cover_bilancio_inglese 18mm.qxp_x27/03/1912:07Pagina1 Annual Report at December 31, 2018 GEDI Gruppo Editoriale A n n u a l R e G p o E r t D a I t G D r e u c e p m p b o S o e c E r i e 3 d t à 1 i t p , o e r 2 r a i 0 z a i 1 o l n 8 e i APERTURE_SFUMATURA.qxp_impaginato 06/02/19 11:46 Pagina 11 GEDI Gruppo Editoriale Società per Azioni Annual Report at 31 December 2018 | GEDI Gruppo Editoriale | 5 Index Financial Highlights 9 Report of the Board of Directors at 31 December 2018 Operating performance and consolidated results of the GEDI Group at 31 December 2018 13 Market Review 14 GEDI Group operating performance for 2018 14 Results by area 16 Subsequent events and outlook 20 Operating performance and consolidated results at 31 December 2018 21 Results of the Parent Company GEDI Gruppo Editoriale SpA at 31 December 2018 30 Reconciliation between the Parent Company’s financial statements and consolidated financial statements 33 Main risks and uncertainties to which the GEDI Gruppo Editoriale SpA and the GEDI Gruppo are exposed 33 Certification pursuant toArticle 37 of Consob Resolution No. 16191/07 (Market Regulations) 37 Other information 37 Proposal for allocation of the 2018 profit 39 Disclosure pursuant to Consob Regulation No. 11971 43 Report on corporate governance and the ownership structure 55 Consolidated financial statements of the GEDI Group at 31 December 2018 Consolidated Statement of Financial Position 99 Consolidated Income Statement and Consolidated Statement of Comprehensive Income 100 Consolidated Statement of Cash Flow 101 Consolidated Statement of Changes in Equity 102 Notes to the Consolidated Financial Statements of the GEDI Group 105 Annexes 177 Certification of the consolidated financial statements pursuant toArticle 154- bis of Italian Legislative Decree No. 58 of 24 February 1998 185 Independent Auditors’ Report of the Consolidated Financial Statements 189 Financial statements of GEDI Gruppo Editoriale SpA at 31 December 2018 Statement of Financial Position 199 Separate Income Statement and Statement of comprehensive income 200 Statement of Cash Flow 201 Consolidated Statement of Changes in Equity 202 Notes to the annual Financial Statements of GEDI Gruppo Editoriale SpA 205 Certification of the financial statements pursuant toArticle 154- bis of Italian Legislative Decree No. 58 of 24 February 1998 261 Board of Statutory Auditors Report 265 Independent Auditors’ Report of the Separate Financial Statements 277 | GEDI Gruppo Editoriale | 7 Company Name GEDI Gruppo Editoriale Società per Azioni Share capital Euro 76,303,571.85 Tax ID and Business Registry of Rome registration number no. 00488680588 VAT No. 00906801006 Registered office Via Cristoforo Colombo 90, Rome, Italy The Board of Directors: Honorary Chairman Carlo De Benedetti Chairman Marco De Benedetti Deputy Chairpersons John Elkann Monica Mondardini CEO and Laura Cioli Managing Director Directors Agar Brugiavini Giacaranda Maria Caracciolo di Melito Falck Elena Ciallié Alberto Clò Rodolfo De Benedetti Francesco Dini Silvia Merlo Elisabetta Oliveri Luca Paravicini Crespi Carlo Perrone Michael Zaoui The Board of Statutory Auditors: Chairman Gaetano Rebecchini Statutory Auditors Maurizio Lauri Marina Scandurra Independent Auditors KPMG SpA | GEDI Gruppo Editoriale | 9 Financial Highlights Consolidated operating data (€ million) Year 2017 Year 2018 Revenues 615.8 648.7 Adjusted gross operating profit 57.4 51.7 Gross operating profit 52.8 33.1 Adjusted operating profit 41.1 33.1 Operating profit 28.2 (11.1) Profit (loss) before taxes 19.1 (33.2) Net profit (123.3) (32.2) Consolidated financial data (€ million) 31-Dec-17 31-Dec-18 Net invested capital 672.7 626.6 Shareholders’ Equity (incl. minority interests) 557.6 523.4 Group Shareholders’ Equity 557.1 522.8 Minority interests 0.5 0.6 Net financial position (115.1) (103.2) Dividends distributed - - Personnel Year 2017 Year 2018 Employees at year-end 2,445 2,359 Average employees 2,214 2,422 Main ratios Year 2017 Year 2018 ROS (Adjusted operating profit/Revenues) 6.7% 5.1% ROS (Operating profit/Revenues) 4.6% -1.7% ROCE (Operating profit/Net capital employed) 4.2% -1.8% ROE (Net profit/Shareholders’ Equity) -22.1% -6.1% APERTURE_SFUMATURA.qxp_impaginato 06/02/19 11:46 Pagina 11 Report of the Board of Directors Report of the Board of Directors | GEDI Gruppo Editoriale | 13 Report of the Board of Directors at 31 December 2018 Operating performance and consolidated On 1 January 2018, the Group adopted the results of the Gedi Group at 31 December following new accounting standards: 2018 Below are the main economic and financial • IFRS 15 - Revenue from Contracts with indicators as at 31 December 2018. Customers, the application mainly resulted in: Consolidated results Year Year - the recording of circulation revenues (?mn) 2017 2018 based on the cover price or the price ef- Revenues, of which: 615.8 648.7 fectively paid by the end purchaser, gross • circulation 262.7 284.6 of all the fees paid, including the portion • advertising 303.1 318.0 paid to newsagents. Consequently, and • add-on products and sundries 50.0 46.2 this is where the difference from the pre- Adjusted gross operating profit 57.4 51.7 vious accounting treatment lies, this com- Gross operating profit 52.8 33.1 mission is also recognised as a distribution Adjusted operating profit 41.1 33.1 cost and is not deducted from the revenue Operating profit 28.7 (11.1) figure as was previously the case; Profit (loss) before taxes 19.1 (33.2) - the statement of consolidated advertis- Net profit (loss) of assets destined ing revenues net of publisher fees arising to continue (131.4) (32.1) from the advertising income on behalf of Profit (loss) from discontinued third party publishers, previously recog- operations and assets held for sale(1) 8.2 - nised under costs for services. Net profit (123.3) (32.2) The Group has applied the internation- al accounting standard IFRS 15 as from 31 December 31 December 1 January 2018, using the “retrospective (?mn) 2017 2018 method”. Comparative information in Net financial position (115.1) (103.2) the Report of the Board of Directors has Shareholders’ Equity therefore been restated. It is noted that (incl. minority interests) 557.6 523.4 the application of the new standard has • Group Shareholders’ Equity 557.1 522.8 had no impact on the operating profit, • Minority interests 0.5 0.6 profit for the period or the Group’s share- Employees 2,445 2,359 holders’ equity, with differing accounting treatment only in certain items. The de- (1) The “Profit (loss) from discontinued operations and assets held for sale” tails regarding the effects of applying IFRS at 31 December 2017 includes the effects of the deferred portion of con- 15 are explained under paragraph 5 of the sideration linked to the sale on 30 January 2015 of All Music, the Group company that produced the mainstream national television channel Dee- Notes to the Financial Statements. Jay TV, to the new producer Discovery Italia. Regarding the comparability of the figures, it should be remembered that on 27 June 2017, the merger of the ITEDI Group into GEDI was completed. • IFRS 9 - Financial Instruments, the applica- Therefore, the consolidated income statement for 2017 includes the ITEDI tion mainly resulted in: Group net profit from 1 July 2017 onwards. - the introduction of new criteria for the The “Adjusted gross operating profit” and the “Adjusted operating profit” classification and measurement of financial were determined excluding reorganisation costs, write-downs for impair- assets and liabilities, replacing the various ment tests and other non-recurrent components of the result. rules given in IAS 39; 14 | GEDI Gruppo Editoriale | Report of the Board of Directors - an estimate of the losses on certain assets As for newspaper circulation in 2018, accord- calculated using the expected losses model ing to ADS (Accertamento Diffusione Stam- (a method that involves early recognition of pa) figures, there was a decline in sales on impairment compared to the previous terms the news stands and in subscription of 7.4% of IAS 39) using supporting information (-8.3% for national papers and -6.8% for lo- that includes historical, current and pro- cal papers). Including digital copies, overall jected data. The standard requires that this circulation dropped by around -5.7%. impairment model is applied to all the fi- nancial instruments, i.e. the financial assets measured at amortised cost, to those meas- GEDI Group operating performance for ured at fair value through other compre- 2018 hensive income, to receivables from rental contracts and to trade receivables. It should be remembered that, on 27 June The effects of the first application of the in- 2017, the merger was completed into GEDI ternational IFRS 9 accounting standard are of the ITEDI Group, publisher of the news- recognised under the opening shareholders’ papers La Stampa and il Secolo XIX. As a equity at the date of first application (1 Janu- result of this deal, GEDI acquired control of ary 2018), in accordance with the standard’s the ITEDI Group, which entered the scope of provisions. The comparative information rec- consolidation on 30 June 2017. Thus, the in- ognised in this Board of Directors Report was come statement of the GEDI Group for the therefore not restated. In order to provide a year 2017 includes the ITEDI Group as from better comparison however, certain data was 1 July 2017 onwards. reclassified for negligible amounts. The details For the main economic indicators illustrated regarding the effects of applying IFRS 9 are below, the change from 2017 is also given on explained under paragraph 5 of the Notes to a like-for-like basis.