Business News
Axel Springer gains market share and remains highly profitable in the crisis year of 2009
Monday 15. March 2010 - EBITDA margin of 12.8 percent / Revenues decline by 4.3 percent / Digital Media earnings double / Stable dividend of EUR 4.40 per share / Net debt reduced further / Number of employees grows
In 2009 Axel Springer consequently pursued its cross-media business model and thereby outperformed the market within the extremely challenging economic environment. As expected, consolidated revenues and earnings before interest, tax and depreciation (EBITDA) adjusted for special effects and purchase price allocations were lower than the high prior-year comparables. Despite a 4.3 percent decline in revenues as well as high restructuring costs and additional investments in its brands, the Group achieved an EBITDA of EUR 333.7 million (previous year: EUR 486.2 million) and an EBITDA margin of 12.8 percent. With earnings per share at EUR 10.19 the management and supervisory boards will propose the payout of a stable dividend of EUR 4.40 per share.
National print media were able to partly compensate for the effects of the slow advertising environment thanks to their strong position in the circulation market and disciplined cost management. The segment even managed to increase its advertising market share. Digital Media achieved a strong rise in revenues and doubled its earnings, thus demonstrating the segments growing importance within the Group. Despite a sharp decline in segment revenues, the Print International segment generated a positive result by reducing its cost base.
Dr. Mathias Döpfner, Chief Executive Officer of Axel Springer AG, summed up the performance of the company at the annual press conference in Berlin: Every eighth euro of our revenues was profit, every fifth euro of our revenues we generated in the internet, we proposed a record dividend, increased the equity ratio to over 40 percent, and reduced the debt de facto to zero. Do you know of any comparable media group that has weathered the crisis so successfully?”
Döpfner continued: “With a double-digit EBITDA margin, our profitability has maintained a level that we forecast years ago for an economically recovered environment. Our earnings have also been impacted by major investments in additional marketing measures and by restructuring costs, which add up to a figure in the high double-digit millions. Of decisive importance are the facts that our national print media have gained market share and that our strongly growing Digital Media business has seen its earnings double, thereby contributing significantly to the Groups success. We are making good progress with our strategy based on reach and are dynamically pursuing central issues such as paid content in the Internet.”
With respect to the 2010 financial year 2010 Döpfner said: “For the current financial year we forecast stable or slightly increasing revenues resulting primarily from growth in the digital segment. We want to increase our EBITDA by around 10 percent, primarily through operational improvements and continued cost discipline in all Group segments. At the same time we plan to use our financial strength in much the same way as we did in 2009, namely to make targeted acquisitions in growth segments.”
Robust circulation revenues and strong digital media performance mitigate the effects of sharp decline in advertising revenues
Axel Springer generated Group revenues of EUR 2,611.6 million for the 2009 financial year (previous year: EUR 2,728.5 million). This corresponds to a decline of 4.3 percent. The development of revenues suffered greatly from the deep recession in most of the Groups markets. Advertising spendings declined massively, and consumer spending in the circulation markets slowed considerably. Within this difficult environment Axel Springer benefited from its strong position in the circulation market. Circulation revenues were relatively robust, falling moderately by 3.3 percent to EUR 1,176.2 million (previous year: EUR 1,215.8 million). The National Newspapers segment even defied the trend with an increase in circulation revenues.
Digital media advertising revenues grew by 24,1 percent thereby raising their share of Group advertising revenues to 29,6 percent. Axel Springer also benefited from the strong market position of BILD, whose advertising revenues remained at nearly the same level as in the previous year, and from its limited dependency on classified advertising. These factors contributed significantly to the market outperformance of the Group despite an 8.8-percent decline in advertising revenues to EUR 1,138.5 million (previous year: EUR 1,248.1 million). Other revenues improved by 12.2 percent to EUR 296.9 million (previous year: EUR 264.7 million) due to, among other things, consolidation effects in the Digital Media segment.
The strong presence of Axel Springer in economically depressed Eastern European markets coupled with currency effects led to a sharp decline in foreign revenues. They fell 8.2 percent to EUR 547.6 million (previous year: EUR 596.8 million). The share of Group revenues declined from 21.9 to 21.0 percent.
Group net income adjusted for essential non-operating effects amounted to EUR 152.6 (previous year: EUR 254.6 million). Earnings per share were EUR 10.19 (previous year: EUR 18.54), while adjusted earnings per share were EUR 5.13 (previous year: EUR 8.55).
Segments: national print segments post double-digit margins despite crisis, digital media increase revenues and earnings
In the previous years slow market environment the segment Newspapers National benefited from the strong reach of its media and their good position in the circulation market. Newspapers National saw circulation revenues rise by 1.0 percent to EUR 631.8 million (previous year: EUR 625.8 million) due to, among other things, the positive effect of the copy price increases implemented in 2008 and 2009. Advertising revenues declined by 12.1 percent to EUR 548.0 million (previous year: EUR 623.4 million). BILD emerged as a winner of the advertising crisis; the publications advertising revenues remained at nearly the same level as the previous year. The segment overall remained highly profitable with revenues of EUR 1,213.7 million for the reporting period (previous year: EUR 1,277.6 million), an EBITDA of EUR 243.8 million (previous year: EUR 348.9 million) and an EBITDA margin of 20.1 percent (previous year: 27.3 percent). The EBITDA was affected by restructuring costs in the amount of EUR 50.4 million (previous year: EUR 18.7 million) and higher fourth-quarter marketing expenditures aimed at further expanding market share.
The Magazines National segment remained profitable despite an 8.2-percent decline in revenues due to the slow market environment. The EBITDA margin was 10.6 percent following 15.7 percent for the previous year. The segment posted revenues of EUR 517.8 million (previous year: 564.1 million). Circulation revenues, which fell by 4.0 percent to EUR 358.8 million (previous year: EUR 373.6 million), did not suffer as much from the slow market environment as advertising revenues, which declined by 20.3 percent to EUR 140.2 million (previous year: 176.0 million). Whereas TV information, computer magazines and financial magazines in particular saw advertising revenues plunge, car and sports publications enjoyed an increase in advertising revenues. The effects of the divestiture of the womens magazine “Jolie” and of the youth magazines also impacted the development of revenues. The segment posted an EBITDA of EUR 55.0 million (previous year: EUR 88.8 million). Measures aimed at boosting efficiency are reflected in the higher restructuring costs of EUR 16.9 million (previous year: 5.3 million).
With strongly growing revenues and a doubling of earnings, the Digital Media segment was able to partially compensate for the adverse developments in the print media segments. Online classified markets such as Immonet and Idealo as well as marketing platforms such as Zanox enjoyed an especially strong rise in revenues. The revenues for the segment grew 24.4 percent to EUR 470.4 million (previous year: EUR 378.2 million). When adjusted for the consolidation effects of the acquisitions of Stepstone ASA and Digital Window in 2009 and gamigo in 2008, revenues rose by 9.1 percent. The pro forma revenues for Digital Media were EUR 569.0 million. This represents an increase in the share in total pro forma revenues from 18.8 percent to 21.0 percent. The segment doubled its EBITDA from EUR 20.9 million to EUR 43.2 million.
The economic crisis was most noticeable in the Print International segment. Eastern European markets in particular experienced a sharp downturn in advertising business, which Axel Springer countered by quickly and persistently cutting costs. Added to this were negative currency effects. Business in France and Switzerland remained relatively stable. Segment revenues fell by 23.9 percent to EUR 311.7 million (previous year: EUR 409.8 million), or by 16.3 percent when adjusted for currency effects. Circulation revenues dropped 14.2 percent to EUR 185.7 million (previous year: EUR 216.4 million), or by 6.3 percent when adjusted for currency effects. Advertising revenues plunged sharply by 36.0 percent to EUR 113.5 million (previous year: EUR 177.4 million), currency-adjusted by 29.3 percent. The segment EBITDA remained profitable at EUR 12.3 million (previous year: EUR 27.8 million) thanks to cost-cutting measures.
The segment Services/Holding posted stable revenues of EUR 98.1 million (EUR 99.0 million) for the reporting period. The EBITDA was EUR -20.5 million (previous year: EUR -0.2 million).
Financial situation: stable operating cash flow – further reduction of net debt
Despite a decline in EBITDA, Axel Springer managed to maintain a stable operating cash flow of EUR 270.0 million (previous year: EUR 265.1 million) due to an improvement in working capital. The Group cut its financial liabilities by EUR 133.7 million and reduced net debt from EUR 369.5 million to EUR 193.0 million. Cash on hand rose from EUR 154.5 million for the previous year to EUR 197.3 million on 31 December, 2009. The equity ratio at years end was 40.8 percent (previous year: 38.0 percent). The Groups workforce grew slightly from 10,666 to 10,740 employees.