Business News

Axel Springer achieves profit jump in second quarter

Wednesday 13. August 2008 - EBITDA for the first half-year rises to EUR 213.9 million / Second quarter earnings improve in all segments / Growing importance of digital media / Half-year earnings of EUR 526.2 million / Outlook for entire year confirmed

Axel Springer AG enjoyed a significant increase in revenues and earnings in the second quarter over the comparable period of the previous year, thereby confirming expectations that second-quarter business would improve over that of the first quarter. The Group benefited from increased cross-media integration and marketing of its brands and publications and dynamic growth, especially in conjunction with acquisitions in the international and digital areas. Despite the difficult economic environment, the Group saw earnings before interest, taxes, depreciation and amortization (EBITDA) adjusted for non-recurring effects and effects from purchase price allocations rise to EUR 213.9 million in the first half-year over 199.4 million for the first half of the previous year. This corresponds to an increase of 7.2 percent. In the second quarter the EBITDA even rose 44.8 percent to EUR 135.2 million (previous year: 93.4 million). All segments contributed to this improvement in earnings in the second quarter.

As already reported on July 22, 2008, Axel Springer saw Group revenues in the first half-year rise 11.1 percent to EUR 1,343.1 million (previous year: 1,208.5 million). A sharp increase in advertising revenues contributed to the significant growth in overall Group revenues in the second quarter. The companies acquired during the first half of the previous year, especially the ZANOX Group and auFeminin.com S.A, were the main drivers behind this growth. The Group continued to grow dynamically abroad, where revenues for the first half-year rose 28.2 percent to EUR 299.8 million (previous year: EUR 233.9 million). The foreign share of revenues thereby accounted for 22.3 percent of Group revenues.

The group grew net income for the reporting period from EUR 88.8 million to EUR 526.2 million. This increase is due in part to the proceeds from the sale of the stake in ProSiebenSat.1 Media AG, which Axel Springer posted in the first quarter. Adjusted for these proceeds from the sale of the stake in ProSiebenSat.1 Media AG the Group achieved an increase of net income by more than EUR 10 million up to EUR 98.9 million.

Dr. Mathias Döpfner, Chief Executive Officer of Axel Springer AG, said: “Axel Springer is defying the trend. Thanks to our strong journalistic brands and ongoing digitization efforts, we enjoyed a sharp increase in profit and revenues in the second quarter. We expect to also be able to set ourselves apart from the negative development of the sector as a whole during the second half of the year. Despite the gloomy economic outlook, we will continue to focus on cross-media integration, to profit from accelerated internationalization, and to achieve our goals for the year as a whole.”

The Management Board confirmed the forecast for the full year. In 2008 Axel Springer is targeting an increase over the previous year in Group revenues and EBITDA adjusted for earnings from the Kirch insolvency and the dividend from the divested stake in ProSiebenSat.1 Media AG.

Revenue sources: Partly strong growth in all revenue categories

During the first six months of the current financial year Axel Springer increased circulation revenues by 2.2 percent to EUR 597.8 million (previous year: 585.1 million). Due to the increase in copy prices enforced last year, the Group was able to compensate for the slight decline in paid circulation. Axel Springer enjoyed a sharp increase in advertising revenues. Contributing to this growth were acquisitions and the positive developments in international operations and digital business, which grew 14.7 percent to EUR 622.4 million (previous year: 542.7 million). Other revenues also rose sharply by 52.3 percent to EUR 122.9 million (previous year: 80.7 million).

Segments: Highly profitable national print segment – Growth in the international and digital fields

In the segment Newspapers National Axel Springer generated revenues of EUR 627.0 million (previous year: 635.0 million) in the first half of this year. While circulation revenues rose 3.0 percent in the first six months of 2008, advertising revenues declined compared to the previous year figure despite a stabilization of advertising revenues in the second quarter. The EBITDA for the first six months was EUR 159.5 million (previous year: 180.1 million). However, the EBITDA showed a positive tendency in the second quarter, during which it grew 6.0 percent. The EBITDA margin was at a high level of 25.4 percent for the first half-year.

Magazines National continued to develop positively despite a slight decline in revenues to EUR 287.4 million (previous year: 296.4 million) due to the difficult market environment. The EBITDA for the first six months rose 22.1 percent to EUR 51.0 million (previous year: 41.8 million). Domestic magazines achieved an EBITDA margin of 17.8 percent. Contributing to this result were low start-up losses and development costs for new publications and the continued focus on cost management.

International newspapers and magazines developed dynamically in the first half of the year. Revenues in the Print International segment rose 6.4 percent to EUR 207.9 million (previous year: 195.3 million). Activities in Switzerland and Poland contributed significantly to this development. As the result of a sharp decline in start-up costs for new activities in the second quarter, this segment reached the profit zone with an EBITDA of EUR 10.4 million (previous year: -9.8 million).

The Digital Media segment continued its growth during the first half of the year. The digital activities of Axel Springer continued to grow with an increase in reach and with strong growth in advertising revenues. The factors contributing to this development included the cross-linking of print, online and mobile products and the consolidation of companies acquired during the past year, especially ZANOX.de and auFeminin.com. The segment’s EBITDA improved from EUR 3.9 million for the previous year to EUR 6.0 million despite the considerable negative currency exchange rate impact from Dogan TV Holding A.S. .

In the Services/Holding segment Axel Springer enjoyed a 31.6 percent increase in external revenues to EUR 49.4 million as a result of consolidation effects and the increase of contract printing revenues. The EBITDA improved to EUR -13.1 million following EUR -16.6 million for the previous year.

Financial situation: Financial liabilities reduced

The cashflow from operating activities for the first half of the year of EUR 92.6 million was less than the previous year’s figure of EUR 149.6 million due to a decrease in payments received in conjunction with claims involving the Kirch insolvency and a reduction in profit tax liabilities. Thanks to payments received during the first quarter of 2008 from the divestiture of ProSiebenSat.1 Media AG, Axel Springer enjoyed a positive cashflow from investing activities during the reporting period in the amount of EUR 400.5 million following a negative cashflow of EUR 511.8 million for the same period of the previous year.

The financial liabilities of Axel Springer declined from EUR 941.1 million at the end of 2007 to EUR 502.0 million. Cash and cash equivalents declined during the same period by EUR 62.3 million to EUR 135.7 million (December 31, 2007: 198.1 million). The Group reduced its net debt by more than half from EUR 743.0 million on the 2007 balance sheet date to EUR 366.3 million. As of June 30, 2008, the equity ratio was 38.3 percent (31.12.07: 31.7 percent).

Milestones: Successful cross-media integration

In the first half of 2008 Axel Springer continued to focus on the cross-media integration of its brands. The Group’s online and mobile portals continued to remain on the growth track and increased the number of users in general and in some parts even to a very large extent.

BILD.de set a new record with 728.3 million page impressions and 4.5 million unique users in the second quarter. The new video portal quickly developed into the leading editorial video platform on the Internet with an average of over 20.4 million video viewings in the second quarter. Munich joined the portfolio of regional portals of BILD.de in May. The mobile portal BILDmobil solidified its position as one of Germany’s largest mobile information portals with approximately 14 million page impressions. computerbild.de recorded 61.8 million page impressions in the second quarter and a reach of 1.9 million unique users, thereby reinforcing its position as one of the most widely visited technology websites in Germany.

During the second quarter DIE WELT and WELT KOMPAKT again bucked the market trend in setting a new circulation record of an average of 280,387 copies. WELT ONLINE achieved 144.6 million page impressions and 19.4 million visits per month on average in the second quarter and took the lead among the internet portals of the German premium newspapers. The reach rose by 1.9 million to 3.4 million unique users. WELTmobil has continually seen its traffic grow after the further expansion of its content.

The regional newspapers HAMBURGER ABENDBLATT and BERLINER MORGENPOST underwent stable development in circulation despite an increase in copy prices. The online portal abendblatt.de received a facelift at the beginning of the second quarter.

In the TV Guide segment TV DIGITAL expanded its position as Germany’s largest TV guide for the digital TV world. TV Digital sold an average of 2.0 million copies which represents an increase of 9.8 percent over the previous year.

jolie.de is the fastest growing online portal for women in Germany. At the European level auFeminin.com recorded an average of 21.4 million unique users per months in the first half-year which is an increase of 10.2 percent over the previous year. Its German subsidiary gofeminin.de GmbH acquired the leading independent health portal Onmeda during the second quarter. Axel Springer has thus taken on another important theme and becomes this way Germany’s leading provider of premium health information.

Online marketing services provider ZANOX.de AG continued on its course of international expansion during the first half-year by opening offices in New York, Warsaw and Zurich.

In Poland the website of FAKT was relaunched in April following a complete revamping. In the Polish print media market Axel Springer expanded its leading position in the segment of daily national newspapers in the first half-year with a cumulative market share of 43.5 percent based on the paid circulation.