RCS MediaGroup - Results of first half 2004

RCS MediaGroup: consolidated revenues up by 11.5% (+15.3% on a like for like basis) at € 1,211.5 million (mn). Publishing revenues: +18.7%. Advertising sales: +7.7%. First profit indicators look excellent: Gross operating profit double at € 112.1 mn; EBIT up from 7.6 to 67.6 mn. Earnings before tax and minority interests up by 78.3% at € 51.0 mn. Milan, September 9, 2004 – The Board of Directors of RCS MediaGroup, chaired by Guido Roberto Vitale, met today to approve the results for the first half of 2004.

Consolidated sales, up by 11.5%, come in at € 1,211.5 mn, versus the € 1,086.9 in the first half of 2003 (1H 2003) that included revenues of € 36.2 mn from Joseph Abboud which was sold at the beginning of 2004. Looking on a like for like basis the growth came in at 15.3%. All group areas contributed to the growth trend.

Add-on products (connected to the group’s publications), which were fully developed in first half 2004 (1H 2004) also contributed to the group’s results for the period, as did the recovery in advertising sales (up 7.7% as compared to the same period in 2003).

Gross operating profit doubled, increasing from € 57.8 to € 112.1 mn. EBIT improved by € 60 mn, going from € 7.6 to € 67.6 mn. Earnings before tax and minority interests show an increase of 78.3% coming in at € 51.0 mn as compared to € 28.6 mn at June 30, 2003, after extraordinary charges of € 27,4 mn.

Cash flow from operating activities and liquidity resulting from the sale of fashion businesses in the USA compensated for the dividend payments and investments made during the period. Consequently, net debt in the first half comes in at € 189.4 and is largely stable as compared to December 31, 2003 (€ 191.6 mn).

The newspaper division shows revenues up by 24,6% as compared to 1H03, mainly due to the positive effect of add-on sales in Italy and Spain and the growth in advertising sales, in particular Spain (+8.4%).

Corriere della Sera and Gazzetta dello Sport confirm their leadership with an average daily circulation of 681,000 and 401,000 copies respectively. During the period, the success of the add-on products was consolidated. The first part of the year included the launch of new initiatives – “La Biblioteca del Sapere” (4.2 mn copies) and the “Classici dell’Arte del ‘900” (3.3 mn copies) – as well as the continuation of successful initiatives launched in the second half of 2003 – “Storia d’Italia” and the “Classici dell’Arte”. The solid performance of Unedisa continues in Spain, with revenues up by 29.3%, sustained by the increase in El Mundo’s circulation that is the country’s second most popular newspaper with an average daily circulation of 319,000 copies with an increase of 25,000 copies compared to the same period 2003. The recovery in advertising sales (up by 8.4%), better than the market average, also contributed to this result as did the success of the “Grande Enciclopedia Universal”, that registered average sales per issue (sold along with the daily El Mundo) of about 180,000 copies.

The trend in revenues in the magazine division in Italy is stable with a net improvement in EBIT that comes in at € 4.5 mn (€ 1.0 mn at June 30, 2003), thanks to the positive performance of the primary publications, in particular Amica, and the commercial strategy (distribution network and advertising fees). In terms of foreign magazines, following the agreement with partner Burda last June, the group is now present in Germany with just the publications of Verlagsgruppe Milchstrasse and of Max Verlag.

The revenues in the books division are up by € 8.6%, coming in at € 309.5 mn (€ 285.1 mn in the same period 2003). This improvement involves all areas and, in particular, the Varia segment that reflects both the increased contribution of initiatives connected with Corriere della Sera and the success in the Italian and French markets of new editions released in the first part of the year. Publications of note include: “La forza della ragione” by Oriana Fallaci (750,000 copies) and “La misteriosa fiamma della regina Loana” by Umberto Eco (300,000 copies). “Tintin et l’Alph Art” by Hergè (288,000 copies), “Savoir Manger” by Cohen (162,000 copies), and “Vivre à quoi ça sert” by Sister Emmanuelle (155,000 copies).

Revenues increased by 16.4% over the same period in 2003 in the radio division thanks to an increase of 16.7% in advertising sales along with an increased product offering and the client portfolio for journalistic services.

The revenues of advertising division show an overall increase of 10.7% as compared to the first six months of 2003. In terms of advertising house sales, RCS Pubblicità’s revenues show an increase of 6.5%. Particularly noteworthy is the strong performance of advertising sales for Gazzetta dello Sport (+12.2%, thanks to important sporting events that took place during the period) and the radio business (CNRplus +29%; RIN +9%), as are the results related to legal and national commercial advertising sales in Corriere della Sera and the direct management of a portfolio of group’s publications that had been managed by other agents during the same period in 2003.

The pre-tax result for the Parent Company comes in at € 16.6 mn (€ 48.5 in the same period 2003) due to the repeal of tax credits on dividends (equal to € 19.6 mn in the same period of 2003) which was compensated for only in part by the increase of dividends and revenues, and charges related to company reorganization.

Outlook for the current year

RCS MediaGroup

The success of the add on products launched at the end of 2003 was confirmed in the first semester and other new initiatives launched have also proven to be quite successful in terms of sales. Important works, sold along with Corriere della Sera, were launched over the course of the past few weeks (“Storia Universale” and the chain “Misteri d’Egitto” by Christian Jacq and the book “Oriana Fallaci intervista Oriana Fallaci”), and others will follow in the coming months in both Italy and Spain even if the excellent performance in the second half of 2003 in this area makes it difficult to project the same growth rates on an annual basis. The group’s advertising sales benefited from a recovery in advertising investments which should continue, even if investors still seem to prefer television. The trend of the first semester, along with the summer sales performance, lead us to forecast results that show significant improvement over those reported in 2003.

For further information: RCS MediaGroup – Media Relations Maria Verdiana Tardi - +39 02 2584 5412 - +39 347 7017627 - [mail protetta] RCS MediaGroup - Investor Relations Arianna Radice – +39 02 2584 4023 [mail protetta] www.rcsmediagroup.it