Gruppo Editoriale L Espresso: Company Presentation March 2015
Disclaimer» This document has been prepared by Espresso Group for information purposes only and for use in presentation of the Group s results and strategies.» For further details on Espresso Group, reference should be made to publicly available information, including the Annual Report, the Semi-Annual Report and Quarterly Reports.» Statements contained in this document, particularly the ones regarding any Espresso Group possible or assumed future performance, are or may be forward looking statements and in this respect they involve some risks and uncertainties.» Any reference to past performance of Espresso Group shall not be taken as an indication of future performance.» This document does not constitute an offer or invitation to purchase or subscribe for any shares and no part of it shall form the basis of or be relied upon in connection with any contract or commitment whatsoever. 2
Index» Full Year 2014 results and Company Overview» Divisional Breakdown» The Digital Strategy» Additional Information 3
Gruppo Editoriale L Espresso - Financial Highlights (FY 2014) 1) Following the integration between the network operator business of Rete A and Telecom Italia Media Broadcasting ( Persidera, the new name, of which the Espresso Group hold 30%) and the disposal to Discovery Italia of All Music (Deejay TV) in accordance with the terms of IFRS 5 Non-current assets held for sale and discontinued operations, the two companies together representing the television business of the Group, were qualified as Discontinued Operations and were shown as such in these financial statements both for 2014 and, for the purposes of comparison, for the year 2013 as well. 4
Gruppo Editoriale L Espresso at a glance Gruppo Editoriale L'Espresso is one of the leading media groups in Italy with interests in NEWSPAPERS, MAGAZINES, RADIO and INTERNET NATIONAL DAILY MAGAZINE Circ. 306K Read. 2,4 million Circ. 236K Read. 1,5 millions + 4 OTHER TITLES 19.4% MARKET SHARE LOCAL NEWSPAPERS 18 NEWSPAPERS Circ. 342K (ADS) Read. 3,0 millions CONSOLIDATED RESULTS 2014 REVENUES 644 EBITDA 60 NET DEBT 34 INTERNET GROUP S NETWORK WEBSITES: 2,3 millions unique users 108K digital subscriptions CO-LEADER IN NEWSMAGAZINES ADVERTISING SALES FOR GROUP S TITLES & THIRD PARTIES: >430 sales agents >280 employees RADIO GRUPPO ESPRESSO IS THE ONLY COMPANY WITH A LONG LIVED STRATEGY IN THE RADIO SECTOR: 3 NAT L RADIO 7.2 MLN COMB DAILY LISTENERS TV 30% STAKE IN PERSIDERA (NETWORK OPERATOR BUSINESS) Sources: Radiomonitor 2014 (radio), Audipress 2014/ (readership), Internal estimates on ADS December 2014 (circulation), AWDB and Webtrekk (internet) 5
Gruppo Editoriale L Espresso - Market share and positioning: circulation ITALIAN NEWSPAPER CIRCULATION AND MARKET SHARE 2014 (1) Source: ADS December 2014 Total Circulation 2014 vs 2013 Total Circulation -11.4% Paid Circulation -11.4% Espresso Group 19.3% Market Share of Total Circulation (1) Internal estimates based on ADS December 2014 data 6
Gruppo Editoriale L Espresso - Add-ons m Add-ons have ensured an additional stream of revenues In 2014 market softened its declining trend The company focused on a smaller number of initiatives but with higher margin: 30m euro revenues 3,3m Ebit (11% margin) 7
Gruppo Editoriale L Espresso - Italian advertising market ITALIAN ADVERTISING MARKET bn (1) Internal estimates based on Nielsen, FCP data 8
Gruppo Editoriale L Espresso - Contribution to year 2014 consolidated results REVENUES SPLIT ( 644 million) * including add-ons EBITDA MARGINS Repubblica Local Newspapers 2,4% 17,0% Radio 23,0% Digital 13,0% Magazines - In 2014, with the exception of the magazines, all the divisions had a positive Ebitda margin EBITDA margin 9,3% 9
Gruppo Editoriale L Espresso - Cost reduction Cost Management : 2008-2013 Cost Management : 2013-2014 In 2009 Gruppo Editoriale L'Espresso S.p.A. approved and announced a major plans of intervention aimed at cost reduction: The overall savings in 2008-2012 were equal to approximately 160 million (20% of the costs recorded in 2008) In order to recover efficiency, the plan entailed structural and permanent interventions addressed to all Group's areas and functions In light of the market and economic scenario the Group in 2013 put in place new actions aimed at a further cost reduction and efficiency: total 2013 costs show a 9.6% reduction thanks to a further cost reduction implemented in the year excluding digital edition and digital terrestrial television, whose costs are increasing to support their development, an 11% reduction has been recorded In 2014 the main cost management action: industrial costs declined thanks to the ongoing reorganization of the production structure of the Group distribution costs fell because of the rationalization of transportation operating and administrative costs reduction mainly thanks to the measures taken and already implemented to contain labor costs In Millions of Euro 2013 2014 Industrial and Technical costs 130,0 120,4 % on total costs 26% 26% Editorial costs 171,6 164,6 % on total costs 34% 35% Commercial costs 57,8 52,8 % on total costs 12% 11% Management & Administration costs 141,4 131,9 % on total costs 28% 28% TOTAL GROUP'S COSTS - CORE BUSINESS 500,8 469,7 Digital costs 42,6 47,1 Add-on, third parties sales and other costs 74,9 67,4 TOTAL GROUP'S COSTS (1) 618,2 584,1 (1) Excluding amortization 10
Index» Full Year 2014 results and Company Overview» and» Divisional Breakdown» The Digital Strategy» Additional Information 11
Gruppo Editoriale L Espresso - La Repubblica CONTRIBUTION TO RESULTS DAILY READERS 2,4 millions OVER 62% ARE 18-54 YEARS OLD THE MAJORITY OF READERS CONSISTS OF: COLLEGE AND UNIVERSITY GRADUATES MEMBERS OF UPPER SOCIO-ECONOMIC CLASSES HIGH RANKING PROFESSIONALS OVER 45% OF READERS ARE ALSO DECISION MAKERS IN PURCHASES Total Circulation 306K Paid Circulation 264K No. 1 in in the PAID daily newspaper market In Millions of Euro FY 13 FY 14 Revenues 233,3 214,5 - Circulation 106,7 99,6 - Advertising 124,8 113,1 - Others 1,7 1,8 EBITDA (0,1) 5,2 Margin 0,0% 2,4% EBIT (2,7) 2,9 Divisional data do not include add-ons THE ONLY NEWSPAPER READ THROUGH ITALY North West 22% SUPPLEMENTS - Il Venerdi (family, tv programming) - Affari&Finanza (business and finance) - D (women s supplement) North East 22% Center 28% South 28% Source: Audipress 2014/I-II and internal marketing research, Internal estimates on ADS 2014 12
Gruppo Editoriale L Espresso - Local newspapers LOCAL NEWSPAPERS Total circulation 342K 3,0 millions readers per day La Provincia Pavese La Sentinella Il Tirreno Il Piccolo Messaggero Veneto La Nuova Alto Adige Venezia Il Mattino di Trentino Padova La Tribuna di Treviso Corriere delle Alpi La Gazzetta di Mantova La Gazzetta di Reggio La Gazzetta di Modena La Nuova Ferrara Il Centro CONTRIBUTION TO RESULTS LOCAL NEWSPAPERS In Millions of Euro FY 13 FY 14 Revenues 183,7 170,4 - Circulation 114,3 107,6 - Advertising 67,5 60,5 - Others 2,0 2,3 EBITDA 34,9 28,9 Margin 19,0% 17,0% EBIT 26,9 6,9 La Nuova Sardegna La Città di Salerno Source: Audipress 2014/I-II and Internal estimates on ADS December 2014. Divisional data do not include add-ons 13
Gruppo Editoriale L Espresso - Magazines MAGAZINES CONTRIBUTION TO RESULTS In Millions of Euro FY 13 FY 14 Revenues 31,8 26,1 - Circulation 22,6 19,1 - Advertising 8,5 6,2 - Others 0,7 0,7 EBITDA (6,6) (5,6) Margin -20,8% -21,5% EBIT (6,8) (5,8) 1,5 millions READERS PER ISSUE Circulation 236K Divisional data do not include add-ons Others Magazines Science Nature Politics Geopolitics Over 60% ARE 18-54 YEARS OLD OVER 71% ARE COLLEGE AND UNIVERSITY GRADUATES Source: Audipress 2014/ and internal marketing research and internal estimates on ADS December 2014 14
Gruppo Editoriale L Espresso - Radio Age-group target: under 44 years old (77%) 4.6 mln daily listeners 49% are under 34 years old 56 % are college / university graduates Age-group target: under 24 years old (45%) 1.7 mln daily listeners 70% are under 34 years old MARKET OVERVIEW - RADIO 1 RTL 6.766 2 RDJ 4.563 3 RDS 4.559 4 RISMI 4.538 5 R105 4.428 6 RAI1 3.965 7 RAI2 2.826 8 VIRGIN 2.286 9 R24 1.974 10 RKISS 1.740 11 RCAP 1.738 12 m2o 1.707 13 R101 1.682 14 RAI3 1.320 15 RMC 1.192 Age-group target: 25 54 years old (63%) 1.7 mln daily listeners 40% are 25-44 years old 73 % are employees CONTRIBUTION TO RESULTS In Millions of Euro FY 13 FY 14 Revenues 53,8 54,6 - Advertising 52,0 52,5 - Others 1,8 2,1 EBITDA 12,7 12,0 Margin 23,6% 22,0% EBIT 9,7 9,7 Source: Radiomonitor 2014 and internal marketing research 15
Gruppo Editoriale L Espresso - Digital Division key figures CONTRIBUTION TO RESULTS In Millions of Euro FY 13 FY 14 Revenues 50,2 52,5 - Advertising 38,5 39,5 - Others 11,7 13,1 EBITDA 9,8 6,8 Margin 19,5% 13,0% EBIT 9,0 6,1 Data excluding third parties sales News and information Repubblica.it is the main information site in Italy, conceived to be fully digital with a very limited contribution (<10%) of printed contents; positioned on real time news, strongly integrates video contents (from content to be read to content to be seen ) Focus on brand extension (i.e. integration between Internet and TV), vertical strategy (i.e. D lifestyle, Finance with Bloomberg, Sport) and international partnership (i.e. Huffington Post) Digital Division: established in 2009 with full responsibility on online strategy across all media. About 200 staff (of which 90 journalists). First 24H coverage online-news service Revenues break down: ~ 60 % national, ~ 20% local ~ 20% other ~75% Adv ~ 25% subscriptions & others Direct cost allocation approach as % of print contents is limited Local Roll out of new features in all the 18 local web sites fostering a +14% web traffic growth in 2014 Leadership in local community news, focusing on real time, video, sport and user generated community contents Entertainment Broad and diversified entertainment media portfolio with interesting potentials in revenues other than advertising (i.e. video on demand, self publishing) Classified Main focus on Legal, Jobs and free Classified (registration) 16
Index» Full Year 2014 results and Company Overview» Divisional Breakdown» The Digital Strategy» Additional Information 17
The Digital strategy The online advertising market in Italy and in Europe m Italy - online advertising market (1) 2014 expected at 2 bn m Benchmarking - online advertising market (1) Online adv. per Capita ( ) ~28 ~55 ~57 ~115 The online advertising industry in Italy has experienced strong growth Display ads is our main reference market The online advertising market in Italy (including search and classified) is still underdeveloped compared to Continental Europe (1) (2) Source: IAB Europe report 2012/2013 and 2007 18
The Digital strategy Focus on the advertising (revenues and usage) Italy Online Advertising Display Market (1) Italy Online Advertising Video Display Market (2) m m ~9% Market share 40m revenues Italy Online Usage Key assets (3) Gruppo Espresso online properties rank 10 overall in Italy, and rank 3 rd if we exclude the global international players Repubblica.it, main digital asset of the Group: Italy Online Reach Traditional Newspaper (3) Real time news positioning Higher reach than any other Newspaper / TV Extremely strong presence in social networks: 3,0m fans on Fb/Twitter/G+ main page 5,5m followers of vertical topics on Fb Well balanced traffic origination (direct vs. indirect) Leadership in the video market in terms of usage (1) Source FCP Internet (2) FCP and internal estimates (3) Source: Audiweb January 2015 19
The Digital strategy Focus on the current digital Subscriptions offering (for Repubblica, R+ brand) Gruppo Espresso - Tablet Replica-only Subscribers (1) As of December 2014 Local Others La Repubblica 13m revenues Not including 17K mobile Main focus in 2015: Continuation of the 2014 partnership strategy with strong brand (i.e. Services) Corporate offering agreement (i.e. agreement with Telecom Italia mobile) # of Tablets/Smartph ones (2) ~17.1M ~19.0M Penetration on ipad/tablets ~0.4% ~0.5% (1) Excluding mobile (2) GFK data 20
The Digital strategy La Repubblica Print vs online positioning 2014: Daily Readers/Browsers ~2,4M ~1,6M 2014: Daily pay circulation ~264K ~69K (Dic 14) Print (2) Online (5) 25% FY 14 - Advertising 100%=~150M Online (1) Within La Repubblica core asset, the online business has the best product positioning and provides further earning opportunities as the number of online users/subscribers grows Print (4) Online (3) FY 14 Subscribers revenues 100%=~110M Online (3) 10% Print (5) 75% Source: (1) AWDB Audiweb Unique Browser; (2) Audipress 2015 / I-II readers (3) Online Active subscribers (4) Kiosk sales 2014 (5) La Repubblica advertising only Print (4) 90% 21
The Digital strategy - La Repubblica.it international benchmark vs online newspaper and TV Online Newspaper TV and broadcaster In countries like Germany/ Italy/France/Spain newspapers have been the first entrants in the real time news online market High domestic reach In countries like UK and USA the real time news online market has been mainly developed by the existing TV broadcasters (with the exception of Daily Mail in UK) Low domestic reach 22
The Digital strategy - Repubblica.it reach (domestic): international benchmarking vs online newspapers Thanks to its specific positioning Rep.it has a higher domestic reach than most of its international peers in its own country Reach % (1) Rep.it is a product conceived to be fully digital with a very limited contribution (>10%) of printed contents, focusing on real time news and video (from content to be read to content to be seen ) (1) Source: Internal estimates based on Netview nov 14 23
The Digital strategy - La Repubblica.it Real time news and Repubblica TV positioning Italy Online Reach vs TV (1) Rep.tv brand in the Repubblica.it homepage Main Actions Strengthening of the news video production both in terms of quality and quantity Focus on sub-brand strategy (thematic areas): Entertainment Life style and fashion Sport Business and finance Auto Technologies New advertising formats Main strategic drivers In Italy Rep.it is perceived more as a «real time news» online site than an «online newspaper» and has a brand awareness that is higher than the traditional TV news sites. Take advantage in the expected integration between Internet and TV (Repubblica TV is part of the Digital Division) Repubblica.it on the PC «real time news» has a separate positioning than Mobile (freemium model) and Tablet (pay model) (1) Source: Audiweb January 2015 24
The Digital strategy La Repubblica branding strategy Repubblica.it is the Italian «real time news» online provider Further convergence between written information and video (i.e. from content to be read to content to be seen ) is expected To take advantage of the expected integration between Internet and TV on the new devices (i.e. Smart TV) further development in the Repubblica TV brand is planned R+ will be the premium/pay brand for all the platforms. Introduction on all platforms (including PC) of new modular payments form adapted to users needs and profile 25
The Digital strategy La Repubblica.it metered pay-wall options High The introduction of a metered pay-wall system is an option that supports in-depth news vs. real-time contents. Focus on online-only contents (i.e. real time, video) 1 2 Today Tomorrow 3 Today, less than 10% (vs 100% of NYT) of the La Repubblica printed contents are available online (i.e. real time news positioning) Soft" metered pay-wall approach is the benchmark (i.e. NYT introduction in 2011 with 20 free articles a month, now down to 10 articles) According to Press+ (provider of pay-wall tools): 10% 50% % of printed contents available in the desktop/laptop version 100% Traffic loss from implementing paid model has ranged from 0%-20% of page views and 0%-7% of monthly unique visitors. No publisher has reported any decline in advertising revenue. This is because most publishers do not sell all of their available inventory 1 Focus on photos videos, everyday day life, showbiz and gossip 2 Focus on real timenews and comments with video and rich-info bundled 3 Focus on politics and in-depth contents (i.e. opinion) 26
The Digital strategy - Local online is a big opportunity ( 000) Italy Usage Growth (1) Traffic growth mainly related to news CAGR ~32% Main data and strategic drivers Main Data Strong usage growth in 2014 (1) : growth of over 14% considering only the PC audience. The total digital audience has reached over 407k daily users Video syndication project: 20 third party local publishers, 45 web sites 18,8 m streaming in January 15 Leadership in local community news Growing (+3%) digital subscriptions (~12K) Journalistic approach: Leadership in local news News Not Journalistic approach: External information, UGC, community Strategic drivers Renewed all the sites and by june will be available also the mobile version Fostering leadership in local community news with focus on real time, events trovaserata, video and sport Deployment on all sites of the user generated community contents Faccionotizia today in beta test on the Tirreno web sites Further area of development already identified Local Sport Local Life (1) Source: Audiweb Data Base 27
The Digital strategy A broad and diversified entertainment media portfolio Radio s Brands Movies and TV guide Market leader with online reach of over 144K daily unique users (+23% vs competitor) and >1.7 m download for the mobile application. "New websites launched in June '13 and new app in February '15, both with a focus on live radio streaming, streaming on demand and on entertainment and engagement (i.e. viral videos, viral contents, galleries). Leader in movies and cinema contents (with 4,4 million monthly unique users, a community with over 200,000 users' reviews, database with over 1 million pages, complete coverage of cinema screenings). 2010 launch of MYMOVIESLIVE!, and in December 2012 of MYMOVIESWIDE! (VOD) Community 2010 Multimedia 2005 Information 2004 Services 2003 Database 2000 Entertainment 2013-2015 Web sites revised in February 14. The social TV guide at the intersection of television and digital with the introduction of socialscore to measure the popularity of TV programs. Tvzap has a reach of 143K daily unique users and 16mln monthly page views Gaming Social gaming (fantasy soccer) with a community of over 130K registered users. For next soccer season a deep redesign of the sites is planned to re-launch this strong and historical brand Self Publishing Social self publishing platform with a community of almost 280K registered users. The website offers a self-publishing service, a dedicated area of writing tips and a catalog of 30,000 books distributed in bookstores and in the main Italian and international ebook platform (1) Source: Audiweb Jan: 2015 and internal data 28
Index» Full Year 2014 results and Company Overview» Divisional Breakdown» The Digital Strategy» Additional Information 29
Gruppo Editoriale L Espresso Financial Highlights (Year-end) ( mn) 2004 2005 (1) 2006 2007 (2) 2008 2009 2010 2011 (3) 2012 (3) 2013 (3) 2014 (4) Revenues 1.081 1.080 1.103 1.098 1.026 887 885 890 812 712 644 - Circulation 269 266 266 277 276 274 268 271 262 250 233 - Add-ons 227 201 193 128 115 101 66 63 49 32 33 - Advertising 546 586 616 657 608 497 528 535 476 403 366 - Other 38 28 28 36 26 15 22 21 26 27 12 EBITDA 234 222 204 223 143 107 147 160 102 64 60 EBIT 192 177 163 181 95 64 109 123 60 31 30 Profit before Taxes 175 152 144 163 76 44 95 108 44 17 28 Net Profit 99 116 104 96 21 6 50 61 22 4 9 Net Debt (143) (253) (263) (265) (279) (208) (135) (110) (108) (74) (34) Capital Employed 638 813 836 811 768 704 678 675 666 638 602 Shareholders' Equity 484 550 563 535 478 486 539 563 556 562 565 Minority Interests 11 11 11 11 11 10 4 2 2 2 2 Dividends 47 56 62 67 69 - - 30 25 - - Capex 94 64 38 41 53 25 25 15 28 21 15 (1) In 2005, the income statement includes the impact of paper contributions ( 15.1 millions), no longer available in 2006 (2) In 2007 Financial results have benefited from two extraordinary effects produced by new regulatory provisions: the different accounting applied to the employee termination indemnity (TFR) entailed a 7.8 millions positive impact on net profit ( 11.6 millions on operating profit); the reduction of both regional tax (IRAP) and income tax (IRES) entailed a recalculation of deferred taxes and subsequent 10.3 millions positive impact on net profit (3) In 2011 and 2012 digital subscription revenues included in circulation (4) Following the integration between the network operator business of Rete A and Telecom Italia Media Broadcasting ( Persidera, the new name, of which the Espresso Group hold 30%) and the disposal to Discovery Italia of All Music (Deejay TV) in accordance with the terms of IFRS 5 Non-current assets held for sale and discontinued operations, the two companies together representing the television business of the Group, were qualified as Discontinued Operations and were shown as such in these financial statements both for 2014 30
Gruppo Editoriale L Espresso - Ownership structure Total share: 412.039.288 31