Separate and Consolidated Interim Financial Statements As at 30 June 2020
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Separate and Consolidated Interim Financial Statements as at 30 June 2020 Separate and Consolidated Interim Financial Statements as at 30 June 2020 Contents 7 Introduction 17 Report on Operations 171 Interim Separate Financial Statements as at 30 June 2020 239 Interim Consolidated Financial Statements as at 30 June 2020 303 Corporate Directory 4 Contents Introduction 7 Corporate Officers 8 Organisational Structure 9 Introduction from the Chairman of the Board of Directors 11 Financial Highlights 12 Report on Operations 17 Mission 18 Market scenario 18 The Rai Group 24 Television 41 Radio 97 RaiPlay and Digital 107 Public broadcasting service function 116 TV production 119 Technological activities 120 Transmission and distribution activities 129 Sales activities 130 Other activities 135 Changes in the regulatory framework 143 Corporate governance 148 Corporate Governance Report - the Rai Control Governance Model and the Internal Control and Risk Management System (SCIGR) 150 Other information 155 Human Resources and Organisation 155 Safety & Security 159 Intercompany Relations 161 Significant events occurring after 30 June 2020 168 Outlook of operations 168 5 Interim Separate Financial Statements as at 30 June 2020 171 Analysis of the results and performance of operating results, financial position and cash flows for the first half of 2020 172 Financial Statements of Rai SpA 186 Notes to the Interim Separate Financial Statements as at 30 June 2020 191 Certification pursuant to article 154-bis of Italian Legislative Decree 58/98 235 Independent Auditors' Report 236 Interim Consolidated Financial Statements as at 30 June 2020 239 Analysis of the consolidated results and performance of operating results, financial position and cash flows for the first half of 2020 240 Financial statements of the Rai Group 255 Notes to the Interim Consolidated Financial Statements as at 30 June 2020 260 Certification pursuant to article 154-bis of Italian Legislative Decree 58/98 300 Independent Auditors' Report 301 Corporate Directory 303 Introduction 8 Corporate Officers Board of Directors Chairman Marcello Foa Chief Executive Officer Fabrizio Salini Directors Rita Borioni Beatrice Coletti Igor De Biasio Riccardo Laganà Giampaolo Rossi Secretary Anna Rita Fortuna Board of Statutory Auditors Chairman Carmine di Nuzzo Standing auditors Giovanni Ciuffarella Maria Teresa Mazzitelli Alternative auditors Pietro Contaldi Antonella Damiotti Independent Auditor PricewaterhouseCoopers 9 Organisational Structure (short form) Board Chairperson of Directors of the Board Internal Audit Supervisory Body Chief Executive Officer General Management Corporate Mastheads TV channels Corporate CFO - Finance and genres and Support and Planning Property CTO-Technological Radio COO - TV production and Infrastructures Local Sites Rai Cinema Rai Com Rai Pubblicità Rai Way 10 Introduction from the Chairman of the Board of Directors In the first half of 2020, the Rai Group posted a slight profit (€4.8 million), improving slightly on the loss of just under €3.3 million in the same period of the previous year. In terms of revenues, in a context considerably influenced by the effects of the health emergency, an overall reduction of approximately €120 million was recorded, due in part to lower revenues from licence fees and in part to lower advertising revenues, which were down by 15% for the Rai Group. Against a significant decrease in revenues, an equally strong reduction in costs was recorded, resulting from actions taken to combat the risk of Covid-19, at the price of heavy repercussions on production activities with costs being deferred to and having an impact on the second half of 2020, and even more so on 2021. The trend of these variables has resulted in an improved EBIT close to €10 million, along with a slight increase in amortisation, depreciation and write-downs. At 30 June 2020, the net financial position was negative by €275.9 million (€-239.1 million at 30 June 2019), an improvement of €265.4 million compared to 31 December 2019. The reduction in net debt compared to 31 December 2019 is due to cash flows in the first half of the year, characterised by ordinary instalments on account equal to approximately 70% of the annual value, and was also positively affected by some events: • the postponement, as a result of the pandemic, of 2020 sports events and consequent renegotiation of the payment instalments still due, relating to the European Football Championship, the Summer Olympics, national football matches and cycling events; • a reduction in personnel disbursements and lower payments for operating expenses and travel costs, due to production activities being stopped during the lockdown period. 2020 will unfortunately be remembered as the year of Covid-19, the pandemic that is scourging the whole world and – due to the ramifications of its implications – it will be a watershed in transforming how our societies are organised, our personal and social relationships, guiding habits and behaviour to a considerable extent, also on a structural level. During the most acute phase of the crisis, Rai developed an intense information campaign, also acknowledging the indications and requests of the Government, which was distributed on all public service platforms and assisted institutions in raising awareness among citizens of the importance of adopting precautionary measures prescribed from time to time to counter and mitigate the spread of infection, also meeting the urgent and pressing need for knowledge, reflection and in-depth analysis, that everyone felt, faced with an unknown and unforeseeable phenomenon. The fundamental role of the Public Service, perfectly aligned with the mission and commitments entrusted to Rai, involved a radical rethinking of the schedule forma to fully respond to these requests, not forgetting the increase in viewing time and restriction measures they would inevitably entail, leaving room for reviewing entertainment-oriented programmes with a different logic and languages. We will not be able to forget the footage from the cameras of the film crews, videomakers, reporters and journalists of Rai productions, who delivered snapshots of a collective pain that we did not imagine we would have to witness in our times. The many initiatives in the educational field were strong and significant, deserving considerable appreciation for the articulation and breadth of the topics covered and the scientific validity of proposals. 11 Initiatives and results on the digital front were also highly important. In this regard, there was the #ilcinemanonsiferma initiative, with the exclusive showing on our platform of 8 films co-produced or acquired by Rai Cinema, 4 of which had never been distributed in cinemas but were aired for the first time directly on RaiPlay. The aim of the initiative was to reflect the Rai Group’s dedication, even when all venues were closed, to a sector – the cinema – which is vital for the national economy and for the collective imagination. So these troubled times highlighted even more clearly what the nature of the mission of the public service should be, in which areas our efforts should focus and which principles our activities should be inspired by, legitimizing the irreplaceable value of a public broadcasting service. Like the vast majority of economic sectors, the pandemic has certainly altered, in a non-cyclical way, the dynamics of the business, and so it will be fundamental to take steps together with the Government to revise the medium/long term compatibility framework, at different levels, to preserve and consolidate this wealth of experience and expertise. Our focus on the future, that guides us as Directors, must not forget the past, especially our most glorious past, with a moving and dutiful tribute to Sergio Zavoli, the great master of Italian journalism, radio and television, author of memorable investigations, superb reports, interviews and TV series. The memory of Zavoli must spur on the entire Company to honour the Public Service with wisdom and rigour. Marcello Foa 12 Financial Highlights Rai SpA (€/million) June 2020 June 2019 Change Revenue 1,173.2 1,277.7 (104.5) External costs (600.0) (726.3) 126.3 HR expenses (464.1) (472.4) 8.3 Total operating costs (1,064.1) (1,198.7) 134.6 EBITDA 109.1 79.0 30.1 EBIT (37.8) (53.1) 15.3 Pre-tax profit/(loss) 25.6 0.0 25.6 Profit/(loss) for the year 33.0 14.0 19.0 Investments in programmes 62.8 75.4 (12.6) Technical investments 30.8 26.6 4.2 Investments in lease rights of use 14.3 5.5 8.8 Total investments 107.9 107.5 0.4 (€/million) 30 June 2020 31 December 2019 Change Equity 751,1 713.0 38.1 Net financial debt excluding operating lease liabilities 105.1 481.2 (376.1) (units) 30 June 2020 31 December 2019 Change Permanent personnel at the end of the period 11,504 11,527 (23) Temporary personnel at the end of the period 52 139 (87) Personnel at the end of the period (Permanent and temporary) 11,556 11,666 (110) 13 1,277.7 1,173.2 726.3 600.0 33.0 25.6 14.0 EBIT 0.0 Revenue External Pre-tax Profit/(loss) costs profit/(loss) for the period (37.8) 11,666 11,556 (53.1) 751.1 713.0 481.2 75.4 62.8 30.8 26.6 105.1 June 2019 Equity Net financial Technical Investments Personnel at the debt investments in programmes end of the period December 2019 excluding operating June 2020 lease liabilities 14 Rai Group (€/million) June 2020 June 2019 Change Revenue 1,245.4 1,365.9 (120.5) External costs (425.6) (560.0) 134.4 HR expenses (513.1) (521.1) 8.0 Total operating costs (938.7) (1,081.1)