Press Release: Results at 30 September 2019 approved

Results at 30 September 2019 approved[1]

Consolidated revenue of € 673.9 million

EBITDA at € 102.4 million[2], € 82.7 million net of IFRS 16 impacts

Positive EBIT of € 64.5 million², € 62.5 million net of IFRS 16 impacts

Net profit of € 40.7 million², € 41.2 million net of IFRS 16 impacts

Net financial debt of € 151.1 million (€ -36.5 million vs. 31.12.2018, € -64,8 million vs 30.09.2018, after distribution of dividends for € 31.1 million)

Milan, 8 November 2019 - The Board of Directors of RCS MediaGroup met today under the chairmanship of Urbano Cairo to review and approve the consolidated results at 30 September 2019.

Income statement (€ millions)	30/09/2019	30/09/2018
Consolidated revenue	673.9	713.3
EBITDA2	102.4	101.8
EBIT2	64.5	77.3
Net profit	40.7	52.1

Statement of financial position (€ millions)	30/09/2019	31/12/2018
Net financial debt1	151.1	187.6

Against a backdrop of persisting uncertainty and shrinking core markets, the advertising market in Italy and Spain in particular, which posted a lower-than-forecast performance, in the first nine months of 2019, the Group continued to generate highly positive margins and cash flows and achieved its targets to gradually reduce financial debt (which fell by € 36.5 million versus 31 December 2018 after distributing dividends for € 31.1 million, thanks to the strong contribution from ordinary operations, which ended with a positive € 82.8 million) (Management Reporting).

The Group's consolidated net revenue at 30 September 2019 amounted to € 673.9 million, down by € 39.4 million versus 30 September 2018. The change is attributable to the drop in publishing revenue of € -20.6 million (-6.3% versus the same period of 2018), in advertising revenue of € -13.1 million (-4.7% versus the first nine months of 2018), and in sundry revenue of € -5.7 million (-5.4% versus the same period of 2018). Digital revenue, which totaled approximately € 115.8 million, accounted for 17.2% of total revenue.

Advertising revenue amounted to € 267.9 million, down by € -13.1 million versus € 281 million in the first nine months of 2018. The 4.7% decline is attributable to the lower-than-forecast performance of the advertising market, as well as to the absence in 2019 of major sporting events typical of even-numbered years (World Cup, Olympics, European Cup, etc.), which had generated in 2018 revenue of approximately € 6 million, net of which the decline would amount to just 2.6%

Total advertising sales on online media amounted to € 87.4 million, making for 32.6% of total advertising revenue. Specifically, in Spain online advertising sales, amounting to € 45.8 million, accounted for approximately 51.6% of total net advertising revenue of the area, growing by 4.8% versus the first nine months of 2018.

Publishing revenue amounted to € 306 million, down by € 20.6 million (-6.3%) versus the first nine months of 2018, due to the fall in circulation in Italy and Spain and the drop in sales of add-on products (the latter also due to the decision to focus on the most profitable products), only partly offset by the development of Solferino books and the growth in digital publishing revenue in Italy.

The Group's titles retained their circulation leadership in their respective market segments. Regarding the comparison with the market, in the first nine months of 2019, Corriere della Sera and La Gazzetta dello Sport on newsstands slowed the decline in copies to -5.1% and -5.9% respectively, versus the market's -8% and -8.3% by relevant segment (ADS: January-September channels required by law). In the first nine months of 2019, Marca and Expansión (OJD) retained their leadership in circulation figures in Spain, while El Mundo confirmed its position as the second national generalist title in terms of average copies sold at newsstands (OJD September 2019). In Spain, the figures published by EGM (Estudio General de Medios: latest update June 2019) confirm Unidad Editorial's leadership in the daily newspapers segment; through its brands, it reaches approximately 2.5 million readers/day, approximately 400 thousand readers more than its main competitors.

As for digital performance indicators, in Italy corriere.it and gazzetta.it stood at an average of 21.1 million and 12.5 million monthly unique users, respectively, at end August 2019 (Audiweb 2.0). At end September, the total active customer base for Corriere della Sera (digital edition, membership and m-site) was 160 thousand subscribers, up by 22% versus the same period of 2018. In Spain, elmundo.es, marca.com and expansión.com stood at an average of 20.3 million, 16.4 million and 6.5 million monthly unique users, respectively, at end September 2019 (Comscore IP Spain, which considers only traffic coming from Spain). On 22 October 2019, concurrent to its thirtieth anniversary, El Mundo - the first Spanish newspaper among generalists - launched a pay model for online news (freemium).

Sundry revenue totaled € 100 million versus € 105.7 million in the first nine months of 2018 (€ -5.7 million).

Activities continued in 2019 on developing and enriching editorial content and products and on enhancing the portfolio of sporting events.

In Italy, the first nine months of 2019 saw the restyling of Amica (19 February), the newCorriere Milano (6 March), the on-lineMotors column of La Gazzetta dello Sport (7 March), the new Gazzetta dello Sport (7 May), the new Corriere Salute (9 May), the restyling of 7 (10 May), the new Sportweek (presented on 13 September, on newsstands from 19 October), and the restyling of Style Magazine (26 September).

On the digital front, the period under review witnessed the launch of economia.corriere.it, the new economic website of the newspaper Corriere della Sera (25 March), the debut of the new online rendition of La Gazzetta dello Sport (8 May), the revamping of the mobile site of Corriere della Sera (16 May), and from 30 September the new version of amica.it. Starting from the beginning of August, users can download the new Corriere della SeraApp from digital stores.

The noteworthy events organized starting from the third quarter in Italy include Tempo delle Donne, held in Milan and now at its sixth edition, featuring over 70 events scattered throughout the city, with more than 50 thousands attendees, the special event to celebrate the first 80 years of Oggi (2 October), and Festival dello Sport held in Trento (10/13 October 2019), which drew 65 thousand attendees and more than 350 guests.

October marked the start of the first four Master courses of RCS Academy, the new Business School of the RCS Group: 'Communication and New Media', 'Sport Digital Marketing & Communication', 'Marketing and Digital Communication' and 'Writing and Journalism Today: the Corriere way'.

In Spain, too, the first nine months of 2019 saw a good number of new editorial projects come to light: the creation at the beginning of the year of BeStory, a digital content production area for social networks; the restyling of Telva (20 February) and the website El Mundo (4 March); the launch in May of UEtv, a new audiovisual production company; from May, the renewal of Metropoli, the El Mundo supplement; the launch of Expansión's weekly supplement Expansión Juridico (3 June); the debut of Marca Claro USA (10 June), the portal born from the partnership between Marca and Claro, already available in Argentina, Colombia and Mexico, and now branching out to the USA, tailored to Spanish audiences and offering news on all the most popular sports in the United States. On 22 October 2019, El Mundo launched its freemium offer.

As a result of the adoption of IFRS 16 as from 1 January 2019, the income statement figures for the first nine months of 2019 and the balance sheet figures at 30 September 2019 cannot be directly compared with the corresponding figures of the same period of the prior year and with the balance sheet figures at 31 December 2018, shown for comparative purposes in the Interim Management Statement.

EBITDA came to € 102.4 million. Excluding the effects of the new standard, EBITDA, amounting to € 82.7 million, dropped by € 19.1 million versus € 101.8 million in the first nine months of 2018, when the results of the RCS Group had benefited from the strong contribution from the grande partenza of the Giro d'Italia held outside of Italy, and from major sporting events typical of even-numbered years, which will take place again in 2020 with the grande partenza of the Giro d'Italia in Hungary and the new season of sport events typical of even-numbered years. The decline is also due to the effect of the increase in paper prices, a trend that is expected to reduce in 2020, as well as to the impact of net non-recurring expense and income (overall effect € -2.2 million, € -2.3 million at 30 September 2019 versus € -0.1 million at 30 September 2018).

The continued efficiency actions in the first nine months of 2019 brought benefits to operating costs of € 19.1 million, of which € 8.6 million in Italy and € 10.5 million in Spain.

The table below shows the trend of revenue, EBITDA and EBITDA before IFRS 16 (i.e. excluding the effects of the new IFRS 16) in each business area.

EBIT in the first nine months of the year amounted to € 64.5 million. Excluding the effects of IFRS 16 (€ 2.0 million), the figure drops by € 14.8 million, due to the performance of EBITDA (including the effects of net non-recurring expense and income of € -2.2 million), only partly offset by lower amortization and depreciation (€ 4.3 million).

The Group's net profit for the first nine months of 2019 amounted to € 40.7 million (a positive € 52.1 million at 30 September 2018) and basically reflects the trends commented on above. Excluding the effects of IFRS 16, net profit would amount to € 41.2 million.

Net financial debt stands at € 151.1 million (improving by € 36.5 million versus 31 December 2018 and by € 64,8 million versus 30 September 2018). The strong contribution from ordinary operations, a positive € 82.8 million (Management Reporting), more than offset the payment of dividends (€ 31.1 million) and outlays for capital expenditure made in the first nine months (€ 11.4 million), as well as outlays for net non-recurring expense (€ 3.7 million).

Overall, in the period from end June 2016 to September 2019, RCS posted a sharp improvement in net debt of approximately € 271.3 million (after distributing dividends of € 31.1 million in 2019), together with a strong growth in margins with a clear and positive effect on the Group's financial structure.

Total net financial debt, which includes financial payables from leases pursuant to IFRS 16 (mainly property leases), amounting to € 183.2 million, stands at € 334.3 million.

Business outlook

Against a backdrop of persisting uncertainty and shrinking core markets, the advertising market in Italy and Spain in particular, which posted a lower-than-forecast performance, in the first nine months of 2019, the Group continued to generate positive margins and cash flows and achieved its targets to gradually reduce financial debt.

In consideration of the actions already implemented and those planned and in the process of being defined to maintain and develop revenue, as well as for the ongoing pursuit of operating efficiency, given the absence of events unforeseeable at this time, the Group believes that it can confirm its target of achieving a further significant reduction in net financial debt in fourth quarter 2019 and margin levels basically in line with those recorded in 2018.

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

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Under paragraph 2, article 154-bis of the Consolidated Finance Law (TUF), Roberto Bonalumi, in his capacity as Financial Reporting Manager, attests that the accounting information contained herein is consistent with the Company's document results, books and accounting records.

***

RCS MediaGroup is one of the leading multimedia publishing groups, operating primarily in Italy and Spain across all publishing areas, from newspapers to magazines and books, from TV to new media and training, as well as being one of the top players on the advertising sales market, organizing iconic events and renowned sporting formats such as the Giro d'Italia. The RCS Group publishes the daily newspapers Corriere della Sera, La Gazzetta dello Sport, El Mundo, Marca and Expansion, as well as numerous magazines, the most popular including Oggi, Amica, Io Donna, 7 and Telva.

[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.

[2] The Interim Management Statement at 30 September 2019 incorporates the new IFRS 16 - Leases, which came into force as from 1 January 2019.

For the adoption of the new standard, the Group followed the modified retrospective transition method (i.e. with the cumulative effect of the adoption recognized as an adjustment to the opening balance of retained earnings at 1 January 2019, without restating comparative information). The income statement figures for the first nine months of 2019, therefore, cannot be directly compared with the corresponding amounts of the same period last year.

The application of the new standard at 30 September 2019 resulted in:

• the recognition under non-current assets of rights of use on leased assets for a total of € 168.1 million;
• the recognition of a financial liability (financial payables from leases pursuant to IFRS 16 previously classified as operating leases) of approximately € 183.2 million;
• the reversal of lease payments of € 19.7 million, offset by higher amortization and depreciation of € 17.7 million and higher financial expense of € 2.7 million; with an impact on EBITDA, EBIT and net result for the period of € +19.7 million, € +2 million and € -0.5 million respectively;
• a decreasing impact on initial equity of € 9.2 million, net of the accounting effects of the tax component, linked to the 'cherry picking' accounting treatment applied to a small amount of property lease contracts.