Reports and Financial Statements As at 31 December 2017
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Separate Financial Consolidated Financial Introduction Statements Statements I Reports and Financial Statements as at 31 December 2017 Reports and Financial Statements as at 31 December 2017 This document has been translated into English for the convenience of the readers. In the event of discrepancy, the Italian language version prevails. Contents Introduction 5 Separate Financial Statements as at 31 December 2017 15 Consolidated Financial Statements as at 31 December 2017 249 Corporate Directory 352 Introduction Corporate Offcers 6 Organisational Framework 7 Letter to the Shareholders 8 Financial Highlights 12 Separate Financial Consolidated Financial Introduction 6 Statements Statements Corporate Offcers Board of Directors Chairperson Monica Maggioni Directors Rita Borioni Arturo Diaconale Marco Fortis Carlo Freccero Guelfo Guelf Giancarlo Mazzuca Paolo Messa until 1 June 2017 Franco Siddi until 6 September 2017 as of 6 September 2017 Board Secretary Nicola Claudio Anna Rita Fortuna Board of Statutory Auditors Chairperson Biagio Mazzotta Standing Auditors Anna Maria Magro Roberto de Martino Alternate Auditors Pietro Floriddia M.M. Assunta Protopapa General Manager until 6 June 2017 as of 9 June 2017 Antonio Campo Dall’Orto Mario Orfeo External Auditor PricewaterhouseCoopers Separate Financial Consolidated Financial Introduction Statements Statements 7 Organisational Framework (short form) Chairperson Board of Directors of the Board Supervisory Internal Board Audit Head Offce(1) Editorial Area (2) Chief Digital Offcer (3) Chief Technology (4) Offcer Chief Financial Offcer (5) Finance & Planning Chief Operations Offcer Corporate TV Production e Support (6) Subsidiaries Rai Cinema Rai Com Rai Pubblicità Rai Way (1) Includes, inter alia, Governance and the Corporate Secretariat, covering the General Manager’s Staff and the Board & Corporate Secretary. (2) Includes: the Editorial Board for Information Programmes, Editorial Coordination for Television Scheduling, Mastheads, TV Channels and Genres, Creative Division, and Radio. (3) Reporting to the Chief Digital Offcer are: Digital, Libraries, and the Public Utility Service. (4) Reporting to the Chief Technology Offcer are: Quality & Planning, the Research and Technological Innovation Centre, Frequency Planning & Spectrum Management, Satellites Service, ICT, Security & Safety, Real Estate Assets, and Services. (5) Reporting to the Chief Financial Offcer are: Strategic Planning & Management Control, Administration & Finance, TV Licence Fees, Tax Affairs, Methodological Legal Support, and PMO. (6) Includes, inter alia, Communications, External, Institutional & International Relations, Human Resources & Organisation, and Legal & Corporate Affairs. Separate Financial Consolidated Financial Introduction 8 Statements Statements Letter to the Shareholders from the Chairperson of the Board of Directors Dear Shareholders, Rai’s 2017 fnancial year closed with positive fnancial and editorial results against a background of renewed certainty over the continuity of the mission which has been assigned to it. In fnancial terms, the fnancial statements show a net proft in line with the previous year, despite a signifcant decrease in revenue, both from licence fees and advertising. Specifcally, the drop in public resources was more than €130 million, primarily due to the reduction of the total annual licence fee from €100 to €90, and to a much lesser extent to the 50% allocation of surplus tax revenue to Rai compared to 67% in 2016. The decrease in advertising revenue totals €50 million and was negatively affected by the absence of the beneft connected with major sporting events in programming and negative performance of the reference market. Rationalisation and optimisation of the cost structure however made it possible to break even and to free signifcant resources to earmark to reinforce the Group’s equity. The net fnancial position also reported a strong improvement. Therefore, at the end of the three year period the main fnancial ratios were positive overall and this allows us to get ready to face the next challenges with confdence. From an operating standpoint, Rai continued to select, set up and implement projects able to adequately respond to consolidated market trends, both in Italy and abroad, which is worth remembering. The increase in video consumption, increasingly via mobile and in on-demand mode, driven by Millennials and Post Millennials, with the transformation of the average user profle towards a more dynamic, interactive and multi-platform model. The achievement of leadership in terms of traditional television reach, including thanks to the expansion of the subjects on offer. The growth of social media as an elective source of information for new generations. The migration of listening to music towards streaming, fostered in Italy by the extremely high diffusion of smartphones. These trends, acting in part also as a cause, are associated with the disruptive force of a new type of competitor, the global tech-giants, known for their high level of fnancial resources and distinctive skills in creating inclusive ecosystems, able to allocate signifcant sums to produce original contents, bringing them directly to the end user, leading to increased disintermediation of the purer aggregators. And as a consequence on everything, the explosion of the offering of contents on all platforms, making it more diffcult to stand out and making the ability to customise a key factor to success. Rai, in this context, has created innovation initiatives in the digital ecosystem, by adding RaiPlay Radio, and its app, to RaiPlay, which has also entered the world of smart TVs. RaiPlay Radio is the multimedia portal dedicated to the radio offer, Separate Financial Consolidated Financial Introduction Statements Statements 9 Letter to the Shareholders from the Chairperson of the Board of Directors enhanced by fve new channels, that can be listened to on Dab+ and also on TV, which makes it possible to directly access both in live and on demand modes. This same logic aimed at intercepting and attracting younger and more technically competent users, is seen in the careful revision of Rai’s presence on the main social networks. Moreover, a project to overhaul the contents management system and interface proposed to users for the Rainews.it portal has almost been completed. Rai’s editorial offer witnessed a year of important achievements. The success of Rai TV series continued in the television segment, which monopolised, as in past years, the ranking of the most watched shows. TV series came into contact with 45.2 million viewers on Rai 1 - 77% of the entire country, fully meeting the Public Service goal to propose a varied offer for everyone without exclusion. Winning such vast audiences is particularly linked to the ability to create “events”, for example with the international co-production of Maltese - Il romanzo del commissario, a powerful crime drama set in Trapani in the 1970s. A series par excellence characterised by a blend between the great tradition of civil narrative and the ability to reinvent the genre through a sophisticated and cinematographic storytelling and aesthetics. La porta rossa on Rai 2 was also important in the strategy to opening our productions abroad. It was distributed globally by Studio Canal and acclaimed as one of the most interesting and innovative series at a European level. There were also numerous new features and events in the entertainment feld, with an innovative proposal not exclusive of Rai 1, which remains the top network. Il Collegio, for example on Rai 2, managed to recover the “lost” audience of general TV, i.e. teenagers, contributing to change the perception of Rai with this target, fundamental including for the natural inclination of the younger age group to centre their media needs around other devices. Rai, a place for great collective events with a strong cultural focus, proposed the extraordinary night-time visit to celebrate the magic of Venice. Stanotte a Venezia was a major creative and productive undertaking, with the use of drones and helicopters, able to reach and charm 5 million viewers. Information, a decisive sector for every Public Service, confrmed its reliability in relation to the population, with Rai news shares clearly higher than any national competitor. For children, an area where we have always dedicated maximum attention, we recently conceived and made available RaiPlay Yoyo to accompany the digital evolution. It is aimed at all children and their families. The new app blends the “magic” of Rai Yoyo and the innovation of the RaiPlay family. The vast scope, quality and variety of the proposed editorial offer has allowed Rai to maintain its leadership of the television market with a 36.5% share for the entire day and 38.5% for prime time confrming its top ranking also for viewers of specialised channels, with 7.4% share for the entire day. Rai Play grew 57% in 2017 in media news and the Rai digital audience progressed at a faster pace compared to market trends, with the mobile component increasing 45% compared to 2016. Radio channels stood at 11.3% of market share. In terms of the reference legal framework, 2017 was a fundamental year for Rai for confrming its Public Service mission and establishing the salient points. With a Decree of the President of the Council of Ministers of 28 April 2017, according to the procedures established by law, Rai was appointed exclusive concessionary Separate Financial Consolidated Financial Introduction