Relazione Amministratori 2011
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_____________________________________________________________________ _________________________________________________________ Annual Financial Report at 31 December 2011 Cairo Communication S.p.A. Head office: Via Tucidide 56, Milan Share Capital € 4,073,856.80 Translation into the English language solely for the convenience of international readers _____________________________________________________________________ Governance ________________________________________________________________________________________ Board of Directors Urbano Cairo * Chairman Uberto Fornara Chief Executive Officer Roberto Cairo Director Marco Janni Director Antonio Magnocavallo Director Marco Pompignoli Director Roberto Rezzonico Director Mauro Sala Director Internal Control Committee Roberto Rezzonico Director Antonio Magnocavallo Director Mauro Sala Director Remuneration Committee Antonio Magnocavallo Director Roberto Rezzonico Director Marco Janni Director Related Party Committee Marco Janni Director Mauro Sala Director Roberto Rezzonico Director ________________________________________________________________________________________ Board of Statutory Auditors Marco Moroni Chairman Marco Giuliani Standing auditor Maria Pia Maspes Standing auditor Mario Danti Alternate auditor Enrico Tamborini Alternate auditor ________________________________________________________________________________________ Audit Firm KPMG S.p.A. * Ordinary and extraordinary executive powers exercised with single signatory, as limited by the Board of Directors. 2 _____________________________________________________________________ DIRECTORS’ REPORT Separate and consolidated financial statements at 31 December 2011 Dear Shareholders, The separate and consolidated financial statements as at and for the year ended 31 December 2011, submitted for your approval, show, respectively, a profit of Euro 19,258 thousand and a profit attributable to the owners of the parent of Euro 23,446 thousand. In 2011, the Cairo Communication Group continued to operate as a publisher of magazines and books (Cairo Editore/Editoriale Giorgio Mondadori and Cairo Publishing), as a multimedia advertising broker (Cairo Pubblicità) for the sale of advertising space on TV, in print media, on the Internet and in stadiums, and as operator of Internet sites (Il Trovatore). In 2011, the short and medium-term economic uncertainty began to deteriorate – starting especially from autumn – reflecting the overall economic-financial scenario. According to AC Nielsen figures, advertising investments in Italy in 2011 amounted to approximately Euro 8.6 billion, down 3.8% versus the previous year. Nielsen’s analysis by media shows that in 2011: the magazine advertising market dropped by 3.7% versus 2010, when it had slid by 5.4% versus 2009, the TV advertising market fell by 3.1% versus 2010, when it had progressed by 6% versus 2009. Against this backdrop, in 2011 current operating results for the Cairo Communication Group surged versus last year, with gross operating profit (EBITDA) of approximately Euro 39.5 million (+31.6%) and operating profit (EBIT) of approximately Euro 35.9 million (+36.6%). The 2011 profit attributable to the owners of the parent came to approximately Euro 23.4 million. Mention must be made that the financial year 2010 had also included non-recurring income from the Cairo-Telepiù arbitration, as illustrated in the 2010 annual financial report, in the paragraph on “ Management Performance of the Cairo Communication Group - Consolidated figures” contained in the Directors’ Report and in the notes to the consolidated and separate financial statements at 31 December 2010 regarding “Other operating revenues - non-recurring income from Cairo-Telepiù arbitration” . Looking at each business segment, in 2011: - for publishing , gross operating profit (EBITDA) and operating profit (EBIT) were up versus the previous year, reaching Euro 19.6 million and Euro 18.2 million respectively, despite the lower number of issues of “Settimanale Dipiù” versus 2010 (52 instead of 53), 4 _____________________________________________________________________ with a drop of approximately Euro 0.3 million in profits, the cut price (from 1 Euro to 50 cents) of six issues of “Dipiù TV”, with a drop of approximately Euro 1 million, and costs of Euro 0.3 million, mainly for personnel, incurred in 2011 during the planning stage of the two new magazines scheduled for 2012. In October, Cairo Editore chose Riccardo Signoretti and Marisa Deimichei as the editors-in-chief of two new weeklies. The first, “Settimanale Nuovo”, led by Riccardo Signoretti, debuted on newsstands on 19 January 2012 (the first 2 issues at a launch price of 50 cents), and the first 6 issues posted average sales of approximately 419 thousand copies, a highly satisfying result that even beats forecasts. The second, a women’s weekly, will be launched in 2012; - for advertising , gross operating profit (EBITDA) and operating profit (EBIT) from current operations surged versus the previous year, reaching respectively Euro 19.9 million and Euro 17.7 million, as a result mainly of the increase in TV advertising revenues (+30.1% overall). Advertising sales on LA7, approximately Euro 167.5 million, were up 32.5% versus 2010. In 2011, LA7 audience shares confirmed the trend that had started in autumn 2010 and increased by 24.4% (3.82% average all-day share versus 3.07% in 2010). Specifically, the 8PM newscast’s average share reached 8.4% in 2011 versus 4.22% in 2010, and continued to enjoy widespread exposure across the media. Excellent results were also achieved by the other news and in-depth programmes, especially by “L’infedele” (6% average share versus 3.71% in 2010), ”Otto e mezzo” (6.69% average share versus 3.91% in 2010) and the new programmes “Italialand nuove attrazioni” (9.97% average share in 2011) and “Piazza Pulita” (6.43% average share in 2011). PERFORMANCE Cairo Communication Group – Consolidated figures The main consolidated income statement figures of 2011 can be compared as follows with those of 2010: 5 _____________________________________________________________________ 2011 2010 (€ thousands) Current Non- Total Current Non- Total operations recurrin operations recurring g items items Gross operating revenue 316,635 - 316,635 271,456 - 271,456 Advertising agency discounts (35,086) - (35,086) (27,896) - (27,896) Net operating revenue 281,549 - 281,549 243,560 - 243,560 Change in inventory (124) - (124) (35) - (35) Other income 2,567 - 2,567 2,871 - 2,871 Non-recurring income from arbitration - - - - 6,792 6,792 Total revenue 283,992 - 283,992 246,396 6,792 253,188 Production cost (220,854) - (220,854) (194,610) - (194,610) Personnel expense (23,630) - (23,630) (21,753) - (21,753) Gross operating profit (EBITDA) 39,508 - 39,508 30,033 6,792 36,825 Amortization, depreciation, (3,584) - (3,584) - provisions and impairment losses (3,738) (3,738) Operating profit 35,924 - 35,924 26,295 6,792 33,087 Net financial income 1,327 - 1,327 349 - 349 Income (loss) on investment (765) - (765) 1 - 1 Pre-tax profit 36,486 - 36,486 26,645 6,792 33,437 Income tax (13,027) - (13,027) (9,518) (3,122) (12,640) Non-controlling interests (3) - (3) (1) - (1) Profit from continuing operations attributable to the owners of the parent 23,456 - 23,456 17,126 3,670 20,796 Loss from discontinued operations (10) - (10) (67) - (67) Loss from discontinued operations attributable to non-controlling interests - - - - - - Loss from discontinued operations attributable to the owners of the (10) - (10) (67) - (67) parent Profit attributable to the owners of 23,446 23,446 17,059 3,670 20,729 the parent - In the schedules of the consolidated income statement for 2010 appearing in this directors’ report, income arising from the Cairo-Telepiù arbitration is shown separately owing to its non- recurring nature. As for the preparation of the consolidated financial statements at 31 December 2010, loss attributable to the owners of the parent in Diellesei S.r.l. in liquidation has been shown separately under “loss from discontinued operations”. In 2011, looking at current operations: - consolidated gross revenue was approximately Euro 319.2 million (Euro 274.3 million in 2010), which comprise operating revenue of Euro 316.6 million and other revenue of Euro 2.6 million, up 16.3% overall versus 2010, - consolidated gross operating profit (EBITDA), amounting to approximately Euro 39.5 million, was up 31.6% versus 2010 (Euro 30 million), 6 _____________________________________________________________________ - operating profit (EBIT) amounted to approximately Euro 35.9 million, rising by 36.6% versus 2010 (Euro 26.3 million), - profit from current operations attributable to the owners of the parent came to approximately Euro 23.4 million, up 37.4% versus 2010 (Euro 17.1 million). Including non-recurring income from the Cairo-Telepiù arbitration, in 2010 consolidated gross operating profit (EBITDA) and operating profit (EBIT) had amounted to approximately Euro 36.8 million and approximately Euro 33.1 million, respectively. Profit attributable to the owners of the parent had come to approximately Euro 20.7 million. The variation in financial income is mainly due to the variation in interest rates versus 2010 (1.19% average 1-month Euribor in 2011 versus 0.57% in 2010). Investment income refers to the effect of the measurement of the investment in the associate Dmail Group S.p.A. The Group statement of comprehensive income can be analyzed as follows: (€ thousands) 2011 2010 Consolidated