Cairo Communication S p A : Interim Management Statement at 31 March 2021

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Interim Management Statement at 31 March 2021

Cairo Communication S.p.A.

Head office: Corso Magenta 55, Milan

Share capital Euro 6,989,663.10

English translation for convenience of international readers. Only the Italian version is authentic

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Governance

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Board of Directors (*)

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Independent Auditors (****)

Deloitte & Touche S.p.A.

1. The Board of Directors was appointed by resolution of the Shareholders' Meeting held on 6 May 2020. The Directors are in office for the years 2020-2021-2022 and therefore until the Shareholders' Meeting called to approve the 2022 financial statements

1. Ordinary and extraordinary executive powers exercised with single signatory, as limited by the Board of Directors

1. The Board of Statutory Auditors in office at the date of approval of this Report was appointed by resolution of the Shareholders' Meeting on 6 May 2020. The Statutory Auditors are in office for the years 2020-2021-2022 and therefore until the Shareholders' Meeting called to approve the financial statements relating to the last of these years.

(****) In office until the Shareholders' Meeting called to approve the 2028 financial statements.

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1. Valuation principles and criteria adopted in preparing the Interim Management Statement at 31 March 2021

The financial statements in this Interim Management Statement have been prepared following the reclassified statements usually adopted for the "Directors' Report on Operations" and in accordance with international accounting standards. The provisions of the international accounting standard on interim financial reporting (IAS 34 "Interim Financial Reporting") are not applied.

The Interim Management Statement at 31 March 2021 has been prepared in accordance with the requirements set out in Borsa Italiana Notice no. 7587 of 21 April 2016: "STAR Issuers: information on interim management statements".

The consolidated income statement figures in first quarter 2021 are shown versus first quarter 2020. Statement of financial position and equity figures appearing in the financial statements are compared with the figures of the consolidated financial statements at 31 December 2020.

The quarterly financial statements at 31 March 2021, as for those at 31 March 2020, have been prepared net of tax and tax effects.

In first quarter 2021, there were no changes to the scope of consolidation from the consolidated financial statements for the year ended 31 December 2020, except for:

• the acquisition of the control of m-dis. At the beginning of 2021 in fact, the acquisition of 45% of m-dis Distribuzione Media S.p.A. came to conclusion, bringing RCS's stake to 90%. The income statement and balance sheet amounts of m-dis Distribuzione Media S.p.A. (and its subsidiaries (MDM Milano Distribuzione, Pieroni Distribuzione, To-dis) are therefore fully consolidated from 2021 (the investment was previously consolidated at equity). Figures for m-dis are shown in the "RCS" operating segment;
• the sale (in February 2021) of the Spanish company Información Estadio Deportivo S.A.;
• the closure of the liquidation of Diellesei S.r.l. in liquidation.

As from 1 January 2021, the transaction whereby RCS and Cairo Pubblicità contributed their respective advertising sales businesses to the equally-owned CAIRORCS Media, came into effect. This transaction had no impact on Cairo Communication's consolidated financial statements. The results of the new company CAIRORCS Media are shown in the "Advertising" section.

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2. Alternative performance measures

In this Interim Management Statement, in order to provide a clearer picture of the financial performance of the Cairo Communication Group, besides of the conventional financial measures required by IFRS, a number of alternative performance measures are shown that should, however, not be considered substitutes of those adopted by IFRS.

The alternative measures are:

• EBITDA: used by Cairo Communication as a target to monitor internal management, and in public presentations (to financial analysts and investors). It serves as a unit of measurement to evaluate Group and Parent operational performance, with EBIT, and is calculated as follows:
  Result from continuing operations, before tax+/- Net finance income
  +/- Other income (expense) from financial assets and liabilities
  EBIT - Operating profit
• Amortization & depreciation
• Bad debt impairment losses
• Provisions for risks
• Income (expense) from equity-accounted investees1

EBITDA - Operating profit, before amortization, depreciation, provisions and write-downs

EBITDA (earnings before interest, tax, depreciation and amortization) is not classified as an accounting measure under IFRS, therefore, the criteria adopted for its measurement may not be consistent among companies or different groups.

RCS defines EBITDA as operating profit (EBIT) before depreciation, amortization and write-downs on fixed assets, and also includes income and expense from equity-accounted investees.

The main differences between the two definitions of EBITDA lie in the provisions for risks and in the allowance for impairment, included in the EBITDA definition adopted by RCS, while they are excluded from the EBITDA definition adopted by Cairo Communication. Owing to the differences between EBITDA definitions adopted, in this Interim Management Statement, consolidated EBITDA has been determined consistently with the definition adopted by the parent Cairo Communication.

Consolidated gross revenue: for a more detailed view, and in consideration of the specific features of the segment, operating revenue - for advertising revenue - includes gross operating revenue, advertising agency discounts and net operating revenue. Consolidated gross revenue is equal to the sum of gross operating revenue and other revenue and income.

1 Included following consolidation of RCS.

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