FY 2010 financial statements examined and approved by the Board of Directors

02/23/2011 - 03:55 PM

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This press release refers to certain performance indicators (EBITDA, Net Financial Debt) that do not conform to International Financial Reporting Standards (IFRS). These terms are defined in the Appendix.

2011-2013 Business Plan approved

TELECOM ITALIA MEDIA GROUP

In 2010 the Group closed the year with a positive EBITDA of 13.2 million euro; net losses were lower by 18.1 million euro compared with 2009; cash flow, excluding the capital increase, improved by 52.3 million euro compared with 2009.

Revenues: 258.5 million euro, + 31.2 million; +13.7% (227.3 million in 2009)

EBITDA: 13.2 million euro, + 20.5 million (-7.3 million in 2009)

EBIT: -46.0 million euro; +21.6 million (-67.6 million in 2009)

Net result: -54.4 million euro; +18.1 million (-72.5 million in 2009)

Net financial position: 115.5 million euro, down 229.6 million compared with 31 December 2009 (345.1 million)

2010 La7 autumn canvass registered a significant result, reaching an audience share of 3.5%, compared with 3.0% in the same period of 2009


The Telecom Italia Media Board of Directors, chaired by Vice Chairman and CEO Giovanni Stella, today examined and approved:

A - The Group’s FY 2010 financial statements;
B - The 2011-2013 Business Plan;

and convened the Shareholders' Meeting for 8 April.

A. Draft FY 2010 Group Financial Statements

FY 2010 financial results exceeded the Business Plan targets providing for EBITDA break-even. Also the net financial position of €115.5 million at 31 December 2010 was better than expectations. These results are even more significant if we consider that the net result was impacted by write-downs totalling around €18 million (of which €9 million to EBITDA) made necessary following the wind up of Dahlia TV.

2010 also saw a further expansion of the Group's offering with new programmes and the launch of new channels on Digital Terrestrial platform (La7d and MTV+) and the web (La7.tv and the new portals Mtvnews.it and Nickjr.it). This translated into a higher audience share (in December La7's average share rose to 3.3% from 2.9% in the same month of 2009) as well as growth in revenues and improved profits.

Consolidated Group revenues reached €258.5 million, up €31.2 million (+13.7%) from €227.3 million in FY 2009, mainly thanks to higher revenues from the Network Operator (TIMB).

EBITDA ended the year in positive territory (€13.2 million), compared with the previous year’s loss (-€7.3 million), growing by €20.5 million. This result is attributable to growth in revenues and to higher profitability of the Network Operator, as well as the recovery in television advertising which benefited both La7 and MTV.

EBIT amounted to -€46.0 million, registering a €21.6 million improvement (-€67.6 million in 2009). The variation is almost entirely attributable to the improvement in EBITDA.

The net result improved by €18.1 million to -€54.4 million (-€72.5 million in FY 2009).

Net financial position at 31 December 2010 amounted to €115.5 million, down €229.6 million from year-end 2009 (€345.1 million). The variation is mainly due to receipts from the capital increase (€239.5 million ) and to tax rebate for fiscal consolidation (€33.8 million), partially offset by capex requirements for the period (€66.9 million).

Excluding the effects of the capital increase and related charges, financial resources of just €6 million were absorbed in 2010, compared with €58 million in the previous year. 

Compared with 30 September 2010, net financial debt rose 16.3 million euro, predominantly as a result of funding requirements for operations over the period.

 

Notwithstanding the significant results achieved over the last three years priority remains the attainment of the economic-financial balance for La7, that becomes one of the main goals of the Business Plan.


BUSINESS BREAKDOWN

1. Telecom Italia Media S.p.A. (La7, La7d, Digital Content)

FY 2010 revenues for Telecom Italia Media S.p.A. amounted to €115.6 million, up €1.9 million (+1.7%) compared with 2009 (€113.7 million).

La7 advertising revenues rose 3.2% to reach €95.2 million. The new channel La7d, launched at the end of March 2010, delivered €4.3 million in advertising receipts. Total gross advertising revenues rose by €12.4 million for 2010 compared with the previous year, an increase of 9.7%, much higher than the growth rate for the TV market as a whole (+6.0% for January-December period, compared to 2009; source Nielsen).

While advertising revenues for the two channels La7 and La7d improved, Telecom Italia's Digital Content revenues were lower (-€2.4 million) as a result of the new contract which came into effect in April, as did revenues from Media Services (-€3.2 million) following the ending of the service business delivered to Dahlia TV.

EBITDA amounted to -€35.6 million, a €2.2 million improvement compared with 2009 (-€37.8 million). This figure was the result of increased revenues and income, partially offset by higher costs relating to La7's richer programming content.

EBIT stood at -€63.0 million, up €2.4 million compared to 2009 (-€65.4 million).

La7 closed 2010 with an average daily share of 3.09%, +2.3% compared with 2009 (3.02%). The improvement is seen nearly throughout the day, with the biggest change coming in the early evening news slot following the arrival of Enrico Mentana to anchor the TgLa7 and in the prime time audience which grew to 3.0% from 2.8% in 2009. In autumn 2010 La7 canvass registered a significant result, reaching an audience share of 3.5%, compared with 3.0% in the same period of 2009.

La7's positive performance is especially encouraging given the major transformations in the television market such as the phasing out of analogue, the rise in Pay-per-View customers and web TV access, all of which have led to a shrinking of the audience for generalist channels.

2. MTV Group

MTV Group's revenues amounted to €97.8 million, up €0.4 million compared with 2009 (€97.4 million), due to the growth in advertising revenues from channel One and the new MTV+ channel.

EBITDA amounted to €12.3 million, a €1.4 million improvement compared with 2009 (€10.9 million) mainly due to increased revenues, the reorganization of Playmaker activities and cost cuts at MTV Mobile, as well as the continued tight control of operational costs.

EBIT stood at €5.0 million, up €2 million compared to 2009 (€3 million).

Overall gross advertising revenues for MTV Group rose by  10.7% from €60.6 million in 2009 to €67.1 million in 2010, at a higher rate than that of the TV market as a whole (+6.0% for January-December period, compared to 2009; source Nielsen).

3. Network Operator (TIMB)

Revenues generated by the Network Operator amounted to €76.1 million, up €26.4 million (+53.1%) from FY 2009 (€49.7 million). The improvement was mainly due to higher revenues from digital multiplex hosting services to third parties which represent around 70.6% of total digital revenues for Telecom Italia Media Broadcasting.

EBITDA amounted to €34.7 million, a €16.9 million improvement compared with 2009 (€17.8 million), after discounting write-downs totalling around €9 million following the wind up of Dahlia TV.

EBIT amounted to €10.2 million, registering a €17.2 million increase on 2009 (-€7.0 million).

Capex during 2010, amounting to €28.4 million, was up €6.7 million compared with the same period of 2009, relating to the digital conversion of TIMB networks as a consequence of the analogue switch-off.

As of 31 December 2010, the three digital Multiplexes covered 83.9%, 90.5% and 61.5% of the Italian population respectively. In particular, the Multiplex TIMB3 covers approx. 95.0%, based solely on the regions/areas in which the switch-off process is completed. In 2010 HD/3D test broadcasts were carried out in some parts of Italy.

Results of the parent company Telecom Italia Media S.p.A.

Telecom Italia Media S.p.A.’s revenues stood at 115.6 milion, compared to 113.7 million in 2009.

The year’s EBITDA was at -35.6 million, improving by 2.2 million from 2009 (-37.8 million).

EBIT and Net Result of the period, amounting respectively to -159.2 million and -153.2 million, suffered mainly a depreciation of goodwill (-€96.3 million) resulting from the latest impairment test performed in the course of preparing the financial statements. The impairment test confirmed the asset valuations presented in the consolidated statements.

Notwithstanding the continuous and significant improvements of operations, the criteria adopted in the test consider mainly the sharp fall in the TI Media stock price over the course of 2010 (-55%) and considering that accounting principles require the company to place greater importance on external information, market capitalization was adopted as the primary valuation metric over value in use.

Net assets of the parent company at 31 December 2010 amounted to 295.0 million, in line with the value of consolidated net assets.

 

B. 2011-2013 Business Plan

TI Media confirms the growth strategy outlined and pursued in the previous Business Plan based on initiatives designed to extract value from its established position as a media content and service provider.

In particular the new 2011-2013 Business Plan sets out the following objectives for La7:

1) TV: maintain La7's editorial approach with distinctive and high quality programming for prime time viewing. The aim is to extend the share growth that began in autumn 2010 to reach ever increasing audience figures and further improve profitability. Develop the audience appeal of channel La7d with a more marked targeting of the female and youth audience.

2) New Media: consolidate the “La7 Web circuit” broadening access to Mobile and Connected Devices. Develop the catch-up TV offering and reinforce the partnership with YouTube with an expanded content offering. Extend support activities to Telecom Italia for partnerships, content selection, development of services and product marketing to support the IPTV and Cubovision offerings.

With respect to MTV, the goals are:

1) TV: exploit the growth opportunities presented by the new television landscape and digitalization while maintaining an innovative positioning and a focus on programming cost efficiencies. Launch MTVNHD (Italy's first music-only HD channel) and consolidate the satellite offerings to maintain leadership in the kids and entertainment segment.

2) Internet: make MTV the go-to destination for music on the Internet in , reinforcing the multiplatform approach: alongside mtv.it and mtvmusic.com, launch MTV On Demand offering the best of MTV on the web. Develop new applications for smartphones, tablet PCs and connected TVs.

The objectives in relation to Telecom Italia Media Broadcasting are:

1) Replace Dahlia TV with new, profitable customers by 2011 to fully exploit the available MUXs, from 2012;

2) Reinforce the privileged position for new entrants to DTT thanks to a greater bandwidth offering compared to other carriers;

3) Fully utilize the 3 MUXs and obtain the 4th MUX by year-end 2012 to begin operating in 2013.

On the basis of assumptions for the 2011-2013 period, Telecom Italia Media Group confirms the growth targets of the previous Business Plan, albeit with a lower growth in 2011 due to the wind up of Dahlia TV. The 2013 targets are as follows:

Revenue growth at an average annual rate of around 10%;

EBITDA margin of 22%-25% by 2013 and positive EBIT at year-end 2013;

Positive operating free-cash flow by year-end 2012;

Investment of around €180 million, of which approx. €65 million in the Network Operator (to complete digitalization of the analogue networks), around €90 million in TV rights acquisitions and 25 million in other tangibles.


CORPORATE GOVERNANCE ISSUES

The Board of Directors has approved a number of proposed amendments to the Company Bylaws and Shareholders' Meeting Regulations to be submitted for examination to the shareholders. The proposals concerning the Bylaws include further revisions in addition to the changes made directly by the Board of Directors on 29 October to bring the Bylaws into line with the so called  Shareholders Rights Directive. Also in relation to the same Directive, a proposal will be made to update the Shareholders’ Meeting Regulations adopted by the Shareholders’ Meeting of 5 May 2004 and subsequently amended on 12 April 2007. 

The Board of Directors has also 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 , Mario Zanone Poma qualify as independent.

 

SHAREHOLDERS’ MEETING CALLED

The Board of Directors has convened a Shareholders’ Meeting in ordinary and extraordinary session, on first call for 8 April, and on second call for 11 April. The Ordinary Meeting, besides approving the FY 2010 Financial Statements, shall reappoint the Board of Directors through competing lists as laid down in the Bylaws, and adopt a number of amendments to the Shareholders' Meeting Regulations intended to make the meetings more effective.

The Extraordinary Session shall vote on amendments to the Bylaws required by recent legislative changes.

§§§

The Manager designate for the preparation of accounting 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.

§§§

The Group’s FY 2010 results and its strategic guidelines for the three-year period 2011-2013 will be illustrated to the financial community during a conference call at 4:30 p.m. (Italian time) on 23 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 48 hours by calling +39 06 334 843 (access code: 329126# for Italian; 218015# for English).

 

> Download the press release attachment (.pdf file)

 

Milan, 23 February 2011