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Mediaset's Board of Directors approves 2017 Results

Mediaset Board of Directors Meeting 24 April 2018

MEDIASET'S BOARD OF DIRECTORS
APPROVES 2017 RESULTS

Consolidated results

Net revenues:
EUR 3,631.0 million

Operating profit (EBIT):
EUR 316.5 million

Net profit:
EUR 90.5 million
The Board of Directors of Mediaset, which met today under the chairmanship of Fedele Confalonieri, examined and approved the Group's Consolidated Annual Report for the year ended 31 December 2017 as well as the Annual Report of the parent company Mediaset S.p.A. Twelve months that saw a generally positive trend with very positive results in Italy, compared with the previous year, which, as is well know, was anomalously impacted by the Vivendi affair.

Of particular note was the increase in the advertising market share and the sharp reduction in television costs, which resulted in a marked rise in operating profit and the consequent return of net profit. Elements that also confirm the timing for the achievement of the targets set out in the Mediaset 2020 Plan, presented to the market at the beginning of the year and that can be summarised as follows:

- Consolidation of the Group's leadership in cross-media advertising to ensure the extensive coverage of the linear television offer is complimented by the increasing enhancement of profiled audiences.

- A focus on the production of original Italian entertainment content, based on a plan for the optimisation of investments.

- The transformation of the pay-TV offer, making it less rigidly dependent on football and more focused on a model of content provision with the opening up of the technological platform developed by Premium - the only one in Italy on digital terrestrial - to third parties.

As mentioned, the implementation of the Plan already, in 2017, led to a marked improvement in the Group's consolidated results as well as to cash generation. Results achieved - despite a scenario characterised by a television advertising market that continues to perform below expectations - thanks to the positive contribution of advertising revenues in both Italy and Spain, as well as a significant reduction in management costs.

The highlights of the figures from the Group's 2017 Results, approved today by the Board of Directors, are as follows:

- Net revenues totalled EUR 3,631.0 million, compared with EUR 3,667.0 million in 2016. In particular, revenues in Italy came to EUR 2,636.2 million, compared with EUR 2,675.9 million in the previous year. In Spain, net revenues came to EUR 996.3 million, compared with EUR 992.0 million in 2016. Advertising revenues in both countries had a decisive impact on the Group's total revenues. In Spain, where there was a gradual slowdown in the market over the course of the year, gross advertising revenues totalled EUR 969.7 million, compared with EUR 962.9 million in the previous year. In Italy, where the national advertising market in 2017 was down (-1.9%), the company's gross television advertising revenues bucked the trend, rising from EUR 2,086.9 million in 2016 to EUR 2,095.4 million. Mediaset's market share in 2017 also rose to 38.3%, up from 37,5% in 2016.

- The Group's total operating costs fell by 11.1% (from EUR 2,495.0 million to EUR 2,218.4 million). Of particular note was the marked reduction in integrated television costs in Italy: down from EUR 3,093.0 million to EUR 2,574.4 million. On a like-for-like basis, compared with 2016, net of the impact of impairments and other one-off charges, the effective reduction in costs came to EUR 72.1 million (-2.6%).

- The Group's consolidated EBIT amounted to EUR 316.5 million, a net turnaround compared with 2016 (-EUR 189.3 million). In Italy, EBIT rose to EUR 70.9 million, compared with -EUR 413.7 million in the previous year, thanks also to the aforementioned cut in operating costs. The figure was also positive in Spain where the total of EUR 245.3 million was a further increase on the EUR 224.4 million recorded in 2016.

- Consolidated net profit consequently returned to positive territory at EUR 90.5 million, compared with the loss of EUR 294,5 million in 2016 (a year severely impacted by the negative effects of the Vivendi affair). In Italy, net profit went from the -EUR 380.1 million recorded in 2016 to -EUR 9.9 million in 2017. In Spain the figure improved on the result of 2016, rising to EUR 197.5 million from the EUR 171.0 million of the previous year.

- Net financial debt rose to EUR 1,392.2 million, compared with EUR 1,162.4 million on 31 December 2016. This change was due to investments related to business combinations, stakes in other strategic assets (Studio 71, LCN20, Radio Subasio, Radio Aut, M&A operation by the Gruppo EI Towers) for a total of EUR 96.3 million, to which should be added cash outlays by the subsidiaries Mediaset Espaņa and EI Towers for share buybacks (EUR 149.5 million) and the distribution of dividends to third-parties (EUR 175.6 million).
The Group's characteristic cash generation amounted to EUR 181.8 million, a marked improvement compared with the figure for 2016 (EUR 58.8 million).

- The Board resolved to propose to the Annual General Meeting of the Shareholders that the profit for the year be allocated to the extradordinary reserve.

- TV ratings. In an increasingly competitive European landscape, characterised also by new global players, Mediaset's channels improved their ratings compared with 2016, maintaining their leadership in both Italy and Spain.
In Italy, Mediaset is the leader in the commercial target with a  prime time share of 33.8% and 33.3% in the 24 hours. Canale 5 grew by 0.4 points in prime time and was Italy's most popular channel in the commercial target in both prime time (16.5%) and the 24 hours (15.9%).
In Spain, the Mediaset Espaņa channels held on to their absolute leadership in the 24 hours with a 28.8% share. Telecinco confirmed its position as Spain's most popular channel across the entire day (13.3%) and in prime time (13.5%).

RESULTS OF THE PARENT COMPANY MEDIASET S.P.A.


Also the parent company Mediaset Spa ended 2017 well with a net profit of EUR 69.2 million, compared with -EUR 151.0 million in 2016.


SIGNIFICANT EVENTS DURING 2017


- New flow channels for TV and radio. During the year the company acquired both the LCN frequencies and the rights for the use of the Focus TV brand with the aim of strengthening the offer of Mediaset's free thematic channels. Canale 20 was launched in 2018 with excellent ratings results, while the new Focus channel will launch in mid-May.
Also in 2017 the Group's radio hub, RadioMediaset, acquired RadioSubasio and Radio Aut, leaders in terms of coverage and listeners in central Italy.

- Investments in sports events. In 2017 Mediaset won exclusive rights to the World Cup in Russia 2018. For the first time the Mediaset Group will broadcast all the matches for free in both Italy and Spain.
During the year the Group also signed an exclusive three-year agreement with FIA (Federazione Internazionale dell'Automobile) for the television rights for all the races in the Formula E, the world championship for electric racing cars. The first E-Prix in Rome was held on 14 April 2018 and was a national event that drew excellent viewing figures on the Mediaset channels.
 
- New online records. In the online news front, in 2017 Tgcom24 became Italy's most popular news website on mobile and second on fixed devices. TgCom24 recorded 9.7 billion page views (+52% compared with 2016) with a daily average of 1.1 million unique users.
At the end of 2017 over 3.2 million (+30% vs. 2016) users had registered with Infinity, Italy's first OTT video-on-demand streaming service launched in 2013 that offers subscribers over 6,000 films, TV series, drama and entertainment. Over the 12 months, also 30 million hours of content was viewed on the platform (+13% on the previous year).


SUSTAINABILITY REPORT

The Board of Directors has approved the Sustainability Report (the so-called "Consolidated non-financial declaration), pursuant to Legislative Decree 254/2016.

FORECAST FOR THE FULL YEAR


There was a negative trend in the advertising market in the first two months of the current year compared with 2017. The advertising revenues of the Mediaset Group are nevertheless expected to improve, also as a result of the exclusive rights, in both Italy and Spain, to the World Cup. Market visibility remains, however, poor, above all in Italy due to the protraction of political uncertainty
During the year, the main actions outlined in the "Mediaset 2020" Plan will be reinforced, with a particular focus on cost controls and cash generation
The combination of these factors are expected to lead to the achievement, year on year, of positive results both in terms of EBIT and net profit.

The executive responsible for the preparation of the Mediaset S.p.A. accounts, Luca Marconcini, declares that, as per para. 2 art. 154-bis, of the Single Finance Bill, that the accounting information contained in this press release corresponds to that contained in the company's books.

REMUNERATION REPORT

The Board of Directors has approved the Remuneration Report pursuant to Art. 123-ter of the Consolidated Law on Finance and the implementation provisions issued by Consob.
At the forthcoming Annual General Meeting the Board will recommend the approval of the first section of the report, outlining the company's policy on the remuneration of directors and executives with strategic responsibilities, in compliance with the provisions of Art. 123-ter of the Consolidated Law on Finance.

MEDIUM-LONG-TERM INCENTIVE AND RETENTION PLAN


The Board of Directors will propose to the forthcoming Shareholders' Meeting the creation of a medium to long-term incentive and retention plan (hereinafter the "Plan") that, also based on the experience of previous plans, will be reserved for executives of Mediaset SpA and its subsidiaries with functions critical to the achievement of the Mediaset Group's strategic objectives.
The plan, which will cover a period of three years (2018-2020), has been defined by the Board based on proposals by the Remuneration Committee and aims to promote the creation of value for shareholders in the medium-long term and incentivising the loyalty of the subjects for whom its is intended.
The plan foresees the attribution of rights for the allocation of a corresponding number of shares of the company, with regular dividend. Rights will be allocated to the recipients as a result of the destination by the same of a share of the reference target premium of the short-term incentive for the year of reference - in an amount equal to 25% or 50% of the same - to the medium-long term plan.
In this case, recipients, in addition to the rights attributed to the share of the reference target premium of the short-term incentive, will receive an equal number of free-of-charge rights. The matured rights and the subsequent free assignment of the underlying shares will be subject to the verification, by the Board of Directors, of the achievement of performance targets, defined by the Board, regarding the Group's overall business results and the existence of an employment relationship at the date of expiry of the vesting period, as specified in the Regulations.
The shares to service the Plan will be made available using shares already issued by the company (treasury stock), to be purchased pursuant to Article 2357 ff. of the Civil Code, provided the company does not wish to or can not draw on those already held as Treasury Stock.
The Board of Directors will have the duty and responsibility to determine certain aspects of the Plan and to take the necessary measures for the implementation of the Plan in accordance with the authorisation attributed by a specially called Shareholders' Meeting in compliance with the principles to be determined by the same.
In line with Article. 84-bis, para. 1, of the Issuers Regulations, appropriate information will be given to the market, through the publication of an information document prepared in accordance with the instructions set out in Annex 3A, Outline 7 of the Issuers Regulations.

Cologno Monzese, April 24, 2018

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