Mediaset Group Interim Financial Report as at 31 March 2014
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 2014 ...... 3 Significant events in the first quarter ...... 8 Performance by geographical area and business segment ...... 9 Group Performance ...... 9 Statement of Financial Position ...... 17 Group headcount ...... 20 Related-party transactions ...... 21 Right to opt-out of the obligation to publish reports in the event of significant transactions ...... 21 Events after 31 March 2014 ...... 21 Forecast for the year ...... 23
Consolidated Accounting Tables and Explanatory Notes ...... 25 Consolidated Accounting Tables ...... 26 Explanatory Notes ...... 32
CORPORATE BOARDS
Board of Directors Chairman Fedele Confalonieri Deputy Chairman Pier Silvio Berlusconi Chief Executive Officer Giuliano Adreani Directors Marina Berlusconi Pasquale Cannatelli Paolo Andrea Colombo Mauro Crippa Bruno Ermolli Marco Giordani Alfredo Messina Gina Nieri Michele Perini Niccolò Querci Carlo Secchi Attilio Ventura
Executive Committee Fedele Confalonieri Pier Silvio Berlusconi Giuliano Adreani Gina Nieri
Risk and Control Committee Carlo Secchi (Chairman) Alfredo Messina Attilio Ventura
Compensation Committee Attilio Ventura (Chairman) Paolo Andrea Colombo Bruno Ermolli Governance and Appointments Committee: Attilio Ventura (Chairman) Paolo Andrea Colombo Carlo Secchi
Committee of Independent Directors for Related-Party Transactions Michele Perini (Chairman) Carlo Secchi Attilio Ventura
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 2013 1Q 2014 1Q 2013 mio € % mio € % mio € %
3,414.7 100% Total net Revenues 820.8 100% 831.6 100% 2,588.5 75.8% Italy 620.9 75.6% 635.4 76.4% 826.8 24.2% Spain 200.4 24.4% 196.6 23.6%
246.3 100% EBIT 29.6 100% 53.4 100%
176.1 71.5% Italy 7.0 23.6% 34.6 64.8% 70.2 28.5% Spain 22.6 76.4% 18.8 35.2% 100.2 Profit before Tax and Minority Interest 2.5 37.3
8.9 Net Result (12.5) 9.3
Main Balance Sheet and Financial Data
31st December 2013 31st March 2014 31st March 2013 mio € mio € mio €
4,436.7 Net Invested Capital 4,356.9 4,577.4
2,977.7 Total Net Shareholders' Equity 2,978.2 2,993.1
2,119.9 Net Group shareholders' Equity 2,108.2 2,139.6 857.8 Minorities Shareholders' Equity 870.0 853.5 (1,459.0) Net Financial Position (1,378.7) (1,584.3) 1,139.3 Operating Cash Flow 296.4 279.3 549.4 Investiments 168.6 223.7 - Dividens paid by the Parent Company - - 4.1 Dividens paid by Subsidiares - -
Personnel
FY 2013 1Q 2014 1Q 2013 % % %
5,693 100% Mediaset Group Personnel (headcount) 5,738 100% 5,800 100% 4,401 77.3% Italy 4,448 77.5% 4,472 77.1% 1,292 22.7% Spain 1,290 22.5% 1,328 22.9%
5,882 100% Mediaset Group Personnel (average) 5,760 100% 5,952 100% 4,574 77.8% Italy 4,473 77.7% 4,626 77.7% 1,308 22.2% Spain 1,287 22.3% 1,326 22.3%
Main Indicators
FY 2013 1Q 2014 1Q 2013
7.2% EBIT/Net Revenues 3.6% 6.4% 6.8% Italy 1.1% 5.4% 8.5% Spain 11.3% 9.6% 0.0 EBT/Net Revenues 0.3% 4.5% 0.0 Net Profit/Net Revenues -1.5% 1.1% 0.01 EPS (euro per share) (0.01) 0.01
0.01 Diluted EPS (euro per share) (0.01) 0.01
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INTRODUCTION
This Interim Report on Operations at 31 March 2014 (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 the Interim Report on Operations 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 2014
Group Highlights The Group’s consolidated earnings in the first quarter of the year were affected, as expected, by the Italian advertising market, which posted a slightly negative performance, anyway showing greater stability compared to previous quarters. The advertising market in Spain instead performed positively year-on-year for the second consecutive quarter, buoyed by more favourable conditions in the television advertising segment and a macroeconomic climate showing clearer signs of moderate economic growth and of recovery in private consumption. In both geographical segments the Group has adopted a policy of adapting its broadcasting offering on the basis of forecast advertising revenues, which are expected to show progressive improvement over the course of the year. Such measures have enabled a structural reduction to be achieved over the last two years in running costs, keeping EBITDA for the quarter substantially at first quarter 2013 levels and lowering consolidated financial debt compared to 31 December 2013 through free cash flow generated in the period. The measures did not have an adverse impact on the audience share figures of the Group’s channels in the reporting period. 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 820.8 million, down on the EUR 831.6 million recorded in 2013;
EBITDA amounted to EUR 322.8 million, up from the EUR 321.5 million recorded in 2013;
EBIT amounted to EUR 29.6 million compared to EUR 53.4 million for the corresponding period of the previous year; the figure was driven by higher amortisation expense on television broadcasting rights due to the different scheduling of sports events broadcast in the first quarter of 2014 compared to the first quarter of the previous year. Operating profitability fell to 3.6% from the 6.4% recorded in 2013;
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Earnings from operating activities, before tax and minority interests, amounted to EUR 2.5 million, compared to EUR 37.3 million at 31 March 2013;
Net earnings of the Group amounted to EUR -12.5 million, compared to the EUR 9.3 million profit posted in the first quarter of 2013;
Consolidated net financial debt fell from EUR 1,459.0 million at 31 December 2013 to EUR 1,378.7 million at 31 March 2014, due to a free cash flow for the period of EUR 87.7 million.
Performance review by geographical area: Italy
In the first quarter of 2014 consolidated net revenues from the Group’s Italian operations totalled EUR 620.9 million, down from the EUR 635.4 million posted in the corresponding period of the previous year.
As was expected, advertising revenues in the first quarter of the year continued to show slightly negative growth, as despite the greater stability witnessed in the macroeconomic climate there are still no clear signs of a sustainable recovery in domestic demand and consumption. 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 1.8%, although the figure suggests that the advertising market is progressively returning to normal compared to previous quarters. In the first quarter of 2013 advertising revenues fell by 19.4% year-on-year, while in the fourth quarter of 2013 they fell by 6.2%. According to the latest figures released by Nielsen, in the first two months of the year, the overall advertising market for “traditional” media fell by 3.2% year- on-year.
Core revenues for Mediaset Premium from the sale of prepaid cards, recharges and easy pay subscriptions, as well as revenues pertaining to the Infinity offer, amounted to EUR 142.8 million, down from EUR 144.5 million in the first quarter of 2013, although subscriber numbers remained substantially unchanged compared to 31 December 2013.
Revenues for EI Towers came to EUR 57.9 million, in line with the 2013 figure.
Operating costs for the quarter (personnel expenses, costs for purchases, services and other charges) fell slightly (-0.8%) compared to the corresponding period of 2013, consolidating the structural reduction in running costs achieved over the last two years through cost efficiency measures.
Total EBIT from operations in Italy amounted to EUR 7.0 million, compared to EUR 34.6 million at 31 March 2013. The change was driven by lower advertising revenues and higher amortisation expenses recognised in the quarter, primarily in relation to pay television rights to broadcast the Serie A league, for which a greater number of matches were scheduled in the reporting period compared to the first quarter of 2013. Operating profitability at the end of the reporting period came to 1.1%, compared to the 5.4% posted in 2013. Total audience over the 24-hour period averaged 11,520,000 viewers in the first quarter 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
4 Interim Financial Report at 31 March 2014 – Interim Report on Operations audience share of 33.3% over the 24-hour period, 33.4% in the Day Time slot and 33.9% in Prime Time.
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 2014 % COMMERCIAL TARGET SHARE 15-64 years old
35.9 36.0 36.4 35.6
32.1 31.5
24 ore Day Time Prime Time
Mediaset RAI
Mediaset’s general interest channels held an audience share in the spring season of 28.1% over the 24-hour period, 28.2% in the Day Time slot and 28.2% in Prime Time. Adding to the total the Group’s digital channels, total audience share over the 24-hour period came to 34.4% of all viewers, with a 34.3% share in Day Time and 35.1% in Prime Time. A positive contribution also came from the Multichannel Free and Pay networks, which added more than 6 points of audience share for overall viewers and over seven points for the commercial target audience.
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GUARANTEE PERIOD: SPRING 2014 (from12/01 to 29/03) % COMMERCIAL TARGET SHARE 15-64 years old
37.0 37.1 37.5 34.7 31.4 30.8
24 ore Day Time Prime Time
Mediaset RAI
The following tables show the hours broadcast by each Mediaset network in the first quarter of the two years compared.
Mediaset Networks - Broadcasted programmes 1Q 2014 1Q 2013 D D% Film 1,047 16.2% 1,085 16.7% (38) -3.5% Tv Movie 168 2.6% 222 3.4% (54) -24.3% Mini-series 115 1.8% 108 1.7% 7 6.5% Telefilm 1,384 21.4% 1,402 21.6% (18) -1.3% Tv Romance - 0.0% 12 0.2% (12) -100.0% Sit-com 285 4.4% 102 1.6% 183 179.4% Soap 68 1.0% 72 1.1% (4) -5.6% Telenovelas 245 3.8% 115 1.8% 130 113.0% Cartoons 37 0.6% 271 4.2% (234) -86.3% Total TV Rights 3,349 51.7% 3,389 52.3% (40) -1.2% News 809 12.5% 884 13.6% (75) -8.5% Information programmes 758 11.7% 696 10.7% 62 8.9% Sport programmes 56 0.9% 48 0.7% 8 16.7% Event 39 0.6% 49 0.8% (10) -20.4% Entertainment: 1,158 17.9% 1,073 16.6% 85 7.9% Culture 81 1.3% 116 1.8% (35) -30.2% Teleshopping 230 3.5% 225 3.5% 5 2.2% Total in-house productions 3,131 48.3% 3,091 47.7% 40 1.3% Total 6,480 100.0% 6,480 100.0% - 0.0%
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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 2014 amounted to EUR 200.4 million, showing an increase of 1.9% compared to the corresponding period of the previous year.
Gross television advertising revenues amounted to EUR 194.6 million, up 1.7% year-on- year. Mediaset España’s share of the television advertising market recorded a slight drop, falling to 42.8%. The latest Infoadex figures available show that television advertising spend in Spain rose by 3.1% in the first quarter of the year compared to the corresponding period of the previous year.
Total costs amounted to EUR 177.7 million, showing substantially no change year-on-year thanks to concerted cost optimisation policies. Over the last four years, cost control measures have brought a cumulative saving of EUR 54.7 million (-23.7%).
As a result of the above performance EBIT came to EUR 22.6 million, compared to EUR 18.8 million in the first quarter of 2013, corresponding to an operating profitability of 11.3% compared to 9.6% in the first quarter of 2013.
Mediaset España Group’s free-to-air multichannel television offering at 31 March 2014 included Telecinco and Cuatro, as well as the thematic channels La Siete, Factoria De Ficcion, Boing, Divinity, Energy and Nueve. As reported in the section Subsequent Events, following the implementation of a supreme court ruling, as of 6 May 2014 the channels La Siete and Nueve from the Mediaset España Group’s multichannel offering were blacked out. Mediaset España Group’s average audience share in the first quarter of the year over the 24-hour segment was 29.4% of all viewers and 31.5% of the commercial target audience.
In the first quarter of the year television consumption in Spain dropped slightly year-on-year to 4.4 hours of viewing per day, with the average daily audience numbering over 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 2014 – Interim Report on Operations The table below shows the programming schedule for the two main networks, Telecinco and Cuatro, for the reporting period, with comparative figures provided for the corresponding period of the previous year.
Telecinco-Cuatro Schedule 1Q 2014 1Q 2013 D D% Hours of broadcasted contents
Film 285 6.6% 283 6.6% 2 0.8% TV Movies, Mini-series and Telefilm 799 18.5% 642 14.9% 158 24.6% Cartoons - 0.0% 16 0.4% (16) -100.0% Total TV Rights 1,084 25.1% 941 21.8% 143 15.2% Quiz-game-show 560 13.0% 772 17.9% (212) -27.5% Sport 81 1.9% 72 1.7% 9 12.7% Documentaries and others 1,734 40.1% 1,808 41.9% (74) -4.1% News 632 14.6% 664 15.4% (32) -4.8% Fiction 228 5.3% 62 1.4% 165 265.3% Others - 0.0% - 0.0% - 0.0% Total in-house productions 3,235 74.9% 3,378 78.2% (143) -4.2% Total 4,319 100.0% 4,319 100.0% - 0.0%
Significant events in the first quarter On 10 February UEFA, at the end of a tender open to all operators, awarded Mediaset the exclusive broadcasting rights for Italy on all platforms for all Champions League live matches and highlights for the three-year period 2015–2016, 2016–2017, 2017–2018. Mediaset will therefore have the exclusive rights for the live broadcast of all matches on pay television and for a game per round in freeview, in addition to the possibility of also broadcasting all matches in delayed broadcast, highlights, and all goals viewable in the same evening, as well as live streaming of the games on all fixed and mobile devices. As of the forthcoming 2014–2015 Champions League season, the most important match of the Wednesday round will be broadcast exclusively and free of charge in HD only on Mediaset channels. Accordingly, it will not be broadcast on either the digital or satellite pay television networks. As of the following season and for three years until 2018, all the matches of the most important football tournament in Europe, including the European Super Cup, will only be broadcast by Mediaset, on the Group’s free-to-air and pay television networks and online services.
As of 1 January 2014 the partial transfer of broadcasting assets from the subsidiary Towertel S.p.A. to EI Towers S.p.A. took effect, as approved in 2013 by the companies’ respective boards of directors.
On 1 January 2014 the transfer of the “commercial” business unit from Mondadori Pubblicità S.p.A. to Mediamond S.p.A. took effect. The transaction entailed the transfer of balance sheet assets and liabilities, personnel and contractual arrangements relating to advertising sales in print magazines published by Arnoldo Mondadori Editore and third-party publishers and on R101 radio stations and third-party stations, in order to create, within one company, Mediamond S.p.A., the most comprehensive integrated advertising sales house for Magazines, Radio and Web in Italy.
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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 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 2014 and 2013; balance sheet figures are stated at 31 March 2014 and at 31 December 2013.
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.
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(values in EUR million) Mediaset Group: Income Statement 1Q 2014 2013 Total consolidated net revenues 820.8 831.6 Personnel expenses 138.6 140.9 Purchases, services, other costs 359.4 369.2 Operating costs 498.0 510.1 EBITDA 322.8 321.5 Rights amortisations 257.3 228.4 Other amortisations and depreciations 35.9 39.8 Amortisations and depreciations 293.2 268.2 EBIT 29.6 53.4 Financial income/(losses) (22.4) (13.8) Income/(expenses) from equity investments (4.7) (2.3) EBT 2.5 37.3 Income taxes (4.4) (17.7) Net profit from continuing operations (1.9) 19.5 Net profit from discontinued operations - - Minority interests in net profit (10.6) (10.2) Mediaset Group net profit (12.5) 9.3
The following table shows key Group income statement figures stated as a percentage of consolidated net revenues.
1Q 2014 2013 Total consolidated net revenues 100.0% 100.0% Operating costs 60.7% 61.3% EBITDA 39.3% 38.7% Amortisation, depreciation and write-downs 35.7% 32.3% EBIT 3.6% 6.4% EBT 0.3% 4.5% Net profit -1.5% 1.1% Tax rate (EBT %) n.s. 47.6%
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 an abridged income statement of Mediaset Group’s domestic business: (values in EUR million) Italy: Income Statement 1Q 2014 2013 Total consolidated net revenues 620.9 635.4 Personnel expenses 112.8 115.7 Purchases, services, other costs 263.3 263.6 Operating costs 376.1 379.3 EBITDA 244.8 256.0 Rights amortisations 206.2 186.0 Other amortisations and depreciations 31.7 35.5 Amortisations and depreciations 237.8 221.5 EBIT 7.0 34.6 Financial income/(losses) (22.0) (13.4) Income/(expenses) from equity investments 1.9 0.1 EBT (13.1) 21.3 Income taxes (1.4) (14.1) Net profit from continuing operations (14.5) 7.2 Net profit from discontinued operations - - Minority interests in net profit (3.2) (3.0) Mediaset Group net profit (17.7) 4.2
The following table shows key income statement figures stated as a percentage of consolidated net revenues.
1Q 2014 2013 Total consolidated net revenues 100.0% 100.0% Operating costs 60.6% 59.7% EBITDA 39.4% 40.3% Amortisation, depreciation and write-downs 38.3% 34.9% EBIT 1.1% 5.4% EBT -2.1% 3.4% Net profit -2.9% 0.7% Tax rate (EBT %) n.s. 66.3%
11 Interim Financial Report at 31 March 2014 – 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 film 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 2014 2013
Integrated Television Operations 608.0- 622.5- -14.5 - -2.3% EI Towers 57.9- 57.7- -0.2 - 0.3% Eliminations (45.0)- (44.8)- -0.2 - -0.5% Total 620.9 635.4 -14.5 -2.3%
Operating Result 1Q changes % changes Business segments breakdown 2014 2013
Integrated Television Operations (9.1)- 20.3- -29.4 - n.s. EI Towers 16.1 14.2 -1.9 13.2%
Total 7.0 34.6 -27.6 -79.8%
12 Interim Financial Report at 31 March 2014 – Interim Report on Operations The income statements of the two geographical areas of operation are reported below. Both areas posted improving income margins in the quarter with respect to the corresponding period of the previous year.
1Q Integrated Television Operations 2014 2013 changes % changes
Gross advertising revenues 491.8 501.3 (9.5) -1.9% Agency discounts (72.0) (73.5) 1.5 2.1% Total net advertising revenues 419.8 427.8 (8.0) -1.9%
Revenues from subscriptions/pre-paid cards 142.8 144.5 (1.7) -1.1% Other revenues 45.3 50.2 (4.9) -9.7% Total Revenues 608.0 622.5 (14.5) -2.3%
Personnel expenses 101.6 104.2 (2.6) -2.4% Operating costs 243.9 243.3 0.6 0.2% TV and movie rights amortisation 206.2 186.0 20.2 10.9% Other amortisation and depreciation 21.2 24.6 (3.4) -13.8% Inter-segment costs 44.2 44.1 0.1 0.4% Total Costs 617.1 602.1 15.0 2.5%
Operating result (9.1) 20.3 (29.4) -144.9%
% on revenues -1.5% 3.3% The drop in revenues from television broadcasting in the reporting period was mainly driven by lower advertising revenues, as reported earlier. The drop in other revenues was almost entirely due to lower proceeds from movie distribution operations, in which, unlike the same period of 2013, the transfer of the relative broadcasting rights to the pay television satellite platform is not included. The change in total costs was substantially due to higher amortisation expense for television broadcasting rights as a result of the greater number of Serie A league matches scheduled in the quarter compared to the first quarter of 2013. Operating costs in the reporting period (personnel expenses, costs for purchases, services and other charges) remained substantially in line with the figure for the first quarter of 2013, consolidating the structural reduction in running costs achieved over the last two years through cost efficiency measures.
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(values in EUR million) 1Q EI Towers 2014 2013 changes % changes
Revenues towards third parties 12.9 12.9 - 0.5% Inter-segment revenues 45.0- 44.8- 0.2- -0.3%0.0% Total revenues 57.9 57.7 0.2 0.3%
Personnel expenses 11.2 11.5 (0.3) -3.2% Operating Costs 19.4 20.3 (0.9) -4.4% Other amortisation and depreciation 10.4 10.9 (0.5) -4.4% Inter-segment costs 0.8 0.7 0.1 6.7% Total costs 41.8 43.5 (1.7) -3.9%
Operating result 16.1 14.2 1.9 0 13.2%0 % on revenues 27.8% 24.7% EI Towers Group posted a 13.2% increase in EBIT for the reporting period, with an operating profitability of 27.8% thanks to further improvements in the optimisation of operating costs. Inter-segment revenues, totalling EUR 45.0 million refer to hosting, assistance, maintenance and logistics services, broadcasting infrastructure use and engineering services provided to the subsidiary Elettronica Industriale. Revenues from other customers refer to hosting, maintenance and logistics services provided to other broadcasters and wireless telecommunications providers.
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Breakdown by geographical area: Spain The following is an abridged income statement of the Group’s Spanish business; figures are those of Mediaset España Group (consolidated figures). (values in EUR million)
Spain: Income Statement 1Q 2014 2013 Total consolidated net revenues 200.4 196.6 Personnel expenses 25.9 25.2 Purchases, services, other costs 96.5 106.0 Operating costs 122.4 131.1 EBITDA 78.0 65.5 Rights Amortisations 51.1 42.4 Others amortisations and depreciations 4.2 4.2 Amortisations and depreciations 55.4 46.7 EBIT 22.6 18.8 Financial income/(losses) (0.5) (0.3) Income/(expenses) from equity investments (6.5) (2.5) EBT 15.6 16.0 Income taxes (3.0) (3.6) Net profit from continuing operations 12.6 12.4 Net profit from discontinued operations - - Minority interests in net profit 0.1 0.1
Mediaset Group net profit 12.8 12.5
The following table shows key income statement figures stated as a percentage of consolidated net revenue from Spanish operations.
1Q 2014 2013 Total consolidated net revenues 100.0% 100.0% Operating costs 61.1% 66.7% EBITDA 38.9% 33.3% Amortisation, depreciation and write-downs 27.6% 23.8% EBIT 11.3% 9.6% EBT 7.8% 8.1% Net profit 6.4% 6.4% Tax rate (EBT %) 19.2% 22.7% Tax rate (EBT %)
15 Interim Financial Report at 31 March 2014 – Interim Report on Operations The breakdown of Mediaset España Group’s revenues is shown below: (values in EUR million) 1Q % 2014 2013 change Gross advertising revenues 194.6 191.2 1.7% Agency discounts (10.8) (11.3) 5.2% Net advertising revenues 183.8 179.9 2.2% Other revenues 16.6 16.7 -0.8% Total net consolidated revenues 200.4 196.6 1.9%
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 substantially no change compared to the first quarter of the previous year.
1Q 2014 2013 % changes Operating costs 177.7 177.8 -0.1%
Personnel expenses 25.9 25.2 2.7%
Purchases, services, other costs 96.5 106.0 -8.9% TV and movie rights amortisation 51.1 42.4 20.5% Other amortisation and write-downs 4.2 4.2 0.0%
Total costs for Mediaset España Group in the first quarter of 2014 are in line with the figure for the first quarter of the previous year, thanks to concerted cost optimisation policies. At 31 March 2014, EBIT from Spanish operations totalled EUR 22.6 million, up from EUR 18.8 million in 2013, with an operating profitability of 11.3%.
Other income statement components for Mediaset Group as a whole are shown below.
1Q 2014 2013 % changes Financial income/(losses) -22.4 -13.8 -62.9
Despite a lower average financial debt, net financial expenses were driven up by the spread between yields paid on bonds placed last year after the close of the first quarter by the
16 Interim Financial Report at 31 March 2014 – Interim Report on Operations subsidiary EI Towers and Mediaset, a transaction which permitted average debt maturities to be lengthened considerably, and yields paid on bonds issued at earlier dates.
1Q 2014 2013 % changes Result from equity investments -4.7 -2.3 n.s.
The lower figure for the quarter was primarily due to higher losses on the 22% equity investment held by Mediaset España in Digital Plus, a company controlled by the Spanish digital satellite platform of the same name.
1Q 2014 2013 % changes
EBT 2.5 37.3 -93.3%
Income taxes -4.4 -17.7 75.4% Tax Rate (%) n.s. 47.6% Net profit from discontinued operations 0.0 0.0 n.s. Minority interests in net profit -10.6 -10.2 -3.8%
Group net profit -12.5 9.3 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. Minority Interests refers to the share of consolidated net earnings of Mediaset España and EI Towers attributable to third parties, on the basis of the interests held by the Group at the respective reporting dates.
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 4.7. 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).
17 Interim Financial Report at 31 March 2014 – 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 31/03/2014 31/12/2013 TV and movie rights 1,757.5 1,830.3 Goodwill 916.1 912.4 Other tangible and intangible non current assets 1,165.8 1,218.9 Equity investments and other financial assets 463.5 469.7 Net working capital and other assets/(liabilities) 145.8 97.9 Post-employment benefit plans (91.7) (92.5) Net invested capital 4,356.9- 4,436.7- Group shareholders' equity 2,108.2 2,119.9 Minority interests 870.0 857.8 Total Shareholders' equity 2,978.2- 2,977.7- Net financial position 1,378.7 1,459.0
The breakdown of the balance sheet by geographical area (Italy and Spain) is shown below. With reference to the Group’s Italian business, Equity Investments and Other Financial Assets include the carrying amount of the controlling interest held in Mediaset España and the 25% equity interest held in Mediacinco Cartera, a fully consolidated subsidiary of Mediaset España, which owns the remaining 75% controlling interest. These holdings are then netted and eliminated on consolidation.
(values in EUR million)
Balance Sheet Summary (geographical breakdown) Italy Spain 31/03/2014 31/12/2013 31/03/2014 31/12/2013 TV and movie rights 1,505.2 1,606.4 252.6 224.1 Goodwill 265.5 261.9 287.4 287.4 Other tangible and intangible non current assets 881.0 931.4 284.9 287.5 Equity investments and other financial assets 1,022.9 1,023.0 393.3 399.4 Net working capital and other assets/(liabilities) 21.8 (41.6) 124.0 139.5 Post-employment benefit plans (91.7) (92.5) - - Net invested capital 3,604.6- 3,688.6- 1,342.1- 1,337.9- Group shareholders' equity 2,082.2 2,099.5 1,433.9 1,419.1 Minority interests 39.8 36.6 12.1 12.2 Total Shareholders' equity 2,122.0- 2,136.1- 1,446.0- 1,431.4- Net financial position 1,482.6 1,552.5 (103.9) (93.5)
18 Interim Financial Report at 31 March 2014 – 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 1,505.2 252.6 (0.2) 1,757.5 Goodwill 265.5 287.4 363.2 916.1 Other tangible and intangible non current assets 881.0 284.9 0.0 1,165.8 Equity investments and other financial assets 1,022.9 393.3 (952.7) 463.5 Net working capital and other assets/(liabilities) 21.8 124.0 0.1 145.8 Post-employment benefit plans (91.7) - - (91.7) Net invested capital 3,604.60.0 1,342.10.0 (589.8)0.0 4,356.90.0 Group shareholders' equity 2,082.2 1,433.9 (1,407.9) 2,108.2 Minority interests 39.8 12.1 818.1 870.0 Total Shareholders' equity 2,122.00.0 1,446.00.0 (589.8)0.0 2,978.20.0 Net financial debt 1,482.6 (103.9) 0.0 1,378.7
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 2014 2013 2014 2013 2014 2013
Net Financial Position at the beginning of the year (1,459.0) (1,712.8) (1,552.5) (1,786.5) 93.5 73.7 Free Cash Flow 87.7 129.4 76.9 135.8 10.8 (6.5) - Cash Flow from operating activities (*) 296.4 279.3 221.9 217.3 74.5 62.0 - Investments in fixed assets (168.6) (223.7) (87.2) (141.6) (81.5) (82.1) - Disposals of fixed assets 0.0 0.1 - 0.1 0.0 - - Changes in net working capital and other current assets/liabilities (40.2) 73.7 (57.9) 60.1 17.7 13.6 ------Change in the consolidation perimeter (1.9) - (1.9) - - - Own share's sell/buyback ------Equity investments/Invesment in other financial assets (5.5)- (0.9)- (5.1)- (0.4)- (0.4)- (0.5)- Cashed-in dividends - - - (113.6)- - - Dividends paid ------
Financial Surplus/Deficit 80.3- 128.5- 69.9- 135.4- 10.4- (6.9)- Net Financial Position at the end of the period (1,378.7) (1,584.3) (1,482.6) (1,651.1) 103.9 66.8 (*): 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 87.7 million. Italian operations alone generated a free cash flow of EUR 76.9 million. Cash flow in the first quarter of the year compared to the corresponding period of the previous year was affected by the change in advertising sales in the last quarter of the two previous years.
19 Interim Financial Report at 31 March 2014 – 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 2014 2013 2014 2013 2014 2013
Investments in TV and movie rights (184.5) (206.0) (105.0) (127.5) (79.6) (78.5) Changes in advances on TV rights 21.5 (9.2) 22.1 (6.4) (0.6) (2.8) TV and movie rights: investments and advances (163.1) (215.2) (82.9) (133.8) (80.2) (81.3) Investments in other fixed assets (5.5) (8.5) (4.3) (7.7) (1.3) (0.8) Total investments in fixed assets (168.6) (223.7) (87.2) (141.6) (81.5) (82.1)
Cash outflows of EUR 1.9 million carried under the item Change in Consolidation Area refer to the acquisition on 28 February 2014 of the company Sart S.r.l. by the subsidiary Towertel S.p.A. at a price of EUR 2.4 million, net of net cash and cash equivalents held by the target company at the acquisition date. Equity Investments/Other Financial Assets for the first quarter of 2014 include EUR 5.1 million in costs incurred for the acquisition of a 1.8% equity interest in the company Jade 1290 GMBH by the subsidiary RTI S.p.A., acquired via payment for new rights issued and subscribed by the subsidiary at 31 December 2013.
Group headcount At 31 March 2014 the Group headcount came to 5,738 employees (5,800 at 31 March 2013 and 5,693 at 31 December 2013). The increase compared to 31 December is almost entirely attributable to temporary personnel employed in the production of television series and dramas. The following tables show the change in employee numbers 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 2014 2013 2014 2013 Managers 301 313 115 119 Journalists 330 337 145 172 Middle managers 862 881 78 81 Office workers 2,917 2,936 929 933 Industry workers 38 5 23 23 Total 4,448 4,472 1,290 1,328
Average workforce (including temporary staff) ITALY SPAIN 1Q 2014 2013 2014 2013 Managers 305 317 115 119 Journalists 329 338 144 172 Middle managers 865 883 79 82 Office workers 2,925 3,013 926 930 Industry workers 49 75 23 23 Total 4,473 4,626 1,287 1,326 - - 0 0
20 Interim Financial Report at 31 March 2014 – Interim Report on Operations
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 and its 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 parent 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, capital increases through the transfer of assets in kind, acquisitions and disposals.
Events after 31 March 2014
On 4 April 2014, Mediobanca–Banca di Credito Finanziario S.p.A., the sole bookrunner for the transaction, brought to a successful close the placement of 7,065,600 EI Towers S.p.A. ordinary shares, equal to 25% of the share capital. The shares are held by Elettronica Industriale S.p.A., an indirect wholly-owned subsidiary of Mediaset S.p.A. The shared were offered through an accelerated bookbuild targeted at Italian and international qualified investors. The offering was closed at a final price of EUR 40.15 per share, raising a total of EUR 283.7 million. At the consolidated level the transaction qualifies as a sale of equity interests in a subsidiary, without entailing a loss of control. As such, the transaction will be recognised in accounts in the second quarter of the year, as required by IAS/IFRS in force, as a transaction with the shareholders of the company. Accordingly, the transaction will have no impact on Group performance in the income statement. The difference between the net price received from the placement of the shares and minority interests in the transaction at the transaction date will be carried in a specific Group shareholders’ equity reserve, net of any tax effects. Starting from the second quarter of 2014, EI Towers Group will be consolidated on a line-by- line basis considering the equity interests resulting from the transaction, with 59.911% of the share capital recognised as minority interests. In financial terms, the net proceeds from the transaction will go to lower consolidated net financial debt, which at 31 March 2014 totalled EUR 1,378.7 million.
21 Interim Financial Report at 31 March 2014 – Interim Report on Operations
As of 6 May 2014, nine out of 24 Spanish digital terrestrial channels were blacked out in implementation of the supreme court ruling of 27 November 2012, which repealed the resolution adopted by cabinet on 16 July 2010 assigning each Spanish television broadcaster an additional channel. Specifically, broadcasting was suspended on two of the eight channels operated by Mediaset España (La Siete and Nueve), three of the eight channels operated by Atresmedia Group (Xplora, La Sexta3 and Nitro), two of the four channels operated by VeoTV Group and two of the four teleshopping channels operated by Net TV Group.
On 6 May 2014, the Board of Directors of Promotora de Informaciones S.A. (Prisa) accepted the offer made by Telefonica S.A. for the purchase of the majority interest amounting to 56% of the capital held by Prisa in the company Distribuidora de Television Digital S.A. (DTS). If the offer becomes binding the related terms will need to be notified to the parties. From that time, Mediaset Espana S.A., which like Telefonica holds an equity interest of 22% in DTS , will be entitled to exercise the rights established in the shareholders' agreement signed in 2010, including the tag along and pre-emption rights.
22 Interim Financial Report at 31 March 2014 – Interim Report on Operations
FORECAST FOR THE YEAR
In Italy, there was an essentially unstable trend in the advertising market also at the beginning of the first quarter and the sector is still not benefitting from any clear signals of a recovery in consumer demand. In this context, Publitalia's commercial strategy remains focused on the long-term sustainability of the advertising market, through the defence of profitability and avoiding driving down prices, a practice that has been adopted by some competitors. This strategy will enable the Group to consolidate its overall market share - even if in the short term there could be a temporary reduction in the share of the television market - ensuring a faster and more solid recovery when the expected growth in the sector begins. In Spain, where economic recovery is much clearer and has already begun, advertising revenues are expected to see moderate growth also in the second quarter. Moreover, at the end of the period, Mediaset España will also benefit from exclusive coverage of the matches of the Spanish national football team during the World Cup in Brazil. The poor visibility for the remainder of the year makes it difficult to make reliable predictions on the consolidated result for the full year. In the coming months, the Group will remain focused on the multiplatform development of its content, the strategic evolution of the pay-TV business, as well as operating efficiency, cash generation and medium term profitability also by taking advantage of the structural reduction in operating costs made in the last two years.
For the Board of Directors the Chairman
23
Mediaset Group Accounting Tables and Explanatory Notes
MEDIASET GROUP
INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION (EUR million)
Notes 31/3/2014 31/12/2013
ASSETS
Non current assets
Property, plant and equipment 4.1 515.4 533.6
Television and movie rights 4.1 1,757.5 1,830.3
Goodwill 4.1 916.1 912.4
Other intangible assets 4.1 650.4 685.3
Investments in associates 4.2 426.8 431.5
Other financial assets 4.2 36.7 38.3
Deferred tax assets 4.3 546.3 538.7
TOTAL NON CURRENT ASSETS 4,849.2 4,970.1
Current assets
Inventories 46.2 41.8
Trade receivables 819.1 898.3
Tax receivables 54.2 66.3
Other receivables and current assets 304.5 311.1
Current financial assets 4.7 42.9 37.8
Cash and cash equivalents 7.7 192.6 197.6
TOTAL CURRENT ASSETS 1,459.3 1,552.9
Non current assets held for sale - -
TOTAL ASSETS 6,308.5 6,523.0
26
MEDIASET GROUP
INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION (EUR million)
Notes 31/3/2014 31/12/2013
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 4.4 504.7 504.7
Valuation reserve 4.5 (13.5) (13.9)
Retained earnings 1,156.8 1,147.4
Net profit for the period (12.5) 8.9
Group Shareholders' Equity 2,108.2 2,119.9
Minority interests in net profit 10.6 13.9
Minority interests in share capital, reserves and retained earnings 859.4 843.9
Minority interests 870.0 857.8
TOTAL SHAREHOLDERS' EQUITY 2,978.2 2,977.7
Non current liabilities
Post-employment benefit plans 91.7 92.5
Deferred tax liabilities 65.5 66.1
Financial liabilities and payables 4.7 1,305.1 1,327.4
Provisions for non current risks and charges 4.6 66.0 65.4
TOTAL NON CURRENT LIABILITIES 1,528.3 1,551.4
Current liabilities
Financial payables 4.7 238.3 326.3
Trade and other payables 1,107.3 1,201.0
Provisions for current risks and charges 4.6 66.2 95.2
Current tax liabilities 25.6 17.7
Other financial liabilities 4.7 82.5 54.9
Other current liabilities 282.1 298.8
TOTAL CURRENT LIABILITIES 1,802.0 1,993.9
Liabilities related to non current assets held for sale - -
TOTAL LIABILITIES 3,330.3 3,545.3
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 6,308.5 6,523.0
27
MEDIASET GROUP
INTERIM CONSOLIDATED INCOME STATEMENT (EUR million)
STATEMENT OF INCOME 1Q 2014 1Q 2013 Notes
Sales of goods and services 813.6 821.1 Other revenues and income 7.2 10.4
TOTAL NET CONSOLIDATED REVENUES 820.8 831.6
Personnel expenses 138.6 140.9 Purchases, services, other costs 359.4 369.2 Amortisation, depreciation and write-downs 293.2 268.2 Impairment losses and reversal of impairment on fixed assets - -
TOTAL COSTS 791.2 778.3
EBIT 29.6 53.4
Financial expenses 4.8 (22.4) (13.8) Income/(expenses) from equity investments (4.7) (2.3)
EBT 2.5 37.3
Income taxes 4.9 4.4 17.7
NET PROFIT FROM CONTINUING OPERATIONS (1.9) 19.5
Net Gains/(Losses) from discontinued operations - -
NET PROFIT FOR THE PERIOD (1.9) 19.5
Attributable to: - Equity shareholders of the parent company (12.5) 9.3 - Minority Interests 10.6 10.2
Earnings per share 4.10 - Basic (0.01) 0.01 - Diluted (0.01) 0.01
28
MEDIASET GROUP
INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (EUR million)
Note 1Q 2014 1Q 2013
PROFIT OR (LOSS) FOR THE PERIOD (1.9) 19.5
OTHER COMPREHENSIVE INCOME RECYCLED TO PROFIT AND LOSS 0.4 8.4
Changes arising from translating the financial statement of foreign operations - -
Effective portion of gains and losses on hedging instruments (cash flow hedge) 4.5 0.5 11.9
Gains and losses on available-for-sale financial assets - -
Other gains and losses of associates valued by equity method - (0.2)
Other gains and losses - -
Tax effects 4.5 (0.1) (3.3) 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) 0.4 8.4
TOTAL COMPREHENSIVE INCOME (A)+(B) (1.5) 27.9 attributable to:
- owners of the parent (12.1) 17.7
- non controlling interests 10.6 10.2
29
MEDIASET GROUP
INTERIM CONSOLIDATED CASH FLOW STATEMENT (EUR million)
Notes 1Q 2014 1Q 2013
CASH FLOW FROM OPERATING ACTIVITIES: Operating profit before taxation 29.6 53.4 + Depreciation and amortisation 293.2 268.2 + Other provisions and non-cash movements 1.5 (4.9) + Change in trade receivables 79.3 94.3 + Change in trade payables (19.4) (28.2) + Change in other assets and liabilities (20.3) (4.5) - Interests (paid)/received (1.0) (7.2) - Income tax paid (18.3) (6.8)
Net cash flow from operating activities [A] 344.5 364.3
CASH FLOW FROM INVESTING ACTIVITIES: Proceeds from the sale of fixed assets - 0.2 Proceeds from the sale of equity investments - - Interests (paid)/received - - Purchases in television rights (184.5) (206.0) Changes in advances for television rights 21.5 (9.2) Purchases of other fixed assets (5.6) (8.5) Equity investments - (0.9) Changes in payables for investing activities (74.3) (3.2) Proceeds/(Payments) for hedging derivatives (0.3) (0.5) Changes in other financial assets (5.6) (5.7) Dividends received - - Business Combinations net of cash acquired 5.1 (1.9) - Changes in consolidation area - -
Net cash flow from investing activities [B] (250.6) (233.7)
CASH FLOW FROM FINANCING ACTIVITIES: Changes in financial liabilities (74.4) (135.7) Corporate bond - - Dividends paid - - Changes in other financial assets/liabilities 1.4 (0.7) Interests (paid)/received (26.0) (24.9)
Net cash flow from financing activities [C] (98.9) (161.3)
CHANGE IN CASH AND CASH EQUIVALENTS [D=A+B+C] (5.0) (30.7)
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD [E] 197.6 221.8
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD [F=D+E] 192.6 191.1
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 1/1/2013 614.2 275.2 504.9 (416.7) 0.6 1,430.7 (287.1) 2,121.9 843.2 2,965.1
Business Combinations ------Allocation of the parent company's 2011 net profit - - - - - (287.1) 287.1 - - -
Dividends paid by the parent company ------
Stock Option plan valuation - - - - 0.1 - - 0.1 0.1 0.2
(Purchase)/sale of treasury shares ------Profits/(losses) from negotiation of treasury shares ------
Change in consolidation perimeter ------
Other changes - - - - (0.1) - - (0.1) - (0.1)
Comprehensive income/(loss) - - (0.2) - 8.6 - 9.3 17.7 10.2 27.9
Balance at 31/03/2013 614.2 275.2 504.6 (416.7) 9.1 1,143.8 9.3 2,139.6 853.5 2,993.1
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 2012 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) (13.5) 1,156.8 (12.5) 2,108.2 870.0 2,978.2
31
EXPLANATORY NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS AT 31 MARCH 2014
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 2013, to which reference is made, except for the adoption of new standards, amendments and interpretations effective from 1 January 2014 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 2013. 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. The Group has applied the following new accounting standards and/or amendments and interpretations to previously effective standards with effect from 1 January 2014.
IFRS 10 Consolidated Financial Statements IFRS 10 replaces the portion of IAS 27 (Consolidated and Separate Financial Statements) that addresses the accounting for consolidated financial statements and SIC-12 Consolidation - Special Purpose Entities, coordinating the notion of control under IAS 27 with the "risks and benefits” approach of SIC 12. IFRS 10 introduces a single notion of control for consolidation purposes that applies to all entities including special purpose entities. The new definition provides for the recognition of control when the investor is able to influence its returns (exposure or rights to the variability of results) by exercising its power, defined as the current ability to direct the relevant activities of
32 Interim Financial Report at 31 March 2014 – Explanatory Notes the controlled entity, i.e. those that have a significant impact on the returns of the investee, resulting from possession of valid substantive rights (ranging from voting rights by way of equity instruments - legal control - nevertheless ascertaining and considering all the facts and circumstances including those linked to any actual or potential rights arising from one or more contractual agreements - "de facto control" -). The adoption of this standard had no impact on the scope of consolidation.
IFRS 11 Joint Arrangements IFRS 11 replaces IAS 31 Interests in Joint Ventures and SIC-13 Jointly-controlled Entities - Non- monetary Contributions by Venturers. This principle governs the two different types of "joint arrangements":
Joint ventures: corporate agreements involving joint control, in which the parties to the agreement have rights to the net assets (equity) covered by the agreement. Joint controlled entities that qualify as a joint venture must be accounted for at equity.
Joint operation: the parties to the agreement have rights to the individual assets and liabilities. For the purposes of the consolidated financial statements, each party recognises its share of the assets and/or liabilities, costs and/or revenues in its financial statements. There are currently no arrangements of this type within the scope of consolidation of the Mediaset Group. IFRS 11 removes the option to account for jointly controlled entities (JCEs) using proportionate consolidation, subject to the criteria for assessing whether an arrangement qualifies as a joint arrangement as above specified. The adoption of this new standard has no impact at Group level because the equity method has already been adopted for the measurement of equity investment in joint ventures as an alternative to proportionate consolidation.
IFRS 12 Disclosure of Interests in Other Entities IFRS 12 provides information regarding all the disclosures requirements that were previously in IAS 27 related to consolidated financial statements, as well as all the disclosures that were previously required by IAS 31 and IAS 28. The new standard establishes reporting requirements for equity investments in subsidiaries, joint arrangements, associates and structured entities, introducing new cases requiring disclosure, not contemplated in the past. This new standard will have no impact on the Group’s financial position or performance.
IAS 27 Separate Financial Statements (as revised in 2011) Following the introduction of the new IFRS 10 and IFRS 12, what remains of IAS 27 is limited to accounting for subsidiaries, jointly controlled entities, and associates in separate financial statements.
IAS 28 Investments in Associates (as revised in 2011)
33 Interim Financial Report at 31 March 2014 – Explanatory Notes As a consequence of the new IFRS 11 Joint Arrangements, and IFRS 12 Disclosure of Interests in Other Entities, IAS 28 has been renamed Investments in Associates and Joint Ventures, and describes the application of the equity method to investments in joint ventures, in addition to associates. The adoption of this standard has no impact at Group level because the equity method has already been adopted for the measurement of equity investment in joint ventures as an alternative to proportionate consolidation.
IAS 32 Offsetting Financial Assets and Financial Liabilities — Amendments to IAS 32 These amendments clarify the meaning of “currently has a legally enforceable right to set-off”. The amendment also clarifies the application of the IAS 32 offsetting criteria to settlement systems (such as central clearing house systems) which apply gross settlement mechanisms that are not simultaneous. These amendments have not impact on the Group’s financial position or performance.
3. Key corporate transactions and changes in the scope of consolidation The partial spin-off of the subsidiary Towertel S.p.A. (broadcasting operations) in favour of EI Towers S.p.A., approved in 2013 by the respective Boards of Directors, became effective 1 January 2014. This transaction had no impact on the scope of consolidation. On 28 February 2014, the subsidiary Towertel S.p.A. acquired 100% of the share capital of Società Assistenza Ripetitori Televisivi S.r.l. (S.A.R.T.), a company that offers hosting, maintenance and management services for telecommunication and broadcasting networks. This company has been consolidated on a line-by-line basis. Finally, following the sale of treasury shares by the subsidiary Mediaset España Comunicación, the Group’s equity investment in the company fell from 42.128% to 42.098% during the quarter.
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 31/12/2013 533.6 1,830.3 912.4 685.3
Changes in the consolidation area 0.2 - 3.6 -
Additions 3.8 128.1 - 36.8
Other changes (0.8) 56.4 - (59.6)
Disposals - - - (0.0)
Amortisation, depreciation and write-downs (21.5) (257.3) - (12.1) Balance at 31/03/2014 515.4 1,757.5 916.1 650.4 The item business combinations refers to the acquisition made in the quarter by the subsidiary Towertel S.p.A. of the whole share capital of Società Assistenza Ripetitori Televisivi S.r.l. Specifically, the increase in goodwill of EUR 3.6 million reflects the provisional allocation of the
34 Interim Financial Report at 31 March 2014 – Explanatory Notes payment due for the acquisition amounting to EUR 4.6 million, EUR 2.4 million of which have been already paid during the quarter. As required by IFRS 3, the final allocation of the consideration paid shall be made within twelve months from the acquisition date in order to determine the fair value of assets acquired and liabilities assumed. If at the end of the evaluation period, any tangible or intangible assets are identified, an adjustment will be made to the provisional amounts recognised at the acquisition date, with retrospective effect as of the acquisition date. Below is a summary of the main changes, in addition to depreciation, amortisation, write-downs and business combinations, compared to the amounts in the consolidated financial statements at 31 December 2013:
increases in Television and movie broadcasting rights of EUR 184.5 million of which EUR 128.1 million for purchases in the period and EUR 56.4 million for capitalisation of advances paid to suppliers (recognised as assets in progress and advances at 31 December 2013). Other changes include decreases and cancellations of previously recognised rights.
increases in property, plant and equipment of EUR 3.8 million, mainly relating to pylons, infrastructure and transmission equipment nearing completion;
increases in other intangible fixed assets totalling EUR 36.8 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 include decreases of EUR 56.4 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 31/12/2013 (Write-offs) 31/03/2014
Equity investments in jointly-controlled 431.5 - - (4.7) 0.1 426.8 and affiliated companies
Equity investments 7.0 - - - - 7.0
Receivables and other financial assets 31.3 0.4 (0.1) - (1.9) 29.7
Total 469.8 0.4 (0.1) (4.7) (1.8) 463.5
With regard to the item Investments in associates and joint ventures, the negative effect for the period includes EUR 6.6 million for the equity accounted 22% stake in DTS Distribuidora de Televisión Digital S.A., corresponding to the pro-rata share in the result for the period, and EUR 1.8 million for the amortisation of intangible assets identified during the final allocation of the cost of this investment. The main changes in Receivables and other financial assets refer to the restatement under Other receivables and current assets of the current portion of the receivables due from the associate Boing S.p.A., originating from the transfer of a library of television broadcasting rights and entertainment programmes for child audiences carried out in the previous financial year.
35 Interim Financial Report at 31 March 2014 – Explanatory Notes
4.3 Deferred Tax Assets and Liabilities
The increase in Deferred tax assets of EUR 7.6 million, mainly refers to the recognition of deferred tax assets generated during the year by the transfer of tax losses from companies scoped in for Italian tax consolidation purposes.
4.4 Other reserves
31/03/2014 31/12/2013
Legal reserve 122.8 122.8 Equity investment evaluation reserve (0.2) (200.0) Consolidation reserve (78.9) (78.9) Other comprehensive income/(losses) 124.4 124.4 Other reserves 336.5 336.5
Total 504.7 504.7 No changes occurred in the item Other reserves during the first quarter.
4.5 Valuation reserves
31/03/2014 31/12/2013
Cash flow hedge reserve (9.7) (10.1) Stock option plans 13.9 13.922 Actuarial Gains/(Losses) (17.7) (17.7)
Total (13.5) (13.9)
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 (10.1) 0.1 (0.9) 0.8 0.6 (0.1) (9.7) of which: - FOREX rate risk (9.6) 0.1 0.0 0.8 (0.1) (0.2) (9.0)
- interest rate risk (0.5) - (0.9) - 0.7 0.1 (0.6)
Stock option plans 13.9 (0.1) - - - - 13.8 Actuarial Gains/(Losses) on defined benefit plans (17.7) - - - - - (17.7) Total (13.9) (0.0) (0.9) 0.8 0.6 (0.1) (13.5)
The valuation reserve for financial assets for cash flow hedging purpose 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,
36 Interim Financial Report at 31 March 2014 – Explanatory Notes 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 2014, 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 change for the period is attributable to the restatement in Prior year profit/(loss) of the portion of the reserve associated with plans for which the exercise period has expired. 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 purpose and the Valuation reserve for actuarial gains and losses, before tax, is shown in the Comprehensive Income Statement.
4.6 Provisions for risks and contingent liabilities
The decrease in risk provisions of EUR 28.4 million is mainly attributable to the use of provisions allocated as at 31 December 2013 as a result of the corresponding liabilities occurring during the first three months of the year. These utilisations include EUR 6.0 million for the amount pertaining to the quarter of the provisions allocated in 2012 to reflect, pursuant to IAS 37, the liabilities connected with a number of long-term contracts for televising sports events, the remaining value of which at 31 March 2014 was EUR 11.2 million. With reference to the main disputes in progress 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 2013.
37 Interim Financial Report at 31 March 2014 – Explanatory Notes
4.7 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.
31/03/2014 31/12/2013
Cash in hand and cash equivalents 0.1 0.1 Bank and postal deposits 192.5 197.6 Securities and other current financial assets 5.1 5.5 Total liquidity 197.7 203.1
Current financial receivables 37.7 32.3
Due to banks (227.4) (315.1) Current portion of non current debt (53.4) (38.2) Other current payables and financial liabilities (36.2) (21.9) Current financial debt (317.0) (375.2)
Current Net Financial Position (81.7) (139.8)
Due to banks (427.5) (427.0) Corporate bond (866.9) (890.9) Other non current payables and financial liabilities (2.7) (1.4) Non current financial debt (1,297.1) (1,319.3) Net Financial Position (1,378.7) (1,459.0)
Securities and other current financial assets consist of bonds and investment funds held by the subsidiary Mediaset Investment S.a.r.l. (EUR 5.5 million at 31 December 2013). Current financial receivables include EUR 22.9 million (EUR 22.9 million as at 31 December 2013) in government subsidies for movie productions made by Medusa Film S.p.A., which had been approved but not paid at the reporting date; EUR 13.9 million (EUR 8.6 million at 31 december 2013) in relation to current accounts managed by the parent Mediaset S.p.A. on behalf of associates and joint ventures; and EUR 0.8 million in financial receivables held by Mediaset España Group (EUR 0.8 million as at 31 December 2013). Due to banks (current) refer to short term credit lines. The decrease in the period, in the amount of EUR 87.7 million, mainly reflect lower draw- downs of short term credit facilities; The current portion of non-current financial debt primarily consists of the current portion of corporate bonds in the amount of EUR 41.9 million, the current portion of term loans and committed revolving credit facilities in the amount of EUR 10.9 million and the current portion of the fair value of collar derivatives designated as hedges against the risk of interest rate fluctuations on medium and long-term financial liabilities, in the amount of EUR 0.5 million. 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 12.4 million (EUR 11.2 million at 31 December 2013 ), amounts owed to factoring companies totalling EUR 16.2 million (EUR 7.4 million at 31 December 2013), loans totalling EUR 4.6 million received to finance film development, distribution and production operations (EUR 3.1
38 Interim Financial Report at 31 March 2014 – Explanatory Notes million euro at 31 December 2013) and the fair value of financial instruments not designated as hedges for the amount exceeding the change in hedged foreign currency payables of EUR 1.9 million. Due to banks (non current) refers to the portion of committed credit lines and term loan maturing beyond 12 months. Term loans are recognised in the financial statements using the amortised cost method. As already reported in the financial statements at 31 December 2013, 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 Corporate Bond refers to the non current portion of the bonds issued by the Mediaset Group, which are detailed as follows:
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 373.9 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 300.5 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 234.4 million. Non-current financial liabilities and payables primarily consist of loans received to finance film development, distribution and production operations in the amount of EUR 1.4 million (EUR 1.4 million at 31 December 2013) and the non current portion of the fair value of collar derivatives designated as hedges against the risk of interest rate fluctuations on medium and long-term financial liabilities, in the amount of EUR 1.3 million.
4.8 Financial income and expenses
1Q 2014 1Q 2013
Interests on financial assets 0.7 0.5 Interests on financial liabilities (15.6) (11.1) - - Other financial income/(losses) (7.5) (4.5) - - Foreign exchange gains/(losses) (0.0) 1.3 - - Total financial income/(losses) (22.4) (13.8) The item Interest expense on financial liabilities includes the interest expense for the period on bonds issued by the Mediaset Group and the EI Towers Group totalling EUR 11.4 million (EUR 3.8 million at 31 March 2013). The increase in Other financial income/(losses) mainly refers to the charges arising from the closing of a credit facility.
39 Interim Financial Report at 31 March 2014 – Explanatory Notes
4.9 Taxes for the period
1Q 2014 1Q 2013 IRES and IRAP tax expenses 0.7 1.0 Tax expenses (foreign companies) 7.9 3.0 Deferred tax expense (4.2) 13.7 Total 4.4 17.7 The item IRES and IRAP taxes includes IRAP tax for the period and income resulting from a negative consolidated taxable base for IRES purposes of companies adhering to the Italian tax consolidation regime, 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.
4.10 Earnings/loss per share
The calculation of basic and diluted earnings per share is based on the following data:
1Q 2014 1Q 2013
Net result for the period (millions of euro) (12.5) 9.3
Weighted average number of ordinary shares (without own shares) 1,136,402,064 1,136,402,064 Basic EPS (0.01) 0.01 Weighted average number of ordinary shares for the diluted EPS computation 1,136,402,064 1,136,402,064 Diluted EPS (0.01) 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.
40 Interim Financial Report at 31 March 2014 – Explanatory Notes
5. Cash Flow Statement 5.1 Business Combination net of Cash Acquired
The item refers to the impact on cash and cash equivalents in the period generated by the acquisition of a 100% stake in the share capital of the company Società Assistenza Ripetitori Televisivi S.r.l.
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 2014 and 2013 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 for Italy mainly relate to the carrying amount of investments held in Mediaset España (41.6%) and Mediacinco Cartera S.L. (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 19.5 million at 31 March 2014. Non-monetary costs relate to the provisions for risks and charges.
41 Interim Financial Report at 31 March 2014 – 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 (0.5) 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”
42 Interim Financial Report at 31 March 2014 – Explanatory Notes
Eliminations/ MEDIASET ITALY SPAIN Q1 2013 Adjustments GROUP
MAIN INCOME STATEMENT FIGURES Revenues from external customers 635.0 196.6 - 831.6 Inter-segment revenues 0.4 - (0.4) - Consolidated net revenues 635.4 196.6 (0.4) 831.6 % 76% 24% 0.0 100%
EBIT 34.6 18.8 - 53.4
% 65% 35% 0% 100%
Financial income/(losses) (13.4) (0.3) - (13.8)
Income/(expenses) from equity investments valued with the equity0.1 method (2.5) - (2.3)
Income/(expenses) from other equity investments - - - -
EBT 21.3 16.0 - 37.3
Income taxes (14.1) (3.6) - (17.7)
NET PROFIT FROM 7.2 12.4 - 19.5 CONTINUING OPERATIONS
Net Gains/(Losses) from discontinued operations - - - -
NET PROFIT FOR THE PERIOD 7.2 12.4 - 19.5
Attributable to: - Equity shareholders of the parent company 4.2 12.5 (7.5) 9.3 - Minority Interests 3.0 (0.1) 7.3 10.2
OTHER INFORMATION Assets 5,849.8 1,772.7 (611.3) 7,011.3
Liabilities 3,700.3 339.3 (21.5) 4,018.2 Investments in tangible and intangible non current assets 141.6 82.1 - 223.7 Amortization 221.5 46.7 - 268.2 Other non monetary expenses (11.2) 0.6 - (10.6)
(*) Includes the change in “Advances for the purchase of broadcasting rights”
43 Interim Financial Report at 31 March 2014 – 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 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
Income Statement Summary INTEGRATED EI ELIMINATIONS GEOGRAPHICAL Q1 2013 TELEVISION TOWERS / SEGMENT OPERATIONS ADJUSTMENTS ITALY
Revenues from external customers 622.4 12.9 - 635.4 Inter-segment revenues - 44.8 (44.8) - Consolidated net revenues 622.4 57.7 (44.8) 635.4 % 98% 9% -7% 100%
Operating costs from thrid parties (347.5) (31.8) - (379.3) Inter-segment operating costs (44.1) (0.7) 44.8 - Total Operating Costs (391.6) (32.5) 44.8 (379.3) Amortisation, depreciation and write-downs (210.6) (10.9) - (221.5) EBIT 20.3 14.3 0.0 34.6
44 Interim Financial Report at 31 March 2014 – Explanatory Notes
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
Operating Assets and Investments INTEGRATED EI ELIMINATIONS GEOGRAPHICAL 31st March 2013 TELEVISION TOWERS / SEGMENT OPERATIONS ADJUSTMENTS ITALY Television rights 1,944.7 - - 1,944.7 Other tangible and intangible non current assets 657.4 344.9 (1.4) 1,000.9 Goodwill 142.8 454.1 (335.1) 261.8 Trade receivables 712.2 32.7 - 744.9 Inventories 34.1 3.3 - 37.4 Operating assets 3,491.2 835.1 (336.5) 3,989.8 - - - - Investments in television rights (*) 127.5 - - 127.5 Other investments 6.9 0.8 - 7.7 Investments in tangible and intangible assets 134.5 0.8 - 135.2
(*) 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 season. 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 2014 – 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 counterparts 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 - 1.3 1.2 0.2
ASSOCIATED ENTITIES A.C. Milan S.p.A.* 0.0 0.1 - 0.0 4.7 0.0 Alba Servizi Aerotrasporti S.p.A. 0.0 0.2 - 0.2 0.1 - Arnoldo Mondadori Editore S.p.A.* 3.3 0.2 - 3.8 0.6 (0.0) Fininvest Gestione Servizi S.p.A. 0.0 0.0 - 0.0 - 0.0 Isim S.p.A. ------Mediobanca S.p.A. - 0.0 (1.7) 0.0 - (197.4) Mediolanum S.p.A.* 1.6 - - 1.1 - - Trefinance S.A.* - 0.0 - - - -
Other associated 0.0 0.4 - 0.0 0.0 0.1
Total associated 4.9 0.8 (1.7) 5.2 5.4 (197.3)
JOINT CONTROLLED AND AFFILIATED ENTITIES 60 DB Entertainment S.L. - 0.0 - - 0.0 - Agrupaciòn de Interés Economico Furia de Titanes II A.I.E. ------Auditel S.p.A. - 1.1 - - - - Beigua S.r.l. ------Big Bang Media S.L. - 0.8 - - 2.4 - Boing S.p.A. 2.4 8.2 0.1 14.1 10.4 18.5 Capitolosette S.r.l.** 0.6 0.1 0.0 5.1 0.8 0.8 DTS Distribuidora de Television Digital SA 0.0 6.2 - 0.0 8.2 - Editora Digital de Medios S.L. 0.0 0.0 - 0.0 0.1 - Fascino Produzione Gestione Teatro S.r.l. - 12.1 (0.0) 0.0 13.2 (12.4) La Fabbrica De la Tele SL - 5.7 - 1.1 6.9 - Mediamond S.p.A. 7.5 1.7 (0.0) 18.9 4.1 8.3 MegaMedia Televisión SL 0.0 1.0 - 0.1 0.4 - Nessma Lux S.A.** - - 0.0 0.0 - (0.2) Netsonic SL - - - - - 0.4 Pegaso Television INC** - - 0.1 2.0 - 3.8 Produciones Mandarina SL - 2.6 - - 2.4 0.1 Supersport Televisión SL 0.2 2.7 - 0.3 1.2 - Titanus Elios S.p.A. - 1.0 - 0.5 - 6.4 Tivù S.r.l. 0.7 0.3 - 0.8 0.5 0.0
Total joint controlled and affiliated entities 11.5 43.7 0.1 42.9 50.5 25.5
KEY STRATEGIC MANAGERS*** - 0.3 - - 0.6 -
PENSION FUNDS (Mediafond) - - - - - (1.2)
OTHER RELATED PARTIES**** 0.0 0.4 - 0.1 0.0 -
TOTAL RELATED PARTIES 16.5 46.4 (1.6) 49.4 57.8 (172.7) * The figure includes the company and its subsidiaries, affiliates 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 consortiums that mainly carry out activities connected with the television signal transmission operational management.
46 Interim Financial Report at 31 March 2014 – 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 200.6 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 related to inflows of EUR 12.8 million from Fininvest S.p.A. as payment of the receivable for which a hold harmless agreement had been signed on 5 March 2010, and outflows for the acquisition of rights regarding the company Milan A.C. of EUR 7.7 million.
47 Interim Financial Report at 31 March 2014 – Explanatory Notes
8. Personal guarantees given and commitments The overall amount of guarantees received, mainly bank guarantees, for receivables from third parties totalled EUR 18.4 million (EUR 30.6 million at 31 December 2013). Of this amount EUR 8.4 million were issued by Mediaset España Group (EUR 25.1 million at 31 December 2013). In addition, bank guarantees in favour of third party companies were issued for a total amount of EUR 55.2 million (EUR 76.7 million at 31 December 2013). Of this amount EUR 49.6 million were issued by Mediaset España Group (EUR 61.2 million at 31 December 2013). The main commitments of the Mediaset Group can be summarised as follows:
commitments for the acquisition of television and movie broadcasting rights, totalling EUR 813.4 million (EUR 878.9 million at 31 December 2013). These future commitments relate mainly to volume deal contracts of the Mediaset Group with some of the leading American TV producers;
commitments for content and program rental contracts totalling EUR 877.6 million, of which 39.2 to associates (EUR 241.2 million at 31 December 2013). The decrease relates to commitments for the purchase of Champions League rights for the years 2015-2016, 2016- 2017, 2017-2018;
commitments for artistic projects, television productions and press agency contracts of approximately EUR 127.0 million (EUR 123.6 million at 31 December 2013), of which EUR 19.6 million due to Related Parties;
commitments for digital broadcasting capacity services of EUR 227.2 million (EUR 239.5 million at 31 December 2013);
contractual commitments for the use of satellite capacity of EUR 102.5 million (EUR 108.0 million at 31 December 2013);
commitments for the purchase of new equipment, works and supplies for the companies’ head offices, multi-year rents and leases, and the supply of EDP services and commitments to trade associations for the use of intellectual property rights totalling EUR 133.0 million (EUR 163.1 million at 31 December 2013).
48 Interim Financial Report at 31 March 2014 – Explanatory Notes
9. Movements resulting from atypical and/or unusual transactions Pursuant to Consob communication no. DEM/6064293 of 28 July 2006 it is hereby stated that in the first quarter of 2014 no atypical and unusual transactions were carried out by the Group as defined by the above 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
49