+25%) and the positive reactions to the recent launch of new products, such as 750g, Slam and Histoire & Jeux. Subscription revenues, meanwhile, were stable (-0.8% on a on a like-for-like basis).

In terms of advertising sales, in the context of a difficult market (-10%; internal source), Mondadori recorded a 10.5% drop in revenues, on a like-for-like basis.

In the first quarter of 2014, Mondadori France, significantly increased its digital revenues (+41.3% on 2013); the growth came from the activities of the properties (+40.6%) as well as from the pure player NaturaBuy (+46%). There was also a significant increase in traffic, with 7.8 million uniques, also as a result of the scoop by Closer.

Advertising sales for the sites, managed internally since January 2014, recorded 39% growth in the first quarter and now accounts for 9% of the total advertising revenues of Mondadori France.

A number of initiatives launched in recent years now make it possible to realise significant economies of scale, in particular with regard to overheads, industrial costs and the cost of managing subscriptions, making it possible to increase gross operating profit, despite a fall in revenues.

In terms of cost reductions, efforts continue to improve efficiency, in particular, in the first months of the year, a voluntary redundancy plan was introduced (with the aim of reducing the headcount by between 10% and 15% in 3 years) and well as a plan to bring the entire staff together under one roof (in December 2014).

· ADVERTISING
The consolidated figures from the area are not comparable given that, as already mentioned, from 1 January 2014, the advertising sales business of Mondadori Pubblicità S.p.A., a subsidiary of Arnoldo Mondadori Editore SpA, were contributed to Mediamond SpA, the 50-50 joint-venture set up in 2009 by Mondadori Pubblicità SpA and Publitalia ’80 SpA. For Mondadori this operation was part of a wider process of innovation of the business model that will contribute to the further affirmation of the Group’s leadership thanks to a new approach, supported by significant synergies and models of offer more suited to the new conditions of the market.

The revenues from the activities of the current Mondadori Pubblicità amounted to €3.9 million; which, on a like-for-like basis and net of the business contributed to Mediamond, were slightly up.

Gross operating profit, that includes the pro-quota results of Mediamond, showed a marked improvement compared with the first quarter of 2013, highlighting the positive effects of the aforementioned operation.

In particular, the first quarter revenues of Mediamond, which is consolidated on an equity basis, taking account of the revenues generated by Mondadori Pubblicità in the same period of 2013, were up by 12.3%.

Specifically:
– the print and radio segments (the part contributed by Mondadori Pubblicità) recorded an increase in revenues of 8.5% (-7.4% for print, compared with a market average of -14.7% at the end of February, and revenues that more than doubled for radio, also as a result of the big changes compared with the previous year following the addition to the portfolio of new radio stations, including Radio Italia, from mid-April 2013, Radionorba and Radio Subasio, at the end of 2013, and Radio Sportiva, from the beginning of 2014);
– advertising sales for the web increased by 24% in a market that was down by 6.3% (Source: Nielsen, February).

• RETAIL

The market of reference for the Retail Area was particularly affected by negative trends of the book market and of consumer electronics, which saw a general downturn in the period, with the single exception of e-readers, that saw double-digit growth, but always within strict limits.

In Q1 2014 Retail Area – which as 19 directly-owned bookstores, 315 franchised bookstores, 186 edicolè, 8 multicenters and 21 club bookstores, and the e-commerce activities of InMondadori.it – generated revenues of €47.2 million, a fall of 6.9% on the €50.7 million of the same period of 2013.

Of particular note during the period was the market share of Retail Area in the book sector which rose from 13.7% in 2013 to 14.3% in 2014, also as a result of renewed communication and promotional activities.

There was a continuation of the negative trend in the club channel that has seen a fall in revenues of around 20%. And, finally, also the sales generated through the InMondadori.it site were down by 4.7%.

In terms of gross operating profit, compared with the same period of last year, the franchise channel remained profitable and the directly-owned outlets (bookstores and multicenters) saw a consistent recovery in margins thanks to the closure of a number of non-profitable bookstores.

In the club channel, the effects deriving from the rationalisation of the network of stores and recruitment efforts made it possible to maintain a level of profitability comparable to that of the previous year.

Also the e-commerce channel benefitted in the first quarter from the reductions in structural costs.

In the context of a generalised recession, a number of activities have already been put in place aimed at the recovery of market share and profitability. In particular:
– the progressive revision of the network and the format of the stores;
– communication activities and advertising aimed at sustaining sales and building market share, in particular for books;
– the ongoing rationalisation of Club recruitment activities (-13%);
– strict cost controls on the management of sales outlets and the renegotiation of rents;
– ongoing reorganisation efforts: the application of solidarity contracts (20% compared with 10% in 2013) at the central offices in Milan and Rimini and the exit from the activities of the business of the management of logistics for the club and on-line channels, now run by the parent company.

• RADIO

After a significant downturn in 2013, the advertising market in Italy started the year weakly, recording a further slide, in February (Source: Nielsen) of 4.3% with all media in negative territory with the sole exception of radio, which grew by 7.5%.

In this context, advertising sales for R101 generated revenues of €2.6 million, in line with the same period of the previous year.

Thanks to a series of actions to review and optimise the structures and the different timing of promotional support and communication, gross operating margins while remaining negative, nevertheless improved.

The end of March, confirming the importance attributed to the radio station within the Group, saw the presentation of the new R101 with a renewed editorial line, a new logo, a new pay off “the Music” and a series of new features for listeners. These changes were accompanied by intense promotional activities in support of the new format, with the launch of partnerships with TV programmes and the reinforcement of links with Italian and international music, thanks to the involvement with tours by a number of internationally renowned artists and groups

• DIGITAL

During 2013 the Digital Innovation Area was set up with the aim of not only accelerating growth in the digital market, but also structuring the processes of innovation and identifying new business development opportunities. The new structure is engaged in the development of marketing services and e-commerce activities, as well as providing support for the activities of Cemit Interactive Media SpA.

In the first months of 2014, in line with already established programmes, efforts continued to strengthen the various teams with the hiring of new resources dedicated to CRM, the spread of the Mondadori loyalty card, marketing services and the technological development of new projects to provide direct support for existing digital activities inside the book, magazine and retail areas.

During the period, the activities of the recent acquisition Anobii was included in the scope of the area.

In the first quarter of the year turnover remained stable compared with the first months of 2013, as a result, on the one hand, of significant growth in e-books (+57%) and the web sites of the Italian magazine titles (+24%) – including Donnamoderna.com (+23.8%), Grazia.it (+43.5%) and Panoramauto.it (+5.2%) – and in France (+39%); and, on the other hand, a reduction in the revenues of Cemit and inMondadori.it.

EXPECTATIONS FOR THE FULL YEAR

In a market context that is still not showing signs of improvement, the positive results of the first quarter, the result of actions taken on the products, the reorganisation and cost reductions, make it possible to forecast a higher level of profitability (EBITDA) for the full year than 2012, confirming what was already stated at the time of the presentation of the 2013 Annual Report.

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The Board of Directors of Mondadori also approved the 2013 Sustainability Report, prepared according to the guidelines of the GRI standard G3.1, with the application level B+.

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

The documentation relating to the presentation of the results for the first quarter of 2014 is available at the company’s registered office, on the web site www.borsaitaliana.it and on the web site www.gruppomondadori.it (Investor relations section).

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

· MAGAZINES ITALY

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

· ADVERTISING

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

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

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

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

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

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

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

· MAGAZINES FRANCE

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

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

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

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

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

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

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

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

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

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

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

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

· DIRECT

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

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

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

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

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

· RADIO

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

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

EXPECTATIONS FOR THE FULL YEAR

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

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

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

§

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

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

§

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

§

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

§

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

§

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

RESULTS OF THE BUSINESS AREAS

· BOOKS

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

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

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

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

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

· MAGAZINES ITALY

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

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

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

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

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

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

· ADVERTISING

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

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

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

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

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

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

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

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

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

· MAGAZINES FRANCE

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

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

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

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

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

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

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

· DIGITAL

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

· DIRECT

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

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

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

• RADIO

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

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

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

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

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

§

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

§

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

The Board of Directors of Arnoldo Mondadori S.p.A. met today, under the chairmanship of Marina Berlusconi, to examine and approve the 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.

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

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The report for the first quarter of 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 interim report for the first three months of the year to 31st March 2010, as presented by the Group’s Deputy Chairman and Chief Executive, Maurizio Costa.

The market scenario

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

A brief overview of the performance of the Mondadori Group

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

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

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

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

GROUP PERFORMANCE IN THE PERIOD TO 31 MARCH 2010

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

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

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

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

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

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

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

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

Information regarding personnel

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

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

RESULTS OF THE BUSINESS AREAS

• Books

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

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

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

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

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

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

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

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

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

• Magazines Italy

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

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

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

Performance during the period was determined by the following:

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

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

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

Of particular note during the period:

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

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

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

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

International activities

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

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

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

Digital

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

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

• Magazines France

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

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

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

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

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

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

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

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

• Advertising

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

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

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

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

• Direct Marketing

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

• Retail

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

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

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

• Radio

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

EXPECTATIONS FOR THE FULL YEAR

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

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

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

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

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

The Board of Directors of Arnoldo Mondadori 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.

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

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

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

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

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

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

The scenario

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

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

Group performance in the period to 31 March 2008

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

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

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

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

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

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

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

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

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

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

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

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

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

Business Area Results
• Books

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

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

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

• Magazines

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

Italy

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

This result was due to the following phenomena:

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

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

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

Facts of relevance affecting the Division in the period included:

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

– the redesign and review of Donna Moderna;

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

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

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

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

France

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

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

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

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

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

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

International activities

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

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

• Advertising

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

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

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

• Printing

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

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

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

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

• Direct marketing

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

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

• Retail

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

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

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

• Radio

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

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

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

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

Expectations for the current year

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

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

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

Despite the unfavourable economic situation, unless there is a further significant downturn in the area in which the company operates, it is possible to forecast a level of operating profit for the current year, net of extraordinary elements and investments in development, in line with that of the previous year

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