Business News
Axel Springer starts new financial year with an increase in earnings
Friday 15. May 2009 - EBITDA up 2.1 percent / Revenues slightly below previous year / Digital Media grew nearly 30 percent / Forecast for year as a whole significantly below previous year due to economic downturn
Axel Springer achieved an increase in EBITDA in the first quarter of 2009 despite the sharpest economic downturn in decades, thereby profiting from its cross-media business model and the strength of its print brands. Group revenues were down slightly over the previous year, but the company maintained its earning power by exercising strict cost discipline. The strong growth of Digital Media and robust circulation revenues compensated for the significant decline in advertising revenues as a result of the slow economy. In 2007 the profit picture had also been affected by the move of BILD and BILD am SONNTAG to Berlin and a decline in earnings over the previous year from the stake in the Dogan TV Group due to negative currency developments. Despite the successful start in the 2009 financial year, the Management Board predicts that revenues will decline and earnings will be significantly lower than the previous year due to the economic downturn and its dramatic effects on the advertising market.
In the first quarter Axel Springer generated Group revenues of EUR 620.0 million following EUR 641.7 million for the previous year. Despite the very slow market environment this figure was only 3.4 percent less than the previous year. Contributing to this development were relatively stable circulation revenues, which declined slightly by a mere 1.7 percent. Due to its strong market position the BILD Group even emerged as a crisis winner. The Digital Media segment enjoyed a significant 26.6-percent increase in advertising revenues. This helped hold the decline in consolidated Group advertising revenues to a relatively moderate 8.0 percent. Growing Digital Media revenues also helped drive up other earnings by 10.9 percent. Whereas domestic revenues remained greatly unchanged, earnings generated abroad fell 14.6 percent due to the economic difficulties in key European markets and negative exchange rate developments.
Despite the slight decline in Group revenues Axel Springer enjoyed a 2.1-percent increase in earnings (EBITDA) to EUR 80.3 million (previous year: EUR 78.7 million). The EBITDA margin rose correspondingly from 12.3 percent to 13.0 percent.
The profit of EUR 201.9 million from the sale of minority stakes in several regional newspapers in March 2009 was reflected in the Groups net income of EUR 213.0 million. The previous years figure of EUR 449.9 million included EUR 438.3 million in profit from the sale of the stake in ProSiebenSat.1 Media AG. Group net income adjusted for non-operating items rose from EUR 31.8 million to EUR 34.9 million in the first quarter. Earnings per share were EUR 7.09 following EUR 14.55 for the previous year. Adjusted earnings per share rose 9.7 percent to EUR 1.18.
Dr. Mathias Döpfner, Chief Executive Officer of Axel Springer AG, said: “Axel Springers business operations remained pleasingly stable despite the fact that we are in the middle of a global economic crisis. Our digitization strategy is paying off in full. The dynamic growth of our online business and the strong market positions of our print publications almost fully compensated for the decline in advertising revenues suffered by newspapers and magazines.”
Döpfner added: “The next nine months will remain extremely difficult for the media sector. Our quarterly result shows that Axel Springer, with its cross-media business model, its attractive brands, financial strength and continued strict cost discipline, is well positioned to emerge stronger from the crisis. Due to the crisis-related decline in advertising revenues, we remain cautious and are prepared to face revenues and earnings for the entire 2009 financial year being significantly below the record results of the previous year.”
Circulation revenues stable – Digital Media shores up declining advertising revenues
Axel Springer generated EUR 289.0 million in circulation revenues in the first quarter, merely a slight 1.7-percent decline over the previous year (EUR 293.9 million). Despite declining circulation the Group enjoyed an increase in circulation revenues in the National Newspapers segment thanks to a strong increase in the price per copy in 2008. This also compensated for the declines in other print segments. Axel Springer was able to limit the effects of the advertising crisis through an increase in advertising revenues in the Digital Media segment. As a result consolidated Group advertising revenues fell only 8.0 percent to EUR 266.1 million (previous year: EUR 289.3 million). Other earnings profited from the growing revenues in the Digital Media segment and rose 10.9 percent to EUR 64.9 million (previous year: EUR 58.5 million).
Segments: National Print Media generates double-digit margin despite advertising crisis; significant improvement in earnings in Digital Media segment
The National Newspapers segment remained highly profitable despite a slight decline in revenues due to the slow economy. Revenues in this segment fell a mere 1.4 percent to EUR 292.4 million (previous year: EUR 296.7 million). Thanks to the increase in the price per copy implemented last year at BILD and BILD am SONNTAG, the newspapers saw circulation revenues rise 5.5 percent to EUR 153.9 million (previous year: 145.9 million). WELT Group/BERLINER MORGENPOST and HAMBURGER ABENDBLATT contributed to this positive development. However, advertising revenues declined 9.6 percent to EUR 131.5 million (previous year: EUR 145.4 million) in this difficult market environment. The segment EBITDA of EUR 64.8 million (previous year: EUR 68.6 million) and the EBITDA margin of 22.2 percent (previous year: 23.1 percent) remained at a high level.
Following a record year in 2008 the National Magazines segment was unable to fully avoid the effects of negative market developments. First-quarter segment revenues fell 10.1 percent to EUR 126.9 million (previous year: EUR 141.1 million). With circulation revenues of EUR 89.1 million (previous year: 94.0 million) the segment was able to limit the decline to 5.2 percent. However, advertising revenues fell 23.9 percent to EUR 33.2 million (previous year: 43.6 million) as a result of the slow economy. Especially hard hit was advertising in business and financial publications, which saw their first-quarter advertising revenues fall by more than half. Lower segment revenues were also reflected in the segment EBITDA, which fell from EUR 24.9 million to EUR 13.1 million. Segment earnings were also affected by expenditures related to social plans. Nonetheless, the EBITDA margin of National Magazines remained in the double-digit realm at 10.3 percent (previous year: 17.6 percent).
The Groups foreign newspapers and magazines in part suffered heavily from the effects of the economic crisis. The severe economic slowdown in important markets of East Europe and in Spain in particular translated into lower earnings. Business in Switzerland and France however remained comparatively stable. The consolidated revenues for the segment Print International fell 26.0 percent in the first quarter to EUR 72.4 million (previous year: EUR 97.9 million). When adjusted for the currency exchange rate effect of EUR -9.6 million, the decline comes to 16.3 percent. Advertising revenues fell disproportionate by 38.1 percent to EUR 24.3 million (previous year: EUR 39.3 million). The circulation revenues of international publications were EUR 46.0 million following EUR 54.1 million for the first quarter of the previous year. The effect of the sharp decline in revenues in this segment on the earnings picture was kept in check through fast, targeted cost-cutting measures. The EBITDA declined slightly from EUR 0.7 million to EUR -2.4 million.
Revenues and earnings in the Digital Media segment grew strongly in the first quarter, thereby contributing significantly to the Groups business success. Print brands and their corresponding online and mobile portals enjoyed strong growth. Axel Springer also profited from its strong position in the online classified advertising market and in success-based online marketing. Segment revenues, which were greatly unaffected by the economic crisis, grew 28.5 percent to EUR 104.7 million (previous year: EUR 81.5 million). Advertising revenues rose 26.6 percent to EUR 77.1 million (previous year: EUR 60.9 million), whereas other revenues were up by 34.1 percent to EUR 27.6 million (previous year: 20.5 million). The Digital Media segments share of Group revenues increased from 12.7 percent to 16.9 percent. Despite substantial capital expenditures for digital activities, the segment EBITDA rose significantly. Following an operating loss of EUR -11.7 million in the first quarter of the previous year, Digital Media saw its EBITDA grow to EUR 6.8 million in the first quarter of 2009. This was due to significantly higher earnings among other parts.
Revenues in the segment Services/Holding for the first quarter amounted to EUR 23.5 million (previous year: EUR 24.5 million). The EBITDA improved from EUR -3.8 million for the previous year to EUR -1.9 million
Financial situation: stronger cashflow from operating activities – higher equity ratio
Axel Springer saw its cashflow from operating activities rise during the first three months from EUR 28.4 million to EUR 48.1 million. The cashflow from capital expenditures was EUR -10.0 million. The previous years figure of EUR 409.2 million was greatly influenced by the receipt of the purchase price for the divested stake in ProSiebenSat.1 Media AG.
The Group used its solid financial situation to reduce the volume of financial liabilities from EUR 524.0 million to EUR 465.8 million. Net debt thereby fell from EUR 369.5 million to EUR 334.8 million by the end of the first quarter. Cash and cash equivalents on March 31, 2009 were 131.0 million (December 31, 2008: EUR 154.5 million). With a balance sheet total and cashflow of EUR 2,970.8 million, the equity ratio climbed from 38.0 percent at the end of 2008 to 42.6 percent on March 31, 2009.