Business News
Axel Springer despite slow market with unexpected positive growth of business in the third quarter
Thursday 12. November 2009 - EBITDA in the third quarter increased by 10.2 percent / High EBITDA margin of 14.0 percent for the first nine months provides financial leeway for anticyclical investments in strong brands / Further reduction of net debt
Axel Springer has again confirmed the strength of its cross-media business model as the company exceeded expectations for the third quarter of 2009. As previously reported, despite the lingering slow market environment the Group enjoyed a 10.2-percent increase in earnings before interest, taxes and depreciation (EBITDA), adjusted for non-recurring effects and purchase price allocations. With robust circulation revenues and a slightly lower reduction of advertising revenues, the decline in total revenues in the third quarter was less than in the two previous quarters. However, revenues and EBITDA for the first nine months of 2009 still lagged behind the previous years figures. The Management Board therefore continues to anticipate a significant decline in Group revenues and EBITDA in the full year despite the recent improvement.
Dr. Mathias Döpfner, Chief Executive Officer of Axel Springer AG, said: “Axel Springer did much better than expected in an extremely slow market. Our national newspapers and magazines retained or even improved their high margins in the third quarter. Thanks to quick cost adjustments our international print business remained profitable. Our digital business is steadily growing, and revenues already surpassed the EUR 300 million mark during the first nine months. We are using our strong financial position to expand our business through acquisitions such as that of StepStone and Digital Window, and we are making anticyclical investments in our own newspaper brands. In the fourth quarter alone we will invest an additional EUR 20 million in an intensive marketing program for BILD and WELT in particular.”
Döpfner added: “In view of the current development of the advertising market we remain cautious about our outlook for the year overall. But the robust development of our business shows that Axel Springer is in a good position to benefit more than the average from the economic recovery which is widely anticipated for the coming year.”
Axel Springer saw its EBIDTA adjusted for non-recurring effects and effects of purchase price allocations grow during the third quarter to EUR 102.2 million (previous year: EUR 92.7 million). Circulation revenues remained relatively stable while the decline in advertising revenues was slowed down. As a result, the quarterly revenues of EUR 631.4 million were only 3.0 percent below the previous years figure (EUR 651.0 million). In addition to the improvement in revenues compared to the first half of 2009, the resolute cost discipline exercised throughout the Group also contributed to the positive quarterly result.
Group revenues for the first nine months were EUR 1,886.2 million or 5.4 percent below the same period of the previous year (EUR 1,994.1 million). Group revenues adjusted for currency exchange rate effects declined by 4.0 percent. Circulation revenues, which fell slightly from EUR 911.6 million to EUR 884.5 million, remained relatively stable primarily due to the robust development of national print media. Digital Media continued to grow in importance as a source of advertising revenue. With an increase of 16.8 percent, Digital Media saw its share of Group advertising revenues grow to 27.8 percent. In addition to the strong market position of BILD and the low dependence on classified advertising revenues, Digital Media contributed greatly to the ability of Axel Springer to outperform the market as a whole with an 11.4-percent decline in Group advertising revenues to EUR 795.4 million (previous year: EUR 897,7 million). Other revenues rose from EUR 184.9 million to EUR 206.3 million, thereby boosting their share of Group revenues to 10.9 percent, among others due to a higher contribution of Digital Media.
The international business was affected by the extremely difficult conditions on Eastern European markets as well as the effects of unfavorable currency developments. Foreign revenues fell accordingly by 14.3 percent to EUR 377.1 million (previous year: EUR 440.3 million). The foreign share of Group revenues declined from 22.1 percent to 20.0 percent. Adjusted for currency exchange rate effects, foreign revenues fell by 8.2 percent.
The increase in business during the third quarter had a positive influence on the EBITDA adjusted for non-recurring effects and effects from purchase price allocations for the first nine months. The 13.7 percent decline to EUR 264.5 million (previous year: EUR 306.6 million) was much less than the figure for the first half of 2009. An approximate EUR 70 million in cost reductions since the beginning of the year made a significant contribution here. The EBITDA margin for the first nine months of 14.0 percent was only slightly below the previous years figure.
As was the case last year, consolidated net income for the reporting period of EUR 317.0 million was greatly affected by non-operating factors. It included a profit of EUR 214.8 million from the completed sale of stakes in regional newspapers. The previous years figure of EUR 560.5 million contained a profit of EUR 438.3 million from the sale of the stake in ProSiebenSat.1 Media AG. When adjusted for these and other non-operating items, consolidated net income for the first nine months amounted to EUR 130.1 million (previous year: EUR 165.4 million). Earnings per share were EUR 10.47 (previous year: EUR 18.29). Adjusted earnings per share were EUR 4.37 (previous year: EUR 5.44).
Segments: double-digit margins for National Newspapers and National Magazines – Digital Media remain most important growth engine
Despite the economic crisis and slow advertising market, the segment National Newspapers remained highly profitable. The decline in revenues slowed during the third quarter. This was due to a slight 1.1-percent increase in circulation revenues although the effects of the 2008 copy price increases of BILD and BILD am SONNTAG no longer played a role. The positive development of advertising revenues for the BILD Group with its strong reach also helped slow the decline in advertising revenues. During the first nine months National Newspapers saw circulation revenues rise 1.4 percent to EUR 475.2 million (previous year: EUR 468.9 million). Advertising revenues declined by 12.3 percent to EUR 394.7 million (previous year: EUR 450.2 million). During the first three quarters the segment thus generated revenues of EUR 891.0 million (previous year: EUR 939.0) with an EBITDA of EUR 205.6 million (previous year: EUR 245.8 million). The EBITDA margin of 23.1 percent (previous year: 26.2 percent) remained at a very high level despite economic challenges.
During the first nine months the segment National Magazines generated revenues in the amount of EUR 368.5 million (previous year: EUR 419.5 million). In addition to the sale of the youth publications and the womens magazine JOLIE, which took effect in the third quarter, this figure was influenced by a significant decline in advertising revenues from EUR 129.9 million to EUR 102.4 million. Computer, car, sports and finance magazines were especially hard hit by this decline. Circulation revenues fared much better: at EUR 270.3 million they nearly equaled the previous years figure of EUR 279.3 million. The EBITDA for the first three quarters declined considerably from EUR 65.9 million to EUR 46.9 million. However, National Magazines enjoyed a slight 1.1-percent increase in EBITDA in the third quarter. At 12.2 percent (previous year: 11.3 percent) the EBITDA margin remained in the double-digit range despite the advertising crisis.
The segment Digital Media was again the leading growth engine with strong increases is both revenues and EBITDA. With revenues of EUR 310.1 million the segment solidified its position as the Groups third-largest source of revenues. Online classified advertising and performance-based marketing activities in particular contributed to this positive development, thereby confirming the Groups successful digitization strategy. In the third quarter Axel Springer further expanded its position in the online classified advertising market with its takeover offer of the online recruitment company StepStone ASA. Revenues for the segment Digital Media rose during the reporting period by 20.4 percent to EUR 310.1 million (previous year: EUR 257.5 million). The pro forma revenues of EUR 376.6 million generated by the segment accounted for a 19.3-percent share (previous year: 17.0 percent) of total Group revenues. The Digital Media EBITDA improved greatly from EUR 0.8 million to EUR 23.6 million with the EBITDA margin rising correspondingly to 7.6 percent (previous year: 0.3 percent). It should be noted that the previous years EBITDA was influenced by the negative currency exchange rate development connected with the stake in Dogan TV.
The revenues and earnings picture for the segment Print International suffered from the far-reaching effects of the economic crisis and negative exchange rate effects. While Axel Springer was in part able to distance itself from unfavorable market developments in France, and business in Switzerland remained stable, markets in Eastern Europe were hit hard by the economic crisis. Revenues in the Print International segment fell by 26.1 percent to EUR 224.9 million (previous year: EUR 304.3 million). When adjusted for currency effects the figure comes to EUR 251.9 million. The segment suffered a significant 39.8-percent decline in advertising revenues to EUR 77.2 million (previous year: EUR 128.2 million). The figure is EUR 87.1million when adjusted for currency exchange rate effects. Circulation revenues were EUR 139.0 million (previous year: EUR 163.5 million) or EUR 154.2 million following currency effect adjustments. Thanks to thorough, quickly implemented cost-cutting measures the segment Print International remained profitable, generating an EBITDA of EUR 3.1 million (previous year: EUR 13.4 million) during the first three quarters.
The segment Services/Holding reported stable revenues of EUR 73.8 million (EUR 73.8 million) for the first three quarters. The EBITDA was EUR -14.7 million (previous year: EUR -19.4 million).
Financial situation: operating cash flow rises again – further reduction of net debt
Between January and September 2009 the cash flow from operating activities rose from EUR 167.9 million to EUR 174.0 million as the result of, among others, a reduction in working capital. The cash flow from investing activities of EUR 151.7 million (previous year: EUR 359.8 million) was greatly influenced by the proceeds from the sale of shares in regional newspapers. The acquisition of a majority in StepStone ASA is reflected by a purchase price of EUR 25.5 million and the consolidation of cash in the amount of EUR 31.9 million. The previous years figure contained the proceeds from the ProSiebenSat.1 transaction.
Group financial liabilities declined from EUR 524.0 million to EUR 490.2 million and net debt fell to EUR 184.2 million (31 Dec. 2008: EUR 369.5 million). Cash and cash equivalents rose to EUR 305.9 million (31.12.2008: EUR 154.5 million). The equity ratio increased to 41.3 percent compared to 38.0 percent at the end of 2008 and remains at a very solid level.