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Now Mondadori needs to grow abroad, says CEO Ernesto Mauri

by Antonella Olivieri

Ernesto Mauri is convinced that 2016 will be remembered as “the year of the turnaround” for Mondadori. The first nine months showed a swing back into the black, with profit of €17.9 million from a loss of €2.8 million the year before. Revenues, including the acquisition of RCS Libri and Banzai Media, are up 14% to €935.5 million. EBITDA grew 59% (24% like for like) to €76.1 million. Net debt surged from €243.6 million to €329 million, the result of a shopping spree, but the net debt/EBITDA ratio is expected to settle at 3.3 times by year end. According to the CEO, no better opportunities could have presented themselves than the acquisitions undertaken so far to guarantee the company’s future prospects as what Mauri calls a “company that’s been born again.”

OLIVIERI: First let’s discuss RCS Libri. Considering the proceeds from the forced sale of Marsilio and Bompiani, net outlay will be around €100 million? What did that bring?

MAURI: Synergy and a reinforcement in all sectors where we operate: trade publishing, scholastic publishing, illustrated books, and a window abroad: there are nearly 40 million USA coffee table books. In Italy, our market share in trade publishing has risen from 23-24% to 27.8%, in school texts from 12-13% to 24%. We are projecting revenue of €312 million at year for Mondadori, €170 million for RCS, plus €200 million from retail.

OLIVIERI: Can you earn money with books?

MAURI: EBITDA margin at year end will be around 15%; you have to consider that we only consolidated RCS in April so that’s missing the first quarter, which is seasonally the weakest.

OLIVIERI: Do you mean margins will be weaker next year?

MAURI: No, because we have an entire year to work on it. We’re currently considering what could be an important development on the distribution side, where we have 600 points of sale.

OLIVIERI: You spent €45 million for Banzai Media—which has €24 million in revenue and EBITDA of around €4 million. Didn’t you pay a bit too much?

MAURI: Too much? I paid what we needed to pay to ensure our future, where declines in book sales will be offset by growth in digital. Some 30% of our magazine advertising will come from digital. We were at 11-12%. Mondadori, with a market share of 32% and 20 million readers, was already the leader in newsstand sales. With Banzai, we’ll add 17 million digital users to the 9 million we have grown over the past ten years through our magazine websites focused on our main themes: women, cooking and wellness. And we will add 180 people with the expertise that we lacked in digital marketing and communication. But above all, with Banzai we have changed the organization: today there’s one unified playbook for our entire digital strategy.

OLIVIERI: What now?

MAURI: The three-year plan we’re preparing for December will be an improvement from the previous one. The major objective is to maximize the contribution of the two acquisitions. But we must already think about what the group should look like in five years. There’s no more room to grow in Italy: we have to look around and become even more international, in particular in the magazine sector where Mondadori still has revenue of about €300 million that needs to be protected.

OLIVIERI: In Europe or America?

MAURI: Always start with Europe, but the market is global. There’s also the Far East, we must look at all markets where there are possibilities of development. The logic is: enough of saying “we’re in a declining sector.” For the first time this year, revenues are rising, without us having asked for a single euro from our shareholders.

OLIVIERI: Yes, but the debt rose. Doesn’t that worry you?

MAURI: We made acquisitions worth €170 million. But we’re liquid. With cash flow of more than €50 million and investments, we’ll pay down the debt rapidly. Our goal is to keep the net debt/EBITDA ratio under 3 times, but without losing out on chances to grow. We must think about the future.