Telecom Italia Media: the Board of Directors Approves the Group's Report on Operations at September 30, 2008

11/06/2008 - 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.

LOSSES REDUCED FOR THE THIRD QUARTER OF 2008: EBITDA UP BY € 7.4 MILLION COMPARED TO THE THIRD QUARTER OF 2007 AND EBIT UP BY € 8.5 MILLION, MARKING A TURNAROUND ON THE FIRST TWO QUARTERS OF 2008

REVENUES FOR THE FIRST NINE MONTHS: € 209.9 MILLION; +17.7% (€ 178.3 MILLION FOR THE FIRST NINE MONTHS OF 2007)

EBITDA: -€ 44.7 MILLION (-€ 37.7 MILLION FOR THE FIRST NINE MONTHS OF 2007)

EBIT: -€ 92.7 MILLION (-€ 83.7 MILLION FOR THE FIRST NINE MONTHS OF 2007)

NET RESULT: -€ 75.2 MILLION (-€ 65.8 MILLION FOR THE FIRST NINE MONTHS OF 2007)

NET DEBT: € 274.1 MILLION (€ 215.8 MILLION AT DECEMBER 31, 2007)

The Board of Directors of Telecom Italia Media, chaired by Berardino Libonati, met today, and examined and approved the Group’s results at September 30, 2008. The third quarter of 2008 ended with significant progress, marking a turnaround on the first two quarters of the year. In further detail, EBITDA for the third quarter (-€ 9.5 million) increased by € 7.4 million on the third quarter of 2007 and EBIT (-€ 23.6 million) was € 8.5 million higher than in the third quarter of 2007. These results were achieved due to the action taken by the Group beginning in May aimed at dealing with the unfavorable market context and containing the decline in advertising sales. The steps taken to improve profitability involved reorganizing the operating structure, revising programming for analog channels, and expanding LA7’s advertising base.

Turning to the results for the first nine months of 2008, consolidated revenues were € 209.9 million, up by 17.7% (€ 178.3 million in the first nine months of 2007), driven by growth in revenues from the digital terrestrial pay-per-view platform — primarily due to the sale of football rights to Mediaset and TIM — and revenues from the Multimedia sector, which amounted to € 30.1 million, up by 50.5% on the first nine months of 2007, owing to the positive contribution of Content Competence Center operations (+€ 3.9 million), satellite channels (+€ 3.0 million), and the new MTV Mobile project (+€ 3.6 million). The Free-to-Air Television sector posted a decline in revenues (-€ 2.3 million) due to gross advertising sales, which decreased by 2.4% on LA7 and 9.8% on MTV.

EBITDA was -€ 44.7 million, compared to -€ 37.7 million in the first nine months of 2007, down by € 7.0 million compared to 2007. This result was primarily affected by the loss reported by Free-to-Air Television, which was impacted not only by the decline in gross advertising sales, but also by increasing programming costs during the first half of the year due to the new programming for the two broadcasters 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 subtracting depreciation and amortization for the period, was -€ 92.7 million, compared to -€ 83.7 million in the first nine months of 2007, down by € 9.0 million. The change, in addition to the decline in EBITDA by € 7.0 million, is primarily attributable to greater amortization of television rights on LA7 (+€ 2.7 million), partly offset by lesser amortization of the right to use digital frequencies.

Net result attributable to the Parent Company was -€ 75,2 million (-€ 65.8 million in the first nine months of 2007).

Net financial debt at September 30, 2008 was € 274.1 million, increasing € 58.3 million compared to December 31, 2007 (€ 215.8 million). The change was mainly due to investments made in the period (€ 34.1 million), particularly the purchase of TV rights, as well as the requirements for operating activities in the period, amounting to € 79.9 million, which were partially offset by the collection of the € 55.7 million arising from the National Tax Consolidation scheme. Compared to net financial position at June 30, financial debt increased by € 28.7 million.

Results by Business Unit

Free to Air Television

The results of the Free-to-Air business showed improvement in the third quarter: revenues amounted to € 32.3 million, up by € 2.2 million (+7.3%) on the third quarter of 2007, EBITDA was -€ 6.3 million, up by € 3.4 million, and EBIT was -€ 14.7 million, up by € 2.2 million.

Revenues for the first nine months of 2008 were € 113.7 million, down by € 2.3 million (-2.0%) on the first nine months of 2007. EBITDA was -€ 27.4 million, down by € 8.7 million on the first nine months of 2007, and EBIT was -€ 53.2 million, marking a decrease of € 11.3 million on the first nine months of 2007.

In detail:

La7 reported revenues of € 67.3 million, down by 3.0 million from the figure for the first nine months of 2007, due to the 2.4% decline in gross advertising sales compared to the same period of 2007 as well as lesser revenues on the sale of television rights, which had characterized the first half of the previous year, with the sale of America’s Cup rights. EBITDA was -€ 30.6 million (down by € 6.1 million on the first nine months of 2007), primarily due to the higher programming costs incurred during the first part of the year. EBIT was -€ 52.3 million (-€ 8.6 million compared to the first nine months of 2007).

During the first nine months of the year, LA7 maintained its market share of 3.1% (compared to 3% in the first nine months of 2007), with a peak of 3.2% in July, the best result since its inception. LA7 was Italy’s only national network to improve during the first nine months of 2008 compared to the first nine months of 2007. The focus of its growth with respect to the previous year remains Prime Time, which grew by more than 20% compared to the first nine months of 2007.

MTV revenues amounted to € 53.9 million, up 5.3% compared to the first nine months of 2007 (€ 51.2 million). The downtrend in gross advertising sales in Italy (-5.7%) and at the international level (-42.8%) was offset by greater sales, primarily due to events and productions undertaken by the new business unit Playmaker. The decrease in gross advertising sales was due to a decline in investments by the mobile phone service provider TIM, which decided to concentrate its advertisements in the second part of the year to coincide with the launch of its joint offer with MTV in July. As a result, MTV’s gross advertising sales in Italy from July to September increased by 5.1% compared to the same period of 2007. EBITDA was € 3.2 million (-€ 2.6 million compared to the first nine months of 2007) and EBIT -€ 0.9 million (-€ 2.7 million on the first nine months of 2007).
Summer is the peak season for live music, and MTV created occasions for young people to gather in order to strengthen its already solid bonds with youth, involving more than 400,000 participants.                                                            
Multimedia

In the first nine months of 2008, multimedia activities continued along the growth trend, recording revenues of € 30.1 million, up 50.5% compared to the same period of 2007 (€ 20 million). This result was primarily due to the performance of the Content Competence Center, which reported revenues of € 6.2 million (€ 2.3 million in 2007, inasmuch as operations began in April). Revenues of Satellite Channels on SKY (Nickelodeon, Comedy Central, and the MTV musical channels) grew, partly offset by a decline in Interactive operations. The MTV Mobile project, launched in July along with TIM, also made a positive contribution, generating revenues of € 3.6 million in the third quarter alone. In confirmation of this trend, EBITDA was a positive € 11.7 million (+€ 4.7 million on the first nine months of 2007) and EBIT € 10.4 million (+€ 4.4 million).

Digital Terrestrial Television

Revenues for the first nine months of 2008 amounted to € 59.7 million (+€ 65.4% compared to the same period of 2007). This performance was driven by the growth of pay-per-view revenues, primarily due to the 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.

EBITDA was -€ 14.1 million, worsening compared to -€ 13.7 million compared to the first nine months of 2007. EBIT was -€ 34.7 million, up by € 0.5 million compared to the first nine months of 2007 due to the aforementioned effect of the lesser amortization of the right to use digital frequencies (-€ 1.0 million), the useful life of which was extended by recent legislation.

News

TM News, which operates through the press agency APCom, earned revenues of € 7.4 million in the first nine months of 2008, reporting growth of 1.4% compared to the first nine months of 2007, with a peak gain of 4.9% in the Traditional Media segment. EBITDA decreased by € 1.7 million, due to an increase in operating costs, and EBIT also showed a € 1.7 million increase on the loss reported in 2007. The contraction of margins is primarily attributable to personnel redundancy expenses associated with the new organizational structure.

§§§

Turning to the strategy for Digital Terrestrial Television announced on September 23 of this year, the Group is moving forward towards an understanding on the sale of its pay-per-view operations to the international group Airplus TV, which is already active in the sector. Closing of the contracts is scheduled for November of this year. This agreement calls for the transfer of the Telecom Italia Media’s Pay-per-View business unit to a new company, the disposal of the new company to the Italian subsidiary of Airplus TV, the purchase of a minority investment in the capital stock of said Italian subsidiary of Airplus TV by Telecom Italia Media (9%), and the signature of long-term digital terrestrial bandwidth hosting agreements (14 Mbits) between Telecom Italia Media’s network operator and the Italian subsidiary of Airplus TV.
In addition, the strategy for digital terrestrial television also includes the Group’s effort towards achieving full development of the Network Operator’s digital assets in the short-term, including through forms of partnership. In this regard, the Company has received a non-binding expression of interest in acquiring an investment in its subsidiary TIMB from a private equity fund. The Company therefore decided to grant said party an exclusive period of 60 days to conduct due diligence and define the terms and conditions, terms and conditions of the operation on which a statement of intent already exists. Both parties have reserved the right to agree or disagree as to the feasibility of the transaction at the end of the due diligence period. 

§§§

The Group’s results as of September 30, 2008 will be presented to the financial community today during a conference call, starting at 6:30pm (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 220473#).
 


 

Alternative performance indicators (file .pdf, 38 Kb)
Enclosures (file .pdf, 114 Kb)