Note: In accordance with IFRS accounting rules, Axel Springer’s consolidated financial statements for 2013 present the results of continuing operations. Therefore, the key figures no longer include the activities covered by the transaction with FUNKE MEDIENGRUPPE, nor the activities of Ringier Axel Springer Media AG in the Czech Republic.
Further progress in the transformation of the company / Investments in paid content offerings and digital portfolio / Steady growth of the digital business in all operating segments / Groupwide EBITDA margin of 16.2 percent / Proposal to raising the dividend to EUR 1.80 per share
Axel Springer pushed forward firmly with the transformation of its business in 2013, on its way to becoming the leading digital publisher. The company invested considerably in expanding its paid-content offerings on the Internet and enlarged its portfolio of online offerings through complementary acquisitions. Axel Springer’s acquisition of the TV news station N24, which was announced in mid-December 2013, was finalized in February 2014. The plan is to mesh DIE WELT with N24, to create the leading multimedia news company for quality journalism in the German-speaking world. In addition, N24 will be established as a central provider of video content for all of Axel Springer’s brands. In the area of national paid models, Axel Springer has sharpened its focus on the core multimedia brands of BILD and DIE WELT. Last year, Axel Springer announced the sale of its regional newspapers, TV program guides, and women’s magazines in Germany to FUNKE MEDIENGRUPPE. Furthermore, the parties agreed to establish joint ventures for marketing and distribution of print and digital media.
Axel Springer fully achieved it’s economic goals last year. At this year’s Annual General Meeting, therefore, the company’s Executive Board and Supervisory Board will propose raising the dividend to EUR 1.80 per share.
Dr. Mathias Döpfner, Chief Executive Officer of Axel Springer SE: “For Axel Springer, 2013 was a year of transformation, transition and new beginnings. There has never been so much change! We had already announced that it would be a year of transformation, accompanied by substantial investments in the future, and consequently we were prepared to accept a decrease in our consolidated net income. We have successfully started into the future of digital journalism. In the next few years we will need to keep the pace of our accelerated digitization in order to become the leading digital publisher.”
In accordance with IFRS accounting rules, Axel Springer’s consolidated financial statements for 2013 present the results of continuing operations. Therefore, the key figures no longer include the activities covered by the transaction with FUNKE MEDIENGRUPPE, nor the activities of Ringier Axel Springer Media AG in the Czech Republic, the sale of which was announced in December 2013. The comparison figures for financial year 2012 were also adjusted accordingly. Furthermore, Axel Springer introduced a new segment structure which reflects the Group’s consistent orientation towards becoming the leading digital publisher. The Group’s activities are now congregated in three operating segments: Paid Models, Marketing Models, and Classified Ad Models. There is also the Services/Holding segment.
Axel Springer fulfilled its revenue forecast for financial year 2013, in that total revenues from continuing operations rose by 2.3 percent to EUR 2,801.4 million (PY: EUR 2,737.3 million). Adjusted for consolidation and currency effects, total revenues were slightly higher (+ 0.2 percent) than the corresponding prior-year figure. This positive development can be credited in large part to the performance of the Classified Ad Models segment, which reported strong revenue growth of about 22 percent. The Marketing Models segment also generated considerable revenue growth of 8.1 percent. Due to lower revenues in the print media business, the revenues of the Paid Models segment were about 3.9 percent less than the corresponding prior-year figure.
Adjusted for non-recurring effects and purchase price allocation effects, earnings before interest, taxes, depreciation, and amortization (EBITDA) from continuing operations came out below the level of the prior year, as expected. It amounted to EUR 454.3 million, reflecting a decrease of 8.9 percent from the prior-year figure (EUR 498.8 million). This development was particularly influenced by the higher expenditures for restructuring measures in the print business and by the investments made to accelerate the digitization of the Group’s business. Despite these heightened costs, Axel Springer generated an EBITDA margin of 16.2 percent, as compared to 18.2 percent in 2012.
The EBITDA margin of the Classified Ad Models segment held firm on a high level of more than 40 percent. At 16.4 percent, the EBITDA margin of the Paid Models segment, in which the bulk of additional expenditures for restructuring measures were made, was below the prior-year EBITDA margin of 19.1 percent. The Marketing Models segment maintained its profitability, with a stable EBITDA margin of 14.4 percent.
For the full year 2014, the Executive Board expects total revenues to rise by an amount in the middle single-digit percentage range. It anticipates that the planned increase in advertising revenues and other revenues will more than offset the expected decrease in circulation revenues. The Paid Models, Marketing Models, and Classified Ad Models segments are each expected to generate higher revenues in 2014. In consideration of the expectedly higher EBITDA contributions of the Paid Models and Classified Ad Models segments, and the expectation that Marketing Models segment’s EBITDA contribution will be stable compared to 2013, the Executive Board is aiming at an increase of Groupwide EBITDA and the adjusted earnings per share by an amount in the low double-digit percentage range.
Axel Springer’s business became even more digitized: The pro-forma revenues of the digital media rose by 6.7 percent and the share of total revenues contributed by digital media activities rose from 44.6 percent in 2012 to 47.9 percent in 2013. The EBITDA of digital media rose by 14.1 percent. Therefore the share of total EBITDA contributed by digital media activitities rose from 49.4 to 61.8 percent.
Axel Springer increased the share of total revenues generated in its international activities to 41.6 percent in 2014 (PY: 38.8 percent). The 9.6 percent increase in international revenues to EUR 1,164.4 million (PY: EUR 1,062.7 million) was driven by the growing internationalization of the digital business.
Groupwide advertising revenues rose by 7.1 percent to EUR 1,637.8 million (PY: EUR 1,529.4 million). More than two-thirds (70 percent) of advertising revenues were generated in Axel Springer’s digital activities.
Axel Springer’s adjusted consolidated net income from continuing operations amounted to EUR 229.8 million (PY: EUR 258.6 million); thus, the adjusted earnings per share attributable to the company’s shareholders came to EUR 1.81, as compared to EUR 2.20 in 2012. At EUR 178.6 million consolidated net income from continuing operations was also less than the corresponding prior-year figure (EUR 190.7 million); on this basis, earnings per share came to EUR 1.34 (PY: EUR 1.64). The development of key operating results is summarized in the table below. (Newsletter recipients can also find this summary at www.axelspringer.com/fy13).
At the Annual General Meeting to be held on April 16, 2014, the Executive Board and Supervisory Board will propose a dividend of EUR 1.80 (PY: EUR 1.70) per share.
Axel Springer’s business activities are now congregated in three operating segments: Paid Models, Marketing Models, and Classified Ad Models. There is also the Services/Holding segment.
The Paid Models segment is primarily aimed at paying readers of Axel Springer’s digital media content, as well as its newspapers and magazines. Whereas the German activities essentially comprise all digital and print activities of the BILD Group and the WELT Group, the international activities comprise the media offerings in western and eastern Europe, which also include the activities of Ringier Axel Springer Media AG. In the area of digital paid content in Germany, the company’s attention was focused in 2013 on signing up paying subscribers in the stationary and mobile Internet. Axel Springer has been successful herein so far, having signed up 47,000 paying digital subscribers for DIE WELT (as of June 2013) and 152,000 for BILDplus (as of early December 2013), the digital paid content model of BILD, within half a year in both cases. In addition, Axel Springer expanded the digital presence of the BILD brand by introducing German National Soccer League coverage at “BUNDESLIGA bei BILD” in August 2013, and broadened the scope of its strategic partnerships. Furthermore, Axel Springer signed an agreement to purchase 100 percent of the equity of N24 Media GmbH in December 2013. The purchase was finalized in February 2014, after the necessary approvals under cartel law and media law were issued. The plan is to establish N24 and WELT Group together as the leading multimedia news company offering premium-quality journalism in the German-speaking world.
The revenues of the Paid Models segment amounted to EUR 1,521.5 million, reflecting a 3.9 percent decrease from the prior-year figure (EUR 1,582.9 million). Adjusted for consolidation effects, they were 5.3 percent less than the corresponding prior-year figure. Circulation revenues declined by 6.8 percent to EUR 759.1 million (PY: EUR 814.7 million). This development was caused by market-driven circulation declines in Axel Springer’s national and international print publications, as well as consolidation effects related to the sale of magazine titles in France. Adjusted for consolidation effects, circulation revenues were 5.1 percent less than the corresponding prior-year figure. Advertising revenues declined by 1.8 percent to EUR 664.0 million (PY: EUR 675.8 million); adjusted for consolidation effects, the decline was 7.7 percent. Segment EBITDA amounted to EUR 250.1 million, as compared to EUR 301.8 million in 2012. Besides from the lower revenues, this decrease resulted mainly from the expected increase in restructuring expenses in the German newspaper business, and from higher expenditures for the digitization of the Group’s business. A positive effect was contributed by the consolidation of the Polish online portal Onet.pl. Despite the additional expenditures for the digital transformation, the EBITDA margin remained on a high level, at 16.4 percent (PY: 19.1 percent).
All business models predominantly involving revenues from advertising customers under performance-based or reach-based marketing arrangements are consolidated within the Marketing Models segment. The reach-based marketing activities include digital business models like aufeminin.com, idealo, kaufDA, and Smarthouse, for example. Performance-based marketing comprises the activities of the zanox Group.
The Marketing Models segment generated revenues of EUR 716.5 million, reflecting an increase of 8.1 percent over the prior-year figure (EUR 662.8 million). This development was driven mainly by the 8.6 percent increase in advertising revenues, which came to EUR 592.0 million (PY: EUR 545.3 million) and which resulted especially from the very positive performance of idealo in the area of reach-based marketing. Other revenues rose by 5.9 percent to EUR 124.5 million (PY: EUR 117.5 million), due in large part to the contribution of the zanox Group in the area of performance marketing. Despite the additional expenditures for establishing new business models, the segment EBITDA of EUR 103.4 million was 5.4 percent higher than the prior-year figure (EUR 98.1 million), while the EBITDA margin of 14.4 percent was nearly on the level of the prior year (14.8 percent).
The Classified Ad Models segment comprises all business models that generate most of their revenues on sales of job and real estate ads to paying customers. This includes the online classifieds portals such as SeLoger, Immonet, Immoweb.be, StepStone, Totaljobs, and meinestadt.de, which are bundled within Axel Springer Digital Classifieds. Classified Ad Models generated the strongest growth of all the operating segments in 2013, with its revenues rising by 21.9 percent to EUR 402.6 million (PY: EUR 330.2 million). This increase was mainly caused by consolidation effects resulting from the full-year consolidation of Immoweb.be, meinestadt.de, and Totaljobs, as well as the initial consolidation of Saongroup (November 2013). Adjusted for these effects, segment revenues were 4.6 percent higher than the corresponding prior-year figure. Advertising revenues rose by 23.9 percent to EUR 381.9 million (PY: EUR 308.2 million). Also in this case, the increase was driven mainly by consolidation effects. Adjusted for these effects, advertising revenues were 5.5 percent higher than the corresponding prior-year figure. Other revenues amounted to EUR 20.8 million, as compared to EUR 22.0 million in 2012. Segment EBITDA rose substantially, by 22.6 percent, to EUR 163.8 million (PY: EUR 133.6 million). The Classified Ad Models segment remained highly profitable, as evidenced by the EBITDA margin of 40.7 percent (PY: 40.5 percent).
The business performance of the Services/Holding segment was influenced primarily by the expectedly higher restructuring expenses and by effects related to the valuation of share-based compensation programs. Accordingly, the segment EBITDA of EUR -63.0 million was substantially lower than the prior-year figure (EUR -34.8 million), while the revenues of EUR 160.8 million were nearly unchanged from the prior year (EUR 161.4 million).
At EUR 572.6 million, the revenues generated in discontinued operations were 5.0 percent less than the corresponding prior-year figure (EUR 602.7 million), while the EBITDA of EUR 116.6 million was 9.8 percent less than the prior-year figure (EUR 129.2 million). This category comprises the activities covered by the transaction with FUNKE MEDIENGRUPPE (subject to the still outstanding approvals under media law and cartel law), as well as the activities of Ringier Axel Springer Media AG in the Czech Republic, the sale of which was announced in December 2013.
The free cash flow generated in financial year 2013 declined by 15.0 percent to EUR 326.7 million (PY: EUR 384.4 million). Mainly due to the financing of the acquisitions performed in connection with the Group’s digitization and internationalization strategy, the net debt of Axel Springer rose from EUR 449.6 million at year-end 2012 to EUR 471.3 million at December 31, 2013. This figure does not yet include the proceeds from the planned sale of print titles to FUNKE MEDIENGRUPPE and from the planned sale of the Czech activities of Ringier Axel Springer Media AG. At December 31, 2013, Axel Springer disposed of unutilized credit lines in the amount of EUR 770.0 million (PY: EUR 786.0 million). Axel Springer can use these funds for general business purposes and for financing possible acquisitions. Axel Springer’s equity ratio was nearly unchanged from the prior year, at 47.0 percent (PY: 46.9 percent). The average number of employees working in continuing operations increased to 12,843 in 2013 (December 31, 2012: 12,080), particularly as a result of the expansion of digital activities and the integration of newly acquired companies.
This press release (also in German), the Group’s key figures, and the Annual Report can be found at www.axelspringer.com/fy13.