Axel Springer generates strong revenue and earnings growth in its digital activities




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07.08.13

Axel Springer generates strong revenue and earnings growth in its digital activities

To press release overview

Digital media account for roughly 45 percent of total earnings / Groupwide EBITDA margin is 18.7 percent / Important milestone for DIE WELT: Already more than 47,000 paying digital subscribers / Axel Springer agrees to sell its German regional newspapers, TV program guides, and women’s magazines to FUNKE MEDIENGRUPPE

Axel Springer made great strides in the digital transformation of its business in the first half of 2013. The Group’s digital media continued to grow at a dynamic rate and delivered the highest contributions to the Group’s revenues and earnings. While the Digital Media segment accounted for roughly 40 percent of consolidated revenues, its contribution to consolidated EBITDA rose to about 45 percent. The strong growth of Axel Springer’s digital media offset the lower revenues of the print media, so that consolidated revenues were on the level of the corresponding figure for the first half of last year. Although consolidated EBITDA was slightly less than the corresponding year-ago figure, Axel Springer’s profitability remained on a high level, with an EBITDA margin of 18.7 percent.

The accelerated pace of digitization was dominant in Axel Springer’s activity in the last few months. An important key aspect was the introduction of paid models for journalistic content on the web. Axel Springer successfully offers digital subscriptions for DIE WELT already since the end of last year; in June of this year, Axel Springer set another cornerstone of the digitization strategy with the introduction of BILDplus.

On July 25, 2013, after the close of the reporting period, Axel Springer announced the planned sale of its German regional newspapers, TV program guides, and women’s magazines to FUNKE MEDIENGRUPPE, for a purchase price of EUR 920 million. In addition, the parties agreed to form two joint ventures for advertising marketing of print and digital media products and retail distribution, respectively. Axel Springer will exercise managerial control and hold the majority of shares in both joint ventures.

Dr. Mathias Döpfner, Chief Executive Officer of Axel Springer AG: “I understand the fears this step caused among some fellow journalists. But I am very sure that we have thereby contributed more to securing the future of journalism as have those who lament the end of publishing so loudly these days.”

Adjusted for non-recurring effects and purchase price allocation effects, Axel Springer’s first-half consolidated earnings before interest, taxes, depreciation, and amortization (EBITDA) were slightly less than the corresponding figure for the first half of last year. Due to higher expenses for the accelerated digitization and for structural adjustments in the print business, adjusted EBITDA declined by 1.5 percent to EUR 303.9 million (PY: EUR 308.7 million). Thus, Axel Springer earned an EBITDA margin of 18.7 percent, as compared to 19.0 percent in the first half of 2012. The EBITDA of the Digital Media segment rose by 23.3 percent to EUR 136.5 million. The EBITDA margin of the Digital Media segment increased from 20.4 percent to 21.3 percent. By contrast, the earnings of the domestic newspapers were affected by lower revenues, due to market conditions, and by higher restructuring expenses, compared to the year-ago period. Nonetheless, the Newspapers National segment remained highly profitable, with an EBITDA margin of 20.5 percent. Despite decreased revenues, the Magazines National segment likewise remained very profitable, with an EBITDA margin of 23.3 percent. Amid an operating environment characterized by persistent economic weakness in key international markets, the EBITDA margin of the Print International segment was 12.4 percent.

At EUR 1,627.3 million, the consolidated revenues generated in the first half of 2013 were on the level of the year-ago figure (EUR 1,620.4 million). The key development contributing to this outcome was the persistently strong growth of the Digital Media segment, which offset the expected decline in print revenues. Adjusted for consolidation, currency, and calendar effects, total revenues were 2.6 percent less than the corresponding year-ago figure.

For the full year 2013, the Management Board continues to expect a low single-digit increase in total revenues, assuming that the structurally declining trends of the print business do not worsen considerably.

The Management Board anticipates that the expected decrease in circulation revenues in the national and international print business will be offset by higher advertising revenues in the Digital Media segment. We continue to anticipate growth in our digital media activities, due to both organic growth and acquisition effects, whereas the revenues generated in the national and international print business will continue to decline, due to market conditions. In consideration of the heightened investments in the accelerated digitization of the Group’s business and the significant expenses incurred for structural adjustments in the print business, Axel Springer expects a single-digit percentage decrease in EBITDA for the full year 2013, compared to 2012.

Share of total revenues contributed by international revenues rises to 37.6 percent / Advertising revenues benefit from the Digital Media segment

As a consequence of the internationalization of the Group’s digital media activities, Axel Springer’s international revenues rose by 11.2 percent to EUR 611.2 million (PY: EUR 549.8 million). Thus, 37.6 percent of Axel Springer’s consolidated revenues in the first six months of 2013 (PY: 33.9 percent) were generated in its international activities.

Driven by strong growth in the Digital Media segment, advertising revenues rose to EUR 891.2 million (PY: EUR 851.7 million). Nearly two thirds (62.4 percent) of the Group’s total advertising revenues were generated in the Digital Media segment.

The circulation revenues of EUR 551.0 million were 5.1 percent less than the corresponding figure for the first six months of 2012 (EUR 580.5 million). This decrease was the result of circulation declines in the Group’s three print segments, due to market conditions.

The other revenues of EUR 185.1 million were slightly less than the corresponding year-ago figure (EUR 188.2 million) and accounted for 11.4 percent of the Group’s total revenues.

Adjusted consolidated net income below the level of the year-ago figure

Axel Springer’s consolidated net income for the first half of 2013 amounted to EUR 155.6 million (PY: EUR 159.6 million). Adjusted for significant non-operating effects, net income amounted to EUR 165.7 million, which was below the level of the year-ago figure (EUR 177.7 million). That corresponds to earnings per share of EUR 1.36 (PY: EUR 1.43) and adjusted earnings per share of EUR 1.40, as compared to EUR 1.55 in the first half of last year.

Segments: Digital Media generates substantial revenue and earnings growth

The Digital Media segment extended its position as the Group’s biggest segment by increasing its revenues substantially, by 18.2 percent to EUR 640.6 million (PY: EUR 542.1 million). This increase resulted both from consolidation effects, e. g. in connection with the acquisitions of Onet.pl, Totaljobs, Immoweb.be, and allesklar.com (meinestadt.de), and from organic growth of 6.9 percent. As a key factor contributing to this development, advertising revenues rose by 22.2 percent to EUR 556.1 million (PY: EUR 455.1 million). Due to the sale of the online games provider gamigo in 2012, the other revenues of EUR 84.5 million were slightly less than the corresponding year-ago figure (PY: EUR 87.0 million). The Digital Media segment also generated substantial earnings growth, with segment EBITDA rising by 23.3 percent from EUR 110.7 million to EUR 136.5 million. The EBITDA margin increased from 20.4 percent to 21.3 percent.

Content portals & other digital media – the first pillar of the Digital Media segment – comprises the brand-derived portals such as BILD.de, DIE WELT Online, aufeminin.com, and Onet.pl, as well as digital business models such as idealo, kaufDA, and Smarthouse. At EUR 219.4 million, the revenues generated in this pillar were 24.7 percent higher than the corresponding figure for the first six months of 2012 (PY: EUR 175.9 million), while the EBITDA generated in this category increased by 17.6 percent to EUR 50.8 million. This pillar remained highly profitable, with an EBITDA margin of 23.2 percent (PY: 24.6 percent), although the introduction of paid-content models and the acquisition of paying subscribers to DIE WELT Online and BILD.de were among the key developments in the first half year. BILD launched its paid-content model, known as BILDplus, in June 2013. DIE WELT has offered various digital subscription packages already since December 2012. As of June 30, 2013, DIE WELT had more than 47,000 digital subscribers. This corresponds to more than 20 percent of the print circulation (IVW II/2013: 227,248 copies). In addition to the digital subscribers, a further 27,000 print subscribers opted to access digital content as part of their brand subscription. Across all platforms, the multimedia brand DIE WELT reaches a total of 1.42 million readers (daily net reach for the period from April 1, 2013 to June 30, 2013).

The second digital pillar, performance marketing, comprises the activities of the zanox Group, the leading network for performance-based online marketing in Europe. The zanox Group increased its revenues by 3.3 percent to EUR 224.1 million in the first six months of 2013 (PY: EUR 216.9 million). At EUR 9.2 million, the EBITDA generated in the performance marketing business was less than the corresponding year-ago figure (EUR 10.5 million), due to market conditions. Thus, the EBITDA margin came to 4.1 percent, as compared to 4.9 percent in the first half of last year.

The third pillar, Axel Springer Digital Classifieds, made the biggest contribution to the strong growth of the Digital Media segment. The first-half revenues generated in this category, which comprises the classified ad portals SeLoger, Immonet, Immoweb.be, StepStone, Totaljobs, and meinestadt.de, rose by 31.9 percent to EUR 197.1 million (PY: EUR 149.4 million), on the strength of both organic growth and acquisition effects. The EBITDA generated in this category rose by 29.6 percent to EUR 82.5 million (PY: EUR 63.7 million) and the EBITDA margin came to 41.9 percent (PY: 42.6 percent).

Despite lower revenues and, compared to the first half of last year, higher restructuring expenses Axel Springer’s German newspapers remained highly profitable, with an EBITDA margin of 20.5 percent (PY: 24.1 percent). At EUR 507.8 million, the revenues of the Newspapers National segment were 10.6 percent less than the corresponding year-ago figure (PY: EUR 568.3 million). Primarily as a result of lower circulation numbers, circulation revenues fell by 5.8 percent to EUR 279.2 million (PY: EUR 296.4 million), while advertising revenues fell by 16.1 percent to EUR 215.8 million (PY: EUR 257.3 million). Aside from the declines attributable to general market conditions, another factor contributing to this decrease was the lack of the additional revenues generated on the special edition “BILD für Alle” in the second quarter of last year. Segment EBITDA declined from EUR 137.1 million to EUR 104.0 million.

The Magazines National segment was likewise highly profitable, with an EBITDA margin of 23.3 percent (PY: 21.2 percent). Segment revenues of EUR 222.3 million were slightly less than the corresponding year-ago figure (EUR 230.9 million). Due to mostly lower circulation numbers, circulation revenues fell by 2.8 percent to EUR 151.1 million (PY: EUR 155.5 million). The advertising revenues of EUR 56.9 million were 8.4 percent less than the year-ago figure (EUR 62.1 million). Despite the revenue decline, segment EBITDA improved by 6.2 percent to EUR 51.9 million (PY: EUR 48.9 million), mainly as a result of lower restructuring expenses and optimized cost structures, compared to the year-ago period.

The business performance of the Print International segment was adversely impacted by the persistently difficult economic conditions in the Group’s international markets, particularly in eastern Europe. The revenues generated by the Group’s international print media declined from EUR 219.3 million to EUR 200.8 million, also as a result of negative consolidation, currency and calendar effects, compared to the year-ago period. Adjusted for these effects, the revenue decline narrowed to 6.9 percent. Circulation revenues were 6.1 percent less than the year-ago figure; adjusted for the above-mentioned effects, the decline was 4.3 percent. Advertising revenues were 19.2 percent less than the year-ago figure; adjusted for the above-mentioned effects, the decline was 17.9 percent. The Print International segment generated an EBITDA of EUR 24.9 million (PY: EUR 28.8 million). The revenue declines were largely offset by cost optimization measures, so that the EBITDA margin of 12.4 percent was only slightly less than the EBITDA margin for the first half of last year (13.1 percent).

At EUR 55.9 million, the revenues of the Services/Holding segment were 6.5 percent less than the year-ago figure (EUR 59.7 million). The EBITDA of EUR -13.4 million was slightly higher than the year-ago figure (EUR -16.8 million).

Net debt declines further

The free cash flow of EUR 126.5 million in the first six months of 2013 was 26.9 percent less than the year-ago figure (EUR 172.9 million). Net debt fell from EUR 449.6 million at year-end 2012 to EUR 423.4 million at the reporting date of June 30, 2013. In addition to promissory note loans in the total nominal amount of EUR 500.0 million, Axel Springer also has access to unutilized credit facilities in the total amount of EUR 810.0 million. These available funds can be used for the transformation and accelerated digitization of the Group’s business, and for financing possible acquisitions. The Group’s equity ratio rose from 46.9 percent at the end of financial year 2012 to 47.7 percent at the reporting date. Due to acquisition effects and organic growth in the Digital Media segment, the average number of employees rose to 14,625 (June 30, 2012: 13,479).

This press release (also in the German language), as well as the Group key figures and the interim financial report, are available at www.axelspringer.com/h-1-2013.

Press Contact Axel Springer SE: Edda Fels
Tel: +49 30 2591 77600