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 2006 2005 2004 2003 2002 2001 2000 1999 IAS/IFRS Standards |
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2005
 Annual Report 2005 |
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| Quarterly Report as of 30 September 2005 |
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| Report on the first half of 2005 |
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| Quarterly Report as of 31 March 2005 |
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Annual Report 2005
The Italian economy in 2005, as that in the rest of the euro area, saw a continuation of the weakness of the previous year, with a further slowdown in the final quarter that coincided with a general increase in the cost of raw materials and energy.
In this context the Mondadori Group confirmed its leadership in the sectors of reference with consolidated revenues for 2005 of €1,657.3 million, an increase of 2.3% on the €1,619.7 million of 2004, with essentially similar levels of growth across all of the main divisions.
Consolidated net profit for the year 2005 came to €114.7 million, compared with €112 million in 2004, an increase of 2.4%. The launch of new titles in the TV listings segment, the start-up costs for Radio R101 and changes related to the renewal of the national contract for journalists all had an impact on consolidated gross operating profit, which came to €223.6 million, compared with €239.6 million in 2004, 13.5% as a proportion of revenues, 14.8% in the previous year.
Consolidated operating profit amounted to €187.4 million, compared with €193.6 million for the previous year with lower amortisation and depreciation of around €10 million. As a proportion of revenues, the figure went from 11.9% for 2004 to 11.3% this year.
Consolidated profit before taxation came to €181.4 million, a slight increase on the €180.5 million of the previous year.
The overall net financial position went from a surplus of €63.2 million on 1 January 2005 to €32.2 million at year-end; this was largely due to the payment of dividends of €85.4 million, investment costs for the acquisition and development of Radio R101 and capital investments at Mondadori Printing for a total of €109 million.
The performance of the individual areas in which Mondadori operates is examined in more detail in the sections dedicated to the individual divisions of the Group. What follows is a brief outline of the highlights.
The Book Division ended the year with revenues of €425 million, a 2.5% increase on 2004.
Edizioni Mondadori remained the undisputed market leader, thanks to the success of the novels by Dan Brown, the reconfirmation and success of important authors in the portfolio and the addition of new, successful authors, resulting in an increase in revenues of 3.4%.
Revenues at Einaudi grew by 3.2%, also as a result of operations linked to the add-on sale of books with newspapers.
The positive trend of recent years in art books and the organisation of exhibitions continued, resulting in an increase of 6.2% compared with the previous twelve months.
Piemme continued its strong growth trend of recent years with an 18.2% increase in revenues compared with 2004; while Sperling & Kupfer saw a fall in sales, mainly due to a shortfall in the large-scale retail channel.
Revenues in the educational sector were in line with those of the previous year, despite a climate of uncertainty in the area due to the pending reforms of the second level of secondary schools.
The Magazine Division generated revenues of €778 million (+2.3% compared with 2004).
The Italian consumer magazine market was characterised by modest growth in circulation (increasing only as a result of new launches), and the reduction in cover prices introduced by a number of publishers.
Concerning add-on sales, overall the sector remained stable, despite the increase in the number of initiatives and the number of competitors. However, Mondadori was able to increase its revenues in this area thanks to the selection of quality products that were consistent with the editorial line of each of the titles. Of particular note was the success of initiatives such as “Le Garzantine” encyclopaedia and the “Meridiani” classics series.
The strategy of internationalising the Mondadori Group magazine sector continued through licensing contracts: the weekly Grazia, launched at the beginning of 2005 in the United Kingdom, continued its expansion in Greece and the United Arab Emirates, creating the basis for further development of other titles.
The advertising market in 2005 grew by 2.8%, with slightly higher growth in the magazine sector, again due to the launch of new titles, while the radio sector remained essentially stable.
Mondadori Pubblicità saw a slight increase in revenues, above all thanks to investments from expanding segments (financial services, telecoms and media) that more than compensated for shortfalls in IT, cars and tourism; of particular note was the positive performance of traditional sectors such as fashion and FMCGs. Advertising sales for the Radio R101 were particularly positive and are managed by a dedicated network within the Group’s advertising sales company.
In 2005 Mondadori Printing saw an increase in revenues of 2.1%, ending the year at a total of €459.1 million, compared with €449.5 for the previous year.
Printing revenues, net of the cost of paper, grew by 1.6%, in particular in the captive sector, sustained by the Group’s participation in the add-on sales phenomenon.
The year also saw a range of restructuring actions, from staff functions to production activities, in particular in the illustrated books area, where the competitive scenario has been affected by aggressive competition from the Far East.
Investments were made in the rotary area to update plant aimed at achieving more competitive production costs and an improvement in the level of quality offered to the customer that will lead to the introduction of a new large-format rotary press.
The Direct Marketing sector recorded revenues of €26.4 million, a fall of 12.3% compared with 2004. The business has been negatively affected by the introduction of new privacy legislation.
The revenues of the joint venture with the Bertelsmann Group, Mondolibri S.p.A., are not included as they are now consolidated under the equity method in accordance with the new IAS-IFRS accounting standards.
In its Retail activities Mondadori generated revenues of €137.2 million, a marked increase on 2004 (+27.2%), the result sales by the directly-managed shops and the growth in the franchising network that has increased the number of outlets to 170. The experimental phase for the Edicolé project came to an end with 33 outlets by the end of 2005.
In January 2005 the Mondadori Group entered the radio sector. Over the year the new Radio R101 saw significant investments made in frequencies, to increase (both quantitative and qualitative) national coverage. There was also a complete redesign of the schedule (music, programmes and presenters) and important promotional activities were carried out to establish the new brand that have made it possible to reach excellent results in terms of appreciation of the proposed model and which has enabled the Group to exceed expectations also on the advertising side.
Under EU regulation No. 1606/2002 of 19 July 2002, all companies governed by the law of a member state whose shares are traded on a regulated market of an EU member state are required to prepare their consolidated financial statements for each year starting on or after 1 January 2005 in conformity with international accounting standards (IAS/IFRS).
Italian Law no. 306 of 31 October 2003 delegated to the government the implementation of the European regulation and under Legislative Decree no. 38 of 28 February 2005 the field of application of international accounting standards was extended by requiring that these standards be used in the preparation of the 2006 annual financial statements of companies issuing financial instruments tradable on regulated markets, with the option of beginning in 2005.
Arnoldo Mondadori Editore S.p.A. has availed itself of this option and has prepared its Annual Report for 2005 in accordance with international accounting standards.
What follows are comments on the highlights from the consolidated financial statements for 2005.
Results for the year
Consolidated revenues for 2005 reached €1,657.3 million, an increase of 2.3%.
The following table presents a breakdown of revenues by business area.
A breakdown of consolidated revenues by geographical area is as follows:
