in
The Espresso group closed financial year 2008 with consolidated revenues of € 1,025.5 million compared to € 1,098.2 million in 2007, with a decline of 6.6% due to the significant contraction of advertising revenues.
Consolidated net income was € 20.6 million, down from € 95.6 million in 2007. Financial year 2008 was negatively affected by extraordinary restructuring charges of approximately € 22 million and extraordinary tax provisions € 13.3 million. The previous year had benefited for € 7.8 million from the one-off positive effect of the different accounting treatment of TFR after changes in the regulations.
The revenues of the group can be broken down as follows:
| (in millions of euro) | 2008 | 2007 | Change | ||
| Values | % | Values | % | % | |
| Circulation | 276.3 | 26.9 | 277.2 | 25.2 | (0.3) |
| Advertising | 608.2 | 59.3 | 657.1 | 59.8 | (7.4) |
| Add-ons | 114.9 | 11.2 | 127.9 | 11.7 | (10.2) |
| Other revenues | 26.1 | 2.6 | 36.0 | 3.3 | (27.8) |
| TOTAL | 1,025.5 | 100.0 | 1,098.2 | 100.0 | (6.6) |
The decline in advertising revenues (-7.4%) was due mainly to the decline recorded by la Repubblica and the periodicals and to the downturn in the radio and televisions sector, while advertising collected by the local papers held up well and internet advertising once again rose sharply. Circulation revenues, excluding add-ons, were in line with 2007. Circulation figures for la Repubblica and L'espresso declined significantly compared to the previous year but this was due mainly to the decision made to eliminate or reduce certain initiatives with a high advertising content which only had a marginal impact on revenues. The fall in revenues from add-on products amounted to 10.2%, which should be considered positively in view of the strong contraction in the market.
The consolidated gross operating margin was € 142.5 million compared to € 223.4 million in 2007, with a fall of 36.2%. This evolution reflects the contraction in the advertising market together with the extraordinary restructuring costs of € 22.1 million as mentioned above, which were only partly offset by savings already achieved in the year thanks to the first effects of the cost cutting measures adopted. The decline affected all sectors of the business as it was due to a fall in advertising revenues which affected all the media of the group.
Consolidated operating income came in at € 95.3 million down from € 180.6 million in 2007.
Consolidated net financial debt at December 31 2008 totalled € 278.9 million, up from € 264.9 million at the end of 2007 due to the payout of dividends (€ 68.8 million), to net disbursements for investment activity (€ 47.2 million) and the buyback of own shares (€ 9.1 million), which absorbed more than the liquidity generated by operating activity (€ 111.4 million).
Consolidated shareholders' equity went down from € 535.4 million at December 31 2007 to € 478.4 million at December 31 2008.
At December 31 2008 there were 3,344 employees on the group payrolls, down by 70 from 3,414 at December 31 2007.
The Board of Directors of the parent company of Gruppo Editoriale L'Espresso, which met on February 25 2009, proposed that no dividend be distributed for the year 2008 and that the earnings for the year be retained (a dividend of € 0.17 per share was distributed in 2007).
The intensification of the economic crisis and the worsening of the outlook for the year 2009 caused a drastic fall in advertising investment as from autumn 2008. Business in the first few months of 2009 confirms the negative trend of advertising investment and there is at present no sign of any recovery, which makes it very difficult to forecast how the year will evolve. The sharp fall in results and the critical outlook for the future impose new and more incisive cost cutting measures, in addition to those already made during 2008 which involve a reduction of € 50 million in costs over the three years 2008-2010 with the aim of guaranteeing continuity and the development of the media of the group, the importance of which continues to be confirmed by the key positions that they occupy in their respective markets. On this subject, management is currently engaged in implementing the cost cutting plans already in place, and in formulating new action starting with a more efficient and incisive company structure and organization with the aim of reducing the company's break-even point from a structural point of view.