Press Release RCS – BoD: Results at 30 June 2021 approved

CorporateJuly 30, 2021 - 13:57

Press Release: Meeting of the Board of Directors of RCS MediaGroup

Results at 30 June 2021 approved[1]

Strong growth in results versus the same period of the prior year: EBITDA of € 67.8 million (€ 7.1 million in 2020), EBIT of € 43.8 million (€ -16.8 million in 2020) and Net Result of € 38.7 million (€ -12 million in 2020)

Consolidated revenue of € 421.8 million, up by € 102.3 million versus first half 2020 (+32%), with digital revenue accounting for approximately 22% of total

Advertising on RCS online media in the six months up by 40% in Italy and by 48% in Spain versus the same period of 2020

Corriere della Sera leading Italian daily newspaper on newsstands with a total active digital customer base at end June 2021 of 336 thousand subscriptions

Digital subscriptions grow strongly in Spain too: 69.5 thousand for El Mundo and 31.7 thousand for Expansión at end June 2021.

Milan, 30 July 2021 - The Board of Directors of RCS MediaGroup S.p.A., which met today, reviewed and approved the Half-Year Report at 30 June 2021.

Income statement (€ millions)	30/06/2021	30/06/2020
Consolidated revenue	421.8	319.5
EBITDA	67.8	7.1
EBIT	43.8	-16.8
Net result	38.7	-12.0

Statement of financial position (€ millions)	30/06/2021	31/12/2020
Net financial debt1	55.9	59.6

Group performance

The start of 2021 was still marked by the restrictive measures enforced by the authorities, both in Italy and Spain, to contain the health emergency which, in addition to the severe social impact, has had and is having repercussions on the organization and timing of work, on the Group's activities and on economic performance, resulting in a general context of great uncertainty.

Specifically, in Spain at the beginning of the year, and in Italy starting from the end of February, the number of infections has risen, leading to the adoption of additional containment measures. Since the second half of February in Spain, and since mid-April in Italy, the situation has improved and the containment measures are being gradually lifted.

In both countries, the vaccination campaign has brought a significant improvement in terms of general infections, hospitalizations, ICU occupancy and fatalities. However, starting from the end of June in Spain, and mid-July in Italy, there is growing concern about the spread of new variants and the increase of infections, especially among young people, in Spain in particular.

The Group is monitoring developments on a daily basis to minimize the impacts in terms of health and safety in the workplace and on the operating and financial front, by defining and implementing flexible and timely action plans.

Against this backdrop, in the first six months of 2021, the Group achieved EBITDA of € 67.8 million and a positive Net Result of € 38.7 million, continuing to generate positive cash flows, reducing its net financial debt by € 3.7 million after distributing dividends of € 15.6 million and absorbing the effects of the consolidation of m-dis, which at 30 June 2021 carries a debt of € 15.1 million, due also to the seasonal trend in working capital.

The Group's consolidated net revenue at 30 June 2021 amounted to € 421.8 million, increasing by € 102.3 million versus first half 2020 (+32%). A strong contribution to the improvement came from the growth in advertising revenue and the organization in the first half of the year of the sporting events that could not be held in the same period of 2020 and were postponed to the second half of the year. As a result of the changed scope of consolidation, revenue in the first six months includes approximately € 23 million from the full consolidation of the amounts of m-dis, while advertising revenue from third-party publishing products (which amounted to € 5 million in first half 2020) is no longer included.

Digital revenue amounted to approximately € 93.7 million and makes for approximately 22.2% of total revenue.

Advertisingrevenue in first half 2021 amounted to € 164.1 million versus € 121 million in first half 2020. The increase of € 43.1 million is attributable to the strong growth in advertising sales recorded from April onwards versus 2020, a period severely affected by the health emergency, and to the positive contribution of the sporting events that had been postponed in 2020 to the second half of the year. As from 1 January 2021, the transaction whereby RCS and Cairo Pubblicità contributed their respective advertising sales businesses to the equally-owned CAIRORCS Media, came into effect. In its role as principal (pursuant to IFRS 15), the RCS Group continues to recognize revenue earned from advertisers for RCS publishing products in the income statement.

Total advertising sales on online media amounted to € 68.8 million in first half 2021, reaching approximately 42% of total advertising revenue. Online advertising on RCS media in the first half grew by 40% in Italy and by 48% in Spain versus first half 2020.

Publishing revenue and circulationrevenue amounted to € 180.2 million (€ 164 million at 30 June 2020) and includes, as from 2021, revenue from the distribution of products of third-party publishers, following the full consolidation of m-dis (€ 14.4 million in first half 2021). Both Italian newspapers retained their circulation leadership in their respective market segments at May 2021 (ADS January-May 2021). At end June, the total active customer base for Corriere della Sera (digital edition, membership and m-site) reached 336 thousand subscriptions. The main digital performance indicators confirm the top market position of RCS, with the Corriere della Sera and La Gazzetta dello Sport brands which, in the period January-May 2021, counted 30.3 million and 17.4 million average monthly unique users and 4.2 million and 2.7 million average daily unique users respectively (Audiweb 2.0).

In Spain, Marca and Expansion confirmed their print circulation leadership in their respective market segments at June 2021 (OJD). Digital subscriptions grew strongly, with 69.5 thousand subscriptions for El Mundo and 31.7 thousand subscriptions for Expansion at end June 2021.

In the six-month period, elmundo.es reached 54.2 million average monthly unique browsers; marca.com stood at 85.7 million and expansión.com at 11.7 million average monthly unique browsers (Google Analytics).

Sundry revenue amounted to € 77.5 million (€ 34.5 million in first half 2020) and includes the sundry revenue from m-dis Distribuzione Media totaling € 8.3 million.

EBITDA came to a positive € 67.8 million, up by € 60.7 million versus first half 2020, as a result of the trend of revenue, and improving versus the same period of 2020 across all business areas. Net non-recurring expense and income came to € -0.6 million (€ -4.3 million at 30 June 2020).

The RCS Group continued its tireless efforts in 2021 to enrich and expand its publishing products on both the digital and traditional channels.

In Italy, regarding the main initiatives only, La Gazzetta dello Sport offered its readers four issues of G Magazine dedicated to the America's Cup, to the Milano-Sanremo, to tennis and one to the European Football Championship. Corriere della Sera presented new podcasts ('Incontri', 'L'Ammazzacaffè', 'Radio Italians', 'Mama non Mama') and new newsletters: for the titles 'Cook', 'Buone Notizie', 'La 27esima ora', 'Corriere Torino', 'Corriere Veneto' and 'Corriere Bologna'. Numerous events were organized and held on the Digilive platform, including Yoga Academy and the Pianeta 2021 meetings on sustainability.

May saw the 12th edition of 'Cibo a regola d'arte', with the prize giving of the 2020 Cook Awards, the fourth edition of 'L'Italia genera Futuro' while the 'Gazzetta Motori Days' event was held on Gazzetta.it. For the European Football Championship, La Gazzetta dello Sport developed various initiatives dedicated to the event.

In Spain, regarding the main initiatives only, February saw the launch of a new section of elmundo.es: 'Sostenibles' focused on green transition, reaching 500 thousand unique users and 600 thousand page views. A new section of Expansión was also launched in March 2021: Economía Sostenible, on issues of corporate sustainability. In first half 2021, thanks to an increased presence of Radio Marca's audio content on marca.com and other digital platforms, Radio Marca increased its own digital audience. June saw the launch of the new daily podcast El Mundo al dia. With the start of the European Football Championship, Marca and marca.com launched several editorial initiatives dedicated to the event. To celebrate its 35th anniversary, Expansión organized events and 'specials' on digitization, sustainability and the post-COVID-19 economy. On 8 and 9 June, the second edition of 'El Foro Economico International Expansion' was held under the title 'Building a sustainable world for future generations' organized in association with The European House Ambrosetti.

The activities on developing and enhancing the editorial offering were complemented by extraordinary actions taken on costs also to promptly adjust the company organization to the changed environment. The benefits of these cost containment actions in first half 2021 amounted to approximately € 5.2 million, of which € 2.4 million in Italy and € 2.8 million in Spain.

Operating profit amounted to € 43.8 million versus an operating loss of € 16.8 million in first half 2020 (€ +60.6 million). The positive change is due mainly to the increase in EBITDA performance.

The net result in first half 2021 came to a positive € 38.7 million, up sharply by more than € 50 million versus a negative € 12 million in first half 2020, reflecting the abovementioned trends.

Net financial debtstands at € 55.9 million at 30 June 2021, improving by € 3.7 million versus 31 December 2020. Net financial debt was negatively impacted, in addition to investments and non-recurring expense, also by (i) the distribution of dividends of € 15.6 million, (ii) the consolidation of m-dis, which at 30 June 2021 carries a debt of € 15.1 million, due also to the seasonal trend in working capital, and (iii) the financial effect, amounting to € 3.9 million at 1 January 2021, of the contribution to CAIRORCS Media (which has a positive net financial position of € 19.5 million at 30 June 2021). Conversely, the positive effects of the net proceeds from the sale of investments and fixed assets, totaling € 6.2 million, refer mainly to the sale of Unidad Editorial Juegos.

Total net financial debt, which also includes financial payables from leases pursuant to IFRS 16 (mainly property leases), amounted to € 200.6 million (€ 214.5 million at 31 December 2020). Financial liabilities from leases amounted to € 144.7 million at 30 June 2021.

With regard to the dispute over the Via Solferino property complex, as indicated by RCS in the press releases of 14 and 17 May 2021, the final award ruled the compensation of litigation costs and dismissed the counterparty's claims for damages based on RCS's alleged reckless conduct and bad faith; the ruling, affecting the merits, reflects the groundlessness of the opposing parties' claims before the Supreme Court of the State of New York, based on allegations against RCS rejected by the final award.

On 30 June 2021, the plaintiffs in the litigation brought against the Company and its Chairman before the Supreme Court of the State of New York filed a second amended complaint containing the same claims as those brought in the previous pleadings, except for the claim over the validity of the sale and concurrent lease to RCS of the properties (no longer presented), and a quantification in at least USD 300 million, based on general and unsubstantiated allegations, of the alleged damages suffered by the Plaintiffs, in addition to a request for an order to pay alleged punitive damages in the same amount.

On 21 June 2021, RCS challenged the awards before the Court of Appeal of Milan.

The Company, having obtained updated valuations of its legal advisors, has decided that the conditions for the recording of provisions for risks do not exist. For further information, reference is made to the Half-Year Report at 30 June 2021, which will be made publicly available within the time limits of law.

Business outlook

The start of 2021 was still marked by the restrictive measures enforced by the authorities, both in Italy and Spain, to contain the health emergency.

Specifically, in Spain at the beginning of the year, and in Italy from the end of February, the number of infections has risen, leading to the adoption of containment measures. Starting from the second half of February in Spain, and since mid-April in Italy, the situation has improved and the containment measures are being gradually lifted.

In both countries, the vaccination campaign has brought a significant improvement in terms of general infections, hospitalizations, ICU occupancy and fatalities. However, starting from the end of June in Spain, and mid-July in Italy, there is growing concern about the spread of new variants and the increase of infections, especially among young people, in Spain in particular. At the end of July, approximately 58.4% of the population over the age of twelve in Italy had completed the vaccination cycle, and in Spain approximately 56.3% of the population.

In 2021 too, the Group is meeting the public's strong need to stay informed through its information offering, ensuring a timely service to its readers. The daily editions of Corriere della Sera and La Gazzetta dello Sport in Italy, and of El Mundo, Marca and Expansión in Spain, the Group's magazines and web and social platforms are playing a pivotal role in informing and reporting on this difficult phase, focusing on their mission as a non-partisan, trustworthy public service, and establishing themselves as authoritative players in daily paper and online information, with strong digital traffic figures.

The developing situation and the potential effects on the business outlook, which will be constantly monitored also in the further course of the year, are unforeseeable at this time as they depend, inter alia, on how the health emergency plays out in the coming months, as well as on the effectiveness of the vaccination campaign and of the public measures, including the economic ones, implemented in the meantime and those to be implemented.

In any event, the Group believes it has adequate management levers to counter the impacts of the health emergency also in 2021 and thus confirm its medium-long term prospects.

In consideration of the actions already implemented and those planned, in the absence of tighter measures to contain the pandemic, an extension of their duration, or a significant return of the regions in the highest risk bands, the Group believes it can confirm the goal of achieving margins (EBITDA) in 2021 that are higher than those achieved in 2020 and a resulting further significant reduction in financial debt.

Developments in the health emergency, the overall economic climate and the core segments could, however, affect the full achievement of these targets.

***

In the words of Urbano Cairo, Chairman and CEO of RCS MediaGroup: 'The results presented today confirm the speed of recovery, remarkable economic performance and the solidity of the Group, boosted by the editorial and advertising initiatives. Leveraging on an even broader and more innovative range of information, we have played, are playing and will continue to play a pivotal role in providing information even during the emergency phase of the pandemic'.

[1] For the definitions of EBITDA, EBIT, net financial debt and total net financial debt, reference should be made to the section 'Alternative performance measures' in this Press Release.

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