Telecom Italia Media: The Board of Directors Approved Preliminary Results as of June 30, 2007

07/23/2007 - 00:00 PM

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REVENUES UP TO €125.0 MILLION; UP 27.8% (€97.8 MILLION IN H1 2006), BOOSTED BY THE INCREASE IN ADVERTISING REVENUES AND DIGITAL TERRESTRIAL TELEVISION

BOOM OF La7 Free-to-air ADVERTISING REVENUES IN Q2, UP 18.3% (UP 15.8% IN Q1)

ONGOING SUCCESS OF MTV, WHICH CELEBRATES ITS 10TH ANNIVERSARY: 10% GROWTH IN ADVERTISING SALES THANKS TO THE CONTRIBUTION OF ALL PLATFORMS

REVENUES FROM DIGITAL TERRESTRIAL TELEVISION DOUBLED (UP 154.7%); €21.9 MILLION (€9.6 MILLION IN Q2 2007)

OPERATING LOSS MORE THAN HALVED: EBITDA -€20.8 million, +60.3% (-€52.4 million in h1 2006), EBIT -€51.6 million, +34.7%(-€79.0 million in h1 2006)

Net DEBT decreased compared to the first quarter: €165.1 million (€190.6 million at march 31, 2007)

Positive results of the new Content Competence Center of the Telecom Group. With the 32nd edition of the America’s Cup 2007, broadcast exclusively the great event on all the Group’s platforms, achieving excellent audience results

Milan, July 23, 2007 – The Board of Directors of Telecom Italia Media, chaired by Enrico Parazzini, examined and approved the preliminary results as of June 30, 2007.

Consolidated revenues for the six-month period amounted to €125.0 million, up 27.8% (€97.8 million in H1 2006), mainly boosted both by the strong growth in domestic advertising revenues (+14.3%), which significantly overperformed the market (down by 2.7% in the first five months 2007-source: Nielsen), and the strong increase in revenues from the Digital Terrestrial Television platform.

EBITDA stood at -€20.8 million, thus improving by 60.3% compared to H1 2006 (-€52.4 million in the same period of 2006). This result was achieved both thanks to an improvement of analogue Free to Air activities by €9.9 million, driven by advertising sales, and the profitability growth of Digital Terrestrial Television, which benefited both from the increase in revenues, an improved efficiency of the platform, and cost rationalization of Free to Air digital channels.

EBIT, after amortization and depreciation for the period, was -€51.6 million, a 34.7% improvement (-€79.0 million in H1 2006). Depreciation and amortization impacted H1 operating profitability by €30.8 million and are mainly attributable to investments in DTT (€14.1 million), whose return shifted in time due to the already known postponement of the switch off.

Industrial investments amounted to €46.2 million in H1 2007 (€58.6 million in the same period of 2006). The decrease in investments is attributable to the completion of the development phase of the digital networks. Investments for the six-month period include €19.2 million for the purchase of television rights and €20.8 million mainly for the extension of the digital coverage of the 2nd multiplex in Sicily, completed in the first quarter of the year.

In the second quarter, net financial debt decreased to €165.1 million compared to €190.6 million at 31 March. The decrease was mainly achieved through the collection of the amount receivable for the Fiscal Consolidation at Telecom Italia Group totaling €48.4 million (financial debt was €128.2 million at 31 December 2006).

Results by Business Segment

Television Free to Air

Income statement results for H1 2007 of the Free to Air were very positive: revenues were €85.9 million, improving 13.8% (€75.5 million in 2006), and both EBITDA (-€9.0 million; +52.4%) and EBIT (-€25.0 million; +23.8%) improved significantly.

The positive performance in terms of revenues was achieved mainly thanks to the growth of advertising sales in Italy (up 12.9%), which strongly overperformed the market, as mentioned above. In detail:
La7 revenues, amounting to €53.4 million, showed a significant increase (up 17.4% compared to €45.5 million in H1 2006), thanks to the large contribution of advertising sales which grew 18.3% in Q2 2007 (up 15.8% in Q1). The positive sales result led to an increase in profitability, improving both EBITDA (+€6.1 million, up 29.3% compared to 2006), and EBIT (+€4.3 million, up 13.4% compared to 2006).

In Q1 2007, La7 consolidated its average daily audience share to 3% in a period marked by a total drop in audience and a high contraction of generalist TV. Moreover, La7 continued to expand its capacity to increase its audience: the overall audience base increased (from year-start, over 50 million Italians watched the network for at least one minute), young audience increased (rising over 20% for 15/34 year bracket, a target group which is ever reducing the time dedicated to watching TV), and the relationship with the adult (with a 3.7% share of 35/64 years old bracket), culturally evolved (share of graduated people: 5.1%) and metropolitan (share: 4.1%) reference audience was consolidated.

The 32nd edition of the America’s Cup recorded a 6.9% share, with a share of over 13% when Luna Rossa participated in the final portion of the Louis Vuitton Cup, with a total audience of over 29 million for the event.

This was coupled by the great success recorded by the Six Nations Rugby Tournament and Superbike races (both over 5% average share with peaks of 17% for Rugby), a marked growth compared to 2006.

Alongside sports events, La7 has confirmed its position as the network dedicated to current events and investigative stories, with programs such as Omnibus (average share 4.5%), Otto e Mezzo (average share 2.4%) and L’infedele (average share 3%). Likewise, the La7 News has demonstrated its focus on all the most significant events in Italy’s political and social life, attracting a large audience (e.g. it reached a 6.1% share for the live broadcast of Veltroni’s speech at the Lingotto in Turin).

MTV revenues amounted to €35.5 million, up 8.6% compared to the first half of 2006 (€32.7 million). In H1 2007, MTV consolidated its position thanks to an increase in domestic and international advertising sales. The aggregate value of MTV’s advertising sales, distributed across all platforms, was 10%. EBITDA and EBIT improved by about €4 million compared to 2006.
The positive trend of the results that MTV achieved in 2006 was confirmed in H1 2007. MTV continues to be a constant, everyday presence for its audience, with more than 8 million young people tuned into the channel every day.

Spring 2007 opened with the presentation of the “MTV10” project, a series of events and activities tied to MTV Italia’s ten-year anniversary, with:

a survey entitled “10 years young, 2 generations face to face”, examining the main changes among young people in the decade from 1997 to 2007

the “MTV Toy” project, through which the network offered its logo for an extraordinarily successful design setting (80,000 visitors at the exhibition during the Salone del Mobile trade fair in Milan)

a hoax campaign entitled “The Sea Tomorrow”, a thought-provoking campaign to test the audience’s sensitivity towards global warming (20,000 views on YouTube and countless blogs on the issue, 10,000 e-mails and text messages sent to the toll-free number shown during the spot, and outstanding press and TV coverage)

In the year when MTV celebrated its tenth anniversary in Italy, direct contact with young people was more important than ever. Numerous events were held in the country, with well-known shows as well as new ideas: from MTV On@Innovaction 2007 (second rendezvous at the innovation fair) to MTV Brand New Nights (3 nights of free concerts live at the Rolling Stone), the Trl Awards (the forerunner for the Trl On Tour season, which attracted more than 100,000 young people to city squares), MTV Toy Party (at an extraordinary location, the Milan Polytechnic Institute) and Comicittà (a week devoted to entertainment, with a comedy and cartoon marathon, “fun” film previews, game/multiplayer arena, and more).
                                                            
Multimedia Products and Services

In the first half of 2007, multimedia activities continued along the growth trend which characterized Q1, recording revenues of €13.2 million, up 33.3% compared to the same period of 2006 (€9.9 million). In Q2 2007 alone, revenues stood at €8.1 million. The positive result was achieved on all platforms also thanks to advertising sales, which increased 61.2%. The good performance of this business area is confirmed also by the positive EBITDA results (4.5 million compared to €2.8 million in H1 2006; up 60.7%) and EBIT (3.9 million, compared to € 2.2 million in H1 2006; up 77.3%). The multimedia activities of the Telecom Italia Media Group include satellite activities and interactive events, as well as the new activities of the Content Competence Center for Telecom Italia. In the satellite sector, the MTV+MTVHits+MTVBrand:New channels confirm the Group’s leadership in the music segment (MTVHits won the Hotbird Award as best European music channel), and with the Comedy Central and Nickelodeon channels it reinforced its presence in the entertainment and children’s sectors. All the interactive channels have shown growth in terms of unique users and the number of pageviews. The first results of the activities of the Content Competence Center, which were launched in April, have been positive, contributing €1.1 million to the growth in revenue for H1.

Digital Terrestrial Television

Revenues for the first half of 2007 more than doubled reaching €21.9 million, growing 154.7% (€8.6 million in H1 2006). Profitability also improved significantly both in terms of EBITDA (-€7.9 million compared to -€26.7 million in H1 2006; up 70.4%) and of EBIT (-€22.0 million compared to -€38.5 million in H1 2006; up 42.9%).

This trend can be attributed to the growth in revenues and margins from pay-per-view, thanks to the commercial development of the “La7 Cartapiù” offer and the positive contribution arising from the agreements reached with Mediaset and Telecom Italia to broadcast the audiovisual contents of Italian Serie A soccer games, and thanks to the initiatives to lower costs on digital free-to-air channels (La7 Sport and QOOB), and the increased sale of digital bandwidth by the Network Operator.

In H1 2007, the range of pay-per-view content was extended with the summer offer, also broadcasting 64 match races of the America’s Cup, 46 car and superbike racing events, 51 TV movies and 108 Cartoons.

QOOB TV continued to grow during this six-month period. This multimedia platform offers the best of animation, cinema, graphic design and music on television, the Internet and mobile phones, reaching approximately 210,000 unique users. During the six-month period, a series of new initiatives was launched (such as the platform in English, the agreement with the European Institute of Design for advertising), with growing appreciation for content, as demonstrated by the increase in the number of videos that were cut and pasted on third-party websites.

The activities of Network Operator (TI Media Broadcasting) confirmed the positive results already achieved in the first quarter of 2007, with the acquisition of frequencies in Sicily, for a total amount of €15.8 million, which enabled the company to extend the regional coverage. Following this transaction, the national coverage of the 2 Digital Multiplexes increased to 87.2% and 75%, respectively.
 
News

In H1 2007, revenues of the “News” Business Area (APCom press agency) amounted to €4.7 million, up 4.4% compared to the same period of 2006. Profitability is virtually in line with the first half of 2006. During Q2, a web news program (E-press) was launched, with a print edition that will be distributed in top-class hotels from the end of July. The production of a multimedia news program is currently being completed.

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Furthermore the Board of Directors:

approved some limited amendments to rules concerning the mechanisms for the nomination of the Statutory Auditors, updating the by-laws to innovations introduced in the Rules for Issuers (Regolamento Emittenti);

acknowledged the completion of the merger by incorporation of Holding Media e Comunicazione HMC S.p.A. and HMC Pubblicità S.r.l. in liquidazione, as of 17 July 2007. As announced, the transaction did not entail any amendment to the By-laws of TI Media and does not require any capital increase of TI Media.

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The results for the first half of 2007 will be presented to the financial community today in the afternoon during a conference call, starting at 4:00pm (CET). Journalists are invited to follow the conference call at the number: + 39 06 33 485 042. For those who are unable to follow the live conference call, a recorded version of the presentation will be available for 48 hours at the number: +39 06 334 843 (access code 155428#).

 

Enclosures (file .pdf, 151 Kb)