Telecom Italia Media: Board approves 2003 full year results

03/18/2004 - 00:00 PM

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After the Seat Pagine Gialle SpA split came into effect on 1 August 2003, Directories businesses were transferred to a beneficiary company, which was subsequently disposed of. Changes to the consolidation area of split company Telecom Italia Media in the wake of these transactions were so extensive that it is not possible to make comparisons on equivalent terms with results for the 2002 financial year. In consequence, Telecom Italia Media SpA and Group income results for 2003, up to operating income level, have been recalculated to exclude items that refer to businesses that were subsequently disposed of.

All operating results improved
compared to full-year 2002

Consolidated revenues for full-year 2003 up 3%
(+25% on equivalent terms)

Gross operating result increases 142%, turning positive for 11.6 million euros 
(from -27.9 million euros in 2002)

Operating profit growth trend expected to continue through 2004

Internet Unit: strong growth compared with 2002,
revenues up 80%, gross operating result improved fourfold
(from 10.1 to 47.6 million euros).

Tin.it active users up 13% compared with 2002

Virgilio remains Italy’s No. 1 portal with 6.6 billion pageviews (25% more than in 2002) and 13.1 million unique browsers
( +19% on 2002)

Television Unit: revenues  +28%, gross operating result +36% and operating income +16% compared with 2002
Gross advertising increase by 41%

MTV posts operating profit (after loss in 2002)
LA7 improves  audience performance with a share in excess of 2%


Seat Pagine Gialle SpA demerger effective as of 1 August, 2003

TELECOM ITALIA MEDIA GROUP

REVENUES: 594.6 MILLION EUROS
AN INCREASE OF 3% COMPARED TO FULL-YEAR 2002
(+25% ON EQUIVALENT TERMS)

GROSS OPERATING PROFIT: POSITIVE FOR 11.6 MILLION EUROS
(+142% COMPARED TO  FULL-YEAR 2002)

OPERATING INCOME BEFORE AMORTIZATION OF GOODWILL ARISING FROM CONSOLIDATION: -71.9 MILLION EUROS
(A 39% IMPROVEMENT COMPARED WITH FULL-YEAR 2002)

OPERATING INCOME: -103 MILLION EUROS
A 33% IMPROVEMENT COMPARED TO FULL-YEAR 2002
(+35% ON EQUIVALENT TERMS)

GROUP NET FINANCIAL POSITION
AS OF DECEMBER 31, 2003: CASH FOR 58.7 MILLION EUROS


The Telecom Italia Media (Telecom Italia Group) Board of Directors, chaired by Riccardo Perissich, met today to examine and adopt the 2003 draft accounts. At the meeting the Board empowered the Chairman to call the Shareholders’ Meeting scheduled for 5 May.

Telecom Italia Media Group results for full-year 2003
(restated  earnings)

Revenues amounted to 594.6 million euros, following 3% growth on the figure of 577.4 million euros registered during the same period in 2002. Underlying revenue growth corresponded to 25%, excluding the effect of changes to the area of consolidation. Revenues were boosted in particular by the Internet Unit, which recorded sharply higher revenues (80%), and by the Television Unit, where revenues rose by 28%.

The gross operating result was equal to 11.6 million euros. This was a major improvement (a 142% increase) compared with the equivalent period during the preceding year, when a 27.9 million euro loss was registered. Growth was driven not just by higher turnover but by enhanced operating efficiency, particularly in the Internet and Television Units.

Operating income prior to amortization of goodwill arising from consolidation was equivalent to a 71.9 million euro loss. This was a 39% improvement compared with 2002, when the result was a 118.7 million euro loss.

Operating income rose by 33% to a 103 million euro loss, against 153.4 million euros for the same period in 2002. Excluding the effect of changes to the area of consolidation, underlying operating income growth corresponded to 35%.

Consolidated net financial position at year-end 2003 was positive, with cash for 58.7 million euros (compared to net financial borrowings equal to 679.6 million euros at year-end 2002). This figure reflects the positive effects of the demerger, and of changes to the consolidation area. Consolidated shareholders’ equity at year-end 2003, corresponding to 474.2 million euros, was down on the year-end 2002 figure of 1,575.1 million euros, predominantly as a result of the split. At year-end 2003 the company employed 2,029 people.

Results by Business Unit

INTERNET

Internet Business Unit revenues for 2003 amounted to 251 million euros, an 80% increase on the same period in 2002 (139.2 million euros). The 2003 gross operating result was a 47.6 million euro profit, following dramatic growth (371%) compared with full-year 2002 (10.1 million euros). Internet Unit operating income posted 91% growth on the same period in 2002 (when a 47.1 million euro loss was recorded), and came in at a 4.4 million euro loss. In greater detail:
• in 2003 the Tin.it Unit registered revenues of 222.1 million euros (114.9 million euros over the same period in 2002), corresponding to 93% growth. The gross operating result rose by 146% to 44.5 million euros (18.1 million euros in 2002). Operating income closed with a profit of 2.2 million euros (despite 11.6 million euros for amortization of goodwill), a 30 million euro improvement on the full-year 2002 loss of 27.8 million euros. Active users at year-end 2003 numbered 2.5 million, up around 13% on year-end 2002.
• Matrix recorded revenues of 35.5 million euros (27.7 million euros for full-year 2002), corresponding to 28% growth and a 3.1 million euro gross operating profit, which was a significant 142% improvement on year-end 2002 (when the result was a 7.3 million euro loss). The 4.7 million euro operating loss was a 68% improvement on the 14.6 million euro loss registered for full-year 2002. At year-end 2003 Virgilio remained Italy’s number one portal, with some 13.1 million unique browsers (up 19% on year-end 2002). Year-end 2003 pageviews totalled 6.6 billion (25% more than for 2002).

TELEVISION

Overall, Television Unit revenues registered a noteworthy increase, in 2003  up by 28% to 113 million euros (compared to the 2002 figure of 88.4 million euros). Despite higher costs sustained for channel repositioning, and subsequent enhancements in the program schedule, the gross operating result posted a 36% improvement to -28.7 million euros. This compares with -44.9 million euros for full-year 2002. Operating income posted a 16% improvement to -71.2 million euros, against -85 million euros for the equivalent period during the preceding year. Television Unit gross advertising income rose by 41% compared with 2002. During 2003, the LA7 channel consolidated its editorial image and enhanced its brand profile; audience share increased over the year and is now above 2% (source: Auditel). Over the same period, MTV continued to reign as Italy’s premier youth television channel, with revenues of 64.1 million euros (+26% compared with full-year 2002) and an operating profit, compared with an operating loss registered for the previous year.


OFFICE PRODUCTS & SERVICES

Business Office Products & Service revenues for 2003 amounted to 184.8 million euros, a 6% contraction on equivalent terms compared with 2002 (i.e. excluding the effects of businesses disposed of in April, and of operations that have left the consolation area). Most of this may be attributed to a slowdown in the consumer and office products markets. On equivalent terms, the gross operating result posted an 11% decrease; on equivalent terms, operating income fell by 42% compared with the same period in 2002.

Telecom Italia Media SpA full-year 2003 results
(restated  earnings)

Telecom Italia Media SpA’s 2003 revenues amounted to 223 million euros, a 94% increase on the same period in 2002 (114.9 million euros). The full-year 2003 gross operating result rose to 20.2 million euros, from 2.8 million euros in 2002. Operating income over the period also posted significant 51% growth compared with 2002: the 25.1 million loss posted was less than half the 51.1 million euro loss recorded for the 2002 financial year.


MANAGEMENT OUTLOOK
It is reasonable to expect the growth trend to continue for the Internet Unit during 2004, and for the recovery in advertising investment that began in late 2003 to be sustained. The Telecom Italia Media Group is pursuing  Internet operations  focusing on ADSL, rolling out innovative services, and developing its search portal. The Television Unit is redesigning its programming to match its editorial policy and audience, in order to consolidate its market share and audience. The Office Products Unit is continuing to strengthen its sales organization, while at the same time rationalizing and innovating its product offering  with the objective of turning around the negative growth posted in 2003. Altogether, these  performances lead us to believe that operating profit shall continue to increase.


MAIN EVENTS JANUARY-MARCH 2004

DIGITAL TERRESTRIAL TELEVISION PROJECT
Ongoing trials of LA7 and MTV via digital terrestrial television began in November 2003 in the Italian cities of Turin, Milan, Rome, Bologna, Modena, Pesaro and Macerata. Four thousand households were selected by specialist companies to take part in these trials. In compliance with company plans, and pursuant to broadcast industry regulations, Telecom Italia Media Group television stations have taken steps to acquire the frequencies and equipment necessary to establish a digital terrestrial broadcast network, in observance of the requisites to obtain authorization for setting up a digital terrestrial television Operator company.
Two agreements were signed in February, regarding digital terrestrial television and interactive citizens service trials: one with the Municipality of Pesaro (3 February), the other with Sun Microsystems Italia and CSP Innovazione nelle ICT (11 February) for trials in the Province of Turin. Also in February, La7 Televisioni (the company that manages the La7 broadcaster, and is owned by Telecom Italia Media), RAI, Mediaset and the Fondazione Ugo Bordoni set up DGTV, an association founded to promote digital terrestrial television take-up in Italy. In March 2004, 62% of the Italian population had DTT coverage.

APCOM
In March 2004, the APCom multimedia agency – which was set up with the Associated Press before being acquired by Telecom Italia Media in September 2003 – signed an agreement with Ipsos, Italy’s leading market research company, regarding the execution and provision of real-time special opinion polls over the agency’s network.

CIPI DISPOSAL
As part of the process of rationalizing its operations portfolio, on 29 January 2004 Telecom Italia Media completed the disposal of its 60% stake in CIPI SpA to Promoinvestments Srl.


Past Telecom Italia Media SpA parent company and consolidated data

The partial pro rata split of Seat Pagine Gialle SpA (demerged company) and the subsequent assets transfer to a newly-founded company (beneficiary company) approved by the 9 May 2003 Extraordinary Shareholders’ Meeting resulted in the beneficiary company taking over Directories Market going concerns (telephone publishing, directory assistance and business information) from 25 July 2003. The demerged  company changed its name to Telecom Italia Media SpA, while the beneficiary company took over the Seat Pagine Gialle SpA name. The demerger  became effective on 1 August, 2003, which was also the date when changes to the area of consolidation came into effect for accounting purposes. Telecom Italia commenced proceedings to dispose of its equity in Seat Pagine Gialle SpA in the second quarter of 2003, and completed this process on  August 8 last year. In view of these transactions, data are not sufficiently homogeneous to enable a comparison of the results achieved during 2003 with Seat PG Group results for the corresponding period in 2002. Nevertheless, in order to provide complete information, 2003 financial year data are provided for the consolidated (-91.9 million euros) and Parent company (-72.6 million euros) net results, which were affected by the lower contribution to profits of the businesses that were disposed of following the demerger.

§§§


Corporate Governance

Pursuant to article 5 of the Telecom Italia Media Code of Corporate Governance, the Board of Directors, having assessed the information supplied by the directors, has deemed that said directors qualify as independent: Adriano De Maio, Candido Fois, Giulia Ligresti, Gianfranco Negri Clementi, Alessandro Ovi and Mario Zanone Poma.
In addition to approving the financial statements, the forthcoming AGM shall be called upon to pass resolutions regarding the renewal of the Board of Directors and Board of Auditors, in addition to the adoption of new regulations for the shareholders’ meeting designed to enhance their efficiency.
In extraordinary session, the Meeting shall be called upon to pass a ruling with regard to the amendment of the company by-laws in order to align them with legislation reform  pertaining to public companies (the Vietti law).