Italian Newspaper Circubstories 2014

Transcription

1 R&S 2015 Annual Report Leading Italian publishing groups and half-year I 2015 Comparison of monographs published by R&S in major Italian publishing groups (which own the leading national information newspapers) in the five years from 2010 to 2014 and in the first half of 2015 The recent evolution of the major Italian publishing groups does not reveal many updates with respect to an overall negative context caused by a widespread process of disaffection towards print copies of newspapers, more significantly since According to ASIG data - Italian Newspaper Printers Association, at the end of 2014, total print circulation fell by more than 400 thousand copies a day, from 3.6 to 3.2 million copies, -12% compared to 2013, a phenomenon which has become particularly intense since 2008 (-40%); -29.8% in the last five years. The number of printing establishments is consequently decreasing (66 in 2014, of which 12 in Lombardy and 8 in Lazio, six fewer than last year). Newspaper advertising is also down (-9.7% in 2014 over 2013, compared to -2.5% in the advertising market as a whole). Conversely, digital circulation is increasing steadily: +180 thousand copies in In the five years from 2010 to 14, the aggregate revenues of the eight major Italian publishing Groups 2 marked a decline of 33.2%, or from 5.9 billion in 2010 to 4.0 billion in 2014 (Tab. 1) 3, -6.9% compared to 4.3 billion in In five years, nearly 2 billion in revenues have been lost, equal to one third of the 2010 turnover. In detail, the decreases concerned more advertising revenue (-41.2%) than circulation (-18.7%). Consequently, the weight on total circulation revenues increased compared to that of advertising revenues (the first increased from 35.9% in 2010 to 43.6% in 2014, the latter decreased from 35.2% to 30.9%) : it is a significant change in the business model in publishing that is also reflected in the data collected worldwide. 4 The most substantial decline in affected RCS (-43.3%), which was also affected by the sale of the French Group Flammarion (book publisher) in September 2012 (over Euro 200 million turnover 5 ); the other groups all lost turnover ranging from 35.5% of Il Sole 24 Ore (net of the sale of the software sector, the decrease would be of about 28%) and 19.8% of Monrif, which marked the smallest reduction. With regard only to the past year, revenues are still down for all companies, more pronounced for Il Sole 24 Ore (-19.2%, which net of the software sale would be -4.3%) and L Espresso (- 9.7%), La Stampa, Class Editori and Monrif stable. The only 1 ASIG - Italian Newspaper Printers Association, 2015 Report on the newspaper industry in Italy. 2 The six groups surveyed in the R&S Annual Report also included Class Editori (publisher of Milano Finanza, founded in 1986 by Paolo Panerai, holds 49% of Italia Oggi Editori-Erinne s.r.l., publisher of ItaliaOggi; 50% is held by Coitalia Fiscale e Giuridica Coop), listed on the Stock Market, and l Editrice La Stampa, renamed Itedi-Italiana Editrice as of following the merger with the Company Edizioni e Pubblicazioni (publisher of Il Secolo XIX from Genoa) and controlled 77% by the FCA Group and 23% by the Perrone family. La Stampa is the fourth national newspaper in 2014 for copies circulated (202 thousand), Il Secolo XIX is the twelfth (53 thousand). The aggregate examined does not include De Agostini as not directly comparable, given its focus on collection editions (collectibles) and mail-order sales (direct marketing). It is estimated that at the end of 2014, the eight Groups considered represent together nearly 70% of total revenues in the Italian publishing sector and, with their newspapers, cover 60% of the national print circulation and more than 80% of digital. 3 For the record, recall the decline of 26.1% of the entire Italian print-publishing sector (Source: Mediobanca Studies Office, Cumulative data of 2,055 Italian companies, ed. 2015). 4 Source: WAN-IFRA (World Association of Newspapers and New Publishers)-World Press Trends 2015: Facts and Figures. A profound shift in the newspaper business model, evolving for years, is finally here: global newspaper circulation revenues have surpassed newspaper advertising revenues, meaning that audiences have become publishers biggest source of revenue. In 2014, newspapers generated an estimated 179 billion dollars in circulation and advertising revenues: 92 billion came from print and digital circulation, while 87 billion came from advertising. In most newspaper markets, print advertising s share of overall revenue is declining, and this decline is forecast to continue. On the other hand, the positive aspect of this trend is that audiences worldwide continue to read and value news products. 5 Excluding Flammarion, RCS turnover would have fallen by about 36%. The RCS Group took over from the eponymous family the publishing company Flammarion in November 2000 with an outlay of Euro 160 million; after a dozen years, in September 2012, the Flammarion Group was sold (to Madrigall S.A. parent company of the French publishing company Gallimard) at a price of Euro million, with a capital gain of 85 million. 1

2 increase concerns revenues from digital activities, especially significant for half of the selected groups: Class Editori (whose area of digital information accounts for 37% of the total, in line with the previous year), Il Sole 24 Ore (whose digital revenues amounted to 30.5% of total revenues in 2014, were 27.7% in 2013) 6, RCS (12.6% digital revenues on 2014 turnover, 11.2% in 2013) and L Espresso (8.2% in 2014 and 7% in 2013). Revenues from digital activities in increased by 12.2% for Il Sole 24 Ore, 9.5% for RCS, 6% for L Espresso and by 5.5% for Class and in aggregate terms by a total of about 10%. That digital editions represent the future of publishing is confirmed by the fact that worldwide revenues from digital circulation are growing steadily: in 2014, they increased by 45% over the previous year. 7 The 2014 turnover of Mondadori stood at 1,177 million, now at levels close to those of RCS (1,279 million), the largest Italian publishing Group, which is left with small margin. However, the context has recently changed: in early October 2015, RCS signed a contract with Arnoldo Mondadori Editore for the sale of the entire shareholding in RCS Libri (main brands Bompiani, Sonzogno, Rizzoli, Fabbri, Marsilio, with the exception of Adelphi Edizioni) for Euro million. Following this operation, Mondadori rose in the first place in the context of Italian publishing: according to 2014 data, including the books area just acquired by RCS (whose turnover amounted to million), the turnover of Mondadori (which already owns the brands Piemme, Sperling&Kupfer, Einaudi, Electa ) would rise to 1.4 billion ahead of RCS with 1.1 billion. RCS also sold 58% of Adelphi Edizioni to the other shareholder Roberto Calasso, first employee then managing editor and owner of the publishing house. With the conclusion of these operations (still pending the verdict of the Antitrust Authority that oversees possible market concentrations), RCS leaves the books sector to focus on the publishing of national newspapers confirming its position as the leading operator in this sector (with a share of 17.3% in print circulation of the national newspapers Corriere della Sera and La Gazzetta dello Sport). 8 The new scenario in Italian book publishing would see Mondadori market leader with 38% (was 26%), followed by the Messaggerie Italiane Group 9 (10%), Giunti Editore Group (6%) and Librerie Feltrinelli Group (5%). 10 Mondadori is focused on periodicals (it does not publish newspapers), the sector in which it is leader in Italy with a market share in terms of copies of 31% in 2014 (34% in 2010). 11 The circulation of newspapers and periodicals represents 43.6% of the 4.0 billion turnover in 2014 by the aggregate of the leading operators; the rest of revenues is mostly from the sale of advertising space (30.9%) and books (13.2%). The composition of revenues is varied among the publishing Groups: advertising income is more relevant for Class, L Espresso and Caltagirone (over 55% of the total), circulation accounts for more in La Stampa and Mondadori (53%). Peculiar are Mondadori, which generates a quarter of sales from books 12 (followed by RCS, which had a turnover of 17% in 2014 from the sale of books) and Monrif, which includes the hotel business for about 20 million turnover. 6 Source: Press Release of Source: WAN-IFRA (World Association of Newspapers and New Publishers)-World Press Trends 2015: Facts and Figures. In 2014, paid digital circulation revenues increased 45 per cent. Although newspapers digital revenues continue to grow, print is still their main source of revenue: globally, over 93 per cent of all newspaper revenue comes from print, and print will continue to be a major source of revenue for many years to come. 8 Considering also the local newspapers, the leading operator in terms of circulation would be Gruppo Editoriale L Espresso with a share of 20.3% (9.6% considering the only national newspaper of the Group, La Repubblica). 9 The Messaggerie Italiane Group (which, among others, consolidates GeMS-Gruppo editoriale Mauri Spagnol, named in tribute to Luciano Mauri and Mario Spagnol, founders of the Longanesi Group, controlled 73.77% by Messaggerie Italiane, 23% by the Spagnol family and 3.23% by Andrea Micheli) has among its main brands Longanesi, Corbaccio, Garzanti, Bollati Boringhieri, Vallardi and Salani. 10 Based on 2014 turnover, the order is as follows: Mondadori (1.4 billion including the former RCS part, the book publishing revenues of which amounted to over half a billion), Effe 2005 Group Feltrinelli Group (399 million), Messaggerie Italiane Group (375 million), Giunti Editore Group (188 million) and Zanichelli Editore Group (142 million). Strong commercial brands such as Sellerio and Adelphi correspond to smaller publishers (11 million in 2014 for Sellerio Editore s.r.l. and 10 million for Adelphi Edizioni). 11 In September 2015, Mondadori ceded control of Monradio (broadcaster of R101 ) to Mediaset and RCS the entire shareholding in the Finelco Group (44.45% - broadcaster of R105, Radio Montecarlo and Virgin Radio ) to the Hazan family, both leaving the radio sector. 12 The share of sales from books will rise to over 35% after the acquisition of RCS Libri. 2

3 In the five years, Mondadori recorded a decrease in advertising revenues (-95.2%) due, however, to an integration within the Fininvest Group of advertising income. All publishers marked declines of between 30% and 40% approximately, with the exception of Class, which marked -20%. As for circulation revenues, Class and RCS marked the greatest declines (respectively -48.3% and -28.6%), and only three Groups limited the reduction: Monrif (with the newspapers Il Giorno, La Nazione and Il Resto del Carlino) held up the best (only - 6.2%), and the decreases of Mondadori (-9% relative only to periodicals) and Caltagirone (-11.3%, with Il Messaggero and local newspapers) appear less accentuated. The presence on foreign markets only regards two groups: RCS (31% of revenues in 2014, they are the Spanish activities of Unidad Editorial) 13 and Mondadori (24%, generated in France). The lower sales affected employment, which declined over the five years by 26.6%, involving about 4,800 employees (Tab. 2). The decline in the workforce was conspicuous for RCS, reaching a third of 2010 figures (- 35.1%), equivalent to about 2,100 resources, of which more than 600 outgoing in France with the sale of the Flammarion Group 14, and for Il Sole 24 Ore, which reduced the workforce by more than 900 resources (- 44.1%), of which 436 related to the software unit sold in May 2014 and Class (-33.8%, 159 resources). The reductions in the workforce in all the other Groups stood between -13% of Mondadori and -22% of Monrif. The fall in the workforce more intensely involved blue collars (-34.5%) and white collars (-32.8%) than journalists (-12.2%). The weight of the latter increased from 30.8% of total employees in 2010 to 36.9% in 2014, the blue-collar base decreased from 8.5% to 7.6%, the white-collar base from 60.7% to 55.5%. The downsizing of journalists was more important for Il Sole 24 Ore (-19.7%), less for Class (-4.7%) and Mondadori (-6.4%). As for the composition of employees, in 2014, La Stampa and Caltagirone marked the highest incidence of journalists (respectively 60.1% and 51.7%), while Mondadori recorded the largest white-collar share (72.4%), also justified by the greater diversification of activities; La Stampa recorded the smallest whitecollar share (30.9%). According to data elaborated by ASIG - Italian Newspaper Printers Association 1, in the period , the hours worked by employees of the Italian newspaper industry fell by 25%. The productivity of the publishing Groups was heavily impacted by the decline in sales. In 2010, each employee on average expressed productivity (net added value per capita) of Euro 96 thousand, which fell to Euro 82 thousand in 2014 (-14.6%) (Tab. 3). Downsizing, turnover and contractual measures (redundancy and solidarity) did not affect labour to the same extent, virtually unchanged in the five years (Euro 82 thousand average in 2010, 84 thousand in 2014). The ULC (labour cost per unit of output) was affected, which increased from 85.4% to 102.4%. This value means that the labour cost exceeds productivity and the wealth created is not sufficient even to pay the salaries of journalists, polygraphs and employees. La Stampa and L Espresso are confirmed leaders in terms of productivity, respectively with 132 thousand and 116 thousand per employee in 2014; all the other Groups are at or below the average (82 thousand) with the lowest value reported by Class (Euro 38 thousand). Class reported the lowest unit labour cost in 2014 equal to Euro 60 thousand per employee, about half of La Stampa, which recorded the highest value at Euro 118 thousand. The worst ULC was reported by Class, which stood at 157.9%, ahead of Il Sole 24 Ore (140.3%), the best from L Espresso (81.9%). Five Groups out of eight reported values greater than or equal to 100%; L Espresso, Mondadori and La Stampa are below this threshold. However, the labour cost absorbs also for them significant portions of the added value (81.9%, 85.4% and 89.4%). The loss of competitiveness of the largest publishers between 2010 and 2014 is equal to 17 points (differential between the fall in productivity of 14.6% and the modest increase in unit labour of 2.4%). Class reports the greatest deterioration of competitiveness ( points), La Stampa clearly the least (-1.5 points). The decline in revenues of circulation and especially advertising that started in 2008 and has not yet stopped, has forced companies to reduce (Tab. 4), which fell in overall aggregate terms by 29.6% in the last five years (although lower than the -33.2% drop in turnover). Revenues have continued to suffer from the 13 In Spain, with the Unidad Editorial Group, RCS is one of the key players in the media sector, publishing the second national generalist newspaper, El Mundo (after El Pais), Expansion leading business newspaper and the sports newspaper, Marca. 14 Excluding Flammarion, the RCS workforce would have fallen by 23%. 3

4 crisis in the sector, albeit to a less accentuated extent than in the recent past; the hope is that, after the costcutting in recent years, the development of new services and products especially in the digital area can also lead to increases in the revenue item. Among the cost categories, the decline in the cost of paper was 28.1% due to the reduction in print runs and average pagination, in other, including distribution, of 31.5%. To a lesser extent, but still significant, the cost of labour decreased (-25%), which represents just over a quarter of the total of the companies examined. All Groups examined have proceeded with drastic costcutting, although less than the decline in revenues in the five years; Il Sole and La Stampa are characterized by cost-cutting in line with the reduction in turnover: -35.4% for Il Sole and -22.1% for La Stampa. Regarding profitability (Tab. 5), in 2014, the overall scenario generally worsened in the five years, both in terms of NOM and income. However, it generally improved compared to In , exceptions are L Espresso, La Stampa and Mondadori, which maintain the positive industrial profitability of 2010 (La Stampa increased by 0.2 p.p.); negative values are marked by all the other Groups, with peaks for Il Sole 24 Ore (-9.6%) and Class (-9.1%) in Compared to 2013, the overall improvement for all Groups retains signs of hope for the near future. Similar trends for ROE and ROI, which also worsened overall in the five years, but improved in 2014 over the previous year. The financial structure is solid overall, but in deterioration and very differentiated among the companies. Aggregate net capital decreased in the last five years by 42.2% (-1,420 million) due to accumulated losses amounting to 1,838 million 15. Two Groups are exceptions: La Stampa, thanks to the capital contributions of the shareholder Fiat for 105 million (35 million in 2012 and 70 million in 2013), and L Espresso for the accumulation of profits in the five years (+145 million). In June-July 2013, RCS completed an option capital increase of 410 million (401 net of incurred) and in June 2014, proceeded to the conversion of savings shares into ordinary shares collecting a balance of 46 million. However, in the five years, its net capital decreased in any case (-74%, equal to -794 million) essentially due to the 1,154 million of cumulative losses. Class also proceeded with a capital increase in 2014 (for Euro 40 million), which allowed the decline in equity in the last five years to stop at -7.5% (the lowest compared to other operators, without prejudice to the aforementioned increases of La Stampa and L Espresso). Aggregate financial debt also declined in the period (-42.1%, equal to -888 million). Between 2010 and 2014, all the Groups reduced their financial exposure, with the exception of Il Sole 24 Ore, whose debt went from 11 to 32 million, and Class (from 57 to 81 million). Overall, the weight of aggregate financial debt on equity remained stable (62.8% in 2010 and 62.9% in 2014). Monrif marks the greatest fragility with financial debt equal to more than five times net capital (2.2 times in 2010), Caltagirone reports the lowest ratio (with net capital 20 times higher than financial debt). Some Groups show discrete liquidity stocks reaching 102.7% of the equity of Monrif (which in 2014 sold the property complex in Florence, headquarters of the newspaper La Nazione, collecting Euro 36.3 million) 16, 31.2% for Il Sole 24 Ore and 26.5% for Caltagirone (the latter has liquidity of 155 million, more than five times financial debt). Publishing companies are characterized by a significant presence of intangible assets, consisting mainly of the value of publishing titles and, at times, goodwill. These items amount to 208.1% of net capital for Mondadori, 186.4% for RCS and 147.9% for La Stampa. As a result, four of the eight Groups recorded negative tangible net capital in 2014; Caltagirone, Class, L Espresso and Il Sole 24 Ore showed positive tangible equity. Caltagirone emerges by far for financial solidity (917.8% the ratio of tangible net capital and financial debt). Regarding the evaluation of intangible assets (after impairment tests to evaluate the congruity of the values in the financial statements with respect to the prospective earning capacity), in the five years, there were impairments by RCS (632 million in relating to the goodwill of the Unidad Editorial Group, over 90 million in 2012 for the newspapers area in Spain), by Mondadori regarding French assets (Euro 240 million in the two-year period 15 Divided as follows (in millions of Euro and as a % of 2014 turnover): -1,154 and -90.2% for RCS, -260 and -22,1% for Mondadori, -197 e % for Caltagirone, -180 and -58% for Il Sole 24 ORE, -92 and -86.1% for La Stampa, -63 and -82.2% for Class, -37 and -18.8% for Monrif and +145 and +22.5% for L Espresso. L Espresso is the only Group that recorded cumulative profits and not losses in the five years. 16 This sale generated a gross capital gain of 20.1 million in the income statement, without which net capital would have presumably zeroed. 4

5 ), by Caltagirone Editore (94 million for goodwill and Euro 36 million in for the newspapers Quotidiano di Puglia, Gazzettino and Corriere Adriatico) and by L Espresso (18.4 million in 2014 for publishing titles). These impairments significantly weighed on losses in the income statement (in particular for RCS, 63% of accumulated losses is indeed caused by said impairments). The effort produced by publishers in terms of advertising and promotion does not necessarily seem correlated with economic-financial performance. Il Sole 24 Ore, RCS and Mondadori invested mostly in advertising expenses (respectively 5.2%, 5.1% and 4.9% of 2014 turnover), while the lowest incidence is reported by Caltagirone (1.8%). For the aggregate, the share increased marginally over the five years, from 3.5% to 3.7% (Tab. 6). Seven of the eight Groups are listed on the Stock Market (the only one unlisted is La Stampa). At the end of 2014, the highest in terms of capitalization is RCS, followed by L Espresso (Tab. 7). Aggregate capitalization recorded a decline of 45.9% in the last five years (the Stock Market capitalization of industrial companies decreased by 3.4%). Mondadori suffered the greatest collapse with -63.8%, Monrif limited the fall to -31.7%. Class is characterized by being the only company that increased its Stock Market value in the five years (+89.4%). 17 At the end of October 2015, the Stock Market scenario changed: l Espresso rose to first place in terms of market capitalization, RCS fell to second position. From the end of 2014 to the end of October 2015, aggregate lost only 1.1% of the Stock Market value, with positive peaks for Mondadori (+26.8%) and only two recessions, RCS (-21.7%) and Class (-13.5%). As evident from the financial statement figures, the circulation dynamics of the newspapers published by the publishing Groups examined was negative. ADS data on national circulation indicates a fairly homogeneous overall scenario, with generalized decreases on print circulation and equally generalized increases for digital editions. 18 Relating to the companies analyzed, the number of copies decreased overall by 29% in the last five years (Tab. 8), with peaks of 55.1% for ItaliaOggi (whose publishing company is an associate of Class Editori), 41.1% for Milano Finanza. Il Giorno -17.2% and Il Gazzettino -18.8% held up the most. Among the print editions, the top position in 2014 remains firmly of Il Corriere (335 thousand copies), ahead of La Repubblica (306 thousand, figure that however doubled to 648 thousand copies with the local newspapers); these are followed by Quotidiano Nazionale (Monrif, 260 thousand copies), La Stampa (202 thousand) and Il Sole 24 Ore (183 thousand). The Caltagirone Group amounts to 278 thousand copies, of which 135 thousand of Il Messaggero, the fifth national newspaper. The classification based on digital copies in 2014 (Tab. 9) still sees Il Sole 24 Ore in the top position, the leading digital national newspaper with 184 thousand copies sold (now in line with print and more than double with respect to the 86 thousand copies of 2013, with digital revenues up by 12.2% in 2014 over 2013), 100 thousand more than Il Corriere, second; these are followed by La Repubblica and Italia Oggi. ADS data nationally report a clear transfer of readers from print to digital. However, it is a trend that is anything but impetuous and especially with a negative balance both in terms of total copies circulated (-400 thousand print copies +180 thousand digital copies in the comparison between 2013 and 2014), and in terms of revenues. According to the ASIG - Italian Newspaper Printers Association 1, the decline in copies circulated was not transferred in proportion to the readership percentages of the daily newspaper, also thanks to the increasingly widespread presence of newspapers on the web and on social networks. The target market for the newspaper industry seems therefore far from being in decline: the brands are strong and authoritative and newspapers sites are the reference point for news reporting on the web. The challenge is to transform this force and authority into revenues and profits. 17 This increase occurred in 2014 and was justified by the company as follows: The sensitive appreciation of the stock and the stock market capitalization of the group, following the capital increase in 2014, significantly increased (about double) the evaluation that the market attributes to the Publisher with respect to about a year ago. Consider that the Stock Market value calculated on the free float of Class Editori was less than 30 million in The only exception is l Avvenire, the number of copies which increased in 2014 compared to 2013 (+1%). 5

6 By comparison, while the circulation of newspapers continued to decline in the last five years in Europe (- 21.3% and -4.5% compared to 2013), North America (-8.7% and -1.3% compared to 2013) and Oceania (-22.3% and -5.3% compared to 2013), globally, the increase was of 16.5% over the past five years and of +6.4% in 2014 compared to the previous year; this increase is largely due to India and Asia in general (in Asia: +32.7% in and +9.8% in ). In 2014, three of the top five newspapers in terms of circulation in the world are Japanese (along with US Today, third, and the Indian Dainik Bhaskar, fourth); even the world s most popular financial newspaper is Japanese (The Nikkei, ninth). To see a European newspaper among the top 50 most popular in the world (with an average daily circulation of at least a million copies each), it is necessary to go down to 15th place, where the German BILD (Axel Springer Group) is placed; the English The Sun (News Group Newspapers) is 18th and another English one, the Daily Mail (DMGT Group) is 30th. Among the Top 50 of the most popular newspapers in the world therefore appear only three of the old continent (one German and two English) and also only three of the United States (USA Today, third, The Wall Street Journal, 13th, and The New York Times, 16th ); 19 are Indian, 12 Chinese, 11 Japanese and 2 Korean. Italy places among the last positions among European countries in the classifications related to reading newspapers: newspaper readers in Italy, in relation to the adult population, amount to 36.6%, against 41.6% in the United States, 46.5% in the UK, 47.9% in France, 67.4% in Germany and the unreachable 83.2% in Japan, first overall; Spain follows (29.8%). Northern European countries and Japan were confirmed at the top of the circulation classifications, with more than 500 copies sold per thousand inhabitants. WAN-IFRA estimated that in 2014, printed newspapers reached 2.7 billion people in the world, almost half of the world adult population, more than 0.8 billion readers of digital newspapers, equal to 42% of internet users in the world. 19 Too often, for oversimplification, it is claimed that the death of newspapers and print media is upcoming. The challenge in the near future is the convergence and integration of print and digital, assigning to each its role and significance. This is explained well by the metaphor used by David Johnson 20, which states: both print and digital have numerous advantages and there is no need for them to work against one another, as much as it is not necessary for a rubber and a pencil to operate against the del key of the computer. Half-year I 2015 (Tab. 10) In the first half of 2015, the decline in sales continued although to a less accentuated extent, with aggregate turnover down overall by 4% (from 7% in the previous period). Only Il Sole 24 Ore increased revenues (+3%). Industrial profitability remains negative for all companies with the exception of L Espresso, Mondadori and Monrif; RCS reported a negative NOM of 34 million in 2015, however still an improvement compared to -65 million in the first half of The net income of L Espresso in 2015 was positive and up, influenced also by the gross capital gain of 9 million on the sale of All Music (publisher of the Deejay TV channel) to Discovery Italia, and Caltagirone went from negative to positive. Comparison with the major European countries (France, Germany, Great Britain, Spain) The phenomenon of the decline in the circulation of newspapers is, as already mentioned, common to all of Europe. In the five-year period , Europe as a whole reported -21.3%, variedly distributed: France -13%, Germany -14.6%, United Kingdom -21.9% and Spain -37.5%. The national decrease (-29.8%) places Italy in fourth place, followed by Spain alone, among the major European countries. The three most circulated information newspapers in Europe are German BILD (2,220 thousand copies a day in 2014) and the English The Sun (1,892 thousand copies) and Daily Mail (1,649 thousand copies), far ahead of the others. 21 In terms of economic-financial newspapers, there was the recent sale of The Financial Times Ltd. by the British Pearson Group to the Japanese Nikkei Inc. Group in July 2015 for 844 million: the Pearson Group thus exits from the newspapers sector to focus daily on that of school and university books, while the Nikkei Group (the independent Asian leading publisher) became a leader in the business press already owning The Nikkei, the 19 Source: WAN-IFRA (World Association of Newspapers and New Publishers)-World Press Trends David Johnson: Journalism Professor at the American University School of Communication. 21 Source: WAN-FRA World Press Trends 2015, OJD, IVW, company financial statements. 6

7 leading economic-financial newspaper in terms of circulation in the world. There was also another recent change in the scenario of the European press involving the British magazine The Economist, whose publishing house The Economist Newspaper Ltd. until October 2015, was owned 50% by The Financial Times Ltd., which evaluated it at cost and elected six of the 13 members of the Board of Directors (the other 50% was owned by various shareholders including the Cadbury, Rothschild and Schroder families). In October 2015, Exor acquired from the Financial Times Ltd. 27.8% of the ordinary shares and 100% of the special class B shares of The Economist Newspaper Ltd. reaching control of 43.4% of the share capital and becoming the single largest shareholder of the company. National information newspapers: Newspaper UNITED KINGDOM: 000 of copies/day Publishing Company Group 1. The Sun 1,892 News Group Newspaper Ltd. News Corp. (Murdoch) 2. Daily Mail 1,649 Group DMGT-Daily Mail and General Trust Plc. (dmg media division) The majority shareholder of the listed Group is the Rothermere Family. FRANCE: 1. Le Figaro 313 Société du Figaro s.a.s. D.I.M.G. (Fam.Dassault) 2. Le Monde 272 Société Editrice du Monde S.A. Control is held by Pierre Bergé (co-founder of Yves Saint Laurent), Xavier Niel and Matthieu Pigasse GERMANY: BILD 2,220 Axel Springer Group (BILD Group division) The majority shareholder of the listed Group is the Springer Family. SPAIN: 1. El País 267 Ediciones El Pais S.L. Prisa Group 2. El Mundo 181 Unidad Editorial S.A. RCS MediaGroup Group National information newspapers: Newspaper UNITED KINGDOM: 000 of copies/day Publishing Company Group FT-Financial Times 216* The Financial Times Ltd. Pearson Group ** FRANCE: Les Echos 126 Les Echos S.A. LVMH Group GERMANY: Handelsblatt 118 DvH Medien GmbH Control is held by Dieter von Holtzbrinck SPAIN: Expansion 41 Unidad Editorial S.A. RCS MediaGroup Group 7

8 * In 2014, the global total of the circulation of the FT was equal to 720 thousand copies, of which 504 thousand digital (+21% compared to 2013) and 216 thousand paper. In 2014, the digital readersof the FT accounted for 70% of total circulation. ** In July 2015, the control ofthe company went from the Pearson Group to the NikkeiInc. Group, one of the leading Japanese publishing Groups and owner of the leading economic-financial newspapersin terms of circulation in the world, The Nikkei. Table 11 shows a summary of the key economic-financial figures as at 2014 of the publishing companies of the leading information and economic newspapers circulated most in major European countries. The overall picture of said figures shows a situation of difficulty, albeit lower than that in Italy, even at the major publishers of European newspapers. The decline in circulation revenues in the last year involves all the Groups considered; the total turnover is growing only for the Groups DMGT and Axel Springer, both diversified, whose revenues are driven mainly by other activities (information services, risk management solutions, marketing services, etc.) and DvH Medien. The first two Groups are characterized by being operationally the most profitable in 2014, with a NOM respectively of 16.4% and 11.2%; these were followed by News Group Newspapers (7.2%), DvH Medien (3.5%) and Ediciones El País (0.1%), while the other Groups reported negative industrial profitability. Of note are some peculiarities emerging from non-recurring items of the income statements in 2014: - News Group Newspapers reported a NOM of 7.2% of turnover and a net loss of -10.7%, caused mainly by extraordinary expenses for about Euro 100 million relating to various legal expenses. - The Axel Springer Group reported a NOM of 11.2% of turnover and net profit of 26.3%, largely due to Euro 649 million of capital gain on the sale of regional newspapers and magazines circulated in Germany and the Czech Republic. - The accounts of The Financial Times were significantly impacted by the positive results of The Economist Newspaper, summarized in about Euro 26 million of dividends received by the Financial Times, which held 50%; without them, there would have been a net loss of -3.2% of turnover. - There were impairments of assets for the German DVH Medien, which closed the year with a net loss of -6.5% of turnover from a positive NOM of 3.5%. In 2014, the publishing companies of British newspapers were first in terms of productivity (net added value per capita), higher than Euro 100 thousand for all, with News Group Newspapers and the DMGT Group that reported even the best ULC (labour cost per unit of product), while the Financial Times reported a labour cost higher than productivity (ULC equal to 107.8%). Halfway in the classification are the German publishing houses with productivity of around Euro thousand and ULC however below 100% (74.5% for the Axel Springer Group and 90.2% for DvH Medien). The situation has worsened of French publishers, whose productivity and wealth created are not sufficient to cover the labour cost (as for four of the eight Italian ones). The Spanish publisher of El País recorded productivity exactly equal to the cost of labour. The financial structure is solid overall albeit differentiated for all the European publishers selected; only the DMGT Group reported an amount of financial debt higher than equity (the former are equal to 161.8% of net capital). News Group Newspapers is characterized by the absence of financial debt and also Société du Figaro has minimal exposure to third parties (3.8% in proportion to net capital). News Group Newspapers is also characterized by the highest liquidity stock that reached 65.9% of equity, followed by DvH Medien (37.1%) and The Financial Times (26.1%); the liquidity stock of the other operators are much lower. By aggregating the main European operators in terms of nationality (eight Italian, three English and French, two German), it is possible to have a summary picture in the European publishing scenario connected to the most circulated newspapers. The following main aspects emerge: - The aggregate in Italy reported the greatest decline in revenues in 2014 over the previous year (-6.9%), followed by France (-2.9%); turnover increased in Great Britain (+4%) and especially in Germany (+7.5%) largely due to the presence of diversified groups (DMGT and Axel Springer). - In terms of aggregate operating profitability, excellent results were achieved in Great Britain (NOM equal to 12.5% of turnover) and Germany (10.3%), with Italy in balance (+0.1%). Worst of all is France (-2.4%). 8

9 - Even based on the cost of labour per unit of product, in the lead are Great Britain (72.5% ULC) and Germany (82.8%), in an intermediate position is Italy (102.4%) and last is France (111.4%), penalized with respect to Italy by a higher labour cost (98 thousand against 84 thousand in Italy). - In terms of financial solidity, the positions are closer with France in the lead (30.7% ratio of financial debt to equity), followed by Britain (38.7%), Germany (44.3%) and Italy (62.9%); the Great Britain aggregate is more liquid (45.7% ratio of liquidity and net capital), followed by Italy (17.5%) and Germany (17%); the French are less liquid (3.4%). Table 1 - Turnover ( ) Circulation (newspapers and periodicals)advertising Others % Change % Change of Circulation of Circulation of of Circulation of which (newspapers which (newspapers which which (newspapers which books and foreig and foreig books and of which Total foreign (include periodicals)advertising Others Total n periodicals)advertising Others Total n (include periodicals) Advertising Others Total foreign millions of Euro and in % of the total millions of Euro and in % of the total millions of Euro and in % of the total Circulatio n (newspap ers and Advertising Others Total of which foreign RCS MediaGroup ,0 3,2-4,9-2,7-1,7-28,6-35,4-60,3-43,3-58,1 27,3 33,7 39,0 100,0 42,6 35,9 36,2 27,9 100,0 31,2 34,3 38,4 27,3 100,0 31,5 17,1 Mondadori Group ,4-92,3 18,1-7,8-26,1-9,0-95,2-15,7-24,5-27,0 44,4 14,8 40,8 100,0 24,7 53,3 11,1 35,6 100,0 29,8 53,5 0,9 45,6 100,0 23,9 25,4 Gruppo Editoriale L'Espresso ,7-9,2-59,3-9, ,4-30,7-52,2-27,3-37,7 59,7 2,6 100,0-39,6 56,6 3,8 100,0-41,4 56,9 1,7 100,0 - Il Sole 24 ORE Group ,7-10,9-49,1-19, ,5-37,7-53,4-35,5-37,6 38,0 24,5 100,1-38,7 33,2 28,2 100,1-45,7 36,7 17,7 100,1 - Monrif Group ,1-4,5 2,3-1,5 - -6,2-39,4-4,3-19,8-39,1 41,9 19,0 100,0-45,5 32,7 21,8 100,0-45,7 31,7 22,6 100,0 - Caltagirone Editore Group ,6-7,1 0,0-6, ,3-41,7-50,0-31,5-33,6 65,5 0,9 100,0-43,4 56,0 0,6 100,0-43,6 55,8 0,6 100,0 - Editrice La Stampa ,7-4,4 40,0-0, ,6-34,8 40,0-21,9-48,2 48,2 3,6 100,0-53,7 41,7 4,6 100,0-53,3 40,2 6,5 100,0 - Class Editori Group ,2-4,3 o -1, ,3-19,6 0,0-33,6-50,0 48,3 1,7 100,0-39,7 60,3-100,0-39,0 58,4 2,6 100,0 - Total ,2-12,9 0,0-6,9-13,4-18,7-41,2-41,3-33,2-49,2 35,9 35,2 28,9 100,0 22,7 15,9 43,3 33,1 23,6 100,0 18,6 43,6 30,9 25,5 100,0 17,3 13,2 Italian publishing press sector (*) ,0-26,1 (*) Source: Cumulative Data of 2055 Italian companies (2015). Source: R&S-Mediobanca Table 2 - Employees ( ) Bluecollar % Change % Change White-collar Whitecollar and Journalists Total Blue-collar collar and Journalists Total Blue-collar collar and Journalists Total Blue-collar collar and Journalists White- White- White- of which of which of which of which and Journalists Total Blue-collar abroad abroad abroad abroad Managers Managers Managers Managers Managers average number and in % of the total average number and in % of the total average number and in % of the total RCS MediaGroup ,1-9,1-5,4-7,8-5,0-43,5-42,5-16,2-35,1-44,7 7,5 64,0 28,5 100,0 47,4 6,6 57,5 35,9 100,0 39,2 6,5 56,7 36,8 100,0 37,2 Mondadori Group (1) ,9-9,4-11,1-9,9-1,7-19,2-14,7-6,4-13,0 2,0 4,1 73,8 22,1 100,0 24,6 3,9 72,0 24,1 100,0 26,4 3,8 72,4 23,8 100,0 26,0 Gruppo Editoriale L'Espresso ,6-6,6-1,6-5, ,0-23,2-8,4-18,2-12,0 47,4 40,6 100,0-10,8 45,3 43,9 100,0-10,0 44,5 45,5 100,0 - Il Sole 24 ORE Group ,3-43,9-9,8-35,0-15,4-37,3-51,6-19,7-44,1-15,4 6,4 72,9 20,7 100,0 0,6 5,4 73,1 21,5 100,0 0,7 7,1 63,1 29,8 100,0 0,6 Monrif Group ,1-7,7-1,1-5, ,0-22,5-11,2-22,1-20,0 42,0 38,0 100,0-16,0 42,8 41,2 100,0-14,9 41,8 43,3 100,0 - Caltagirone Editore Group ,1-12,3-2,8-6, ,8-28,7-11,5-19,0-14,0 38,7 47,3 100,0-13,7 36,4 49,9 100,0-14,2 34,1 51,7 100,0 - Editrice La Stampa ,2-12,4-8,8-10, ,4-18,5-14,9-15,7-8,6 31,9 59,5 100,0-9,6 31,5 58,9 100,0-9,0 30,9 60,1 100,0 - Class Editori Group ,0-7,1 2,2-3,1-0,0-47,1-4,7-33, ,6 31,4 100, ,1 42,9 100, ,8 45,2 100,0 - Total ,8-14,3-5,2-10,9-3,9-34,5-32,8-12,2-26,6-33,6 8,5 60,7 30,8 100,0 7,6 57,7 34,7 100,0 7,6 55,5 36,9 100,0 Italian publishing press sector (*) ,6-15,8 Total of which abroad (1) Number of employees abroad at year-end. (*) Source: Cumulative Data of 2055 Italian companies (2015). Source: R&S-Mediobanca 9

10 Table 3 - Productivity and labour cost per employee ( ) Productivity per employee (a) thousands of Euro % Change Labour cost per employee (b) (1) Loss of Productivity per Labour cost per Productivity Labour cost per ULC ULC competitivenes employee (a) employee (b) (1) per employee employee (1) s b/a in % thousands of Euro b/a in % (a) (b) (a)-(b) Gruppo Editoriale L'Espresso , ,9-15,3 1,1-16,4 Mondadori Group , ,4-22,6-4,1-18,5 Editrice La Stampa , ,4 3,9 5,4-1,5 RCS MediaGroup , ,0-14,6 4,1-18,7 Monrif Group , ,2-14,1 2,6-16,7 Caltagirone Editore Group , ,2-24,8-1,1-23,7 Il Sole 24 ORE Group , ,3-8,8 4,8-13,6 Class Editori Group , ,9-28,3 9,1-37,4 Average , ,4-14,6 2,4-17,0 Italian publishing press sector (*) -16,8-7,2-9,6 (1) Calculated excluding expenses for early retirement incentives. (*) Source: Cumulative Data of 2055 Italian companies (2015). Source: R&S-Mediobanca Table 4 - Costs ( ) Paper Labour % Change Other (*) Total Paper Labour Other (*) Total Paper Labour Other (*) millions of Euro millions of Euro RCS MediaGroup ,1-28,0-42,4-39,7 Il Sole 24 ORE Group ,0-46,3-29,5-35,4 Class Editori Group ,4-26,9-27,8-28,2 Gruppo Editoriale L'Espresso ,2-19,4-24,9-22,6 Caltagirone Editore Group ,6-18,8-24,3-22,3 Editrice La Stampa ,3-20,0-20,3-22,1 Mondadori Group ,0-15,1-23,8-20,6 Monrif Group ,2-22,2-4,9-14,8 Total ,1-25,0-31,5-29,6 as a % of total 6,5 26,3 67,2 100,0 6,7 28,0 65,3 100,0 Total (*) Operating, excluding depreciation and amortization, financial expenses and other extraordinary. The paper of Class Editori are only related to the parent company. Source: R&S-Mediobanca Table 5 - Economic-financial indicators ( ) NOM Income ROI ROE Intangible Financial assets debt Liquidity NC tangible in % of FD NOM Income ROI ROE Intangible Financial NC tangible assets debt Liquidity in % of FD NOM Income ROI ROE Intangible Financial NC tangible assets debt Liquidity in % of FD as a % of turnover as a % of net capital as a % of turnover as a % of net capital as a % of turnover as a % of net capital Gruppo Editoriale L'Espresso 12,1 10,2 12,8 10,2 121,2 60,8 24,8 neg. 4,2 2,7 4,1 0,7 117,2 44,4 29,3 neg. 6,4 3,9 6,1 1,5 84,6 19,3 13,9 79,9 Editrice La Stampa 4,5 4,0 50,4 4,7 89,1 64,4 6,3 17,0-6,1-8,4 neg. neg. 165,9 17,3 4,4 neg. 4,7 3,7 21,7 3,3 147,9 23,2 6,9 neg. Mondadori Group 7,6 6,0 11,5 7,8 155,2 78,4 14,6 neg. -2,9-4,9 neg. neg. 238,7 172,2 25,4 neg. 2,8 0,8 5,5 0,2 208,1 109,1 4,5 neg. RCS MediaGroup 4,5 3,2 5,0 0,7 148,9 97,0 3,1 neg. -9,9-12,9 neg. neg. 147,3 138,2 3,1 neg. -1,6-4,9 neg. neg. 186,4 180,2 5,1 neg. Monrif Group 1,8-0,9 1,7 neg. 41,7 223,7 18,2 26,1-4,9-8,2 neg. neg. 89,8 482,2 40,8 2,1-4,6-8,3 neg. neg. 100,1 509,7 102,7 neg. Caltagirone Editore Group 5,8 6,4 2,2 0,8 59,0 6,9 33,7 598,5-6,9-4,2 neg. neg. 55,0 7,9 29,8 572,6-6,9-4,1 neg. neg. 54,1 5,0 26,5 917,8 Class Editori Group -1,1-1,8 neg. neg. 106,3 82,3 8,6 neg. -23,3-27,3 neg. neg. 124,4 215,6 29,1 neg. -9,1-12,8 neg. neg. 84,8 125,1 15,6 12,1 Il Sole 24 ORE Group -9,6-9,4 neg. neg. 63,3 4,3 29,8 843,3-14,7-15,2 neg. neg. 128,8 46,8 7,0 neg. -9,6-10,4 neg. neg. 70,2 29,2 31,2 102,1 Total 115,2 62,8 18,0 neg. 119,5 76,7 23,0 neg. 108,2 62,9 17,5 neg. Italian publishing press sector (*) 3,9 5,6 5,5 3,2 15,9 73,7 14,0 114,2-4,9-4,3 neg. neg. 25,7 97,5 14,1 76,1 0,4 0,2 2,3 neg. 26,0 90,8 12,1 81,5 (*) Source: Cumulative Data of 2055 Italian companies (2015). Source: R&S-Mediobanca 10

11 Table 6 - Advertising and promotion expenses Var p.p as a % of turnover Il Sole 24 ORE Group 3,8 5,2 1,4 RCS MediaGroup 5,9 5,1-0,8 Mondadori Group 4,2 4,9 0,7 Gruppo Editoriale L'Espresso 1,9 3,1 1,2 Editrice La Stampa 3,1 2,9-0,2 Monrif Group 2,9 2,8-0,1 Caltagirone Editore Group 2,5 1,8-0,7 Average 3,5 3,7 0,2 (*) Referred to the parent company. N.a. for Class Editori Group. Source: R&S-Mediobanca. Table 7 - Stock Market Capitalization (1) % Change (end of October) % Change millions of Euro millions of Euro millions of Euro millions of Euro Editoriale L'Espresso , ,1 RCS MediaGroup , ,7 Mondadori , ,8 Caltagirone Editore , ,4 Il Sole 24 ORE , ,3 Class Editori , ,5 Monrif ,7 42 2,4 Total (2) , ,1 (1) Calculated excluding portfolio treasury shares. (2) The weight of the total industrial Stock Market capitalization was 0.8% in 2010 and 0.5% in Source: R&S-Mediobanca 11

12 Table 8 - Newspaper Circulation NATIONAL INFORMATION NEWSPAPERS: NEWSPAPER AVERAGE CIRCULATION (000 COPIES/DAY) CHANGE % PUBLISHING COMPANY La Repubblica ,8 Editoriale L'Espresso Local newspapers (1) ,6 Editoriale L'Espresso ,3 Corriere della Sera ,6 RCS MediaGroup Il Messaggero ,1 Caltagirone Editore Il Gazzettino ,8 Caltagirone Editore Il Mattino ,4 Caltagirone Editore Nuovo quotidiano di Puglia ,0 Caltagirone Editore Corriere Adriatico ,2 Caltagirone Editore ,8 QN-Il Resto del Carlino ,7 Monrif QN-La Nazione ,7 Monrif QN-Il Giorno ,2 Monrif "Quotidiano nazionale" ,3 La Stampa (2) ,9 Editrice La Stampa Il Sole 24 ORE ,5 Il Sole 24 ORE Milano Finanza ,1 Class Editori ItaliaOggi ,1 Italia Oggi Editori-Erinne s.r.l. (3) Total ,0 In addition to 328 thousand copies in 2010 and 217 thousand copies in 2014 related to La Gazzetta dello Sport (RCS), the most circulated national sports newspaper (-33.8%). (1) 18 local newspapers published in 10 different Italian regions. (2) Considering also Il Secolo XIX with effect and twelfth nationally for copies circulated in 2014 (53 thousand), the sum of La Stampa and Il Secolo XIX copies circulated would be 255 thousand. (3) 49% of Class Editori, 50% of Coitalia Fiscale and Giuridica Coop. Source: Elaborations R&S on data of ADS - Accertamento Diffusione Stampa. 12

13 Table 9 - Circulation main national newspapers (print + digital) in 2014 NATIONAL INFORMATION NEWSPAPERS: NEWSPAPER PRINT (000 COPIES/DAY) DIGITAL (000 COPIES/DAY) PRINT+DIGITAL (000 COPIES/DAY) digital in % of print Il Sole 24 ORE ,5 Corriere della Sera ,0 La Repubblica ,6 ItaliaOggi ,0 La Stampa ,9 Il Fatto Quotidiano ,3 Milano Finanza ,6 L'Unione Sarda ,7 Il Messaggero ,9 Il Gazzettino ,2 Avvenire ,6 Il Mattino ,0 QN-Il Resto del Carlino ,5 QN-La Nazione ,1 QN-Il Giorno ,1 Total ,7 In addition to 234 thousand copies in 2014 related to La Gazzetta dello Sport (RCS), the most circulated national sports newspaper (217 thousand print and 17 thousand digital). Source: ADS - Accertamento Diffusione Stampa. 13

14 Table 10 - Data of the first half-year 2015 (in millions of Euro) Data half-year I 2015 as a % of turnover 2014 as a % of turnover % Change RCS MediaGroup Revenues ,1 NOM -34-5, ,6 neg/neg Income -50-8, ,9 neg/neg Net income , ,5 neg/neg Mondadori Group Revenues ,8 NOM 9 1,7 9 1,7 0,0 Income -8-1,5-7 -1,3 neg/neg Net income -11-2, ,8 neg/neg Gruppo Editoriale L'Espresso Revenues ,3 NOM 21 6,9 23 7,1-8,7 Income 20 6,5 14 4,3 42,9 Net income 22 7,2 4 1,2 450,0 Il Sole 24 ORE Group Revenues ,0 NOM -8-4, ,1 neg/neg Income -8-4, ,3 neg/neg Net income -8-4,7 9 5,5 neg/pos Monrif Group Revenues ,0 NOM 1 1,1-1 -1,0 pos/neg Income -3-3,4-5 -5,0 neg/neg Net income -3-3,4-5 -5,0 neg/neg Caltagirone Editore Group Revenues ,8 NOM -5-6, ,0 neg/neg Income -1-1,3-3 -3,8 neg/neg Net income 1 1,3-5 -6,3 pos/neg Class Editori Group Revenues ,7 NOM -6-16, ,5 neg/neg Income -8-22, ,6 neg/neg Net income -8-22, ,5 neg/neg Total turnover ,0 Source: R&S-Mediobanca on data of half-year financial statements. 14