Business News
Axel Springer remains highly profitable despite slow market environment
Thursday 06. August 2009 - Revenues and EBITDA below strong previous year / EBITDA margin remains high at 13 percent / Strong operating cash flow / Net debt further reduced
Axel Springer remained highly profitable during the first half of 2009 through its successful cross-media business model, the strength of its brands and strict cost discipline. As predicted the Group was unable to distance itself from the extremely difficult market environment and had to settle for a decline in revenues and EBITDA compared to the all-time record performance during the comparable period of last year. However, the Group EBITDA margin remained stable in comparison to the first quarter of 2009 even though advertising revenues continued to decline. The management board predicted after the first quarter that revenues would decline and earnings would be significantly lower in 2009 compared to the previous year. This forecast has been confirmed by the half-year results.
Group revenues for the first half-year were EUR 1,254.8 million with a 6.6-percent decline (previous years figure EUR 1,343.1 million). The decline comes to 5.1 percent when adjusted for exchange rate effects. Circulation revenues declined by 2.9 percent to EUR 580.4 million (previous year: EUR 597.8 million) yet remained comparatively stable despite the economic crisis. An increase in advertising revenues of 15.1 percent in the Digital Media segment partially compensated for the sharp decline in advertising revenues suffered by the print media segments. Overall advertising revenues for the first half-year fell by 13.0 percent to EUR 541.5 million (previous year: EUR 622.4 million). Other revenues grew by 8.1 percent to EUR 132.9 million (previous year: EUR 122.9 million) thanks in part to the rise in revenues in the Digital Media segment.
The extremely difficult economic conditions in important Eastern European markets coupled with exchange rate effects led to a decline in foreign revenues of 16.7 percent to EUR 249.6 million (previous year: EUR 299.8 million). Axel Springer thereby generated 19.9 percent (previous year: 22.3 percent) of consolidated revenues through international business activities. The decline in foreign revenues comes to 10.2 percent when adjusted for exchange rate effects.
Axel Springer was able to compensate in part for the decline in advertising revenues due to the slow economy through disciplined cost management in all segments of the Group. The Group was able to cut total expenditures during the first half-year by more than EUR 50 million and to generate earnings before interest, tax and depreciation adjusted for special effects and purchase price allocations (EBITDA) of EUR 162.3 million compared to EUR 213.9 million for the previous years period. Axel Springer was thus able to maintain the EBITDA margin at a high level of 12.9 percent (previous year: 15.9 percent) despite the slow economy. The EBITDA margin remained stable compared to the first quarter of 2009.
Consolidated net income for the reporting period was EUR 267.3 million. This figure was influenced by non-operating factors as it was during the previous year. The EUR 210.3 million in profit from the sale of stakes in regional newspapers contributed to consolidated net income. The previous years figure of EUR 526.2 million included EUR 438.3 million in profit from the sale of the stake in ProSiebenSat.1 Media AG. When adjusted for essential non-operating items, consolidated net income for the first half-year amounted to EUR 77.5 million compared to EUR 112.9 million for the same period of the previous year. Earnings per share were EUR 8.84 (previous year: EUR 16.96). Adjusted earnings per share were EUR 2.61 (previous year: EUR 3.80).
Dr. Mathias Döpfner, Chief Executive Officer Axel Springer AG, said: “As expected Axel Springer has been unable to separate itself from the massive decline of the advertising market. But we were able to quickly adjust to the situation and, to a degree, compensate for it by significantly reducing costs. As a result we were able to maintain our EBITDA margin at the high level of 13 percent. The fact that our profit margin is comparable to that of the first quarter shows that our cross-media business model remains stable in times of crisis. Our excellent financial position provides us with sufficient leeway to make acquisitions, such as our recent acquisition of a stake in Digital Window. We will continue to take advantage of the anti-cyclical opportunities offered by our successful digitization strategy.”
Döpfner added: “We currently see no signs of recovery in our most important markets. We have used the crisis to make very selective adjustments to our portfolio, thereby allowing us to place even greater emphasis on our strong print and online brands. This includes investing in advertising for our own media products in an effort to gain market share during these difficult times.”
Segments: All segments were profitable – National Newspapers and National Magazines generated double-digit returns
Despite the increasingly negative effects of the economic crisis, the segment National Newspapers remained very profitable and continued to make the greatest contribution to Group earnings. Revenues in this segment during the first half-year fell by 5.8 percent to EUR 590.6 million compared to EUR 627.0 million for the same period of the previous year. Circulation revenues rose slightly by 1.5 percent to EUR 307.2 million (previous year: EUR 302.6 million) as the result of increases in copy prices, especially for BILD and BILD am SONNTAG, implemented in May 2008. Advertising revenues fell by 13.8 percent to EUR 269.4 million (previous year: EUR 312.6 million). As the Axel Springer publication with the greatest reach, BILD has done relatively well during the crisis. The segment EBITDA was EUR 129.5 million compared to EUR 159.5 million for the same period of the previous year. With an EBITDA margin of 21.9 percent (previous year: 25.4 percent) National Newspapers remained highly profitable despite the difficult market environment.
The segment National Magazines saw revenues and profits decline during the first half-year. However, the decline during the second quarter was much milder than it was in the first quarter of 2009. Segment revenues for the first half-year fell by 8.4 percent to EUR 263.3 million compared to EUR 287.4 million for the comparable period of the previous year. Circulation revenues declined by 3.0 percent to EUR 180.8 million (previous year: EUR 186.3 million) but remained relatively stable during the second quarter. Magazine advertising revenues fell sharply. They plunged by 22.1 percent from EUR 93.6 million to EUR 72.9 million. The segment EBITDA for the first half-year declined to EUR 31.8 million compared to EUR 51.0 million for the previous year. Nonetheless, National Magazines managed to generate a double-digit EBITDA margin of 12.1 percent (previous year: 17.8 percent). The segment EBITDA margin rose by 3.4 percentage points over the first quarter of the current financial year to 13.7 percent.
The economic crisis, in part, seriously affected the revenue and profit pictures of the international print business. The Eastern European and Spanish markets in particular were problematic, whereas business in Switzerland and France remained relatively stable. Following a slight loss in the first quarter of 2009 the segment Print International returned to profitability, thanks to a significant reduction in costs, with a second-quarter EBITDA margin of 5.7 percent. During the first half-year segment revenues declined by 27.1 percent to EUR 151.6 million (previous year: EUR 207.9 million). When adjusted for exchange rate effects segment revenues fell by 17.8 percent. Circulation revenues dropped by 15.0 percent to EUR 92.5 million (previous year: EUR 108.8 million). When adjusted for exchange rate effects the decline was much less, namely 5.2 percent. Advertising revenues plunged 40.1 percent (31.8 percent when adjusted for exchange rate effects) to EUR 53.9 million compared to EUR 90.0 million for the same period of the previous year. Due to diverse cost reductions in national subsidiaries, the segment EBITDA remained positive at EUR 2.1 million (previous year: EUR 10.4 million.
The Digital Media segment enjoyed growing revenues and a significant improvement in earnings in the first half-year. Digital Media has thus established itself as the third-largest segment after newspapers and magazines, thereby overtaking Print International. Online classified advertising and performance-based online-marketing contributed greatly to this welcome development. The growth of print brands and related online content and the mobile portals weakened somewhat. The segment overall enjoyed a 17.1-percent increase in revenues during the first half-year to EUR 200.8 million (previous year: EUR 171.5 million), thereby accounting for 16.0 percent total Group revenues (previous year: EUR 12.8 percent). Digital Media saw advertising revenues rise by 15.1 percent to EUR 145.4 (previous year: EUR 126.3 million). Other revenues grew even more strongly – by 22.8 percent to EUR 55.5 million (previous year: 45.2 million). The segment was able to more than double its EBITDA from EUR 6.0 million to EUR 16.9 million for an EBITDA margin of 8.4 percent in the first half of the year.
The segment Services/Holding reported revenues for the first six months of EUR 48.5 million (previous year: EUR 49.4 million) with an EBITDA of EUR -18.0 million (previous year: EUR -13.1 million).
Financial situation: strong operating cash flow – Net debt further reduced
Axel Springer saw its cash flow from operating activities improve significantly in the first half-year to EUR 115.8 million (previous year: EUR 92.6 million). The receipt of the proceeds from the sale of stakes in regional newspapers contributed significantly to the cash flow from investment activities of EUR 146.3 million. The previous years figure of EUR 400.5 million was influenced by the considerable proceeds from the ProSiebenSat.1 transaction.
The Group reduced financial liabilities as of June 30, 2009 from EUR 524.0 million to EUR 393.6 million and net debt from EUR 369.5 million to EUR 236.1 million as of June 30, 2009. Cash and cash equivalents at the end of the first half-year were EUR 157.5 million (December 31, 2008: EUR 154.5 million). Axel Springer continues to enjoy a high equity ratio of 42.7 percent (December 31, 2008: 38.0 percent).