Axel Springer's Q3 net income down 6.1% year-over-year to €82M, sales up 11.5% to €792.6M with digital revenue growth, positive earnings in national newspapers, magazines
November 7, 2011
– All-time high EBITDA of EUR 446.3 million for the first nine months / EBITDA margin increases to 19.3 percent / Revenues improve by 11.7 percent / Digital media with significant revenue and earnings growth / National magazines see revenues grow by 7.5 percent in third quarter
Axel Springer confirms its expectations for the full year backed by a successful third quarter. Group revenues continued to grow strongly with EBITDA improving by 26.5 percent over the third quarter of 2010. This result was strongly supported by digital media, which saw earnings doubled in this period, and a positive earnings development at national newspapers and magazines. In the first nine months Axel Springer increased its Group EBITDA by 15.7 percent and revenues by 11.7 percent. The company grew both organically and through the consolidation of acquired companies.
Axel Springer enjoyed an increase in earnings before interest, taxes and depreciation (EBITDA) adjusted for non-recurring effects and purchase price allocations to EUR 446.3 million (PY: EUR 385.8 million) in the first nine months. The EBITDA margin for the same period rose from 18.6 percent to 19.3 percent. The segment Newspapers National remained highly profitable with an EBITDA margin of 23.8 percent. The segment Magazines National also remained highly profitable with an EBITDA margin of 23.2 percent for the nine-month period. The Print International and Digital Media segments each reported EBITDA margins of over 16 percent for the same period.
In the first nine month Axel Springer achieved an 11.7-percent increase in Group revenues to EUR 2,318.2 million (PY: EUR 2,075.3 million). With revenues up 34.4 percent in the Digital Media segment and 30.4 percent in the Print International segment, the company was again able to more than compensate for a slight decline in national print media revenues. Group revenues adjusted for consolidation effects improved by 5.3 percent. Consolidation effects of the Eastern European joint venture with Ringier had an effect until the end of June 2011.
Dr. Mathias Döpfner, Chief Executive Officer of Axel Springer AG, said: “Our digital media continue to grow dynamically while making an increasingly greater contribution to our earnings. In particular our strong German print brands profited in the third quarter from a – compared to the previous year – stable demand from our advertising customers as well as from price increases for important publications. The German magazines developed especially well. This shows that it is still possible to improve the profitability in print business.”
The Management Board of Axel Springer confirms the outlook and expects – even without further acquisitions – a high single-digit percentage growth for Group revenues for the 2011 financial year. The Board anticipates that all revenue-generating categories – circulation, advertising and other revenues – will likely contribute to this increase. The Board also forecasts a low double-digit percentage improvement in EBITDA, also without further acquisitions.
Strong international growth – Circulation and advertising revenues are up
International activities continued to gain importance in the current financial year. In the first nine months Axel Springer reported a 35.5-percent increase in international revenues to EUR 757.8 million (PY: EUR 559.2 million). International revenues now account for 32.7 percent – or nearly one third – of Group revenues (PY: 26.9 percent). The company grew abroad primarily through the expansion of digital activities and the growth of print activities in Eastern Europe.
Axel Springer reported an 18.6-percent increase in advertising revenues in the first nine months to EUR 1,145.2 million (PY: EUR 965.9 million). Contributing to this strong growth were consolidation effects, especially through SeLoger.com and the East European joint venture Ringier Axel Springer Media, and organic growth.
Circulation revenues during the first nine months improved 4.8 percent to EUR 908.9 million (PY: EUR 867.0 million). Contributing factors included the consolidation of the joint venture with Ringier and the price increases for publications, among others for parts of the BILD circulation, which took effect at the beginning of May 2011. Other revenues rose 9.0 percent to EUR 264.1 million (PY: EUR 242.3 million).
Adjusted consolidated net income rises by 7.7 percent
In the first nine months Axel Springer generated a consolidated net income of EUR 233.2 million following EUR 257.6 million in the prior-year period. Consolidated net income adjusted for non-operating effects rose 7.7 percent to EUR 259.5 million (PY: EUR 241.0 million). Shareholders of Axel Springer AG saw their adjusted earnings per share rise from EUR 2.28 to EUR 2.31.
Digital media remain growth engine – national print media develop positively in the third quarter
The segment Newspapers National remained highly profitable in the first nine months with an EBITDA margin von 23.8 percent (PY: 26.3 percent) despite a slight decline in revenues. In the third quarter the EBITDA margin rose to 26.0 percent (PY: 25.8 percent). Segment revenues for the nine-month period were EUR 854.1 million (PY: EUR 874.3 million). Circulation revenues rose slightly due to price increases whereas advertising revenues declined. Although the segment EBITDA fell from EUR 230.3 million to EUR 203.6 million, it improved by 0.4 percent in the third quarter following a sharp decline in the previous quarters.
As expected, digital activities remained the company’s most important driver of growth. Axel Springer continued to persistently pursue its digitization strategy in all three core segments: content portals, online marketplaces and online marketing. The Digital Media segment reported a 34.4 percent increase in revenues in the first nine months to EUR 677.7 million (PY: EUR 504.3 million). Contributing here were strong organic growth and consolidation effects. Advertising revenues rose by 43.2 percent, other revenues by 4.7 percent. The Digital Media segment was able to double its EBITDA to EUR 111.9 million (PY: EUR 56.1 million), thereby accounting for around 25 percent of the Group’s EBITDA. The segment’s EBITDA margin rose from 11.1 percent to 16.5 percent.
The segment Magazines National was able to make up for the decline experienced in the first half-year. The segment revenues for the first nine months of EUR 353.1 million remained around the previous year’s level (EUR 354.4 million). The EBITDA improved by 4.4 percent to EUR 82.1 million (PY: EUR 78.6 million), and the EBITDA margin grew from 22.2 percent to 23.2 percent. Revenues rose by 7.5 percent in the third quarter. Contributing here were increases in circulation and advertising revenues of 9.6 percent and 6.7 percent respectively. The EBITDA for the third quarter rose by 29.0 percent.
Axel Springer reported a 30.4-percent increase in revenues to EUR 350.0 million (PY: EUR 268.5 million) in the segment Print International in the first nine months. The consolidation effects of the joint venture Ringier Axel Springer Media impacted the figures until the end of the second quarter. Segment advertising revenues improved by 35.4 percent while circulation revenues grew by 25.5 percent. The EBITDA gained 63.2 percent to EUR 56.8 million (PY: EUR 34.8 million). The Segment reported an EBITDA margin of 16.2 percent following 13.0 percent for the prior-year period.
The segment Services/Holding achieved a 12.9-percent increase in revenues for the first nine months to EUR 83.3 million (PY: EUR 73.8 million) while generating an EBITDA of EUR -8.1 million (PY: EUR -13.9 million).
Free cash flow of EUR 260.7 million
Axel Springer announced an increase in free cash flow within the first nine months from EUR 204.9 million for the same period of the previous year to EUR 260.7 million. The company’s net debt as of September 30, 2011 was EUR 446.4 million (December 31, 2010: net liquidity of EUR 79.6 million). The financing of the acquisition of SeLoger.com had a significant impact here. At the end of the third quarter Axel Springer had an unused line of credit of EUR 940 million. The equity ratio remained at a high level closing at 46.0 percent as of September 30, 2011 (December 31, 2010: 49.2 percent). The number of employees increased steadily to a nine-month average of 12,520 (PY: 11,387) as the result of the continuous growth of digital media activities, the consolidation of Ringier Axel Springer Media and the acquisitions of SeLoger.com and kaufDa.
Industry intelligence Editor's Note: In an omitted table, Axel Springer reported Q3 net income of €82 million and net sales of €792.6 million. For the same period a year ago, the company recorded net income of €87.3 million and net sales of €711.0 million.