Axel Springer's H1 net income down 11.2% year-over-year to €151.2M influenced by non-recurring items; revenues up 11.8% to €1.53B primarily driven by increases in international print media, digital media
August 3, 2011
– Revenues grow by 11.8 percent / EBITDA rises by 10.5 percent to EUR 288.7 million / EBITDA margin of 18.9 percent / Increasing contribution of digital and international media to revenues and earnings / Half-year operating earnings at all-time high
After getting off to a successful start in the current financial year, the business activities of Axel Springer continued to develop positively in the second quarter. In the first half year the Group’s EBITDA rose by 10.5 percent and revenues increased by 11.8 percent. Axel Springer grew both organically and through the consolidation of acquired companies. As expected, the Group was able to more than compensate for slightly declining revenues of national print media through strong growth in digital and international media. Moreover digital and international media already accounted for 38.8 percent of the Group’s EBITDA (PY: 21.5 percent) and 44.0 percent of Group revenues (PY: 35.8 percent) in the first six months.
Axel Springer generated an 11.8 percent increase in Group revenues in the first half-year to EUR 1,525.6 million (PY: EUR 1,364.3 million). The increase in revenues was 4.2 percent when adjusted for consolidation effects. The growth was driven primarily by revenue increases of 53.4 percent in international print media and 30.3 percent in the digital media.
Axel Springer remained highly profitable with an EBITDA margin of 18.9 percent (PY: 19.1 percent). The Group saw earnings before interest, taxes and depreciation (EBITDA) adjusted for non-recurring effects and purchase price allocations rise by 10.5 percent to EUR 288.7 million (PY: EUR 261.2 million). The Newspaper National segment posted an EBITDA margin of 22.7 percent. At 23.7 percent the profitability of the Magazines National segment remained at the very high level of the previous year. The profitability of the strongly growing Print International and Digital Media segments increased further: the Print International segment saw its EBITDA margin rise to 17.1 percent, whereas the Digital Media segment significantly jumped to 16.4 percent.
Dr. Mathias Döpfner, Chief Executive Officer of Axel Springer AG, said: “The results confirm our strategy. Axel Springer’s digital and international activities are not only the driving forces behind our growth but now account for nearly 40 percent of our operating profit. In our digital business we achieved a higher earnings contribution in particular of our content and classified advertising portals. Our paid-content initiative in the Internet is making progress, and we will insistently continue to pursue this long-term change in paradigm.”
The Management Board of Axel Springer reaffirmed the forecast of a single-digit percentage increase in revenues for the 2011 financial year, to which all revenue-generating categories – circulation, advertising and other revenues – are expected to contribute. The Management Board expects a low double-digit percentage increase in EBITDA over the previous year.
Nearly one-third of Group’s revenues generated abroad – Advertising and circulation revenues grow
The share of international revenues continued to grow in the first half-year to 32.6 percent (PY: 25.8 percent) of total Group revenues. Axel Springer posted a 41.1-percent increase in international revenues to EUR 497.1 million (PY: EUR 352.3 million), primarily through the expansion of business in eastern Europe and the international expansion of digital media.
Advertising revenues grew considerably 18.6 percent to EUR 762.3 million (PY: EUR 642.7 million). In addition to the consolidation effects of primarily the eastern European joint venture Ringier Axel Springer Media and SeLoger.com, the organic growth of digital and international media operations contributed to this positive development. National print media saw declining advertising revenues, intensified in the second quarter because of a strong previous year’s quarter due to the men’s soccer World Cup. Axel Springer saw circulation revenues grow by 5.8 percent in the first half-year to EUR 588.5 million (PY: EUR 556.4 million). The consolidation of the joint venture with Ringier and the initial effects of the price increases for BILD contributed to this development. Other revenues increased by 5.7 percent to EUR 174.8 million (PY: EUR 165.3 million).
Adjusted consolidated net income of EUR 168.4 million
Consolidated net income for the first half-year amounted to EUR 151.2 million compared to EUR 170.3 million for the same period of the previous year. Consolidated net income adjusted for non-recurring effects gained 14.9 percent to EUR 168.4 million (PY: EUR 146.6 million). Adjusted earnings per share for Axel Springer AG shareholders improved from EUR 1.42 to EUR 1.49. This key figure is based on the weighted average of outstanding shares in 2011 (98.429 million). As the result of the share split in June 2011, the total number of Axel Springer shares tripled to 98.940 million.
All operating segments highly profitable
The Newspapers National segment managed to maintain a good level of profitability despite declining revenues. The segment revenues of EUR 565.1 million were 3.3 percent below the figure for the previous year (EUR 584.4 million). Circulation revenues, which also benefited from a price increases at BILD in the second quarter of 2011, remained relatively stable. Advertising revenues fell 6.8 percent in the first half-year, whereby the previous year’s figure reflected significant additional advertising revenues resulting from the men’s soccer World Cup. National newspapers generated an EBITDA of EUR 128.5 million (PY: EUR 155.5 million). This equates to an EBITDA margin of 22.7 percent (PY: 26.6 percent).
The Digital Media segment continued to grow dynamically in the first half-year. Axel Springer saw revenues rise significantly by 30.3 percent to EUR 435.1 million (PY: EUR 333.9 million) with advertising revenues growing by 42.8 percent to EUR 357.1 million. Contributing to this development were strong organic double-digit growth rates of most digital activities as well as the effects of the consolidation of SeLoger.com and kaufDa since March 2011 and of other companies. The pro forma revenues generated by digital media rose to EUR 457.7 million (PY: EUR 376.2 million); organic growth thus amounted to 21.7 percent. The share of the Group’s total pro-forma revenues rose from 26.7 percent to 29.6 percent. The digital media posted a considerable improvement of the EBITDA margin from 12.0 percent to 16.4 percent. The EBITDA jumped 77.6 percent to EUR 71.4 million compared to EUR 40.2 million for the same period of the previous year.
The Print International segment achieved a 53.4-percent gain in revenues to EUR 236.6 million (PY: EUR 154.3 million). The growth in revenues is attributed to the consolidation of Ringier companies into the joint venture Ringier Axel Springer Media since July 1, 2010. When adjusted for consolidation and currency effects, revenues declined by 4.0 percent. Whereas adjusted advertising revenues gained 1.1 percent, adjusted circulation revenues were 6.4 percent below the previous year’s figure. The EBITDA margin improved significantly from 10.3 percent for the previous year to 17.1 percent.
Last year’s sale of the business and financial media and of the stake in the publishing house Cora-Verlag were primarily responsible for the decline in revenues in the Magazines National segment to EUR 233.2 million (PY: EUR 243.0 million). When adjusted for consolidation effects, revenues remained almost at the same level as the previous year (-0.2 percent). Circulation revenues fell by 5.3 percent; when adjusted for consolidation effects the decline was much smaller (1.5 percent). Advertising revenues dropped by 4.7 percent, or by 2.1 percent when adjusted for consolidation effects. The figures for the previous year also reflect additional revenues generated in conjunction with the men’s soccer World Cup in the second quarter. The segment EBITDA was EUR 55.3 million (PY: EUR 57.8 million). The segment remained highly profitable with an EBITDA margin of 23.7 percent (PY: 23.8 percent).
The Services/Holding segment posted a 14.0-percent increase in revenues to EUR 55.6 million (PY: EUR 48.8 million) with an EBITDA of EUR 7.0 million (PY: EUR 8.3 million).
Strong free cash flow
The free cash flow for the first half-year was EUR 110.2 million compared to only EUR 73.7 million for the same period of the previous year, which had reflected working capital effects and higher restructuring payments. The financing of the acquisition of SeLoger.com in particular contributed to the Group’s consolidated net debt of EUR 549.6 million as of June 30, 2011 (December 31, 2010: net liquidity of EUR 79.6 million). At the end of the first half-year Axel Springer had credit facilities available for use in the amount of EUR 810.0 million. The equity ratio at the end of the first half-year was 44.0 percent compared to 49.2 percent at the end of 2010. The continual extension of staff in digital media, the consolidation of Ringier Axel Springer Media and the acquisitions of SeLoger.com and kaufDa led to an increase in the average number of employees to 12,388 (PY: 11,025).