De Agostini S.p.A. owns a group of companies organized into publishing, media & communication, gaming & services, and finance businesses. In 2016, the group sold some publishing businesses and finalized agreements to merge Zodiak Media and Banijay into a new Banijay Group. The group was also awarded a new nine-year concession for the Italian Lotto game through its IGT subsidiary.
1. Financial Statements
for the Year Ending December 31, 2016 -
Draft
11
1. The Group
De Agostini S.p.A. owns a group of operating companies organised by business. Its structure
can be summarised as follows:
Businesses
o Publishing
o Media & Communication
o Gaming & Services
Finance
Each business comes under the responsibility of a sub-holding company, which co-ordinates,
manages and controls all the operating companies under its responsibility.
Alongside the above-mentioned activities, holding company activities are carried out by
companies in the holding company structure which, in addition to De Agostini S.p.A., includes
other directly and indirectly controlled financial companies.
A diagram summarising the Group structure at 31 December 2016 is shown below, followed by
a brief description of the activities carried out by each business.
PUBLISHING MEDIA & COMM. GAMING & SERVICES FINANCE
Digital / Direct
Marketing
International
Atresmedia Italy
Partworks
North America Gam.
and Inter.
Private Equity
Investment
Books
Grupo Pl.-
DeA (JV)
Zodiak
Media
North America Lottery
Alternative Asset
Management
De Agostini
S.p.A.
Ass. Generali Stake
De Agostini Editore
DeA
Communications
IGT (Plc.) DeA Capital
Publishing Activities
2. Financial Statements
for the Year Ending December 31, 2016 -
Draft
12
PUBLISHING
This is the Group’s traditional business, and is organized by business unit, based on the nature
of products provided and the channels used:
Partworks, which includes Italian and international partworks activities, managed by
the subsidiary De Agostini Publishing and which produces collections sold through
newsstands and on subscription aimed at various target markets, including hobbies,
cinema, children's products and cookery courses. In 2016, this business included the
activities of the ‘Print & Collectibles’ business, which offers collections to customers in
many European countries by mail order.
Books, which includes De Agostini Editore's traditional publishing activities in the book
and school texts sectors. In the books sector, the Group operates through De Agostini
Libri, which is mainly active in children's books and general reference books. During
the year, the White Star business division was sold; in addition, a major publishing
venture was launched with Gruppo Planeta, with the aim of jointly developing the trade
books sector in Italy via the jointly-controlled company, DeA Planeta Libri. In School
Texts, the Group mainly operates in the Italian market through De Agostini Scuola
under a number of brands in the primary and secondary school, university and
dictionary sectors.
Other activities comprise the following:
- Digital, which includes activities relating to theme-based TV channels (‘DeA Kids’,
‘DeA Junior’ and ‘Super!’) designed for children and families on both satellite and
digital terrestrial platforms, as well as a series of properties on digital platforms. The
Digital area is also responsible for managing the ‘DeAbyDay’ web network, which
has a female target audience, and manages the network of kids' websites
(www.deakids.it and www.supertv.it);
- Direct Marketing, which includes the activities managed through the subsidiary De
Agostini Atlas Editions. In 2016, the Group radically simplified the business portfolio,
which involved selling the ‘Atlas for Men’ and ‘Direct Sales’ product lines and moving
the ‘Print and Collectibles’ line into the Partworks business. Following these
operations, the activities in question focused on the ‘Consumables’ product line,
which is aimed at customers in various European countries via the mail order
channel.
The sub-holding company for the Publishing activities is De Agostini Editore S.p.A. (De
Agostini Editore), which is fully and directly owned by De Agostini S.p.A.
3. Financial Statements
for the Year Ending December 31, 2016 -
Draft
13
MEDIA & COMMUNICATION
The sector includes the Group's interests in media & communication; the relevant sub-holding
company is DeA Communications S.A. (DeA Communications), which is fully-owned directly
by De Agostini S.p.A.
At December 31, 2016, the business included the following companies:
Banijay Group, which is approximately 37% held on a fully diluted basis via LDH, a
holding company that is 49.9% owned by DeA Communications and the holder of a
74% controlling stake in the Banijay Group. The Banijay Group was created in 2016
following the merger of the two subsidiaries Zodiak Media and Banijay. Other
shareholders in the group are the Lov Group (with a 50.1% interest in LDH) and Vivendi
(with a 26% interest in the Banijay Group).
Grupo Planeta-De Agostini, a 50:50 joint venture with Planeta Corporación, which
controls:
- Atresmedia, a Spanish national radio/TV broadcaster listed on the Madrid stock
exchange;
- DeA Planeta, active in cinema and content distribution in Spain.
Based on the IAS/IFRS international accounting standards adopted by the Group in preparing
the consolidated financial statements, the activities in question are recorded under
"Investments in associations and joint ventures" and are valued at equity.
4. Financial Statements
for the Year Ending December 31, 2016 -
Draft
14
GAMING & SERVICES
The business includes the Group’s activities in Gaming & Services. The sub-holding company
for these activities is IGT Plc, with registered office in the UK and listed on the NYSE, which is
51.13% controlled by De Agostini S.p.A. (of which 4.98% is via DeA Partecipazioni).
IGT operates according to the following structure:
North America Gaming & Interactive (NAGI). This business area, which is based
in Las Vegas, Nevada, provides a full suite of casino-related products and solutions for
the US and Canadian markets, through the development of games, systems and
solutions for: (i) traditional casinos, (ii) online interactive betting systems, and (iii) the
"DoubleDown Casino" free-to-play application. It also develops, sells and licenses
casino management systems, which provide customized services and promotional
offers to individual players. The business area's revenues are generated by the
sale/rental of gaming machines and software to casinos and by services relating to the
maintenance of machines and systems.
North America Lottery (NALO). This business area, which is based in Providence,
Rhode Island, develops and provides innovative solutions; thanks to these solutions,
IGT has become the sole point of reference for the North America World Lottery
Association (WLA), supporting 39 out of 45 lotteries in the US. The area's revenues are
generated from the sale of instant lottery tickets, the sale/rental of lottery hardware,
software and terminals and from facilities management contracts, particularly in
Illinois, Indiana and New Jersey.
International. Through this business area, IGT is the world's leading provider of
innovative end-to-end solutions for all the regulated gaming channels and areas; it
also provides a variety of interactive games such as poker, casino and bingo. The
business area is responsible for the strategic development and operational
management of IGT's full product portfolio for the following markets: Europe, the
Middle East, Central America, Latin America, the Caribbean, Asia and Oceania. The
business area's revenues are generated from the sale/rental of gaming machines and
software for casinos, from the sale/rental of hardware, software and terminals for
lotteries, from the sale of instant lottery tickets and from professional services in the
form of lottery facilities management and lottery operation fees.
Italy. This business area provides a broad range of business-to-consumer (B2C)
games with five product lines: (i) lotteries; (ii) gaming machines; (iii) sports betting;
(iv) commercial services; (v) interactive games.
- Lotteries: since 1998, IGT has been the concession-holder for Gioco del Lotto in
Italy, allowing it to capitalize on a proven track record in managing all activities
throughout the entire lottery value chain (collection of all bets through high-
security processing systems, management of electronically connected terminals
at retail outlets, advertising and promotion, staff training, assistance for
license-holders and management of back office activities). In 2016, the Group
was awarded a new nine-year concession for Lotto, via its subsidiary
Lottomatica, acting in a consortium with other Italian and foreign operators.
Since 2004, Lottomatica has been operating as the sole concession-holder for
Gratta & Vinci (scratchcards) in Italy.
- Sports Betting: provides a sports betting platform which consists of a central
core with associated support modules; it holds numerous concessions for
managing sports and horse race betting, as well as non-sporting events relating
to the world of theatre, music, culture and national and international events.
5. Financial Statements
for the Year Ending December 31, 2016 -
Draft
15
- Gaming Machines: designs, develops, produces and supplies machines, games,
systems and software for the regulated gaming market; it is the world's leading
provider of video lottery terminals and AWP slot machines installed at various
retail outlets and electronically connected to a central system. Revenues are
generated from a percentage of bets, net of the relative taxes.
- Interactive Games: provides interactive games authorized in the Italian market,
such as online poker, casino, bingo, roulette, blackjack and other skill-based
games, sports and horse race betting, and online betting on car and motorcycle
races. It includes ‘10 e Lotto’, ‘Win for Life’, ‘Eurojackpot’, and ‘Gratta e Vinci
online’.
- Commercial services: offers processing services for high volumes of commercial
transactions not connected with lotteries, including top-up services for mobile
phones, usage payments, and ticket sales for music and sporting events.
6. Financial Statements
for the Year Ending December 31, 2016 -
Draft
16
FINANCE
This business includes the activities carried out by the Group in alternative investment, which
are broken down into private equity investment and alternative asset management.
Private Equity Investment
In the Private Equity Investment business, DeA Capital has "permanent" capital, and
therefore has the advantage – compared with traditional private equity funds, which
are normally restricted to a pre-determined duration – of greater flexibility in
optimizing the timing of entry into and exit from investments. In terms of
investment policy, this flexibility allows it to adopt an approach based on value
creation, including over the medium to long term.
Alternative Asset Management
In the Alternative Asset Management business, DeA Capital – through its
subsidiaries IDeA FIMIT SGR and IDeA Capital Funds SGR – is Italy’s leading
operator in real estate fund management and private equity funds respectively. The
two asset management companies are active in the promotion, management and
value enhancement of investment funds, using approaches based on sector
experience and the ability to identify opportunities for achieving the best returns.
Alternative Asset Management has been the Company's main focus for strategic
development in recent years. In view of this, DeA Capital is expected to continue to
concentrate its asset allocation in this business, partly through investments in funds
managed by the above-mentioned private equity/real estate platforms, with the aim
of generating financial returns.
The sub-holding company for the Finance business is DeA Capital S.p.A. (DeA Capital), which
is listed on the FTSE Italia STAR segment of the Milan stock exchange and is directly controlled
by De Agostini S.p.A. through a stake of around 58.3%.
The business also includes a minority shareholding in Assicurazioni Generali – one of
Europe’s leading insurance companies and listed on the Milan stock exchange. Around 1.29%
of the stake is held via DeA Partecipazioni (a company directly controlled by De Agostini
S.p.A.).
7. Financial Statements
for the Year Ending December 31, 2016 -
Draft
17
Holding company activities
Holding company activities are carried out by companies in the holding company structure,
which includes – as well as the Company, De Agostini S.p.A. – other directly and indirectly
controlled companies; specifically, these activities relate to the management of shareholdings
in the sub-holding companies of the Group's individual businesses, as well as its interests in
non-strategic shareholdings and activities.
At December 31, 2016, the main companies belonging to the holding company structure were:
- DeA Partecipazioni, which holds 1.29% of the share capital of Assicurazioni Generali
(as well as a minority shareholding of 4.98% in IGT);
- DeA Factor, which carries out the factoring of receivables due to Group companies
from third parties.
With effect from midnight on December 31, 2016, the subsidiary De Agostini Invest was
merged into DeA Communications; in view of the type of holding company activities – both
business and financial – now carried out by the latter, the income statement and balance sheet
figures for DeA Communications were restated under holding company activities in the Group's
segment reporting.
8. Financial Statements
for the Year Ending December 31, 2016 -
Draft
18
2. Significant events during the year
Publishing
Sale of Publishing businesses
In 2016, a number of agreements were signed relating to the sale of various Publishing
businesses to third parties. Specifically:
De Agostini Libri sold the White Star business division for a significantly negative
consideration (EUR 0.1 million);
the subsidiary Provea sold stakes held in Florange O.O.O. and Florange L.L.C., which
are Russian and Ukrainian companies respectively, operating in the Direct Sales
business, for a consideration of around EUR 7.5 million;
De Agostini Atlas Editions sold its 92.4% stake in Atlas For Men, which is active in
catalogue and online mail order sales in France and many other European countries, for
a consideration of approximately EUR 51 million.
Creation of the DeA Planeta Libri joint venture
On October 17, 2016, De Agostini Libri created DeA Planeta Libri, a 100%-owned company.
After the 2016 year-end, with effect from January 1, 2017, De Agostini Libri and Planeta
Corporación contributed the Publishing business division (comprising activities in the books
sector) and cash and cash equivalents respectively, totaling EUR 2.0 million each, to DeA
Planeta Libri.
The objective of the Company, which is currently jointly controlled, is to develop business in
the trade books sector in Italy.
Media & Communication
Finalization of agreements for the merger of Zodiak Media and Banijay
In February 2016, the agreements signed in 2015 were finalized for the merger between
Zodiak Media and Banijay, companies in which the De Agostini Group had shareholdings (a
controlling stake in the first and a minority shareholding in the second).
The merger resulted in the creation of the new Banijay Group, which is approximately 37%
held on a fully diluted basis alongside joint shareholders Lov Group (with a stake of just over
37%) and Vivendi (with 26% of the capital of the Banijay Group).
For the De Agostini Group, the merger operation entailed the simultaneous repayment of
PIK/mezzanine bonds previously subscribed in favor of Zodiak Media (for EUR 100 million) and
the full issue of all guarantees for the financial debt of this company (approximately EUR 150
million on the date of issue).
As part of the merger, agreements were signed between the shareholders of the Banijay Group
with the aim of regulating this group's corporate governance, with specific rights for the De
Agostini Group as a shareholder with a strategic minority stake.
9. Financial Statements
for the Year Ending December 31, 2016 -
Draft
19
Signing of new shareholders' agreements between Planeta Corporación and
the De Agostini Group
In 2016, new shareholders' agreements were signed between Planeta Corporación and the De
Agostini Group relating to the joint management of the Grupo Planeta-De Agostini joint
venture; the new agreements include the option, inter alia, for De Agostini to make the
investment more liquid.
Gaming & Services
Award of the sole concession of the Lotto game.
On May 16, 2016, the ADM (Customs and Monopolies Agency) awarded the new sole
concession for the Lotto game for the next nine years to the consortium controlled by
Lottomatica (with a 61.5% stake), and also including the Czech group KKCG (with a 32.5%
stake), a company affiliated with the Federation of Italian Tobacconists (4%) and Novomatic
Italia (2%).
The deal includes payment of a license fee totaling EUR 770 million (of which EUR 600 million
was paid in 2016 and the remainder in April 2017). In addition, EUR 138.2 million will be
invested by the consortium to upgrade the technological infrastructure supporting the Lotto
game.
Finance
Sale of the controlling stake in Innovation Real Estate
On June 10, 2016, DeA Capital Real Estate completed the sale of a 55% stake in Innovation
Real Estate to a group of institutional investors and entrepreneurs operating in the real estate
sector, for a consideration of EUR 5.7 million (after distribution of dividends totaling EUR 6.0
million).
On March 10, 2016, DeA Capital Real Estate had completed the purchase of shares
representing a 3.0% stake in Innovation Real Estate, for a price of EUR 0.7 million, bringing its
shareholding in the company to 100%.
Launch of the IDeA Corporate Credit Recovery I (IDeA CCR I) Fund
In June 2016, IDeA Capital Funds completed the launch of the IDeA Corporate Credit Recovery
I fund, which has total assets of EUR 262.8 million, of which EUR 177.6 million relates to the
loans business (comparto crediti or CC) and EUR 85.2 million to the new finance business
(comparto nuova finanza or CNF).
As Italy's leading debtor-in-possession financing fund, the purpose of IDeA CCR I is to help
relaunch medium-sized Italian companies that are facing financial difficulties but have solid
business fundamentals.
Seven banks contributed to the loans business by selling to the fund loans they had made to
eight previously identified companies, in exchange for units in the Fund.
10. Financial Statements
for the Year Ending December 31, 2016 -
Draft
20
The new finance business has obtained a commitment for the financial resources to support
the plans to relaunch the companies from both Italian investors (institutional investors and
some family offices, as well as DeA Capital, the fund's sponsor) and international investors.
Acquisition of a direct stake in SPC
In July 2016, the DeA Capital Group acquired, via its subsidiary DeA Capital Real Estate, a
stake of 66.3% in SPC, a company that specializes in secured and unsecured debt recovery,
with a focus on the leasing, banking, consumer and commercial sectors in Italy.
On December 22, 2016, a capital increase was carried out for the DeA Capital stake, totaling
EUR 0.6 million, which brought the stake held in the company to 71.5%, for a total investment
of EUR 1.6 million.
Under the agreements signed with the minority shareholders (SPC management, business
partners), regulated by a shareholders' agreement, a further capital increase will be carried
out by the company's management during 2017, which will bring DeA Capital's stake to
68.7%.
Holding company activities
Termination of the contract for the purchase and sale of options on 10,000,000
Assicurazioni Generali shares
On February 25, 2016, DeA Partecipazioni signed an options contract with Investendo Due,
which assigned to DeA Partecipazioni the right to sell, and to the counterparty the right to
purchase, 10,000,000 Assicurazioni Generali shares, at a strike price of EUR 12.23 per share;
it also included the option for the party exercising its right to choose either the physical
delivery of the shares specified in the contract or payment in cash of the difference between
the market price and the strike price.
On April 29, 2016, Investendo Due exercised its right to purchase the above-mentioned
shares, choosing settlement in cash, by DeA Partecipazioni, of the difference between the
strike price and the stock market price of Assicurazioni Generali on that date (EUR 13.32 per
share), totaling EUR 10.9 million.
Purchase of shares of De Agostini S.p.A.
Under the shareholders' agreements signed in June 2015 for the corporate governance of the
B&D Holding/De Agostini Group, on May 31, 2016 and June 8, 2016 respectively, B&D Holding
purchased 1,073,977 shares and 7,813 category B shares of De Agostini S.p.A. (representing
2.5% of the related share capital, excluding special category C and D shares held by
Investendo Due); the shares in question had been automatically converted into category A
shares.
11. Financial Statements
for the Year Ending December 31, 2016 -
Draft
21
Capital increase by De Agostini S.p.A.
On June 25, 2016, the extraordinary shareholders' meeting of De Agostini S.p.A. voted to
launch a capital increase of up to EUR 2,558,208, via the issue of up to 2,558,208 new shares,
to be offered, without option rights, to Investendo Due; on September 19, 2016, the capital
increase was fully subscribed and paid up by Investendo Due, which thus increased its holding
in De Agostini S.p.A. to 10.324% of the related share capital (from 5.303% at December 31,
2015).
The shares subscribed by Investendo Due in 2016 take precedence over shares outstanding at
December 31, 2015 in the distribution of certain reserves, in accordance with the new articles
of association adopted following the resolutions of the above-mentioned extraordinary
shareholders’ meeting.
Note that 99% of Investendo Due is owned, directly and/or indirectly, by directors and senior
managers of De Agostini S.p.A., while the remaining 1% is held by B&D Holding.
Dividends received/paid
In June 2016, the shareholders’ meeting of De Agostini S.p.A. approved the Financial
Statements for the Year Ending December 31, 2015, which closed with a net profit of EUR 33.6
million. The shareholders approved partial distribution of this amount as a dividend (EUR 24.2
million).
In 2016, as well as the dividends received from the companies included in the scope of the
holding company structure (around EUR 0.6 million), De Agostini S.p.A. recorded dividends
from the operating companies amounting to EUR 89.3 million, of which EUR 67.8 million
related to IGT (four quarterly dividends of USD 0.20 per share each) and EUR 21.5 million
related to DeA Capital (deriving from the partial distribution of the share premium reserve at
EUR 0.12 per share).
"Amend & Extend" agreement for loans held by De Agostini S.p.A.
On August 1, 2016, De Agostini S.p.A. signed the "Amend & Extend" agreement for the "Club
Deal 2014" loan, for a total amount of EUR 500 million, thereby extending the original maturity
date for an amount of EUR 425 million from October 2019 to 2020/2021 (also reducing the
margin); at the same time, it also signed a new interest rate swap agreement in an amount of
EUR 150 million, with start date October 2019 and end date October 2021.
After the end of 2016, in February 2017, De Agostini S.p.A. signed the "Amend & Extend"
agreement for the "Club Deal 2013" loan, thereby extending the final maturity, for a total
amount of EUR 164.5 million, by three years (from April 2018 to April 2021).
The above extensions are expected to generate financial cost savings of around EUR 12 million
over the life of the new loans.
12. Financial Statements
for the Year Ending December 31, 2016 -
Draft
22
3. Analysis of the Group’s operating performance and financial
position
3.1 Introduction
Legislative framework for the preparation of the financial statements
The Consolidated Financial Statements for the Year Ending December 31, 2016 were prepared
under the same accounting standards as those adopted in the previous year, namely the
IAS/IFRS, approved by the European Union.
The terms IAS and IFRS refer to all International Accounting Standards (IAS), International
Financial Reporting Standards (IFRS) and associated interpretations of the International
Financial Reporting Interpretations Committee (IFRIC) or its predecessor, the Standing
Interpretations Committee (SIC).
The provisions of Legislative Decree 38/2005 and of the IAS/IFRS constitute the legislative
framework for the Company in preparing the Consolidated Financial Statements.
In accordance with the provisions of Legislative Decree 38/2005, the Company prepares its
financial statements pursuant to art. 2423 et seq. of the Italian Civil Code.
Following the sales of the business division White Star and the interests in Florange and Atlas
For Men (as described in the section on "Significant events during the year" above), the
Financial Statements for the Year Ending December 31, 2015 were revised in accordance with
IFRS 5; in addition, the effect relating to the extraordinary sale of Associazioni Generali shares,
as part of the purchase and sale of De Agostini S.p.A. shares, was reclassified under non-
recurring income.
Figures in EUR million
2015
"As
Reported"
Publishing
assets
disposals/
Other
2015
"Restated"
REVENUES 5,060 (156) 4,904
EBITDA 1,574 (74) 1,500
Deprec., amort. and other non-cash items (848) - (848)
Income (loss) from equity investments 23 - 23
ORDINARY EBIT 749 (74) 675
Financial income/(charges) (443) 2 (441)
ORDINARY EBT (A) 306 (72) 234
Impairment (148) 1 (147)
Other non-recurring income/(charges) (212) 70 (142)
NO - ORDINARY EBT (B) (360) 71 (289)
EBT (A+B) (54) (1) (55)
Taxes (12) - (12)
Net profit (loss) from assets
sold/discontinued operations
(114) 1 (113)
Consolidated net profit (loss) (180) - (180)
Of which:
Net profit (loss) pertaining to minorities (53) - (53)
Net profit (loss) pertaining to group (127) - (127)
Net Financial Position (7,717) - (7,717)
13. Financial Statements
for the Year Ending December 31, 2016 -
Draft
23
Restated Consolidated Financial Statements
The Consolidated Financial Statements and explanatory notes in this document have been
supplemented by a number of performance indicators that enable the management to provide
information on the performance of the Group’s businesses, in line with analysis and control
parameters.
For this reason, a set of restated Consolidated Financial Statements were prepared showing
performance indicators more commonly used by the management than those shown in the
above-mentioned Consolidated Financial Statements and explanatory notes. These are:
Net revenues. This represents the turnover of individual businesses and the Group as
a whole, calculated as the income from sales and services.
EBITDA. This represents operating profit/loss before tax, financial income/charges,
one-off items, profits/losses from shareholdings valued at equity, depreciation and
amortization, and other non-cash items (e.g. impairment losses and gains/losses on
the sale of tangible and intangible assets). Given the nature of the business carried out
by the companies in the Finance business and the holding company structure, the net
financial income relating to these activities is included in EBITDA.
ORDINARY EBIT. This is calculated using the EBITDA figure plus the profits/losses
from shareholdings valued at equity, depreciation and amortization and other ordinary
non-cash items.
ORDINARY EBT. This is calculated by subtracting the figure for net financial income
from ORDINARY EBIT.
This figure – like ORDINARY EBIT – does not include the effects of any
impairment or other non-recurring items included in the NON-ORDINARY EBT
figure, which is shown separately.
NET FINANCIAL POSITION (NFP) This represents the difference between: (+) cash
and cash equivalents, loans, receivables and certain available-for-sale financial assets
or assets at fair value through profit and loss; and (-) financial liabilities.
Net revenues, EBITDA, ORDINARY EBIT/EBT and net financial position are alternative
performance indicators not determined according to IAS/IFRS; they are reported to help show
performance trends, as well as to provide useful information on the Group’s ability to manage
debt, and to assist in estimating the value of group assets.
The restated Consolidated Financial Statements show the same net profit and
shareholders’ equity as the Consolidated Financial Statements and are used below to
comment on both the consolidated results and those of the individual business areas.
14. Financial Statements
for the Year Ending December 31, 2016 -
Draft
24
3.2 Restated Consolidated Financial Statements
A summary is shown below of the Group’s key financial and operating performance indicators,
based on the restated Consolidated Financial Statements, prepared in accordance with the
above comments.
By way of introduction, note that the comparison of results reported in 2016 with those from
2015 was affected by the acquisition of IGT (finalized at the beginning of April 2015, and thus
with an impact on the figures for only about nine months in 2015).
Figures in EUR million 2016 2015 Absolute %
REVENUES 5,193 4,904 289 6%
EBITDA 1,584 1,500 84 6%
Deprec., amort. and other non-cash items (940) (848) (92)
Income (loss) from equity investments 45 23 22
ORDINARY EBIT 689 675 14 2%
Financial income/(charges) (443) (441) (2)
ORDINARY EBT (A) 246 234 12 5%
Impairment (42) (147) 105
Other non-recurring income/(charges) 51 (142) 193
NO - ORDINARY EBT (B) 9 (289) 298 n.a.
EBT (A+B) 255 (55) 310 n.a.
Taxes (25) (12) (13)
Net profit (loss) from assets sold/discontinue 43 (113) 156
Consolidated net profit (loss) 273 (180) 453 n.a.
Of which:
Net profit (loss) pertaining to minorities 151 (53) 204 n.a.
Net profit (loss) pertaining to group 122 (127) 249 n.a.
Net Financial Position (8,085) (7,717) (368) n.a.
Of which:
Games and Services (7,523) (7,135) (388) n.a.
Change
15. Financial Statements
for the Year Ending December 31, 2016 -
Draft
25
3.3 Operating performance
Net revenues
Consolidated net revenues in 2016 were EUR 5,193 million, an increase of EUR 289 million on
2015 (EUR 4,904 million). These figures break down as follows:
The Publishing business posted net revenues of EUR 444 million, a fall of EUR 76 million
(-14.6%) compared with 2015, which mainly affected the Partworks business area (EUR - 68
million).
The Media & Communication business posted net revenues of EUR 9 million, a decrease of
EUR 3 million compared with 2015, due entirely to Zodiak Active Plus.
The Gaming & Services business reported net revenues of EUR 4,675 million, up by EUR
4,294 million on 2015, which reflected the change in the scope of consolidation due to the
consolidation of IGT in April 2015.
The Finance business posted net revenues of EUR 67 million, a decrease of EUR 13 million
compared with 2015 (largely relating to the deconsolidation of Innovation Real Estate); the
revenues in question mainly related to alternative asset management fees and to income from
service activities, particularly those relating to consultancy, management and the sale of
properties in the real estate fund portfolios.
EBITDA
The Group recorded EBITDA of EUR 1,584 million for the year ending December 31, 2016, an
increase on the previous year. This breaks down as follows:
EBITDA for the Publishing business was EUR -11 million, a deterioration of some EUR 25
million on 2015; this fall was mainly due to reduced revenues, as explained above, the lower-
Net Revenues
Figures in EUR million 2016 % 2015 % Change
Publishing 444 8.5% 520 10.6% (76)
Media & Communication 9 0.2% 12 0.2% (3)
Games & Services 4,675 90.0% 4,294 87.6% 381
Finance 67 1.3% 80 1.6% (13)
Holding Companies / Eliminations (2) 0.0% (2) 0.0% -
Consolidated Total 5,193 100.0% 4,904 100.0% 289
EBITDA
Figures in EUR million 2016 % 2015 % Change
Publishing (11) -0.7% 14 0.9% (25)
Media & Communication (2) -0.1% (1) -0.1% (1)
Games & Services 1,599 100.9% 1,470 98.0% 129
Finance 40 2.5% 41 2.7% (1)
Holding Companies / Eliminations (42) -2.7% (24) -1.6% (18)
Consolidated Total 1,584 100.0% 1,500 100.0% 84
16. Financial Statements
for the Year Ending December 31, 2016 -
Draft
26
than-expected results of some works launched during the year, and the higher costs of new
restructuring operations (whose benefits only partially materialized during the year).
EBITDA for the Media & Communication business was EUR -2 million, a decrease on 2015.
The Gaming & Services business reported EBITDA of EUR 1,599 million, up by EUR 1,470
million on 2015, which reflected the change in the scope of consolidation after the
consolidation of IGT in April 2015.
EBITDA for the Finance business was EUR 40 million (EUR 41 million in 2015) and reflected
both the contribution of DeA Capital’s activities and the receipt of a dividend of EUR 14 million
from Assicurazioni Generali (EUR 19 million in 2015, received for a greater number of shares,
which were then partially sold in 2015).
EBITDA for holding company activities/inter-business eliminations was negative at EUR
42 million, down by EUR 18 million on 2015, mainly due to the allocation in 2016 of costs
relating to long-term incentive plans.
ORDINARY EBIT
The Group’s ORDINARY EBIT for the year ending December 31, 2016 was EUR 689 million,
after deducting depreciation/amortization charges and other ordinary non-cash items totaling
EUR 940 million, and income from shareholdings valued at equity totaling EUR 45 million.
Amortization, depreciation and other ordinary non-cash items break down as follows:
EUR 574 million relating to amortization and write-downs of intangible assets (EUR 502
million in 2015);
EUR 366 million relating to amortization and write-downs of tangible assets (EUR 346
million in 2015).
In 2016, the Group reported profit of EUR 45 million from shareholdings valued at equity,
compared with profit of EUR 23 million in 2015; the figure for 2016 includes profit of EUR 13
million for the LDH/Banijay Group (zero in 2015), representing the contribution of Zodiak
Media, which was recorded under "net profit/loss from discontinued operations") and profit of
EUR 28 million for Grupo Planeta-De Agostini (profit of EUR 20 million in 2015).
ORDINARY EBIT
Figures in EUR million 2016 2015 Change
EBITDA 1,584 1,500 84
Deprec., amort. and other non-cash items (940) (848) (92)
Income (loss) from equity investments 45 23 22
ORDINARY EBIT 689 675 14
17. Financial Statements
for the Year Ending December 31, 2016 -
Draft
27
Net profit (loss)
The table below shows the relationship between ORDINARY EBIT and consolidated net loss:
ORDINARY EBT for 2016 was positive at EUR 246 million, after taking net financial expenses of
EUR 443 million into account.
A breakdown of net financial charges for 2016 (compared with the corresponding values for
2015) is as follows:
EUR -8 million relating to the Publishing business (EUR -9 million in 2015);
EUR -415 million relating to the Gaming & Services business (EUR -400 million in
2015);
EUR -20 million relating to holding company activities (EUR -31 million in 2015).
Non-ordinary income totaling EUR +9 million in 2016 (versus non-ordinary charges totaling
EUR -289 million in 2015) were included in the NON-ORDINARY EBT figure. Note, in particular,
the following items recorded in 2016:
impairment of EUR -42 million, of which EUR -35 million related to the Gaming &
Services business and EUR -7 million to the Finance business;
other non-recurring income/(charges) totaling EUR +51 million, of which EUR +103
million related to the USD/EUR exchange rate effect, mainly due to IGT's financial debt.
Net profit (loss)
Figures in EUR million 2016 2015 Change
ORDINARY EBIT 689 675 14
Financial income/(charges) (443) (441) (2)
ORDINARY EBT (A) 246 234 12
Impairment (42) (147) 105
Other non-recurring income/(charges) 51 (142) 193
NO - ORDINARY EBT (B) 9 (289) 298
EBT (A+B) 255 (55) 310
Taxes (25) (12) (13)
Net profit (loss) from assets sold/discontinued
operations 43 (113) 156
Consolidated net profit (loss) 273 (180) 453
Of which:
Net profit (loss) pertaining to minorities 151 (53) 204
Net profit (loss) pertaining to group 122 (127) 249
18. Financial Statements
for the Year Ending December 31, 2016 -
Draft
28
The tax liability for 2016 was EUR 25 million (compared with EUR 12 million in 2015); the
increase was due to higher taxable income in 2016.
Profit from discontinued operations was EUR +43 million in 2016 (versus a loss of EUR -113
million in 2015, due mainly to the holdings in Zodiak Media/Banijay); this related to the capital
gain from the sale of Atlas For Men (EUR +32 million) and the reversal to the income
statement of the fair value reserve for Banijay (EUR +12 million).
To summarize, the consolidated net profit for 2016 was EUR 273 million, compared with a loss
of EUR 180 million in 2015.
The net profit attributable to the Group was EUR 122 million compared with a loss of EUR 127
million in 2015.
In 2016, the net profit attributable to minorities was EUR 151 million (compared with a loss of
EUR 53 million in 2015), and mainly reflected:
EUR +150 million relating to the pro-rata share of the IGT Group's net profit/loss (EUR
-56 million in 2015), previously recorded at the consolidated level of the De Agostini
S.p.A Group;
EUR +3 million relating to the pro-rata share of the net profit/loss of the DeA Capital
Group, IDeA Opportunity Fund and the AVA Fund (EUR +3 million in 2015), previously
recorded at the consolidated level of the De Agostini S.p.A Group;
EUR -2 million relating to the pro-rata share of the net loss of Connect Venture One
(value close to zero in 2015), previously recorded at the consolidated level of the De
Agostini S.p.A Group;
Statement of Performance – IAS 1
A summary version of the Comprehensive Income or Statement of Performance - IAS 1, is
shown below. It reports the net profit for the year as the sum of the portion recorded on the
Income Statement and that posted directly to shareholders' equity:
19. Financial Statements
for the Year Ending December 31, 2016 -
Draft
29
Available-for-sale financial assets recorded a loss of EUR 46 million in 2016 (a loss of EUR 85
million in 2015) due, in particular, to the decrease in the fair value of Assicurazioni Generali
(EUR -56 million), which was only partially offset by increases in the investment made by the
Connect 1 Fund (EUR +7 million).
Profits/losses on exchange rate differences largely reflected the effects of the conversion into
euro of the financial statements of the Group’s companies that are prepared in different
currencies. This related, in particular, to the Gaming & Services business (EUR +53 million
compared with EUR +312 million in 2015) and was due mainly to the appreciation of the US
dollar against the euro.
To summarize, comprehensive income totaled EUR 292 million in 2016 compared with a figure
of EUR 56 million in 2015; the portion attributable to the Group totaled EUR 105 million
compared with EUR 29 million in 2015.
Statement of Performance - IAS 1
Figures in EUR million 2016 2015
Net Profit/(Loss) (A) 273 (180)
Items that could be subsequently reclassified within the profit (loss) for the period
Profit / (loss) on available-for-sale financial assets (46) (85)
Profit / (loss) on traslating foreign operations 48 341
Profit / (loss) on cash flow hedge 5 9
Profit / (loss) on investments valued at equity 11 (6)
Tax effect 1 (24)
Items that could be subsequently reclassified within the profit (loss) for the period
Profit/(loss) on remeasurement of defined benefit plans - 1
Tax effect - -
Other comprehensive income/(loss) (B) 19 236
Total comprehensive income/(loss) (A+B) 292 56
Of which:
Net profit (loss) pertaining to minorities 187 85
Net profit (loss) pertaining to group 105 (29)
20. Financial Statements
for the Year Ending December 31, 2016 -
Draft
30
3.4 Statement of financial position
The table below shows a summary of the Group’s key figures from the statement of financial
position:
Goodwill
At December 31, 2016, goodwill was EUR 6,766 million (EUR 6,579 million at December 31,
2015), broken down as follows:
EUR 34 million relating to the Publishing business (unchanged from December 31,
2015), entirely attributable to School Texts;
EUR 6,602 million attributable to the Gaming & Services business (EUR 6,415 million at
December 31, 2015); the increase from December 31, 2015 (EUR 187 million) was due
to minor acquisitions totaling EUR 7 million, and the conversion differences on goodwill
denominated in foreign currencies (EUR +180 million);
EUR 129 million relating to the Finance business (EUR 130 million at December 31,
2015), mainly attributable to IDeA FIMIT SGR/DeA Capital Real Estate (EUR 97 million).
Other intangible assets
Other intangible assets include intellectual property rights, concessions, licenses and
trademarks, as well as other intangibles.
At December 31, 2016, Other intangible assets totaled EUR 2,781 million (EUR 3,133 million at
December 31, 2015), comprising:
EUR 35 million relating to the Publishing business (EUR 40 million at December 31,
2015), mainly in respect of publishing investments relating to school texts, intellectual
property rights and basic software and applications;
Figures in EUR million Change
Goodwill 6,766 6,579 187
Other intangible assets 2,781 3,133 (352)
Tangible assets 1,501 1,387 114
Investments 1,547 1,484 63
Cash and cash equivalents 511 832 (321)
Other net assets 175 (191) 366
TOTAL 13,281 13,224 57
for hedging:
Financial liabilities 8,818 8,948 (130)
Shareholders' equity 4,463 4,276 187
31.12.2016 31.12.2015
21. Financial Statements
for the Year Ending December 31, 2016 -
Draft
31
EUR 2,719 million relating to the Gaming & Services business (EUR 3,055 million at
December 31, 2015), primarily for customer agreements, concessions, licenses and
capitalized software;
EUR 27 million relating to the Finance business (EUR 38 million at December 31, 2015),
chiefly due to customer contracts and performance fees for asset management, project
management and agency activities relating to DeA Capital.
Tangible assets
At December 31, 2016, tangible assets totaled EUR 1,501 million (EUR 1,387 million at
December 31, 2015), which breaks down as follows:
Real estate totaling EUR 230 million (EUR 228 million at December 31, 2015);
Other tangible assets totaling EUR 1,271 million (EUR 1,159 million at December 31,
2015).
Real estate (EUR 230 million) includes:
EUR 20 million relating to the Publishing business (EUR 21 million at December 31,
2015);
EUR 208 million relating to the Gaming & Services business (EUR 205 million at
December 31, 2015);
EUR 2 million relating to the Finance business (unchanged from December 31, 2015).
Other tangible assets totaled EUR 1,271 million, including:
EUR 6 million relating to the Publishing business (EUR 8 million at December 31, 2015);
EUR 1,259 million relating to the Gaming & Services business (EUR 1,143 million at
December 31, 2015), mainly for terminals and contract-related systems;
EUR 6 million relating to holding company activities (EUR 7 million at December 31,
2015).
Investments
At December 31, 2016, the Group’s investments totaled EUR 1,547 million, a increase of EUR
63 million on the figure of EUR 1,484 million at end 2015. The table below shows a breakdown
of this item:
Investments
Figures in EUR million 31.12.2016 31.12.2015 Change
Investment properties 61 76 (15)
Equity Investments 554 377 177
Loans and receivables 171 205 (34)
Available-for-sale financial
assets
701 764 (63)
Financial assets at fair
value through profit or loss
60 62 (2)
Total group 1,547 1,484 63
22. Financial Statements
for the Year Ending December 31, 2016 -
Draft
32
At December 31, 2016 property investments totaled EUR 61 million (EUR 76 million at
December 31, 2015) attributable to the AVA Fund (managed by IDeA Capital Funds), De
Agostini S.p.A. and Nova Immobiliare; the decrease from December 31, 2015 was due to sales
of real estate units held by the Venere Fund, which is owned by the AVA Fund. Depreciation
and write-downs of EUR 1 million were charged for the period (in line with 2015).
Shareholdings valued at equity included EUR 352 million for Grupo Planeta-De Agostini and
(EUR 325 million at December 31, 2015) and EUR 128 million for LDH/Banijay Group (zero at
December 31, 2015).
Loans and receivables totaled EUR 171 million, a decrease of EUR 34 million on the balance at
December 31, 2015 (EUR 205 million), and mainly included customer financing receivables of
the IGT portfolio.
At December 31, 2016, available-for-sale financial assets totaled EUR 701 million, compared
with EUR 764 million at December 31, 2015. These mainly included shareholdings not held for
trading and units in mutual investment funds. A breakdown of available-for-sale financial
assets by business area is shown below.
The largest component relates to the investment (included under financial assets) in
Assicurazioni Generali shares, recorded at a value of EUR 284 million (EUR 341 million at
December 31, 2015), which represented the closing price on December 31, 2016 (EUR 14.12
per share). At December 31, 2016, the Group owned 1.29% of the share capital of
Assicurazioni Generali, i.e. 20,130,815 of its shares (unchanged compared with December 31,
2015).
"Available-for-sale financial assets" also include investments in funds (EUR 193 million, of
which EUR 183 million is held through the Finance business and EUR 10 million through
holding company activities, compared with EUR 185 million at December 31, 2015) and other
shareholdings/assets (EUR 224 million, of which EUR 119 million relates to the Finance
business and, in particular, the shareholding in Kenan Investments/Migros, and EUR 83 million
to holding company activities, compared with EUR 238 million at December 31, 2015).
At December 31, 2016, "Financial assets at fair value through profit and loss" totaled EUR 60
million (EUR 62 million at December 31, 2015); these break down into EUR 1 million relating
to the Publishing business (EUR 3 million at December 31, 2015), EUR 8 million relating to the
Gaming & Services business (EUR 5 million at December 31, 2015), EUR 36 million relating to
the Finance business (EUR 38 million at December 31, 2015), and EUR 15 million relating to
holding company activities (EUR 16 million at December 31, 2015).
Available-for-sale financial assets
Figures in EUR million 31.12.2016 % 31.12.2015 % Change
Publishing - 0.0% 2 0.3% (2)
Media & Communication - 0.0% - 0.0% -
Games & Services 22 3.1% 15 2.0% 7
Finance 586 83.6% 651 85.2% (65)
Holding 93 13.3% 96 12.6% (3)
Total group 701 100% 764 100% (63)
23. Financial Statements
for the Year Ending December 31, 2016 -
Draft
33
Other net current assets
At December 31, 2016, "Other net current assets" totaled EUR +175 million (EUR -191 million
at December 31, 2015). The table below shows the items included in this figure, compared
with the corresponding values at the end of 2015.
The net balance of "Trade receivables and payables" comprises trade receivables of EUR 1,002
million (EUR 1,014 million at December 31, 2015) and trade payables of EUR 1,062 million
(EUR 1,081 million at December 31, 2015).
At December 31, 2016, "Held-for-sale assets/liabilities" related entirely to Sigla, following the
launch, at the end of 2015, of a process to sell this holding. At December 31, 2015, this item
consisted of assets of EUR 601 million and liabilities of EUR -383 million, giving a net balance
of assets of EUR 218 million, relating, in particular, to Zodiak Media and Banijay, as well as
Sigla.
The net balance of "Tax assets and liabilities” includes deferred tax assets of EUR 57 million
(EUR 76 million at December 31, 2015) and deferred tax liabilities of EUR 705 million (EUR 858
million at December 31, 2015).
The net balance of "Other assets/liabilities" includes other assets totaling EUR 2,132 million
(EUR 1,523 million at December 31, 2015), of which EUR 384 million relates to inventories
(EUR 348 million at December 31, 2015), and other liabilities totaling EUR 1,035 million
(EUR 875 million at December 31, 2015). The increase of EUR 449 million in the item is largely
due to the license fee required to be paid for the renewal of the concession for the Lotto game.
At December 31, 2016, "Provisions" of EUR 104 million (EUR 117 million at December 31,
2015) mainly related to employment severance indemnity of EUR 19 million (EUR 20 million at
December 31, 2015), other employee benefits of EUR 26 million (EUR 21 million at December
31, 2015), the agent severance fund of EUR 4 million (EUR 5 million at December 31, 2015)
and provisions for risks and charges, including those for investee companies of EUR 54 million
(EUR 71 million at December 31, 2015).
Shareholders' equity
At December 31, 2016, Group and minorities' consolidated shareholders’ equity totaled EUR
4,463 million (versus EUR 4,276 million at end-2015); Group shareholders’ equity was EUR
2,464 million (EUR 2,371 million at end-2015), while minority interests accounted for
EUR 1,999 million (EUR 1,905 million at end-2015).
The increase of EUR +93 million in Group shareholders’ equity in 2016 was due to:
Other net assets
Figures in EUR million 31.12.2016 31.12.2015 Change
Trade receivables/payables: net balance (60) (67) 7
Net balance of non-current
assets/liabilities or of discontinued
operations held for sale
11 218 (207)
Net balance of tax assets/liabilities (769) (873) 104
Net balance of other assets/liabilities 1,097 648 449
Provisions (104) (117) 13
Total group 175 (191) 366
24. Financial Statements
for the Year Ending December 31, 2016 -
Draft
34
net profit of EUR +122 million for 2016;
the payment of dividends totaling EUR -22 million;
other changes totaling EUR -7 million.
Shareholders' equity relating to minority interests rose by EUR +94 million due to:
net profit of EUR +151 million for 2016;
the payment of dividends totaling EUR -124 million (to the minority shareholders of
IGT, DeA Capital);
other changes totaling EUR +67 million (including the impact of the exchange rate
differences arising on the conversion of the financial statements of the group’s foreign
subsidiaries that have a functional currency other than the euro, totaling EUR +23
million).
Net Financial Position (NFP)
The table below shows the Group’s net financial position broken down by business area:
The main change in the balance recorded at end 2016 compared with the previous year's
figure at both Group level and the Gaming & Services business level is due to the investment
made in renewing the concession for the Lotto game.
The net financial position of just the holding company activities at December 31, 2016 was
EUR -582 million, and comprises payables to banks (EUR -600 million), the De Agostini S.p.A.
convertible bond (EUR -80 million), cash and cash equivalents (EUR +89 million) and other
assets/liabilities of EUR +9 million (including intercompany loans). The net financial position at
December 31, 2016 was up by EUR +18 million versus the end-2015 figure, mainly due to
dividends from subsidiaries (EUR +110 million), dividends paid to shareholders (EUR -22
million net of the portion collected by DeA Partecipazioni on the De Agostini S.p.A. shares), the
partial conversion of the mezzanine bonds of Zodiak Media (EUR -40 million), the De Agostini
S.p.A. share capital increase subscribed to by Investendo Due (EUR +7 million) and structure
costs and financial/other charges (EUR -37 million).
As mentioned earlier, the net financial position is calculated using the figures reported in the
financial statements, and is the difference between: (+) cash and cash equivalents, loans,
receivables and certain available-for-sale financial assets or assets at fair value through profit
and loss; and (-) financial liabilities.
Net Financial Position
Figures in EUR million 31.12.2016 31.12.2015 Change
Publishing (89) (111) 22
Media & Communication 2 3 (1)
Games & Services (7,523) (7,135) (388)
Finance 107 126 (19)
Holding (582) (600) 18
Total group (8,085) (7,717) (368)
25. Financial Statements
for the Year Ending December 31, 2016 -
Draft
35
The reconciliation statement below shows the key figures in the Consolidated Statement of
Financial Position at December 31, 2016 as compared with the amounts included in the net
financial position.
The differences, which can be seen in "Available-for-sale financial assets", broadly relate to the
classification under this item of assets that do not meet the requirements for being included in
the calculation of net financial position, according to the Group’s accounting principles;
specifically, at December 31, 2016, as at December 31, 2015, the most significant differences
related to the value of the investments in Assicurazioni Generali, and in funds and other
financial investments.
For information on the use of financial instruments, pursuant to art. 2428, para. 2, point 6-bis
of the Italian Civil Code, please refer to the Notes to the Consolidated Financial Statements for
the Year Ending December 31, 2016.
* * *
In addition to the commentary on the consolidated results, with the related breakdown by
business, see the following websites for details on the financial information of the Group’s main
businesses, which mainly consist of companies whose shares are traded on regulated markets:
www.atresmedia.com
www.igt.com
www.deacapital.it
www.generali.com.
Figures in EUR million
Carrying
amount at
31.12.2016
of which in
Net Financial
Position
INVESTMENTS - NON-CURRENT ASSETS 732 22
Available-for-sale financial assets 696 22
Financial assets at fair value through profit or loss 36 0
LOANS AND RECEIVABLES - NON-CURRENT ASSETS 60 60
INVESTMENTS - CURRENT ASSETS 29 29
Available-for-sale financial assets 5 5
Financial assets at fair value through profit or loss 24 24
LOANS AND RECEIVABLES - CURRENT ASSETS 111 111
CASH AND CASH EQUIVALENTS 511 511
NON-CURRENT FINANCIAL LIABILITIES (8,372) (8,372)
CURRENT FINANCIAL LIABILITIES (446) (446)
Net Financial Position - Group (7,375) (8,085)
26. Financial Statements
for the Year Ending December 31, 2016 -
Draft
36
3.5 Main risks and uncertainties to which the Parent Company and consolidated
Group companies are exposed
As mentioned in the first section of the Report on Operations, the Group operates in a number
of business sectors and in finance and is organized accordingly; each business activity
comes under a sub-holding company, which is responsible for the coordination, management
and control of all the companies that pertain to it. Alongside the above-mentioned activities,
holding company activities are carried out by companies in the holding company structure,
which includes the Parent Company and other directly- and indirectly-controlled financial
companies.
Given its structure and the international arena in which it operates, the Group is exposed to a
number of risks and uncertainties, which can be categorized as either systemic risks or
specific risks.
Such risks may significantly affect the operating performance and financial position of the
Parent Company and the other companies included in the Group's Consolidated Financial
Statements.
Systemic risks relate to trends in macroeconomic variables in the different countries in which
the Group operates, and at global level, including GDP, interest rates, inflation, exchange rates
and unemployment, as well as the state of the financial markets – which particularly affects
access to capital and return on investment (especially financial investment).
Specific risks can be analyzed according to individual business areas, and include:
for the Publishing business, risks connected with the demand for published products
(i.e. partworks, school texts and others), the costs of producing these items, legislative
changes and the efficiency and effectiveness of logistics systems;
for the Media & Communication business, risks associated with the performance of TV
broadcasters (in turn affected by trends in advertising revenues) and the creative
abilities required to launch new program formats on the market;
for the Gaming & Services business, risks connected with the renewal of existing
contracts or licenses, the innovation required to launch new gaming and services
products, production capacity for new gaming/lottery management systems, the
possibility of a technological malfunction (system and/or terminals) that prevents
collection of receipts, and fixed-odds sports betting, where the operator bears the
bookmaking risk;
for the Finance business, risks connected with typical private equity activity and
alternative asset management activity (undertaken by IDeA FIMIT SGR and IDeA
Capital Funds SGR), and the performance of the investments made.
Risks for each business, common to all business areas in which the Group is highly diversified,
are also associated with the attitude of management, relationships with employees and
suppliers, and integration policies.
The specific risks relating to the holding company activities – in addition to those connected
with the management of the operations in the above-mentioned business sectors and Finance,
and the associated effects on cash flow or dividends – include exposure to specific sectors or
investments and the difficulties of identifying opportunities for investments or disposals.
27. Financial Statements
for the Year Ending December 31, 2016 -
Draft
37
Although we stress the significance of the above-mentioned risks for the Group’s operating
performance and financial position, we have put in place appropriate measures to limit the
impact of any serious negative developments.
With regard to systemic risks, in the early 2000s the Group started to diversify its
investments, both by sector and by geographical area. It now has a widely diversified portfolio
of activities combining resilient businesses (such as lotteries) with others that have good long-
term growth prospects (such as media and content production), all with a strong international
footprint.
With regard to specific risks, the Group believes it has adopted a modern system of
governance for its businesses, facilitating the effective management of complexity and the
achievement of the strategic goals of the sub-holding companies and the Group. Specifically,
this governance system has set out the procedures for managing relationships between the
Parent Company and sub-holding companies, and the responsibilities of the latter concerning
the coordination, management and control of all operating companies under their
responsibility.