Class Editori Spa Via M. Burigozzo, 5 – 20122 Milan – Website: www.classeditori.it Share capital 10,560,751.00 Euros – Economic & Administrative Index n° 1205471 – Tax and VAT Code 08114020152 Composition of Corporate Bodies
Board of Directors
Chairman Victor Uckmar
Vice Chairman and Managing Director Paolo Panerai Vice Chairman Luca Nicolò Panerai Vice Chairman Pierluigi Magnaschi Executive Director Vittorio Terrenghi Executive Director Gabriele Capolino
Directors William L. Bolster Maurizio Carfagna Paolo Del Bue Peter R. Kann Samanta Librio Maria Martellini Angelo Eugenio Riccardi
Board of Statutory Auditors
Chairman Carlo Maria Mascheroni Statutory auditors Lucia Cambieri Vieri Chimenti
Alternate auditors Ferruccio Germiniani Pierluigi Galbussera
Independent Auditor
BDO Spa
The three-year mandates of the Board of Directors and the Board of Statutory Auditors, appointed by the Shareholders' Assembly on 30th April 2010, will expire at the time of the Shareholders' Assembly that approves the financial statements for the 2012 financial year. The independent auditor is appointed until the Shareholders’ Meeting which will approve the 2012 financial statements.
Page 2 Class Editori Spa
and subsidiaries Registered office, Via Marco Burigozzo 5, Milan
Quarterly Management Report at 31st March 2012
The quarterly management report was drawn up on a consolidated basis, as required by current legislation.
COMMENTS ON ECONOMIC DATA
The principal income statement items that contributed to the operating result as of 31st March 2012, and which are highlighted in the accounts prospectus, can be summarised as follows:
• Total revenues for the period amounted to 25.19 million euros, a 15.2% drop compared with 31st March 2010 due to the exit from the scope of consolidation of MF Honyvem Spa which was sold in December 2011 with a significant capital gain. Considering the same scope of consolidation, the effective fall in turnover amounts to 2.5%. This drop is due to market performance in the last three years;
• the Publishing House's operating costs amounted to 26.77 million euro, a 9.5% fall compared with the figure at 31st March in the previous year. Considering the same scope of consolidation, operating costs increased by 1.2% due to the return on the investments made during 2011 for the launch of the new television channels, both in staff and in sales structures and production activities;
• the gross operating margin (Ebitda), defined as the difference between revenues and the cost of production prior to depreciation/amortisation and financial charges, showed a loss of 1.58 million euros: net of the deconsolidation effect of MF Honyvem (the Ebitda of which stood at 0.72 million euros at 31 March 2011), the decrease amounted to just under 1 million euros;
Page 3 • depreciation/amortisation and write-downs amounted to 0.75 million euros, a decrease of 1.77 million euros compared to the same period in 2011;
• though the net financial position has significantly improved, net financial borrowing rose from 212,000 euros at 31st March 2011 to 473,000 euros in the same period of 2012, mainly due to the increase in rates paid and partly due to the decision to maintain the liquidity deriving from the capital gain on MF Honyvem consistent;
• in the first quarter, the group showed a net loss after minority interests of 2.63 million euros, against a loss of 2.57 million euros during the same period of the preceding year. Net of the deconsolidation effect of MF Honyvem, the same scope of consolidation would have generated a net improvement of 0.45 million euros.
SIGNIFICANT ECONOMIC-FINANCIAL EVENTS IN 2012
The most recent Nielsen figures for 2012 (January and February) show an overall fall of 5.7% in the advertising market. During this period, the television sector lost 7% and the radio sector 5%. Web media continued to grow by 12.3% during the quarter.
As regards the press, advertising data for the first 3 months published by the Observatory of the Federation of Advertising Concessionaires (FCP) fell by 8.3% in overall terms.
In particular, paid newspapers registered an overall decrease of 7.4% in terms of turnover and 0.1% in terms of space, a sign that the reductions were mainly due to average sales prices. This performance is confirmed by the data relative to single typologies, with national Commercial advertising which fell by 5.9%.
Magazines, instead, lost 7.9% in turnover, almost entirely due to the reduction in advertising spaces.
Overall advertising collections on the Publishing House's media were in countertendency with respect to the market, showing a slight increase in the first quarter of 2012, amounting to 0.2% with respect to the same period in 2011. This result was achieved thanks to the significant increase in turnover from digital media (TV +29% and the Internet +100%) which offset the fall in turnover from printed media (-4.7%) and confirm the correctness of the strategic choice of investing in the
Page 4 digital market despite the fact that turnover does not yet allow a positive margin to be achieved.
As regards the circulation and readership of newspapers, the market was decidedly negative in the first few months of 2012. The publishing house's circulation data for the period remains at satisfactory levels. Class achieved (latest updated moving average) a circulation of approximately 84,800 copies, Capital 76,400 copies and Milano Finanza 87,200 copies, with a strong growth in readership. Recent Audipress data for spring 2012 is very also positive, with 128,000 readers for Class, 234,000 for Capital and 332.000 for Milano Finanza.
The Internet traffic of Class Editori achieved new historical records during the first half of 2012. The average number of individual users connected during the day amounted to 93,833 during the period in question, compared with 69,562 of the first quarter of 2011 (+34.9%). In terms of viewed pages, growth was even higher (+37.9% compared with the same quarter of 2011), reaching 2 million pages per day compared with 1.5 million in the same period one year ago (source: Audiweb AWReport). The growth in traffic was even higher in March 2012: + 48% compared with December 2011, and 123,916 average users per day (source: Audiweb AWDatabase).
In the field of tablet and smartphone applications, at the end of the first quarter of 2012, 151,000 of these had been downloaded for the economic-financial publications. This number rose to 282,000 if the Class Meteo-The Weather Channel applications are considered, with over half a million accesses/month.
The impact of information services on the Social networks is also growing strongly: in particular, MF/Milano Finanza reached over 50,000 users on Twitter, establishing a record in the sector.
In the context of continuing market uncertainty, the publishing house is implementing a cost containment plan. This plan involves all expense areas and all sectors of the publishing house. In particular, the company and its employees agreed to the Cooperation and Solidarity plan, implemented in 2009, which provides for a 12-month, voluntary reduction of salary by approximately 10%, starting in March, and the use of all remaining vacation time by the end of the year.
Page 5 Revenues for the period can be broken down as follows:
(€/millions) Change 31/03/2012 31/03/2011 % News-stand sales 2.42 2.56 (5.5%) Subscription revenues 6.58 11.08 (40.6%) Advertising revenues 13.54 13.51 0.2% Other revenues 2.66 2.55 4.3%
Total 25.20 29.70 (15.2%)
The reduction in news-stand revenues is associated with the market situation, while the fall in subscription revenues is mainly due to the deconsolidation of MF Honyvem (3.86 million less revenues) and, to a lesser extent, to other phenomena.
As well as revenues that cannot be posted to other categories, other revenues mainly comprises charge-backs to group associates for services rendered.
FINANCIAL SITUATION
The financial situation at 31st March 2012 is as follows:
€ (thousands) 31/03/2012 31/12/2011 31/03/2011
Net medium/long-term financial indebtedness (904) (1.114) (2.083)
Net short-term financial indebtedness/net short- term cash in hand (44,101) (37,683) (55,502) Of which: Financial payables (72,376) (68,484) (58,431) Cash in hand and financial receivables 28,275 30,801 2,929
Net financial position: net indebtedness/net cash in hand (45,005) (38,797) (57,585)
The net financial position of the Publishing House at 31st March 2012 showed an improvement of approximately 12.6 million euros compared with 31st March 2011, while the growth in financial borrowing derived from the decision to use credit lines in
Page 6 order to avoid the effects of the credit crunch. This was fully offset by the 28 million euros of cash and financial receivables. Medium-to-long term financial payables include a long-term soft loan taken out with Centrobanca and a loan with Mediocredito, both expiring in 2015. Current financial payables include, in addition to cash and current account lines, stand-by loans and short- term revolving credit. Liquid assets are held in a current account.
PERSONNEL
Data
31/03/2012 31/12/2011 31/03/2011
Executives 19 20 28 Journalists 131 137 142 Clerical staff 217 227 298 Total 367 384 468
The significant reduction compared with the first quarter of 2011 was mainly generated by the exit of MF Honyvem from the publishing house's scope of consolidation on 14th December 2011: when it was sold, the company employed 6 directors and 95 clerical staff.
The publishing house employed 20 apprentices at 31st March 2012.
Class Editori Spa carries out its activities at its registered office in Via Burigozzo 5, Milan, and also at the following operative offices:
Milan - Via Burigozzo 8
Rome - Via Santa Maria in Via, 12
New York – 7 East, 20 St.
Page 7 ACCOUNTING PRINCIPLES AND EVALUATION CRITERIA
The accounting principles adopted in preparing the financial statements and consolidated quarterly data are the same as those used for the consolidated financial statements of the previous financial year. This consolidated intermediate management report was prepared using the historical cost convention, except for financial instruments available for sale, which, if present, were accounted for at fair value.
The figures for the comparison period have also been reclassified according to IFRS. The Quarterly Management Report at 31st March 2012 was prepared in accordance with Article 154 ter of Legislative Decree 195/2007, as well as the Issuers' Regulations issued by Consob as defined in Article 82 of Consob Regulations n° 11971/1999 (as amended) and annex 3D of these Regulations. Complete information, for both the consolidated group financial statement and for the parent company Class Editori S.p.A., was published as part of the annual financial statements at 31st December 2011 and the 2011 half-year report, to which reference should be made.
Page 8 SCOPE OF CONSOLIDATION
The scope of consolidation includes the parent company Class Editori S.p.A. and the companies which it controls, and thus where it has the power to determine the financial and management policies of a company in order to obtain benefits from its activities. Subsidiary companies are consolidated as of the date when control was effectively transferred to the Group and cease to be consolidated from the date when such control is transferred outside the Group. Subsidiary companies are consolidated on a line-by-line basis. To prepare consolidated data, information on the financial position and performance of subsidiary and associated companies was used, defined by individual companies in the Group at the reference date, suitably reclassified if necessary and adjusted to reflect the application of uniform accounting principles adopted by the Group. Preparation of the consolidated quarterly statement eliminated all balances and operations between Group companies, as well as profits and losses not realised in intergroup transactions. Subsidiaries that were not operative or in liquidation were consolidated using the equity method or cost method whenever their influence on the result of the Group was not significant. Equity investments in associate companies, that is those in which the Group has a significant influence, were recognised using the equity method, as defined by IAS 28. Profits or losses of pertinence to the Group are recognised in the consolidated financial statements on the date when such significant influence began and until the date when it ceased.
The scope of consolidation of the publishing house at 31st March 2012 is shown below:
Page 9 Consolidation on a line-by-line basis The following subsidiaries of Class Editori Spa, apart from Class Editori Spa itself, have been consolidated using the global line-by-line consolidation method:
Percentage of Ownership
- Milano Finanza Editori Spa 81.827 % and subsidiaries: - Milano Finanza Servizi Editoriali Srl 99.00 % - MF Editori Srl 100.00 % - Lombard Editori Srl 50.10 % - PMF News Editori Spa (formerly Capitale Sud Editori Spa) 89.00 % - Campus Editori Srl 70.00 % - Milano Finanza Service Srl 75.01 % - Edis Srl 99.50 % - MF Conference Srl 51.00 % - DP Analisi Finanziaria Srl 94.73 % - EX.CO Srl 100.00 % - Class Editori Service Spa 100.00 % - (directly 80%) - (through E-Class 20%) - Classpi Spa 51.00 % and subsidiaries: - Class TV Service Srl 100.00 % - E-Class Spa 100.00 % - Global Finance Media Inc. 73.52 % - Class CNBC Spa (1) 2.73 % - CFN/CNBC B.V. 68.43 % - Radio Classica Srl 99.00 % - MF Dow Jones Srl (2) 50.00 % - Telesia Spa (2) 75.625 % and subsidiaries: - Classpi Digital Srl (3) 77.00 % - Country Class Editori Srl 100.00 % - Fashion Work Business Club Srl 100.00 % - Assinform/Dal Cin Editore Srl 75.00 % - I Love Italia Srl 51.00 % - Class Meteo Services Srl 100.00 % - TV Moda Srl 51.00 % - Classint Advertising Srl 100.00 % - Class Servizi Televisivi Srl 100.00 %
(1) Consolidated using the line-by-line method as it is 63.34% controlled by CFN CNBC Holding B.V. (2) Consolidated using the line-by-line method as Class Editori Spa has operational control (3) The remaining 23% is directly owned by Class Editori Spa
Page 10 Equity method The following affiliates of Class Editori Spa have been consolidated using the equity method:
- Italia Oggi Editori - Erinne Srl 48.00 % and its subsidiaries
- Romaintv Spa 12.00 %
- Class Horse TV Srl 30.00 %
- Upcube Srl 25.00 %
No changes occurred to the area of consolidation at 31st December 2011.
During March 2012, 25% of the company capital of Upcube Srl was subscribed. The corporate purpose of the company, currently in the start-up phase, is the provision of consulting services, the organisation of events and the development of a portal for the on-line sale of goods and services, already active at www.giraffare.it. Given the very recent purchase and the fact that the company is in the development stage, the holding was posted at cost.
Agefi-Class S.A. was excluded from the scope of consolidation, because it is not operative.
I Love Italia Srl was also excluded from the scope of consolidation and therefore valued at cost, because it is in the start-up phase.
SIGNIFICANT EVENTS DURING THE QUARTER AND OUTLOOK
In order to address the changing market conditions with greater efficiency and provide clients with customised solutions that best meet their requirements, in March the concessionaire Class Pubblicità adopted a new organisational structure that is capable of exploiting the potential of the group, heavily focused on multimedia. Operating activities were subdivided into seven Business Unit; in each of them the division of officials and agents has the task of selling spaces and services to all the media of the publishing company, from printed press to TV, applications, radio, events, international initiatives and editions, featuring particularly high development potentials.
Page 11 Class Editori signed with Xinhua News Agency, the press agency of the Chinese government, an understanding aimed at the cooperation in a series of editorial projects. According to the agreement, in force since 2012, news and analyses on the economy, finance and the Italian and Chinese fashion industry are exchanged; the agreement also includes joint activities regarding Chinese lifestyle, cultural and economic TV information that will be broadcast on Class Cnbc, ClassTV Msnbc (digital terrestrial channel 27) and the TV channels of the Out of Home system by Telesia. According to the agreement, Class Editori is also a privileged partner of Xinhua in its strategy to develop TV activities through the Xinhua CNC Company, the broadcaster of the CNC all news channel in English spread all over Asia, with the plan to create local channels in Europe, the first of which will be in Italy.
Given the current very cautious and inactive scenario, any kind of forecast on the market and operational trends is hard to make.
In general the investments made by the publishing house in equipment, quality products and programs and structures confirm the confidence it has in a recovery of the economy and its capacity to be prepared for a change in the current recession trend.
For the Board of Directors Executive Director Vittorio Terrenghi
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CLASS EDITORI Spa and subsidiaries Quarterly Management Report 01/01/2012- 31/03/2012 Consolidated economic data (euro x 000)
INCOME STATEMENT 31/03/12 31/03/11
REVENUES
Revenues from sales 23,992 28,112 Other operating revenues 1,203 1,587
Total revenues 25,195 29,699
COSTS
Operating costs 26,772 29,594
Gross operating profit – EBITDA (1,577) 105
Amortisation, depreciation and write-downs 747 2.513
Operating result - Ebit (2,324) (2,408)
Net financial income (charges) (473) (212)
Net Result (2,797) (2,620)
Minority interest profit/(loss) 167 50
Net Group result (2,630) (2,570)
Page 13 DECLARATION AS PER ARTICLE 154-BIS ITEM 2 OF LEGISLATIVE DECREE 24 FEBRUARY 1998, N. 58
The undersigned Emilio Adinolfi, as the Director in charge of financial reporting for Class Editori S.p.A., hereby certifies that the accounting information in this document is consistent with accounting records.
The Appointed Director Emilio Adinolfi
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