Telecom Italia Media: the Board of Directors approved the Consolidated Report on Operations as of June 30, 2008 and the strategic guidelines for the coming three-year period

08/07/2008 - 00:00 PM

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This press release includes alternative performance indicators not considered under IFRS (EBITDA, Net Debt). These terms are defined in the appendix.

REVENUES: € 148.3 MILLION; +18.6% (€ 125.0 MILLION IN H1 2007)

Free to Air: € 81.4 million; -5.2%

Multimedia: € 16.6 million; +25.8%

Digital Terrestrial Television: € 46.1 MILLION; +110.5% (MAINLY THANKS TO TRADING OF FOOTBALL RIGHTS)

APCOM: € 4.8 million; +2.1%

EBITDA: -€ 35.2 milLION; (-€ 20.8 milLION in H1 2007)

EBIT: -€ 69.1 milLION; (-€ 51.6 milLION in H1 2007)

NET RESULT: -€ 55.4 milLION; (-€ 42.2 milLION in H1 2007)

NET DEBT: € 245.4 million (€ 215.8 million at december 31, 2007); +13,8%

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The Board of Directors of Telecom Italia Media, chaired by Berardino Libonati, examined and approved the Group’s results at June 30, 2008 and the strategic guidelines for the coming three-year period.

The Group’s consolidated revenues for H1 2008 amounted to € 148.3 million, up by € 23.3 million, or 18.6% (€ 125.0 million in H1 2007). The increase was due to the performance of Digital Terrestrial TV (+ € 24.2 million) — mainly thanks to the sale of football rights to Mediaset and TIM — and Multimedia (+€ 3.4 million), whereas Free to Air Television revenues decreased (-€ 4.5 million) , due to a drop in gross advertising sales by 1.2% for La7 and by 12.5% for MTV.

EBITDA was -€ 35.2 million, decreasing by € 14.4 million (-€ 20.8 million in H1 2007). This result was primarily affected by the loss recorded by Free to Air Television, which was impacted by a decrease in advertising sales along with an increase in the costs of new programming for the two networks La7 and MTV. The decline in EBITDA was also due to the increasing weight of the costs of acquiring football rights for digital terrestrial television, partly offset by the increase in revenues.

EBIT after depreciation and amortization for the period was -€ 69.1 million, a fall of € 17.5 million (-€ 51.6 million in H1 2007). Amortization for the first half of 2008 amounted to € 33.9 million. The increase was mainly due to € 12.4 million for the purchase of television rights and € 15.3 million relating to digital network infrastructure.

Net result attributable to the Parent Company was -€ 55,4 million (-€ 42.2 million in H1 2007).

The net financial position was € 245.4 million, a fall of € 29.6 million compared to December 31, 2007 (€ 215.8 million). The change was mainly due to industrial investments made in the period (€ 27.3 million), particularly the purchase of TV rights, as well as the requirements for current operations in the period, amounting to € 58.0 million, which were partially offset by the collection of the € 55.7 million receivable arising from the national tax consolidation scheme.

Results by Business Unit

Free to Air Television

Revenues generated in H1 2008 by the Free-to-Air business amounted to Euro 81.4 million, a decrease of Euro 4.5 million (-5.2%) compared to the same period of 2007; EBITDA was therefore -€ 21.1 million, down by € 12.1 million compared to the first half of 2007 and EBIT amounted to -€ 38.5 million, with a decrease of € 13.5 million compared to H1 2007 (-€ 25.0 million).

In detail:

LA7

La7 reported revenues of € 51.2 million, down by 4.1% from the € 53.4 million recorded in the first half of 2007, due to the decline in gross advertising sales (-1.2%) on 2007 as well as lesser revenues on the sale of television rights, compared to the first half of the previous year, which saw the sale of America’s Cup rights. The first half of 2007 saw record growth of advertising sales (+15%) against the prevailing market trend. EBITDA stood at -€ 22.3 million, down by € 7.6 million on the first half of 2007 (-€ 14.7 million). This result was due to increased programming costs, particularly entertainment-related costs incurred in the first part of the year. EBIT was -€ 37.0 million (down € 9.1 million compared to H1 2007).
In June 2008, LA7’s audience reached an all-time record high, coming to 3.2% and ending the first half of the year at 3.1%, against the backdrop of a market that continues to show a decline in the viewership of general-interest TV networks. The increase is largely due to Prime Time, which posted an improvement of 20%.

MTV

MTV’s revenues amounted to € 35.7 million, substantially in line with the € 35.5 million posted in the first half of 2007. The period was affected by the downtrend in gross advertising sales (-12.5%, of which sales in Italy were down -9.7% and international sales -44.9%), offset by greater sales for events and productions (+€ 4.6 million). The decrease in gross advertising sales in Italy was affected by the decline in investments by TIM, which decided to concentrate its efforts in the second half of the year to coincide with the launch of its MTV Mobile offer. EBITDA was € 1.1 million (-€ 4.5 million compared to H1 2007); EBIT was -€ 1.5 million (-€ 4.4 million compared to the same period of the previous year). Margins were affected by the decrease in advertising sales and increased programming costs compared with 2007, primarily concentrated in the first half of the year. 

Multimedia

In the first half of 2008, multimedia operations posted a positive result, with revenues of €16.6 million, up by 25.8% (€13.2 million in the first half of 2007). This result was primarily due to the performance of the Content Competence Center, which reported revenues of € 3.7 million (€ 1.1 million in 2007, as operations began in April). Revenues of Satellite Channels on SKY (Nickelodeon, Comedy Central, and the MTV musical channels) were up, partly offset by a decline in Interactive activities. EBITDA increased to € 6.1 million from € 4.5 million in the first half of 2007 and EBIT climbed to € 5.3 million, compared to € 3.9 million in the first half of 2007.

Digital Terrestrial Television

Revenues amounted to € 46.1 million in the first half of 2008, up sharply by 110.5% (€ 21.9 million in the first half of 2007). This performance was driven by the growth of pay-per-view revenues, primarily due to the aforementioned sale of football rights to Mediaset and TIM, the development of the commercial offering “LA7 Cartapiù” and the increase in revenues from the rental of digital band to third parties by the Network Operator.
Profitability fell in terms of EBITDA (-€ 9.1 million, compared to -€ 7.9 million in the first half of 2007) and EBIT (-€ 24.7 million, compared to -€ 22.0 million in the first half of 2007) due to the increasing weight of the costs of acquiring football rights on pay-per-view operations for the period and the development of digital networks by the network operator.

News

TM News, which operates through the press agency APCOM, reported revenues of € 4.8 million during the first half of 2008, marking an increase of 2.1% over 2007, EBITDA of -€ 4.6 million, compared to -€ 3.0 million in the first half of 2007, and EBIT of -€ 4.8 million, compared to -€ 3.2 million in the first half of 2007. The deterioration of margins is primarily attributable to the expenses of personnel redundancies due to the new organizational structure.

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Outlook and Strategic Guidelines 2009-11

In a market context characterized by a decrease in the expected growth of advertising investments and sharper competitive pressure, the Group began as early as May 2008 to take steps aimed at containing any further decline in profitability and reversing the downtrend recorded in the first few months of the year.

In particular, the Group, beginning in September 2008, launched an expansion of its advertising base and took incisive action on costs by reorganizing its operating structure and revising the autumn programming of the analog channels La7 and MTV, maintaining high quality standards for its networks.

On this basis, the Telecom Italia Media Group expects that its losses in the second half of the year will be lower than those reported in the first half of 2008, as well as those reported in the second half of 2007. This performance, however, will not permit the Group to improve its profitability for the entire year with respect to the previous year, although the positive impact of the actions taken during 2008 will be fully reflected in 2009.

The strategic guidelines set out for the next three years call for the Group to consolidate its current editorial profile for analog channels, despite significant cost savings. In particular, La7 will proceed with a revision of its programming with the aim of significantly reducing the network’s losses, while maintaining high quality standards. Playmaker production operations within MTV, which are currently in the start-up phase, will also be developed.

The Group will also continue to pursue its multichannel, multimedia development strategy. In this context, it will consolidate its current MTV businesses over satellite and the Web, with the goal of improving on the positive results achieved thus far, and will develop and enhance the business over the mobile channel through the expansion of MTV-Mobile.

For digital terrestrial, the Group plans to review its PPV strategy, seeking out majority strategic partners for joint ventures, out of consideration for the continuing structural problems and the increasing difficulties encountered in acquiring premium content at competitive prices. The Network Operator DTT will gradually shift its focus to the establishment of digital networks, the technical management of these networks, and the rental of band to third parties, with the aim of exploiting its digital assets.

Lastly, the Group intends to attempt to recover profitability in its Press Agency business.

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The Board of Directors acknowledged the resignation of Enrico Parazzini, effective as of August 8, 2008, from his position as member of the Board of Directors of the Company and other positions held within the TI Media Group, consistent with his decision to leave the Telecom Italia Group. The Board and the internal auditors have expresses their thanks to Mr Parazzini for his highly qualified professional and managerial contribution over the years.

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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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The Group’s results as of June 30, 2008 will be presented to the financial community today during a conference call, starting at 5:30PM (CET). Journalists are invited to follow the conference call at the number: +39 06.33485042. 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 06.334843 (access code 208995#):



 


Enclosures (file .pdf, 114 Kb)