RCS Plan Estratégico 2011-13

2011-2013 Strategic PlanPresentation to the Financial CommunityMilan, December 17, 2010

• Executive Summary

• Strategic Guidelines

• Revenues / EBITDA targets 2010-2013

• Organization and HR

• Economic and Financial Management’s key elements

• Details by Business Unit

2

Agenda

Milan, 17 December 2010

Executive Summary (I)

• The markets of reference for RCS are facing a process of radical transformation due to the following:

– Technological innovation– Transformation of purchase behavior and consumption of readers and of advertisers– Entrance of new competitors

• The change in the media sector shows:

– Traditional media markets shrinking, with the exception of books– Growth in digital advertising, but still not sufficient to compensate the decrease in traditional

businesses– Crisis in the traditional business model– Emerging opportunities to develop revenues from digital activities (e.g. digital pay models, video

web and tv, direct marketing CRM, integrated advertising projects…) with still limited volumes but significant potential

• Necessity to align strategies, organization and competencies for the new arising challenges, especially in these times of uncertainty

• In the new scenario, RCS wants to be a Media Group leader in quality content, multimedia and international, and in the development of the Strategic Plan 2011-2013 the following objectives have been stated:

– Consolidate the sustainability and guarantee the continuity of the Group– Be ready to exploit any emerging opportunities, despite the difficult predictability


Milan, 17 december 20104

Executive Summary (II)

• Strategic Plan 2011-2013 guidelines:

– Strengthen quality editorial production, rethinking products and offers– Expand relations with clients and advertising investors to increase and consolidate loyalty– Develop the multimedia and digital publishing evolution of the Italian and Spanish Power Brands,

Vertical Magazines and Books– Redesign the business model mainly regarding revenues, Group organization, new organization

of work and above all company competencies– Focus the investments and the ambition to grow in Italy and abroad to defend traditional

publishing and to develop multimedia and digital businesses, disinvesting from non core assets

• Strategic Plan economic targets from 2010 to 2013 are:

– Revenues: from 2.259 (1) to 2.453 million Euro – EBITDA: from 197 (1) to 296 million Euro – EBITDA margin: from 8,7% (1) to 12%– Net Financial Position: from - 979 to - 677 million Euro

1. Includes GE Fabbri in 2010, EBITDA ex non recurring items








Agenda

Strategic Plan 2011-2013 - Objectives

1

Revenues

2008 - 2010 2011 - 2013

2

Business tradizionale

Business digitale

In this uncertain market, the Strategic Plan 2011-2013 propose two objectives:

Consolidate the sustainability and guarantee the continuity of the Group:

– Efficient cost structure– Revenue mix with higher importance of

digital business – Sound balance sheet

Be ready to exploit any emerging opportunity, despite the difficult predictability

– Business model evolution– Organizational alignment– Competencies to manage the new

business model

Rationalization through the crisis

Transformation of the business model for the sustainability of

the Group



International and Multimedia

Publishing Group,

leader in quality content

The mission of Group RCS remains unchanged


Focus on customer

relationship

Focused investments and growth ambitions

Re-design the business model

Be a multimedia and digital

reality

Create quality publishing contents

Strategic Guidelines of the Group


Organization & Competencies

Digital publishingcontent pay model

TV/Video Presence

CRM/ consumers

E-reading and e-books

Publishing productReview

Strategicworking groups

Books Italy and FranceBooks Italy and France

Advertising House

Advertising House

UnidadEditorialUnidad

EditorialMagazinesMagazines OthersOthersNewspapers

ItalyNewspapers

Italy

Business Areas

OperationsOrganization

workgroups

Adv HouseModel Review

ICT Platforms

Cross section projects


Create quality publishing contents

“Quality” journalism

Multimedia and information hierarchy between different platforms/media and products

Safeguard circulation and weekly purchase frequency

Target readers/customers and engagement methods

New product concept with a different format and content mix (localinformation, reports, …)

The importance of video in multimedia offering

1

2

3

4

5

6


Focus on customer relationship

ObjectivesObjectives DescriptionDescription

• Direct feedback system to better understand the readers

• Continuous monitoring of customer base

Improve publishing product

Increase customerloyalty

Higher support of the three main revenue streams

• Specific loyalty programs at both single Brand and Group level

• Direct Marketing for the Group publishing products

• Optimization of total offer through events, promotions, etc…

Creation and maintenance of a cross division database on country basis and development of competencies


Digital Pay modelDigital Pay model

Tablet applicationTablet applicationSmartphonesSmartphonesWeb

(PC+Tablet)Web

(PC+Tablet) SmartphonesSmartphonesWeb (PC+Tablet)Web (PC+Tablet)

Be a multimedia and digital reality - Digital

1. News selection / elaboration / opinions / video / website images, available exclusively for a fee

ELMUNDO.ES

EXPANSION.COM

MARCA.COM

EL MUNDO DIGITAL EDITION

EXPANSION DIGITAL EDITION

MARCA DIGITAL EDITION

CdS DIGITAL EDITION

GAZZETTA.IT

GAZZETTA.IT PREMIUM1

GdS DIGITAL EDITION

CORRIERE.IT

CORRIERE.IT PREMIUM1

FreeFree


Be a multimedia and digital reality – Video Web

ItalyItalyPower Brands’ websites

number of streaming (estimate)SpainSpain

605

413

285

202

610

519

437

324

0

200

400

600

800

2012

# streaming (Million)

20132010 2011

SpainItaly

Source: RCS and BCG

Format

Brands

Platforms

•Video news•Sport rights•Magazines•Documentaries•Talk show•Live event•Video chat


Fiction/Non Fiction and Partworks

Fiction/Non Fiction and Partworks EducationEducation

“Traditional” eBook (2013, ~3000 titles):• All the new releases + selected back list

“Native" eBook / Apps (2013 ~70 Apps)• 6 Areas:

eBook price ~30% lower than paperversion

• Review of the pricing policies

Apps price slightly lower than eBook

4 possible channels: • Direct (Libreriarizzoli.it) • Retailer Online / Offline • Pure player online • Devices developer

Children’s book

IllustratedPartworks

Comics (France)

Contents service

Famous Authors

eBook:• Conforming to the educational reform

(from 2012 there is an obligation to providedigital versions)

eBook school text price bounded by governmental policies

Evaluation of optimal pricing strategy for complementary products

Dedicated sales force

Be a multimedia and digital reality - E-reading

Product

Pricing

Distribution


Re-design the business model

• Balance the revenue mix according to the new scenario, with higher focus on digital business

• More flexible cost structure

• Assure business sustainability through efficiency enhancement

• Review Group’s organizational structure and alignment to strategic objectives

• Provide the Group of the necessary resources to face the new challanges


Focused investments and growth ambitions

• Multimedia and multiplatform development of the Italian and Spanish newspapers Power Brands

• Focus on Vertical Magazines in Italy and abroad

• Consolidate the competitive position in the Italian and French books’ markets, also through acquisitions and innovations in the digital segment

• Investment and strengthen the technological platforms (i.e. TV/Video on line, CRM, ...)

• Portfolio management with potential disposals and, as a result, a reduction of capital invested in non core assets








Agenda


Strategic Plan 2011-2013 - Main Assumptions

Advertising

Circulation

Digital Circulationas of 2013

(copies /000)

Newpapers

Magazines

Online

Newspapers

Online

FTA TV

0.0%

- 4.0%

15,3%

3,0%

18,9%

4,9%

1,9%

1,8%

30,1%

3,4%

23%

53%

Newspapers

Newspapers

- 3,2%

n.a.

- 3,9% (1)

- 5,4%

Newspapers

Newspapers

-

-

120 (2)

103 (2)

Paper CostNewspaper

Magazine

7,3%

3,1%

7,3%

3.1%

- 3.7% (3)Labour Cost

Add ons-

-

-

-

- 6.0%

- 12.0%

-

-

0,8%

1,3%

2,9%

1,2%Books

RCSRCSMKTMKT RCSRCSMKTMKT

Source: Internal estimate on Nielsen, Datamonitor, i2p, CPC, Zenith and PWC

Cagr %2010-2013

Cagr %2010-2013

Cagr %2010-2013

Cagr %2010-2013

(1) Corriere della Sera - 3.3% and Gazzetta dello Sport - 4.6%, includes the effects of cannibalization from digital editions(2) Tablets Forecast at 2013 amounted to 3.8 million in Italy and to 3.2 million in Spain, with a market share for RCS of 3.2% in both countries(3) Base salary


Economic targets – Revenues

= CAGR10-13m€

2,8%

2013E

2,453

2010 IIF

2,259

1. Includes GEF in 2010

304

1,955

536

1,917

TraditionalBusiness

Digital andMultimedia

- 0.7%

20.8%

1

2013 results improve due to the digital & multimedia business growth and to the consolidation of the traditional business

• ≈ 30 % Digital Advertising (Display, Video, Ipad/Tablet)

• ≈ 30% Development of the DTT in Spain• ≈ 25% Digital circulation (Ipad/tablet, mobile),

e-book and e-commerce• ≈ 15% Other

CAGR 10-13 except of UK Partworks = +0.7%• Circulation decrease in Italy and Spain partially

offset by price increases• Advertising increase on traditional business in

both Italy and Spain (CAGR 10-13 around 2%)• Disposal of UK partworks and decrease in add

ons offset by Fiction/NonFiction and Educational books increase

• Exploitation of RCS Sport and other projects (Abroad)

Contribution of the following drivers:• Traditional advertising increase• Circulation decrease• Cover prices increase• Cost of paper increase• Increase of books and education• Decrease in add ons and disposal GEF• Labour cost increase

• Savings and efficiencies

• Contribution to Power Brands fromdigital/multimedia expansion(adv baseline, Ipad, freemium, web TV)

• Development DTT in Spain

• Other


Economic targets - EBITDA

= CAGR10-13

12,0%8,7%EBITDA %

m€

14.5%

296

2013E2010 IIF

197

1


2013 results improve due to digital & multimedia business growth, to further efficiencies and to the consolidation of the traditional business

≈ 0%

≈ 33%

≈ 40%

≈ 17%

≈ 10%


Italy vs other countries

Italy

Revenues1, % on total 2010 IIF (2.259m€)

Revenues1, % on total 2010 IIF (2.259m€)

Italy

EBITDA1, % on total 2010 IIF (197m€)

EBITDA1, % on total 2010 IIF (197m€)

Italy

Revenues1, % on total 2013E (2.453m€)

Revenues1, % on total 2013E (2.453m€)

Italy

EBITDA1, % on total 2013E (296m€)

EBITDA1, % on total 2013E (296m€)


61

RoW

39

5347

41

59

4753

RoW

RoW RoW








Agenda

Strategic Plan 2011-13 - Organizational priorities

• Align Group organization to the strategic objectives

• Continue the efficiency enhancement

• Provide the Group of the necessary competencies/resources to face the new challenges of the Strategic Plan (both through internal development and by bringing in skills from outside)

• Fostering a business environment oriented towards creativity, innovation/experimentation and organizational flexibility, in a trustful environment between employees and the company

1

2

3

4









Agenda


Economic targets

m€

1. Ex non recurring items 2. Includes GEF and impairment test as of 30 June 2010 3. Excludes Impairment test

Revenues

EBITDA1

%

EBIT %

2010 IIF 2 2013E CAGR'10 – '13

2 259

1978.7%

803,5%

2 453

29612,0%

2013

8,2%

2.8%

14.5%

n.s.

2007PF 2009

2 660

27110.2%

1304,9%

2 206

1336,0%

- 97

2008

2 785

37313.4%

n.a.


Cash Flow Management

• Cumulated technical investments of approximately €160 millionInvestments

• Cumulated Free Cash Flow (before CAPEX) of about €530 millionFree Cash Flow

• No disposals have been included in the NFP, although the Group is strongly considering the valorization of not strategic assets

Portfolio & non core assets

• Ratio NFP/EBITDA 2013E = 2.3xNet Financial Position


Investimenti cumulati 2011 – 2013 Investimenti cumulati 2011 – 2013

100 % = 160 m€

49

20

10

21

ROIROI

m€

%

Cumulated CAPEX, net capital employed and ROI

Cumulated CAPEX 2011 – 2013 Cumulated CAPEX 2011 – 2013 Net capital employedNet capital employed

Other

Technical

TV Rights

ICT

1.855

2.067

2.141

2.364

2008 2010 IIF2009 2013E

5,5%

- 4,3%

3,8%

10,7%

2008 2010 IIF2009 2013E

PFN/EBITDA ex NR

5,07,94,2 2,32.6

Net Financial Position

As of 31/12 m€


- 677

2010IIF

- 979

2009

- 1.057

2008

- 1.147

2013E

- 966

2007PF








Agenda


EBITDA %

2010 IIF

14.7%

2013E

16.1%• Increase multimedia and multiplatform revenues of the Gazzetta and Corriere Power Brands:

– Digital pay model development– On line video expansion– Corriere editorial review (graphic, mixed themes,

young generation attraction, etc…)– Supplements editorial review and valorization – Advertising collection development (brand exploitation,

new formats, special projects)– Non-publishing revenues increase (Gazzetta on line

Gaming, e-commerce)– Restore margins in the classified business– Redefinition of the organization (editorial and

advertising sales force) to make it coherent with the multimediality

– CRM• Strengthen the local editions and the online local editions

system• Focus on safeguarding the add-ons profitability• Free press at break-even

• Increase multimedia and multiplatform revenues of the Gazzetta and Corriere Power Brands:

– Digital pay model development– On line video expansion– Corriere editorial review (graphic, mixed themes,

young generation attraction, etc…)– Supplements editorial review and valorization – Advertising collection development (brand exploitation,

new formats, special projects)– Non-publishing revenues increase (Gazzetta on line

Gaming, e-commerce)– Restore margins in the classified business– Redefinition of the organization (editorial and

advertising sales force) to make it coherent with the multimediality

– CRM• Strengthen the local editions and the online local editions

system• Focus on safeguarding the add-ons profitability• Free press at break-even

Newspapers Italy

31

Unidad Editorial

2010 IIF

8.3%

2013E

18.0%EBITDA %

• Increase of multimedia and multiplatform publishing revenues of the Power Brands:

– Strengthen the positioning in the press business– Cover prices increase– Digital pay model for Orbyt Power Brands– Online video expansion– CRM – DTT expansion (Veo7, Marca TV)

• Advertising collection development– Increase in TV and Internet advertising– Brand exploitation with multiplatform offer– New formats and special projects– Direct marketing

• Non-publishing revenues increase (e-commerce and social network)

• Redefinition of the new organization (editorial and advertising sales force) to make it coherent with the multimedia approach

• Focus on safeguarding the add-ons profitability

• Increase of multimedia and multiplatform publishing revenues of the Power Brands:

– Strengthen the positioning in the press business– Cover prices increase– Digital pay model for Orbyt Power Brands– Online video expansion– CRM – DTT expansion (Veo7, Marca TV)

• Advertising collection development– Increase in TV and Internet advertising– Brand exploitation with multiplatform offer– New formats and special projects– Direct marketing

• Non-publishing revenues increase (e-commerce and social network)

• Redefinition of the new organization (editorial and advertising sales force) to make it coherent with the multimedia approach

• Focus on safeguarding the add-ons profitability



Magazines

2010 IIF

1.9%

2013E

6.3%EBITDA %

• Focus on Women/Fashion multimedia system:

– Protection of traditional business and Amica restyling– Strengthen on web and TV– Digital contents pay model for tablets

• Interior Design multimedia system development:– BravaCasa restyling – Advertising offer format (integrated projects, direct

marketing)– Digital development (e-commerce, digital contents pay

model for tablets)• Travel multimedia system development:

– Brand Dove empowerment (e-commerce, contents/services for tablets, Dove TV)

• Infancy multimedia system development:– Increase digital revenues (tablets, e-commerce)– International expansion (China, Brazil)

• Family segment :– Creation of Oggi system

• Further cost-efficiency measures• Corporate structure simplification

• Focus on Women/Fashion multimedia system:

– Protection of traditional business and Amica restyling– Strengthen on web and TV– Digital contents pay model for tablets

• Interior Design multimedia system development:– BravaCasa restyling – Advertising offer format (integrated projects, direct

marketing)– Digital development (e-commerce, digital contents pay

model for tablets)• Travel multimedia system development:

– Brand Dove empowerment (e-commerce, contents/services for tablets, Dove TV)

• Infancy multimedia system development:– Increase digital revenues (tablets, e-commerce)– International expansion (China, Brazil)

• Family segment :– Creation of Oggi system

• Further cost-efficiency measures• Corporate structure simplification


Books

2010 IIF

8.9%

2013E

9.7%EBITDA%

• Fiction-non fiction Italy– Portfolio optimization with strengthening of the

competitive position in the most attractive market segments

– Commercial and promotional re-organization (promotional and advertising policies, commercial net, efficiency structure)

– Launch special projects and e-books• Fiction-non fiction France

– Strengthening in the most attractive segments and development of new editorial areas (e-books)

– Distribution activities development• Education

– Strengthen market positioning – Commercial and distribution efficiency

enhancement– Multimedia and digital product range development

with complementary contents and services for didactic activities and digital production

• Illustrated– Launch of new editorial segments– International network development

• Partworks– Maintain the current offer in Italy, with focus on

restoring profitability

• Fiction-non fiction Italy– Portfolio optimization with strengthening of the

competitive position in the most attractive market segments

– Commercial and promotional re-organization (promotional and advertising policies, commercial net, efficiency structure)

– Launch special projects and e-books• Fiction-non fiction France

– Strengthening in the most attractive segments and development of new editorial areas (e-books)

– Distribution activities development• Education

– Strengthen market positioning – Commercial and distribution efficiency

enhancement– Multimedia and digital product range development

with complementary contents and services for didactic activities and digital production

• Illustrated– Launch of new editorial segments– International network development

• Partworks– Maintain the current offer in Italy, with focus on

restoring profitability


Italian Advertising House

• Redefinition of the organizational model to increase market presence and penetration

– Marketing and commercial organization by clients (top, medium, new business)

– Sales forces dedicated to fashion and design segments– Creation of a Sport system (dedicated sales force and

marketing)– Online specialized sales-men integrated within each

client/system team– Strengthening of the integrated projects area

• Creation of a new offer model

– Integrated projects (tailor made/catalogue)– Enhancement of Power Brands– New multimedia formats (video on line, iPad, etc.)– Affiliation with external websites

• Redefinition of the organizational model to increase market presence and penetration

– Marketing and commercial organization by clients (top, medium, new business)

– Sales forces dedicated to fashion and design segments– Creation of a Sport system (dedicated sales force and

marketing)– Online specialized sales-men integrated within each

client/system team– Strengthening of the integrated projects area

• Creation of a new offer model

– Integrated projects (tailor made/catalogue)– Enhancement of Power Brands– New multimedia formats (video on line, iPad, etc.)– Affiliation with external websites

Disclaimer

This presentation contains management preliminary estimates and forward-looking statements,including information related to RCS MediaGroup projected financial performance and the expecteddevelopment of the publishing industry, in particular in the newspaper, magazine, book and newmedia segments. These statements are based on estimates and assumptions made by managementof the company and are believed to be reasonable, as of this date, though by their nature futureestimates are uncertain and subject to variations due to possible changes in the market. Actualresults or experience could differ materially from the information contained herein.This communication does not constitute an offer or solicitation for the sale, purchase or acquisition ofsecurities of any of the companies mentioned in any jurisdiction and is directed to professionals ofthe financial community.

For further information, please contact our Investor Relations Department

Federica De Medici+39 02 2584 5508 [email protected]

Nicola Banco+39 02 2584 4787 [email protected]


RCS Plan Estratégico 2011-13

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