Business News
January through September 2008: Axel Springer defies the crisis / 8.1 percent increase in revenues / Earnings up 4.1 percent
Thursday 13. November 2008 - Revenues grow despite slow market environment / EBITDA excluding ProSiebenSat.1 Media dividend up 4.1 percent / Digital media primary growth drivers / Guidance for 2008 confirmed
During the first nine months of 2008 Axel Springer AG defied the crisis and has pressed ahead with its strategic pursuit of becoming Europes best-integrated media group. Despite a worsening of the market environment the Group achieved an increase in revenues while maintaining a high EBITDA margin. The management reconfirmed its revenue and earnings guidance for 2008 as a whole and, despite growing economic concerns, anticipates an increase in both consolidated revenues and EBITDA over the previous year (adjusted for the dividend from the divested stake in ProSiebenSat.1 Media AG and income from the Kirch insolvency).
Axel Springer saw consolidated revenues for the first nine months grow by 8.1 percent to EUR 1,994.1 million (previous year: 1.844.9 million). This clear increase is attributable primarily to acquisitions made in 2007. Adjusted for consolidation effects revenues increased 1.6 percent. The Group also continued to grow abroad. Axel Springer saw foreign revenues rise 17.1 percent to EUR 440.3 million (previous year: 376.0 million). The company thus generated 22.1 percent of total revenues in international markets.
Despite economic headwind Axel Springer achieved earnings before interest, taxes and depreciation (EBITDA) adjusted for non-recurring effects and effects from purchase price allocations of EUR 306.6 million, which represents an EBITDA margin of 15.4 percent. This is an increase of 4.1 percent compared to the previous years figure of EUR 294.4 million, which has been adjusted for the ProSiebenSat.1 Media AG dividend. EBITDA was nominally down 3.4 percent. Axel Springer was able to compensate for the decline in domestic print advertising revenues and a lower income from investments through earnings generated by new acquisitions, copy price increases of important publications and cost-cutting measures.
The significant increase in net income from EUR 179.6 million to EUR 560.5 million was driven primarily by the proceeds from the sale of the stake in ProSiebenSat.1. Earnings per share rose accordingly from EUR 5.61 to EUR 18.23. Net income and earnings per share amounted to EUR 133.2 million and EUR 4.17 respectively following adjustment for the proceeds from the sale.
Dr. Mathias Döpfner, Chief Executive Officer of Axel Springer AG, said: “During the first nine months Axel Springer grew dynamically – and also organically, that is excluding acquisitions – while retaining a high level of profitability. Our EBITDA rose by 4.1 percent when the dividend from ProSiebenSat.1 Media is left out of the equation. But the advertising market has deteriorated significantly during the third quarter. The fact that were are able to confirm our guidance for 2008 in the currently slow market environment is unusual and a clear confirmation of our strategy.”
Döpfner continued: “The economy as a whole and the media sector face significant challenges in the coming months. But we are very confident that Axel Springer, with its focus on digitization and internationalization and its efficient structures, is in a good position. We will continue our offensive in difficult times. We have strong brands, excellent employees and the financial strength to consequently pursue our strategy.”
Growth in all revenue categories; advertising revenues enjoy especially strong growth
During the first nine months of the current financial year Axel Springer enjoyed a 2.1-percent increase in circulation revenues to EUR 911.6 million (previous year: 892.9 million). The results reflect the price increases implemented during the second quarter, which more than compensated for a slight decline in circulation. Despite a slowdown during the third quarter Axel Springer achieved strong growth in advertising revenues of 8.7 percent to EUR 897.7 million (previous year: 825.9 million). The acquisitions made during the previous year and the positive development of international and digital business activities contributed significantly to this growth. Other revenues also rose sharply by 46.6 percent during the reporting period to EUR 184.9 million (previous year: 126.1 million).
Segments: national print sustains position in difficult market environment; strong growth in digital media segment and international activities
During the first nine months of 2008 the Newspapers National segment faced a slow market environment, which worsened during the third quarter as the result of the financial crisis and weakening economy. Nonetheless, national newspapers performed well with revenues of von EUR 939.0 million (previous year: 946.9 million). While sales revenues rose 3.8 percent, advertising revenues declined 6.2 percent to EUR 450.2 million (previous year: 480.2 million) due to the weakening of the advertising market during the third quarter. The segment EBITDA was EUR 245.8 million (previous year: 260.4 million). However, Axel Springer saw the segment EBITDA grow 7.6 percent to EUR 86.3 million (previous year: 80.2 million) during the third quarter. The EBITDA margin for the reporting period was 26.2 percent (previous year: 27.5 percent), thus remaining at a high level.
The increasingly difficult market environment also affected the Magazines National segment, which declined 3.3 percent to EUR 419.5 million (previous year: 434.1 million). However, earnings developed positively. During the first nine months the EBITDA rose 15.2 percent to EUR 65.9 million (previous year: 57.2 million). The segment saw its EBITDA margin grow to 15.7 percent over 13.2 percent for the comparable period of last year.
The international print activities of Axel Springer developed differently from the national print business. The Print International segment enjoyed increases in both revenues and EBITDA. During the first nine months of 2008 revenues rose 3.5 percent to EUR 304.3 million (previous year: 294.1 million). Activities in Poland and Switzerland contributed significantly to these results. The segment began operating in the black during the second quarter with the positive trend continuing throughout the third quarter. The segment finished the first nine months of 2008 with an EBITDA of 13.4 million (previous year: -6.2 million).
Investment in the digital activities and the rapidly progressing integration of online and mobile portals with the respective print titles of Axel Springer are paying off. This can be seen in the dynamic development of revenues in the Digital Media segment, which has established itself as an important growth engine for the Group. During the first nine months of 2008 Axel Springer saw revenues more than double in this segment from EUR 112.0 million for the first three months of last year to EUR 257.5 million at the end of September 2008. This strong growth is partly attributed to acquisitions made during the first half of the year. Pro forma revenues in the Digital Media segment grew organically by 24.9 percent during the first nine months. The segment EBITDA was EUR 0.8 million following EUR 26.8 million for the first three quarters of the previous year, whereby the previous years figures were heavily influenced by the EUR 23.1 million dividend payment from the stake in ProSiebenSat.1 Media AG. In addition, a foreign exchange charge in the double-digit millions from the investment in Dogan TV has adversely affected the earnings development.
Axel Springer saw revenues in the Services/Holding segment grow by more than one-fourth to EUR 73.8 million (previous year: 57.8 million) as a result of the integration of subscription activities of PVG Presse-Vertriebsgesellschaft into the subsidiary ims. The EBITDA was EUR ?19.4 million (previous year: – 20.6 million)
Financial situation: net financial debt significantly reduced
The cashflow from operating activities for the first nine months of 2008 declined to EUR 167.9 million (previous year: 228.1 million). The reasons for this include the lower payments from claims related to the Kirch insolvency and the decline in profit tax liabilities. The cashflow from investing activities improved to EUR 359.8 million following a negative cashflow of EUR 1,279.2 million for the previous year as a result of the sales price payment for the divested stake in ProSiebenSat.1 Media.
Net funds declined by EUR 78.6 million to EUR 119.5 million from EUR 198.1 million at the end of 2007. The reduction of financial liabilities from EUR 941.1 million to EUR 524.6 million lowered Group net financial debt to EUR -405.1 million from EUR -743.0 million at the end of 2007. The Group equity ratio as of September 30, 2008 was 37.2 percent (December 31, 2007: 31.7 percent).