Q1 2011 Interim Report approved by Board of Directors

05/04/2011 - 02:27 PM

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TELECOM ITALIA MEDIA GROUP:

REVENUES: 52.3 million euros; -4.6 million euros (56.9 million euros in Q1 2010)

EBITDA: 1.9 million euros; +0.2 million euros (1.7 million euros in Q1 2010)

EBIT:-12.7 million euros; +0.5 million euros (-13.2 million euros in Q1 2010)

NET INCOME: -9.2 million euros; +1.9 million euros (-11.1 million euros in Q1 2010)

NET FINANCIAL DEBT: 146.1 million euros (115.5 million euros as at 31 December 2010)

Significant Q1 growth (+36.6%) in La7 advertising revenues, as the channel reaches average audience share of 3.4% (+25.7%)

This press release contains a number of alternative performance indicators not contemplated under IFRS accounting principles (EBITDA, Net Financial Debt). Definitions of these terms are provided in an attachment.

The Telecom Italia Media Board of Directors, chaired by Severino Salvemini, today examined and approved the Group’s Q1 2011 results (as at 31 March 2011).

Q1 2011 posted an improvement over the same period in 2010, building on the positive trend registered during previous accounting periods: EBITDA was positive and losses were further reduced. The quarter showed significant growth in advertising revenues and a higher audience share for La7.

Consolidated Group revenues amounted to 52.3 million euros, down 8.1% (56.9 million euros in Q1 2010) after a drop in revenues from Network Operator activities as a result of the wind up of Dahlia TV activities and, to a lesser extent, a drop in revenues from MTV. This drop was partially offset by the growth in La7 advertising revenues (+6 million euros), which far outstripped the guaranteed minimum and the extra amounts associated with audience share increases specified in the agreement with .

EBITDA amounted to 1.9 million euros, a 0.2 million euro improvement (1.7 million euros in Q1 2010). Ongoing Group-wide cost containment made it possible to offset the drop in revenues and to increase EBITDA to slightly above the levels recorded in Q1 2010.

After depreciation and amortization over the period, EBIT corresponded to -12.7 million euros. The 0.5 million euro improvement (-13.2 million euros in Q1 2010) was ascribable to the positive improvement in EBITDA, and to lower depreciation and amortization for the Network Operator unit and the MTV Group.

Net income amounted to -9.2 million euros, a 1.9 million euro improvement (-11.1 million euros in Q1 2010) as a result of the positive impact of operational management, and lower financial charges as a result of the company’s recapitalization.

Net financial debt amounted to 146.1 million euros, a rise of 30.6 million euros compared with 31 December 2010 (115.5 million euros). The difference may principally be ascribed to industrial investments over the period (14.2 million euros), and to funding requirements amounting to 16.0 million euros as a result of Network Operator unit expenditure on investments undertaken at the end of 2010, and payment for autumn programming costs.

Breakdown of results by business area

1. TI Media - La7

TI Media – La7 revenues in Q1 2011 amounted to 33.4 million euros, +6.0 million euros (+21.9%) compared with Q1 2010 (27.4 million euros) due to the positive trend in advertising revenues.

EBITDA amounted to -3.0 million euros, a 6.1 million euro improvement compared with Q1 2010 (-9.1 million euros). This performance was boosted by higher revenues, which more than offset higher operating costs associated principally with La7d programming. La7 programming costs remained more or less in line with the figures for Q1 2010.

EBIT amounted to -9.9 million euros, a 5.9 million euro improvement compared with Q1 2010 (-15.8 million euros).

Q1 2011 overall gross advertising revenues were up 36.6% to 43.3 million euros compared with Q1 2010 (31.7 million euros), boosted by higher advertising revenues from La7 and from the new La7d channel, which generated gross advertising revenues of 2 million euros. This positive result was in countertrend with the TV market that shrank by 0.5%.

Improvement in advertising revenues was driven by the excellent performance of La7 in daily average audience share, which reached 3.42% in Q1 2011, up 25.7% compared with the same period in 2010 (the network’s best-ever performance).

The most impressive audience performance was recorded in the early evening slot (4.3% share, compared with 2.4% in Q1 2010), following Enrico Mentana’s arrival at TG La7 news. Impressive growth was also registered in prime time, where La7 has an average 3.5% audience, which was up around 40%.

Q1 2011 revenues for “Digital Content” activities amounted to 3.7 million euros, down slightly on the Q1 2010 figure of 4.0 million euros. The difference may be ascribed to the new contract that came into force in April 2010, which is based on a less profitable scale than the previous one, though it is set to rise over time. During the quarter, operations focused on enriching the range of content offer for the Cubovision and Connected TV platforms.

2. MTV Group

MTV’s Q1 2011 revenues amounted to 13.7 million euros, down 3.7 million euros (17.4 million euros in Q1 2010). Performance was impacted by the following principal factors: a contraction in advertising revenues from One (-1.5 million euros) as a result of lower advertising revenues, lower revenues from the Satellite-Music Platform channels (-1.4 million euros) which were impacted by the recent contract renegotiations with Sky, and 0.5 million euros in lower revenues from MTV Mobile. The reduction in revenues was tackled through a far-reaching cost cutting drive which has brought down costs by optimizing the programming schedule, making greater use of the library, and reducing operating costs.

EBITDA amounted to -0.6 million euros (0.6 million euros in Q1 2010).

EBIT amounted to -2.0 million euros (-1.2 million euros in Q1 2010).

Gross advertising revenue fell by 8.9% from 12.6 million euros in Q1 2010 to 11.5 million euros in Q1 2011.

During the quarter, work continued on repositioning the MTV channels with an appropriate communications campaign spanning the traditional channel, the new digital channel and the satellite music channels. In March, the MTV+ channel was relaunched under the new MTV Music brand, and the Sky platform music channels benefited from a revamped look and content.

3. Network Operator (TIMB)

Network Operator revenues in Q1 2011 amounted to 12.8 million euros, down 7.3 million euros compared with 2010 (20.1 million euros in Q1 2010). This performance is principally ascribable to termination of Dahlia TV activities, after the company went into liquidation in January 2011. In Q1 2010, Dahlia generated 7.3 million euros in revenues.

EBITDA amounted to 5.5 million euros, down 4.7 million euros (10.2 million euros in Q1 2010).

EBIT amounted to -0.7 million euros, down 4.5 million euros (3.8 million euros in Q1 2010).

The Network Operator continued seeking to fill its multiplexes after Dahlia wind up. Early in the year, two new channels (HSE 24 and RTL 102.5) went on air; another two channels are awaiting the authorization to broadcast.

As at 31 March 2011, TIMB’s three Digital Multiplexes (excluding the fourth, for which trial HD/3D broadcasts have been run in some parts of ) respectively covered 83.9%, 90.5% and 61.5% of the Italian population. The TIMB3 Multiplex covers 95.0% of regions and areas where the switch off process has already been completed.

Outlook

In view of the economic and regulatory environment in which Telecom Italia Media operates, the company plans to pursue the following orientations for its operations in 2011:

  • Enhance the La7 and La7d channels’ editorial approach by orienting programming choices towards “high-value timeslots” via a range of distinctive and high-quality offerings;
  • Grow La7 and La7d TV advertising revenues by leveraging audience share growth and the impact of the contract renewal with Cairo Communication, which guarantees advertising revenue linked to increases in La7 and La7d audience share;
  • Continue to pursue an advisory and digital content supplier role to Telecom Italia platforms, and seek to build on the positive results achieved so far;
  • Tackle the rescaling of revenues from the main MTV channel by evolving towards a new MTV Music channel and developing revenues from satellite channels. Implement major cost efficiencies, particularly with regard to programming, in order to ensure appropriate levels of profitability;
  • To schedule, replace Dahlia as a customer by renting digital bandwidth at remunerative prices which, by the end of 2011, will gradually make it possible to fully exploit the now available Multiplex bandwidth capacity, while at the same time continuing with the network digitization process in accordance with the switch off calendar.

Given this situation, in the first half of 2011 Telecom Italia Media expects revenues and operational profitability to undergo a contraction compared with the same period of 2010, as a result of the revenues budgeted from Dahlia not being collected, partially offset by greater advertising revenue from La7. In the second half of the year, revenues and profitability are expected to recover, and it is considered likely that by the end of 2011 profitability will have returned to 2010 levels.

The net financial position will also grow as a result of investment requirements for completing switch off-related digital infrastructure and lower fiscal consolidation benefits than in 2010.

§§§

Prior to the Board Meeting, the Committee for Internal Control and Corporate Governance was held and appointed Professor Adriano De Maio as its Chairman.

Adriano De Maio was also appointed as Lead Independent Director by the Board.

Pursuant to article 18.5 of the company’s Articles of Association, the Board confirmed the manager in charge of drafting the company’s accounting documents, Paolo Serra (Head of the company’s Administration and Control Department) in the post that he has held since 7 November 2007.

Furthermore, the Board of Directors verified that the powers and resources available to the manager in charge of drafting the company’s accounts are adequate to perform his duties.

After the Committee for Internal Control and Corporate Governance expressed its favourable opinion, the Board of Directors took steps to amend the procedure for undertaking transactions with related parties adopted on 25 November last year, pursuant to CONSOB Regulations, in view of its consideration that intra-group transactions undertaken at conditions equivalent to market or standard conditions are not considered relevant in terms of applying the CONSOB Regulations – as envisaged under the Regulations themselves. Oversight of these transactions continues to be conducted pursuant to the company’s code of conduct by the Managerial Committee established upon implementation of the Procedure.

The updated text of the procedure is currently being published on the corporate web site at http://www.telecomitaliamedia.it/et, under the Governance section.

§§§

The Board of Directors has revised the FY 2011 calendar of meetings for the adoption of the financial statements (previously published on 29 October 2010), which now reads thus:

  • 27 July: Board Meeting to approve the First Half 2011 interim accounts (amendment: meeting previously scheduled for 28 July 2011);
  • 28 October: Board Meeting to approve the Q3 2011 interim accounts (meeting confirmed).

§§§

Pursuant to sub-section 2, clause 154 bis of the Unified Finance Act, the manager in charge of drafting the company’s accounting documents, Mr. Paolo Serra, has declared that the accounting disclosures contained in this press release correspond to the data records, accounting books and accounts entries.

§§§

The Group’s Q1 2011 results will be illustrated to the financial community on 4 May 2011 during a conference call scheduled to start at 3:30 p.m. Italian time. Journalists may follow the presentation over the phone by dialing 800 408 088 (from ) or +39 06 33 485 042 (from outside ). Those unable to call at that time may listen to a recording of the presentation over the following two days by calling +39 06 334 843 (access code: 341250# for the Italian-language version; 230149# for the English-language version).

> Download the press release attachments (.pdf file, 109 kb)

 

Rome, 4 May 2011