Management Reports • Dec 21, 2015
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Milan, December 21st 2015
How to succeed in the near future: RCS Plan 2016-2018
How to succeed in the near future: RCS Plan 2016-2018
...but print consumption structurally declining
Source: Global Consumer Media Usage and Exposure Forecast 2014 – 2018, PQMedia
Main source of news across age groups
Audience is "always on" and demands a 24/7 interaction online, and this is even more evident for younger generations
3:00-5:59 6:00-8:59 9:00-11:59 12:00-14:59 15:00-17:59 18:00-20:59 21:00-23:59
9
'17E
'16E
'15E
'18E
TV
(4%)
5%
Source: RCS estimate on Nielsen-GroupM-Zenith data (Italy); ArceMedia, I2P (Spain)
'12 '13
'14
10
'10
'11
Next to a challenging ATL market, there is a large market of BTL/ B2B marketing and communication solutions growing and increasingly digital
How to succeed in the near future: RCS Plan 2016-2018
Starting point and context
Starting point and context
Ensure sustainable economics going forward
Value RCS assets, managing the business transformation
Set strong foundations for future growth
To achieve these objectives, there are 8 fundamental actions to focus on
Persistently reduce costs, protecting products' investments & quality Stabilize revenues and margins of Print+Web+Mobile editorial products Selectively invest in high-potential areas Exploit scale to optimize technological platforms Optimize the value chain by leading the print industry consolidation process Dismiss non-core/ low value assets Simplify the organization, focusing on capabilities, accountability & execution Continuously monitor the Plan's execution via shared KPIs in order to swiftly adapt to a changing environment 1 2 3 4 5 6 7 8
1 Persistently reduce costs, protecting products' investments & quality Stabilize revenues and margins of Print+Web+Mobile editorial products Selectively invest in high-potential areas Exploit scale to optimize technological platforms Optimize the value chain by leading the print industry consolidation process Dismiss non-core/ low value assets Simplify the organization, focusing on capabilities, accountability & execution Continuously monitor the Plan's execution via shared KPIs in order to swiftly adapt to a changing environment 2 3 4 5 6 7 8
| A | External costs | • Direct costs (Physical production, Publishing & Editing, Logistic services) • Indirect costs (General services, Marketing & Sales services, IT & Telecom, Professional services) |
|---|---|---|
| B | Labor costs | • Right-sizing of corporate/ support functions also through integration of Italy & Spain |
| • Lean model on product costs (content creation, prepress, print, logistics) |
||
| C | Print consolidation | |
| • the value chain by leading industry See 5 Optimize Action - consolidation process |
1.Cost Intensity = External costs/revenues; External costs = Total costs excluding personnel costs
Persistently reduce costs, protecting products' investments & quality Stabilize revenues and margins of Print+Web+Mobile editorial products Selectively invest in high-potential areas Exploit scale to optimize technological platforms Optimize the value chain by leading the print industry consolidation process Dismiss non-core/ low value assets Simplify the organization, focusing on capabilities, accountability & execution Continuously monitor the Plan's execution via shared KPIs in order to swiftly adapt to a changing environment 1 2 3 4 5 6 7 8
| A | New verticalities | • Launch new paid verticalities for Corriere della Sera • Launch/develop new products "mobile-first" for Millennials • Foster cross-fertilization across countries • |
|---|---|---|
| B | Local editions | • Optimize print Local editions • Launch digital Hyperlocal editions • |
| C | Subscriptions | • Push on subscriptions and ARPU1 on Print & Digital editions • Reduce churn |
| D | Price | • Introduce selected paywall on companion websites • Review and optimize pricing strategy on Print editions |
2) Stabilize revenues and margins of editorial products
| Topic Launch1 |
Reading July 2015 |
Revenues 2016P |
~2 - 2.5 M€ |
|---|---|---|---|
| • B2C product sold on top of Corriere since mid 2015 – Free product since 2011 |
(M€) | ||
| Overview | • Key success factors: – Higher quality – Discretionary purchase – Communication |
EBITDA-CapEx 2016P (M€) |
~0.5 - 1 M€ |
| EBITDA-CapEx/ Revenues 2016P (%) |
~25 - 35% |
LaLettura
Review and optimization of current operating model
2018P 1+ M€
(M€)
2) Stabilize revenues and margins of editorial products
2) Stabilize revenues and margins of editorial products
1 Persistently reduce costs, protecting products' investments & quality Stabilize revenues and margins of Print+Web+Mobile editorial products Selectively invest in high-potential areas Exploit scale to optimize technological platforms Optimize the value chain by leading the print industry consolidation process Dismiss non-core/ low value assets Simplify the organization, focusing on capabilities, accountability & execution Continuously monitor the Plan's execution via shared KPIs in order to swiftly adapt to a changing environment 2 3 4 5 6 7 8
| A | International Sport events and formats |
• Push Sport events and formats, building on our "Iconic" properties, Professional events, Mass events • Develop "systems" of events |
|---|---|---|
| B | International audience | • Expand in Spanish-speaking markets, with a Marca-branded digital product • Leverage content from RCS power brands in Sport |
| C | Data-centric transformation |
• Leverage Data to improve current revenue streams and create new ones • Focus on 4 areas: Online Adv, Subscriptions for Print and Digital, B2B Marketing Services, Product improvements/ new product development |
33 1. Includes events with Long Term Licensing, organized by RCS 2. Percentages refer to the portion of Sport Events revenues generated by the relative category of events in 2015F Note. Events represented here are not an exhaustive list and refer to a selection of events in current portfolio of RCS Sport and Last Lap
%2
| Phase 1 Short term, with current set-up |
Phase 2 Medium term, potentially with a partner |
|
|---|---|---|
| "Iconic" properties: enhance the value to international best practices |
• Giro D'Italia - enhance its value as a global brand, • Iconic "classic" cycling and running races - fully exploit value, raise brand awareness |
• RCS with a stronger competitive positioning • Further step-change in scale achievable at |
| Professional events: build, develop and grow "systems" of events |
• Develop "systems" of events at international level • Build up on current properties by RCS |
international level, potentially joining forces with a partner • Examples of partnership areas (illustrative): – Strategic investments in high potential events – Further development of own, new |
| Mass events: develop new formats and "systems" of events |
• Growing market where Italy can command a superior value • Build up on current properties by RCS + invest in new formats development |
formats, building up/ acquiring key capabilities – Creation of global circuits of professional events |
~500 M people speak Spanish worldwide...
Online Video Adv Spend (M\$), Top 10 countries, 2015E-2020E
| Tattivide di (-) an a |
|
|---|---|
| OUR PITCH OUR RULES | |
| Calcio | 2k research * Improve |
| $0.65971980878098787006$ | |
| La Gazzetta dello Sport HIGHE SOILA PROLEOMAZ, SUILE COPYLY FAROWDAY MOTIVALE MOVEFORD. |
To succeed, need to have: Value of Marca brand and Marca+Gazzetta contents to Spanish speaking audiences
Recognized power of Marca brand to international audience
World class reference sites covering Spanish La Liga and Italian Serie A (Marca and Gazzetta)
Direct information from stars playing in La Liga and Serie A
Attractiveness to fans in Latin countries where many players come from
International audience: RCS has competitive advantage in Spanish speaking countries; a local support/partner would complement RCS strengths B
What is needed to succeed
| Technological Platform |
|||
|---|---|---|---|
| Generate data | Analyze data | Utilize data | |
| What is this about? |
Identify, collect and maintain useful client information |
Use algorithms to extract information and make them usable by the business |
Use the output of data analysis to support business decisions |
| Examples of actions |
• Group and maintain data under a unique repository • Mandatory log-in on all News and Verticals websites |
• Statistical analysis of audience profiles • Attribution models |
• From offline to online Adv • From point of sale circulation to subscriptions • B2B marketing services • Product improvements and new product development |
1 Persistently reduce costs, protecting products' investments & quality Stabilize revenues and margins of Print+Web+Mobile editorial products Selectively invest in high-potential areas Exploit scale to optimize technological platforms Optimize the value chain by leading the print industry consolidation process Dismiss non-core/ low value assets Simplify the organization, focusing on capabilities, accountability & execution Continuously monitor the Plan's execution via shared KPIs in order to swiftly adapt to a changing environment 2 3 4 5 6 7 8
| A | Enable business | • Digital contents • Digital advertising • Users' profiling • Customer experience management |
|---|---|---|
| B | Rationalize costs/investments |
• Standardize platforms across businesses/ countries • Renegotiate jointly existing contracts |
| C | Exploit revenue synergies |
• Develop revenue/ operating synergies |
| Italy | Spain | ||
|---|---|---|---|
| Infrastructure | Datacenter Platform A | Datacenter Platform B | |
| Enterprise Platform | Server Farm Platform A Common Enterprise Platform |
||
| Content Management System | CMS Platform A | CMS Platform B | |
| CRM Platform A | CRM Platform B | ||
| Customer Care Platform A | Customer Care Platform B | ||
| CRM & eCommerce | Campaign Platform A | Campaign Platform B | |
| eCommerce Platform A | eCommerce Platform B | ||
| SFA1 Platform A |
SFA1 Platform B |
||
| SFA & Advertising | Digital Inventory Platform A | Digital Inventory Platform B | |
| Adserver Platform A | Adserver Platform B | ||
| Common Business Intelligence Platform | |||
| Analytics | Common Web Analytics Platform | ||
| Advanced Analytics Platform A | Advanced Analytics Platform B | ||
| Customer DB Platform A | Customer DB Platform B | ||
| Data | DMP2 Platform A |
DMP2 Platform B |
|
| Big Data Platform A | Big Data Platform B | ||
| Architecture A | Architecture B | ||
| Digital Channels | • Development mostly outsourced |
• Development mostly in house |
1 Persistently reduce costs, protecting products' investments & quality Stabilize revenues and margins of Print+Web+Mobile editorial products Selectively invest in high-potential areas Exploit scale to optimize technological platforms Optimize the value chain by leading the print industry consolidation process Dismiss non-core/ low value assets Simplify the organization, focusing on capabilities, accountability & execution Continuously monitor the Plan's execution via shared KPIs in order to swiftly adapt to a changing environment 2 3 4 5 6 7 8
5) Optimize the value chain by leading the print industry consolidation process
There is excess of capacity in the Italian market, with outdated plants requiring investments
5) Optimize the value chain by leading the print industry consolidation process
1 Persistently reduce costs, protecting products' investments & quality Stabilize revenues and margins of Print+Web+Mobile editorial products Selectively invest in high-potential areas Exploit scale to optimize technological platforms Optimize the value chain by leading the print industry consolidation process Dismiss non-core/ low value assets Simplify the organization, focusing on capabilities, accountability & execution Continuously monitor the Plan's execution via shared KPIs in order to swiftly adapt to a changing environment 2 3 4 5 6 7 8
Assets already identified as potential divestments, at the right conditions given asset trend and potential
Retain assets when functional to the core business
Under review
1 Persistently reduce costs, protecting products' investments & quality Stabilize revenues and margins of Print+Web+Mobile editorial products Selectively invest in high-potential areas Exploit scale to optimize technological platforms Optimize the value chain by leading the print industry consolidation process Dismiss non-core/ low value assets Simplify the organization, focusing on capabilities, accountability & execution Continuously monitor the Plan's execution via shared KPIs in order to swiftly adapt to a changing environment 2 3 4 5 6 7 8
7) Simplify the organization, focusing on capabilities, accountability & execution
The new organizational setup has been designed to ensure accountability of key decisions and execution of the overall Plan
V.
Ensure transformation enablers (platforms, capabilities mix), also nurturing young talents already present in RCS Group organization
7) Simplify the organization, focusing on capabilities, accountability & execution
Procurement also providing Operations guidelines/ framework agreements
8) Monitor the Plan's execution via shared KPIs in order to swiftly adapt
Action 8: Continuously monitor the Plan's execution via shared KPIs in order to swiftly adapt to a changing environment
| Key principles | Examples (illustrative) | |
|---|---|---|
| The Plan will be continuously internally monitored with a set of KPIs, providing: |
Persistently reduce costs, • External costs (direct & 1 protecting products' indirect) |
|
| Transparency On actions performed and results achieved |
investments & quality • Labor costs • • EBITDA-CapEx per Stabilize revenues and 2 |
|
| Accountability With KPIs consistent to Plan's objectives |
product margins of Print+Web+ • Key milestones (e.g. Mobile editorial products products' launch) • Selectively invest in high 3 • EBITDA-CapEx per |
|
| Timeliness To react promptly to changing conditions |
potential areas product • % of audience profiled • |
|
Starting point and context
| Plan Target | Year 1 (2016P) | |
|---|---|---|
| Revenues | +1.5% (CAGR 2015F - 2018P) |
Flat |
| Net Efficiencies | ~60 M€ (2018P vs. 2015F) |
~40 - 45 M€ |
| EBITDA % excl. Non Recurring |
~13% (2018P) |
~10% |
| Net Result | Solidly positive |
Slightly positive |
| Net Cash Flow | 3 years cumulative 95-100 M€ |
Break even |
| Debt Ratio | ~2x | ~4x |
P&L key highlights (current perimeter)
Q&A session
Milan, December 21st 2015
This presentation contains management preliminary estimates and forward-looking statements, including information related to RCS MediaGroup projected financial performance and the expected development of the publishing industry, in particular in the newspaper, magazine, book and new media segments. These statements are based on estimates and assumptions made by management of the company and are believed to be reasonable, as of this date, though by their nature future estimates are uncertain and subject to variations due to possible changes in the market. Actual results 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 of securities of any of the companies mentioned in any jurisdiction and is directed to professionals of the financial community.
For further information, please contact our Investor Relations Department
Investor Relations Department
+39 02 2584 5508 [email protected] Federica De Medici
Milan, December 21st 2015
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