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Axel Springer leverages its strong profitability to invest in accelerated digitization

Thursday 07. March 2013 - EBITDA rises to EUR 628.0 million / EBITDA margin 19.0 percent / Revenues up 3.9 percent / Digital Media contributes the biggest share of revenues, for the first time ever / Adjusted earnings per share EUR 3.00 / Proposed dividend EUR 1.70

Benefitting from the successful progress of digitization, Axel Springer increased its EBITDA by 5.8 percent to EUR 628.0 million in 2012. Consolidated revenues rose by 3.9 percent to EUR 3,310.3 million. Having boosted its revenues by 22.0 percent to EUR 1,174.2 million, the Digital Media segment overtook the Group’s national newspapers as Axel Springer’s biggest revenue contributor, for the first time ever. And the Digital Media segment EBITDA of EUR 242.9 million, reflecting a 53.6 percent increase from the prior-year figure, closely approached the level of the Newspapers National segment. Despite declining circulation and advertising revenues, Axel Springer’s national print media remained highly profitable, with EBITDA margins of more than 20 percent. The international revenues rose by 11.0 percent. Their share in the Group’s revenues increased from 32.9 percent to 35.1 percent.
Dr. Mathias Döpfner, Chief Executive Officer of Axel Springer AG: “The year 2012 marked an important turning point for Axel Springer: For the first time ever, we generated revenues of more than one billion euros on our digital media activities, more than any other operating segment. Furthermore, this growth is profitable, with higher EBITDA margins than before. From this strong position, we will pursue the digitization of our business with even more speed and vigor. We intend to accelerate the digital transformation of the entire Group, in order to further bolster our position of digitization pioneers. We intend to accelerate the pace of innovation, further increase the efficiency of capital employed, and shape the fundamental structural transformation of the media industry. Although our print media will continue to make an important contribution to the success of our business for a long time, our goal is clear: We want to become the leading digital media group.”
In the financial year 2012, Axel Springer increased its earnings before interest, taxes, depreciation, and amortization (EBITDA), adjusted for non-recurring effects, by 5.8 percent to EUR 628.0 million (PY: EUR 593.4 million). The EBITDA margin rose from 18.6 percent to 19.0 percent. This development was largely driven by the increased profitability of our Digital Media segment, which improved its EBITDA margin by more than four percentage points to 20.7 percent (PY: 16.4 percent). Axel Springer’s national newspapers achieved an EBITDA margin of 22.7 percent, after 24.3 percent in the prior year. With an EBITDA margin of 20.7 percent (PY: 22.0 percent), the Magazines National segment also maintained its profitability on a high level. In our national print business, we were therefore able to largely contain the effects of lower revenues and higher restructuring expenses. After recovering in the fourth quarter, the EBITDA margin of the Print International segment came to 14.7 percent for the full year 2012, only slightly below the corresponding prior-year figure (PY: 15.6 percent), amid a generally difficult market environment.
Axel Springer generated consolidated revenues of EUR 3,310.3 million in financial year 2012, reflecting an increase of 3.9 percent from the prior-year figure (PY: EUR 3,184.9 million). This growth was driven by a 22.0 percent increase in the revenues of the Digital Media segment to which the consolidation of newly acquired companies attributed. Digital media achieved a double-digit organic growth as well. Adjusted for consolidation and currency effects, the Axel Springer Group generated a slight revenue increase of 0.2 percent.
For financial year 2013, the Executive Board anticipates a low single-digit percentage increase in total revenues, assuming that the structurally declining trends of the print business do not worsen considerably. The Executive Board anticipates that the expected decrease in circulation revenues will be more than offset by the planned increase in advertising revenues and by constant other revenues. The Executive Board continues to expect organic growth in digital media, strengthened by acquisition effects, while the revenues of our national and international print media are expected to decline further, in line with market trends.
Axel Springer will increase the investments in the company’s further development in financial year 2013. The pace of digitization will be accelerated and the structures of our print business increasingly adjusted to reflect the structural changes. This plan will necessitate higher expenditures for expanding the digital business and significant expenses for structural adjustments in the print business. By reason of these expenditures, the Executive Board anticipates a single-digit percentage decrease in the Group’s EBITDA, compared to 2012.
Slight increase in adjusted consolidated net income
Adjusted for significant non-operating effects, Axel Springer’s consolidated net income amounted to EUR 347.9 million in 2012 (PY: EUR 343.3 million). The adjusted earnings per share attributable to the company’s shareholders came to EUR 3.00 (PY: EUR 3.03). The consolidated net income of EUR 275.8 million was lower than the corresponding prior-year figure (PY: EUR 289.4 million), due to non-operating, non-recurring effects and purchase price allocation effects. Earnings per share came to EUR 2.41, as compared to EUR 2.62 in 2011. On this basis, the Executive Board and Supervisory Board will propose a dividend of EUR 1.70 per share, unchanged from last year, to the Annual General Meeting.
Strong revenue growth in international activities / Further significant increase in advertising revenues
The importance of Axel Springer’s international activities continued to grow in 2012. As a result of the increasing internationalization of the Group’s digital activities, international revenues rose by 11.0 percent to EUR 1,163.3 million (PY: EUR 1,048.0 million). Thus, the percentage of total revenues contributed by international activities rose from 32.9 percent to 35.1 percent.
The positive performance of the digital business was also reflected in the development of advertising revenues, which rose by 9.4 percent to EUR 1,758.1 million (PY: EUR 1,606.8 million). Axel Springer generated significantly more than half (56.4 percent) of its total advertising revenues on digital media activities, while the advertising revenues of the print activities declined.
The circulation revenues of EUR 1,162.6 million were 3.5 percent less than the corresponding prior-year figure (EUR 1,204.5 million). This decrease was driven by circulation declines in the Group’s three print segments.
Other revenues rose by 4.3 percent to EUR 389.6 million (PY: EUR 373.5 million). Gains were registered in all segments, but the increase was mostly noticed in the Digital Media segment.
Digital Media segment contributes the biggest share of revenues, for the first time ever
The Digital Media segment continued on a course of dynamic growth, generating revenues of EUR 1,174.2 million in financial year 2012, indicative of an impressive 22.0 percent increase over the prior-year figure (PY: EUR 962.1 million), and contributed the largest share of the Axel Springer’s total revenues for the first time ever. This development can be attributed both to consolidation effects and to double-digit organic growth. Advertising revenues, which at EUR 992.0 million were 25.4 percent higher than the corresponding prior-year figure (PY: EUR 791.2 million), accounted for the biggest share of segment revenues. With an EBITDA margin of 20.7 percent (PY: 16.4 percent), the Digital Media segment also boosted its profitability considerably. Segment EBITDA improved by 53.6 percent, from EUR 158.1 million in 2011 to EUR 242.9 million in 2012.
The first of the three pillars of the Digital Media segment – Content Portals & Other Digital Media – comprises brand-derived portals such as BILD.de, DIE WELT Online, aufeminin.com, and azet.sk, for example, as well as other digital business models like idealo, kaufDA, and Smarthouse, for example. The revenues generated in this pillar rose by 27.8 percent to EUR 387.4 million in 2012 (PY: EUR 303.1 million). The corresponding EBITDA rose by 27.6 percent to EUR 90.2 million (PY: EUR 70.7 million). The EBITDA margin for these activities was unchanged from the prior year, at 23.3 percent.
The second pillar, Performance Marketing, comprises the activities of the Zanox Group, the leading network for performance-based online marketing in Europe. Zanox increased its revenues by 4.4 percent to EUR 456.6 million (PY: EUR 437.2 million). The EBITDA of EUR 28.0 million was slightly less than the corresponding prior-year figure of EUR 28.7 million. This decline can be attributed primarily to the investments made to further the Group’s development. The EBITDA margin of this pillar was 6.1 percent (PY: 6.6 percent).
The third pillar, Axel Springer Digital Classifieds, in which the classified portals SeLoger, Immonet, Immoweb.be, StepStone, Totaljobs, and meinestadt.de are consolidated, performed especially well in financial year 2012, with revenues rising by 48.9 percent to EUR 330.2 million (PY: EUR 221.8 million). Furthermore, the classified portals doubled their EBITDA from EUR 68.0 million in 2011 to EUR 136.3 million in 2012. The corresponding EBITDA margin jumped from 30.7 percent to 41.3 percent.
At 22.7 percent, the EBITDA margin of the Newspapers National segment held firm on a high level (PY: 24.3 percent). Due to lower circulation and advertising revenues, the revenues of our national newspapers fell by 3.3 percent to EUR 1,126.1 million (PY: EUR 1,164.9 million). Whereas circulation revenues of 599.9 million (PY: EUR 617.6 million) were 2.9 percent less than the prior-year figure due to circulation declines, the advertising revenues of EUR 492.5 million were 4.4 percent less than the prior-year figure (PY: EUR 515.0 million). Both as a result of lower revenues and higher restructuring expenses, segment EBITDA declined from EUR 282.7 million in 2011 to EUR 256.1 million in 2012.
At 20.7 percent, the EBITDA margin of the Magazines National segment remained on a high level (PY: 22.0 percent). Segment revenues fell by 3.9 percent to EUR 450.1 million (PY: EUR 468.1 million). Due to lower circulation numbers, the circulation revenues of our national magazines declined by 2.9 percent to EUR 306.7 million (PY: EUR 315.8 million). As the positive effects emanating from our sports magazines were not enough to offset the declines registered by our other titles, advertising revenues fell 7.3 percent from the prior year to EUR 119.1 million (PY: EUR 128.4 million). The segment EBITDA of EUR 93.3 million (PY: EUR 103.2 million) was significantly influenced by higher restructuring expenses.
The performance of the Print International segment in the financial year 2012 was influenced by the persistently difficult general economic conditions, especially in eastern Europe. At EUR 440.8 million, segment revenues were 6.9 percent less than the prior-year figure (PY: EUR 473.5 million). Adjusted for consolidation and currency effects, revenues were 5.5 percent less than the corresponding prior-year figure. Circulation revenues were 5.6 percent lower, or 4.0 percent lower after adjusting for consolidation and currency effects, than the respective prior-year figures. The drop in advertising revenues was much sharper, as they fell by 10.3 percent, or by 9.2 percent on an adjusted basis. The international print media generated an EBITDA of EUR 65.0 million (PY: EUR 73.8 million). The EBITDA margin of 14.7 percent was slightly lower than the prior-year EBITDA margin of 15.6 percent.
At EUR 119.1 million, the revenues of the Services/Holding segment were 2.5 percent higher than the prior-year figure (PY: EUR 116.2 million). Segment EBITDA amounted to EUR -29.3 million (PY: EUR -24.4 million). This result can be attributed mainly to charges related to the measurement of share-based compensation programs; they were partially offset by the positive effect of income from the Kirch insolvency.
Free cash flow increased by 30.8 percent
At EUR 384.4 million, the Group’s free cash flow was 30.8 percent higher than the corresponding figure for 2011 (PY: EUR 293.9 million). The Group’s net debt fell from EUR 472.8 million at year-end 2011 to EUR 449.6 million at December 31, 2012. After the successful placement of a promissory note loan in the second quarter, the Group negotiated a new EUR 900.0 million credit facility in September 2012 to replace an expiring credit facility. Therefore, Axel Springer is very well equipped to press forward dynamically with the Group’s digital transformation. The equity ratio remained on a high level of 46.9 percent at December 31, 2012 (PY: 46.1 percent). The average number of employees increased, particularly as a result of the integration of newly acquired companies, from 12,885 in 2011 to 13,651 in 2012.