October 2019
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1 Rai at a glance
Company overview Rai is owned by the Italian state
• Sole Italian broadcasting company responsible for the public television service operating on a variety of platforms including free to air digital, terrestrial and satellite television and radio channels, radio stations, internet and cinema 99.56% 0.44% • 99.56% owned by the Italian Ministry of Economy and Finance (“MEF”) and the remaining by the Italian Society of Authors and Publishers (Società Italiana Autori ed Editori, “SIAE”) • Public service mission with a regulated contractual framework defining the quality and quantity of programming
1 • Market leader in TV broadcasting in Italy, with a 36.3% share of Floating TV audience in 2018 • Capillary infrastructure reaching over 99% of the Italian 35.03% 64.97% 100% 100% 100% population thanks to its subsidiary Rai Way (64.97% owned by Rai and 35.03% public) Others • Revenues mainly linked to Licence Fee (68.5% in 2018) and advertising (24.6% in 2018) • Listed on the Among which: Milan Stock • Auditel Srl (33.0%) Exchange • Rai Corporation (100%)3 • Market Cap: • San Marino RTV €1.5bn2 (50.0%) • Tavolo Editori Radio Srl (15.80%) • Tivù Srl (48.16%)
1) Auditel data 2018 - Average day (02.00-02.00) – All individuals 4+ 2) Factset as of 28 October 2019 3) Rai Corporation is in liquidation 2 Credit highlights
A leading player in the Italian broadcasting space, with strong government support
1 Leading Position in Broadcasting and Advertising in Italy
4 2 2021 Strategy and Commitment to State Support for a Public Investment Grade Service Function Rating
3 Solid Financial Performance and Liquidity Profile
3 Broad multi-platform offer, designed to appeal across the consumer spectrum
Generalist Semi-Generalist Theme-based International Television
Generalist Theme-based Web Radio
Web App Digital
Cinema/Home Video Publishing Other
4 Competitive offering built upon 6 pillars
News Entertainment Sport Film/Fiction Culture Children
23 daily editions of Rai5, Rai Storia Over 20,000 hours television news of Over 6,000 Over 18,200 Over 5,500 hours (History) and Rai of children TV which 3 regional hours hours of Italian fiction Scuola products editions, for 2,440 broadcast broadcast broadcast (Education) broadcast hours*
41 daily national 36% of Over 2,000 news editions (GR) programs Dedicated offer Radio 3 focused Rai Radio Radio hours of sports and 3 regional dedicated to on Radio 3 on culture commentary Kids news editions music
569 million of mediaviews on About 1.100 632 million page properties Rai, Digital Raisport.rai.it movies available Raicultura.it RaiPlay Yoyo views 784 million on on Rai Play the YouTube’s Rai channel
* Do not include programming hours of the all news’s channel Rai News 24
Source: 2018. Un anno di Rai 5 Stable leading position in TV audience share…
Evolution of audience share – Average Day
23.8% 24.5% 23.7% 24.0% Other 1 1.2% Fox 1.0% 1.1% 0.9% 7.2% 7.0% 6.6% 7.1% Sky Mediaset 31.3% 31.2% 32.2% 31.6% Rai
36.5% 36.3% 36.4% 36.4%
2017 2018 1H 2018 1H 2019
Number of TV channels 356 360 363 350 produced by companies based in Italy
(of which Rai) 14* 14* 14* 14*
Source: Auditel data 2018 - Average day (02.00-02.00) – All individuals 4+ 1) Including Discovery, La7, Viacom and other channels * Excluding international channels and HD overlapping 6 …with a competitive specialized channel offering
Rai total audience share – Average day – 1H 2019
Among which: 1.2%
1.2%
1.2%
1.1%
0.4% 6.8% 36.4%
29.7% 6.9%
5.9%
16.9%
Rai 1 Rai 2 Rai 3 Generalist Thematic/Semi-generalist Total Rai
Compared with (0.2) +0.1 +0.3 +0.2 (0.2) - 1H 2018 (%)
Source: Auditel data I semester 2019 - Average day (02.00-02.00) – All individuals 4+ 7 Strong position compared to European public service media
Public service media television weekly reach (2018)
0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0%
Italy 74.8%
UK 74.5%
Germany 74.0%
Norway* 71.2%
Austria 69.9%
Denmark 69.5%
Sweden 66.0%
Switzerland (IT) 64.2%
Ireland 62.8%
EBU Average 60.0%
* Norway 2017 data.
Source: EBU - Media Intelligence Service – “Audience Trends: Television 2019”. Weekly reach based on 15+ minutes consecutive viewing 8 Highest value for money offer in Europe and delinquency ratio’s improvement
License fee cost in Europe (€, 2018) Delinquency rate Europe (2017)
The sharp decrease is 450 30% attributable to the new 2013 collection method introduced in 2016 based on which 27.0% 400 390.5 Licence Fee for household licences are charged directly 25% in the power bills issued by electricity companies 350 339.0 309.2 300.0 300 20%
250 233.9 210.0 15% 14.1% 13.0% 200 2017 166.1 160.0 10.1% 150 10%
6.8% 7.0% 7.2% 100 90.0 5.0% 5% 4.0% 50 <2%
0 0%
UK UK
Italy Italy Italy
Ireland Ireland
Austria Austria
Norway Norway
Sweden Sweden
Denmark Denmark
Germany Germany
Switzerland Switzerland
Source: EBU – Media intelligent survey/Datasets (July 2019): yearly amount of the licence fee paid by citizens and evasion rates 9 Second player in TV advertising despite regulated commercial activity
Rai TV advertising market share (%)
10.9% 11.2% 10.3% 11.1%
12.9% 13.1% 12.0% 13.2%
56.8% 57.0% 57.7% 54.8%
19.4% 18.7% 20.0% 20.9%
2017 2018 1H 2018 1H 2019
Rai Mediaset Sky Other • Rai’s commercial advertisements are capped and cannot exceed 4% of weekly programming time or 12% of any hour • Advertising for commercial operators cannot exceed 18% in prime time and 15% daily However, advertisement can be extended up to 20% if different from TV ads (i.e. teleshopping)
Source: Nielsen 10 Third Leading brand in national radio audience with 11.1% share in 2018
Radio listening figures 2018 (06:00-06:00 – All individuals 14+ )
Group 0% 2% 4% 6% 8% 10% 12%
Rtl 102.5 10.7%
Radio 105 8.2%
n.a. RDS 7.4%
Radio Deejay 7.2%
n.a. Radio Italia 6.5%
4.8%
Media Radio Radio Kiss Kiss 4.0%
3.5% Radio listening share by Group - 2018 Virgin Radio 3.4%
Radio 24 Il Sole 24 Ore 3.1%
Radio Capital 2.1% 15.2% 12.1% 2.0% 11.1% 11.0%
0.8%
Source: T.E.R. (Tavolo Editori Radio) data 2018 – Survey with CATI (based on 120,000 interviews) - 06:00-06:00 - All individuals 14+ 11 Apps offering is booming and internet offering keeps growing
Unique browsers Rai 2015 – 2018 (Browsers/mm)
CAGR 26.0 22.2 22.9 +13.1% 18.0 13.8 12.3 12.1 +15.5% 9.0
2015 2016 2017 2018 - Rai portals and app
Source: 2018. Un anno di Rai - Webtrekk 2015-2018 data
Total Stream Views Rai per quarter (views/mm)
99.5 82.0 85.2 44.6 53.6
2Q 2018 3Q 2018 4Q 2018 1Q 2019 2Q 2019
Source: Audiweb Media View 2.0 - April 2018/June 2019 data
12 Consolidated and widespread physical presence in Italy
Full and complete range of product offered through: • 4 TV production centres Aosta Bolzano Trento • 21 regional offices (one in each of the Italian regions and two in Trentino Alto Adige) Milan Trieste Turin Venice Bologna
Genoa Milan Turin Florence Ancona
Perugia
Pescara Rome Campobasso
Naples Bari Rome Naples Potenza
Cagliari Cosenza
TV Production Centres Palermo Regional Offices
13 Rai Way unique broadcasting tower infrastructure in Italy • Primarily used for distribution services, including DTT, DAB and MF, TV and radio contribution
• DTM technology guarantees HD contribution
Network services between the regional offices. The network
Transmission Transmission is also full HD ready and prepared for 4K
• Providing live national and international broadcasting services, television contribution services for shots on location and backup services
for the terrestrial network
Satellite Satellite Network • Broadcasting Rai programs in the rest of the world
• Two separate control centres in Rome and Milan
• Remote configuration and monitoring activities, as well as the management of actions seeking to restore National National the transmission and broadcasting networks
• Rai Way is the only terrestrial network operator Centres Control to cover over 99% of the population • +2,300 sites across the country €506.3mm vs. €978.2mm • Rai Way personnel stationed throughout the territory Rai stake in Rai Way Rai stake in Rai Way is constantly monitoring the quality of provided @ Book Value @ Market Value1 services (1H 2019)
Ability to reach population living in remote areas thanks to significant investments
1) Factset as of 28 October 2019 14 Credit highlights
A leading player in the Italian broadcasting space, with strong government support
1 Leading Position in Broadcasting and Advertising in Italy
4 2 2021 Strategy and Commitment to State Support for a Public Investment Grade Service Function Rating
3 Solid Financial Performance and Liquidity Profile
15 Rai’s activities are under the control of the State
Role Organization Commercial Broadcaster
Legislative
Executive
Control1
Level of control
High
Low 1) Consob and Borsa Italiana to be considered as body of control for Rai Way and for commercial broadcaster Mediaset. 16 Rai’s legal framework underscores government support Regulator Description
• The Concession was assigned under Legislative Decree no. 177/2005 and the Prime Minister's Decree of 28 April 2017 and expires in 2027 • Key aspects of the Concession:
o Investment guidelines for Licence Fee and advertising income defined through a Decree set Concession by the Ministero dello Sviluppo Economico (“MISE”) o Monitoring of Licence Fee usage subject to periodic verification
o Possibility to undertake different activities others than the public service TV/Radio and multimedia as commercial or editorial initiatives related to corporate purpose, that do not affect in any way the supply of the public service. These accessory activities cannot be prevailing on the main ones and cannot be financed by the Licence Fee
• The Service Agreement runs for five year from 2018 to 2022, it is negotiated with the MISE and sets the following obligations for Rai:
o to offer to its users the widest range of TV programs and shows, providing them with high- quality, complete and objective information
o to provide TV and radio linear offer also by streaming Service Agreement o to maintain the necessary systems to ensure it can efficiently control and monitor its activities
o to provide to the MISE an industrial plan that defines the organizational model, objectives for the rationalization of industrial and financial assets and a plan to re-launch the radio broadcasting, in line with the provisions of the contract
17 Public service broadcasting regulatory requirements
Broadcasting Time - 2018 Genre Guidelines Investment Guidelines – 2020
• Pre-determined genres of public • 17% of total income (Licence Fee service content are: + advertising income) invested in 28% o Information and in-depth European works of independent study producers Target 70% o Programmes and service • 7% of mentioned costs (or features expenses) invested in minors’ o Programmes and in-depth content (at least 65% animation) cultural features 72% • 4% (4.2% in 2021) of total o Information and sports income (Licence Fee + advertising programmes income) invested in production o Programmes for minors and acquisition of Italian films o Italian and European audiovisual productions Regulated Not Regulated • Rai must set aside broadcasting slots for social topics, giving particular attention to associations and voluntary work
72.0% of offering is on topics covered by service contract vs target set by contract at 70%
18 Government backing leads to a balanced and resilient revenue model
Licence Fee represents a solid percentage of Revenue from Sales and Services over time (€mm)
Revenue from sales 2,608.4 2,565.8 1,303.6 1,360.8 and services (€mm)
31.9% 31.5% 32.0% 32.2%
68.1% 68.5% 68.0% 67.8%
2017 2018 1H 2018 1H 2019
Licence Fee Other Revenues
• New collection method was introduced by Law 208 of 28 December 2015 (the 2016 Stability Law) • As of 1 January 2016, Licence Fee for household licences were to be charged directly in the power bills issued by electricity companies, in each case under a separately detailed item • The 2016 Stability Law provided for a rebuttable presumption that all households possess a television
19 Credit highlights
A leading player in the Italian broadcasting space, with strong government support
1 Leading Position in Broadcasting and Advertising in Italy
4 2 2021 Strategy and Commitment to State Support for a Public Investment Grade Service Function Rating
3 Solid Financial Performance and Liquidity Profile
20 Revenues evolution
Revenues from Sales and Services (€mm)
∆ 1H 2018- ∆ 2017-2018 2019 2,608.4 2,565.8 184.2 176.7 (4.1)% The increase in other income by +27% is mainly due to revenues from compliance with service 647.6 631.1 (2.5)% contract including digital programming development (Law 145/2018), amounted to €19.2mm 1,360.8 1,303.6 +27.1% 87.7 111.5 329.2 327.1 (0.6)% 1,776.6 1,758.0 (1.0)%
886.7 922.2 +4.0%
2017 2018 1H 2018 1H 2019
Licence Fee Adevertising Other income1
The difference in Revenues from Licence Fee between 2017 and 2018 is attributable to: • Licence Fee collected by enforcement order €(9.3)mm, i.e. Licence Fee paid in 2018 by users not up to date with their payments up to 2016. The decrease is attributable to the progressive reduction of the enforcements in place • Contingencies on ordinary Licence Fee €(10.7)mm that recognizes the Licence Fee of the previous year paid to the State in the current year, whose amount became identifiable only after the completion of financial statements
1) Other income includes sales of music rights [and editions], special services under agreement, film and home video distribution, signal broadcasting, tower rental, circuit hire, radio bridge and link services. 21 Strong track record in reducing costs since 2016
External Costs (€mm)
• Reduction from 2016 to 2018: (14.3)%
• In 2018, external costs net special sport events reduction of €(36)mm compared to 2016 was due to:
1,151.3 o the cost rationalization process 986.8 139.6 1,033.8 - 10.9 o higher costs incurred in 2016 for work on Rai real estate
525.8 • As of 1H 2019, the increase in costs by +6.5% vs 1H 2018 is 560.0 10.8 largely attributable to the filming rights (i.e. +€41.2mm) of the 1,011.7 1,033.8 975.9 following sports events:
o Football – Coppa Italia +€24.0mm due to higher 515.0 560.0 contractual charges and a higher number of matches in the first half of 2019 compared to 2018
2016 2017 2018 1H 2018 1H 2019 o Football - Champions League +€23.1mm, in the first half of 2018 Rai did not broadcast External costs net special sport events Special sport events
o Football - National Team +€6.7mm due to the presence in 2019 of the under-21 European Championship and a • Major sport events purchase are part higher number of matches of Rai’s public service mission
• These bi-annual costs have a direct impact on Rai’s operating results
22 Strong effort over the last few years in keeping personnel costs under control
Average employees number Personnel cost (€mm)
(0.9)% (1.2)% +2.3% +0.3%
12,917 12,805 12,809 12,661 756 714 774 372
983.3 1,006.2 12,161 12,091 12,035 12,289
519.4 521.1
2017 2018 1H 2018 1H 2019 2017 2018 1H 2018 1H 2019
Permanent employees Fixed term employees Personnel cost
The slight increase in 2018 is due to provision of the rewards system for personnel (i.e. non- recurring)
23 EBITDA evolution
EBITDA trend (€mm) Reclassified EBITDA1 trend (€mm)
23.3% 22.8%
20.9% 20.3%
606.9 585.0 7.6% 7.1% 6.6% 5.4%
264.7 284.8 198.8 181.0 70.1 89.5
2017 2018 1H 2018 1H 2019 2017 2018 1H 2018 1H 2019
EBITDA EBITDA Margin Reclassified EBITDA Reclassified EBITDA Margin
1) Net of TV amortization of programmes, which are capitalized costs and thus not part of COGS (cost of goods sold)
24 Historically stable capex profile
Capex (€mm)
(0.9)% +4.1% • As of 1H 2019, Investment in intangible assets mainly refers to TV series for €177.9mm (vs €177.6mm in 1H 2018) and films for €36.6mm (vs €24mm in 1H 2018) 556.0 551.2 • Investment in tangible assets falls within the scope of the modernization and 91.7 103.8 technological development initiatives that the Rai implemented
• Investments are stable over time
244.9 255.0 33.0 464.3 447.4 33.3
211.6 222.0
2017 2018 1H 2018 1H 2019 Investment in intangible assets Investment in tangible assets
25 Strong capital structure and net financial position
Net Financial Position (€mm)
The increase in 2018 NFP is due mainly to advanced payments for major sport events
0.63x
0.44x 0.39x
239.1
81.3 286.5 209.0 157.8
2017 2018 1H 2019
NFP Operating lease liabilities Debt to Equity1
The reduction of NFP (excluding operating lease liabilities due to implementation of IFRS 16 starting in 2019) is determined by Licence Fee proceeds higher in the first half of the year
1) Debt to equity based on NFP excluding operating lease liabilities / total shareholders’ equity
26 Envisaged bond transaction would extend duration and provide funds to implement the strategic plan
Maturity profile as of 30 June 20191 Debt structure as of 30 June 2019
€mm €mm
450.0 450.0 81.3 400.0 360.0 14.9 0.5 350.0 20.0 350.0 320.0 250.0 300.0 349.22 250.0 150.0 239.1 200.0 350.0 2 50.0 150.0 -50.0 100.0 (226.8) 55.0 -150.0 50.0 50.0 5.0 5.0 10.0 -250.0 0.0 2019 2020 2021 2022 2023 Cash Operating lease liabilities Derivatives and others Rai Way Loan EIB Loan Undrawn Revolving Rai Undrawn Revolving Rai Way Bond EIB Loan Bond
• In April 2019, Rai increased its Committed Revolving Facility from €270mm to €320mm and extended the tenor of the loan • In addition Rai has relevant uncommitted lines supporting its ordinary working capital requirements • As of end of 2018 and 1H 2019 significant headroom under bank facility financial covenants
1) Excluding no material Rai Way loan for totally €0.5mm, derivatives instruments and other items for €14.8mm and Operating Leasing for €81.3mm 2) Nominal value of the security is €350.0mm. Reported in Rai financial statements at amortized cost for €349.2mm 27 Credit highlights
A leading player in the Italian broadcasting space, with strong government support
1 Leading Position in Broadcasting and Advertising in Italy
4 2 2021 Strategy and Commitment to State Support for a Public Investment Grade Service Function Rating
3 Solid Financial Performance and Liquidity Profile
28 Strategic objectives of the 2019-2021 Business Plan
• In line with media world trend and with the indications of the service contract, Rai of the future will pursue several objectives:
o Develop an increasingly digital offer Public service media with o Make all content available in multiplatform mode digital traction
o Preserve economic-financial stability
29 Strategic initiatives within the plan’s four transformation areas
1 Put users and content at the heart of Rai 2 Bridge the digital gap • Multiplatform strategy development • Rethinking of the digital news offer
• Evolution toward a content-centric • Development of an editorial offer designed for organizational structure RaiPlay
• Evolution of the TV offer • Innovation incubators launch
• Evolution of the radio offer • Other digital initiatives
3 Finance the transformation Public service media 4 Control enabling factors • Optimization of costs with digital traction • Human resources development • Evolution of the role of TV production • Development of technological from supplier to partner of genres infrastructure
• Revenue development: • Evolution of the group’s distribution structure (DTT, SAT, IP) o Advertising revenue development o Other revenue development • Adaptation of the real estate assets
30 Summary of Moody’s view on Rai’s credit profile
Baa3/Negative outlook1
• In line with the Government-Related Issuers (GRI) methodology, Rai's Baa3 rating reflects the combination of a baseline credit assessment (BCA) of ba1, the Baa3 domestic currency rating of the Government of Italy, the very high dependence between Rai and the Italian sovereign and Moody's expectations of strong support from the sovereign • Rai's BCA of ba1 reflects the following considerations: o the recurrence and stability of the company's revenue, 68% of which is generated through Licence Fee payments by Italian households, with limited potential for evasion, given the current method of collection o its strong position in Italy as the leading broadcaster in terms of audience share o the stable regulatory framework (e.g. licence extension to 2027) • On October 22nd, 2019 Moody’s has changed to negative from stable the outlook on the ratings of Rai. The negative outlook reflects Moody’s expectation of a substantial deterioration in the company’s key credit metrics in 2019 and 2020, and while leverage in 2021 may improve because of the absence of large investment costs, visibility on this potential recovery is relatively low o This is mitigated by adequate Rai's liquidity, supported by a cash balance of €227mm at June 2019 and a fully available committed revolving credit facility of €320mm. The company also has access to uncommitted bank facilities for a total amount of €420mm o Moody's expects that Rai will successfully refinance its approaching bond maturity in the coming months, while maintaining adequate liquidity at all times
Strengths Challenges
✓ Recurring Licence Fee revenue provides a degree of revenue visibility × Weak cash flow generation and high gross debt/EBITDA compared and stability with commercial broadcasters ✓ Good track record of government support × Low revenues from the domestic advertising market ✓ Market leader in terms of TV audience share × Interventionist actions and regulatory environment ✓ Strong position in Italian society and the media landscape
1) Rating Action as of October, 22nd 2019
31 Appendix Rai Group – Consolidated Income Statement
€mm 2017 2018 1H 2018 1H 2019 Revenue from Sales and Services 2,608.4 2,565.8 1,303.6 1,360.8 Other revenue and income 15.6 12.2 6.3 5.1 Total Revenue 2,624.0 2,578.0 1,309.9 1,365.9 Costs for the purchase of consumables (13.6) (12.8) (6.8) (6.6) Costs for services (950.6) (920.9) (492.6) (527.9) Other costs (69.6) (53.1) (26.4) (25.5) HR expenses (983.3) (1,006.2) (519.4) (521.1) Impairment of financial assets - (2.7) 0.3 (1.1) Depreciation, amortisation and write-downs (576.9) (573.8) (266.1) (270.3) Provisions 3.2 (0.7) (1.9) 0.8 Total costs (2,590.8) (2,570.2) (1,312.9) (1,351.7) EBIT 33.2 7.8 (3.0) 14.2 Financial income 8.1 1.4 0.8 0.8 Financial expense (16.8) (15.6) (8.4) (7.9) Earnings from equity investments recognised under the equity method (0.5) 0.1 0.2 0.4 Pre-tax profit/(loss) 24.0 (6.3) (10.4) 7.5 Income tax (9.7) 6.3 5.5 (4.2) Profit/(loss) for the period 14.3 - (4.9) 3.3
33 Rai Group – Consolidated Balance Sheet €mm 2017 2018 1H 2019 Property, plant and equipment 1,070.3 1,073.1 1,057.2 Real estate investments 4.7 4.4 3.0 Intangible assets 944.9 919.5 930.1 Lease rights of use - - 79.7 Equity investments 6.9 6.7 6.8 Non-current financial assets 4.6 3.1 3.6 Other non-current assets 15.2 50.2 27.1 Total non-current assets 2,046.6 2,057.0 2,107.5 Inventory 2.4 2.3 2.3 Trade receivables 390.6 373.3 442.6 Current financial assets 7.2 6.5 8.9 Current income tax receivables 21.7 19.0 19.5 Other current receivables and assets 69.6 121.9 180.5 Cash and cash equivalents 228.0 92.2 226.8 Total current assets 719.5 615.2 880.6 Non-current assets held for sale - - 1.3 Total assets 2,766.1 2,672.2 2,989.4 Share capital 242.5 242.5 242.5 Reserves 209.9 197.2 164.1 Retained earnings (losses) (34.1) (50.3) (54.3) Total Group shareholders’ equity 418.3 389.4 352.3 Third party capital and reserves 42.2 42.5 42.6 Retained earnings (losses) attributable to minority interests carried forward 19.6 21.1 11.2 Total shareholders’ equity attributable to minority interests 61.8 63.6 53.8 Total shareholders’ equity 480.1 453.0 406.1 Non-current financial liabilities 403.4 369.2 27.4 Non-current lease liabilities - - 56.3 Employee benefits 483.1 434.9 445.6 Provisions for non-current risks and charges 185.3 181.5 173.7 Deferred tax liabilities 38.6 23.5 41.4 Other non-current payables and liabilities 2.0 1.6 0.9 Total non-current liabilities 1,112.4 1,010.7 745.3 Trade payables 660.1 706.0 696.9 Provisions for current risks and charges 0.3 0.3 0.2 Current financial liabilities 40.8 16.0 360.6 Current lease liabilities - - 30.5 Current income tax payables 30.5 31.0 17.2 Other current payables and liabilities 441.9 455.2 732.6 Total current liabilities 1,173.6 1,208.5 1,838.0 Total liabilities 2,286.0 2,219.2 2,583.3 Total shareholders' equity and liabilities 2,766.1 2,672.2 2,989.4
34 Rai Group – Consolidated Cash Flow Statement €mm 2017 2018 1H 2018 1H 2019 Gain (Loss) before tax 24.0 (6.3) (10.4) 7.5 Adjustments for: Depreciation, amortisation and write-downs 576.9 576.5 265.8 271.4 Provisions and (issues) to personnel provisions and other provisions 6.0 70.3 35.8 27.2 Net financial charges (income) 8.7 14.2 7.6 7.1 Earnings from equity investments recognised under the equity method 0.5 (0.1) (0.2) (0.4) Other non-monetary items 0.5 0.2 0.1 - Cash flow generated by operating activities before changes in net working capital 616.6 654.8 298.7 312.8 Change in inventory 0.5 0.1 0.1 - Change in trade receivables 244.6 12.9 28.5 (70.4) Change in trade payables (26.1) 45.9 22.2 (9.1) Change in other assets/ liabilities 221.0 (105.4) 278.3 242.1 Use of provision for risks (45.9) (31.9) (24.0) (13.2) Payment of employee benefits (78.4) (68.8) (34.8) (31.1) Taxes paid (12.1) (5.6) (0.3) - Net cash flow generated by operating activities 920.2 502.0 568.7 431.1 Investments in property, plant and equipment and real estate investments (91.7) (103.8) (33.3) (33.0) Disposal of property, plant and equipment and real estate investments 0.9 0.6 - - Investments in intangible assets (464.3) (447.4) (211.6) (222.0) Disposal of intangible assets 1.1 1.0 - 1.3 Equity investments (0.2) - - - Dividends collected 1.9 0.4 0.1 0.1 Interest collected 0.1 0.3 0.1 0.1 Change in financial assets (3.8) 1.4 (1.4) (2.1) Net cash flow generated by investment activity (556.0) (547.5) (246.1) (255.6) Long-term loans taken out - - - - Long-term loan redemptions (40.2) (70.2) (20.1) (5.1) Repayments of lease liabilities - - - (10.2) (Decrease)/Increase in short-term borrowings and other loans (160.2) 5.7 0.1 1.2 Interest paid (7.4) (6.5) (6.1) (5.9) Dividends distributed (14.6) (19.3) (19.3) (20.9) Net cash flow generated by financial activities (222.4) (90.3) (45.4) (40.9) Change in cash and cash equivalents 141.8 (135.8) 277.2 134.6 Cash and cash equivalents at the beginning of the period 86.2 228.0 228.0 92.2 Cash and cash equivalents at the end of the period 228.0 92.2 505.2 226.8
35 EBITDA Reconciliation
€mm 2017 2018 1H 2018 1H 2019
Profit/(Loss) for the period 14.3 - (4.9) 3.3
Income tax 9.7 (6.3) (5.5) 4.2
Earnings from equity investments recognised under the equity method 0.5 (0.1) (0.2) (0.4)
Financial income (expense) 8.7 14.2 7.6 7.1
EBIT 33.2 7.8 (3.0) 14.2
Provisions (3.2) 0.7 1.9 (0.8)
Amortization of programmes 408.1 404.0 194.6 195.3
Amortization of other intangibles 6.6 9.7 4.3 4.6
Depreciation of property, plant, equipment and real estate investments 102.8 100.4 48.6 49.0
Amortisation of lease rights of use 1 - - - 12.1
Write downs 59.4 62.4 18.3 10.4
EBITDA 606.9 585.0 264.7 284.8
Amortization of programmes (408.1) (404.0) (194.6) (195.3)
Reclassified EBITDA2 198.8 181.0 70.1 89.5
1) Introduced by adoption of IFRS 16. 2) Net of TV amortization of programmes, which are capitalized costs and thus not part of COGS.
36 Key Financial Figures
€mm 2017 2018 1H 2018 1H 2019
EBITDA 606.9 585.0 264.7 284.8
Amortization of programmes (408.1) (404.0) (194.6) (195.3)
Reclassified EBITDA1 198.8 181.0 70.1 89.5
Net Financial Position (209.0) (286.5) (239.1)
Net Financial Position excl. Operating Lease Liabilities (209.0) (286.5) (157.8)
Leverage Ratio2 0.34x 0.49x - 0.55x
Debt to Equity3 0.44x 0.63x - 0.39x
1) Net of TV amortization of programmes, which are capitalized costs and thus not part of COGS. 2) Leverage ratio based on NFP excluding operating lease liabilities / EBITDA. 3) Debt to equity based on NFP excluding operating lease liabilities / total shareholders’ equity 37