Business News

Digital Media Drive Profitable Growth of Axel Springer

Thursday 09. August 2012 - Revenues up 6.2 percent / 19.0 percent EBITDA margin / Digital Media EBITDA margin exceeds 20 percent / Publication of key figures for three digital business areas / Free cash flow up 56.8 percent

In the second quarter of 2012, Axel Springer seamlessly sustained the positive business trend enjoyed over the first three months of the year. The Group benefited from strong revenue and earnings growth in its Digital Media segment which reported an EBITDA margin of over 20 percent during the first half year. The Group’s EBITDA for the first six months was up 6.9 percent. The significantly improved profitability of the Group’s digital media activities and the continued high earnings power of the German print media contributed substantially to these results. Axel Springer saw total revenues rise by 6.2 percent through organic growth and the consolidation of new companies. The Management Board confirmed its full-year guidance in view of the good business performance to date.
Axel Springer’s first half-year earnings before interest, taxes and depreciation (EBITDA) adjusted for non-recurring effects and effects of purchase price allocations rose by 6.9 percent to EUR 308.7 million (PY: EUR 288.7 million). At 19.0 percent, the EBITDA margin was also slightly higher than last year’s margin of 18.9 percent. The EBITDA margin for national newspapers rose from 22.7 percent to 24.1 percent, with that of national magazines remaining essentially stable at 21.2 percent, close to last year’s record level. Digital media increased its EBITDA margin by 4 percentage-points to 20.4 percent. Continued adverse economic conditions in key international markets had a negative impact on the profitability of the Group’s international print activities, which reported an EBITDA margin of 13.1 percent, considerably down on the previous year’s results. Beside the drop of revenues higher additional restructuring costs compared to the year-ago period contributed to this development.
Total revenues for the first half year rose by 6.2 percent to EUR 1,620.4 million (EUR 1,525.6 million). Especially the revenues of digital media increased again strongly. Due to a slight rise in the revenues of national newspapers, overall revenues for the German print media remained largely stable. Print International, by contrast, suffered a considerable drop in revenues. Adjusted for consolidation effects, Axel Springer’s total revenues rose by 2.5 percent.
Dr. Mathias Döpfner, Chief Executive Officer of Axel Springer AG: “Our Digital Media’s EBITDA margin exceeded 20 percent during the first half year, underscoring the successful development of our digital business activities. The online classified portals bundled into Axel Springer Digital Classifieds are particularly profitable. We proved with our very successful anniversary edition “BILD für Alle”, among others, that print media with a high reach remain attractive advertising platforms despite the structural challenges. Our success motivates us to further adapt our structures and business models – especially in our German-language core business – even more systematically to the new media usage. Our aim is to secure the long term positive economic and journalistic development of Axel Springer AG.”
Under the assumption that general economic conditions do not experience a significant deterioration, the Management Board continuously expects to generate a single-digit percentage increase in the Group’s total revenues in the financial year 2012. The Management Board expects that growing revenues in the digital media business will more than compensate for slightly lower revenues in the print business. The Management Board also expects that the Group’s EBITDA will be slightly higher than the corresponding figure for 2011. In that respect, the Management Board anticipates lower earnings in the print business, and substantially higher earnings in the digital business, compared to 2011.
International share of total revenues reaches 33.9 percent / Additional advertising revenues from “BILD für Alle”
International revenues rose by 10.6 percent over the first half year to EUR 549.8 million (PY: EUR 497.1 million). Axel Springer thus generated 33.9 percent (PY: 32.6 percent) of total revenues in international markets, a trend driven by the digitization of the group’s international business activities.
The positive growth effects of digitization were also reflected in an 11.7 percent increase in advertising revenues to EUR 851.7 million (PY: EUR 762.3 million). Meanwhile, more than half of the Group’s advertising revenues are generated by digital media, whose advertising revenues rose by 27.4 percent over the first half year. In the second quarter, national newspapers enjoyed additional advertising revenues from the “BILD für Alle” special edition, while advertising revenues for national magazines and international print media declined.
Circulation revenues over the reporting period were EUR 580.5 million (PY: EUR 588.5 million). A slight increase in the Magazines National segment did not fully offset lower circulations revenues in the Newspapers National segment and the Print International segment.
Growth in the Digital Media segment helped other revenues rise by 7.7 percent to EUR 188.2 million (PY: EUR 174.8 million).
Adjusted consolidated net income increases to EUR 177.7 million
Axel Springer’s consolidated net income for the first half year improved from EUR 151.2 million to EUR 159.6 million. Consolidated net income adjusted for significant, non-operating effects rose by 5.5 percent to EUR 177.7 million (PY: EUR 168.4 million). Earnings per share increased to EUR 1.43 from EUR 1.36 a year earlier, while adjusted earnings per share rose 4.5 percent to EUR 1.55 (PY: EUR 1.49).
German print media and digital media highly profitable / Publication of key figures for digital business areas provides for additional transparency
The EBITDA margin for the Newspapers National segment rose from 22.7 percent to 24.1 percent in the first half year. Due to the additional revenues generated by “BILD für Alle”, Newspaper National revenues increased slightly to EUR 568.3 million (PY: EUR 565.1 million). The campaign to mark BILD’s 60th anniversary was reflected in a 2.1 percent increase in advertising revenues. Circulation revenues declined 1.0 percent due to a fall in circulation volumes. The additional revenues also had a positive effect on earnings, with EBITDA rising 6.7 percent to EUR 137.1 million (PY: EUR 128.5 million).
The Magazines National segment once again reported a high EBITDA margin at 21.2 percent (PY: 23.7 percent) despite slightly lower revenues. Magazines National revenues were down 1.0 percent at EUR 230.9 million (PY: EUR 233.2 million), but circulation revenues remained stable – despite a fall in circulation volumes – due to a positive calendar effect. Advertising revenues were down 5.9 percent. Segment’s EBITDA amounted to EUR 48.9 million following EUR 55.3 million for the same period a year earlier. This was caused by lower revenues and higher restructuring costs.
Business development in the Print International segment again suffered from continued adverse economic conditions during the first half of the year, with revenues falling 7.3 percent to EUR 219.3 million (PY: EUR 236.6 million). Adjusted for consolidation and currency effects, revenues were down 4.6 percent. Circulation revenues fell 4.5 percent or, adjusted for consolidation and currency effects, 1.9 percent. Advertising revenues declined much more sharply by 11.3 percent or 8.9 percent after adjustment. Print International’s EBITDA fell from EUR 40.5 million to EUR 28.8 million. Besides a decline in revenues this was also due to higher restructuring costs compared to the same period a year earlier. The 13.1 percent EBITDA margin was accordingly considerably lower than the previous year’s 17.1 percent.
The Digital Media segment continued its profitable growth with strong dynamics, attaining an EBITDA margin of over 20 percent in the first half year. Segment revenues jumped 24.6 percent to EUR 542.1 million (PY: EUR 435.1 million). At 27.4 percent, advertising revenues rose even more strongly than other revenues, which posted an 11.6 percent increase. Besides effects from the consolidation of new companies, a strong 12.8 percent organic growth also contributed to the revenue increase. The dynamic business development was reflected in a 55.0 percent increase in EBITDA to EUR 110.7 million (PY: EUR 71.4 million). Digital Media thus contributed over one third of total revenues and Group’s EBITDA in the first half year. The segment improved its EBITDA margin by 4 percentage points to 20.4 percent (PY: 16.4 percent).
To increase the transparency of the growth and profitability of its digital activities, Axel Springer has for the first time also included key figures for the three digital pillars Content Portals & Other Digital Media, Performance Marketing and Axel Springer Digital Classifieds in its 2012 Interim Report.
The first pillar, Content Portals & Other Digital Media, encompasses brand-related portals such as BILD.de, Welt Online, aufeminin.com and azet.sk, as well as digital business models such as idealo, kaufDA and Smarthouse. The revenues of these activities jumped 31.4 percent to EUR 175.9 million (PY: EUR 133.8 million) in the first half year. EBITDA rose by 37.4 percent to EUR 43.2 million (PY: EUR 31.4 million). As a result, this pillar was able to report a 24.6 percent EBITDA margin after 23.5 percent over the same period last year.
The second pillar, Performance Marketing, covers the activities of the Zanox Group, Europe’s leading network for performance based online-marketing. Revenues rose to EUR 216.9 million from EUR 206.0 million over the same period a year earlier. The segment’s EBITDA was EUR 10.5 million (PY: EUR 13.3 million). In addition to the relatively low margin – which is caused by the business model – consumer reticence in a number of markets as well as growth investments had an impact on earnings performance. The segment accordingly reported a 4.9 percent EBITDA margin.
The third pillar includes the online classifieds portals SeLoger, Immonet and StepStone, which have been integrated into Axel Springer Digital Classifieds GmbH, as well as Totaljobs, which was acquired in April. This pillar reported a 56.9 percent jump in revenues to EUR 149.4 million (PY: EUR 95.2 million) over the first half of the year and more than doubled its EBITDA from EUR 31.1 million to EUR 63.7 million. The EBITDA margin rose from 32.6 to 42.6 percent.
The EBITDA of the segment Digital Media includes costs of EUR 6.7 million (PY: EUR 4.3 million) that are not allocated to the three pillars, e.g. for business development and M&A.
Revenues in the Services/Holdings segment rose by 7.4 percent to EUR 59.7 million (PY: EUR 55.6 million), with EBITDA at EUR -16.8 million (PY: EUR -7.0 million). This resulted mainly from effects related to the valuation of our share-based compensation programs. Due to the development of the company’s share price, the valuation of these programs gave rise to income in the year-ago period, but expenses in the period just ended.
Successful placement of a promissory note
Axel Springer increased its free cash flow in the first six months by 56.8 percent to EUR 172.9 million (PY: EUR 110.2 million). Net debt fell from EUR 472.8 million at year end 2011 to EUR 314.8 million at June 30, 2012. To refinance expiring credit lines, the group successfully placed a EUR 500 million promissory note on the capital markets at the start of the second quarter. Together with unutilized credit lines, Axel Springer now has adequate funds at its disposal for the long term financing of organic and external growth.
The group’s equity ratio rose from 46.1 percent at the end of the fiscal year 2011 to 48.7 percent. As a result of organic growth and acquisitions in digital media, the average number of employees rose to 13,479 (30.06.2011: 12,648).