Axel Springer : increases its earnings forecast following a strong first half-year

During the second quarter, Axel Springer continued the positive business development trend from the first three months, significantly increasing both revenues and operating income. This was driven by the continuing dynamic growth in the digital business models, which increased organically by 10.7 percent during the first half-year of 2017. Their share of the total revenues amounted to 70.6 percent. Moreover, the digital activities accounted for 77.1 percent of the Group's EBITDA. During the first half-year, Axel Springer increased total revenues by 6.9 percent to EUR 1,695.0 million (PY: EUR 1,585.3 million). All three operating segments contributed to this growth. Adjusted for consolidation and currency effects, total revenues increased by 4.7 percent compared with the prior year period.

Axel Springer significantly increased the earnings before interest, taxes, depreciation, and amortization (EBITDA), adjusted for non-recurring effects, by 16.2 percent to EUR 317.2 million (PY: EUR 272.9 million). In addition to the Classified Ad Models, which increased their EBITDA by 16.6 percent, this can be attributed to a strong growth in the Paid Models of 33.6 percent. The Group's EBITDA margin increased from 17.2 percent to 18.7 percent. Following a very good first half-year, Axel Springer is increasing its earnings forecast: for the full year, an increase in the EBITDA and adjusted earnings per share is now expected in the high single-digit percentage range, whereas previously an increase in the mid-to-high single-digit percentage range had been expected.

Dr Mathias Döpfner, Chief Executive Officer of Axel Springer SE: 'Our investments, especially those in the international digital business, are paying off. In particular, the continued excellent development in the Classified Ad Models demonstrates this. The Paid Models have also experienced two strong quarters, owing to the sustained growth momentum of BUSINESS INSIDER and the best-marketed 'BILD für Alle' thus far, which was produced on the occasion of the 65th anniversary.'

Owing to the continued development of the digital activities, the average number of employees in the Group increased by 4.5 percent to 15,664 (PY: 14,986).

Adjusted net income significantly increases

The positive business development is also reflected in the net income, adjusted for non-recurring effects and impairments from purchase price allocations. During the first half-year, it increased by 15.9 percent to EUR 169.5 million (PY: EUR 146.2 million). The adjusted earnings per share improved by 15.4 percent from EUR 1.20 to EUR 1.38. The unadjusted net income amounted to EUR 116.9 million, compared with EUR 273.2 million for the prior year period. The prior-year value was influenced by significant one-off effects associated with the incorporation of Ringier Axel Springer Schweiz AG and the sale of CarWale. The unadjusted earnings per share amounted to EUR 0.95 (PY: EUR 2.41).

Optimized financing conditions

During the first six months, the free cash flow, excluding the effects of real estate transactions, increased by 24.4 percent to EUR 163.2 million (PY: EUR 131.2 million). Due in part to April's dividend payment, the net debt increased to EUR 1,234.7 million, as of June 30, 2017, compared to EUR 1,035.2 million at the end of 2016. To further optimize the financing conditions, Axel Springer carried out a partial cancellation, conversion and reissue of existing Schuldschein (promissory notes) in May 2017. On account of this, the average interest improved, the average term increased and the financing volume grew by EUR 428 million. Of the existing long-term credit lines of EUR 1,500.0 million, the sum of EUR 460.0 million had been utilized by the end of June (at the end of 2016: EUR 680.0 million). As of June 30, 2017, the equity ratio was 39.0 percent compared with 40.9 percent at the end of 2016.

Revenue increases in all operating segments

The Classified Ad Models segment continued to develop very pleasingly during the first half-year. Revenues increased by 15.6 percent to EUR 491.0 million (PY: EUR 424.7 million). The organic growth of 11.8 percent was underpinned, in particular, by the significant gains in the job and real estate portals. The consolidation effects resulting, in particular, from the integration of Land & Leisure were also a factor. The Classified Ad Models increased the EBITDA significantly by 16.6 percent to EUR 199.9 million, compared with EUR 171.4 million in the prior year period. Adjusted for consolidation and currency effects, the EBITDA increased by 13.3 percent. With a slightly improved EBITDA margin of 40.7 percent (PY: 40.4 percent), the Classified Ad Models remained the Group's most profitable segment.

Following a strong start to the year, the Paid Models further accelerated their positive trend during the second quarter. A successful special edition of BILD during the second quarter also contributed to this. Overall, the segment increased revenues during the first half-year by 2.3 percent to EUR 725.4 million (PY: EUR 709.0 million). This was primarily attributed to the strong growth in the digital activities, particularly foreign digital activities. The business news service BUSINESS INSIDER surpassed the high growth rate experienced during the first three months. The effects of the first-time consolidation of eMarketer are also reflected here. The growth in the digital Paid Models more than compensated for the market-driven decline in the print business. As a result of the growth in revenues and continuing cost discipline, the EBITDA for the segment increased by 33.6 percent to EUR 110.9 million (PY: EUR 83.0 million). Adjusted for consolidation and currency effects, the increase amounted to 20.7 percent. The EBITDA margin improved significantly from 11.7 percent to 15.3 percent.

Axel Springer also recorded strong growth in the Marketing Models segment, which increased revenues during the first half-year by 8.1 percent to EUR 447.8 million (PY: EUR 414.1 million). Adjusted for consolidation and currency effects, revenues increased by 10.9 percent. The EBITDA for the segment amounted to EUR 40.4 million, compared with EUR 46.5 million for the prior year period. This is attributed to the challenging market conditions for some of the Reach Based Marketing activities. The EBITDA margin for the segment decreased to 9.0 percent, compared with 11.2 percent for the prior year period.