MEDIASET GROUP Interim Financial Report as at 31 March 2015
MEDIASET S.p.A. - via Paleocapa, 3 - 20121 Milan Share Capital Euros 614,238,333.28 fully paid up Tax Code, VAT number and inscription number in the Milan Enterprises Register: 09032310154 Website: www.mediaset.it INDEX
Corporate Boards ...... 1
Financial Highlights ...... 2
Introduction ...... 3
Interim Report on Operations at 31 March 2015 ...... 3 Significant events in the first quarter ...... 8 Performance by geographical area and business segment ...... 10 Group Performance ...... 10 Statement of Financial Position ...... 18 Group headcount ...... 22 Related-party transactions ...... 22 Right to opt-out of the obligation to publish reports in the event of significant transactions ...... 22 Events after 31 March 2015 ...... 23 Forecast for the year ...... 24
Consolidated Accounting Tables and Explanatory Notes ...... 25 Consolidated Accounting Tables ...... 26 Explanatory Notes ...... 32
CORPORATE BOARDS
Board of Directors Chairman Fedele Confalonieri
Deputy Chairman and Chief Executive Officer Pier Silvio Berlusconi
Directors Giuliano Adreani Marina Berlusconi Franco Bruni Pasquale Cannatelli Mauro Crippa Bruno Ermolli Marco Giordani Fernando Napolitano Gina Nieri Michele Perini Alessandra Piccinino Niccolo' Querci Stefano Sala Carlo Secchi Wanda Ternau
Executive Committee Fedele Confalonieri Pier Silvio Berlusconi Giuliano Adreani Marco Giordani Gina Nieri
Risk and Control Committee Carlo Secchi (Chairman) Franco Bruni Fernando Napolitano
Compensation Committee Michele Perini (Chairman) Bruno Ermolli Fernando Napolitano
Governance and and Appointments Committee Carlo Secchi (Chairman) Michele Perini Wanda Ternau
Committee of Independent Directors for Related-Party Transactions Michele Perini (Chairman) Alessandra Piccinino Carlo Secchi
Board of Statutory Auditors Mauro Lonardo (Chairman) Francesca Meneghel (Regular Auditor) Ezio Maria Simonelli (Regular Auditor) Massimo Gatto (Alternate Auditor) Flavia Daunia Minutillo (Alternate Auditor) Riccardo Perotta (Alternate Auditor)
Independent auditors Reconta Ernst & Young S.p.A.
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MEDIASET GROUP: FINANCIAL HIGHLIGHTS
Main Income Statement Data
FY 2014 1Q 2015 1Q 2014 mio € % mio € % mio € %
3,414.4 100% Total net Revenues 828.8 100% 820.8 100% 2,483.4 72.7% Italy 608.5 73.4% 620.9 75.6% 932.1 27.3% Spain 220.7 26.6% 200.4 24.4%
248.8 100% EBIT 45.9 100% 29.6 100%
104.4 42.0% Italy 3.8 8.3% 7.0 23.6% 144.8 58.2% Spain 42.1 91.7% 22.6 76.4% 138.7 0.0% Profit before Tax and Minority Interest 37.6 0.0% 2.5 0.0%
23.7 0.0% Net Result 0.7 0.0% (12.5) 0.0%
Main Balance Sheet and Financial Data
31st December 2014 31st March 2015 31st March 2014 mio € mio € mio €
3,906.8 - Net Invested Capital 3,787.3 - 4,356.9 -
3,045.6 - Total Net Shareholders' Equity 3,163.7 - 2,978.2 -
2,322.8 - Net Group shareholders' Equity 2,412.6 - 2,108.2 - 722.7 - Minorities Shareholders' Equity 751.1 - 870.0 - (861.3) - Net Financial Position (623.6) - (1,378.7) - 1,226.5 - Operating Cash Flow 302.2 - 296.4 - 1,705.2 - Investiments 257.5 - 168.6 - - - Dividens paid by the Parent Company ------Dividens paid by Subsidiares - - - -
Personnel
FY 2014 1Q 2015 1Q 2014 % % %
5,559 100% Mediaset Group Personnel (headcount) 5,672 100% 5,738 100% 4,299 77.3% Italy 4,412 77.8% 4,448 77.5% 1,260 22.7% Spain 1,260 22.2% 1,290 22.5%
5,711 100% Mediaset Group Personnel (average) 5,635 100% 5,760 100% 4,437 77.7% Italy 4,371 77.6% 4,473 77.7% 1,274 22.3% Spain 1,264 22.4% 1,287 22.3%
Main Indicators
FY 2014 1Q 2015 1Q 2014
7.3% - EBIT/Net Revenues 5.5% - 3.6% - 4.2% - Italy 0.6% - 1.1% - 15.5% - Spain 19.1% - 11.3% - 4.1% - EBT/Net Revenues 4.5% - 0.3% - 0.7% - Net Profit/Net Revenues 0.1% - -1.5% - 0.02 - EPS (euro per share) 0.02 - (0.01) -
0.02 - Diluted EPS (euro per share) 0.02 - (0.01) -
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INTRODUCTION
This Interim Report on Operations at 31 March 2015 (the “Quarterly Report”) has been prepared in accordance with article 154-ter of Legislative Decree 58/1998 and amendments thereto and Consob Communication DEM/8041082 of 30 April 2008 and in compliance with the international accounting and financial reporting standards (IAS/IFRS) applicable under Regulation (EC) No. 1606/2002 of the European Parliament and of the Council of 19 July 2002, in particular with IAS 34—Interim Financial Reporting. The presentation of the reclassified consolidated financial statements and of the statutory financial statements provided in this Interim Financial Report corresponds to the presentation adopted for the annual financial statements. The Explanatory Notes have been prepared in compliance with the minimum requirements of IAS 34 – Interim Financial Reporting. As such, the information disclosed in this report is not comparable to that of complete financial statements prepared in accordance with IAS 1. This Quarterly Report has not been audited.
INTERIM REPORT ON OPERATIONS AT 31 MARCH 2015
Group Highlights During the first three months of the year, the situation was still affected, as expected, by the change in dynamics that has been underway now for several quarters in the advertising markets in the Group's two target geographies. In Italy, in a general economic situation where signs of sustainable recovery in domestic demand and consumption are still weak, the Group's advertising revenues in the quarter, despite gradually improving, were still in slight decline, while in Spain, advertising revenues grew for the sixth consecutive quarter, showing a decidedly strong performance, favoured by a macroeconomic environment in which a phase of economic growth and recovery of private consumption is continuing and gradually consolidating. The positive performance of advertising revenues in Spain, and the continued policy of significant cost control in both geographies during the quarter, resulted in strong growth in group earnings and operating profitability. This, together with the reduction in financial expenses and improvement in the earnings of investees, enabled the achievement of a positive consolidated net profit, compared to the net loss recorded in the same period of 2014. Key consolidated financial figures for the quarter compared to the corresponding quarter of the previous year are provided below.
Consolidated net revenues amounted to EUR 828.8 million, up on the EUR 820.8 million recorded in 2014;
EBITDA amounted to EUR 306.7 million, up from the EUR 322.8 million recorded in 2014;
EBIT was equal to EUR 45.9 million, compared to EUR 29.6 million recorded in the same period of the previous year. Operating profitability fell to 5.5% from 3.6% recorded in 2014;
3 Interim Financial Report at 31 March 2015 – Interim Report on Operations
Earnings from operating activities, before tax and minority interests, amounted to EUR 37.6 million, compared to EUR 2.5 million at 31 March 2014;
Net earnings of the Group amounted to EUR 0.7 million, compared to the EUR 12.5 million loss posted in the first quarter of 2014.
Consolidated net financial debt decreased from EUR 861.3 million at 31 December 2014 to EUR 623.6 million at 31 March 2015 due to the free cash flow in the period amounting to EUR 161.1 million and the receipt of EUR 100 million from the sale of 11.1% of Mediaset Premium S.p.A. to Telefónica in January.
Performance review by geographical area: Italy
In the first quarter of 2015 consolidated net revenues from the Group’s Italian operations totalled EUR 608.5 million, down from the EUR 620.9 million posted in the corresponding period of the previous year.
Advertising revenues in the first three months of the year continued, as expected, to show a slightly negative performance. Gross advertising revenues in the first quarter for media licensed to the Group (free-to-air and pay television channels and the relative share of sub-licensing on websites) fell by 1.6% compared to 2014. Advertising revenues were nevertheless showed continuous and gradual improvement in the first three months, and in particular the result for March showed a slight increase over the same month of the previous year. Based on the latest data published by Nielsen, in the first two months of the year, Mediaset advertising revenues decreased by 3.8% compared to the same period of 2014, against a 4.4% decrease in the overall advertising market compared to 2014.
Core revenues for Mediaset Premium from the sale of prepaid cards, recharges and easy pay subscriptions and Infinity revenues amounted to EUR 136.5 million, down from EUR 142.8 million in the first quarter of 2014, although subscriber numbers remained substantially unchanged compared to 31 December 2014.
EI Towers revenues amounted to EUR 59.4 million, up 2.6% compared to EUR 57.9 million in 2014;
In the reporting quarter, overall operating costs of the Italian business (personnel expenses, purchasing and service costs and other expenses, amortisation and write-downs of television broadcasting rights and other fixed assets) decreased by 1.5% compared to the total in the same period of 2014; this performance reflects the process of structural reduction in operating costs and investments in the last three years.
Total EBIT from operations in Italy amounted to EUR 3.8 million, compared to EUR 7.0 million at 31 March 2014. Operating profitability at the end of the reporting period came to 0.6%, compared to 1.1% posted in 2014. The total audience over the 24-hour period in the first quarter of 2015 amounted to 11 million 762 thousand viewers, a slight increase from 11 million 520 thousand viewers in the same period of 2014. Auditel statistics show that Mediaset networks as a whole, including both free-to-air and pay television (Premium Calcio) channels broadcast over the digital terrestrial network, obtained an audience share of 33.6% over the 24-hour period, 33.5% in the Day Time slot and 35.0% in Prime Time.
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The table below shows the breakdown of audience share by network for the reporting period.
(Source: Auditel)
The Group is the affirmed market leader with the commercial target audience for all three of its general interest channels and as broadcaster in all three time slots. Notably, Canale 5 ranks in top spot and Italia 1 in third spot in all time slots with the 15–64 year-old viewer target.
1st Quarter 2015 % COMMERCIAL TARGET SHARE 15-64 years old
37.1 35.8 35.7 35.4 32.9 32.8
24 hours Day Time Prime Time
Mediaset RAI
Mediaset’s general interest channels held an audience share in the spring season of 27.9% over the 24-hour period, 27.8% in the Day Time slot and 28.9% in Prime Time. Adding to the Group's digital channels, total audience share over the 24-hour period came to 34.3% of all viewers, 34% in the Day Time slot and 35.9% in Prime Time.
5 Interim Financial Report at 31 March 2015 – Interim Report on Operations A positive contribution also came from the Theme Free and Pay networks, which added nearly six points of audience share for overall viewers and more than seven points for the commercial target audience.
GUARANTEE PERIOD: SPRING 2015 (from11/01 to 28/03) % COMMERCIAL TARGET SHARE 15-64 years old 38.3 36.5 36.5 34.3 32.2 32.0
24 hours Day Time Prime Time
Mediaset RAI
The following tables show the broadcasting hours of the linear multichannel free-to-air and pay television offers broken down by type, in the first quarter of the two years under review.
Mediaset Networks Schedule - Broadcasted 1Q 2015 Types Generalist Networks Multi-Channel Pay-tv Networks Total Mediaset Film 1,053 16.3% 2,090 13.8% 9,958 23.0% 13,101 20.2% Fiction 1,922 29.7% 4,994 33.0% 11,073 25.5% 17,989 27.7% Cartoons 219 3.4% 4,265 28.2% 4,363 10.1% 8,847 13.6% Total tv rights 3,194 49.3% 11,349 75.1% 25,394 58.6% 39,937 61.5% News 1,454 22.4% 425 2.8% 762 1.8% 2,641 4.1% Sport 230 3.5% 248 1.6% 2,487 5.7% 2,965 4.6% Entertainment 1,313 20.3% 2,091 13.8% 14,607 33.7% 18,011 27.7% Education 60 0.9% 643 4.3% 94 0.2% 797 1.2% Teleshopping 229 3.5% 364 2.4% - 0.0% 593 0.9% Total in-house productions 3,286 50.7% 3,771 24.9% 17,950 41.4% 25,007 38.5% Total 6,480 100.0% 15,120 100.0% 43,344 100.0% 64,944 100.0%
Mediaset Networks Schedule - Broadcasted 1Q 2014 Types Generalist Networks Multi-Channel Pay-tv Networks Total Mediaset Film 1,047 16.2% 1,882 12.4% 9,787 22.7% 12,716 19.6% Fiction 2,265 35.0% 4,973 32.9% 11,204 25.9% 18,442 28.5% Cartoons 37 0.6% 4,068 26.9% 4,300 10.0% 8,405 13.0% Total tv rights 3,349 51.7% 10,923 72.2% 25,291 58.5% 39,563 61.1% News 1,475 22.8% 431 2.9% 726 1.7% 2,632 4.1% Sport 187 2.9% 350 2.3% 2,435 5.6% 2,972 4.6% Entertainment 1,158 17.9% 1,916 12.7% 14,606 33.8% 17,680 27.3% Education 81 1.3% 1,029 6.8% 142 0.3% 1,252 1.9% Teleshopping 230 3.5% 471 3.1% - 0.0% 701 1.1% Total in-house productions 3,131 48.3% 4,197 27.8% 17,909 41.5% 25,237 38.9% Total 6,480 100.0% 15,120 100.0% 43,200 100.0% 64,800 100.0%
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Performance review by geographical area: Spain
Consolidated net revenues for Mediaset España Group at the end of the first quarter of 2015 amounted to EUR 220.7 million, showing an increase of 10.1% compared to the corresponding period of the previous year.
Gross television advertising revenues amounted to EUR 216.5 million, up 11.3% year-on- year. The latest Infoadex figures available show that advertising spend in Spain rose by 8.4% compared to the corresponding period of the previous year, while television advertising spend increased by 11.8%. Again according to Infoadex, Mediaset España in the period had a television market share 43.0%.
Total costs, amounting to EUR 178.6 million, were substantially in line with the previous year, thanks to the constant cost control process. Over the past five years, optimisation policies have resulted in a cumulative reduction of quarterly operating costs of EUR 53.9 million (-23.4%), without affecting the quality of the television product offered.
As a result of the above performance EBIT came to EUR 42.1 million, compared to EUR 22.6 million in the first quarter of 2014, corresponding to an operating profitability of 19.1% compared to 11.3% in the first quarter of 2014.
Mediaset España Group’s free-to-air multichannel television offering at 31 March 2015 included Telecinco and Cuatro, as well as the thematic channels Factoría De Ficción, Boing, Divinity and Energy. Mediaset España Group’s average audience share in the first quarter of the year over the 24-hour segment was 31.4% of all viewers and 33.2% of the commercial target audience, a significant increase over the first quarter of 2014.
In the first quarter of the year television consumption in Spain dropped slightly year-on-year to 4.3 hours of viewing per day, with the average daily audience numbering approx. eight million viewers. Reported below is the breakdown of audience share for Mediaset España Group's general interest channels and thematic channels.
7 Interim Financial Report at 31 March 2015 – Interim Report on Operations The following table shows the programming schedule of the multi-channel offer in the first quarter of the two years under review.
Mediaset España schedules - Broadcasted 1Q 2015 Types Generalist Networks Multi-Channel Total Mediaset Film 305 7.1% 368 4.3% 673 5.2% Fiction 801 18.5% 3,041 35.2% 3,842 29.6% Cartoons 14 0.3% 2,026 23.4% 2,040 15.7% Total tv rights 1,120 25.9% 5,435 62.9% 6,555 50.5% News 559 12.9% 86 1.0% 645 5.0% Sport 29 0.7% 18 0.2% 47 0.4% Entertainment 694 16.1% 1,016 11.8% 1,710 13.2% Education 1,918 44.4% 2,085 24.1% 4,003 30.9% Teleshopping - 0.0% - 0.0% - 0.0% Total in-house productions 3,200 74.1% 3,205 37.1% 6,405 49.5% Total 4,320 100.0% 8,640 100.0% 12,960 100.0%
Mediaset España schedules - Broadcasted 1Q 2014 Types Generalist Networks Multi-Channel Total Mediaset Film 285 6.6% 405 3.1% 690 4.0% Fiction 1,027 23.8% 4,632 35.7% 5,659 32.7% Cartoons - 0.0% 2,014 15.5% 2,014 11.7% Total tv rights 1,312 30.4% 7,051 54.3% 8,363 48.4% News 632 14.6% 279 2.2% 911 5.3% Sport 81 1.9% 213 1.6% 294 1.7% Entertainment 560 13.0% 1,989 15.3% 2,549 14.8% Education 1,734 40.1% 3,427 26.4% 5,161 29.9% Teleshopping - 0.0% - 0.0% - 0.0% Total in-house productions 3,008 69.6% 5,908 45.5% 8,916 51.7% Total 4,320 100.0% 12,960 100.0% 17,280 100.1%
Significant events in the first quarter On 13 January 2015 the agreement was completed through which the Spanish operator Telefónica (via the subsidiary Telefónica de Contenidos) acquired 11.1% of the shares of Mediaset Premium Spa for a price of EUR 100 million. The positive difference deriving from the sale of the stake and the minority interests of the company determined at the transaction date (including the adjustment of net debt to the target values established in the contract), amounting, net of tax effects, to EUR 82.9 million, qualifying the transaction as the sale of a minority interest in a subsidiary, was recognised at the consolidated level in the quarter in question as an increase in the specific Group shareholders' equity reserve. On 27 January 2015, following the preliminary agreement signed on 13 June 2014, EI Towers S.p.A. signed two final agreements with Cairo Network S.r.l., a company wholly owned by Cairo Communication S.p.A.. The agreements related respectively: to the design and implementation of a new national digital terrestrial multiplex intended to operate on the national frequency in UHF technology, for which Cairo Network S.r.l. obtained assignment of the corresponding user rights (the “MUX”) from the Ministry of Economic Development; and to the subsequent multi-year technical operation of the MUX in full service mode (hospitality, service and maintenance, use of broadcasting infrastructures, etc.).
8 Interim Financial Report at 31 March 2015 – Interim Report on Operations The agreements provide for a transitional phase, during which implementation, commissioning and an initial period of operation of the MUX will take place, which will run from the date of signing of the agreements to 31 December 2017, followed by a fully operational phase of the MUX lasting 17 years (from 2018 to 2034). On 24 February 2015, EI Towers S.p.A. made a takeover bid for 100% of the ordinary shares of Rai Way S.p.A., listed on the electronic stock exchange of Milan. For further information on the bid, please refer to the Report on Operations of the 2014 Consolidated Financial Statements (Subsequent Events) and the announcements made to the market during the period. In particular, on 22 April 2015, as announced to the market on the same date, the Board of Directors of EI Towers S.p.A. acknowledged that, even before the start of the offer period, the conditions for its continuation did not exist. See the Subsequent Events in this Report for more details in this regard. With regard to the issue concerning state aid for the purchase of digital terrestrial decoders, for which a disclosure was made in previous reports and in the consolidated financial statements as at 31 December 2014, we note that the Court of Rome, following Mediaset's application for resumption of the suspended proceedings and following the ruling of the EU Court of Justice, set the deadline for submission of statements and the discussion at 30 September 2015. The expert assessment previously ordered by the Court had found that the Mediaset Group had derived no statistically verifiable benefit from the state aid scheme. On 13 February 2014, the Court of Justice of the European Union, summoned by the Civil Court of Rome, had handed down its ruling on the preliminary questions put to it, which held that the Italian Judge, if the amount of aid to return had not been directly determined by the European Commission, in its decision establishing the incompatibility of the aid with the Treaty (as in the case in question), has the power to determine said amount, if necessary and if adequate elements exist, also as being equal to zero. In March, an agreement was signed with Infront Italy S.r.l. for the acquisition by Mediaset Premium of access for the period from 1 July 2015 to 30 June 2018 to the exclusive use for the Pay-TV market in Italy of archive rights and promotion and advertising rights relating to the tenders for the next three seasons 2015/2018 of the Serie A Championship, in addition to the historical archive for the previous seasons starting from 2008/2009. In March, R.T.I. S.p.A. signed two volume deal agreements with Warner Bros International Television Distribution Inc. and Universal, which together account for approx. 40% of film production and 50% of television production in the Major world. The agreements signed will provide Mediaset Group the exclusive access for Italy of films and TV series distributed by the two US majors for the periods 2016-2020 and 2016-2018, respectively, for all television platforms and exploitation windows, both in linear (Free/Pay) and non-linear pay (SvoD, On Demand) mode. In quantitative terms, the Group will be able to count on over 900 hours of un-aired serial product and more than 2,400 hours of library product, as well as new films distributed in cinemas and major library films.
9 Interim Financial Report at 31 March 2015 – Interim Report on Operations As part of the AD4Venture operations, the following transactions were carried out during the quarter:
sale by Mediaset España of the 11.82% stake held in Grupo Yamm Comida a Domicilio S.L. realising a gain of EUR 5.4 million;
subcription by R.T.I. S.p.A. and Mediaset España of 2.98% of the share capital of Wimdu Gmbh (an online platform for apartment rental throughout the world) for a total invesment of EUR 6.0 million;
subscription of the increase in the capital of the company Westwing Group Gmbh (formerly Jade 1290 Gmbh) for an amount of EUR 1.0 million.
Performance by geographical area and business segment
In this section we give a breakdown of the consolidated income statement, balance sheet and cash flow statement to show the contribution to Group performance of the two geographical areas of business, Italy and Spain. For each geographical area, revenues and operating performance are reported, broken down by business segment. The presentation of the income statement, balance sheet and cash flow figures shown below corresponds to the presentation adopted in the Report on Operations accompanying the Annual Consolidated Financial Statements. As such the figures are restated with respect to the financial statements attached, in order to highlight the intermediate aggregates considered most significant for understanding the performance of the Group and of the individual business units. Although not required by law, the criteria adopted in preparing the aggregates and notes referring the reader to the relevant statutory financial statement items have been disclosed in accordance with guidance provided by Consob Communication 6064293 of 28 July 2006 and the CESR Recommendation on alternative performance measures (or non-GAAP measures) dated 3 November 2005 (CESR/05-178b). The performance figures provided refer to progressive totals at the end of the first quarters of 2015 and 2014; balance sheet figures are stated at 31 March 2015 and at 31 December 2014.
Group Performance The consolidated income statement reported below shows the intermediate aggregates making up earnings before interest, taxes, depreciation and amortisation (EBITDA) and earnings before interest and taxes (EBIT). EBITDA measures the difference between consolidated net revenues and operating costs, including costs of a non-monetary nature relating to amortisation, depreciation and write-downs (net of any write-backs) of current and non-current assets. EBIT is measured by deducting from EBITDA costs of a non-monetary nature relating to amortisation, depreciation and write-downs (net of any write-backs) of current and non-current assets.
10 Interim Financial Report at 31 March 2015 – Interim Report on Operations
(values in EUR million)
Mediaset Group: Income Statement 1Q 2015 2014 Total consolidated net revenues 828.8 820.8 Personnel expenses 134.0 138.6 Purchases, services, other costs 388.1 359.4 Operating costs 522.1 498.0 EBITDA 306.7 322.8 Rights amortisations 229.1 257.3 Other amortisations and depreciations 31.7 35.9 Amortisations and depreciations 260.8 293.2 EBIT 45.9 29.6 Financial income/(losses) (13.1) (22.4) Income/(expenses) from equity investments 4.8 (4.7) EBT 37.6 2.5 Income taxes (11.2) (4.4) Net profit from continuing operations 26.4 (1.9) Net profit from discontinued operations - - Minority interests in net profit (25.7) (10.6) Mediaset Group net profit 0.7 (12.5)
The following table shows key Group income statement figures stated as a percentage of consolidated net revenues.
1Q 2015 2014 Total consolidated net revenues 100.0% 100.0% Operating costs 63.0% 60.7% EBITDA 37.0% 39.3% Amortisation, depreciation and write-downs 31.5% 35.7% EBIT 5.5% 3.6% EBT 4.5% 0.3% Net profit 0.1% -1.5% Tax rate (EBT %) 29.7% n.s.
Below we look at the breakdown of the income statement by geographical area to report the contribution to performance of the Group's Italian and Spanish operations.
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Breakdown by geographical area: Italy The following is a condensed income statement of Mediaset Group's domestic business: (values in EUR million) Italy: Income Statement 1Q 2015 2014 Total consolidated net revenues 608.5 620.9 Personnel expenses 108.1 112.8 Purchases, services, other costs 277.9 263.3 Operating costs 386.0 376.1 EBITDA 222.5 244.8 Rights amortisations 191.6 206.2 Other amortisations and depreciations 27.2 31.7 Amortisations and depreciations 218.7 237.8 EBIT 3.8 7.0 Financial income/(losses) (13.7) (22.0) Income/(expenses) from equity investments (0.2) 1.9 EBT (10.1) (13.1) Income taxes 0.2 (1.4) Net profit from continuing operations (9.9) (14.5) Net profit from discontinued operations - - Minority interests in net profit (6.1) (3.2) Mediaset Group net profit (16.1) (17.7) - -
The following table shows key income statement figures stated as a percentage of consolidated net revenues.
1Q 2015 2014 Total consolidated net revenues 100.0% 100.0% Operating costs 63.4% 60.6% EBITDA 36.6% 39.4% Amortisation, depreciation and write-downs 35.9% 38.3% EBIT 0.6% 1.1% EBT -1.7% -2.1% Net profit -2.6% -2.9% Tax rate (EBT %) 1.6% n.s.
12 Interim Financial Report at 31 March 2015 – Interim Report on Operations Below we report the performance of the Group’s Italian operations broken down by business segment.
. Integrated Television Operations, including free-to-air and pay television broadcasting and accessory operations consisting of Web publishing, teleshopping, publishing, licensing and merchandising, and movie production and distribution. . EI Towers including hosting, maintenance and management operations in relation to radio, television and wireless telecommunications networks run by the listed company EI Towers S.p.A..
The two abridged statements that follow report revenues and EBIT for the business segments identified.
1Q Revenues changes % changes Business segments breakdown 2015 2014
Integrated Television Operations 594.0- 608.0- -13.9 - -2.3% EI Towers 59.4- 57.9- -1.5 - 2.6% Eliminations (45.0)- (45.0)- -0.1 - -0.1% Total 608.5 620.9 -12.4 -2.0%
Operating Result 1Q changes % changes Business segments breakdown 2015 2014
Integrated Television Operations (13.7)- (9.1)- -4.6 - -50.2% EI Towers 17.4 16.1 1.3 8.3%
Total 3.8 7.0 -3.2 -46.2%
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Reported below are the income statements for the two areas identified:
1Q Integrated Television Operations 2015 2014 changes % changes
Gross advertising revenues 484.6 492.4 (7.7) -1.6% Agency discounts (70.9) (72.0) 1.1 1.5% Total net advertising revenues 413.7 420.4 (6.7) -1.6%
Revenues from subscriptions/pre-paid cards 136.5 142.8 (6.4) -4.5% Other revenues 43.8 44.5 (0.9) -2.1% Total Revenues 594.0 608.0 (13.9) -2.3%
Personnel expenses 97.1 101.6 (4.5) -4.4% Operating costs 256.6 243.9 12.8 5.2% TV and movie rights amortisation 191.6 206.2 (14.6) -7.1% Other amortisation and depreciation 18.1 21.2 (3.1) -14.6% Inter-segment costs 44.2 44.2 - 0.0% Total Costs 607.7 617.1 (9.4) -1.5%
Operating result (13.7) (9.1) (4.6) -49.9%
% on revenues -2.3% -1.5%
The drop in revenues from television broadcasting in the reporting period was mainly driven by lower advertising revenues, as reported earlier. The reduction in total costs is mainly due to lower amortization of television rights following the reduction in investments of previous years and partly due to a smaller number of events planned in the Serie A calendar compared the same period in 2014. In the same period there was also a reduction in personnel expenses, mainly due to a lower average number.
(values in EUR million) 1Q EI Towers 2015 2014 changes % changes
Revenues towards third parties 14.5 12.9 1.6 12.3% Inter-segment revenues 45.0- 45.0- (0.1)- -0.1%0.0% Total revenues 59.4 57.9 1.5 2.6%
Personnel expenses 11.0 11.2 (0.2) -1.4% Operating Costs 21.2 19.4 1.8 9.5% Other amortisation and depreciation 9.0 10.4 (1.4) -13.5% Inter-segment costs 0.7 0.8 (0.1) -10.1% Total costs 42.0 41.8 0.2 0.5%
Operating result 17.4 16.1 1.3 0 8.3%0 - - % on revenues 29.3% 27.8%
14 Interim Financial Report at 31 March 2015 – Interim Report on Operations In the quarter under review the EI Towers Group recorded an 8.3% increase in operating earnings compared to the first quarter 2014. This was achieved thanks to increased revenues generated by infrastructure contracts and provision of services to wireless telecommunications operators, mainly deriving from the contribution of the acquisitions, made during the previous year, of Sart S.r.l. (subsequently merged with Towertel S.p.A.), Hightel S.p.A. (now NewTelTowers S.p.A.) and Torre di Nora S.r.l. (subsequently merged into NewTelTowers S.p.A.). Inter-segment revenues, relating to hosting, assistance, maintenance and logistics services, broadcasting infrastructure use and engineering services provided to the subsidiary Elettronica Industriale were stable at EUR 45.0 million. Costs of EUR 1.8 million were recognised during the period mainly attributable to the costs relating to the cash and stock takeover bid of Rai Way S.p.A. mentioned above. Excluding those costs, operating costs would have been essentially stable compared to the same period of the previous year . After recognition of depreciation and amortization of EUR 9.0 million, which was down EUR 1.4 million compared to the first quarter of 2014, EBIT amounted to EUR 17.4 million (EUR 16.1 million in same period of 2014); EBIT margin was up at 29.4% compared to the previous 27.8%, despite the impact of the non-recurring charges described above.
15 Interim Financial Report at 31 March 2015 – Interim Report on Operations
Breakdown by geographical area: Spain The following is an abridged income statement of the Group’s Spanish business; figures are those of the Mediaset España Group (consolidated figures). (values in EUR million)
Spain: Income Statement 1Q 2015 2014
Total consolidated net revenues 220.7 200.4 Personnel expenses 25.9 25.9 Purchases, services, other costs 110.6 96.5 Operating costs 136.5 122.4 EBITDA 84.2 78.0 Rights Amortisations 37.5 51.1 Others amortisations and depreciations 4.6 4.2 Amortisations and depreciations 42.1 55.4 EBIT 42.1 22.6 Financial income/(losses) 0.6 (0.5) Income/(expenses) from equity investments 5.0 (6.5) EBT 47.6 15.6 Income taxes (11.3) (3.0) Net profit from continuing operations 36.3 12.6 Net profit from discontinued operations - - Minority interests in net profit - 0.1
Mediaset Group net profit 36.4 12.8
The following table shows key income statement figures stated as a percentage of consolidated net revenues from Spanish operations.
1Q 2015 2014 Total consolidated net revenues 100.0% 100.0% Operating costs 61.8% 61.1% EBITDA 38.2% 38.9% Amortisation, depreciation and write-downs 19.1% 27.6% EBIT 19.1% 11.3% EBT 21.6% 7.8% Net profit 16.5% 6.4% Tax rate (EBT %) 23.7% 19.2% Tax rate (EBT %)
16 Interim Financial Report at 31 March 2015 – Interim Report on Operations The breakdown of Mediaset España Group's revenues is shown below: (values in EUR million)
1Q % 2015 2014 change Gross advertising revenues 216.5 194.6 11.3% Agency discounts (8.8) (10.8) 18.3% Net advertising revenues 207.7 183.8 13.0% Other revenues 13.0 16.6 -21.9% Total net consolidated revenues 220.7 200.4 10.1%
The item Other revenues mainly includes revenues from the distribution of movie co- productions, revenues from gambling and merchandising and income from telephone traffic originating from the interactive segments of various television shows; the figure shows a substantial reduction compared to the first quarter of the previous year. The change is attributable to the decrease in revenues from movie distribution; the first quarter of 2014 included revenues from the distribution of the movie “8 apellidos vascos”.
1Q 2015 2014 changes % changes Operating costs 178.6 177.7 0.9 0.5%
Personnel expenses 25.9 25.9 0.0 0.0%
Purchases, services, other costs 110.6 96.5 14.1 14.6% TV and movie rights amortisation 37.5 51.1 -13.6 -26.6% Other amortisation and write-downs 4.6 4.2 0.4 9.5%
Total costs for Mediaset España Group in the first quarter of 2015 are in line with the figure for the first quarter of the previous year, thanks to concerted cost optimisation policies. As at 31 March 2015, EBIT from Spanish operations totalled EUR 42.1 million, compared to EUR 22.6 million in 2014, with an operating profitability of 19.1%, up 7.8% compared to 2014.
Other income statement components for the Mediaset Group as a whole are shown below.
1Q 2015 2014 changes % changes Financial income/(losses) -13.1 -22.4 9.3 41.4
The significant reduction in financial expenses in the first quarter of 2015 compared to the same period of the previous year was mainly due to the lower average financial debt in the two periods. In 2014, this item reflected the effect of the charges and commissions connected to the early termination of certain medium and long term committed credit facilities.
17 Interim Financial Report at 31 March 2015 – Interim Report on Operations 1Q 2015 2014 changes % changes Result from equity investments 4.8 -4.7 9.5 n.s.
In the first quarter of 2015, the gain from the management of investments and financial assets available for sale was driven by the capital gain realised by Mediaset España as a result of divestment of the stake held in Grupo Yamm Comida a Domicilio S.L., acquired in 2014 as part of Ad4Ventures business. In the first quarter of 2014, the loss deriving from investees was mainly related to the 22% stake in Digital Plus, a company owning the Spanish satellite pay-TV platform of the same name, which was sold by Mediaset España at the beginning of the third quarter of last year.
1Q 2015 2014 changes % changes
EBT 37.6 2.5 35.1 n.s.
Income taxes -11.2 -4.4 -6.8 n.s. Tax Rate (%) 29.7% n.s. Net profit from discontinued operations 0.0 0.0 0.0 n.s. Minority interests in net profit -25.7 -10.6 -15.1 n.s.
Group net profit 0.7 -12.5 13.1 n.s.
Earnings for the reporting period are stated net of income taxes in accordance with the recognition criteria set forth by IAS 34, applying the estimated income tax rate that will be applied at year end. In calculating IRAP tax, estimated taxes took into account the deductibility of the cost of employees with an open-ended contract, according to the new provisions in force from 2015, and in Spain of the reduction in the ordinary tax rate from 30% to 28%. Minority Interests refers to the share of consolidated net earnings of Mediaset España (53.8% in the first quarter of 2015 and 57.9% in the first quarter of 2014) and EI Towers (59.9% in the first quarter of 2015 and 39.9% in the first quarter of 2014), and, from the first quarter of 2015, includes the minority interests of Mediaset Premium S.p.A..
Statement of Financial Position The Group’s balance sheet and its breakdown by geographical area are reported below in abridged form, restated to show the two main aggregates Net Invested Capital and Net Financial Position; the latter consisting of Total Financial Debt, Cash and Other Cash Equivalents and Other Financial Assets. Details of the items making up the net financial position are provided in Note 4.8. The following tables therefore differ in their layout from the statutory balance sheet, which primarily distinguishes current from non-current assets and liabilities. Equity Investments and Other Financial Assets include assets recognised in the consolidated statement of financial position as investments in subsidiaries and other companies, and non-current equity investments and financial receivables recognised in the consolidated statement of financial position as Other Financial Assets (thus excluding hedging derivatives, which are included as Net Working Capital and Other Assets/Liabilities).
18 Interim Financial Report at 31 March 2015 – Interim Report on Operations Net Working Capital and Other Assets/Liabilities include current assets (apart from cash and cash equivalents and current financial assets included in the Net Financial Position), deferred tax assets and liabilities, non-current assets held for sale, provisions for risks and charges, trade payables and taxes payable.
(values in EUR million)
Balance Sheet Summary 31/03/2015 31/12/2014 TV and movie rights 2,593.5 2,581.4 Goodwill 934.4 934.4 Other tangible and intangible non current assets 1,079.1 1,092.3 Equity investments and other financial assets 77.9 70.3 Net working capital and other assets/(liabilities) (801.8) (674.6) Post-employment benefit plans (95.8) (96.9) Net invested capital 3,787.3- 3,906.8- Group shareholders' equity 2,412.6 2,322.8 Minority interests 751.1 722.7 Total Shareholders' equity 3,163.7- 3,045.6- Net financial position 623.6 861.3
The breakdown of the balance sheet by geographical area (Italy and Spain) is shown below.
(values in EUR million)
Balance Sheet Summary (geographical breakdown) Italy Spain 31/03/2015 31/12/2014 31/03/2015 31/12/2014 TV and movie rights 2,336.3 2,370.2 257.8 211.8 Goodwill 283.9 283.9 287.4 287.4 Other tangible and intangible non current assets 800.3 809.5 278.8 282.8 Equity investments and other financial assets 1,011.9 1,006.8 18.7 16.3 Net working capital and other assets/(liabilities) (864.6) (800.2) 62.8 125.5 Post-employment benefit plans (95.8) (96.9) - - Net invested capital 3,472.0- 3,573.2- 905.4- 923.7- Group shareholders' equity 2,442.7 2,362.2 1,196.8 1,181.1 Minority interests 106.1 84.0 8.3 8.3 Total Shareholders' equity 2,548.8- 2,446.3- 1,205.0- 1,189.4- Net financial position 923.2 1,127.0 (299.6) (265.7)
19 Interim Financial Report at 31 March 2015 – Interim Report on Operations The table below shows the breakdown of the Group balance sheet at 31 March 2013 to show the effect of the line-by-line consolidation of Mediaset España.
(values in EUR million) Balance Sheet Summary (geographical Eliminations/ Mediaset Italy Spain breakdown) Adjustments Group TV and movie rights 2,336.3 257.8 (0.6) 2,593.5 Goodwill 283.9 287.4 363.2 934.4 Other tangible and intangible non current assets 800.3 278.8 1,079.1 Equity investments and other financial assets 1,011.9 18.7 (952.7) 77.9 Net working capital and other assets/(liabilities) (864.6) 62.8 0.1 (801.8) Post-employment benefit plans (95.8) (95.8) Net invested capital 3,472.00.0 905.40.0 (590.1)0.0 3,787.30.0 Group shareholders' equity 2,442.7 1,196.8 (1,226.9) 2,412.6 Minority interests 106.1 8.3 636.8 751.1 Total Shareholders' equity 2,548.80.0 1,205.00.0 (590.1)0.0 3,163.70.0 Net financial debt 923.2 (299.6) 623.6
The following table is an abridged cash flow statement broken down by geographical area, showing cash flows over two periods. Items have been restated with respect to the standard IAS 7 layout used to prepare the statutory cash flow statement in order to show changes in Net Financial Position, considered the most significant indicator of the Group’s ability to meet its financial obligations. (values in EUR million)
Cash Flow Statement Mediaset Group Italy Spain as at 30 September 2015 2014 2015 2014 2015 2014
Net Financial Position at the beginning of the year (861.3)- (1,459.0)- (1,127.0)- (1,552.5)- 265.7- 93.5- Free Cash Flow 161.1 87.7 113.9 76.9 47.2 10.8 - Cash Flow from operating activities (*) 302.2 296.4 210.0 221.9 92.2 74.5 - Investments in fixed assets (257.5) (168.6) (173.5) (87.2) (83.9) (81.5) - Disposals of fixed assets 0.1 - 0.0 - 0.1 - - Changes in net working capital and other current assets/liabilities 116.2 (40.2) 77.4 (57.9) 38.8 17.7
Change in the consolidation perimeter (1.6) (1.9) (1.6) (1.9) Own share's sell/buyback (17.8) (5.5) (17.8) Equity investments/Invesment in other financial assets 96.0- - 91.5- (5.1)- 4.5- (0.4)- Cashed-in dividends Dividends paid ------
Financial Surplus/Deficit 237.6- 80.3- 203.8- 69.9- 33.9- 10.4- Net Financial Position at the end of the period (623.6) (1,378.7) (923.2) (1,482.6) 299.6 103.9 (*): Net profit +/- minority interests + amortisations +/- net provisions +/- valuation of investments recorded using the net equity method + changes in valuation reserves - gains/losses on equity investments
The Group’s free cash flow amounted to EUR 161.1 million. Italian operations alone generated a free cash flow of EUR 113.9 million.
20 Interim Financial Report at 31 March 2015 – Interim Report on Operations The table below shows the increase of fixed assets reported in the cash flow statement.
Increase in fixed assets Mediaset Group Italy Spain from 1/1 to 30/9 2015 2014 2015 2014 2015 2014
Investments in TV and movie rights (241.1) (184.5) (157.6) (105.0) (83.5) (79.6) Changes in advances on TV rights (10.8) 21.5 (11.0) 22.1 0.2 (0.6) TV and movie rights: investments and advances (251.9) (163.1) (168.6) (82.8) (83.3) (80.2) Investments in other fixed assets (5.6) (5.5) (4.9) (4.3) (0.7) (1.3) Total investments in fixed assets (257.5) (168.6) (173.5) (87.2) (83.9) (81.5)
The change in the item Investments in television and movie broadcasting rights mainly refers to the acquisition of the archive rights of Serie A for the 2015-2018 season, which was offset in the period in working capital. The negative cash flow of EUR 1.6 million related to the item Change in consolidation area refers to the cash disbursement of the subsidiary Towertel S.p.A. for the acquisition of Hightel S.p.A. in 2014. The item Purchase/sale of treasury shares relates to the disbursement of EUR 17.8 million for the purchase of treasury shares by Mediaset España. The item Investments/other financial assets mainly includes, in the first quarter of 2015, proceeds of EUR 100 million from the sale of 11.1% of the subsidiary Premium S.p.A., to the Telefónica Group and investments and divestments as part of the Ad4Ventures business, the details of which can be found in note 4.2. Equity Investments in associates and joint ventures and other financial assets.
21 Interim Financial Report at 31 March 2015 – Interim Report on Operations
Group headcount At 31 March 2015 the Group headcount came to 5,672 employees (5,738 at 31 March 2014 and 5,559 at 31 December 2014). The increase compared to 31 December is almost exclusively due to the temporary staff used in the production of television series and dramas in place during the period under review. The following tables show the change in the workforce for the reporting period, broken down by employment grade for the two geographical areas of operation.
Number of employees (including temporary staff) ITALY SPAIN as at 31 March 2015 2014 2015 2014 Managers 290 301 120 115 Journalists 320 330 140 145 Middle managers 850 862 81 78 Office workers 2,870 2,917 895 929 Industry workers 82 38 24 23 Total 4,412 4,448 1,260 1,290
Average workforce (including temporary staff) ITALY SPAIN 1Q 2015 2014 2015 2014 Managers 294 305 120 115 Journalists 320 329 143 144 Middle managers 853 865 80 79 Office workers 2,856 2,925 897 926 Industry workers 48 49 24 23 Total 4,371 4,473 1,264 1,287
Related-party transactions Transactions conducted with related parties do not qualify as "atypical" or "unusual", and are part of the normal course of business of the Group companies. Such transactions are conducted at arm's length, considering the nature of the goods and services provided. Detailed information on the impact on Group performance, financial position and cash flow of transactions conducted with holding companies, associates, joint ventures and affiliates is provided in Note 7, together with the disclosures required by the Consob Communication of 29 July 2006.
Right to opt-out of the obligation to publish reports in the event of significant transactions Pursuant to Article 3 of Consob Resolution no. 18079 of 20 January 2012, on 13 November 2012 the Board of Directors decided to apply the opt-out mechanism established in Article 70, paragraph 8 and Article 71, paragraph 1-bis of Consob Regulation no. 11971/99, as amended, thereby taking advantage of the right to opt-out of obligations to publish the reports required in the event of significant transactions such as mergers, spin-offs, and share capital issues through the transfer of assets in kind, acquisitions and disposals.
22 Interim Financial Report at 31 March 2015 – Interim Report on Operations Events after 31 March 2015 On 21 April 2015, the Shareholders' Meeting of EI Towers S.p.A., on proposal by the majority shareholder Elettronica Industriale S.p.A. approved the payment of a dividend of 1.10 euro per share through the partial distribution of the profit earned in 2014. With reference to the above mentioned cash and stock takeover bid, on 22 April, the Board of Directors of EI Towers S.p.A., having examined the press release of 16 April with which RAI S.p.A., controlling shareholder of Rai Way S.p.A., stated that it would not have agreed in any way to the bid, consequently acknowledged that, even prior to the bid period, the conditions for its continuation did not exist. On 24 April, Towertel S.p.A., a company wholly owned by EI Towers S.p.A. signed a preliminary agreement for the sale of 100% of the share capital of Tecnorad Italia S.p.A., a company that manages 134 transmission sites hosting mainly mobile telecommunication operators, paying an advance of EUR 5 million. The final closing of the transaction is expected in the coming month of July. With reference to the Spanish legislative framework, we note that, at the reporting date, three appeals against the renewal of the concession of eight digital channels (four of which of Mediaset España) are still pending before the “Sala Tercera de lo Contencioso Administrativo del Tribunal Supremo”. If these appeals are upheld, the result would mean the switching off of all the channels. As already highlighted in the consolidated financial statements as at 31 December 2014, Mediaset España considers it reasonable to assume that these appeals will not be upheld and will therefore not result in any change to the current structure of the channels compared to the previous assignments. With reference to the switching off of channels that took place on 6 May 2014 in accordance with the ruling of the “Tribunal Supremo” of 18 December 2013, we note that on 18 April last the government called a tender for the assignment of concessions for six new channels: three in standard definition and three in high definition. Mediaset España will take part in the tender with the aim of obtaining two channels: one standard and one in high definition. On 15 April 2015, the Shareholders' Meeting of Mediaset España Comunicación S.A. approved the resolution to cancel shares in portfolio as at 31 March 2015 amounting to 10% of share capital, by a corresponding reduction in share capital. On 30 April 2015, Promotora de Informaciones S.A. (Prisa) announced completion of the sale of the majority stake of 56% of Distribuidora de Television Digital S.A. (Digital Plus-DTS) to Telefónica S.A. after having obtained the necessary authorisations from the competent regulatory bodies. As a result of this event, on 4 May 2015, Mediaset España, as envisaged by the agreements signed on 4 July 2014 concerning the sale to Telefónica of the 22% stake in DTS, received from Telefónica the further amount of EUR 10 million as an adjustment to the price of EUR 325 million received in the third quarter of 2014 from the sale of the equity investment.
23 Interim Financial Report at 31 March 2015 – Interim Report on Operations
FORECAST FOR THE YEAR
In a global economic environment rendered once again unstable by the situation in Greece, the latest estimates from leading observers confirm, for Italy, the expectations of a slow start to the economic recovery which should result, in 2015, in modest GDP growth of less than 1%. As things stand, it is therefore extremely difficult to make predictions about the evolution over the full year of Italian advertising market. As for the second quarter of the year, the Group's advertising sales companies in any case estimate, across all media, a better performance than that recorded in the first quarter (-1.6% vs. 2014). In Spain, where a more solid economic recovery is underway, the positive trend in advertising revenues recorded by Mediaset España in the first months of the year is expected to continue. This expectation - along with the improved result due to the sale of the stake in Digital Plus that took place in 2014 and the reduction from 30% to 28% of the Spanish tax rate - should therefore ensure a very positive contribution to the Group's consolidated results. However, for a reliable estimate of the consolidated results at year end, we will need check the progress, especially in the second half of the year, of two major sources of revenue: on the one hand, advertising sales in Italy and Spain, and, on the other, Mediaset Premium subscriptions linked to the new football offer which includes exclusive three-year rights to the Champions League from next season. Finally, there are no significant changes regarding trade agreements and/or strategic alliances from the situation communicated by the Group during the Shareholders' Meeting on April 29.
For the Board of Directors the Chairman
24
Mediaset Group Accounting Tables and Explanatory Notes
MEDIASET GROUP
INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION (EUR million)
Notes 31/3/2015 31/12/2014
ASSETS
Non current assets
Property, plant and equipment 4.1 442.1 455.8
Television and movie rights 4.1 2,593.5 2,581.4
Goodwill 934.4 934.4
Other intangible assets 4.1 637.1 636.4
Investments in associates 4.2 32.2 32.5
Other financial assets 4.2 58.8 50.0
Deferred tax assets 4.3 458.0 471.7
TOTAL NON CURRENT ASSETS 5,156.1 5,162.2
Current assets
Inventories 29.8 42.7
Trade receivables 1,419.4 1,489.8
Tax receivables 4.4 45.7 75.3
Other receivables and current assets 291.9 278.8
Current financial assets 74.9 73.2
Cash and cash equivalents 486.8 457.3
TOTAL CURRENT ASSETS 2,348.5 2,417.1
Non current assets held for sale - -
TOTAL ASSETS 7,504.5 7,579.3
26
MEDIASET GROUP
INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION (EUR million)
Notes 31/3/2015 31/12/2014
LIABILITIES AND SHAREHOLDERS' EQUITY
Share capital and reserves
Share capital 614.2 614.2
Share premium reserve 275.2 275.2
Treasury shares (416.7) (416.7)
Other reserves 4.5 836.5 755.4
Valuation reserve 4.6 9.6 (4.0)
Retained earnings 1,092.9 1,074.9
Net profit for the period 0.7 23.7
Group Shareholders' Equity 2,412.6 2,322.8
Minority interests in net profit 25.7 53.4
Minority interests in share capital, reserves and retained earnings 725.4 669.3
Minority interests 751.1 722.7
TOTAL SHAREHOLDERS' EQUITY 3,163.7 3,045.6
Non current liabilities
Post-employment benefit plans 95.8 96.9
Deferred tax liabilities 64.5 67.7
Financial liabilities and payables 4.8 1,073.3 1,093.8
Provisions for non current risks and charges 4.7 52.2 54.5
TOTAL NON CURRENT LIABILITIES 1,285.8 1,312.9
Current liabilities
Financial payables 4.8 16.6 210.4
Trade and other payables 2,659.5 2,589.1
Provisions for current risks and charges 4.7 50.8 74.3
Current tax liabilities 10.0 5.8
Other financial liabilities 4.8 65.5 72.2
Other current liabilities 252.5 269.0
TOTAL CURRENT LIABILITIES 3,055.0 3,220.8
Liabilities related to non current assets held for sale - -
TOTAL LIABILITIES 4,340.8 4,533.7
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 7,504.5 7,579.3
27
MEDIASET GROUP
INTERIM CONSOLIDATED STATEMENT OF INCOME (EUR million)
STATEMENT OF INCOME 1Q 2015 1Q 2014 Notes
Sales of goods and services 820.7 813.6 Other revenues and income 8.1 7.2
TOTAL NET CONSOLIDATED REVENUES 828.8 820.8
Personnel expenses 134.0 138.6 Purchases, services, other costs 388.1 359.4 Amortisation, depreciation and write-downs 260.8 293.2 Impairment losses and reversal of impairment on fixed assets - -
TOTAL COSTS 782.9 791.2
EBIT 45.9 29.6
Financial expenses 4.9 (13.1) (22.4) Income/(expenses) from equity investments 4.8 (4.7)
EBT 37.6 2.5
Income taxes 4.10 (11.2) (4.4)
NET PROFIT FROM CONTINUING OPERATIONS 26.4 (1.9)
Net Gains/(Losses) from discontinued operations - -
NET PROFIT FOR THE PERIOD 26.4 (1.9)
Attributable to: - Equity shareholders of the parent company 0.7 (12.5) - Minority Interests 25.7 10.6
Earnings per share 4.11 - Basic 0.00 (0.01) - Diluted 0.00 (0.01)
28
MEDIASET GROUP
INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (EUR million)
Note 1Q 2015 1Q 2014
PROFIT OR (LOSS) FOR THE PERIOD 26.4 (1.9)
OTHER COMPREHENSIVE INCOME RECYCLED TO PROFIT AND LOSS 9.7 0.4
Changes arising from translating the financial statement of foreign operations - -
Effective portion of gains and losses on hedging instruments (cash flow hedge) 4.6 18.8 0.5
Gains and losses on available-for-sale financial assets 4.5 (5.4) -
Other gains and losses of associates valued by equity method - -
Other gains and losses - -
Tax effects (3.6) (0.1) OTHER COMPREHENSIVE INCOME NOT RECYCLED TO PROFIT AND LOSS - -
Changes in revaluation surplus - -
Actuarial gains and losses on defined benefit plans - -
Other gains and losses of associates valued by equity method - -
Other gains and losses - -
Tax effects - -
TOTAL OTHER COMPREHENSIVE INCOME FOR THE PERIOD NET OF TAX EFFECTS (B) 9.7 0.4
TOTAL COMPREHENSIVE INCOME (A)+(B) 36.1 (1.5) attributable to:
- owners of the parent 12.5 (12.1)
- non controlling interests 23.6 10.6
29
MEDIASET GROUP
INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS (EUR million)
Notes 1Q 2015 1Q 2014
CASH FLOW FROM OPERATING ACTIVITIES: Operating profit before taxation 45.9 29.6 + Depreciation and amortisation 260.8 293.2 + Other provisions and non-cash movements (7.6) 1.5 + Change in trade receivables 70.3 79.3 + Change in trade payables 81.6 (19.4) + Change in other assets and liabilities (16.3) (20.3) - Interests (paid)/received (0.5) (1.0) - Income tax paid 5.1 (18.3)
Net cash flow from operating activities [A] 439.3 344.5
CASH FLOW FROM INVESTING ACTIVITIES: Proceeds from the sale of fixed assets - - Proceeds from the sale of equity investments - - Interests (paid)/received - - Purchases in television rights (241.1) (184.5) Changes in advances for television rights (10.8) 21.5 Purchases of other fixed assets (5.6) (5.6) Equity investments - - Changes in payables for investing activities (11.1) (74.3) Proceeds/(Payments) for hedging derivatives 13.5 (0.3) Changes in other financial assets 2.8 (5.6) Dividends received - - Business Combinations net of cash acquired 5.1 (1.4) (1.9) Changes in consolidation area 5.2 100.0 -
Net cash flow from investing activities [B] (153.7) (250.6)
CASH FLOW FROM FINANCING ACTIVITIES: Change in treasury shares 5.3 (17.8) Changes in financial liabilities (202.0) (74.4) Corporate bond - - Dividends paid - - Changes in other financial assets/liabilities (0.1) 1.4 Interests (paid)/received (36.3) (26.0)
Net cash flow from financing activities [C] (256.2) (98.9)
CHANGE IN CASH AND CASH EQUIVALENTS [D=A+B+C] 29.5 (5.0)
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD [E] 457.3 197.6
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD [F=D+E] 486.8 192.6
30
MEDIASET GROUP
INTERIM CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY (EUR million)
Share Share Legal Company's Valuation Retained Profit/ Total Total TOTAL capital premium reserve treasury reserve earnings/ (loss) Group shareholders' SHARE- reserve and other shares (accumulated for the shareholders' equity HOLDERS' reserves losses) period equity attributable EQUITY to minority interests
Balance at 1/1/2014 614.2 275.2 504.7 (416.7) (13.9) 1,147.4 8.9 2,119.9 857.8 2,977.7
Allocation of the parent company's 2013 net profit - - - - - 8.9 (8.9) - - -
Dividends paid by the parent company ------
Stock Option plan valuation - - - - (0.1) 0.1 - - - -
(Purchase)/sale of treasury shares ------Profits/(losses) from negotiation of treasury shares ------
Change in consolidation perimeter - - - - - (0.4) - (0.4) 0.4 -
Other changes - - - - - 0.8 - 0.8 1.2 2.0
Comprehensive income/(loss) - - - - 0.4 - (12.5) (12.1) 10.6 (1.5)
Balance at 31/03/2014 614.2 275.2 504.7 (416.7) (13.7) 1,156.9 (12.5) 2,108.2 870.0 2,978.2
Balance at 1/1/2015 614.2 275.2 755.4 (416.7) (4.0) 1,074.9 23.7 2,322.8 722.7 3,045.6
Allocation of the parent company's 2014 net profit - - - - - 23.7 (23.7) - - -
Dividends paid by the parent company ------
Stock Option plan valuation ------
(Purchase)/sale of treasury shares ------Profits/(losses) from negotiation of treasury shares ------
Change in consolidation perimeter - - 82.9 - - (5.1) - 77.8 5.4 83.2
Other changes - - - - - (0.5) - (0.5) (0.6) (1.1)
Comprehensive income/(loss) - - (1.8) - 13.6 - 0.7 12.5 23.6 36.1
------Balance at 31/03/2015 614.2 275.2 836.5 (416.7) 9.6 1,092.9 0.7 2,412.6 751.1 3,163.7
31
EXPLANATORY NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS AT 31 MARCH 2015
1. Basis of preparation These interim condensed consolidated financial statements, prepared in accordance with IAS 34 - Interim Financial Reporting - are based on the same accounting standards and measurement criteria adopted in preparing the consolidated financial statements at 31 December 2014, to which reference is made, except for the adoption of new standards, amendments and interpretations effective from 1 January 2015 and for some complex measurement processes, including the impairment tests designed to ascertain any impairment of fixed assets. In the absence of indicators, events, or circumstances such as to change the measurements previously made, these tests are generally carried out when preparing the annual financial statements, when the information is available for this process to be completed in a comprehensive manner. Finally, actuarial valuations needed to determine employee benefits provisions are normally drawn up on a semi-annual basis. These condensed interim consolidated financial statements do not contain all information and disclosures required for the annual financial statements and should therefore be read in conjunction with the Consolidated Financial Statements at 31 December 2014. The preparation of the interim financial statements requires management to make estimates and assumptions that affect the reported amounts of revenues, costs, assets and liabilities and the disclosure of contingent assets and liabilities at the reporting date. Income taxes for the period were recognised based on the best estimate of the weighted average tax rate expected for the entire year. The consolidated interim results of the Mediaset Group are affected by the seasonal nature of advertising revenues, traditionally more concentrated in the first half of the year. The values of the items in the Consolidated Financial Statements, in view of their size, are shown in millions of Euros.
2. New accounting standards, amendments and interpretations effective from 1 January 2014 As noted in the 2014 Annual Report, a number of new accounting standards and/or amendments and interpretations to previously effective standards are applicable from 1 January 2015 that do not have any significant impact for the Group.
3. Key information relating to the scope of consolidation The main changes in the scope of consolidation during the period under review are summarised below. With regard to the subsidiaries we note that: - on 13 January 2015 the sale was completed of 11.11% of the share capital of the company Mediaset Premium S.p.A. to the Spanish operator Telefónica through the
32 Interim Financial Report at 31 March 2015 – Explanatory Notes company Telefónica de Contenidos S.A. As a result of this sale onwership interest in Mediaset Premium S.p.A. decreased from 100% to 88.89%; - on 2 March 2015 a deed was signed for the merger of the company Torre di Nora S.r.l. into the holding company Hightel S.p.A.. This transaction takes statutory effect from 4 March 2015, with accounting and tax effects from 1 January 2015. This transaction had no impact on the scope of consolidation; - during the quarter, following the purchase of treasury shares and the exercise of the option right by the stock option plan beneficiaries, Mediaset Group's ownership interest in the subsidiary Mediaset España Comunicación, increased from 45.993% to 46.169%. With regard to minority interests within the framework of the AD4Venture operations, we note that: - On 26 January 2015, the subsidiary Mediaset España sold its 11.82% holding in Grupo Yamm Comida a Domicilio S.L., a company offering home catering services on-line; - on 2 February 2015, the subsidiary R.T.I. S.p.A. subscribed for 2.98% of the share capital of the company Wimdu Gmbh, an online platform for apartment rental throughout the world. Subsequently, on 4 February 2015, the subsidiary Mediaset España Comunicación S.A. also subscribed for 2.98% of the share capital of that company. - On 24 March 2015 the subsidiary R.T.I. S.p.A. subscribed for an increase in the capital of the company Westwing Group Gmbh (formerly Jade 1290 Gmbh). As a result, its investment increased from 2.22% to 2.29%.
4. Comments on the main changes in assets, liabilities, revenues and expenses 4.1 Tangible and intangible fixed assets, Television and movie broadcasting rights
Property, plant Television and Other intangible Goodwill and equipment movie rights assets
Balance at 31/12/2014 455.8 2,581.4 934.4 636.4
Changes in the consolidation area - - - -
Additions 5.4 223.1 - 29.1
Other changes (0.6) 18.1 - (17.6)
Disposals (0.1) - - (0.0)
Amortisation, depreciation and write-downs (18.5) (229.1) - (10.9) Balance at 31/03/2015 442.1 2,593.5 934.4 637.1 The main changes with respect to the figures shown in the consolidated financial statements as at 31 December 2014 are summarised below:
increases in television and movie broadcasting rights of EUR 241.1 million, of which EUR 223.1 million for purchases in the period and EUR 18.0 million for capitalisation of advances paid to suppliers (recognised as assets in progress and advances at 31 December 2014). Other changes include decreases and cancellations of previously recognised rights.
increases in property, plant and equipment of EUR 5.4 million, mainly attributable to advance payments for the construction of transmission sites and equipment, building work
33 Interim Financial Report at 31 March 2015 – Explanatory Notes on Group-owned properties and upgrading of the quality standards of existing production facilities;
increases in other intangible fixed assets totalling EUR 29.1 million, primarily consisting of increases in assets in progress and advances for advances on future purchases of rights. As already commented for Television and movie broadcasting rights, the item Other changes includes decreases of EUR 18.0 million relating to the capitalisation as broadcasting rights of advances paid to suppliers.
4.2 Equity Investments in associates and joint ventures and other financial assets
Balance at Write-ups / Balance at Additions Disposals Other changes 31/12/2014 (Write-offs) 31/03/2015
Equity investments in jointly-controlled 32.5 - - (0.1) (0.2) 32.2 and affiliated companies
Equity investments 21.7 7.0 (8.0) - - 20.8
Receivables and other financial assets 28.2 11.5 (1.0) 0.5 (1.1) 38.0
Total 82.4 18.5 (9.0) 0.4 (1.3) 91.0
For the item Equity Investments in associates and joint ventures, the negative effect for the period relates to the measurement at equity of those companies. Increases in the item Investments in other companies were part of the investments called AD4Venture and consisted of the subscription of:
2.98% of the share capital of Wimdu Gmbh for EUR 3.0 million, by the subsidiary R.T.I. S.p.A.;
2.98% of the share capital of Wimdu Gmbh for EUR 3.0 million, by the subsidiary Mediaset España;
the increase in the capital of the company Westwing Group Gmbh (formerly Jade 1290 Gmbh) for an amount of EUR 1.0 million. The decrease in the item relates to the sale, in January this year, of the investment held by Mediaset España in the company Grupo Yamm Comida a Domicilio S.L. for EUR 5.4 million. The main changes in the item Receivables and other financial assets relate to the reclassification to the item Other Receivables and Current Assets of the current portion of the receivables due in one year from the associate Boing S.p.A., to the non-current portion of the fair value of foreign exchange hedging derivatives and the increases in financial receivables.
34 Interim Financial Report at 31 March 2015 – Explanatory Notes
4.3 Deferred Tax Assets and Liabilities
The decrease in Deferred tax assets of EUR 13.7 million, mainly relates to uses generated by the temporary mismatch of the tax and financial values of assets and liabilities and the recognition of deferred tax assets generated during the period by the transfer of tax losses from companies scoped in for Italian tax consolidation purposes.
4.4 Tax credits
This item, amounting to EUR 45.7 million (EUR 75.3 million at 31 December 2014) includes EUR 36.0 million relating to net credits due from the tax authorities to the Group's Italian companies scoped in for Italian tax consolidation purposes. The main change relates to the use of the tax credit (relating to the subsidiary R.T.I. S.p.A.) arising due to the conversion of deferred tax assets on the impairment of intangible assets carried out in the year 2012 as discussed in the financial statements as at 31 December 2014. This credit was used as an offset pursuant to article 17 of Italian Legislative Decree 241/1997 as per article 2.57 of Italian Decree Law no. 225/2010.
4.5 Other reserves
31/03/2015 31/12/2014
Legal reserve 122.8 122.8 Equity investment evaluation reserve - - Consolidation reserve (78.9) (78.9) Reserves for minority transactions 466.3 383.3 Other reserves 326.3 328.1
Total 836.5 755.4 The change in the first quarter in the item Reserves for minority transactions, relates to the recognition of the gain, net of tax effects, originating from the sale of 11.11% of the capital of the company Mediaset Premium S.p.A. to the Telefónica Group as discussed in section Significant events and transactions in the first quarter. The change in the item Other reserves mainly relates to the transfer to the income statement of the Group's portion of the Valuation reserve for available-for-sale assets recognised on 31 December 2014, following the sale of the investment Grupo Yamm Comida a Domicilio S.L..
35 Interim Financial Report at 31 March 2015 – Explanatory Notes
4.6 Valuation reserves
31/03/2015 31/12/2014
Cash flow hedge reserve 22.4 8.8 Stock option plans 11.4 11.4 Actuarial Gains/(Losses) (24.2) (24.2)
Total 9.6 (4.0)
The table below shows the changes occurred during the period.
Opening Through balance Balance at Increase/ Fair Value Deferred tax Balance at Valuation reserves Profit and adjustments 1/1 (Decrease) adjustments effect 31//03 Loss Account of the hedged item Financial assets for cash flow hedging purpose 8.8 1.2 0.1 (10.6) 28.1 (5.2) 22.4 of which: - FOREX rate risk 12.1 1.2 - (10.6) 28.5 (5.3) 26.0
- interest rate risk (3.3) - 0.1 - (0.4) 0.1 (3.6)
Stock option plans 11.4 - - - - - 11.4 Actuarial Gains/(Losses) on defined benefit plans (24.2) - - - - - (24.2) Total (4.0) 1.2 0.1 (10.6) 28.1 (5.2) 9.6
The Valuation reserve for financial assets for cash flow hedging purposes is connected with valuations of derivative instruments designated as hedges against the foreign exchange risk associated with the acquisition of television and movie broadcasting rights in foreign currencies, or as hedges against the interest rate risk associated with medium and long-term financial liabilities. The reserve for stock option plans consists of debit entries for costs accruing at 31 March 2015, measured in accordance with IFRS 2, in connection with stock options assigned by Mediaset under three-year stock option plans and by the subsidiary Mediaset España Comunicación for the portion attributable to the Group. The Reserve for actuarial gains and losses consists of components arising from the actuarial valuation of defined benefit plans, recognised directly through shareholders' equity. The change in the Valuation reserve for financial assets for cash flow hedging purposes and the Valuation reserve for actuarial gains and losses, before tax, is shown in the Comprehensive Income Statement.
36 Interim Financial Report at 31 March 2015 – Explanatory Notes
4.7 Provisions for risks and contingent liabilities
The decrease in risk provisions, mainly attributable to the Mediaset España Group relates to the use of provisions recognised as at 31 December 2014 as a result of the corresponding liabilities occurring during the first three months of the year. With reference to the main disputes and the contingent liabilities during the quarter under review, no facts or circumstances occurred such as to alter the situation reported in the financial statements at 31 December 2014.
4.8 Net Financial Position
Below is a breakdown of the consolidated net financial position as required by Consob communication no. 6064293 dated 28 July 2006; the Group's current and non-current financial debt is detailed separately in the table. For a breakdown of changes in the net financial position over the period, see the section on the Group's balance sheet and financial structure in the Interim Report on Operations.
31/03/2015 31/12/2014
Cash in hand and cash equivalents 0.1 0.1 Bank and postal deposits 486.7 457.2 Securities and other current financial assets 15.0 10.5 Total liquidity 501.8 467.8
Current financial receivables 28.1 46.7
Due to banks (13.8) (207.5) Current portion of non current debt (46.1) (44.7) Other current payables and financial liabilities (21.5) (27.3) Current financial debt (81.4) (279.5)
Current Net Financial Position 448.5 234.9
Due to banks (197.6) (197.5) Corporate bond (869.2) (893.4) Other non current payables and financial liabilities (5.3) (5.2) Non current financial debt (1,072.1) (1,096.2) Net Financial Position (623.6) (861.3)
The item Bank and postal deposits included EUR 149.6 million for the EI Towers Group and EUR 311.0 million for the Mediaset España Group. Securities and other current financial assets consist of bonds held by the subsidiary Mediaset Investments S.a.r.l. amounting to EUR 8.8 million (EUR 9.0 million as at 31 December 2014) and the fair value of foreign exchange derivatives for the amount exceeding the change in payables in currency hedged. Current financial receivables include EUR 19.9 million (EUR 19.9 million as at 31 December 2014) in government subsidies for movie productions made by Medusa Film S.p.A. and Taodue, which had been approved but not paid at the reporting date; EUR 8.1 million (EUR 26.7 million as at 31 December 2014) in relation to current accounts managed by the parent Mediaset S.p.A. on behalf of associates and joint ventures; and EUR 0.1 million in financial receivables held by Mediaset España Group.
37 Interim Financial Report at 31 March 2015 – Explanatory Notes Due to banks (current) refer to short term credit lines. The decrease of EUR 193.7 million refers to a reduced use of this type of financing. The current portion of non-current financial debt primarily consists of the current portion of corporate bonds for EUR 42.0 million (EUR 40.7 million as at 31 December 2014), the current portion of the term loan for EUR 2.8 million (EUR 2.9 million as at 31 December 2014) and the current portion of the fair value of derivatives designated as hedges against the risk of interest rate fluctuations, amounting to EUR 1.3 million (EUR 1.1 million as at 31 December 2014). Other current payables and financial liabilities mainly include current accounts managed by the parent Mediaset S.p.A. on behalf of associates and joint ventures totalling EUR 15.6 million (EUR 18.7 million as at 31 December 2014 ), amounts owed to factoring companies totalling EUR 0.5 million (EUR 4.8 million at 31 December 2014), and loans totalling EUR 5.1 million received to finance film development, distribution and production operations (EUR 3.6 million at 31 December 2014). Due to banks (non current) refers to the portion of committed credit facilities (revolving) maturing beyond 12 months and relating to Mediaset S.p.A.. These payables are recognised in the financial statements using the amortised cost method. As already reported in the financial statements at 31 December 2014, existing loans and credit facilities are subject to financial covenants on a consolidated basis (semi-annual and annual), which, if not met, would result in a refund of the portion used. To date, these requirements have been met. The item Bond issue refers to the non-current portion of bonds issued by Mediaset Group, as set out below:
bonds issued by Mediaset S.p.A. on 1 February 2010 for a total nominal value of EUR 300.0 million, whose amortised cost (including the current portion) amounted to EUR 301.1 million,
bonds issued by Mediaset S.p.A. on 23 October 2013 for a total nominal value of EUR 375.0 million, whose amortised cost (including the current portion) amounted to EUR 374.8 million;
and the bonds issued by the subsidiary EI Towers S.p.A. on 26 April 2013 for a total nominal value of EUR 230.0 million, whose amortised cost (including the current portion) amounted to EUR 235.3 million. Non-current financial liabilities and payables primarily consist of loans received to finance film development, distribution and production operations for EUR 1.3 million (EUR 1.3 million as at 31 December 2014) and the non-current portion of the fair value of collar derivatives designated as hedges against the risk of interest rate fluctuations, for EUR 4.0 million.
38 Interim Financial Report at 31 March 2015 – Explanatory Notes
4.9 Financial income and expenses
1Q 2015 1Q 2014
Interests on financial assets 1.2 0.7 Interests on financial liabilities (12.1) (15.6) - - Other financial income/(losses) (2.4) (7.5) - - Foreign exchange gains/(losses) 0.1 (0.0) - - Total financial income/(losses) (13.1) (22.4) The item Interest expense on financial liabilities includes the interest expense for the quarter on bonds issued by the Mediaset Group and the EI Towers Group totalling EUR 11.3 million (EUR 11.4 million at 31 March 2014). The item Other financial income/(charges) included financial expenses as at 31 March 2014 resulting from the early pay-off of a credit facility during the first quarter of 2014.
4.10 Taxes for the period
1Q 2015 1Q 2014 IRES and IRAP tax expenses (4.8) 0.7 Tax expenses (foreign companies) 3.0 7.9 Deferred tax expense 12.9 (4.2) Total 11.2 4.4 The item IRES and IRAP taxes includes costs relative to the estimate of IRAP tax for the period and the estimate of IRES tax for companies that are not part of the tax consolidations scheme and income of EUR 11.3 million resulting from a negative consolidated taxable base in the period for IRES purposes for Mediaset Group companies that are part of the Italian tax consolidation scheme, with a corresponding amount being recognised in the balance sheet as deferred tax assets. The item deferred tax assets and liabilities comprises the financial movements for the period for the posting and/or use generated by the impact of the progress of temporary differences between the values for tax and accounting purposes. The taxes of foreign companies primarily include charges for current taxes recognised by companies of the Mediaset España Group.
39 Interim Financial Report at 31 March 2015 – Explanatory Notes
4.11 Profit/loss per share
The calculation of basic and diluted earnings per share is based on the following data:
1Q 2015 1Q 2014
Net result for the period (millions of euro) 0.7 (12.5)
Weighted average number of ordinary shares (without own shares) 1,136,402,064 1,136,402,064 Basic EPS 0.00 (0.01) Weighted average number of ordinary shares for the diluted EPS computation 1,136,402,064 1,136,402,064 Diluted EPS 0.00 (0.01)
The figure for earnings per share is calculated using the ratio of the Group's net profit/loss to the weighted average number of shares in circulation during the period, net of treasury shares. The figure for earnings per diluted share is calculated using the number of shares in circulation and the potential diluting effect from the allocation of treasury shares to the beneficiaries of vested stock option rights.
5. Cash flow statement
5.1 Business combinations net of cash and cash equivalents acquired
This item relates to the impact on cash and cash equivalents for the period of the outlay incurred for the completion of the acquisition of Hightel S.p.A during the fourth quarter of 2014.
5.2 Changes in stakes in subsidiaries
The amount refers to the net proceeds arising from the sale of the 11.11% investment in the subsidiary Mediaset Premium S.p.A..
5.3 Change in treasury Shares
The amount relates to the outflow of EUR 17.8 million for the buyback of treasury shares by Mediaset España as part of the share buyback programme approved by the Board of Directors of the Company. As a result of this acquisition, the total number of own shares is 40,686,142 corresponding to 10% of the share capital.
40 Interim Financial Report at 31 March 2015 – Explanatory Notes
6. Segment reporting As required under IFRS 8, the following information relates to the operating segments identified on the basis of the Group's present organisational structure and internal reporting system. The Group's main operating segments, already included in the analysis of results contained in the Interim Report on Operations, are the same as the geographical areas (Italy and Spain) identified according to the location of operations. These operations are then segmented further, to monitor the performance of the business areas operating in each country. In relation to Spain, which corresponds to the Mediaset España Group, no significant areas have been identified other than the core business of television, which is therefore the same as that entity. The following paragraphs contain the information and reconciliations required under IFRS 8 in relation to profits, losses, assets and liabilities, based on this segmentation process. The information can be extrapolated from the two sub-consolidated financial statements prepared at that level, while the information provided for the three operating segments based in Italy has been given with reference to the earnings and operational activities directly attributable to them.
Geographical sectors The following tables contain the key financial information for the two geographical operational areas of Italy and Spain, as at 31 March 2015 and 2014 respectively. The tables have been prepared on the basis of specific sub-consolidated financial statements in which the carrying amount of the equity investments held by companies belonging to a segment in companies belonging to another segment have been kept at their respective purchase cost and eliminated upon consolidation. Likewise, in the sector income statement, income and expenses (relating to any dividends received from these investments) have been included under Income from other equity investments. The inter-segment assets figures mainly relate to the elimination of equity investments recognised under the assets of the Italy geographic sector in Mediaset España and Mediacinco Cartera (25%-owned, and already fully consolidated into the Spain area, which owns 75% of it) and the loan granted to Mediacinco Cartera S.L. by Mediaset Investment S.a.r.l., which amounted to EUR 11.2 million at 31 December 2015. Non-monetary costs relate to the provisions for risks and charges.
41 Interim Financial Report at 31 March 2015 – Explanatory Notes
Eliminations/ MEDIASET ITALY SPAIN Q1 2015 Adjustments GROUP
MAIN INCOME STATEMENT FIGURES Revenues from external customers 608.1 220.7 - 828.8 Inter-segment revenues 0.4 - (0.4) - Consolidated net revenues 608.5 220.7 (0.4) 828.8 % 73% 27% 0.0 100%
EBIT 3.8 42.1 0.0 45.9
% 8% 92% 0% 100%
Financial income/(losses) (13.7) 0.6 - (13.1)
Income/(expenses) from equity investments valued with the equity(0.2) method (0.3) - (0.5)
Income/(expenses) from other equity investments - 5.3 - 5.3
EBT (10.1) 47.6 0.0 37.6
Income taxes 0.2 (11.3) - (11.2)
NET PROFIT FROM (9.9) 36.3 0.0 26.4 CONTINUING OPERATIONS
Net Gains/(Losses) from discontinued operations - - - -
NET PROFIT FOR THE PERIOD (9.9) 36.3 0.0 26.4
Attributable to: - Equity shareholders of the parent company (16.1) 36.4 (19.6) 0.7 - Minority Interests 6.1 - 19.6 25.7
OTHER INFORMATION Assets 6,590.7 1,518.2 (604.4) 7,504.5
Liabilities 4,042.0 313.1 (14.3) 4,340.8 Investments in tangible and intangible non current assets 173.5 83.9 - 257.5 Amortization 218.7 42.1 (0.0) 260.8 Other non monetary expenses 1.1 6.9 - 8.0
(*) Includes the change in "Advances for the purchase of broadcasting rights"
42 Interim Financial Report at 31 March 2015 – Explanatory Notes
Eliminations/ MEDIASET ITALY SPAIN Q1 2014 Adjustments GROUP
MAIN INCOME STATEMENT FIGURES Revenues from external customers 620.5 200.4 - 820.8 Inter-segment revenues 0.4 - (0.4) - Consolidated net revenues 620.9 200.4 (0.4) 820.8 % 76% 24% 0.0 100%
EBIT 7.0 22.6 - 29.6
% 24% 76% 0% 100%
Financial income/(losses) (22.0) (0.5) - (22.4)
Income/(expenses) from equity investments valued with the equity1.9 method (6.5) - (4.7)
Income/(expenses) from other equity investments - - - -
EBT (13.1) 15.6 - 2.5
Income taxes (1.4) (3.0) - (4.4)
NET PROFIT FROM (14.5) 12.6 - (1.9) CONTINUING OPERATIONS
Net Gains/(Losses) from discontinued operations - - - -
NET PROFIT FOR THE PERIOD (14.5) 12.6 - (1.9)
Attributable to: - Equity shareholders of the parent company (17.7) 12.8 (7.5) (12.5) - Minority Interests 3.2 (0.1) 7.5 10.6
OTHER INFORMATION Assets 5,173.9 1,745.8 (611.2) 6,308.5
Liabilities 3,051.9 299.9 (21.4) 3,330.3 Investments in tangible and intangible non current assets 87.2 81.5 - 168.6 Amortization 237.8 55.4 - 293.2 Other non monetary expenses 0.4 (0.3) - 0.1
(*) Includes the change in "Advances for the purchase of broadcasting rights"
43 Interim Financial Report at 31 March 2015 – Explanatory Notes Italy: Operating segments Operating segments have been reported in the Interim Report on Operations, where details on performance for the period can be found.
Income Statement Summary INTEGRATED EI ELIMINATIONS GEOGRAPHICAL Q1 2015 TELEVISION TOWERS / SEGMENT OPERATIONS ADJUSTMENTS ITALY
Revenues from external customers 594.0 14.5 - 608.5 Inter-segment revenues - 44.9 (44.9) - Consolidated net revenues 594.0 59.4 (44.9) 608.5 % 98% 10% -7% 100%
Operating costs from thrid parties (353.7) (32.2) - (386.0) Inter-segment operating costs (44.2) (0.7) 44.9 - Total Operating Costs (397.9) (32.9) 44.9 (386.0) Amortisation, depreciation and write-downs (209.7) (9.0) 0.0 (218.7) EBIT (13.7) 17.4 0.0 3.8
Income Statement Summary INTEGRATED EI ELIMINATIONS GEOGRAPHICAL Q1 2014 TELEVISION TOWERS / SEGMENT OPERATIONS ADJUSTMENTS ITALY
Revenues from external customers 608.0 12.9 - 620.9 Inter-segment revenues - 45.0 (45.0) - Consolidated net revenues 608.0 57.9 (45.0) 620.9 % 98% 9% -7% 100%
Operating costs from thrid parties (345.5) (30.6) - (376.1) Inter-segment operating costs (44.2) (0.8) 45.0 - Total Operating Costs (389.7) (31.4) 45.0 (376.1) Amortisation, depreciation and write-downs (227.4) (10.4) 0.0 (237.8) EBIT (9.1) 16.1 0.0 7.0
44 Interim Financial Report at 31 March 2015 – Explanatory Notes
Operating Assets and Investments INTEGRATED EI ELIMINATIONS GEOGRAPHICAL 31st March 2015 TELEVISION TOWERS / SEGMENT OPERATIONS ADJUSTMENTS ITALY Television rights 2,336.3 - - 2,336.3 Other tangible and intangible non current assets 515.5 286.1 (1.2) 800.3 Goodwill 142.8 476.2 (335.1) 283.9 Trade receivables 1,265.1 44.1 - 1,309.2 Inventories 24.7 2.6 - 27.3 Operating assets 4,284.4 809.1 (336.3) 4,757.1
Investments in television rights (*) 157.6 - - 157.6 Other investments 3.3 1.6 - 4.9 Investments in tangible and intangible assets 160.9 1.6 - 162.5 (*) Not including the change in “Advances for the purchase of broadcasting rights”
Operating Assets and Investments INTEGRATED EI ELIMINATIONS GEOGRAPHICAL 31st March 2014 TELEVISION TOWERS / SEGMENT OPERATIONS ADJUSTMENTS ITALY Television rights 1,505.2 - - 1,505.2 Other tangible and intangible non current assets 572.4 310.0 (1.4) 881.0 Goodwill 142.8 457.9 (335.1) 265.5 Trade receivables 669.9 32.7 - 702.6 Inventories 39.2 2.8 - 42.1 Operating assets 2,929.4 803.4 (336.5) 3,396.3
Investments in television rights (*) 105.0 - - 105.0 Other investments 2.5 1.7 - 4.3 Investments in tangible and intangible assets 107.6 1.7 - 109.3
(*) Not including the change in “Advances for the purchase of broadcasting rights”
The main operating assets allocated to the Italy sector include television and movie broadcasting rights assigned to the Integrated Television Operations segment, the library (films, dramas, mini-series, TV films and cartoons), long-running self-produced drama series, and entertainment, news and sport rights serving both the free-to-air and Mediaset Premium channels. In particular, sports broadcasting rights include the broadcasting rights for the Serie A league championship for Italy’s leading soccer clubs, up until the 2014/2015 and for the 2015- 2018 seasons. Other tangible and intangible assets mainly relate to:
for the Integrated Television Operations segment, television frequency user rights for DTT Multiplex and related transmission equipment, equipment supporting television production centres, IT systems, and the upgrading of management offices and other properties and investments relating to development of the Mediaset Premium subscription- based pay-TV platform;
for EI Towers, they include land, buildings and the equipment related to the broadcasting network.
45 Interim Financial Report at 31 March 2015 – Explanatory Notes
7. Related party transactions The following summary table shows, for the main income statement and balance sheet groupings, the details of the companies that are the counterparties of these transactions (identified in accordance with IAS 24 and grouped by type of relation):
Financial Other Operating Trade Revenues income/ Trade payables receivables/ costs receivables (charges) (payables)
CONTROLLING ENTITY
Fininvest S.p.A. 0.0 1.2 - 0.1 1.2 0.2
ASSOCIATED ENTITIES A.C. Milan S.p.A.* 0.0 0.1 - 0.1 2.7 0.0 Alba Servizi Aerotrasporti S.p.A. 0.0 0.2 - 0.2 0.1 - Arnoldo Mondadori Editore S.p.A.* 2.9 0.3 - 4.4 0.4 (0.0) Fininvest Gestione Servizi S.p.A. 0.0 - - 0.0 - - Isim S.p.A. ------Mediobanca S.p.A. - 0.0 (1.1) 0.0 - (195.1) Mediolanum S.p.A.* 0.7 - - 0.8 - - Trefinance S.A.* - 0.0 - - - -
Other associated 0.0 0.4 - 0.0 0.0 0.0
Total associated 3.6 0.9 (1.1) 5.5 3.3 (195.0)
JOINT CONTROLLED AND AFFILIATED ENTITIES 60 DB Entertainment S.L. ------Agrupaciòn de Interés Economico Furia de Titanes II A.I.E. ------Auditel S.p.A. - 1.2 - - - - Beigua S.r.l. ------Big Bang Media S.L. - (0.0) - - 0.0 - Boing S.p.A. 2.4 8.5 0.1 3.6 12.1 11.2 Editora Digital de Medios S.L. 0.0 0.0 - - - - Fascino Produzione Gestione Teatro S.r.l. - 12.9 (0.0) 0.0 15.4 (12.1) La Fabbrica De la Tele SL - 5.6 - - 6.5 - Mediamond S.p.A. 6.2 1.7 0.2 22.1 2.8 8.0 MegaMedia Televisión SL 0.1 1.1 - 0.0 0.5 - Nessma Lux S.A.** - - 0.0 0.0 - 2.3 Pegaso Television INC** - - 1.0 2.0 - 4.1 Produciones Mandarina SL - 4.3 - - 7.0 - Supersport Televisión SL 0.3 2.3 - 0.2 1.2 - Titanus Elios S.p.A. - 1.1 - 0.0 - 6.1 Tivù S.r.l. 0.7 0.3 - 1.1 0.4 0.0
Total joint controlled and affiliated entities 9.7 38.9 1.1 29.1 45.8 19.6
KEY STRATEGIC MANAGERS*** - 0.4 - - 0.2 (0.5)
PENSION FUNDS (Mediafond) - - - - - (0.5)
OTHER RELATED PARTIES**** 0.0 0.0 0.0 0.0 0.0 -
TOTAL RELATED PARTIES 13.3 41.5 0.1 34.7 50.5 (176.2) * The figure includes the company and its subsidiaries, associates or jointly controlled companies. ** The figure includes the company and its subsidiaries. *** The figure includes the directors of Mediaset S.p.A. and of Fininvest S.p.A., their close family members and companies in which these persons exercise control, joint control or significant influence or in which they hold, either directly or indirectly, a significant stake of no less than 20%, of the voting rights. **** The figure includes transactions with several consortia that mainly carry out activities connected with the television signal transmission operational management.
46 Interim Financial Report at 31 March 2015 – Explanatory Notes Revenues and trade receivables due from associated entities mainly relate to the sales of television advertising space. The costs and the related trade payables mainly refer to purchases of television productions and broadcasting rights and to the fees paid to associates for the sale of advertising space managed through exclusive concessions by Group companies. The item other receivables/(payables) mainly refers to payables for loans and credit facilities due to affiliate companies, intercompany current accounts and loans given to associates. The other receivables due from Boing S.p.A. mainly relate to the remaining consideration due to R.T.I. S.p.A. for the disposal of the business unit carried out on 1 April 2013. The payables for loans and credit facilities due to other affiliates amounting to EUR 200.4 million mainly relate to contracts with Mediobanca (an associate of the Fininvest Group) and refer to the draw down of the revolving facility with a term of 8 years granted by Mediobanca in May 2011. The main impacts on the consolidated cash flows generated by related-party transactions involved outflows for the acquisition of rights regarding the company Milan A.C. of EUR 9.2 million.
47 Interim Financial Report at 31 March 2015 – Explanatory Notes
8. Personal guarantees given and commitments The overall amount of guarantees received, mainly bank guarantees, for receivables from third parties totalled EUR 11.5 million, of which EUR 7.7 million relating to the Mediaset España Group. In addition, bank guarantees in favour of third party companies were issued for a total amount of EUR 70.2 million. Of this amount EUR 55.6 million were issued by the Mediaset España Group (EUR 56.4 million at 31 December 2014). The main commitments of the Mediaset Group can be summarised as follows:
commitments for the acquisition of television and movie broadcasting rights, totalling EUR 1,395.9 million (EUR 584.5 million at 31 December 2014). These future commitments relate mainly to volume deal contracts of the Mediaset Group with some of the leading American TV producers. The increase for the period mainly relates to the new volume deal agreements signed with Warner Bros International Television Distribution Inc. and Nbc Universal.
commitments for content and program rental contracts totalling EUR 800.1 million, of which 27.6 to associates. This items includes the commitments for the purchase of the exclusive broadcasting rights on all platforms for the Champions League for the years 2015- 2018;
commitments for artistic projects, television productions and press agency contracts of approximately EUR 93.5 million, of which EUR 19.4 million due to Related Parties;
commitments for digital broadcasting capacity services of EUR 193.3 million;
contractual commitments for the use of satellite capacity of EUR 76.2 million;
commitments for the purchase of new equipment, works and supplies for the companies' head offices, multi-year rents and leases, the supply of EDP services and commitments to trade associations for the use of intellectual property rights totalling EUR 270.2 million.
48 Interim Financial Report at 31 March 2015 – Explanatory Notes
9. Movements resulting from atypical and/or unusual transactions Pursuant to Consob communication no. DEM/6064296 of 28 July 2006 it is hereby stated that in the first quarter of 2015 no atypical and unusual transactions were carried out by the Group as defined in the Communication.
The Company Executive responsible for the preparation of the company accounting documents of Mediaset S.p.A., Luca Marconcini, herewith declares, pursuant to paragraph 2, article 154, second part, of the Consolidated Finance Act that the accounting information contained in this document corresponds to the contents of accounting documents, books and postings of the company.
For the Board of Directors the Chairman
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