Telecom Italia Media: Board Meeting approves Third-Quarter 2004 Report

11/08/2004 - 00:00 PM

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To foster greater clarity in the presentation of Telecom Italia Media SpA and Group performance figures for the first three quarters of 2004, principal earnings and operations data down to operating income level are presented with comparisons to figures for the corresponding period in 2003, having taken into account the Seat Pagine Gialle SpA demerger (which took effect on August 1, 2003) and changes affecting the consolidation area during the periods under comparison.

Great success of capital increase as adopted
by Shareholders’ Meeting in September

All operating results for the first nine months of 2004
significantly improved on equivalent terms

Consolidated revenues up 18%

Gross operating profit positive for 21.7 million euros
(against a 7.3 million euro loss for the first nine months of 2003)

Operating income improved by 25% to -62.4 million euros
(against -83.5 million euros for the first nine months of 2003)

Net financial position as of September 30, 2004 negative by 256.2 million euros (58.7 million euros cash positive as of December 31, 2003), impacted by higher debt following the De Agostini Group settlement

Internet Unit boasts strong growth compared with the first nine months of 2003

Tin.it: revenues (+26.2%) and gross operating profit (+51.9%) both up; operating income six times higher than for the first nine months of 2003; one of Italy’s largest Wi-Fi networks with 608 hot spots (482 activated)

Virgilio: one of Italy’s most popular portals with 5.7 billion pageviews (up 18.3% on the first nine months of 2003) and 14.1 million unique visitors (up 12.7% compared with September 30, 2003)

Television Unit: improvement of both revenues (+31.2%)
and profitability

LA7: three-year digital terrestrial TV rights acquired to broadcast football matches from Bologna, Palermo, Cagliari, Reggina, Fiorentina, Lecce, Chievo, Brescia and Parma

LA7: audience share rises to 2.5% in September; gross advertising income up 23.7%; all results register growth

MTV: overall gross advertising income up 27%, of which local advertising up 30%; net result remains stably positive

MTV Europe Music Awards 2004: great excitement for Europe’s most successful music event, to be held in Rome on November 18th

Buffetti: profitability improved as gross operating result grows 10.6% compared with the first nine months of 2003


Today the Telecom Italia Media (Telecom Italia Group) Board of Directors, chaired by Riccardo Perissich, examined and adopted the Report on results as of September 30, 2004.


Introduction
In order to foster greater clarity in the presentation of Telecom Italia Media SpA and Group performance figures for the first nine months of 2004, the principal results and operations data down to operating profit level are provided in comparison with figures for the corresponding period in 2003, having taken into account the Seat Pagine Gialle SpA demerger (which took effect on August 1, 2003) and changes affecting the consolidation area. Consolidation changes in 2003 essentially consisted of the divestment of a number of office product companies from the Buffetti Group, the acquisition of TM News (owner of APCom), and in 2004 the disposal of Cipi and the GPP Group. Telecom Italia Media SpA and consolidated figures for the first three quarters of 2004 were impacted by the settlement with the De Agostini Group (as announced in a press release dated June 28, 2004).


Telecom Italia Media Group results for the first nine months of 2004

Revenues grew by 18% on equivalent terms to 431.5 million euros, compared with 365.8 million euros for the same period in 2003. The Group’s organic growth was driven by the Internet Unit, which posted a 26.5% growth in revenues, and by the Television Unit, where revenue growth was equal to 31.2%.

The Group posted a 21.7 million euro gross operating profit, up 29 million euros on equivalent terms compared with the first half of 2003 (a loss of 7.3 million euros). The gross operating margin on revenues, rising from -2% to +5%. Growth was driven by higher turnover in all areas of business, and by improved operating efficiency.

Operating income was up 25.2% to -62.4 million euros on equivalent terms compared with the first nine months of 2003, when an 83.5 million euro loss was recorded.

Consolidated net financial position at September 30, 2004 was equal to 256.2 million euros (compared with 58.7 million euros cash as of December 31, 2003). This figure was impacted by the settlement reached with the De Agostini Group, though it does not yet include the 120 million euro capital increase carried out following the closing of accounts on September 30. Total consolidated shareholders’ equity as of September 30, 2004 was equal to 230.3 million euros (474.2 million euros at December 31, 2003). The headcount at September 30, 2004 was 1,845.

The Telecom Italia Media Group during the third quarter of 2004

Revenues rose 16% on equivalent terms to 125.6 million euros, as against 108.3 million euros over the same period in 2003. The gross operating result increased by 10.1 million euros to a positive 4.6 million euro, compared with the 5.5 million euro loss registered during the third quarter of 2003. Operating income improved by 23.6% to a 23.7 million euro loss compared with the same period in 2003 (a 31 million euro loss).

Results by Business Unit

INTERNET

Internet Business Unit revenues for the first nine months of 2004 grew 26.5% to 223.6 million euros compared with the same period in 2003 (176.8 million euros) as all business areas turned in positive performances and in particular by revenue growth from the sale of ADSL products. The gross operating result for the period posted a profit of 50 million euros, 58.3% up on the first nine months of 2003 (31.6 million euros). Unit-wide operating income corresponded to a profit of 11.9 million euros, against the 4.3 million euro loss registered during the first nine months of 2003.
In greater detail:
Tin.it revenues grew by 26.2% to 199.6 million euros during the first nine months of 2004 (158.2 million euros over the same period in 2003). Results improved significantly across the board, driven principally by strong revenue growth from ADSL: the number of Tin.it ADSL customers more than doubled compared with September 30, 2003. Operating income reached 16.5 million euros, compared with 2.6 million euros for the corresponding period in 2003; six times as much as during the first nine months of 2003. During the nine months, development of the Wi-Fi network continued. As of September 30, 2004 the network consisted of 608 hotspots, of which 482 are active and 126 currently being activated, making Tin.it’s hot spot network one of Italy’s most extensive. Lastly, in March the entire ADSL customer base was migrated from a 256 Kb to 640 Kb service.

Matrix, which owns the Virgilio Portal and search engine, posted revenues of 28.1 million euros over the first nine months of 2003, up 19.1% compared with the figure of 23.6 million euros recorded for the first nine months of 2003. The overall performance of Matrix also showed significant improvements compared with last year: the gross operating profit of 2.1 million euros was a major improvement on the 0.1 million euro profit of the first nine months of 2003. Operating income (-3.1 million euros) registered a 41.3% improvement (compared with a loss of 5.3 million euros). At September 30, 2004 Virgilio remained one of Italy’s most popular portals with around 14.1 million unique browsers (+12.7% compared with September 30, 2003); pageviews over the same period totalled 5.7 billion (+18.3% compared with September 30, 2003).

TELEVISION

In the first nine months of 2004 gross advertising revenues for the entire Unit grew by 25.6% to 109.5 million euros, compared to the corresponding figure of 87.2 million euros for the same period in 2003. Overall revenues amounted to 93.7 million euros, following noteworthy 31.2% growth compared with the first nine months of the preceding year (71.4 million euros). The gross operating result posted a 37.5% improvement, despite costs sustained for the repositioning of the broadcaster and the enrichment of the programming. Losses were reduced to -17.8 million euros (-28.5 million euros for the first nine months of 2003). Excluding costs sustained for trials of digital terrestrial television, this figure registered a 54% improvement. Operating income grew by 4.4% to -53.5 million euros, compared with the same period during the preceding year (-56 million euros). Excluding costs sustained for trials of digital terrestrial television, operating income posted a 16.1% improvement.
In greater detail:
LA7 successfully continued to strengthen its brand and positioning. In September 2004 the channel registered an audience share of 2.5% (source: Auditel), up on the corresponding period in 2003 (2.2%). The new autumn schedule started very well, with new shows and continued success for the broadcaster’s flagship shows. During the first nine months of 2004 gross advertising revenues increased by 23.7% to 54.8 million euros compared with the first nine months of 2003 (44.3 million euros). Turnover registered 15.8% growth to 42.2 million euros, compared with 36.4 million euros over the corresponding period in 2003.

MTV consolidated and strengthened its position on Italy’s advertising market, maintaining its status as Italy’s number one youth TV channel. Overall gross advertising revenues amounted to 54.7 million euros, after 27.5% growth in both domestic and international advertising compared with the first nine months of 2003 (42.9 million euros), while gross advertising from Italian avails posted a 30% growth. During the first nine months of 2004 revenues rose 36.9% to 54.6 million euros, allowing the company to post operating income of 4.8 million euros (compared with a 0.6 million euro loss for the first nine months of 2003). The net result amounted to a stable 2.5 million euro profit (compared with a loss of 1.1 million euros for the first nine months of 2003). Specific MTV-brand multimedia expansion is continuing across all technology platforms, especially satellite and the Internet, coordinated through the www.mtv.it website.

OFFICE PRODUCTS & SERVICES

Revenues for this Unit for the first nine months of 2004 amounted to 95.1 million euros, in line with the first nine months of 2003 on equivalent terms. The development and sale of new products has enabled the halt of the negative trend in turnover recorded in recent years. Profitability improved on equivalent terms in the first nine months of 2004 compared with the same period in 2003: the gross operating result grew by 10.6% to 8.4 million euros, compared with 7.6 million euros during the same period in 2003; operating income rose by 22.5% to 1.4 million euros, compared with 1.1 million euros during the first nine months of 2003.

Telecom Italia Media SpA results for the first nine months of 2004

Telecom Italia Media SpA revenues for the first nine months of 2004 amounted to 199.6 million euros, a rise of 25.5% on equivalent terms compared with the first nine months of 2003 (159.1 million euros). Third-quarter 2004 Parent company revenues were equal to 63.2 million euros (up 22.5% on the figure of 51.6 million euros recorded for the third quarter of 2003).

Operating profitability during the period improved. The gross operating result registered a 92.3% growth rising from 16.8 million euros in 2003 to 32.3 million euros during the first nine months of 2004, while operating income turns positive, rising from a loss of 14.4 million euros during the first nine months of 2003 to positive 0.7 million euros for the same period in 2004. Higher profitability continued in the third quarter of 2004, with the gross operating result registering 100.3% growth to 11 million euros compared with the third quarter of 2003 (5.5 million euros); operating profit turned positive by 0.8 million euros (against a loss of 5.7 million euros during the same period last year).


EVENTS OCCURRING AFTER SEPTEMBER 30, 2004

La7: digital terrestrial football match agreement
In September 2004 La7 Televisioni acquired the rights to broadcast the home football matches played by Bologna, Palermo, Cagliari, Reggina, Fiorentina and Lecce via digital terrestrial television. In October rights were also acquired for Chievo, Brescia and Parma. Digital terrestrial broadcasts will be launched in 2005 on a pay-per-view basis and using a prepaid card system. The operation envisages total commitment of approximately 32 million euro for three years, and is part of Telecom Italia Media’s digital terrestrial television project, leveraging a network that now covers 67% of the Italian population.


“MTV Europe Music Awards 2004” and “Live in Rome” concert
MTV Italia presents the “MTV Europe Music Awards”, Europe’s most successful and highest profile musical event to be held in Rome on November 18, 2004. Broadcast around the world live from the Tor di Valle racecourse, the event will appeal to a potential audience of one billion people. The free “Live in Rome” concert MTV is organizing as part of the event will be held the same day, with top Italian and international artists performing live on stage right next to the ancient Roman Coliseum.

Capital increase
Telecom Italia Media’s capital increase totalling approximately 120 million euros, as passed by the September 10, 2004 Shareholders’ Meeting, was highly successful and elicited a very favorable response from the market. During the offer period (October 11 – 29, 2004) 97.3% of the ordinary shares and 88.5% of the savings shares on offer were subscribed.

Management outlook
On the basis of current performance, the positive trend in profitability from operations is expected to continue. Furthermore, as a result of operations associated with the De Agostini settlement (disposal of a 40% stake in Finanziaria Web and the successful capital increase), actions have been undertaken to rebalance the Group’s financial position.

Comparisons between Telecom Italia Media figures for the first nine months of 2004 and Seat Pagine Gialle figures for the first nine months of 2003

Following the company’s split and the changes in the consolidation area, insufficient equivalence exists to draw comparisons between Telecom Italia Media consolidated and statutory accounts for the first nine months of 2004 and the corresponding Seat Pagine Gialle Group figures for the same period in 2003. These figures are, nevertheless, presented in tables in the appendix to the Third-quarter 2004 Report, which will be published on the Telecom Italia Media web site.

§§§

Results for the first nine months of 2004 will be presented to the financial community during a conference call tomorrow, 9 November, starting at 10 a.m. Italian time. Journalists may listen to the presentation by calling +39 06 33485042. Members of the media who are unable to listen live may access a recording of the presentation by dialling +39 06 334843 (access code 64561#).

§§§
The company has announced its 2005 calendar of events and the publication dates for Telecom Italia Media’s earnings and finance data. Any alterations to this timetable shall be announced in good time:

11 February: Board Meeting to examine the Telecom Italia Media Group preliminary full-year 2004 results;

15 March: Board Meeting to adopt the draft full-year 2004 operating accounts and consolidated financial statements;

22 April: Shareholders’ Meeting to adopt the full-year 2004 financial statements;

6 May: Board Meeting to adopt the first-quarter 2005 report;

22 July: Board Meeting to examine the Telecom Italia Media Group preliminary first-half 2005 financial results;

6 September: Board Meeting to adopt the first-half 2005 report;

4 November: Board Meeting to adopt the third-quarter 2005 report.

Pursuant to Article 82 of CONSOB ruling no. 11971/99 (and subsequent amendments and additions), the company intends to make use of the dispensation from the obligation to publish quarterly reports for the periods October-December 2004 and April-June 2005.