The sale of Digital+ weighs on PRISA's results

The group records losses of 2,084 million euros from January to September due to the extraordinary accounting effect from the sale of Digital+.

The gross operating result (EBITDA) of PRIS stood at 179.3 million euros between January and September, 11.7% less than in the same period of 2013, while the net operating result (EBIT) was -53.4 million euros, compared to 82.9 million euros in the first nine months of the previous year.

Income from operations reached 1,068.7 million euros in this period (7.1% lower than that recorded in 2013) and the net financial result amounted to 31.4 million euros (127.4% more than in September of the previous year).

Adjusted EBITDA at constant exchange rates (215 million euros) grew by 7.4% (although it slowed to +2.1% in the stagnant third quarter).

Advertising in Spain continues to show fragile signs of recovery, with a positive trend change in September.

In Spain, the Group's adjusted advertising revenues decreased by -2.4% in the first 9 months of 2014. September shows a positive trend, after the irregularity of the last three quarters.

In radio, local advertising consolidates its growth trend (+4.4% accumulated, with positive increase in each of the last 9 months). Chain advertising still does not show a clear trend. The press moderates its decline in the last three quarters.

In Portugal, Media Capital's advertising revenues increased by +14.1% (+14.8% in TVI and +9.7% in MC Radio).

Activities in Latin America maintain solid growth in local currency, but with the negative impact of the exchange rate

In Latin America we experienced solid growth in Education (+9.9%) and Radio (+4.6%) in local currency, excluding the impact of the change in the consolidation perimeter. The stagnant quarter (+24.3% and -8.6% respectively) was affected by the slowdown of the economy in several countries in the area (and the World Cup effect). PRISA has suffered a negative impact due to the evolution of exchange rates in the 9 months of the year, which reached 73.4 million euros in revenue and 22.6 million in EBITDA (55.5 in revenue and 15.4 in EBITDA in the first half). 62.5% of the group's EBITDA already comes from Latin America at constant exchange rates.

Refinancing plan

The group continues focused on the execution of its refinancing plan: cancellation of 780 million euros through debt repurchase at a discount (c.25%) with funds from the application of Capital for 100 million euros at €0.53 per share; the sale of 13.68% of Mediaset España; and the agreement for the sale of 56% of Canal+ to Telefónica for an initial price of 750 million.
The Group's net banking debt stands at 2,599.72 million euros as of September 30, 2014 (2,500 million gross debt at the Group's head office, compared to 3,300.76 in December 2013).

Radio

Advertising in Spain decreased by 2%, showing worse performance in the months of July and August, the fall of which is due to seasonal effects such as the Soccer World Cup, which has especially negatively affected this medium. In September a change in trend is seen, which is expected to be maintained for the rest of the year.
Advertising in Latin America increases in local currency in all countries.

The reported results are impacted by the exchange rate, which has a negative impact on radio revenues of 10.9 million euros (2.2 million in EBITDA). It is worth highlighting the change in the consolidation of Mexico and Costa Rica, which went from being consolidated by proportional integration to doing so by equity accounting due to a change in the international accounting regulations adopted by the EU that has had an impact since January 2014.
Excluding these impacts, Radio's advertising revenues in Latin America would have increased by 5.3%, with a worse third quarter in Chile (affected by the change of government in this country) and Colombia (we expect recovery throughout the year).
The effort continues in cost control (-4.8% in adjusted terms), mainly in personnel costs in Spain (-8.4% adjusted in the period).

The adjusted EBITDA of the radio area reached 37 million euros in the accumulated third quarter (+13.5% compared to 9M 2013, and +20.3% adjusted by FX); In Spain, adjusted EBITDA improves by 6.4 million euros.

Sale of Canal +

In June 2014, the purchase and sale contract for 56% of Canal+ was formalized with Telefónica for an initial amount of 750 million euros. The operation, approved by the representative panel of the banks, is only subject to authorization by the competition authorities.

The signing of the purchase and sale contract generated an accounting loss of 2,064 million euros in PRISA's consolidated accounts, and 750 million in the individual accounts. This loss on the individual generated a capital imbalance that was compensated by an automatic conversion of part of the holding company's debt into participating loans in an amount sufficient to compensate for said capital imbalance. This conversion was contemplated in the refinancing agreement signed by the Group in December 2013.

The amount of the debt conversion into participatory loans (PPL's ​​according to the contractual name) was 507 million euros, and took place on September 15.

The results of this transaction are presented in the consolidated income statement under “Results from discontinued operations”, and the assets and liabilities as “Non-current assets held for sale” and “Liabilities linked to non-current assets held for sale”.