UPDATE 2-RCS MediaGroup confirms needs new capital for overhaul

Wed Dec 19, 2012 12:37pm EST

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* RCS plans capex of 300 mln euros to help growth strategy

* Core margins seen more than doubling to 10 percent in 2015

* Credit Suisse appointed advisor on capital needs (Adds details, advisor appointment, analysts comment)

By Danilo Masoni

MILAN, Dec 19 (Reuters) - RCS MediaGroup, the publisher of Italy's most influential newspaper, Corriere della Sera, acknowledged on Wednesday it will need a large injection of capital to accelerate its digital transition and reverse losses over the next three years.

Sources close to the matter said last month RCS was mulling a cash call of at least 400 million euros, about half its net debt, but last week the company delayed a decision on the likely capital increase until February or March.

But unveiling the outline business plan for the next three years under new Chief Executive Pietro Scott Jovane, the company said on Wednesday it would need "new significant capital resources" to help it achieve its targets, as cost cuts and disposals will not be enough.

It also said Credit Suisse has been appointed to advise Jovane on the "preparation of the financial structure that will support the implementation of the plan, including equity measures".

It did not give a figure for the needed capital boost but said it will require investments of 300 million euros ($396 million) and will focus on digital innovation and support for its key brands, while cutting costs and selling non-core assets to improve efficiency.

The indebted group has been hit hard by the economic downturn that has rattled Europe and is set to close 2012 in loss for a second straight year, with margins squeezed by a rapid fall in advertising and circulation sales.

RCS said it expects revenue to steady at 1.6 billion euros in 2015, with digital revenues accounting for around 25 percent of total turnover, while its core profit margin is expected to rise to 10 percent of sales from 4 percent in 2012.

Earnings before interest, tax, depreciation and amortization (EBITDA) are expected to be around 160 million euros in 2015, excluding one-off charges, it said.

Analysts said the amount of planned investments was higher than expected, while the profit target was broadly in line. They had anticipated a lack of detail on disposals and capital needs.

The shares were up 5 percent immediately after the plan was unveiled but turned lower to end the session down 1.1 percent at 1.26 euros. ($1=0.7568 euros) (Additional reporting by Antonella Ciancio; Editing by Greg Mahlich)

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