The Board of Directors approved the Quarterly Report for the period ended March 31, 2004

05/05/2004 - 00:00 PM

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For the purposes of greater clarity in showing the performance of Telecom Italia Media SpA and of the Group for Q1 2004, the key financial and business data, down to the operating result, have been compared with those for the same period of FY 2003, taking into account both the spin-off of Seat Pagine Gialle SpA, effective as of August 1, 2003, and the changes in the area of consolidation for the periods being compared. 

All the financial results and the quarterly margins show significant improvements on an equal perimeter basis.

Consolidated revenues for the quarter grew by 18.1%.

Gross operating profit reached €3.2 million (gross operating loss amounted to €2 million in Q1 2003).

Operating income improved by 19.7%, reaching € -23.6 million (from a loss of €29.4 million in Q1 2003)

Net consolidated financial availability has been maintained in the period (positive for €55.4 million)

Strong growth of the Internet area compared to Q1 2003

Tin.it: with 364 hot spots (of which 245 active) is one of the first Italian Wi-Fi networks; Q1 2004 revenues and GOP increase by 30.8% and 33.5% respectively

Virgilio: confirmed its position as the leading Italian portal with 1.9 billion pageviews (+16.1% compared to Q1 2003) and 14.7 million unique users (+19.5% compared to March 31, 2003)

Television Area: in Q1 2004, gross advertising sales increased by 25% and profitability improved (GOP +6.1%)

MTV: the number of advertisers increased by 27%
LA7: audience share improved to above 2%

Buffetti: positive inversion in the trend of sales for Q1 2004
compared to prior years (+1.1% compared to Q1 2003)


Today, the Board of Directors of Telecom Italia Media (Telecom Italia Group), chaired by Riccardo Perissich, analyzed and approved the quarterly report for the period ended March 31, 2004.

Foreword
For the purposes of greater clarity in showing the performance of Telecom Italia Media SpA and of the Group in the first quarter of 2004, the main financial and business data down to the operating result have been compared with those for the same period in the 2003 financial year taking into account both the spin-off of Seat Pagine Gialle SpA (effective as of August 1, 2003) and the changes in the perimeter of consolidation. These latter changes were due mainly, in 2003, to the disposal of some companies in the office products business within the Buffetti Group and the acquisition of TM News, owner of APCom, and in 2004, to the sale of Cipi.

Q1 2004 results of the Telecom Italia Media Group

Revenues amounted to €148.5 million, with an 18.1% organic growth compared to €125.7 million in the same period of 2003. The Group’s organic growth was mainly influenced by the performance of the Internet Area, which recorded a 32.1% increase in revenues and the Television Area, which posted a 23.7% increase in revenues.

Gross operating profit became positive for €3.2 million with a growth of €5.2 million, on a like for like basis compared to the first quarter of 2003. The improvement is mainly due to the higher turnover achieved in all the business areas.

Operating income posted a loss for €23.6 million, thus improving by 19.7% in comparable terms with respect to Q1 2003(€ -29.4 million).

The consolidated net financial position was positive with cash for €55.4 million as of March,31 2004, compared to an availability of €58.7 million at December 31, 2003. The reduction of €3.3 million cash is basically due to the investments for the period, partially offset by the operating free cash flow, coming from the cash received for disposals and other net cash ins. Consolidated shareholders’ equity as of March 31, 2004 was €440.6 million (€474.2 million as of December 31, 2003). Personnel as of March 31, 2004 numbered 1,882.


Results of the Business Areas

INTERNET

Revenues of the Internet Business Area (Tin.it division and Matrix SpA - Virgilio) for Q1 2004 amounted to €75.1 million with an increase of 32.1% compared to the same period of 2003 (€56.8 million). Gross operating profit for the period amounted to €13.5 million, a 42.1% growth compared to Q1 2003 (€9.5 million). Operating income for the whole area showed a significant improvement becoming positive at €0.6 million compared to an operating loss of €2.4 million in Q1 2003.
In particular:
Tin.it in Q1 2004 achieved revenues of €67.9 million (€51.9 million in the same period for 2003) with a growth of 30.8%. Gross operating profit increased by 33.5% to €14.4 million (€10.8 million in the same period of 2003). Operating income amounted to €3.9 million compared to €1.1 million in Q1 2003. Active users as of March 31, 2004 numbered 2.8 million (including Telecom Italia’s ADSL Alice subscribers, to whom Tin.it provides some services) up about 18.2% compared to March 31, 2003. Moreover in Q1 2004, the development of the Wi-Fi network continued and as of March 31 it reached 364 hot spots, of which 245 active and 119 currently being activated, thus making Tin.it’s network one of the first Italian Wi-Fi networks in terms of number of locations. Lastly, in March the entire Tin.it ADSL client base was migrated from a speed of 256 Kb to 640 Kb.

Matrix, with the portal and search engine Virgilio, achieved revenues for €8.6 million in the first quarter of 2004 , a growth of 32.9% compared to the €6.5 million for Q1 2003. Furthermore, during the period all the results improved significantly compared to those for the previous financial year. More specifically, gross operating loss (€0.9 million) improved by 38.9% (compared to an operating loss of €1.5 million in Q1 2003) and operating loss (€2.8 million) improved by 13% (operating loss at 3.2 million in Q1 2003). As of March 31, 2004, the unique users of Virgilio – that is confirmed as the first Italian portal – were about 14.7 million (+19.5% compared to March 31, 2003). Pageviews at the end of the quarter were 1.9 billion (up +16.1% compared to March 31, 2003). Lastly, a new home page was launched during the quarter improved both in contents and graphics.

TELEVISION

In Q1 2004, overall gross advertising sales of the business area grew in excess of 25% compared to the same period of 2003. Total revenues of the Area amounted to €26.4 million, with a significant increase (+23.7%) compared to Q1 2003 (€21.3 million). In spite of the higher costs sustained for the repositioning of La7 and consequent enrichment of the programming schedule, and the experimentation of digital terrestrial television, also gross operating loss improved by 6.1% reaching €9.3 million (compared to a gross operating loss of €9.9 million in Q1 2003). Operating income posted a loss of €19.7 million, improving by 3.8% compared to the same period of the previous year (€ -20.5 million).
In particular:
LA7 successfully continued to strengthen its brand and enhance its editorial image, achieving a share stably above 2% (source: Auditel) in the first three months of 2004, increasing compared to the same period for 2003. Still in the first quarter of 2004, overall revenues grew by 17.1% reaching €14.4 million (€12.3 million in the same period for 2003), while gross advertising revenues increased by 25.5% compared to the first quarter of 2003. All the channel’s results show improvements, net of the costs linked to the experimentation for digital terrestrial television. During the quarter, La7 carried on with its programming format characterised by news and the alternating of current events, culture and entertainment through the traditional programs that represent the network’s strength and with the launch of new formats and the exclusive screening of important sport events such as the Six Nations Rugby Tournament.

MTV strengthened its position in the Italian advertising market, with an increase by 27% in the number of companies that advertised on the channel, and confirmed itself as the leading broadcaster in the youth television segment, with revenues of €12.9 million (+26.4% compared to the first quarter of 2003) and an operating result improved by 51% compared to the same period of the previous financial year. In terms of audience, the Audistar research (Eurisko observatory) shows the significant growth trend of MTV (with terrestrial broadcasting technology).  The weekly audience increased by 10.2% compared to the first quarter of 2003, reaching the level of 13.6 million contacts. Lastly, the multimedia development of the MTV brand is continuing. MTV is now broadcast through specific channels on all the technological platforms, particularly by satellite and the Internet, with the site http://www.mtv.it/.

OFFICE PRODUCTS & SERVICES

In the first three months of 2004, compared to trends over the last years, the Area of Products &Services (Buffetti Group) achieved a turnaround in the growth trend of turnover thanks to the increase in sales of new products (+12% compared to Q1 2003) and to the maintenance in the volumes of traditional products. In Q1 2004, the revenues of the Area reached €38.2 million with a growth of 1.1%, on an equal perimeter, compared to Q1 2003 (€37.8 million). Gross operating profit increased to €5.6 million, up 19.2%, in comparable terms, with respect to the same period of the previous financial year. Operating income was €3.1 million with a growth rate of 28.6%, in comparable terms, compared to the first three months of 2003.

Q1 2004 results of Telecom Italia Media SpA

Telecom Italia Media SpA revenues amounted to €67.9 million, up 29.7% compared to Q1 2003 (€52.4 million). Gross operating profit increased by 62.3% to €9.3 million (€5.8 million in the same period of 2003). The operating result for the period improved significantly (+76.1%), compared to the same period of 2003. In fact, the operating loss greatly decreased to €1.1 million (compared to an operating loss of €4.6 million for Q1 2003).

Comparison between the data of Telecom Italia Media for Q1 2004 and the historical data of Seat Pagine Gialle for Q1 2003
Following the spin-off and the previously mentioned changes in the consolidation area, it is not significant, due to lack of comparability, to compare consolidated and statutory results of Q1 2004 for Telecom Italia Media with the relative historical data of the Seat Pagine Gialle Group that refer to the same period for 2003. However, these data are given in the attached tables and in the “First Quarter Report 2004”, which will be available on Telecom Italia Media’s Internet site.