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Article Excerpt
Original Source: FD (FAIR DISCLOSURE) WIRE
OPERATOR: Good afternoon, this is the Chorus Call conference operator. Welcome, and thank you for joining the Mondadori 2007 results conference call. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions.
(OPERATOR INSTRUCTIONS)
UNIDENTIFIED COMPANY REPRESENTATIVE: -- For magazines there was 2.5%. We include also the new launchings, more than our [Manchester] radio situation, plus 8% and Internet 42.7%. As far as the French market is concerned, when it comes to the magazines where we are, we have a different circulation than in Italy, substantially similar, minus 2.5%, but in terms of advertising, there is a minus 3.6% versus last year.
Now, the Group results, just to sum it up, and we shall see it in greater detail, sales grew by 19.9%, well, thanks also to the contribution from our French counterpart. But also, when it comes to the figures, net from the French results last year, we had a four-month impact. We have a growth of 1.8%, substantially identical in terms of EBITDA and also including, if you like, the investment which is worth EUR8.8 million. And therefore the incidence in sales remained the same as last year, 13.7%. And when it comes to EBITDA, in this particular case, excluding nonrecurrent items and Mondadori France, the growth is 16.7%, 1.5% growth and net 16.7%.
Net profit, 3.3% in spite of more burdensome financial charges and payoff from the acquisition in France and the net debt got to EUR19.4 million, in spite of the investments, investment and a dividend policy which was worse EUR84.7 million.
Now, let us see the profit and loss account. Many things have already been anticipated to you, so I'll leave you with reading the numbers. Substantially we'll see that there is an improvement at the level of EBITDA and EBIT and incidence, which is the same versus sales and 3.3% is net profit.
Now, let us see what happens with EBITDA. We started last year with [40.3] and we had elements that impacted in terms of positive nonrecurrent items worth EUR2.3 million, connected to staff and connected to some assets which varied, deferred taxes at EUR1.5 million and then the negative impact of SEE, the controlling company, which we are minority stakeholders in EUR9.6 million.
So we had efficiencies worth 7.6%. France gave a positive contribution worth EUR38.6 million. This is the delta between the 12 months of '07 minus the four months already calculated in 2006 and then as to development, both in Italy in France, we have investments worth EUR8.8 million and EBITDA eventually is EUR268.9 million.
Let's now see the situation. The financial situation really doesn't deserve any specific comment. Maybe the only thing to be commented upon is that the incidence of circulating capital on earnings through the improvement of the mix in terms of the magazines business and the rest you can just go through it. There's nothing relevant about it. Debt we've commented before. ROE grows little by little, at 22.7%.
Now, cash flow, how did we get to this improvement, which is equal to EUR20 million almost. We had a generation of EUR156.3 million, then own shares worth EUR10.3 million, dividends EUR84.7 million, investments EUR58.9 million and therefore taxes EUR17 million. You see on the right-hand side the breakdown of these investments. We made a further investment in terms of territorial improvement and more diffusion in terms of radio, EUR28.3 million. We invested EUR10 million in shareholdings, graphics, EUR16 million, retail, EUR11 million, and miscellanea, plus EUR6.4 million.
And, as I said, taxes were EUR17 million. We had minor taxes, as well as different items, which you will get by going through the indications which are going to be handed over to you after the presentation. Now, the dividend policy, the proposal before meeting, will be the same dividend vis-a-vis last year, therefore a 35 payout, so in line with previous year's and it grew of course vis-a-vis the two figures. So we're close to 6.7%, 6.8%.
Now let's go division by division for more details. First of all, the businesses, the various businesses performed, as you can see. We're not going to comment on them one by one, because we're going to be commenting in greater detail on a business-by-business basis later. I'd like to point out that anyhow, net earnings net from France is EUR1.8 billion. Magazines without France would have been flat and substantially the rest will be discussed in the detailed analysis which follows.
Now, for each single division and market overview, as I was saying before, we find ourselves in a situation where strong readers are definitely -- or more loyal readers -- are definitely less than the European average. The criteria which are usually taken into consideration is those people who read more than 11 books a year. As you can see, Italy is more or less at the same level as Spain, which means less than half compared with the other major European countries.
In this particular market, there is a slow growth, 1.5%, and the channel by channel split, as you can see in the pie chart, confirms the very strong role of book and Internet stopped really appearing on the scene. Still low, but with a significant progression.
Now let us see what we have done, our performance. In terms of earnings, still confirms rather unusually extraordinary results vis-a-vis the Italian and international markets, because 20% of EBITDA is really a very, very significant performance, which substantially confirms the performance that we have recorded last year.
It is important to say that it is even more significant vis-a-vis two elements. First of all, in the trade, we continued to grow plus 2.4% in spite of the fact that we don't have the so-called trigger books, with many millions, like the Dan Brown impact. Those of you who follow us, we have pointed out more than once titles such as this one as an element of growth.
So the growth of 2.4% was good, so Mondadori, Einaudi, Piemme and Sperling had satisfactory results. We can remember Mr. Hosseini's book. Einaudi had an extraordinary performance and also in terms of earnings grew and Mondadori, without Dan Brown, had titles which were best sellers, such as the books by Mr. Saviano, Mr. Calebresi, et cetera, so the trend is good.
The school market is substantially flat, minus 0.7%. On the one hand, we don't have a growth in terms of number of students and then there is a trend of price reduction over and beyond the various campaigns that are being carried out at the beginning of each school year, criticizing schooling publishers. We're not really [eagles], because our sales remained stable, but with cost efficiencies we had good results. Then exhibition and arts publishing, we have minus 5%. I have to tell you more about this, which is not connected with the typical management of events, exhibitions, et cetera.
But it's connected with the fact that Electa used to supply different products and therefore illustrated books, arts books, et cetera, with a certain price level. And, therefore, faced with a minus 20%, which is the overall market result, we had a slight decrease in terms of earnings caused by this specific fact.
Distribution, books and different things, plus 7% total. Well, we can say that the result is positive and comforting, with even a better articulation if we compare it with other publishers and less connected with specific factors as it used to be over the past few years.
Magazines. Magazines, again, I would say that it's worth, indeed, focusing on the different elements of our sales. First and foremost, we have to say that in this case, the EBITDA level confirms positively what we did last year, because this year is 14.8%. But let's see the split in terms of earnings.
Net circulation, minus 3.7%, compensated by joint sales, plus 3.4% in a market which slowed down by approximately 20%. This is connected on the one hand that we had a rather careful launching policy last year in terms of net circulation, and on the other hand we had a great ability and a great efficiency in managing a declining business that is the joint sales that we indeed managed to increase in terms of sales. And therefore I say that earnings with the same type of comparison are exactly the same. As to advertising, we had a minus 1.7% on our magazines, which is certainly not a good performance, but I should tell you more in a few minutes when we will see specifically what happened in this particular division.
We go on with other magazines actions. France, as you can see, had an increase, which was indeed calculated over the whole year. Let's see in details. Italy, France and advertising. Italy, we had a rather extraordinary phenomenon. That is, we kept and raised our sales in a shrinking market with an increased level of EBITDA and this is the confirmation for a business which is not only sustainable but can also be well managed, also in a declining phase, and this is really the evidence that you can read yourselves.
We have set up an independent distribution company. We changed the situation of our earnings and gave...
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