Telecom Italia Media: The Board of Directors Approves Results at December 31, 2007

02/28/2008 - 00:00 PM

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TELECOM ITALIA MEDIA GROUP:

GROWTH TREND AND OPERATING PROFITABILITY IMPROVEMENT FOR 2007 CONFIRMED. BEST OPERATING PROFITABILITY SINCE 2005

REVENUES: € 263.1 million; +26.8% (€ 207.5 million in 2006), thanks to the positive performance of advertising sales and Digital Terrestrial TV

EBITDA: -€ 55.3 million, +33.3% (-€ 82.9 million in 2006)

EBIT: -€ 117.1 million, +14.8% (-€ 137.5 million in 2006)

NET RESULT: -€ 88.1 million (-€ 101.1 million in 2006)

NET DEBT: € 215.8 million (€ 128.2 million at December 31, 2006)

LA7 Free to Air advertising sales increased: +15.8% compared to 2006, outperforming the market (+1.2% - source: Nielsen)

MTV’s advertising sales increased 6.0% thanks to the contribution of all the platforms

Digital Terrestrial Television: revenues doubled, growing 99.0% to € 62.7 million (€ 31.5 million in 2006)

TELECOM ITALIA MEDIA S.p.A.: revenues amounted to €152.5 million (+34.0% compared to 2006);
EBITDA -84.5 (+16.0% compared to 2006); EBIT -108.7 (+11.6% compared to 2006); net result  -€ 79.4 million (-€ 92.1 million in 2006); net debt € 106.4 million (€ 48.5 million at December 31, 2006)

The Board of Directors of Telecom Italia Media, chaired by Enrico Parazzini, examined and approved the draft financial statements of the Group and the Parent Company at December 31, 2007.


Telecom Italia Media Group in FY 2007

Consolidated revenues for 2007 amounted to € 263.1 million, up 26.8% (€ 207.5 million for 2006), driven by the positive performance of domestic advertising sales (+11.6%), which outperformed the market (+ 1.2% - source: Nielsen) and the sharp rise in revenues generated by the Digital Terrestrial platform, mainly for the broadcasting of Serie A TIM football matches.

EBITDA was - € 55.3 million, with a marked improvement compared to 2006: + 33.3% (- € 82.9 million in 2006). In detail, this result stems from the profitability growth achieved both by the Digital Terrestrial TV (+61.3%) — which benefited from an increase in revenues and a more effective platform management, as well as cost rationalization measures on Free to Air digital channels — and the Multimedia business area (+48.0%), which benefited from the positive contribution of advertising sales that increased 25.9%.

EBIT, after amortization and depreciation for the year, was - € 117.1 million, a 14.8% improvement (- € 137.5 million in 2006). Depreciation and amortization weighted on operating profitability for 2007 by € 62.0 million and are mainly related (€ 28.7 million) to investments on DTT and the higher use of television rights.

Net result of the Parent Company was - € 88.1 million (- € 101.1 million in 2006).

Net debt amounted to € 215.8 million, up € 87.6 million compared to December 31, 2006 (€ 128.2 million). The change was mainly due to industrial investments for the year (€ 68.8 million) and the requirements for operating activities of the year (€ 57.9 million), partly offset by the collection of the receivable arising on the National Tax Consolidation (€ 48.5 million). 

Industrial investments amounted to € 68.8 million in 2007 (€ 84.8 million in 2006). The decrease in investments was mainly due to the completion of the development phase of digital networks.

Results by Business Unit


Free to Air Television

The Free to Air Business Unit recorded positive results in 2007: revenues were € 160.2 million, improving 10.9% (€ 144.4 million in 2006). The positive performance in terms of revenues was achieved mainly thanks to the growth of advertising sales in Italy (+11.0%), which outperformed the market, as mentioned above (+1.2% - source: Nielsen). EBITDA was - € 31.6 million (- € 1.1 million compared to 2006); EBIT was - € 62.2 million (- € 3.2 million compared to 2006).

In detail:


LA7

La7 revenues, amounting to € 96.7 million, increased (+15.8% compared to € 83.5 million in 2006) thanks to the significant contribution of advertising sales, which grew 15.8%. The positive increase in sales stems from a constant improvement in the quality of the TV offer, which in the second half of the year led to an increase in development costs to develop the programming format compared to the previous year. EBITDA was - € 40.0 million (- € 1.4 million compared to 2006); EBIT was - € 65.3 million (- € 3.5 million compared to 2006). 

In 2007, La7 maintained its 3% average daily share, with an increase in the afternoon slot (+15% over the same period of 2006), reaching a 4.5% average share. Moreover, overall coverage increased, with total contacts reaching 52.1 million (92.3% of total population).

Sport continues to contribute highly to LA7 success: the Six Nations Rugby Championship recorded an average share of 5.5%, with peaks at 17%, twice the results achieved in 2006, the America’s Cup (the first great event broadcast on all the platforms of the Telecom Italia Group, with over 29 million total viewers) reached 6.9%, and the World Superbike Championship reached 4.8%. Football also recorded good results, with live broadcasting of the Uefa Cup and the recent acquisition of several Coppa Italia matches enabled LA7 to achieve a prime time average share of over 7%.

In the News sector, LA7 maintained its focus on news and politics, offering also a summer version of both Omnibus and Otto e Mezzo, two of the most successful shows, along with L’infedele, the alternative news program much appreciated by the public (average viewers per minute: +3%).
TG LA7 (news) confirms its focus on the most significant political and social events in Italy, also through a large number of Special editions on extraordinary topical events, with many hours of live broadcasting.
Unique entertainment is provided also by Daria Bignardi with her sure-fire and successful show Le Invasioni Barbariche.
LA7 also provided a significant moment of encompassing memory of Italian history with the event show of the year, Il Sergente, which marked the TV comeback of Marco Paolini. The show recorded 4.6 million Italian viewers, with a share of 5.7% and an average number of viewers of 1.2 million.


MTV

MTV revenues amounted to € 71.8 million, up by 7.8% compared to 2006 (€ 66.6 million). MTV consolidated its position thanks to the growth of advertising sales in Italy (+3.6%) and internationally (+3.6%); the overall value of MTV advertising sales distributed on all platforms grew 6.0%.  Both EBITDA (+5.0% to € 8.4 million) and EBIT (+10.7% to € 3.1 million) improved compared to 2006. 

These positive results were reached in the 10th year of operations of MTV in Italy. This anniversary was marked by several specific events, which culminated in the not-to-be-missed MTV Day. This year, MTV Day offered a double event, with two simultaneous concerts in Rome and Milan. This free event gathered 140,000 young people from all over Italy. 123 Italian artists and the most popular MTV’s VJs recorded more than 6 million TV contacts and 83,000 web streaming requests.        


Multimedia

In 2007, growth continued for the multimedia business unit, which reached revenues of € 31.5 million, up 33.5% compared to 2006 (€ 23.6 million). The positive result was achieved on all platforms also thanks to advertising sales, which increased 25.9%. The good performance of this business unit is confirmed also by the positive EBITDA results (€ 11.1 million compared to € 7.5 million in 2006; up 48.0%) and EBIT (€ 9.5 million, compared to € 6.3 million in 2006; up 50.8%). The multimedia operations of the Telecom Italia Media Group include satellite broadcasting and interactive events, as well as the activities of the Content Competence Center for Telecom Italia.

Also on the Sky platform, with the satellite network including the MTV+MTVHits+MTVBrand:New channels and the new MTVPulse, MTVGold and VH1, MTV confirmed its undisputed leading position in the youth and music segment, whereas Comedy Central and Nickelodeon consolidated MTV’s presence in the satellite entertainment and children’s programs. All of the Interactive channels (mtv.it, la7.it, etc.), performed well in terms of both unique users and pageviews. The results of the Content Competence Center, which started its activities in April, were positive and contributed € 3.7 million to the increase in revenues for 2007.


Digital Terrestrial Television

Revenues for 2007 amounted to € 62.7 million, growing 99.0% (€ 31.5 million in 2006). Profitability also improved significantly both in terms of EBITDA (- € 16.8 million compared to - € 43.4 million in 2006; +61.3%) and EBIT (- € 45.9 million compared to - € 67.6 million in 2006; +32.1%).
This performance is attributable both to the increase in pay-per-view revenues and margins (thanks to the commercial development of the offering “LA7 Cartapiù”), and the cost rationalization policy adopted for the Free-to-Air digital channels (LA7 Sport and QOOB), as well as the growth in sales of digital band by the Network Operator.

The Digital Terrestrial sales offering “LA7 Cartapiù” allows the purchase of football matches for 10 teams out of 20 from the Serie A TIM. With reference to football, the programming was expanded to include international events, such as the Uefa Cup and the best of other countries’ championships. In the 2007-2008 season, non-football content was also expanded with the introduction of cult Japanese horror movies, telefilms, motor shows, cartoons, golf events and edutainment shows. “LA7 Cartapiù” allows users to buy single events, event packages or the entire programming for a month.

In 2007, QOOB TV — the multimedia platform broadcasting on television, the Internet and mobile phones the best of cartoons, movies, graphic design, and music, maintained a constant traffic of approximately 210,000 unique users. Appreciation of content is on the rise, as shown by an increasing number of videos copied and pasted on third-party websites. In order to satisfy the foreign public, in April QOOB was launched in an English version.

The Network Operator (TI Media Broadcasting) continued to perform well. During the first half of the year, a contract was finalized to acquire frequencies in Sicily for a total amount of € 15.8 million, which allowed the company to increase its coverage in the region. Following this transaction, the national coverage of the two Digital Multiplexes increased to 87.2% and 74.9%, respectively. Revenues from band sales to third parties increased approximately 49% compared to year-end 2006. Over the first nine months, important multi-year contracts were signed by the company to lease digital band to host new channels on its multiplexes.
 

News

Revenues of the “News” business area (APCom press agency) amounted to € 10.1 million in 2007, up 8.6% compared to 2006, with a more marked increase by 10% for the New Media segment and 13% for the Corporate Clients segment. EBITDA was virtually stable compared to 2006, despite the increase in operating costs, whereas EBIT improved 3.2% as a result of a decrease in depreciation and amortization.
At the end of July, a new editorial project was launched (the first APCom project adopting an advertising business model) — e-Press, afternoon press edition, with free distribution to 4 and 5-star hotels. Moreover, the integration of the multimedia desk continued through the inclusion of “new journalism figures” and, consequently, the launch of Notiziario Multimediale (multimedia news). Experimentation with photography production was also begun by the same journalistic structure that began developing video products for the web in collaboration with AP for own-brand and private-label products.


Telecom Italia Media S.p.A.

Revenues amounted to € 152.5 million, up 34.0% compared to 2006 (€ 113.8 million). Growth is mainly attributable to the increase in Free To Air advertising sales (+15.8%) and to the development of Digital Terrestrial Television, whose revenues increased 73.2%.

EBITDA was - € 84.5 million, thus improving by 16.0% compared to 2006 (- € 100.6 million).

EBIT was - € 108.7 million, thus improving by 11.6% compared to 2006 (- € 122.9 million).

Net result of Telecom Italia Media S.p.A. was - € 79.4 million (- € 92.1 million in 2006).

Net debt at year-end 2007 amounted to € 106.4 million compared to € 48.5 million at year-end 2006. The change was mainly due to industrial investments for the period (€ 30.5 million), the requirements for operating activities (€ 72.9 million), partly offset by the collection of the receivable arising from the sale of Buffetti (€ 2.7 million) and by the collection of the receivable arising on the National Tax Consolidation (€ 42.9 million).

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The manager responsible for the preparation of the Company’s accounting documents, Paolo Serra, declares in accordance with paragraph 2 of article 154-bis of the Testo Unico della Finanza (Financial Law) that the accounts information contained in this press release corresponds to the accounts documents, books and records.


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FORESEEABLE EVOLUTION: OUTLOOK FOR THE CURRENT YEAR

Forecasts for 2008 predict limited growth in traditional TV advertising sales as a result of both increased fragmentation of investments as well as the lack of a clear-cut regulatory framework within the sector. Italy’s failure to complete the reform of its TV sector is expected to have a negative impact on the entire media market.

Meanwhile, although not at the levels originally anticipated, an increase in the dissemination of innovative platforms (IPTV, Internet, DTT, DVB-H, satellite) is expected, which should bolster demand for personalized content.

For these reasons, and consistent with the changes in scenario, the Telecom Italia Media Group has revised its target for the achievement of a positive EBITDA figure for the Television Free to Air + Multimedia area to beyond 2008.

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Calling of the Shareholders’ Meeting

TI Media’s Board of Directors has entrusted the Chairman with the task of calling a Shareholders’ Meeting for April 10, 2008.

In addition to approving the 2007 annual report, the meeting will elect the Board of Directors (using the competing-list system set forth in the By-laws); the extraordinary session will vote on a number of changes to the By-laws necessary to comply with recent regulatory changes.

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The Group’s results as of December 31, 2007 will be presented to the financial community today during a conference call, starting at 5:00pm (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 186013#).
 

Enclosures (file .pdf, 151 Kb)