FY 2009 financial statements examined and approved by the Board of Directors

02/25/2010 - 04:39 PM

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A number of the alternative performance indicators used in this press release are not envisaged under IFRS accounting standards (EBITDA, Net Financial Debt, etc.). These terms are defined in the Appendix.
 

 

2010-2012 Strategic Guidelines and targets approved

Approved a 240 million euro capital increase, the cancellation of nominal value and a reverse stock split (one for ten)

Content Competence Centre contract with Telecom Italia renewed

Executive Deputy Chairman Giovanni Stella appointed CEO following the resignation of Mauro Nanni

Andrea Mangoni co-opted as company director. Nomination to be submitted to the forthcoming Shareholders’ Meeting for the approval of the 2009 financial statements

Shareholders’ Meeting called; proposal to appoint PricewaterhouseCoopers as external auditors for the period 2010-2018
 

TELECOM ITALIA MEDIA GROUP:

Increased revenues and stringent cost-cutting measures during the year enabled the company to close 2009 with a nearly 80% reduction in EBITDA losses

REVENUES: 227.3 MILLION EURO; UP 5.8% (214.8 MILLION EURO AT Y/E 2008)

EBITDA: -7.3 MILLION EURO; UP 28.3 MILLION EURO (-35.6 MILLION EURO AT Y/E 2008)

EBIT: -67.6 MILLION EURO; UP 29.2 MILLION EURO (-96.8 MILLION EURO AT Y/E 2008)

NET RESULT: -72.5 MILLION EURO; UP 21.4 MILLION EURO (-93.9 MILLION EURO AT Y/E 2008)

NET FINANCIAL DEBT: 345.1 MILLION EURO (286.8 MILLION EURO AT 31 DECEMBER 2008)

LA7 posts excellent +12.0% gross advertising income, against a 10.2% slump in the television market as a whole

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As a result of the disposal of a majority 60% stake in the TM News company on 15 May 2009, pursuant to IFRS 5, TM News earnings are classified as “Net profit (loss) from discontinued operations/assets held for sale”. To foster greater clarity in this presentation of the Group’s earnings, historical income statement data used in comparisons with the 2009 figures have been restated and recognized under like items. Similarly, accounts figures up to 31 December 2008 pertaining to Pay-per-View operations, which were sold off on 1 December 2008, are classified as Discontinued Operations.
 

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At today’s meeting, chaired by Berardino Libonati, the Telecom Italia Media Board of Directors examined and approved:

  1. The Group’s FY 2009 financial statements;
  2. The 2010-2012 Strategic Guidelines and targets;
  3. The proposal to increase share capital by 240 million euro through the cancellation of nominal value and a one for ten reverse stock split; 
  4. The renewal of the Content Competence Centre Contract with Telecom Italia;
  5. The appointment to CEO of Executive Deputy Chairman Giovanni Stella following the resignation of Mauro Nanni; the co-optation as company director of Andrea Mangoni, whose appointment will be submitted to the forthcoming Shareholders’ Meeting;

The call for a Shareholders’ Meeting, and a proposal to appoint PricewaterhouseCoopers as external auditors for the period 2010-2018, following the revocation of Reconta Ernst & Young's mandate.

 

A. Draft FY 2009 Group Financial Statements

FY 2009 closed with a marked improvement on 2008. The Parent company’s share of net losses (-72.5 million euro) improved by 21.4 million euro compared with the preceding financial year (-93.9 million euro), despite the impact of 14.5 million euro in charges associated with the disposal of equity interests, predominantly generated by the sale of 60% of TM News. This improvement is all the more impressive considering the major slump in the TV advertising income market, which was down 10.2% over the year (Nielsen figures, December 2009). Against this backdrop, LA7 put in a particularly strong performance, registering a 12.0% rise in gross advertising income (up 13.8 million euro) compared with 2008.

Consolidated Group revenues in FY 2009 were up 12.5 million euro (5.8%) to 227.3 million euro, compared with 214.8 million euro for FY 2008, predominantly as a result of higher revenues for TI Media S.p.A. and the Network Operator (TIMB).

FY 2009 EBITDA amounted to -7.3 million euro, compared with -35.6 million euro for FY 2008, a 28.3 million euro improvement (+79.5%). This excellent operating result is attributable to the above-mentioned increase in revenues, 14.2 million euro in lower programming costs, aggressive efficiency gains at LA7 and, to a lesser extent, 10.4 million euro in efficiency gains at MTV, following aggressive company restructuring.

FY 2009 EBIT amounted to -67.6 million euro, a 29.2 million euro improvement (compared with -96.8 million euro for FY 2008).

The net result for Parent company shareholders, excluding discontinued operations/assets held for sale, improved by 21.4 million euro to -72.5 million euro (-93.9 million euro for FY 2008).

Net financial debt at 31 December 2009 amounted to 345.1 million euro, up 58.3 million euro compared with 31 December 2008 (286.8 million euro). Compared with 30 September 2009, net financial debt rose 27.7 million euro, predominantly as a result of funding requirements for operations over the period.

 

Results Breakdown by Sector

1. Telecom Italia Media S.p.A.

Telecom Italia Media S.p.A.’s FY 2009 revenues amounted to 113.7 million euro, up 16.3 million euro (+16.7%) compared with 2008 (97.4 million euro).

EBITDA amounted to -37.8 million euro, a 28.0 million euro improvement compared with 2008 (-65.8 million euro).

EBIT amounted to -65.4 million euro, a 26.3 million euro improvement compared with 2008 (–91.7 million euro).

The Parent company’s share of the net result amounted to -64.8 million euro, a 15.6 million euro improvement on 2008 (-80.4 million euro).

Net financial debt at year-end 2009 amounted to 245.8 million euro, compared with 179.0 million euro at year-end 2008.

Telecom Italia Media S.p.A.’s revenues were driven by net advertising income, which in 2009 registered growth in excess of 13.2% compared with the previous year. This performance is all the more impressive considering the industry-wide slump registered in 2009: as noted earlier, TV advertising income posted a 10.2% drop (Nielsen figures, December 2009). Turnover also benefited from service operations on behalf of Dahlia TV (around 3 million euro), which were completed at the end of June 2009.

LA7’s excellent FY 2009 results are also in part attributable to a fine performance by the Cairo concessionary, and to benefits arising from sharp network-wide cuts on operating costs amounting to around 12.6 million euro.

Such action involved mainly a cost review for the LA7 schedule, in particular for entertainment programmes, as well as reorganization measures to recoup efficiency and raise productivity, resulting in reduced labour costs and external costs.

With an average daily share of 3.0%, down slightly on the figure of 3.1% registered for 2008, LA7’s FY 2009 result was sufficiently excellent to enable the network to hit its viewer figure targets. This was achieved despite the year being characterized by significant cuts to the programming budget, and the competition from digital terrestrial television as more and more parts of Italy went “all-digital”.

Digital Content operation revenues generated 15.3 million euro, up 6.3 million euro compared with the figure of 9.0 million euro recorded in FY 2008. Growth in operations was achieved by developing new offerings for IPTV clients, which grew in number compared with the same period in 2008.

2. MTV Group

MTV’s revenues amounted to 97.4 million euro, down 14.3% compared with 2008 (113.6 million euro). This performance was impacted primarily by a reduction in net advertising income over the period (down 22.7%, from 69.7 million euro in 2008 to 53.9 million euro in 2009).

MTV implemented a corporate reorganization programme to counter this slump in advertising revenue. Focusing predominantly on the production side, the drive generated 14.2 million euro in cost savings and made it possible to offset the impact of lower revenues on EBITDA , which at the end of 2009 amounted to 10.9 million euro (down 3.6 million euro compared with 2008). Excluding one-off charges of 2.1 million euro associated with the restructuring programme, EBITDA posted a fall of 1.5 million euro compared with the previous year.

EBIT amounted to 3.0 million euro, essentially reflecting EBITDA performance, and was down 3.6 million euro compared with FY 2008.

3. Network Operator (TIMB)

Revenues from Network Operator activities amounted to 49.7 million euro, up 5.3 million euro (+11.9%) compared with FY 2008 (44.4 million euro). This performance is essentially attributable to higher revenues from digital multiplex hosting services.

EBITDA amounted to 17.8 million euro, up 2.2 million euro compared with 2008 (15.6 million euro), and was driven by revenue growth.

EBIT amounted to -7.0 million euro, after registering a 4.8 million euro improvement compared with 2008 (-11.8 million euro). This was achieved thanks to the revenue growth mentioned earlier, but was partially offset by an increase in operating costs.

FY 2009 capex amounted to 21.7 million euro, up 9.1 million euro compared with the same period in 2008, as TIMB digitized its networks in regions where the analogue TV switch-off has gone live.

As at 31 December 2009, the three digital multiplexes (excluding the fourth, which at the time of writing is operational in Sardinia only), respectively covered 79.3%, 88.9% and 29.5% of the Italian population (the third operating in "all digital" areas only).

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B.  2010-2012 Guidelines

TI Media’s growth strategy is based on actions designed to extract value from its role as a publisher and service provider. In pursuit of this goal, the Group is focusing on content creation and aggregation, and the development of new channels as part of its multi-platform approach. The company’s role as a Media Service Provider will see it offering broadcast services and platforms to support other media players’ content creation, aggregation and distribution.

 

 

Strategic Guidelines and targets in individual sectors are as follows:

 

 

TELECOM ITALIA MEDIA SpA/LA7

 

  1. TV: consolidate the channel’s editorial approach, which is noted for its creativity, innovation, pluralism and diversity of opinion, while maintaining programming efficiency enhancement policies; launch a second channel (LA7D) on DTT at the end of March targeted more towards female and young viewers;
  2. New Media: develop LA7.TV, the new over-the-internet catch-up TV venture, which was rolled out in December with the goal of: a) maximizing advertising income by reusing TV content; b) positioning the network as a leading-edge player on the Italian market; c) utilizing the platform to evaluate innovative advertising formats and try out offerings of web-specific content and Over the Top TV (OTTV). As a result of the renewed Telecom Italia contract, content selection activities will continue for IPTV and OTTV, leveraging media competencies and relationships with broadcasters and content providers.

 

 

 MTV Group

  1. TV: maintains innovative positioning and youth target leadership by generating value from MTV International network productions; counter the reduction in advertising revenue by launching a new channel in “all digital” areas, offering music-only programming, while continuing with the aggressive efficiency enhancement and cost control drive;
  2. Theme-based channels via satellite: increase the number of channels under the Nickelodeon and Comedy Central brands to confront increasing competition;
  3. Multimedia and “Mobile”: make MTV the go-to destination for music on the internet in Italy, in part by launching an online store for music videos (for example, MTVmusic.com); strengthen positioning on the Mobile market by focusing strongly on music as the key USP compared to other carriers’ offerings. 

 Network Operator (TIMB)

  1. Obtain the fourth MUX ;
  2. Complete roll-out of the digital network by implementing an effective investment plan that achieves the target of 95% population coverage by the switch-off deadline;
  3. Focus sales efforts on DTT newcomers by highlighting the network’s status as the most attractive operator thanks to greater bandwidth availability;
  4. Grow turnover by increasing the amount of bandwidth sold and offering new services, seizing opportunities generated by market growth as new content providers emerge; continue with ongoing cost efficiencies in order to hit profitability growth targets.

The Telecom Italia Media Group expects the above strategies to make it possible to achieve the following targets over the three-year period 2010-2012:

Average revenue growth of around 10% annually, driven particularly by TI Media Broadcasting.

Confirmation of EBITDA break-even in 2010 and a target of a 15%/18% EBITDA Margin by 2012.

Investment of approx. 200 million euro, of which approx. 90 million euro in the Network Operator (predominantly to convert analogue networks to digital), and approx. 85 million euro in TV rights acquisitions.

A significant reduction in financial debt and the restoration of financial balance following the 240 million euro capital increase.  

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C.  Capital Increase

The Board of Directors has furthermore examined a proposal to undertake a capital increase. The Board resolved to call a Shareholders’ Meeting in extraordinary session to consider:

(a) Cancelling the nominal value of ordinary and savings shares;

(b) A reverse stock split at a ratio of one ordinary / savings share for every 10 ordinary / savings shares held, without modifying the nature or extent of rights vested in the savings shares;

(c) A capital increase of 240 million euro through the issue of ordinary shares to be offered on an optional basis to ordinary and savings share holders, revoking the Board's previous power to raise share capital to a total 10 million euro. In the run-up to the offer, the Board of Directors is empowered to set the subscription price, the maximum number of shares to be issued, and the option ratio.

Majority shareholder Telecom Italia, which controls Telecom Italia Media via a 69.2% direct and indirect equity interest, has guaranteed its support for the initiative and pledged to subscribe its portion of the capital increase, in addition to any residual portion that remains unassigned.

On receipt of all necessary authorizations and completion of fulfilment requirements, should market conditions allow, the capital increase will go ahead subsequent to shareholders’ approval during the first half of 2010.

The capital increase is part of the 2010-2012 Business Plan approved today by the Board of Directors. It has been designed to reinforce the company's asset structure and support growth in the extremely dynamic market in which it operates.

D.  Renewal of Content Competence Centre Contract with Telecom Italia

The Board has approved the renewal of the Content Competence Centre Agreement with Telecom Italia, which will allow TI Media to continue and expand its activities in conceiving and planning programming, research, and acquisition of media content for distribution over Telecom Italia’s various TV platforms (IPTV, CUBO, WEB - formerly Yalp!-). As part of its innovative broadband service strategy for growth, Telecom Italia recently launched its Cubo Vision device. Commonly known as “Over the Top TV”, this multimedia broadband device makes it possible to view digital terrestrial TV channels and leading WebTV content on a home TV, purchase pay-per-view films, and manage personal content such as photos, videos and music offline.

Telecom Italia has asked TI Media to step up its IPTV, Web and Mobile platform consultancy by renewing the above-mentioned contract early. Telecom Italia has also appointed TI Media to assist the Parent company in conceiving and producing content offerings for Cubo Vision. TI Media’s remuneration consists of both fixed and variable additional fees. The latter have been agreed on the basis of price metrics that take into account Telecom Italia’s commercial growth targets for its IPTV and/or OTTV customer base, and revenues from content access over these platforms.  To verify the validity of the agreed prices, the company commissioned a leading consultant to evaluate the pricing scale, which gave a positive opinion. Based on estimates within Telecom Italia’s Commercial Plan, these revenues are expected to grow to exceed 20 million euro annually by 2012.

 

E.  Corporate Governance

 

Following the resignation of Mauro Nanni who has assumed another important position within Telecom Italia Group, the Board of Directors has appointed as CEO the Executive Deputy Chairman Giovanni Stella - granting him all management powers and overall governance of TI Media Group, as well as legal representation of the company - and has co-opted as company director Andrea Mangoni, whose appointment will be submitted to the forthcoming Shareholders’ Meeting. Andrea Mangoni’s CV is attached with this press release.  The Board of Directors and Statutory Board of Auditors warmly thank Mauro Nanni for his highly valuable contribution, professional experience, and the managerial abilities that he brought to the company.

The Board of Directors has verified the suitability of members of the Board as a whole, and found that directors Adriano De Maio, Candido Fois, Lorenzo Gorgoni, Gianfranco Negri Clementi, Alessandro Ovi, Sergio Ristuccia, Fabio Alberto Roversi Monaco, Mario Zanone Poma qualify as independent.

The Board of Directors further noted the appointment of Piero Vigorelli as Chairman of Telecom Italia Media Broadcasting (TIMB), as resolved by the TIMB Board of Directors' meeting of yesterday 24 February 2010.

 

F.  Shareholders’ Meeting Called

The Board of Directors has called a Shareholders’ Meeting in ordinary and extraordinary session, on first call for 8 April, and on second call on 9 April. In addition to approving the FY 2009 financial statements and the extraordinary share capital operation described above, the shareholders will be invited to reappoint the Board of Statutory Auditors, whose term ends with adoption of the FY 2009 financial statements. The Shareholders’ Meeting is also called upon to pass a resolution regarding the revocation of Reconta Ernst & Young’s mandate as principle external auditor and the appointment of PricewaterhouseCoopers as external auditors from 2010 to 2018.

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The Manager designate for the preparation of accounting and corporate documents, Paolo Serra, hereby declares, pursuant to paragraph 2, Art.154-bis of the Italian Consolidated Financial Law, that the accounting information contained herein corresponds to the company’s documentation, accounting books and records.

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The Group’s FY 2009 results and its strategic guidelines for the three-year period 2010-2012 will be illustrated to the financial community during a conference call at 3 p.m. (Italian time) on 26 February. Journalists may listen in to the presentation by phone on 800 408 088 (callers from Italy) and +39 06 33 485 042 (International callers). It will also be possible to listen to the presentation again over the following seven days by calling +39 06 334 843 (access code: 280298# for Italian; 179187# for English).

 

> Appendix

> CV Andrea Mangoni


 

 

Milan, 25 February 2010