On course for further growth: Axel Springer off to a good start in 2018

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Adjusted EBITDA is growing organically at a rate of 6.7 percent / Revenue increase of 6.9 percent / All operating segments with increases / Digital media are growing organically at a rate of 9.5 percent and account for 80.3 percent of the adjusted Group EBITDA / Full-year forecast confirmed

Axel Springer started the financial year 2018 with a good first quarter. The Group achieved increases in revenue and earnings in all operating segments. The driving factors were again the digital business models, in particular Classifieds Media. In the first three months digital activities generated organic growth of 9.5 percent, thereby contributing 70.1 percent of Group revenue in accordance with the new accounting standard IFRS 15. They even accounted for 80.3 percent of adjusted Group EBITDA. Overall, the Group increased revenues in the first quarter by 6.9 percent to EUR 773.5 million (PY: EUR 723.5 million). Organically, which means adjusted for consolidation and currency effects, the increase was 4.7 percent compared to the prior year period.

During the first three months of the year, earnings before interest, taxes, depreciation, and amortization (EBITDA), adjusted for non-recurring effects, increased considerably by 16.3 percent to EUR 171.2 million (PY: EUR 147.2 million). All three operating segments contributed to this increase in earnings. Organically, Group EBITDA grew by 6.7 percent in the reporting period. The adjusted EBITDA margin increased to 22.1 percent (PY: 20.3 percent).

The Group further developed its position as a digital growth company in the first quarter of 2018. The Executive Board confirm their full-year forecast for 2018. On the revenue side it expects a rise in the low to mid single-digit percentage range. This growth in earnings is also going to be achieved organically. The Group expects adjusted EBITDA to rise by a figure in the low double-digit percentage range. For adjusted earnings per share, Axel Springer expects an increase in the low to mid single-digit percentage range. Organically, adjusted EBITDA and adjusted earnings per share are expected to increase in the mid to high single-digit percentage range.

Dr. Mathias Döpfner, Chief Executive Officer of Axel Springer SE, comments: 'We have used our digital strengths successfully again in the first quarter. The Classifieds Media have become established as a profitable growth driver. Our journalistic products have also clearly improved.'

The average number of employees at Axel Springer rose in the first quarter by 3.4 percent to 16,123 (PY: 15,598).

Consolidated net income well above the prior year

The consolidated net income, adjusted for non-recurring effects and depreciations due to purchase price allocations, increased in the first quarter by 3.7 percent to EUR 80.9 million (PY: EUR 78.1 million). Axel Springer therefore achieved adjusted earnings per share of EUR 0.63 compared to EUR 0.62 in the prior year. This amounts to an increase of 0.7 percent, whilst the organic growth was 2.2 percent. Unadjusted consolidated net income increased considerably in the reporting period by 79 percent to EUR 84.7 million (PY: EUR 47.3 million). The primary contributor to this increase was the one-time effect from the transfer of the Axel-Springer high-rise in Berlin to the Axel Springer Pensionstreuhandverein. Non-adjusted earnings per share increased from EUR 0.36 in the prior year period to EUR 0.69.

Free cash flow growing strong

During the first quarter, Axel Springer increased its free cash flow, excluding the effects of real estate transactions at the company locations, by 31.0 percent to EUR 127.4 million (PY: EUR 97.2 million). This increase was partly due to the change in the recognition of rental payments as a result of the new lease accounting. Net debt amounted to EUR 1,391.8 million as of March 31, 2018 (December 31, 2017: EUR 1,020.2 million). The decisive factor here was the higher leasing liabilities due to the first-time application of the new lease accounting and the leasing of the Axel-Springer-Passage and the Axel-Springer high-rise. Of the existing long-term credit lines of EUR 1,200.0 million, EUR 389.2 million was utilized by the end of March (December 31, 2017: EUR 365.0 million). At the end of the quarter, the equity ratio was 42.4 percent (compared with 43.5 percent in the first quarter 2017).

During the first quarter Doğan Holding initiated the sale of all media activities to the Turkish media group Demirören. In this context, Axel Springer has agreed with the Doğan Holding on an early exercisability of the put options for an amount of EUR 160 million for their around 7 percent shares in Doğan. Originally, Axel Springer had expected a sale in 2020/2022. The agreement is subject to the conditions precedent of the sale of the Doğan TV shares to Demirören and the unchanged bank guarantee for the put options.

Revenue and earnings are growing in all operating segments

The Classifieds Media segment increased revenues in the first three months by 16.2 percent to EUR 290.2 million (PY: EUR 249.7 million). This was attributable primarily to organic growth of 11.3 percent which came mainly from the job portals. Following the acquisition of Logic-Immo by SeLoger, consolidation effects from the integration of French real estate portal were also reflected. The adjusted EBITDA from the segment increased substantially by 11.4 percent to EUR 112.6 million (PY: EUR 101.1 million). Organically, the increase amounted to 5.8 percent. With an adjusted EBITDA margin of 38.8 percent (PY: 40.5 percent) the Classifieds Media remained highly profitable despite capital expenditure for future growth.

The News Media segment also had a good start this year. Revenues in the segment increased by 1.7 percent in the first quarter to EUR 351.5 million (PY: EUR 345.7 million). This was attributed in particular to the continuing dynamic growth in the digital activities, especially foreign digital activities. The organic development of BUSINESS INSIDER was particularly positive. Furthermore, there were gratifying increases in advertising revenues, both in national and international business. BILD also contributed to this, stating higher print advertising revenues in the first quarter than in the prior year period. The adjusted EBITDA from News Media increased by 11.0 percent to EUR 49.4 million (PY: EUR 44.5 million). Organically, adjusted EBITDA was 1.6 percent below the prior year. The adjusted EBITDA margin increased to 14.1 percent compared with 12.9 percent in the prior year period.

Revenues in the Marketing Media segment increased in the reporting period by 5.0 percent to EUR 118.1 million (PY: EUR 112.5 million). Adjusted for consolidation and currency effects, revenues were 1.9 percent higher than in the prior year period. Adjusted EBITDA from the segment recorded significant growth of 55.8 percent, reaching EUR 23.6 million (PY: EUR 15.1 million). In addition to substantial organic growth (32.7 percent) due to the discontinuation of US business at Bonial as well as improved earnings at aufeminin and finanzen.net in the area of reach-based marketing, the consolidation effects in the performance marketing subsegment also contributed to this growth. The adjusted EBITDA margin for the segment increased to 19.9 percent, compared with 13.4 percent for the prior year period.