Cairo Communication S p A : Annual Report at 31 December 2021

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The Group at 31 December 2021

Cairo Communication

S.p.A.

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DIRECTORS' REPORT ON OPERATIONS

Separate and consolidated financial statements at 31 December 2021

Shareholders,

the separate and consolidated financial statements as at and for the year ended 31 December 2021, submitted for your approval, show, respectively, a profit of Euro 11.7 million and a profit attributable to the owners of the parent of Euro 51 million.

In 2021, the Group operated as a:

• publisher of magazines and books (Cairo Editore/Editoriale Giorgio Mondadori and Cairo Publishing);
• TV (La7, La7d) and Internet (La7.it, TG.La7.it) publisher and network operator (Cairo Network);
• multimedia agency for the sale of advertising space. Specifically, from 1 January 2021, the contribution by RCS and Cairo Pubblicità to CAIRORCS Media (on an equal basis) of their respective advertising sales business units, relating to the print and online titles in Italy of RCS, became effective;
• publisher of dailies and magazines (weeklies and monthlies) in Italy and in Spain, through RCS MediaGroup, also active in the organization of major world sporting events;

The first few months of the year saw completion of the purchase of 55% of m-Dis Distribuzione Media S.p.A., raising RCS's interest in the company to 100%.

In 2020, the comparative year, the national and international landscape had been swept by the spread of the Coronavirus and the ensuing restrictions for its containment adopted by the governments of all the countries involved; these restrictions had had a direct effect on the organization and timing of work and on the Group's activities.

In the initial phase (so-called phase 1, or lockdown), the measures adopted by the public authorities had resulted in the closure of non-essential activities and severe restrictions on people movement (unless authorized for specific reasons).

The situation had been rather critical in the first half of 2020. The curbing of infections, which had marked the end of the first half and part of third quarter 2020, had led to a gradual improvement in the situation.

Subsequently, as early as August 2020 in Spain and October in Italy, the curve of infections had started to rise again, leading the public authorities of the two countries to reintroduce a series of restrictive measures.

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The beginning of 2021 continued to be marked by the health emergency and the containment measures implemented by the authorities, both in Italy and Spain.

Specifically, in Spain at the beginning of the year, and in Italy from the end of February 2021, the number of cases has risen, leading to the adoption again of restrictive measures. Starting from the second half of February in Spain, and from mid-April in Italy, the situation improved and the containment measures were gradually lifted.

In both countries, the vaccination campaign, together with the introduction of measures to boost vaccination, prevention and/or monitoring, has gradually brought great benefits in terms of cases, hospital and ICUs admission rates and deaths, which have allowed them to speed up the reduction of restrictive measures and improve the situation.

The vaccination campaign and the measures adopted have allowed the two countries to cope effectively with the spread of the Omicron variant at the end of 2021 and to curb its impact on business activities and people's lives.

Following the downtrend of 2020, the economic recovery that started in 2021 was marked by higher prices for transportation and a number of commodities, including printing paper and energy, and in some cases, supply difficulties. This situation is causing a general increase in production costs and difficulties in production processes for various sectors, whose current production is struggling to keep pace with the trend in demand. With regard to the Group, this economic context, and its development during the year, impacts on production costs and may also affect the performance of the advertising market, as it may influence the advertisers' propensity to spend.

The Group is monitoring developments on a daily basis to minimize the impacts in terms of health and safety in the workplace and on the operating and financial front, by defining and implementing flexible and timely action plans.

In 2021, the international scenario was marked by economic recovery after the decline in 2020 associated with the spread of the Coronavirus and the restrictive measures implemented by the public authorities of the countries involved. Italy's GDP for the full year 2021 increased by 6.5% (ISTAT), while Spain recorded an annual GDP growth rate of 5.2% (Institute of National Statistics - INE).

After several years of virtual price stability, in 2021 the national consumer price index was up by 3.9% on an annual basis in Italy (ISTAT) and by 6.5% in Spain (Institute of National Statistics -INE) versus a 5% growth in the Euro Zone.

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