Increased number of paid-content offerings on the Internet / Digital portfolio supplemented through several acquisitions / Groupwide EBITDA margin is 17.5 percent / Management Board confirms expectations for the full year
Axel Springer has accelerated the transformation into the leading digital publisher. The focus was on the increased number of paid models for journalistic content on the web, several acquisitions to supplement existing digital platforms and activities, and the introduction of new online offerings in cooperation with strategic partners. In the print business, Axel Springer had announced the planned sale of the German regional newspapers, advertising papers, TV program guides, and women’s magazines to FUNKE MEDIENGRUPPE in July 2013. Thus Axel Springer focuses in journalistic content even more intently on its core multimedia brands DIE WELT and BILD, including the associated magazine brands.
Dr. Mathias Döpfner, Chief Executive Officer of Axel Springer AG: “For Axel Springer 2013 is a year of reshaping the company and investments. We are making substantial investments to expand our core multimedia brands BILD and DIE WELT. The first experiences with our paid-content offerings have strengthened our conviction that quality journalism is of value to readers, also online.”
Thanks to robust growth in the first nine months of 2013, Digital Media solidified its position as the segment that contributes the highest revenues and earnings. It generated about 40 percent to the Group’s total revenues and 46 percent of Groupwide EBITDA in the reporting period. The growth of Axel Springer’s digital media activities offset the lower revenues generated in the print business. Consolidated revenues rose by 1.5 percent to EUR 2,443.1 million (PY: EUR 2,407.7 million). Adjusted for consolidation, currency, and calendar effects, consolidated revenues were 0.8 percent less than the corresponding figure for the first nine months of 2012.
As expected, the Group’s earnings before interest, taxes, depreciation, and amortization (EBITDA) adjusted for non-recurring effects and purchase price allocations were less than the corresponding figure for the first nine months of 2012. Mainly as a result of higher expenses for structural adjustments in the print business and the accelerated pace of digitization, the adjusted EBITDA of EUR 427.0 million was 7.0 percent less than the corresponding year-ago figure (EUR 459.3 million). Despite these additional costs, Axel Springer maintained a high EBITDA margin of 17.5 percent (PY: 19.1 percent). The Digital Media segment increased its EBITDA by 18.5 percent to EUR 196.6 million and achieved an EBITDA margin of 20.5 percent (PY: 20.2 percent).
By contrast, the earnings performance of the German newspapers was affected by reduced revenues, due to market conditions, and by higher restructuring expenses. Nonetheless, the profitability of the Newspapers National segment remained on a high level, with an EBITDA margin of 20.0 percent (PY: 23.6 percent). The Magazines National segment also remained highly profitable, with an EBITDA margin of 22.7 percent (PY: 21.0 percent). Due to the persistently tough economic conditions in key international markets, the EBITDA margin of the Print International segment came to 12.5 percent (PY: 12.8 percent).
The Management Board continues to expect that the Group’s total revenues in financial year 2013 will reflect a low single-digit percentage increase over the corresponding figure for 2012. It anticipates that the decline of circulation revenues will be more than offset by the expected growth of advertising revenues and stable other revenues. While the revenues of the Digital Media segment are expected to rise further on the strength of both organic growth and acquisition effects, the revenues of the national and international print activities will decline further, in line with market conditions. In consideration of the heightened investments in the acceleration of digitization and significant expenses for structural adjustments in the print business, Axel Springer anticipates a single-digit percentage decrease in the Groupwide EBITDA for the full year 2013.
In the first nine months of 2013, Axel Springer generated 37.3 percent (PY: 34.4 percent) of the total revenues internationally. As a result of the growing internationalization of the Group’s digital activities, international revenues rose by 10.0 percent to EUR 910.3 million (PY: EUR 827.2 million).
The positive development of the Digital Media segment was also responsible for the 6.6 percent increase in advertising revenues, to EUR 1,330.4 million (PY: EUR 1,248.0 million). Thus, the Digital Media segment generated nearly two thirds of the Group’s total advertising revenues.
The circulation revenues generated in the first nine months of 2013 amounted to EUR 833.7 million, reflecting a 5.2 percent decline from the corresponding year-ago figure (EUR 879.0 million). Market-driven circulation declines in the three print segments were mainly responsible for this development.
The other revenues generated in the nine-month period fell slightly, to EUR 279.0 million, from the year-ago figure (EUR 280.8 million). Thus, they accounted for 11.4 percent of Axel Springer’s total revenues.
Axel Springer increased its consolidated net income from EUR 188.7 million in the first nine months of last year to EUR 204.5 million in the reporting period. Adjusted for significant non-operating effects, consolidated net income amounted to EUR 230.7 million (PY: EUR 256.9 million). Accordingly, earnings per share came to EUR 1.77 (PY: EUR 1.62) and adjusted earnings per share came to EUR 1.93 (PY: EUR 2.21).
Axel Springer expanded its activities in the Digital Media segment in the first nine months by introducing new offerings in its existing activities and by means of supplementary acquisitions. Following the launch of the paid-content subscription models BILDplus and BILD Bundesliga (featuring German national soccer league coverage) in the summer of 2013, Axel Springer further extended the digital presence of the BILD brand by means of strategic partnerships. For example, the online travel magazine TRAVELBOOK.de, in cooperation with “Tripadvisor,” was launched in October 2013. BILD Music offers on-demand music and music videos in cooperation with the streaming service “AMPYA.”
In addition, Axel Springer expanded the digital sports portfolio of BILD and WELT by purchasing a majority interest in the sports and fitness app Runtastic in early October 2013. In the online classifieds business, Axel Springer announced in October 2013 to purchase, through its subsidiary StepStone, the YOURCAREERGROUP as of January 1, 2014. The YOURCAREERGROUP is one of the leading operators of job portals for hotels, restaurants and tourism in the German-speaking countries. And in October 2013, Axel Springer furthermore engaged in the start-up financier Project A Ventures.
The percentage of Axel Springer’s total revenues and EBITDA contributed by the Digital Media segment continued to grow in the first nine months of 2013. Thus, the revenues of this segment rose by 16.6 percent to EUR 959.8 million (PY: EUR 823.3 million). This increase was driven both by consolidation effects, including the acquisitions of Onet.pl, Immoweb.be, allesklar.com (meinestadt.de), and Totaljobs, and by organic growth. The Digital Media segment generated organic growth of 6.6 percent in the first nine months of this year. The positive development of this segment was mainly carried by a 19.9 percent increase in advertising revenues, to EUR 829.8 million (PY: EUR 692.3 million). Segment EBITDA rose by 18.5 percent to EUR 196.6 million (PY: EUR 165.9 million), while the EBITDA margin improved slightly, from 20.2 percent to 20.5 percent.
The first pillar of the Digital Media segment, Content Portals & Other Digital Media, comprises brand-derived portals such as BILD.de, DIE WELT Online, aufeminin.com, and Onet.pl, as well as other digital business models such as idealo, kaufDA, and Smarthouse. The revenues generated in this area of the Digital Media segment rose by 25.4 percent to EUR 328.0 million in the first nine months of 2013 (PY: EUR 261.7 million). The organic growth rate was 11.6 percent. EBITDA rose by 24.5 percent to EUR 71.1 million. Despite the substantial investments associated with the introduction of digital paid-content models, Content Portals & Other Digital Media were highly profitable, with an EBITDA margin of 21.7 percent (PY: 21.8 percent).
The second digital pillar, Performance Marketing, comprises the activities of the zanox Group, the leading network for performance-based online marketing in Europe. The revenues generated in this area of the Digital Media segment in the first nine months of 2013 rose by 2.7 percent to EUR 335.3 million (PY: EUR 326.6 million), due entirely to organic growth. At EUR 13.6 million, the EBITDA earned in the area of Performance Marketing was less than the corresponding year-ago figure (EUR 15.9 million), due to market conditions. Accordingly, the EBITDA margin fell to 4.1 percent from 4.9 percent in the comparable year-ago period.
In the third pillar of the Digital Media segment, Axel Springer Digital Classifieds, which includes the classified ad portals SeLoger, Immonet, Immoweb.be, StepStone, Totaljobs, and meinestadt.de, the revenues generated in the first nine months of 2013 amounted to EUR 296.4 million, reflecting an increase of 26.2 percent over the corresponding year-ago figure (EUR 234.9 million). The organic growth rate was 5.9 percent. This area of the Digital Media segment contributed the highest EBITDA of the three pillars, at EUR 121.3 million (PY: EUR 101.8 million). This increase was driven both by organic growth and by the acquisition of new companies. Axel Springer Digital Classifieds generated an EBITDA margin of 40.9 percent, as compared to 43.3 percent in the first nine months of last year.
The Newspapers National segment remained highly profitable, with an EBITDA margin of 20.0 percent (PY: 23.6 percent). At EUR 781.7 million, the revenues of the German newspapers were 6.6 percent less than the corresponding figure for the first nine months of 2012 (EUR 836.7 million). Particularly as a result of lower circulation numbers for all titles, as well as unfavorable calendar effects in the first quarter, the circulation revenues of EUR 432.3 million were 4.9 percent less than the corresponding year-ago figure (EUR 454.5 million). However, circulation revenues declined by only 3.2 percent in the third quarter, after Axel Springer raised the copy price for about one third of BILD’s circulation in mid-August 2013. The advertising revenues of EUR 330.0 million were 8.5 percent less than the corresponding figure for the first nine months of 2012 (EUR 360.7 million). In the third quarter, however, advertising revenues were 10.5 percent higher than the year-ago figure, due to the additional advertising revenues generated by the special BILD edition on the federal parliamentary elections. Segment EBITDA for the first nine months of 2013 amounted to EUR 156.1 million, as compared to EUR 197.2 million in the year-ago period. This decline can be attributed in large part to the decrease in revenues and the expected increase in restructuring expenses.
The Magazines National segment also generated a consistently high EBITDA margin of 22.7 percent in the first nine months of 2013 (PY: 21.0 percent). Segment revenues fell by 2.4 percent to EUR 331.0 million (PY: EUR 339.0 million). Predominantly lower circulation numbers caused circulation revenues to fall by 2.3 percent to EUR 227.6 million (PY: EUR 233.1 million). Despite an increase in the third quarter, the nine-month advertising revenues of EUR 83.0 million were 4.3 percent less than the year-ago figure (EUR 86.7 million). Segment EBITDA improved by 5.9 percent to EUR 75.3 million (PY: EUR 71.0 million). This positive development resulted mainly from the lower level of restructuring expenses, compared to the year-ago figure.
The business performance of the Print International segment reflected the persistently difficult general economic conditions in Axel Springer’s international markets, especially in eastern Europe. The revenues of this segment declined from EUR 320.0 million in the first nine months of last year to EUR 286.7 million in the reporting period. Adjusted for consolidation, calendar, and currency effects, the decline in segment revenues was only 6.7 percent. Circulation revenues were 9.2 percent less, or on an adjusted basis 4.2 percent less than the respective year-ago figures. Advertising revenues were 19.1 percent less, or on an adjusted basis 17.2 percent less than the respective year-ago figures. Segment EBITDA amounted to EUR 36.0 million, as compared to EUR 41.1 million in the first nine months of 2012. Because the revenue declines were largely offset by cost optimization measures, the EBITDA margin fell only slightly, from 12.8 percent to 12.5 percent.
At EUR 83.9 million, the revenues of the Services/Holding segment were 5.5 percent less than the corresponding year-ago figure (EUR 88.8 million), due to market conditions. Non-recurring effects such as higher restructuring expenses and the valuation of share-based compensation programs led to a decrease in segment EBITDA, from EUR -16.0 million in the year-ago period to EUR -36.9 million in the reporting period.
At EUR 216.0 million, the free cash flow generated in the first nine months of 2013 was 24.5 percent less than the corresponding year-ago figure (EUR 286.0 million). Axel Springer reduced its net debt from EUR 449.6 million at year-end 2012 to EUR 344.2 million at the end of the third quarter of 2013. As of September 30, 2013, Axel Springer had access to unutilized credit facilities in the amount of EUR 890.0 million. Axel Springer can use these funds for structural adjustments, for the accelerated digitization, and for financing possible acquisitions. The Group’s equity ratio rose from 46.9 percent at the end of financial year 2012 to 48.1 percent. Due to the acquisitions-driven and organic growth of the Digital Media segment, the average number of employees rose to 14,423 (September 30, 2012: 13,504).
This press release (also in the German language), as well as the Group key figures and the quartely financial report, are available at www.axelspringer.com/q-3-2013.