Tiscali's 1H03 results approved

Milan, 29th August 2003 - Organic growth in revenues and ADSL subscribers

Increase in EBITDA and profitability
- First half revenues of EUR 429.7 million, up 17% on 1H02
- 470,000 ADSL customers, an increase of 110,000 on the first quarter; 8,000 new customers per week
- First half gross profit at EUR 216.9 million (50% of revenues), an increase of 26% on 1H02.
- EBITDA positive for the third consecutive quarter, at EUR 33 million (7.6% of revenues), compared with a loss of EUR 8.6 million in 1H02

The board of directors of Tiscali has approved the company's 1H03 results. In the first six months of the year Tiscali continued to show vigorous organic growth and healthy profitability thanks to its strong presence in the broadband market, and to the completion of the integration and restructuring programme begun in the previous two years. Revenues rose, and both gross profit and EBITDA remained solid-this last in the black for the third quarter in a row.

Although growth in narrowband subscribers slowed overall, partly because of one-off seasonal factors in June, Tiscali increased its market share in new ADSL customers, with 8,000 new users signing up every week, keeping gross margin unchanged. These good results were due to heavy promotion of the service in all Tiscali's markets, and to the gradual implementation of EU directives to liberalise the broadband market, which is now losing much of its monopolistic character in terms of regulation and tariffs. Revenues and profitability were also boosted by a good performance from corporate services, Tiscali's second-biggest business, accounting for 16% of revenues. Here, revenues shot up by 58% on 1H02, and produced a gross margin of over 50%. Tiscali acquired three business services companies in the first half of the year, enabling it to increase customer numbers and market share in France, Austria and Italy, and generating immediate synergies with the group's proprietary IP network.

1H03 results:
Revenues jumped 17% vs. 1H02, to EUR 429.7 million. Internet access revenues, accounting for 70% of the total, went up by 16% year-on-year, from EUR 257.7 million in 1H02 to EUR 298.7 million in 1H03. Around EUR 60 million of this figure consisted of ADSL revenues. The number of active users at 30 June 2003 stood at 7.6 million, of whom around 470,000 were broadband customers. Portal revenues, accounting for 6% of the total, fell 12% to EUR 23.9 million. This fall was entirely due to the disposal of Hispavista and World Online Merchandising in the first half of 2002. The sale of value-added services such as music and secure mail more than offset the drop in advertising revenues.

Revenues from corporate services, which make up 16% of the total, shot up 58% from EUR 43.9 million to EUR 69.4 million, thanks to a wider consolidation base and an expanded range of products and services. Voice revenues jumped 29% to EUR 32.5 million, from EUR 25.3 million in 1H02, highlighting the strategic importance of this business, which the group can offer either wholesale or to businesses and consumers in addition to internet services.

Gross profit stood at EUR 216.9 million (50% of total revenues), an increase of 26% on the EUR 171.7 million posted in the same period of 2002. This performance demonstrates the positive effect of the company's proprietary network on profitability (including in the broadband market), and its ability to effectively curb costs through the integration of its numerous acquisitions.

Marketing costs went up 12%, from EUR 59.3 million in 1H02 to EUR 66.4 million; however, they fell from 16% of total revenues in 1H02 to 15% in 1H03. Personnel costs slid 3%, from EUR 71.1 million (19% of revenues) in 1H02 to EUR 68.9 million (16% of revenues).

The company posted a positive first-half EBITDA result of EUR 33 million, vs. a loss of EUR 8.6 million in the same period of last year.

The EBIT loss dropped sharply, from EUR 353 million in 1H02 to EUR 98.8 million, partly due to a change in the policy on goodwill amortisation, increasing the period applied from five to ten years. Goodwill amortisation was EUR 50.3 million in 1H03.

The company posted a net loss of EUR 129.3 million, a marked improvement on the EUR 403.8 million loss recorded in the same period of last year.

Tiscali invested EUR 43 million in 1H03, of which EUR 12.2 million were one-off costs incurred for the group's new headquarters in Cagliari.

As of 30 June 2003 the group had cash resources of around EUR 285.3 million, and net debt of EUR -187.3 million.

At the end of the financial year the company will assess the extent to which it will claim tax credits accrued in respect of past losses (which total more than EUR 1 billion), in light of projections for future profitability.

2Q03 results

Revenues jumped 26% in 2Q, from EUR 172.5 million in 2Q02 to EUR 217.2 million in 2Q03. Gross profit stood at EUR 111.3 million (51% of 2Q revenues), an increase of 28% on the same period of 2002, when the figure was EUR 87.2 million (50% of revenues).

EBITDA was positive, at EUR 17.4 million, from a loss of EUR 9.5 million in 2Q02. This represented an increase of 11% on the first quarter EBITDA figure (EUR 15.6 million)

EBIT was negative to the tune of EUR 32.5 million; this is a major improvement on the EUR 134.1 million loss posted in 2Q02.

The free cash flow was negative for EUR 28.3 million in the period, of which EUR 7.1 million related investments for the new headquarter in Cagliari.

Year-end targets revised up

In light of the good 1H03 results, Tiscali has confirmed its full-year revenue target and revised up its estimates for ADSL user numbers and profitability:

- Revenues up by over 20%
- Over 750,000 broadband customers
- EBITDA margin of 8%
- Positive free cash flow in the last quarter of 2003

The group also confirms its target of reaching a positive consolidated net profit in 2005, before any extraordinary items.