Quarterly Financial Report as10 of September 30, 2010
Quarterly Financial Report as of September 30, 2010 Axel Springer AG 2 Group Key Figures
Group Key Figures
in € millions 9M/2010 9M/2009 Change
Revenues 2,075.3 1,886.2 10.0 %
Newspapers National 874.3 891.0 – 1.9 %
Magazines National 354.4 386.5 – 8.3 %
Print International 268.5 224.9 19.4 %
Digital Media 504.3 310.1 62.6 %
Services/Holding 73.8 73.8 0.0 %
International revenues 559.2 377.1 48.3 %
International revenues as percent of total revenues 26.9 % 20.0 %
Pro forma revenues Digital Media 494.4 410.8 20.4 %
Digital Media revenues as percent of total revenues (pro forma) 23.9 % 20.7 %
1) EBITDA 385.8 264.5 45.9 %
1) EBITDA margin 18.6 % 14.0 %
Consolidated net income 257.6 317.0 – 18.7 %
2) Consolidated net income, adjusted 241.0 130.1 85.3 %
3) Total assets 3,623.3 2,934.3 23.5 %
3) Equity 1,768.9 1,196.8 47.8 %
3) Equity ratio 48.8 % 40.8 %
Free cash flow 204.9 148.7 37.8 %
3) Net debt 39.0 – 193.0 -
4) Earnings per share (in €) 8.12 10.47 – 22.4 %
2)4)5) Earnings per share, adjusted (in €) 7.43 4.02 84.8 %
Closing price (in €) 96.96 71.70 35.2 %
Average number of employees 11,387 10,757 5.9 %
1) Adjusted for non-recurring effects and effects of purchase price allocation. 2) Adjusted for significant, non-operating items (see page 11). 3) As of September 30, 2010 and December 31, 2009, respectively. 4) Diluted. 5) The year-ago comparison figure for the adjusted earnings per share was calculated on the basis of the weighted average shares outstanding during the reporting period.
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Quarterly Financial Report as of September 30, 2010 Axel Springer Group
Business developments and operating revenues. Starting in the third quarter, moreover, the Group’s operating results were further boosted by the results – at a glance profit contributions of the companies contributed by Significant increases in revenues and profits Ringier to the joint venture Ringier Axel Springer Media. Axel Springer is well on track to conclude the current financial year with significant increases in revenues and Outlook for 2010 profits. At € 2,075.3 million, consolidated revenues for Although the rate of organic growth slowed somewhat in the third quarter as a result of the recently more subdued the first nine months of 2010 were 10.0 % higher than the corresponding prior-year figure. Aside from organic market conditions, we anticipate a significant increase in growth, these gains were also due to the first-time con- full-year revenues for the financial year 2010, due to the solidation of new companies, especially StepStone, additional revenue contributions of the Group’s interna- Digital Window, and the joint venture with Ringier. Ad- tional print and digital media. Furthermore, we can re-affirm justed for consolidation effects, total revenues were financial position, liquidity, and financial performance the year: For the full year of 2010, the Management Board 2.3 % higher than the corresponding year-ago figure. expects that EBITDA will rise to the level of the all-time high Having reached a new record high of € 385.8 million, recorded in the financial year 2008 (€ 486.2 million).
EBITDA was 45.9 % higher than the year-ago figure. This disproportionately strong increase in earnings can Implementation of the Group’s business strategy be attributed to the anti-cyclical expansion of our brands, In the reporting period, Axel Springer continued to sys- as well as the growing internationalization, systematic tematically implement its strategy of profitable growth digitization, and successful cost limitation measures in based on the three core elements of expanding its market Germany and abroad. All operating segments exceeded leadership position in German-language core media busi- their respective comparison figures from 2009. The EBITDA ness, internationalization, and digitization. In addition, Axel Springer took further important steps to set the course for margin rose from 14.0 % to 18.6 %. future growth. Original expectations exceeded in part Despite challenging economic conditions in the reporting In the German print media business, we successfully period, Axel Springer’s business performance and oper- made anti-cyclical investments in our strong brands. In ating results exceeded our expectations, in part, at the terms of paid circulation, Axel Springer is still the big- time of publishing the Annual Report 2009 early this year. gest newspaper publisher and the third-biggest maga- zine publisher in Germany. The Group’s position in the Advertising revenues increased substantially, in line with German market was further strengthened by means of our planning assumptions. Adjusted for consolidation and the intensive consolidation of print and online editorial teams, cross-media reach marketing, and the market currency effects, they were 4.5 % higher than the corre- sponding year-ago figure. The decline in print media introduction of new formats. By selling certain equity advertising revenues was more than offset by the strong investments, moreover, Axel Springer focused its me- organic growth of our digital media. As expected, the dia portfolio more sharply on its core high-circulation development of circulation and advertising markets of our and wide-reach newspapers and magazines. print media was subdued, both in Germany and in the other European countries in which Axel Springer operates. As announced, Axel Springer’s internationalization efforts have been focused on the markets of eastern The disproportionately high increase in earnings, which Europe. By way of the joint venture Ringier Axel Springer had not been expected on that level of magnitude at the Media, we are now active in Slovakia and Serbia for the beginning of the current year, can be attributed to the first time; moreover, we have markedly expanded our factors mentioned above. In the print media, the cost market positions in the Czech Republic and Hungary. savings more than offset the earnings effect of lower
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Finally, we also expanded our business in Russia and Industry environment improved our competitive position in that country. Press distribution market The press distribution market was not immune to the Axel Springer’s digitization efforts were focused in par- adverse effects of the difficult economic environment: ticular on the development of a successful offering of The total paid circulation of newspapers and magazines
media products for the iPhone and iPad, and on the was 2.9 % below the level of the corresponding year-ago establishment of premium offers on our content portals. period. Thanks to the price increases implemented over We have expanded our business model in the Digital the past four quarters, however, circulation revenues
Media segment through the introduction of paid-content declined by only 1.3 %. services. Other important activities included strategic acquisitions to bolster the Group’s position in success- The 369 daily and Sunday newspapers tracked by IVW based online marketing and online marketplaces. generated total sales of 22.7 million copies per issue,
indicative of a 2.7 % decrease from the year-ago period. As General economic conditions in the year-ago period, newsstand sales suffered a much worse decline (– 5.1 %) than subscription sales (– 1.7 %). State of the economy Within the press distribution market, the demand for daily
The recovery of the world economy, which had been and Sunday newspapers declined by 2.9 %, weighted for quite robust at first, lost some of its momentum over the their respective publication frequencies. course of 2010. The economies of the United States and Japan already began to slow down during the spring. Total sales of general-interest magazines, including According to the Autumn Report of the leading economic membership and club magazines, came to 112.9 million research institutions, economic growth in the euro zone copies per issue, indicative of a 2.2 % decrease from the began to slow in the middle of the year (Autumn Report 2010, corresponding year-ago period; sales of subscription
IMF October 2010). magazines declined by 2.5 %, while those of newsstand
magazines increased by 0.5 %. The number of titles tracked
The economy of Germany is going through a phase of by IVW was 878 (+ 1.4 % over the year-ago period). strong recovery. The upswing is no longer being carried Weighted for their respective publication frequencies, the primarily by exports; instead, domestic demand is becom- demand for general-interest magazines declined by 3.2 %. ing a critical growth-supporting factor. Both consumer spending and business investment have increased sub- Advertising market stantially over the course of 2010 (Autumn Report 2010). The German advertising market exhibited clear signs of
The inflation rate rose by only 1.0 % in the first three quar- recovery in the first nine months of 2010. Based on data ters of 2010. As before, this moderate increase was driven from Nielsen Media Research, the total gross advertising by energy prices (German Federal Statistical Office). market, which reflects the total volume of printed ad pages, increased over the depressed figure for the correspond- According to the GfK Group, consumer sentiment con- ing year-ago period, which was heavily affected by the tinued to improve in the third quarter of 2010. The eco- economic and financial crisis, as a result of the improved nomic upswing, accompanied by falling unemployment business and consumer climate in Germany. In the first numbers and moderate price increases, led to an appre- nine months of 2010, the total gross advertising market, ciable improvement of consumer sentiment. including conventional online advertising (but excluding search term marketing and affiliates, and media advertis- The labor market experienced sustained improvement in ing) amounted to € 14.5 billion, representing an increase the first three quarters. In September 2010, unemployment of 11.7 % over the corresponding year-ago figure. This fell to 3.0 million, while the number of workers increased increase was largely driven by television (+ 17.2 %) and
(German Federal Labor Agency). online media (+ 34.5 %).
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However, the advertising data published by Nielsen Media types of published classified ads, with the exception of Research is only indicative of general trends of the adver- job ads; the declines were especially pronounced in the tising industry, and does not accurately reflect the actual categories of real estate, automobiles, and travel. Thanks development of net advertising revenues. Due to the to the improved situation of the labor market, job ads considerably intensified competition in the media industry exhibited a clearly positive development (+ 6.2 %). and the associated effects on advertising rates, advertis- ing market figures based on standard rates, which do According to Nielsen, general-interest magazines not reflect any discounts allowed, present a distorted (excluding media advertising) managed to halt the down- picture of actual business developments. It should also ward slide of their advertising revenues. At € 1.85 billion, be remembered that such advertising market data only their gross advertising revenues were 5.1 % higher than refers to the advertising of branded products and services, the corresponding figure for the first nine months of last and that of large retailers, and does not include classified year. The types of general-interest magazines that bene- ads and advertising supplements. The anticipated devel- fitted most from the increase in advertising expenditures opment of net advertising revenues (see page 26) makes were current-interest magazines (+ 9.4 %), supplements it clear that they continued to diverge from the gross adver- (+ 17.0 %), automotive magazines (+7.4 %), customer tising revenues based on standard advertising rates in 2010. magazines (+ 12.4 %), home and lifestyle magazines
(+ 11.7 %), and sports magazines (+ 8.6 %). Primarily, the At € 4.7 billion, the gross advertising revenues of the categories that sustained revenue declines were IT/tele- print media (excluding classified ads and supplements, communications magazines (– 7.1 %), biweekly women’s and media advertising) were slightly higher (+1.0 %) than magazines (– 2.1 %), health magazines (– 21.3 %), and the corresponding year-ago figure. youth magazines (– 3.4 %). Also in the case of general- interest magazines, the development of net advertising According to Nielsen Media Research, the volume of revenues was considerably worse. newspaper ads for branded products (excluding media advertising) has declined (– 1.8 %). Reduced advertising According to Nielsen Media Research, the gross advertis- expenditures in numerous sectors (textiles, retail, tourism, ing revenues (excluding media advertising) of the online automobiles, telecommunications, health, and pharma- market in Germany (including conventional banner ad- ceuticals) could not be offset by increased advertising vertising, but excluding search term marketing and affili- expenditures in other sectors, such as finance, services, ates) increased by 34.5 % to € 1.52 billion in the report- construction, household and garden supplies, and per- ing period. Also in this case, the data does not include sonal care items. Discount retail chains in particular any kind of revenue-reducing discounts, so that the actual scaled back their advertising expenditures considerably. development was less favorable. The increase in revenues from conventional online banner formats occurred primarily Because Nielsen follows only a relatively small portion of in the sectors of services, automobiles, finance, personal newspapers’ advertising revenues, comprising ads for care products, retail, food, and textiles/clothing. branded products and services and the advertising sup- plements of large retail chains, this data does not ade- Nielsen Media Research also reports that the gross ad- quately reflect the actual business performance of this vertising revenues of advertising-financed television in segment. According to ZMG-Statistik, for example, the Germany (excluding media advertising) amounted to net ad volumes of regional subscription newspapers € 6.8 billion in the first nine months of 2010, representing
(including classified ads) declined by 6.9 % in the months a substantial increase of 17.2 % over the corresponding from January to August 2010; the ad volumes of super- year-ago period. regional newspapers (including classified ads) declined by an average of 6.1 %, on a comparable basis, in the At € 855.5 million, the gross advertising revenues of first nine months of 2010. In the segment of regional radio stations (excluding media advertising) were 4.7 % subscription newspapers, ad volumes were lower for all higher than the corresponding year-ago figure.
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Also in the case of electronic media, gross advertising and wide-reach newspapers and magazines of its core revenues do not adequately reflect the actual market business. The sale of the Group’s investment in Westfalen- development. It can further be said of all types of media Blatt, which was already agreed last year, was completed that the pressure on advertising rates has increasingly in the first quarter of 2010. In the second quarter, Axel led to the granting of more in-kind rebates, which are Springer sold the business and financial magazines Euro contained especially in the print and TV advertising reve- and Euro am Sonntag of Axel Springer Financial Media, nues, making those revenues appear higher than they as well as the Group’s investments in wallstreet:online AG, actually were. ZertifikateJournal AG and its investment in Hamburg- based CORA Verlag, a publisher of entertainment litera- Business developments – Group ture. In the third quarter, we also sold our investment in wallstreet:online capital AG. Acquisitions, divestitures, and strategic partnerships On July 1, 2010, Axel Springer AG and Ringier AG bun- In the digital media business, Axel Springer expanded its dled their eastern European media activities under the line-up of success-based online marketing companies in roof of a new joint venture, Ringier Axel Springer Media the current year. In late February 2010, the affiliate network AG, based in Zurich/Switzerland (with each partner hold- Digital Window acquired its competitor Perfiliate Ltd., ing a 50 % equity interest). After the merger was approved which operated in Great Britain, the United States, and by the cartel authorities, Axel Springer contributed its Scandinavia under the name buy.at. In July 2010, Axel subsidiaries in Poland and the Czech Republic to the new Springer and PubliGroupe contributed their investment in company, while Ringier contributed its activities in Serbia, Digital Window to zanox. Having been thus expanded, the Slovakia, and the Czech Republic. The Hungarian activi- zanox Group occupies a leading position in the success- ties of both partners will be contributed to the joint ven- based online marketing business in Europe. Services ture once the Hungarian cartel authority grants its ap- aimed at customers in continental Europe and Scandinavia proval. In addition, Axel Springer made a cash capital have been combined under the zanox brand name, with contribution of approximately € 39 million to the joint the goal of achieving a clear geographical alignment of venture and a compensation payment of approximately business under a strictly defined brand architecture. The € 125 million to Ringier. By virtue of the agreements under- Affiliate Window brand is being used in Great Britain. lying the transaction, all activities of Ringier Axel Springer Media will be fully consolidated in the consolidated finan- Another point of emphasis for Axel Springer has been to cial statements of Axel Springer AG. In early July 2010, expand the Group’s European presence in the online Ringier Axel Springer Media purchased the licensing rights classified ad markets. Having completed the sale of the to publish the magazine GEO in the Czech Republic and Solutions Division of the Group’s subsidiary StepStone Slovakia. Axel Springer Hungary purchased the licensing AS (formerly StepStone ASA) in the second quarter, Axel rights to publish GEO in Hungary; those rights will be Springer is now focusing on the online job exchanges contributed to the joint venture after the transaction is operated by StepStone, which represent an ideal com- approved by the cartel authority. plement to the Group’s core competence in online clas- sified ad markets and marketplaces in the digital portfolio. After being agreed in the fourth quarter of 2009, the acquisition by Axel Springer Russia of a 100 % equity In September, Axel Springer acquired approximately 12.4 % interest in G+J Russia, which includes the titles GEO, of the shares in SeLoger.com SA, the leading provider of GALA BIOGRAFIA, GEO TRAVELLER, and GEOLENOK, real estate portals in France, at a price of € 34.00 per share. along with other online offerings, was approved by the For the same price, the Group submitted a draft voluntary cartel authority and thus finalized in March 2010. public takeover bid to the French stock exchange author- ity for all outstanding shares of SeLoger.com SA in late Axel Springer’s media portfolio in the segment of German September. The bid price values the company’s entire print media was focused more sharply on the high-circulation share capital at € 566 million. At the end of October,
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SeLoger.com SA submitted the draft of a so-called Innovation and product development “response letter” to the French stock exchange author- In the current year, Axel Springer has continued to ex- ity; in that letter, the independent expert appointed by pand its offering of new print and online formats, while SeLoger.com SA indicated a range of € 37.10 to € 40.00 also refining its editorial content, on the basis of current as the appropriate value of the company’s share. Our bid trends of reader and user behavior. is not supported by the company. The French stock exchange authority’s release required for the offer is still As an example of such activities, one issue of BILD am pending; the French cartel authority’s approval was is- SONNTAG was published in 3D in large part, and one sued at the beginning of November. issue of BILD was published entirely in 3D. Using the com- plimentary 3D glasses included with these issues, readers In connection with the bundling of the eastern European could see all photos, graphs and ads in three dimensions; activities of Axel Springer and Ringier and the acquisition and many of the stories appearing in these issues dealt of G+J Russia, Axel Springer broadened its portfolio of with this subject. As another example, HÖRZU, Europe’s international content portals considerably, for example biggest weekly TV program guide, introduced another self- through the addition of the online issues of BLESK in the standing, innovative magazine format to the market, Czech Republic and NOVÝ CAS in Slovakia. HÖRZU HEIMAT, in the third quarter, following on the huge success of the special title HÖRZU WISSEN. Based on the agreement reached in November 2009, Do⁄an Yayin Holding A.S. (DYH), Istanbul/Turkey, con- Journalistic excellence is critically important for the Group’s ducted a capital increase for Do⁄an TV Holding A.S. business success. Therefore, Axel Springer has provided a (DTVH), Istanbul/Turkey, in the amount of approximately special budget of € 1 million to finance especially costly € 196.4 million, in January 2010. On April 30, 2010, a journalistic investigations in all kinds of media. Exclusive further capital increase in the amount of approximately news stories and topics with extraordinary in-depth investi- € 188.0 million was conducted on the basis of the afore- gation potential are meant to impress even more readers mentioned agreement. Those two measures reduced and users with the quality of Axel Springer’s media offerings. DTVH’s debt considerably and lowered Axel Springer’s equity interest in DTVH from 25.0 % to 19.9 %, as planned. In the digital media business, Axel Springer further ex- panded its offering of paid services for mobile terminal In July and August 2010, court dates were held in connec- devices. For example, the Group’s cross-brand iKiosk tion with the tax proceeding involving DTVH and its sub- app, the introduction of which was timed to coincide sidiaries. According to information provided by DYH first- with the U.S. launch of the iPad in April 2010, already instance proceedings in the amount of approximately encompasses all the Group’s German newspapers and TRY 1.1 billion have been decided in favor of DTVH and its many of its magazines. Following the initial market intro- subsidiaries, and first-instance proceedings in the amount duction of digital versions of WELT, WELT KOMPAKT, of TRY 2.43 billion have been decided against DTVH and and WELT am SONNTAG KOMPAKT, the Group’s its subsidiaries to date. Furthermore, proceedings involv- newspapers BILD and BILD am SONNTAG, as well as ing an amount of approximately TRY 1.25 billion have not HAMBURGER ABENDBLATT and BERLINER yet been decided. DTVH has appealed the disadvanta- MORGENPOST, appeared as paid-subscription e-papers geous rulings and successfully petitioned the Supreme in May, coinciding with the German market introduction Court for a temporary stay of execution in the amount of of the iPad. Furthermore, electronic versions of B.Z., approximately TRY 1.05 billion to date; the Supreme Court AUTO BILD, COMPUTER BILD, and SPORT BILD have has still not decided on matters involving an amount of been available since July. And in September, BILD der FRAU, approximately TRY 900 million. Based on the developments HÖRZU, HÖRZU WISSEN, and TV DIGITAL also came to date, no estimate of the possible financial consequences out with e-papers. All these titles can be tested for 30 days can be made at the present time. free of charge, after which users can choose between different subscription models.
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In May, moreover, Axel Springer introduced Germany’s from a single source. In terms of gross market shares, first digital magazine to the market, The ICONIST. Devel- Axel Springer Media Impact is the leading cross-media oped exclusively for the iPad, The ICONIST combines media marketer in Germany. It markets advertising spaces the ease of reading offered by print titles with the many in print and online media and on mobile terminal devices, useful features of digital formats. Furthermore, an Eng- including, since the second quarter of 2010, advertising lish-language international version of this lifestyle app has spaces for the apps that have been developed for the iPad. been available since July. And our French automotive A centralized organizational unit was formed to market magazine SPORT AUTO introduced the first iPad app for digital media on a cross-media basis. car lovers to the French market, underscoring the Group’s In collaboration with other premium marketers, Axel Springer pioneering role in the area of digital product development. Media Impact launched a joint initiative in September 2010 And under the igourmand brand, an iPad version is already aimed at targeted, tailored communications with online available to complement the many iPhone apps of our users. By means of this “Brand Targeting Initiative,” cooking magazine VIE PRATIQUE GOURMAND that have advertising customers can bundle their campaigns on already appeared. especially wide-reach media, which together reach two- Axel Springer also expanded its offering of apps for the thirds of German users, thereby minimizing scatter losses. iPhone and other mobile terminal devices in the third In addition to conventional advertising formats, moving- quarter. Seeking to capitalize on the enthusiastic response image formats are also available. to its iPhone app, BILD is now offering additional paid- The performance-based remuneration system that was subscription service applications such as the BILD traffic introduced last year has enabled Axel Springer Media fine calculator and the BILD traffic jam alert service. In Impact to win new advertising customers, including major addition, new paid-subscription content from the BILD’s vendors of fast-moving consumer goods (FMCGs), which regional issues is now available via the WAP portal of has bolstered Axel Springer’s positioning considerably in BILDmobil. And our online classified ad markets have this market segment. Axel Springer Media Impact further likewise introduced various apps to the market, with great expanded its customer base by means of tailored cross- success. Right after being launched, the iPhone version media marketing campaigns, some of which also feature of StepStone’s job exchange service jumped to first place social media offerings. as the most-downloaded business app. And immonet.de demonstrated its innovation capacity by launching The multi-title World Cup concepts that were developed Germany’s first app for mobile real estate searches. for our newspapers and magazines on the occasion of the soccer World Cup this year have met the high expec- Introduced at the beginning of this year, the personal TV tations placed in them. One such concept was the so- service watchmi combines program data produced by the called Kaiser Card created in collaboration with soccer editorial staff of TV DIGITAL with a self-learning software legend Franz Beckenbauer; numerous advertising part- program that automatically records TV programs based ners from a wide range of sectors were involved in this on the user’s personal preferences and adds them to large-scale marketing campaign. individualized TV channels, which can be viewed when- ever the user wants. Since the International TV/Radio Awards Exhibition in September, watchmi is also available as an Again this year, numerous awards have attested to the integrated software solution on hybrid set-top boxes for HD high level of journalistic quality and the innovation strength receivers, which means it can reach even more TV viewers. of Axel Springer. Especially worthy of note were the awards In addition, users have been able to integrate Internet vid- received by BERLINER MORGENPOST and BILD at this eos into their personal TV channels already since May. year’s Art Directors Club (ADC) Awards in Berlin, the selection of WELT am SONNTAG as “International News- Marketing paper of the Year” and the induction of HAMBURGER Axel Springer Media Impact markets the Group’s German ABENDBLATT in the International Newspaper Color newspapers, magazines, and brand-derived digital media Quality Club.
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In early July, the Axel Springer Academy received the Operating results – Group Grimme Online Award in the category of “Knowledge and Education” for its Internet-special “littleberlin.de,” At € 2,075.3 million, Axel Springer’s revenues in the first marking the first time this award has been given to a nine months of 2010 were 10.0 % higher than the corre- journalism school. This award is widely considered to be sponding year-ago figure (PY: € 1,886.2 million). Higher the most important distinction honoring the journalistic revenues were contributed by the Digital Media and Print quality of German websites. International segments, especially the consolidation effects related to the companies StepStone and Digital Window Commitment to social responsibility (including buy.at), as well as the companies contributed As one of Europe’s biggest media companies, Axel Springer by Ringier to the joint venture Ringier Axel Springer Media actively supports political and social causes on the basis in the third quarter of 2010. Adjusted for consolidation of the principles embodied in its corporate constitution. effects, Axel Springer’s revenues in the first nine months
of 2010 were 2.3 % higher than the corresponding year- In late September 2010, on the occasion of the 20th anni- ago figure. Aside from the growth of the Digital Media versary of German reunification, Axel Springer presented segment, another key factor contributing to the year-on- the monument entitled “Väter der Einheit” (“Fathers of Unity”) year revenue increase was the recovery of international by the French sculptor Serge Mangin to the public. The print media, which resulted in part from currency transla- installation honored the three politicians George Bush tion effects. Adjusted for consolidation and currency senior, Mikhail Gorbachev, and Helmut Kohl, and was translation effects, total revenues were 1.5 % higher than officially unveiled by Helmut Schmidt. the corresponding year-ago figure.
Introduced in January 2010, the “Media Archive 68” gives all interested users the chance to inspect original sources on the reporting by Axel Springer’s newspapers in the years of the student movement in Germany. The self-critical examination of the role played by our company in those years is meant to spark further debate on that subject.
Furthermore, the Group and its media demonstrate a high degree of social commitment. One example is the “Berlin Heroes” campaign of B.Z., which has promoted volun- teerism in Berlin for a year now. Numerous readers have used the media platform berliner-helden.com to volunteer their time and effort in the service of social projects.
In the third quarter, Axel Springer Poland (now a subsidi- ary of the joint venture Ringier Axel Springer Media) cre- ated the FAKT Foundation, the goal of which is to provide assistance and support especially to impoverished fami- lies with numerous children, single parents, the elderly, At € 867.0 million, circulation revenues were 2.0 % less and victims of natural disasters. The foundation is gener- than the corresponding year-ago figure (PY: € 884.5 million) ously supported by the mass-circulation tabloid FAKT. and accounted for 41.8 % (PY: 46.9 %) of total revenues. The decrease mainly reflected the lower circulation num- bers of most newspapers and magazines. The effects of deconsolidated companies (especially among the Group’s
Quarterly Financial Report as of September 30, 2010 Axel Springer AG 10
German magazines) and newly consolidated companies StepStone, Digital Window, and buy.at, on the basis of in the Print International segment nearly offset each other. unaudited financial information.
At € 965.9 million, advertising revenues were 21.4 % At € 1,793.0 million, the total expenses contained in higher than the corresponding year-ago figure (PY: the earnings before interest, taxes, depreciation, and € 795.4 million), mainly as a result of substantial growth amortization (EBITDA), not adjusted for non-recurring in the Digital Media segment. The development of adver- effects, were 6.2 % higher than the corresponding figure tising revenues in the Group’s print media was subdued. for the first nine months of 2009 (PY: € 1,688.1 million). The disproportionately small increase in total expenses, At € 242.3 million (PY: € 206.3 million), the Group’s other compared to the increase in revenues, resulted mainly revenues were 17.5 % higher than the corresponding from consolidation effects. Personnel expenses in par- year-ago figure and accounted for 11.7 % (PY: 10.9 %) of ticular were influenced by StepStone, while the perform- total revenues. The biggest single factor contributing to this ance-based business model of Digital Window, like that increase was the consolidation effect related to the inclusion of zanox, entails a comparatively higher rate of purchased of the corresponding revenues of StepStone Solutions, goods and services. The numbers were additionally influ- which was sold again with effect as of May 1, 2010. enced by the eastern European companies that were consolidated for the first time in the third quarter. Coun- A comparison of segment revenues provides a clear tervailing effects included cost limitation measures, which illustration of the differing development of the print and affected both variable and fixed costs. digital media. In the third quarter of 2010, the Group’s German newspapers and magazines did not quite match At € 679.6 million, the purchased goods and services their performance in the first half of the year. Both adver- were 5.2 % higher than the corresponding year-ago figure tising and circulation revenues came under growing pres- (PY: € 645.9 million). This increase resulted mainly from sure. In the first nine months of 2010, therefore, newspaper consolidation effects in the Digital Media and Print Inter- revenues were 1.9 % less and magazine revenues were national segments. Countervailing effects included the
8.3 % less than the respective year-ago figures. On the lower print circulation runs, which led to lower production other hand, the total revenues of the Print International costs and paper consumption, as well as lower prices for segment were 19.4 % higher than the corresponding raw materials. The ratio of purchased goods and services year-ago figure, especially due to the first-time consolida- to total revenues narrowed to 32.7 % (PY: 34.2 %). tion of the companies contributed by Ringier to the joint venture. The total revenues of the Digital Media segment At € 579.2 million, the personnel expenses were were 62.6 % higher than the corresponding year-ago figure, 4.2 % higher than the corresponding year-ago figure (PY: mainly as a result of consolidation effects, but also due € 555.9 million), mainly due to the higher average number to organic growth. of employees, which resulted primarily from the consoli- dation of new subsidiaries. Due to the international digital media acquisitions and the expansion of the eastern European print media business, At € 79.8 million, the depreciation, amortization, and the importance of Axel Springer’s international revenues impairments were 22.5 % higher than the corresponding has grown in the year to date. Some 26.9 % (PY: 20.0 %) year-ago figure of € 65.2 million. This increase resulted mainly of total revenues were generated outside of Germany. At from the higher level of purchase price allocation effects. € 494.4 million, the pro-forma revenues of the Digital
Media segment were 20.4 % higher than the correspond- The increase in other operating income to € 121.6 million ing year-ago figure (PY: 410.8 million). Thus, their share (PY: € 44.2 million) resulted primarily from the profit rec- of pro-forma total revenues rose from 20.7 % to 23.9 %. ognized in connection with the sale of StepStone’s Solu- The pro-forma revenues comprise the companies ac- tions Division. At € 534.2 million, the other operating quired during the course of 2009 and 2010, especially expenses were 9.8 % higher than the corresponding
Quarterly Financial Report as of September 30, 2010 Axel Springer AG 11
year-ago figure (PY: € 486.4 million). For the most part, this increase resulted from the first-time consolidation of newly acquired companies and from the losses incurred in connection with the sale of significant activities of Axel Springer Financial Media. These effects were partially offset by lower operating costs in the other business.
The income from investments amounted to € 11.1 million. Due to the reduction of Axel Springer’s shareholding, the accumulated foreign exchange losses of Do⁄an TV Holding A.S., which had previously been recog- nized directly in equity, must now be recognized as ex- penses in the income from investments. The foreign ex- change losses were largely offset by income from the sale of shares. In the year-ago period, the income from invest- ments (€ 229.6 million) was heavily influenced by the profits recognized on the sale of regional newspaper investments. The operating income from investments presented within EBITDA amounted to € 15.0 million (PY: € 19.6 million). The consolidated net income in the amount of € 257.6 million (PY: € 317.0 million) contains net profits
The net financial expenses amounted to € – 18.7 million on the sale of business divisions and investments in the
(PY: € – 13.8 million). Adjusted for the effects associated amount of € 55.9 million (PY: € 208.8 million). Other non- with the measurement and settlement of the call options operating effects were purchase price allocation effects in on shares of Axel Springer AG that had been granted by the amount of € – 24.5 million (PY: € – 14.5 million) and other the shareholders H&F Rose Partners, L.P. and H&F Inter- effects in the amount of € – 20.7 million (PY: € 7.8 million). national Rose Partners, L.P., the net financial expenses The taxes on these effects came to € 5.9 million (PY: amounted to € – 21.3 million (PY: € – 22.8 million). € – 15.2 million). Adjusted for non-operating effects, the consolidated net income amounted to € 241.0 million The income taxes for the year to date amounted to (PY: € 130.1 million).
€ – 60.3 million (PY: € – 76.4 million). The tax rate was
19.0 % (PY: 19.4 %). In both reporting periods, the tax The diluted earnings per share amounted to € 8.12 rates were influenced by the mostly tax-exempt income (PY: € 10.47). Based on the weighted average shares from the sale of shares. outstanding in the first nine months of 2010, the adjusted diluted earnings per share attributable to shareholders of At € 385.8 million, the earnings before interest, taxes, Axel Springer AG amounted to € 7.43 (PY: € 4.02). depreciation, and amortization (EBITDA) were 45.9 % higher than the corresponding year-ago figure, reaching The adjusted consolidated net income and the adjusted a new high. The EBITDA margin was 18.6 % (PY: 14.0 %). diluted earnings per share are not defined under Interna- This outstanding result underscores the operating strength tional Financial Reporting Standards and should there- of our company. The EBITDA figure does not contain non- fore be regarded as supplementary information to the recurring effects such as the gains or losses on the sale consolidated interim financial statements. of business divisions and investments and purchase price allocation effects, for example.
Quarterly Financial Report as of September 30, 2010 Axel Springer AG 12
Business developments and operating ma 2010 Pressemedien II, WELT am SONNTAG is still the most-read premium Sunday newspaper. According results – Segments to Verbraucheranalyse 2010-I, the WELT Group (including Newspapers National its online media) reached more than 3.6 million readers According to ma 2010 Pressemedien II, BILD reached and users; thus, it enjoys a greater cross-media reach approximately 12.5 million readers; therefore, it is still the than any other super-regional premium newspaper. In early highest-circulation and widest-reach daily newspaper in October 2010, on the occasion of the 20th anniversary of Germany by a wide margin. In the first nine months of German reunification, the entire WELT issue was 2010, its circulation remained below the level of the cor- adorned with exclusive, unusual illustrations by the artist responding year-ago period; it also did not stabilize in the Georg Baselitz. third quarter. Despite the subdued development in the third quarter, BILD solidified its leading position among Since the beginning of the current year, WELT AKTUELL has print media in the German advertising market in the been distributed free of charge on all domestic Lufthansa reporting period. The most important factor contributing flights; since April, it has also been distributed free of to this successful performance was the greater emphasis charge in the first-class coaches and lounges of the placed on the segment of fast-moving consumer goods. German railway system Deutsche Bahn. According to market studies, this compact, quick-to-read newspaper With a reach of 10.3 million readers, BILD am SONNTAG reaches an unusually high number of business executives successfully defended its uncontested position as the No. 1 and achieves considerable reading times; thus, the WELT Sunday newspaper in Germany. To capitalize on its wide Group can now offer its advertising customers a very reach, the BILD Group introduced new advertising con- attractive, additional means of reaching the exclusive cepts such as the BILD am SONNTAG “family product”; ad target group of business travellers. volumes and advertising revenues increased considerably. The Group’s two major regional newspapers HAMBURGER ABENDBLATT and BERLINER MORGENPOST also made Circulation Newspapers National further investments in the quality of their publications this
Average paid circulation, IVW data 9M/2010 Change yoy year, highlighting their positioning as premium brands in
BILD 3,075,811 – 4.8 % their respective markets by means of completely overhauled editorial and graphical concepts. Above all, BERLINER BILD am SONNTAG 1,619,230 – 3.7 % MORGENPOST intensified its local reporting by significantly
expanding its regional section. The newspaper’s extensive DIE WELT/WELT KOMPAKT 256,543 – 4.3 % coverage of the capital city is also reflected in the new, WELT am SONNTAG 401,618 – 0.3 % cross-media brand campaign that was launched in August. Among other changes, HAMBURGER ABENDBLATT ex-
HAMBURGER ABENDBLATT 228,331 – 4.9 % panded its opinion and analysis section and added its own
culture section. Through its new structure, HAMBURGER ABENDBLATT positioned itself even more clearly as the BERLINER MORGENPOST 130,825 – 9.1 % definitive newspaper for politics, culture, and business in B.Z./B.Z. am SONNTAG 183,280 – 4.4 % Hamburg and northern Germany.
Most recently, the newsstand newspaper B.Z. reached In terms of circulation and readership, DIE WELT (together 0.5 million readers in the Berlin metropolitan area, under- with its tabloid version WELT KOMPAKT) is still Germany’s scoring its position as the capital city’s most-read news- third-biggest premium newspaper; and according to paper. B.Z. won new readers by means of various
Quarterly Financial Report as of September 30, 2010 Axel Springer AG 13
measures, including a discount coupon book; in line with Key Figures Newspapers National 3rd Quarter the market trend, however, its paid circulation declined. in € millions Q3/2010 Q3/2009 Change
Key Figures Newspapers National 9 Months External revenues 290.0 300.4 – 3.5 %
Share in cons. revenues 40.8 % 47.6 % in € millions 9M/2010 9M/2009 Change
External revenues 874.3 891.0 – 1.9 % Circulation revenues 162.9 168.1 – 3.0 % Share in cons. revenues 42.1 % 47.2 % Advertising revenues 119.0 125.3 – 5.0 %
Other revenues 8.0 7.0 13.3 % Circulation revenues 463.0 475.2 – 2.6 %
Advertising revenues 389.5 394.7 – 1.3 % EBITDA 74.7 76.2 – 1.9 % Other revenues 21.8 21.1 3.5 % EBITDA margin 25.8 % 25.4 %
EBITDA 230.3 205.6 12.0 %
EBITDA margin 26.3 % 23.1 %
Magazines National In the midst of a market environment that is still intensely competitive, the Group’s TV program guides and At € 874.3 million, total segment revenues in the first nine women’s magazines turned in a generally satisfactory months of 2010 were 1.9 % less than the corresponding performance. According to ma 2010 Pressemedien II, year-ago figure (€ 891.0 million). Circulation revenues fell HÖRZU reached 4.6 million readers, thereby confirming by 2.6 % to € 463.0 million (PY: € 475.2 million), while its market position as the biggest weekly TV program advertising revenues exhibited a more stable development, guide in Germany. Its circulation has held up well in the despite the losses in the third quarter; at € 389.5 million, year to date, thanks in part to the supplement HÖRZU they were only 1.3 % less than the year-ago comparison DIGITAL, which has been very well received. Following figure (€ 394.7 million). Higher ad volumes at BILD and its successful launch in October 2009, the knowledge BILD am SONNTAG partially offset the declines that were magazine HÖRZU WISSEN achieved a paid circulation experienced by the regional newspapers in particular. of 150 thousand (company data) also with its fifth issue; Advertising revenues for the third quarter of 2010 were thus, it has earned a very good position in the market
5.0 % less than the corresponding figure for the third segment of knowledge magazines. Most recently, TV quarter of last year. This decline resulted from lower DIGITAL, the highest-circulation TV program guide for advertising revenues of the BILD Group and DIE WELT. digital television, reached a total of 3.4 million readers and stabilized its circulation in the third quarter; for the
Segment EBITDA improved by 12.0 % to € 230.3 million first nine months of 2010, however, the number of pur- (PY: € 205.6 million). That corresponds to an EBITDA chased copies was slightly less than the corresponding margin of 26.3 % (PY: 23.1 %). The total expenses of the year-ago figure. Among the Group’s women’s magazines, Newspapers National segment were less than the corre- BILD der FRAU reaffirmed its pole position in the market. sponding year-ago figure, due in particular to reduced With 5.9 million female readers and a circulation of almost restructuring expenses and lower paper costs. 1 million copies, BILD der FRAU maintained its wide lead over competing titles. Benefitting from last year’s editorial integration with BILD der FRAU, FRAU von HEUTE managed
to limit the decline of its circulation to 3.2 %.
Quarterly Financial Report as of September 30, 2010 Axel Springer AG 14
Circulation Magazines National In September, AUTO BILD supplemented its editorial content with new sections and topical series. In August,
Average paid circulation, IVW data 9M/2010 Change yoy moreover, it published its first special issue for used cars.
TV DIGITAL 1,697,127 – 3.3 % With a circulation of 585.6 thousand copies and a reach of 2.9 million readers, AUTO BILD asserted its position as HÖRZU 1,405,748 – 1.8 % the undisputed No. 1 among weekly automotive maga- FUNK UHR 592,681 – 7.4 % zines. AUTO BILD’s specialty titles also performed well. BILDWOCHE 165,530 – 9.0 % Having changed to a bimonthly publication frequency in TV NEU 114,056 – 13.5 % 2010, AUTO BILD KLASSIK increased its average num- ber of sold copies to 127.1 thousand.
BILD der FRAU 998,677 – 1.7 %
FRAU von HEUTE 191,833 – 3.2 % According to the most recent survey, SPORT BILD reached
11.8 % of the total German-speaking male population, more than any other sports magazine in the country. Demand COMPUTER BILD 620,399 – 9.0 % was strong for several special issues; on the whole, how- COMPUTER BILD SPIELE 241,870 – 5.5 % ever, the magazine’s circulation followed a negative trend. AUDIO VIDEO FOTO BILD 173,284 6.5 % By contrast, the ad business was significantly higher, thanks in particular to the very high volume of ads placed before
AUTO BILD 585,562 – 6.4 % and during the soccer World Cup. For instance, various
AUTO TEST 206,797 – 6.5 % merchandising articles such as collector’s albums, for
AUTO BILD KLASSIK1) 127,095 - example, were successfully marketed on the occasion of that sports event. AUTO BILD ALLRAD 72,706 10.4 %
AUTO BILD SPORTSCARS 68,996 4.2 % Among the Group’s music magazines, ROLLING STONE enjoyed phenomenal success with the exclusive publica- SPORT BILD 461,347 – 5.1 % tion of a new CD by Prince. ROLLING STONE is the first music magazine in the world with which this performing
ROLLING STONE 63,221 10.8 % artist has entered into a sales and distribution agreement.
MUSIKEXPRESS 52,465 – 1.0 %
METAL HAMMER 42,071 – 9.6 % Key Figures Magazines National 9 Months
1) IVW listed as of Q1/2010. in € millions 9M/2010 9M/2009 Change
External revenues 354.4 386.5 – 8.3 % Compared to the first nine months of last year, the de- velopment of Axel Springer’s computer, automotive, Share in cons. revenues 17.1 % 20.5 % and sports magazines was mixed in the latest period.
Circulation revenues 241.5 270.3 – 10.7 % With a reach of 4 million readers, COMPUTER BILD Advertising revenues 96.4 102.4 – 5.8 % successfully defended its market leadership position in the segment of computer magazines. The change of publi- Other revenues 16.5 13.8 19.5 % cation day to Saturday led to an even better penetration of the target group. Benefitting from their relaunches in the EBITDA 78.6 46.9 67.7 % fourth quarter of last year, specialty titles COMPUTER EBITDA margin 22.2 % 12.1 % BILD SPIELE and AUDIO VIDEO FOTO BILD occupied the top positions in their respective segments. In opposi- tion to the market trend, AUDIO VIDEO FOTO BILD increased its circulation by 6.5 %.
Quarterly Financial Report as of September 30, 2010 Axel Springer AG 15
At € 354.4 million, the total revenues of the Magazines Print International
National segment were 8.3 % less than the correspond- As of July 1, 2010, the Group’s existing portfolio of inter- ing year-ago figure, mainly due to the sale of the Group’s national print media was expanded significantly as a result women’s and youth magazines and its business and of Ringier’s contribution of its eastern European activities financial media. Adjusted for consolidation effects, seg- to the joint venture Ringier Axel Springer Media. Ringier ment revenues were 2.3 % less than the corresponding contributed its newspapers and magazines in the Czech year-ago figure. At € 241.5 million, circulation revenues Republic, a market in which Axel Springer had been were 10.7 % less than the year-ago figure; adjusted for represented with seven magazines to date. By way of consolidation effects, they were only 4.8 % less than the the new joint venture, moreover, Axel Springer is now corresponding year-ago figure. At € 96.4 million, adver- also represented in Serbia and Slovakia for the first time. tising revenues were 5.8 % less than the year-ago figure; As for the Hungarian market, the necessary approval of adjusted for consolidation effects, they were on the level the merger by the cartel authority is still pending. In Poland, of the year-ago period. The declines at the Group’s Axel Springer contributed all of its newspapers and maga- women’s magazines, TV program guides, and computer zines to the joint venture. magazines were offset by significant gains at the Group’s sports and automotive magazines. Eastern European markets In Hungary, the women’s magazine KISKEGYED increased Segment EBITDA reached an all-time high of € 78.6 million, its circulation and reach compared to the year-ago period, indicative of an increase of 67.7 % higher than the corre- in opposition to the market trend. With a 9.0 % increase sponding year-ago figure (€ 46.9 million), which had been in its female readership, KISKEGYED successfully defended burdened by higher-than-usual restructuring expenses, its top reach position among traditional weekly women’s compared to prior years. Thus, the EBITDA margin nearly magazines. Despite having increased its copy price, the doubled from 12.1 % to 22.2 %. Important factors leading circulation of style-guide magazine GLAMOUR exceeded to the substantially higher earnings figure were the higher the respective year-ago figures in all quarters of the current profit contributions of the Group’s TV program guides, year (MATESZ). Moreover, Axel Springer successfully automotive magazines, computer magazines, and sports implemented an online-to-print concept with its food title magazines. Other contributing factors were portfolio MINDMEGETTE; the second issue will come out around streamlining and cost reduction measures. Christmas 2010 with a planned circulation of approximately 30 thousand copies. According to Szonda Ipsos/GfK
Key Figures Magazines National 3rd Quarter Hungária, VASÁRNAP REGGEL extended its reach by 6.6 % in opposition to the general trend; as the widest-
in € millions Q3/2010 Q3/2009 Change reach premium Sunday newspaper in that country, it
External revenues 111.4 123.2 – 9.6 % reaches 498 thousand readers.
Share in cons. revenues 15.7 % 19.5 % The joint venture Ringier Axel Springer Media is the leading
publisher in the Czech Republic. With an average circu- Circulation revenues 78.3 89.5 – 12.5 % lation of 386.2 thousand (ABC CR, January–August 2010) Advertising revenues 27.1 29.5 – 8.1 % and a reach of 1.4 million readers, the mass-circulation Other revenues 6.0 4.2 43.7 % tabloid BLESK was still the No. 1 daily newspaper in that country in the first eight months of 2010 (SKMO – Media
EBITDA 20.8 15.1 38.0 % Projekt, January–June 2010), although it fell short of its year-ago circulation numbers, with a circulation decline of EBITDA margin 18.6 % 12.2 % nearly 6.6 %. During the same period, BLESK PRO ZENY, the country’s leading weekly women’s magazine, reached more than 700 thousand female readers with a circulation of 192.6 thousand. Even after the strong gains registered
Quarterly Financial Report as of September 30, 2010 Axel Springer AG 16
last year, the weekly title REFLEX (which has been recog- loss of only 1.7 %; with a reach of 888.5 thousand readers, nized as the country’s best magazine on several occa- it still is the country’s most-read newspaper (ABC Serbia, sions) increased its average paid circulation further, to Ipsos Strategic Marketing, Print AdEc). In the current year roughly 64 thousand copies. With its automotive titles to date, the mass-circulation tabloid ALO! actually sold con- SVET MOTORU and AUTO TIP, moreover, Axel Springer siderably more copies than in the corresponding year-ago successfully defended its position as that country’s big- period and was the country’s fastest-growing newsstand gest publisher of automotive magazines. newspaper. Introduced in May 2010, the Sunday newspaper SUNDAY ALO! has established itself well in the market, The latest reach analysis (PBC 1–8/2010) confirmed the along with the Sunday edition of BLIC (BLIC NEDELJE). The outstanding market position of our newspapers and maga- news magazine NIN, a majority interest of which has been zines in Poland. The average circulation of our mass- acquired last year, increased its circulation on the heels of a circulation tabloid FAKT for the year to date has been comprehensive relaunch. 447.6 thousand copies. Despite a decrease of roughly
5.1 %, FAKT’s market share held steady, so that it was still In Russia, the titles purchased from G+J Russia were Poland’s biggest-selling newspaper (ZKDP, 1–8/2010). successfully integrated into the media portfolio. In the pe- With a circulation of 103.3 thousand copies, the premium riod from March to July 2010, GEO increased its reach by newspaper DZIENNIK GAZETA PRAWNA, in which Ringier 7.2 % over the comparable period in 2009 to 1.1 million Axel Springer Media holds an equity interest through the (TNS Russia). During the same period, the monthly pocket- joint venture Infor Biznes, was still the third-biggest news- format lifestyle magazine GALA BIOGRAFIA increased its paper among opinion-shaping titles. The Polish magazines reach by 11.2 % to approximately 872.9 thousand readers. published by Axel Springer also turned in a successful And Axel Springer’s existing products also registered performance. With 1.4 million readers (PBC 1–8/2010), strong gains. For example, COMPUTER BILD increased its
NEWSWEEK successfully defended its status as Poland’s reach by 57.0 %, while FORBES had 30.0 % more readers most popular opinion-shaping magazine. And the Polish than in the comparable year-ago period. editions of AUTO BILD and COMPUTER BILD, both of which reached considerably more than 1 million readers, defended Western European markets their leading positions in their respective market segments. According to recent market analyses, Axel Springer also reached more readers in Switzerland. The magazine The Group’s market leadership position in Slovakia is BEOBACHTER, for example, increased its reach consid- based in large part on the NOVÝ CAS family of brands. erably: According to MACH-Basic 2010-2, it is read by With an average circulation of 143.6 thousand, the mass- 960 thousand inhabitants on a regular basis, representing circulation tabloid of the same name controlled a market an increase of 2.9 % over the last survey conducted in the share in excess of 44.4 % (Audit Bureau of Circulations, previous year. In opposition to the market trend, the TV
January–August 2010) and reached more than 1.0 million program guide TELE increased its reach by 2.9 %. On the readers (MML-TGI, Media SR, September 2009–March 2010). other hand, our business medium HANDELSZEITUNG
In the segment of women’s magazines, the weekly NOVÝ sustained circulation losses (– 7.1 %, WEMF) and also
CAS PRE ZENY, with a paid circulation of 167.8 thousand reach losses (– 8.8 %). The circulation of the business copies (Audit Bureau of Circulations, January–August 2010), magazine BILANZ remained stable, as before. The ad and the monthly EVA both hold comfortable market posi- business of both these media exhibited a positive trend. tions. And the family magazine ZIVOT is one of the highest- Having been introduced in the current year, the lifestyle circulation titles in the country of Slovakia. supplement FIRST of HANDELSZEITUNG, BILANZ, and PME MAGAZINE continued to meet with strong interest Also in Serbia, Ringier Axel Springer Media is the publish- on the part of readers and advertising customers. ing house with the biggest total circulation and widest reach. At 148.8 thousand copies, the circulation of Serbia’s big- In France, Axel Springer managed to buck the negative gest newsstand newspaper BLIC sustained a circulation trend of the reader market, for the most part. For example,
Quarterly Financial Report as of September 30, 2010 Axel Springer AG 17
the TV program guide TELE MAGAZINE reached consid- € 40.9 million or 55.8 %. This increase resulted mainly from erably more readers than in the year-ago period: Its reach the revenue contributions of the companies included in the of 1.1 million readers exceeded the corresponding year- joint venture with Ringier, which were consolidated for the ago figure by 8.6 %. During the same period, the biweekly first time in the third quarter. Adjusted for consolidation food magazine VIE PRATIQUE GOURMAND, the best- effects, third-quarter revenues were 2.5 % higher than the selling food magazine in France, actually increased its year-ago figure; additionally adjusted for currency transla- reach by 29.8 %. And AUTO PLUS, the French version of tion effects, the revenues of the Print International segment
AUTO BILD, solidified its leading position in the circulation were 2.1 % less than the corresponding year-ago figure. and advertising markets and boosted its subscriber base to more than 100 thousand customers (OJD, July 2009– At € 268.5 million, external revenues in the first nine months
June 2010). Amid an adverse market environment, AUTO of 2010 were 19.4 % higher than the corresponding year- JOURNAL was the only general-interest title in France to ago figure (PY: € 224.9 million). Adjusted for consolida- increase its paid circulation (+ 3.1 %) over the comparable tion effects, the revenue increase came to 5.0 %; addi- year-ago period (OJD). tionally adjusted for currency translation effects, revenues
were 1.7 % less than the corresponding year-ago figure.
In the advertising and circulation markets of Spain, the At € 162.5 million, circulation revenues were 16.9 % recovery to date has been more halting than has been the higher than the year-ago figure (PY: € 139.0 million), case in other European countries. Amid this environment, primarily as a result of the newly consolidated news- Axel Springer’s magazines developed more or less in tandem papers and magazines in the Czech Republic, Slovakia, with the market. Axel Springer Spain still holds the highest and Serbia, as well as the expanded portfolio in Russia. market shares in the segments of weekly automotive maga- Adjusted for currency translation and consolidation effects, zines, computer magazines, and video game magazines. circulation revenues were 1.7 % less than the correspond- ing year-ago figure. The international companies mentioned
Key Figures Print International 9 Months above also made an important contribution to advertising revenues, which at € 91.7 million were 18.7 % higher than in € millions 9M/2010 9M/2009 Change the year-ago figure (PY: 77.2 million). Adjusted for currency
External revenues 268.5 224.9 19.4 % translation and consolidation effects, advertising revenues
were 3.6 % less than the corresponding year-ago figure. Share in cons. revenues 12.9 % 11.9 %
In the third quarter of 2010, the Print International segment Circulation revenues 162.5 139.0 16.9 % generated EBITDA of € 18.9 million. The earnings jump Advertising revenues 91.7 77.2 18.7 % over the year-ago period reflects the strong profitability of Other revenues 14.2 8.6 65.1 % the newly consolidated media in eastern Europe. At € 34.8 million, EBITDA for the first nine months of 2010
EBITDA 34.8 3.1 > 100 % was € 3.1 million higher than the year-ago figure. This substantial increase resulted in part from the first-time EBITDA margin 13.0 % 1.4 % consolidation of the companies included in the joint venture with Ringier, but also in part from the growing revenues, strict cost reduction measures, and portfolio The financial performance of the Print International segment optimization measures of our international companies. was influenced above all by the first-time consolidation of The EBITDA margins of 13.0 % in the first nine months (PY: the companies contributed by Ringier to the joint venture 1.4 %) and 16.5 % in the third quarter of 2010 (PY: 1.4 %) Ringier Axel Springer Media in the third quarter of 2010. both marked the highest levels ever achieved since the segment was formed at the beginning of 2008. At € 114.2 million, external revenues in the third quarter were higher than the corresponding year-ago figure by
Quarterly Financial Report as of September 30, 2010 Axel Springer AG 18
Key Figures Print International 3rd Quarter soccer World Cup. And so it proved again that an online portal can also successfully publish print media. in € millions Q3/2010 Q3/2009 Change
External revenues 114.2 73.3 55.8 % Traffic Figures of Editorial Online Offerings (Selection)
Share in cons. revenues 16.1 % 11.6 % Unique in thousands Visitors Change Visits Change (monthly average) 9M/20101) yoy 9M/20102) yoy Circulation revenues 69.4 46.5 49.2 %
Bild.de 8,932.4 69.5 % 141,903.6 48.9 % Advertising revenues 38.9 23.4 66.3 %
computerbild.de 4,680.4 83.1 % 20,813.1 57.3 % Other revenues 5.9 3.4 74.2 %
welt.de 4,455.4 44.9 % 28,311.7 30.4 %
goFeminin.de 4,252.3 56.2 % 11,261.0 32.4 % EBITDA 18.9 1.0 > 100 %
transfermarkt.de 1,520.1 1.9 % 19,827.4 11.9 % EBITDA margin 16.5 % 1.4 %
onmeda.de 1,470.3 79.8 % 3,403.5 39.4 %
abendblatt.de 1,325.0 56.7 % 6,700.5 35.0 %
autobild.de 1,162.0 55.6 % 5,462.7 6.6 % Digital Media morgenpost.de 746.3 21.4 % 2,756.7 – 7.6 % In terms of user numbers, Bild.de continues to stand out finanzen.net 721.4 > 100 % 9,701.1 37.0 % among the Group’s content portals. In the first nine months of 2010, Germany’s biggest news and entertain- hamburg.de 696.8 51.0 % 2,780.6 18.6 % ment portal increased its unique visitors (unique visitors bz-berlin.de 609.5 > 100 % 2,207.8 > 100 % according to comScore, unless otherwise indicated) by bildderfrau.de 195.9 41.2 % 439.2 – 4.5 %
3) 69.5 % and its visits by 48.9 % over the comparison period. tvdigital.de 181.3 > 100 % 320.6 > 100 %
Thanks to its wide reach, Bild.de was one of the most 3) hoerzu.de 163.9 > 100 % 451.1 54.1 % coveted online media for the advertising industry. In the year 1) Source: comScore (in part increased growth rates due to enlargement of user to date, the ad spaces on the portal’s start page have been population as of end 2009). practically sold out on a regular basis. Additional revenue 2) Source: IVW. 3) Source: company data. sources were tapped by means of new features like the advertising-financed movie portal BILD Kino, which was introduced at the beginning of this year. In the reporting period, BILD’s mobile portal BILDmobil nearly tripled its visits over the corresponding year-ago At the start of the new soccer season, Axel Springer figure to 13.4 million. To date, 719 thousand customers extended its highly popular offering of National Soccer use the BILDmobil rate plan, 6.5 % more than at the League videos to the most important European soccer middle of this year. leagues (Champions League, Europe League, and Premier League), in cooperation with the pay-TV company sky. WELT ONLINE impressed even more users after its BILD Super-Manager, the big league contest for the German comprehensive relaunch in the second quarter. In the soccer community, successfully started its second season first nine months of the year, the portal reached 44.9 % in August with a revised design and new features. The more unique visitors than in the comparable year-ago players’ market values were supplied by transfermarkt.de, period. Furthermore, it was the widest-reach website of Germany’s biggest soccer community. This soccer portal any German premium newspaper, by a growing margin. concept was transferred to the Italian market and to Our regional portals also saw their visitor numbers increase women’s soccer (soccerdonna.de) in the current year. significantly and set new records for unique visitors in the Moreover, transfermarkt.de published two comprehensive third quarter. In September 2010, abendblatt.de extended reference works in print: its second Season Guide for the its paid-subscription model for premium content from National Soccer League and a special publication on the regional reporting to sports reporting. B.Z.’s news and city
Quarterly Financial Report as of September 30, 2010 Axel Springer AG 19
portal increased its reach on the strength of expanded The Group’s non-brand-derived portals were also very local content and its highly popular special channels on successful in the first nine months of 2010. Since the sports and cultural events. Compared to the first nine beginning of this year, gamigo.de, one of the leading months of 2009, the number of unique visitors tripled to European providers of “massively multiplayer online 609.5 thousand. And hamburg.de, the official city portal of games,” has picked up more than 2 million new players. Hamburg, also increased its unique visitors; furthermore, Also, it expanded its repertory by adding six new games. its mobile portal, which was launched at the beginning of this year, saw its page impressions triple in the third quarter. auFeminin.com, the biggest European online portal for women, continued on a successful course in the first nine The websites of our German magazines likewise improved months of 2010. Thanks to new content and features, their reach numbers significantly. In the first nine months of coupled with systematic internationalization, it increased 2010, computerbild.de increased its unique visitors by its reach considerably. With an average of 25.8 million
83.1 %, underscoring its position as Germany’s second- unique visitors, the company reached 30.9 % more users biggest technology website for computers, telecommuni- in Europe than in the first nine months of 2009. An impor- cations, and consumer electronics. In the first nine months tant event in the third quarter was the introduction of of this year, autobild.de reached 55.6 % more users than auFeminin.TV, the first Europe-wide, web-based TV chan- in the year-ago period. The increase in the number of nel for women. auFeminin.TV offers an attractive mixture users visiting the site was further supported by the infor- of news, entertainment, and services. Some of the edito- mation offering, which was expanded in the second quar- rial content is produced in collaboration with TV station ter, and by the optimized search function. France 24. The Smart AdServer, which is also used by Axel Springer Media Impact for its marketing activities, The iPhone and iPad apps of our German newspapers and was technologically refined. Since the beginning of this magazines have been very well received by users and have year, goFeminin.de has successfully operated and mar- reached a top position. By the end of September 2010, the keted the website bildderfrau.de in Germany. By this means, iPhone apps for BILD and WELT were purchased and we can exploit synergies in marketing, content production, downloaded more than 250 thousand times. And iKiosk and IT. The Polish portal oFeminin.pl has continued to (see page 7), which is being expanded to include more develop very satisfactorily since its introduction at the end and more German media, has registered a steadily grow- of 2009, attracting an average of 516 thousand users per ing number of downloads from month to month. After month (Gemius Traffic). Thus, it successfully defended its the cost-free introductory phase, many users chose to No. 2 position in the market. purchase Axel Springer e-paper editions on a permanent basis, thanks also to the flexible subscription model. And Smarthouse Media, one of the world’s leading providers of our exclusive magazine for the iPad, The ICONIST, has web-based financial applications for online brokers, financial been the most-downloaded lifestyle app for months. services providers, and investment fund companies, as well as the operator of finanzen.net, increased its long-term The personal TV service of Axel Springer Digital TV Guide, mandates and registered growing demand in the B2B watchmi, now supports all significantly personalized adver- segment in the first nine months of 2010. Under new man- tising formats. Since being introduced in January 2010, agement, the finance platform finanzen.net, which has been this innovative software has been downloaded about positioned in the market as a self-standing online company, 100 thousand times. In the third quarter, the number of doubled its unique visitors in the first nine months of 2010; it regular users doubled to approximately 20 thousand. is still the widest-reach finance portal in Germany. The software program, which was honored with the IT Innovation Award 2010, is an ideal complement to our The online offerings contributed by Ringier to the joint TV program guides. venture Ringier Axel Springer Media expanded Axel Springer’s online portfolio significantly in the other coun- tries of Europe besides Germany. In the Czech Republic,
Quarterly Financial Report as of September 30, 2010 Axel Springer AG 20
Blesk.cz is one of that country’s leading online media. In of Europe benefitted from the economic recovery in the the first eight months of this year, the portal reached an euro zone and registered generally rising job ad volumes. average of 860.1 thousand unique visitors. Long one of This growth was fueled by the acquisition of key cus- the fastest-growing portals in the Czech Republic, tomers and by the launch of specialized job portals for women’s portal bleskprozeny.cz more than doubled its different cooperation partners. visitors compared to the corresponding year-ago period (NetMonitor). In Serbia, the online edition of BLIC success- In the first nine months of 2010, immonet.de, one of the fully defended its market-leading position among news leading real estate portals in Germany, attracted 1.6 million portals in that country, with an average of 2.3 million unique unique visitors, 34.3 % more than in the comparable year- visitors in the year to date. In Slovakia, the online portal of ago period. This successful performance was aided by NOVÝ CAS, cas.sk, also increased its visitor numbers, in cross-media formats like the magazine immonet.berlin, as this case by 48.6 % over the corresponding year-ago figure. well as the attractive news section of the website, and the new immonet app. Furthermore, immonet.de deepened its The Group’s previously existing content portals in its ties to the real estate industry even more by means of the international markets continued the strong growth trend immonet.works series of events and seminars that started of prior periods. The Polish portals increased their unique in the second quarter. And immonet further expanded the users by a total of 20.6 % to 7.6 million (Gemius Traffic). range of services offered to customers by integrating the Also in the third quarter, the online editions of FAKT and portals of the company Umzugsauktion GmbH & Co. KG, NEWSWEEK generated especially high growth rates. With- which was acquired in April. in a single year, Fakt.pl picked up more than 1.6 million At idealo.de, one of the leading German portals for prod- new unique visitors, more than tripling the total number. uct and price comparisons, the number of product inquir- The online platforms of the Swiss business media in- ies referred to vendors was 30 % higher than the corre- creased their unique visitors significantly in the first nine sponding year-ago figure. Aside from the open search months of 2010. Bilanz.ch generated growth of 48.2 % function introduced last year, the main growth driver was and Handelszeitung.ch generated growth of 36.3 %. the extended range of product categories. Another im- Beobachter.ch increased its unique visitors by nearly portant development is the new feature geld.idealo.de, one-third (NET-Metrix Audit). According to Webaudit, which makes it easy to compare the rates charged by Axel Springer’s online network in Hungary has earned a providers of financial services. firm place among that country’s top ten website providers, following a phase of above-average growth. In the report- In Axel Springer’s third area of expertise, marketing, ing period, the women’s portal NANA increased its unique the Group is still Europe’s No. 1 player in the business visitors by 72.9 %, the food website MINDMEGETTE its of success-based online marketing. After integrating all unique visitors by 60.2 %, and the regional news portals such activities under the roof of zanox, we can now their unique visitors by a total of 53.2 % over the respec- service European markets in a more targeted manner tive comparison figures from 2009. In France, the online and take advantage of synergies. Prestigious new adver- portals of our automotive magazines kept their user num- tising customers and partner websites (affiliates) have bers stable. In Russia, FORBES’ web portal boosted its further enhanced the appeal of the company’s platforms. unique visitors to an average of 1.2 million in the first nine months of 2010 (Xiti). In the third quarter, zanox entered into a cooperation agreement with TBG Digital, the international specialist Beyond Europe, the launch of the Indonesian online for advertising on Facebook. As a result, our advertising edition of AUTO BILD is especially worthy of mention. customers can now include the world’s biggest social network in their campaigns. And it is the first affiliate Axel Springer’s online classified ad markets and network ever to offer a technical solution that makes it marketplaces performed very well in the first nine months easy to update product prices on price search engines, of 2010. StepStone’s job portals in the various countries in order to fulfill the current legal requirements. This fea-
Quarterly Financial Report as of September 30, 2010 Axel Springer AG 21
ture was introduced in response to a ruling issued by the At € 494.4 million, the pro-forma revenues of the Digital German Federal Supreme Court in March 2010, accord- Media segment were 20.4 % higher than the correspond- ing to which online vendors must first update the prices ing year-ago figure (PY: € 410.8 million). Consequently, of the products they advertise on price search engines, their share of the Group’s total pro-forma revenues rose and then on their own websites. from 20.7 % in the first nine months of last year to 23.9 % in the latest period. In the Group’s TV/radio activities, Schwartzkopff TV, our production company for TV entertainment formats, At € 56.1 million, EBITDA of the Digital Media segment entered into an exclusive cooperation agreement in the was more than twice as high as the corresponding year- second quarter with Talpa Media (the media group of fago figure (€ 23.6 million). Even adjusted for consolida-
John de Mol) for the German market. Under this agree- tion effects, segment EBITDA was more than 100 % higher ment, Schwartzkopff TV acquired the rights to co-produce than the year-ago figure. John de Mol’s successful international TV formats for
German TV stations. Key Figures Digital Media 3rd Quarter
Key Figures Digital Media 9 Months in € millions Q3/2010 Q3/2009 Change
External revenues 170.4 109.3 55.9 % in € millions 9M/2010 9M/2009 Change Share in cons. revenues 24.0 % 17.3 %
External revenues 504.3 310.1 62.6 %
Share in cons. revenues 24.3 % 16.4 % Advertising revenues 138.2 75.7 82.5 %
Other revenues 32.2 33.5 – 4.0 %
Advertising revenues 388.3 221.1 75.6 %
Other revenues 116.0 89.0 30.3 % EBITDA 15.8 6.7 > 100 %
EBITDA margin 9.3 % 6.1 %
EBITDA 56.1 23.6 > 100 %
EBITDA margin 11.1 % 7.6 %
Services/Holding The Services/Holding segment comprises the three The total segment revenues of € 504.3 million were Group-owned newspaper printing plants, as well as the 62.6 % higher than the corresponding year-ago figure (PY: investment income/expenses of the rotogravure joint € 310.1 million). This increase resulted mostly from the venture PRINOVIS, and the internal departments of consolidation of StepStone and Digital Window (including Logistics, Services, and Holding. buy.at). At € 388.3 million, advertising revenues were
75.6 % higher than the year-ago figure (PY: € 221.1 million).
Aside from consolidation effects, this increase was driven Key Figures Services/Holding 9 Months primarily by the higher revenues of the Group’s content portals in Germany and abroad. The Group’s online mar- in € millions 9M/2010 9M/2009 Change ketplaces also exceeded their respective year-ago figures External revenues 73.8 73.8 0.0 % by considerable margins. The category of other revenues Share in cons. revenues 3.6 % 3.9 % amounted to € 116.0 million (PY: € 89.0 million). The increase of 30.3 %, resulted from the revenue contribu- EBITDA – 13.9 – 14.7 - tions of StepStone Solutions, which were consolidated in the first four months of the current financial year, as well as from higher revenues at gamigo.de, zanox, and the Group’s content portals.
Quarterly Financial Report as of September 30, 2010 Axel Springer AG 22
On external revenues that were unchanged in comparison financial liabilities increased by € 65.1 million; in the with the prior year, at € 73.8 million, the Services/Holding corresponding year-ago period, they had been reduced segment generated an EBITDA of € – 13.9 million (PY: by € 49.9 million.
€ – 14.7 million). The year-ago figure contained expenses for a bonus share and employee share ownership program, Net liquidity as well as tax effects of prior years, among other items. At € 499.3 million, total cash and cash equivalents were higher by € 302.0 million than the corresponding figure
Key Figures Services/Holding 3rd Quarter at the end of 2009 (€ 197.3 million). Financial liabilities amounted to € 460.2 million (December 31, 2009: in € millions Q3/2010 Q3/2009 Change € 390.3 million). As of September 30, 2010, therefore,
External revenues 25.0 25.3 – 1.2 % the Group held a net surplus of cash and cash equivalents in the amount of € 39.0 million (December 31, 2009: net Share in cons. revenues 3.5 % 4.0 % debt of € 193.0 million). The Group has access to various
credit facilities, including one facility in the total amount EBITDA – 5.6 3.3 - of € 1.5 billion, of which € 0.5 billion will fall due in 2012 and € 1.0 billion in 2013. Of this credit facility, an amount
of € 375.0 million had been utilized as of September 30, 2010. The credit facility can be used both for general Financial position business purposes and for financing acquisitions. As of September 30, 2010, the total amount of unutilized short- Cash flow and capital expenditures term and long-term credit facilities was € 1,145 million The cash flow from operating activities rose to € 243.0 million (December 31, 2009: € 1,220 million). (PY: € 174.0 million). This increase resulted primarily from the improved operating results; it was partially offset by higher restructuring expenses and the repayment of liabili- Net assets ties. Furthermore, the dividends paid by companies ac- As of September 30, 2010, the total consolidated assets counted for by the equity method were lower than the of € 3,623.3 million were € 689.0 million or 23.5 % corresponding year-ago figure. higher than the corresponding figure at the end of 2009 (€ 2,934.3 million). The cash flow from investing activities amounted to € –129.9 million (PY: € 152.1 million). The significant The development in the first nine months of 2010 was factors affecting this result were the payments made in significantly influenced by the first-time consolidation of the connection with the formation of the joint venture Ringier companies contributed by Ringier to the joint venture Axel Springer Media and the payments made for the Ringier Axel Springer Media, as well as other newly acquisition of an approximately 12.4 % equity share in acquired companies. In addition, the Group sold the Solu- SeLoger.com. Countervailing factors included the pay- tions Divisions of StepStone and other equity investments. ments received from the sale of StepStone’s Solutions Division and from the sale of equity investments. The Following the reduction of the Group’s shareholding in positive figure for the corresponding year-ago period Do⁄an TV Holding A.S., this equity investment was re- resulted mainly from the receipt of the purchase price on classified from assets held for sale to non-current finan- the sale of the Group’s regional newspaper investments. cial assets. Also, the acquisition of a 12.4 % equity inter- est in SeLoger.com further increased the Group’s non- The cash flow from financing activities amounted to current financial assets. € 183.8 million (PY: € –176.4 million). That amount in- cluded the proceeds on the sale of treasury shares in the amount of € 261.4 million, especially from the placement of treasury shares effected in September 2010. In addition,
Quarterly Financial Report as of September 30, 2010 Axel Springer AG 23
Due to the increased leasing of office space to third par- September 24, the Group effected the placement of treas- ties in 2010, an amount of € 28.0 million was reclassified ury shares with institutional investors, which had been as investment property. planned since April of this year, in the amount of 2.7 million
(representing 8.3 % of share capital). Concurrently with this
The € 29.2 million or 9.7 % increase in trade receivables placement, another 2.8 million shares of Axel Springer AG was mainly due to the granting of longer payment terms (representing 8.3 % of share capital), which had been held and the first-time consolidation of newly acquired com- by Deutsche Bank Luxembourg S.A., were placed as well. panies. The increase in cash and cash equivalents re- The placement, which was conducted in the form of an sulted mainly from the placement of treasury shares in accelerated book-building procedure, met with very strong September 2010. interest and the order book was well filled shortly after investors were contacted. As a result, the placement price At € 1,768.9 million, the Group’s equity was higher than the was set at € 92.00, representing only a small discount from corresponding figure at the end of 2009 by € 572.0 million the current market price. The cash proceeds amounted to
(47.8 %). The equity ratio rose to 48.8 % (PY: 40.8 %). approximately € 250 million. As a result of this placement, The increase in the percentage of equity attributable to the free float portion of Axel Springer’s shares rose by shareholders of Axel Springer AG resulted in part from 16.6 percentage points to 40.8 %. Furthermore, the aver- the net income earned in 2010 and also in part from the age daily number of shares traded on the stock exchange placement of treasury shares. The increase in non-controlling increased substantially; that had been an important goal interests resulted primarily from the first-time consolidation of of the placement, in order to make the Axel Springer Ringier Axel Springer Media AG, in which the Group holds share more attractive for additional investor groups. a 50 % equity interest.
At € 1,133.8 million, non-current provisions and liabilities were 17.4 % higher than the corresponding year-ago figure (PY: € 966.1 million). This increase resulted mainly from the higher utilization of credit facilities and from the remeas- urement of contingent purchase price liabilities related to company acquisitions. Another contributing factor was the increase in pension obligations, especially due to a calcula- tion adjustment to account for current interest rate devel- opments. By contrast, the current provisions and liabilities of € 720.6 million were lower than the corresponding year- ago figure by € 50.7 million or 6.6 %, mainly due to the implementation of restructuring measures.
The Axel Springer share
Inclusion in the MDAX and placement of treasury shares The attractiveness of Axel Springer’s share for institutional and individual investors was enhanced considerably in Share price September 2010, when the company that operates the The Axel Springer share performed very well in the third
German stock exchange, Deutsche Börse, decided to quarter, its price rising by 12.1 % to € 96.96. Since the include the Axel Springer share, which had formerly been end of 2009, Axel Springer’s shareholders have benefit- a component of the SDAX, in the MDAX. The change ted from a 29.2 % appreciation of their shares, excluding was effected in the respective indexes with effect as of the dividend payments. Over the same period, the MDAX
September 20, 2010. At the end of the same week, on (stock market index) gained only 14.9 %. The DJ Euro-
Quarterly Financial Report as of September 30, 2010 Axel Springer AG 24
Stoxx Media Index, which tracks the most important placement of company shares, we have encountered sub- European media shares, recovered in the third quarter; as stantially growing interest in our equity story, both among of September 30, 2010, however, it was still only 1.0 % investors and stock analysts. Axel Springer is currently higher than its level at the end of 2009. As of September monitored by nine stock analysts; most recently, equinet 30, 2010, the market capitalization of free-float shares added the company to its coverage in the third quarter. was approximately € 1.3 billion. Thus, Axel Springer held the 20th spot in the MDAX. The positive share price de- At this year’s German Investor Relations Awards (Extel velopment continued in October. At the end of the month, Survey), which is organized by the German Investor Rela- the Axel Springer share was trading at € 106.85, indica- tions Association and Thomson Reuters, Axel Springer tive of a 42.4 % gain since the end of 2009. was awarded first place among SDAX companies. As part of this survey, investment fund managers and stock ana- lysts evaluated the entire IR work of the Axel Springer team.
Annual shareholders’ meeting About 330 shareholders participated in the annual share- holders’ meeting of Axel Springer AG, which was held in Berlin on April 23, 2010. The shareholders present and
represented at the meeting, who accounted for 82.7 % of voting capital, approved all draft resolutions submitted by
the management with majorities of at least 96.1 %, includ- ing the payment of a dividend of € 4.40 per share. The treasury shares held by the company were not counted for that purpose.
For information on pending and resolved actions for nulli- fication and disclosure in the past reporting period, please Investor relations refer to the interim financial report as of June 30, 2010. We at Axel Springer place a high priority on providing timely, transparent, and comprehensive information about the development of our company. To that end, the company’s Corporate Governance CEO and CFO hold telephone conferences to explain all Dr. Nicola Leibinger-Kammüller, the Chief Executive Officer published financial reports. Such telephone conferences of Trumpf GmbH + Co. KG, was appointed to the Super- are both transmitted live on the Internet and recorded for visory Board of Axel Springer AG effective July 14, 2010. later viewing on the company’s website. Financial reports She succeeded Brian M. Powers, the CEO of the invest- and presentations are also available for download at the ment group Hellman & Friedman, who resigned his seat company’s website. in the second half of May.
In the first nine months of 2010, we participated in a total of eleven conferences and held numerous road shows. Workforce In the third quarter, we presented our company at the Excluding vocational trainees and journalism students Commerzbank TMT Conference in Frankfurt and organ- and interns, Axel Springer had an average of 11,387 (PY: ized an extensive road show, during the course of which 10,757) employees in the first nine months of 2010. The we held numerous talks with investors in Frankfurt, London, increase over the corresponding year-ago figure resulted and New York. We also presented the company and its mainly from the consolidation of the joint venture Ringier strategy in meetings with investors in Berlin. As a result of Axel Springer Media (see page 6), which was formed on Axel Springer’s inclusion in the MDAX and the successful July 1, 2010, as well as the consolidation of the compa-
Quarterly Financial Report as of September 30, 2010 Axel Springer AG 25
nies Digital Window and StepStone, which were not, Risk and opportunities report respectively partly not, included in the corresponding year-ago figure. Without consideration of consolidation The risks and opportunities of Axel Springer have not effects, the Group’s workforce was slightly smaller com- changed significantly from the presentation in the Annual pared to the year-ago period. Report 2009.
Through its project “Opportunities:Equal!,” Axel Springer With the exception of the rather theoretical risk of a com- is seeking to achieve a more balanced mix of men and plete write-off of all assets related to companies in which women in management positions. For the next five to eight the Group holds investments, no risks that would endan- years, we have set the goal of doubling the average per- ger the company’s ability to survive as a going concern centage of women on all management levels of the com- can be discerned. The above-mentioned risk has a very pany from the current level of 16 %. Instead of setting a low probability of occurrence. Currently, no risk concen- uniform quota, individual and department-specific targets trations or interdependencies that could have a significant are agreed with the respective department managers. In the influence on the company’s financial position, liquidity, or future, the company-wide percentage of women in man- financial performance are discernible, assuming that the agement positions will be published on an annual basis. global economy does not worsen drastically again.
Under this project, numerous measures have been de- Events after the reporting date veloped, including measures aimed at structured talent management, succession planning, and improving the No developments or events of material significance have compatibility of work and family. In recognition of its occurred after the reporting date of September 30, 2010. efforts to promote equal opportunity, Axel Springer AG was honored this year with the TOTAL E-Quality Seal, Outlook which is sponsored by the German Federal Ministry of Family, Seniors, Women and Youth. State of the economy According to the assessment of the economic research Axel Springer has also launched a project aimed at giving institutions involved in the preparation of the Autumn Re- managers the chance to systematically review their lead- port, the recovery of the world economy will continue, ership skills and align them with the management princi- albeit at a slower pace. However, a renewed downturn ples introduced last year, based on a 180-degree feed- cannot be ruled out because structural problems could back system. And the company’s day care program for prove to be very hard to solve (Autumn Report 2010). In its employees was further improved in 2010. In August, Axel Autumn Forecast 2010, the IMF expects that the world
Springer opened a day care center close to its business economy will expand at a rate of 4.8 % in the current year location in Hamburg. Modeled after the day care center and then at a rate of 4.2 % in 2011 (IMF October 2010). in Berlin, it even bears the same name, “Wolkenzwerge” (“Cloud Dwarves”). The new day care center was offi- According to the Autumn Report, the German economy cially opened on the occasion of the 60th anniversary of will expand at a rate of 3.5 % in 2010; for 2011, however, the Hamburg publishing house. We are also expanding the growth rate is predicted to be only 2.0 %. Export the capacity of our day care center in Berlin. By this means, growth has been weakening already since the third quar- Axel Springer makes an important contribution to ensuring ter of 2010. For the full year 2010, however, exports are the compatibility of work and family at both locations. expected to increase at a rate of 15.3 %, followed by an
additional increase of 7.1 % in 2011. Investments in plant and equipment are also expected to lose steam in the second half of 2010. As stated in the Autumn Report, the growth rate of such investments is expected to aver-
age 8.9 % in 2010 and 5.8 % in 2011. On the other hand,
Quarterly Financial Report as of September 30, 2010 Axel Springer AG 26
consumer spending is picking up, thanks to the favorable Expenditure Forecast” of October 2010), a worldwide development of the labor market and rising real incomes. increase of 4.8 % is considered possible in 2010, assum-
Following a growth rate of only 0.1 % in the current year, ing that the economy continues to strengthen; halfway consumer spending can be expected to grow at a rate of through the year, the forecast had been for a 3.5 %
1.4 % in 2011, so that it will become a significant driver increase. The improved expectations are rooted in the of economic growth in Germany. According to the Autumn development of advertising revenues in central and east-
Forecast, consumer prices are expected to increase at ern Europe (+ 7.2 %) and Latin America (+ 16.8 %) in somewhat faster rates of 1.1 % and 1.6 % in 2010 and 2010. Furthermore, the advertising markets of the United 2011, respectively. The main factors contributing to this States and western Europe, which were hard hit by the trend will be rising energy prices, higher taxes, and the crisis, have followed a more stable development than stronger economy. The recovery from the deep economic had been expected in the summer of 2010. crisis is also reflected in the labor market. On average for the full year 2010, the number of unemployed job seek- In view of the economic recovery in Germany, the fore- ers is expected to shrink to 3.2 million and then fall be- cast for the development of net advertising revenues in low the level of three million in 2011. That would corre- Germany has again been corrected upwards. spond to an unemployment rate of 7.7 % in the current year and 7.0 % in 2011. Based on its generally more positive assessment of the global advertising market, ZenithOptimedia expects that In its Autumn Forecast 2010, the IMF also anticipates the total advertising market in Germany will expand at a that the economies of the central and eastern European rate of 2.4 % in 2010, somewhat below the expected countries besides Germany will continue to stabilize. growth rate for the overall economy (+ 3.5 %). Most of
this growth will be carried by television (+ 6.1 %) and
Anticipated Economic Development (Selection) online media (+ 16.1 %).
Change in gross domestic ZenithOptimedia is predicting declines in the net advertis- product compared to prior year 2010 2011 ing revenues of newspapers (– 2.1 %) and magazines 1) Germany 3.5 % 2.0 % (– 2.6 %). For the full year 2010, the Central Association
Hungary 0.6 % 2.0 % of the German Advertising Industry (ZAW) anticipates a
Czech Republic 2.0 % 2.2 % development in the range from – 2.5 % to + 1.0 % com-
Poland 3.4 % 3.7 % pared to the previous year. This forecast covers traditional media, as well as direct advertising and online advertising, Slovakia 4.1 % 4.3 % among other segments. Serbia 1.5 % 3.0 %
Switzerland 2.9 % 1.7 % According to ZenithOptimedia 2010, the online market France 1.6 % 1.6 % will continue to follow a trend of significant growth, with
Russia 4.0 % 4.3 % net advertising revenues (including search term market-
Spain – 0.3 % 0.7 % ing and affiliates) expanding at a rate of 16.1 %.
Source: IMF, Autumn Forecast 2010. 1) Autumn Report 2010. Whereas the net advertising revenues of the television advertising market are expected to increase at a rate
of 6.1 %, those of the radio market are expected to
Industry environment decline (– 2.2 %). Following the worst drop in worldwide advertising ex- penditures in decades, the global advertising market Based on all the forecasts published to date, the total appears to be stabilizing. According to the latest adver- advertising market is expected to continue expanding in tising market forecast of ZenithOptimedia (“Advertising 2011. According to ZenithOptimedia, total net advertis-
Quarterly Financial Report as of September 30, 2010 Axel Springer AG 27
ing revenues can be expected to increase at a rate of According to ZenithOptimedia’s forecast, the net advertis-
2.8 % in 2011, with different rates of growth predicted for ing volume in the online market in western Europe will newspapers (+ 0.6 %) and magazines (– 1.7 %). The online expand by 10.4 % to US$ 17.6 billion in 2010, based on the market can be expected to experience above-average assumption of constant exchange rates. In some eastern growth of 12.8 % in 2011. European markets, the growth rates will be much higher.
The forecast data reflects the long-term, structural redis- Anticipated Advertising Demand for Online Media tribution of advertising expenditures in favor of digital (Selection) media. Based on the results to date, Internet and televi- sion have weathered the recession better than all other Change in net ad volume compared to prior year 2010 media; according to the forecast, they will increase their Germany 16.1 % respective shares of total advertising expenditures. It is Hungary 5.7 % assumed that the further growth of these two media will 1) Czech Republic 17.3 % depend on the convergence or even the fusion of TV and online video offerings. Poland 20.5 % 1) Slovakia 26.1 %
1) The communications industry also perceives opportunities Serbia 33.3 %
1) for new growth especially in new marketing programs, Schwitzerland 11.6 % networked advertising concepts, the creation of new France 6.8 % business sectors, and product innovations. Russia 40.6 %
Spain 12.0 % For the international markets in which Axel Springer operates directly, ZenithOptimedia is predicting uneven Source: ZenithOptimedia, Advertising Expenditure Forecast (October) 2010. 1) development of the net advertising revenues of newspa- Gross advertising volume. pers and magazines (as of October 2010).
Group
Anticipated Print Advertising Demand 2010 (Selection) Strategic and organizational orientation In 2010 and beyond, Axel Springer will continue to pursue Change in net ad volume compared to prior year Newspapers Magazines its strategy based on the core elements of extending its market position in the German-language core business, Germany – 2.1 % – 2.6 % internationalization, and digitization. Hungary – 6.8 % – 6.8 %
2) Czech Republic 35.2 % 6.4 % The market leadership position in the core business will
1) Poland – 8.2 % – 7.5 % be extended by continually developing the Group’s strong
2) brands and additionally by developing and establishing Slovakia – 1.5 % – 1.7 %
2) innovative cross-media advertising formats. By this means, Serbia 8.5 % 9.4 % the extraordinarily wide reach of our print media and con- 2) Switzerland 1.8 % 1.8 % tent portals can be put to optimal use. 1) France – 0.6 % – 0.7 %
3) Axel Springer will continue to systematically implement Russia 11.4 %
1) its internationalization strategy. The Group will focus on Spain – 4.8 % – 8.0 % strong, established print brands that appeal to a broad Source: ZenithOptimedia, Advertising Expenditure Forecast (October) 2010. base of readers, while continuing to digitize its activities. 1) Excluding classified ads. 2) Gross ad volume, excluding classified ads. Aside from the strategic fit, other important criteria to be 3) Print media in total. applied for making investments in companies are the professionalism of the management and the monetiza-
Quarterly Financial Report as of September 30, 2010 Axel Springer AG 28
tion potential of digital business models. Geographically, Concurrently with the publication of the semiannual finan- Axel Springer will focus especially on the countries of cial report in August of this year, we announced medium- central and eastern Europe. term profit margin targets for the Group’s segments. Thus, we have set the goal of generating an EBITDA margin of The digitization strategy is aimed at expanding both the at least 25 % in the Newspapers National segment and Group’s content portals and its marketplaces, as well as an EBITDA margin of at least 20 % in the Magazines its marketing activities. With regard to content portals, we National segment. In the Print International segment, we will focus on the continued development of paid content will strive to generate an EBITDA margin of at least 15 % and other offerings. In that endeavor, we can fall back on in the medium-term, and in the Digital Media segment, an our experience with the very popular formats that have EBITDA margin of at least 20 %. already been introduced. In the segment of marketplaces, the Group has expanded its portfolio significantly through For the current year, we anticipate a moderate decrease the acquisition of StepStone. In the area of marketing, in the total revenues of the Newspapers National segment, the Group intends to step up the pace of international due to moderately lower advertising and circulation reve- growth, now that zanox’s business has been comple- nues. Despite the lower amount of investment income to mented by the acquisition of the Digital Window affiliate result from the non-recurrence of the contributions of the network. At the present time, no significant adjustments regional newspapers that have been sold, we expect to to the Group’s organizational structure are planned. generate significantly higher EBITDA, in view of the restructuring measures that have been initiated. Anticipated business developments and operating The Group’s German magazines continue to operate performance within a challenging competitive environment; therefore, In consideration of the development of the Group’s reve- we expect that revenues in the advertising and press nues and earnings in the first nine months of 2010, the distribution market will remain under pressure. Nonethe- Management Board is reaffirming its full-year forecast, less, we anticipate that EBITDA of the Magazines National which had been raised after the first six months. For the segment will be substantially higher than the prior-year full year 2010, therefore, the Management Board antici- figure, by reason of the efficiency enhancement meas- pates a significant increase in revenues and EBITDA on ures that have since been implemented. the level of the all-time high achieved in financial year 2008 (€ 486.2 million). For the Print International segment, we expect to gener- ate higher advertising and circulation revenues, as well as The expected decline in circulation revenues will be offset significantly higher EBITDA, compared to the respective by higher advertising and other revenues. We expect that prior-year figures. This development will be supported by the decline in the German print business can be offset by the improved financial performance of our established higher revenues from the Group’s international print me- international companies and by the additional revenue dia and digital media. The positive development of earn- and earnings contributions of the companies contributed ings will be further supported by additional operating by Ringier to the joint venture Ringier Axel Springer Media. improvements, positive restructuring effects, the con- tinued practice of cost discipline in all areas of the In the Digital Media segment, the significant revenue gains Group, the earnings contributions of recently acquired expected for 2010 will be driven both by organic growth companies, and the companies of the joint venture with and by the full-year consolidation of StepStone and Digital Ringier, which are being consolidated for the first time. Window. Both advertising revenues and other revenues are expected to make a contribution to the significant Assuming that the economic recovery continues, we increase in segment revenues. Based on the dynamic anticipate a further, moderate increase in revenues and growth and growing profitability of the Group’s brand- EBITDA for the financial year 2011. Such an outcome will derived online activities, we anticipate a substantial be largely driven by the continuous expansion of the increase in the segment EBITDA. Group’s international and digital business.
Quarterly Financial Report as of September 30, 2010 Axel Springer AG 29
For the Services/Holding segment, we anticipate slightly Anticipated workforce development lower revenues. We also expect that EBITDA for the full- Despite continual workforce adjustments in the German year 2010 will be slightly lower than the corresponding print business, the Group’s average workforce in 2010 prior-year figure, due to higher project costs and lower is expected to be larger than the corresponding prior- investment income contributions. year figure. The main causes here are the integration of StepStone and Digital Window, as well as, above all, the Anticipated development of liquidity and financial position companies contributed by Ringier to the joint venture Based on the current planning status, the Group’s liquidity Ringier Axel Springer Media. Furthermore, the organic and financial position will not change significantly before growth of the Group’s digital media will result in a slight the end of this year. Axel Springer has access to exten- increase in personnel. sive short-term and long-term credit facilities, which can also be used for acquisitions. Based on the capital ex- Planning assumptions penditure projects planned to date (including the further The future developments of the Group’s financial perform- development of web-based systems and IT infrastructure), ance, liquidity, and financial position are planned on the investments in property, plant and equipment and intan- basis of assumptions that are plausible and sufficiently gible assets will likely be higher than the corresponding probable from today’s perspective, despite being fraught prior-year figure. These investments will be financed from with considerable uncertainties by reason of the current the Group’s operating cash flow. economic environment. Therefore, actual developments could possibly differ significantly from the assumptions Dividend policy applied and thus from the plans and trend forecasts Axel Springer strives to maintain a consistent dividend made on the basis of these assumptions. policy, in conformity with the Group’s business perform- ance and operating results, in a manner that allows for strengthening the capital basis and financing growth.
Quarterly Financial Report as of September 30, 2010 Axel Springer AG 30
Consolidated Statement of Financial Position
€ thousands ASSETS 09/30/2010 12/31/2009 Non-current assets 2,614,202 1,874,600
Fixed assets 2,365,400 1,666,249
Intangible assets 1,088,153 835,438
Property, plant and equipment 689,701 704,752
Investment property 58,417 31,704
Non-current financial assets 529,129 94,355
Investments accounted for using the equity method 69,102 59,702
Other non-current financial assets 460,027 34,653
Receivables from income taxes 41,389 39,829
Other assets 154,874 152,249
Deferred tax assets 52,539 16,273
Current assets 1,009,115 1,059,702
Inventories 24,681 31,900
Trade receivables 331,118 301,947
Receivables due from related parties 48,810 43,987
Receivables from income taxes 30,589 55,944
Other assets 74,658 70,364
Cash and cash equivalents 499,259 197,259
Assets held for sale 0 358,301
Total assets 3,623,317 2,934,302
Quarterly Financial Report as of September 30, 2010 Axel Springer AG 31
€ thousands EQUITY AND LIABILITIES 09/30/2010 12/31/2009 Equity 1,768,859 1,196,848
Shareholders of Axel Springer AG 1,547,355 1,145,206
Non-controlling interests 221,504 51,642
Non-current provisions and liabilities 1,133,812 966,087
Provisions for pensions 341,007 310,415
Other provisions 41,819 39,327
Financial liabilities 450,165 383,801
Trade payables 1,544 1,536
Liabilities due to related parties 8,990 4,135
Other liabilities 101,844 58,987
Deferred tax liabilities 188,443 167,886
Current provisions and liabilities 720,646 771,367
Provisions for pensions 47,377 49,056
Other provisions 135,310 161,233
Financial liabilities 10,075 6,480
Trade payables 206,815 204,802
Liabilities due to related parties 14,482 22,213
Liabilities from income taxes 43,624 54,866
Other liabilities 262,963 272,717
Total equity and liabilities 3,623,317 2,934,302
Quarterly Financial Report as of September 30, 2010 Axel Springer AG 32
Consolidated Statement of Comprehensive Income
€ thousands Consolidated Income Statement Q3/2010 Q3/2009 9M/2010 9M/2009 Revenues 710,983 631,429 2,075,275 1,886,199
Other operating income 15,497 21,127 121,615 44,189
Change in inventories and internal costs capitalized 740 529 1,326 499
Purchased goods and services – 240,718 – 212,509 – 679,593 – 645,891
Personnel expenses – 189,986 – 183,534 – 579,172 – 555,869
Depreciation, amortization and impairments – 26,409 – 21,801 – 79,838 – 65,159
Other operating expenses – 175,885 – 162,552 – 534,213 – 486,351
Income from investments 3,908 6,310 11,130 229,587
Result from investments accounted for using the equity method 2,072 2,328 3,321 2,414
Other investment income 1,836 3,983 7,809 227,173
Financial result – 6,375 – 4,505 – 18,654 – 13,778
Income taxes – 4,420 – 24,785 – 60,266 – 76,429
Net income 87,335 49,709 257,610 316,997
Net income attributable to shareholders of Axel Springer AG 79,389 48,709 245,349 311,383
Net income attributable to non-controlling interests 7,946 1,000 12,261 5,614
Basic earnings per share (in €) 2.58 1.64 8.14 10.47
Diluted earnings per share (in €) 2.57 1.64 8.12 10.47
€ thousands Consolidated Statement of Recognized Income and Expenses Q3/2010 Q3/2009 9M/2010 9M/2009 Net income 87,335 49,709 257,610 316,997
Actuarial gains/losses from defined benefit pension obligations – 9,158 – 17,677 – 15,784 – 17,677
Currency translation differences 8,381 1,492 29,329 – 2,780
Changes in fair value of available-for-sale financial assets – 2 0 – 4 6
Changes in fair value of derivatives in cash flow hedges 2,547 – 1,389 – 185 – 5,681
Other income/loss from investments accounted for using the equity method – 5,227 – 4,318 13,974 – 2,511
Other income/loss – 3,459 – 21,892 27,330 – 28,643
Comprehensive income 83,876 27,817 284,940 288,354
Comprehensive income attributable to shareholders of Axel Springer AG 72,848 26,547 269,066 282,578
Comprehensive income attributable to non-controlling interests 11,028 1,270 15,874 5,776
Quarterly Financial Report as of September 30, 2010 Axel Springer AG 33
Consolidated Statement of Cash Flows
€ thousands 9M/2010 9M/2009* Net income 257,610 316,997
Reconciliation of net income to the cash flow from operating activities
Depreciation, amortization, impairments, and write-ups of fixed assets 79,949 65,876
Result from investments accounted for using the equity method – 3,321 – 2,414
Dividends received from investments accounted for using the equity method 3,930 11,092
Result from derecognition of fixed assets – 12,376 – 214,700
Changes in non-current provisions 8,720 11,280
Changes in deferred taxes – 35,987 – 16,232
Other non-cash income and expenses – 36,243 – 7,792
Changes in trade receivables – 5,727 – 14,466
Changes in trade payables – 12,148 – 4,106
Changes in other assets and liabilities – 1,429 28,451
Cash flow from operating activities 242,978 173,986
Proceeds from disposals of intangible assets, property, plant and equipment 278 177
Proceeds from disposals of consolidated subsidiaries and business units less cash and cash equivalents given up 103,651 8,194
Proceeds from disposals of non-current financial assets 16,020 169,949
Purchases of intangible assets, property, plant, equipment and investment property – 38,383 – 25,477
Purchases of shares in consolidated subsidiaries and business units less cash and cash equivalents acquired – 139,458 5,273
Purchases of investments in non-current financial assets – 71,959 – 5,982
Cash flow from investing activities – 129,851 152,134
Dividends paid to shareholders of Axel Springer AG – 131,179 – 130,604
Dividends paid to other shareholders – 5,979 – 2,417
Purchase of non-controlling interests – 5,464 – 470
Reissuance/purchase of treasury shares 261,375 6,974
Proceeds from other financial liabilities 172,318 85,527
Repayments of other financial liabilities – 107,223 – 135,382
Cash flow from financing activities 183,848 – 176,372
Cash flow-related changes in cash and cash equivalents 296,975 149,748
Changes in cash and cash equivalents due to exchange rates 4,868 – 90
Changes in cash and cash equivalents due to changes in companies included in consolidation 157 1,738
Cash and cash equivalents at beginning of period 197,259 154,529
Cash and cash equivalents at end of period 499,259 305,925
*) Prior-year figures adjusted due to the reclassification of effects for purchase and disposal of non-controlling interests.
Quarterly Financial Report as of September 30, 2010 Axel Springer AG 34
Consolidated Statement of Changes in Equity
Accumulated other comprehensive income
Changes in fair value
Deriva- Share- Ad- Accumu- Available- tives in holders Non- Sub- ditional lated for-sale cash of Axel con- scribed paid-in retained Treasury Currency financial flow Other Springer trolling € thousands capital capital earnings shares translation assets hedges equity AG interests Equity
Balance as of 01/01/2009 98,940 40,279 1,102,471 – 207,294 11,379 4 – 10,986 – 9,659 1,025,134 42,568 1,067,702
Comprehensive income 311,383 – 2,967 4 – 5,654 – 20,188 282,578 5,776 288,354
Dividends paid – 130,604 – 130,604 – 2,417 – 133,021
Reissuance of treasury shares 1,330 5,644 6,974 6,974
Change in consolidated companies – 919 – 919 12,621 11,702
Purchase and disposal of non- controlling interests – 2,353 – 2,353 2,622 269
Other changes 552 137 688 – 309 379
Balance as of 09/30/2009 98,940 40,831 1,281,445 – 201,650 8,412 8 – 16,640 – 29,847 1,181,498 60,861 1,242,359
Balance as of 01/01/2010 98,940 43,103 1,229,769 – 200,687 12,997 8 – 15,475 – 23,449 1,145,206 51,642 1,196,848
Comprehensive income 245,349 25,674 – 8 – 137 – 1,812 269,066 15,874 284,940
Dividends paid – 131,179 – 131,179 – 5,979 – 137,158
Reissuance of treasury shares 72,437 188,939 261,376 261,376
Change in consolidated companies 161,190 161,190
Purchase and disposal of non- controlling interests – 120 – 120 – 120
Other changes 281 2,725 3,006 – 1,223 1,783
Balance as of 09/30/2010 98,940 43,384 1,418,981 – 11,748 38,671 0 – 15,612 – 25,261 1,547,355 221,504 1,768,859
Quarterly Financial Report as of September 30, 2010 Axel Springer AG 35
Consolidated Segment Report
Operating segments
€ thousands Newspapers National Magazines National Print International Digital Media Services/Holding Consolidated totals Q3/2010 Q3/2009 Q3/2010 Q3/2009 Q3/2010 Q3/2009 Q3/2010 Q3/2009 Q3/2010 Q3/2009 Q3/2010 Q3/2009 External revenues 289,956 300,350 111,431 123,215 114,218 73,299 170,388 109,264 24,990 25,301 710,983 631,429
Internal revenues 2,735 2,028 52 2,025 11,720 4,021 6,190 5,167 76,308 76,141
Segment revenues 292,690 302,378 111,483 125,240 125,938 77,320 176,578 114,431 101,298 101,442
EBITDA* 74,722 76,165 20,777 15,053 18,863 1,001 15,840 6,690 – 5,605 3,311 124,599 102,219
EBITDA margin* 25.8 % 25.4 % 18.6 % 12.2 % 16.5 % 1.4 % 9.3 % 6.1 % - - 17.5 % 16.2 %
Thereof income from investments 220 1,644 – 42 400 1,544 – 179 523 1,514 1,414 2,925 3,658 6,304
Thereof accounted for using the equity method 0 0 – 42 324 1,544 – 179 130 464 441 1,718 2,072 2,327
Depreciation, amortiza- tion, impairments and write-ups (except from purchase price allocations) – 563 – 726 – 233 – 740 – 2,997 – 1,799 – 2,705 – 2,073 – 10,990 – 11,588 – 17,488 – 16,926
EBIT* 74,159 75,439 20,545 14,313 15,866 – 799 13,135 4,615 – 16,594 – 8,277 107,111 85,291
Effects of purchase price allocations 0 0 0 – 22 – 3,953 – 973 – 5,185 – 3,863 – 18 – 18 – 9,156 – 4,875
Non-recurring effects – 1 4,512 175 – 5,998 – 179 0 180 160 0 – 92 175 – 1,418
Segment earnings before interest and taxes 74,158 79,951 20,720 8,294 11,734 – 1,772 8,130 912 – 16,612 – 8,387 98,130 78,998
Financial result – 6,375 – 4,505
Income taxes – 4,420 – 24,785
Net income 87,335 49,709
*) Adjusted for non-recurring effects and effects of purchase price allocations.
Geographical information
€ thousands Germany Other countries Consolidated totals Q3/2010 Q3/2009 Q3/2010 Q3/2009 Q3/2010 Q3/2009 External revenues 504,069 503,945 206,914 127,485 710,983 631,429
Quarterly Financial Report as of September 30, 2010 Axel Springer AG 36
Operating segments
€ thousands Newspapers National Magazines National Print International Digital Media Services/Holding Consolidated totals 9M/2010 9M/2009 9M/2010 9M/2009 9M/2010 9M/2009 9M/2010 9M/2009 9M/2010 9M/2009 9M/2010 9M/2009 External revenues 874,345 890,975 354,385 386,483 268,471 224,862 504,285 310,087 73,789 73,792 2,075,275 1,886,199
Internal revenues 6,570 5,220 656 4,372 19,677 9,236 17,817 15,063 224,689 228,991
Segment revenues 880,915 896,195 355,040 390,855 288,148 234,098 522,103 325,150 298,478 302,783
EBITDA* 230,255 205,638 78,623 46,876 34,806 3,057 56,060 23,596 – 13,928 – 14,665 385,818 264,502
EBITDA margin* 26.3 % 23.1 % 22.2 % 12.1 % 13.0 % 1.4 % 11.1 % 7.6 % - - 18.6 % 14.0 %
Thereof income from investments 1,537 4,232 292 1,580 3,297 1,411 6,111 9,391 3,752 3,014 14,989 19,628
Thereof accounted for using the equity method 0 0 223 1,022 3,159 1,321 275 1,697 – 335 – 1,626 3,321 2,414
Depreciation, amortiza- tion, impairments and write-ups (except from purchase price allocations) – 3,498 – 2,070 – 1,508 – 2,262 – 6,332 – 5,152 – 7,934 – 6,218 – 38,157 – 34,668 – 57,429 – 50,370
EBIT* 226,757 203,568 77,116 44,614 28,474 – 2,095 48,126 17,378 – 52,085 – 49,333 328,389 214,132
Effects of purchase price allocations 0 0 0 – 65 – 6,038 – 2,941 – 18,365 – 11,468 – 54 – 54 – 24,456 – 14,528
Non-recurring effects 6,165 214,793 1,731 – 5,998 – 2,861 0 27,563 160 0 – 1,355 32,597 207,600
Segment earnings before interest and taxes 232,921 418,361 78,847 38,551 19,575 – 5,036 57,325 6,069 – 52,139 – 50,742 336,530 407,204
Financial result – 18,654 – 13,778
Income taxes – 60,266 – 76,429
Net income 257,610 316,997
*) Adjusted for non-recurring effects and effects of purchase price allocations.
Geographical information
€ thousands Germany Other countries Consolidated totals 9M/2010 9M/2009 9M/2010 9M/2009 9M/2010 9M/2009 External revenues 1,516,098 1,509,084 559,177 377,115 2,075,275 1,886,199
Quarterly Financial Report as of September 30, 2010 Axel Springer AG 37
Notes to the Consolidated Financial Statements
General information As a consequence of these changes, acquisitions and disposals of non-controlling interests must now be treated Axel Springer Aktiengesellschaft (“Axel Springer AG”) is exclusively as equity transactions. Since January 1, 2010, an exchange-listed stock corporation with its registered related cash flows have been disclosed in cash flow from head office in Berlin/Germany. financing activities instead of cash flow from investing activities. The prior-year figure was adjusted accordingly; The quarterly financial report of Axel Springer AG as of disbursements from acquisitions of non-controlling inter- September 30, 2010, fulfills the requirements of the German ests (€ 0.5 million) were reclassified from cash flow from Securities Trading Act (WpHG). The consolidated interim investing activities to cash flow from financing activities. financial statements were prepared in condensed form in conformity with the regulations of IAS 34, and by appli- Companies included in the consolidated cation of Section 315a HGB in accordance with the International Financial Reporting Standards (IFRS) of the financial statements International Accounting Standards Board (IASB) and the The following changes in the composition of the compa- interpretations of the IFRS Interpretations Committee nies included in the consolidated financial statements (IFRS IC) approved by the IASB, in effect and recognized occurred: by the European Union (EU) as of the reporting date. The reporting currency is the Euro (€); unless otherwise indi- 09/30/2010 12/31/2009 cated, all figures are stated in Euro thousands (€ thousands). Fully consolidated companies
Germany 51 53 Apart from the adjustments described in the following, the accounting and valuation methods and the estimation Other countries 69 76 methods applied in the interim financial statements as of Fully consolidated special purpose entities September 30, 2010 are basically the same as those Germany 3 3 applied in the consolidated financial statements as of December 31, 2009. A detailed description of these Investments accounted for using the equity method methods has been published in the notes to the consoli- Germany 3 5 dated financial statements for 2009. Other countries 3 2
Application of IFRS 3 (revised 2008) and IAS 27 (revised 2008) Effective January 1, 2010, we included our German investments in Axel Springer Mediasales & Service GmbH, We report business combinations and transactions with Berlin, in Panther Holding GmbH, Berlin, and in hamburg.de non-controlling interests that are completed on or after GmbH & Co. KG, Hamburg, in the consolidated financial January 1, 2010, according to the regulations of the new statements, for the first time. IFRS 3 “Business Combinations” (revised 2008) and the new IAS 27 “Consolidated and Separate Financial At the end of February, a 100 % interest in Perfiliate Group, Statements” (revised 2008). Different to the accounting with registered offices in London/UK, was acquired. The policies applied as of December 31, 2009, incidental five companies belonging to the Perfiliate Group have acquisition costs and adjustments to contingent purchase been fully consolidated since March 1, 2010. price liabilities are expensed as incurred. As already in prior years, we offset effects from acquisitions and dis- At March 31, 2010, the acquisition of a 100 % interest in posals of non-controlling interests within equity. We do Axel Springer Russland Holding GmbH, Hamburg (formerly: not exercise the full goodwill option and continue to only G+J Deutschland Medien- und Vertriebsbeteiligung disclose the goodwill allocated to our own interests. Verwaltungs GmbH), and its 100 % investment in
Quarterly Financial Report as of September 30, 2010 Axel Springer AG 38
Axel Springer RUS, Moscow/Russia, (formerly: OOO At the end of August 2010, finanzen.net, a business unit “Gruner + Jahr Magazines”), was completed. Since then, belonging to Smarthouse, was spun off into the newly foun- both companies have been fully consolidated. ded finanzen.net GmbH, Karlsruhe, which was included in the consolidated financial statements for the first time.
The acquisition of a 51 % interest in Umzugsauktion GmbH & Co. KG, Schallstadt, was completed in April. Acquisitions and divestitures The company has been fully consolidated in the consoli- dated financial statements since April 30, 2010. With the goal of developing eastern European media activities, Axel Springer AG and Ringier AG, Zurich/ Due to the sale of the Solutions division of the StepStone Switzerland, merged their business activities in Poland, Group, which was completed at the beginning of May the Czech Republic, Slovakia, and Serbia into the jointly 2010, one German subsidiary and 22 subsidiaries in managed company Ringier Axel Springer Media AG, other countries were deconsolidated effective May 1, Zurich/Switzerland, effective July 1, 2010. In addition, we 2010. In addition, two foreign subsidiaries of the Step- made a cash contribution of € 38.8 million and a com- Stone Group were liquidated. pensation payment to Ringier of € 124.8 million. Our 50 % interest in the joint venture company is held by AS wallstreet:online AG, Berlin, as well as wallstreet:online Online Beteiligungs GmbH, Berlin, a wholly-owned sub- capital AG, Berlin, which were previously fully consoli- sidiary of Axel Springer AG. Due to the agreement to a dated, were sold in May and August 2010 and decon- call option on the acquisition of one further interest, we solidated effective May 1 and August 1, 2010, respectively. account for the transaction as a business combination and include the Ringier Axel Springer Media Group in the The disposals of our interests in Cora Verlag GmbH & Co. KG, consolidated financial statements of Axel Springer AG Hamburg, and ZertifikateJournal AG, Veitshöchheim, starting July 1, 2010. were completed at the beginning of April and the begin- ning of May, respectively. These investments were previ- Along with the cash contribution and the compensation ously accounted for using the equity method. payment, the preliminary acquisition costs totaling € 226.0 million also included the carrying amounts of the Moreover, Axel Springer Schweiz AG, Zurich/Switzerland, assets less liabilities brought in (€ 61.2 million) and con- was merged into Handelszeitung und Finanzrundschau tingent purchase price liabilities of € 1.2 million. The AG, Zurich/Switzerland, in June 2010. Handelszeitung und preliminary incidental acquisition costs recorded in other Finanzrundschau AG changed its name to Axel Springer operating expenses amounted to € 2.9 million. Schweiz AG.
Effective July 1, 2010, Ringier Axel Springer Media AG, Zurich/Switzerland, and twelve foreign subsidiaries brought in by Ringier, were fully consolidated in our consolidated financial statements for the first time. In addition, PNS a.s., Prague/Czech Republic, a company brought in by Ringier, was accounted for using the equity method for the first time.
In July, DW-Holding GmbH, Berlin, was merged into ZANOX.de AG, Berlin, and Sport B.Z., Berlin, into Ullstein GmbH, Berlin. Moreover, three German companies and one foreign company were deconsolidated in August 2010 due to business activity having largely been suspended.
Quarterly Financial Report as of September 30, 2010 Axel Springer AG 39
Based on the preliminary purchase price allocation, the Since consolidation, the joint venture contributed to preliminary acquisition costs of this business combina- consolidated revenues in the amount of € 64.7 million tion could be allocated to the purchased assets and and to consolidated net income in the amount of € 9.7 liabilities at the acquisition date as follows: million. Thereof revenues amounting to € 40.2 million as well as a net income of € 6.1 million relate to companies which Ringier contributed into the joint venture. If the € thousands Carrying Adjust- Carrying amount ment amount creation of the joint venture had already occurred on before amount after January 1, 2010, consolidated revenues would have acquisition acquisition increased by € 128.1 million and consolidated net in- Title rights 1,211 159,494 160,705 come by € 22.1 million. Customer relationships 0 43,897 43,897 Other concessions, The disposal of our subsidiaries wallstreet:online AG, property rights 9,451 0 9,451 Berlin, and wallstreet:online capital AG, Berlin, occurred Property, plant and equipment 41,708 0 41,708 in May and August 2010, respectively. The loss on dis- posal was € 15.4 million. It was disclosed in other oper- Non-current financial assets 21,859 12,727 34,586 ating expenses.
Trade receivables 42,844 0 42,844 The sale of the Solutions business unit of the StepStone Other assets 23,429 0 23,429 Group was completed in May 2010. The preliminary gain Cash and cash equivalents 62,076 0 62,076 on disposal was € 63.3 million. It was mainly disclosed in Provisions – 5,392 0 – 5,392 other operating income. Trade payables – 20,819 0 – 20,819
Other liabilities – 19,220 0 – 19,220 Additional company transactions completed in the first
Deferred tax liabilities – 6,372 – 37,033 – 43,406 nine months of 2010, as well as initial inclusions of com-
Net assets 150,775 179,084 329,858 panies, had no material effects individually and in total on the net assets, financial position, and results of opera- Non-controlling interests 164,929 tions of the Axel Springer Group. Preliminary acquisition cost 226,047 Preliminary goodwill 61,118 Relationships with related parties
From January to September 2010, goods and services The purchase price allocation considers all subsequent with a total value of € 76.2 million (PY: € 87.3 million) events related to the acquisition date and has not yet were received from related companies. The goods and been completed. In particular, the approval of the cartel services supplied to related companies during the report- authorities regarding the contribution of the Hungarian ing period amounted to € 48.4 million (PY: € 56.8 million). business activities of Axel Springer and Ringier into the In general, the transactions giving rise to the goods and joint venture is still outstanding and thus one part of the services received and supplied were in line with the business combination is still pending. scope of business dealings described in the consoli- dated financial statements as of December 31, 2009. Of the other intangible assets acquired, intangible assets with carrying amounts of € 143.6 million have indefinite useful lives. The preliminary goodwill is essentially attrib- utable to inseparable values such as employee expertise and expected synergy effects from the integration, and was allocated to the Print International segment.
Quarterly Financial Report as of September 30, 2010 Axel Springer AG 40
Other disclosures French cartel authority; the clearance by the French stock exchange authority is still outstanding. By agreement of April 8, 2004, the shareholders H&F Rose
Partners, L.P. and H&F International Rose Partners, L.P. An interest rate of 4.6 % was used as a basis for calcu-
(collectively referred to as “H&F” in the following) granted lating pension obligations (December 31, 2009: 5.3 %). to Axel Springer AG 560,700 call options for the purchase This resulted in an increase in pension obligations of of Axel Springer AG shares. Thus, Axel Springer AG was € 24.4 million and of deferred tax assets of € 7.6 million; fundamentally entitled to purchase one share of Axel not affecting net income. Springer AG from H&F for each share issued to a mem- ber of the Management Board under the Management The contingent purchase price liabilities arising from Participation Program. business combinations increased by € 31.8 million to € 84.3 million. The call options will lapse if and to the extent that H&F sells the shares in Axel Springer AG and in exchange In the segment report, the effects from the disposal of pays a cash settlement to Axel Springer. With the sale of interests and businesses were disclosed as non-recurring 498,400 shares of Axel Springer AG by H&F in 2010, all effects in the Digital Media segment (€ 48.0 million), in 498,400 call options that still existed on December 31, 2009, the Newspapers National segment (€ 6.2 million), and in have lapsed. The cash settlement paid by H&F was the Magazines National segment (€ 1.7 million). In addi-
€ 13.4 million. tion, exchange losses in the amount of € – 19.5 million were shown as a non-recurring effect in the Digital Media In the first nine months of 2010, the participants of the segment, especially related to the reduction of our inter- Management Participation Program awarded in 2004 est in Do⁄an TV. The other non-recurring effects totaling exercised a total of 239,121 options at a weighted aver- € – 3.7 million were primarily composed of costs in con- age exercise price of about € 60.64 per option and nection with business combinations. The effects of pur- acquired shares in Axel Springer AG for a total of chase price allocations are primarily composed of depre- € 14.5 million, accordingly. The weighted average mar- ciation and amortization. ket price at the exercise times was € 92.26. On Sep- tember 30, 2010, 10,079 options were still outstanding. In connection with a further capital increase at Do⁄an TV Holding A.S. (DTVH) carried out by Do⁄an Yayin Holding In the context of the sale of 2.7 million of our own shares in the second quarter of 2010, existing contractual agree- in September we have received € 246.8 million, which ments to reduce our interest in DTVH from the original increased equity accordingly. 25 % to 19.9 % were realized. This interest, which had been carried as held-for-sale, was disposed of in the con- Due to increased leasing of office space to third parties, solidated statement of financial position. Upon disposal we reclassified an amount of € 28.0 million into invest- of the interest, exchange losses of € 16.7 million were ment property. transferred from accumulated other comprehensive income
to the consolidated income statement. Our 19.9 % interest
In the beginning of September, we acquired a 12.4 % in DTVH, which is allocated to the Digital Media segment, interest in SeLoger.com SA at a price of € 34.00 per was accounted for as an addition in other investments. share (total acquisition price € 70.0 million). Moreover, we launched the draft of a voluntary public offer for all remaining outstanding shares of SeLoger.com SA for the same price per share at the French stock exchange authority at the end of September. At the beginning of November, the public offer has been approved by the
Quarterly Financial Report as of September 30, 2010 Axel Springer AG 41
Review Report
We have reviewed the condensed consolidated interim Based on our review, no matters have come to our at- financial statements - comprising the statement of fi- tention that cause us to presume that the condensed nancial position, income statement, statement of recog- consolidated interim financial statements have not been nized income and expenses, statement of changes in prepared, in material respects, in accordance with the cash flows, statement of changes in equity, and selected IFRS applicable to interim financial reporting as adopted explanatory notes - together with the interim group man- by the EU, nor that the interim group management report agement report of Axel Springer AG for the period from has not been prepared, in material respects, in accor- January 1 to September 30, 2010, which are compo- dance with the provisions of the German Securities Trad- nents of the quarterly financial report pursuant to Section ing Act applicable to interim group management reports. 37x (3) WpHG, ("Wertpapierhandelsgesetz": German Securities Trading Act). The preparation of the con- Berlin, November 9, 2010 densed consolidated interim financial statements in ac- cordance with the IFRS applicable to interim financial reporting as adopted by the EU and of the interim group management report in accordance with the provisions of Ernst & Young GmbH the German Securities Trading Act applicable to interim Wirtschaftsprüfungsgesellschaft group management reports is the responsibility of the legal representatives of the company. Our responsibility is to issue a review report on the condensed consoli- dated interim financial statements and on the interim group management report based on our review. We conducted our review of the condensed consolidated interim financial statements and the interim group man- agement report in accordance with German generally accepted standards for the review of financial statements promulgated by the Institut der Wirtschaftsprüfer (Insti- Ulrich Plett Gunnar Glöckner tute of Public Auditors in Germany) (IDW). Those stan- Wirtschaftsprüfer Wirtschaftsprüfer dards require that we plan and perform the review so [German Public Auditor] [German Public Auditor] that we can preclude through critical evaluation, with a certain assurance, that the condensed consolidated interim financial statements have not been prepared, in material respects, in accordance with the IFRS applica- ble to interim financial reporting as adopted by the EU and that the interim group management report has not been prepared, in material respects, in accordance with the provisions of the German Securities Trading Act applicable to interim group management reports. A re- view is limited primarily to inquiries of company per- sonnel and analytical procedures, and thus does not provide the degree of assurance achievable through a financial statements audit. Since, in accordance with our engagement, we have not performed a financial state- ments audit, we cannot express an audit opinion.
Quarterly Financial Report as of September 30, 2010 Axel Springer AG 42
Report of the Audit Committee of the Supervisory Board
The quarterly financial report as of September 30, 2010 and the independent auditor's review report of the in- terim financial statements, which served as the basis for the auditor’s certification, were presented to the Audit Committee of the Supervisory Board. These documents were explained by the Management Board and discussed with the independent auditor. The Audit Committee approved the interim financial statements.
A reproduction of the review report of the independent auditor is provided in the notes to the interim financial statements of this quarterly financial report.
Berlin, in November 2010
Dr. Giuseppe Vita
Chairman of the Audit Committee
Disclaimer
This quarterly financial report contains forward-looking statements, which are necessarily fraught with certain risks and uncertainties. The future development and results of Axel Springer AG and the Axel Springer Group may differ considerably from the assumptions applied for purposes of this quarterly financial report. The present quarterly financial report does not constitute an offer to sell, nor an invitation to submit an offer to buy, securities of Axel Springer AG. The present quarterly financial re- port does not entail an obligation on the part of the com- pany to update the statements contained therein.
Quarterly Financial Report as of September 30, 2010 Axel Springer AG 43
Additional Information
Financial calendar 2010 Contacts
Annual Financial Statements Press Conference March 10, 2010 Axel Springer AG
Annual Shareholders' Meeting April 23, 2010 Axel-Springer-Strasse 65 10888 Berlin Quarterly Financial Report as of March 31, 2010 May 11, 2010 Tel. +49 (0) 30 25 91– 0 Interim Financial Report as of June 30, 2010 August 05, 2010 Quarterly Financial Report as of September 30, Investor Relations 2010 November 10, 2010 Fax +49 (0) 30 25 91– 7 74 22 [email protected]
Claudia Thomé Share information Head of Investor Relations Tel. +49 (0) 30 25 91– 7 74 21 [email protected] in € 9M/2010 9M/2009 Change
Earnings per share (diluted) 8.12 10.47 – 22.4 % Daniel Fard-Yazdani Closing price 96.96 71.70 35.2 % Deputy Head of Investor Relations
Highest price 97.20 74.85 29.9 % Tel. +49 (0) 30 25 91– 7 74 25 [email protected] Lowest price 73.31 46.94 56.2 %
Average exchange rate 84.88 59.88 41.8 %
Additional information about Axel Springer AG is available on the Internet at www.axelspringer.com. Listing information The quarterly financial report is also available in the origi- Share type Registered share with restricted transferability nal German.
Stock exchange Frankfurt (official exchange)
Stock exchange segment Prime Standard
Security ID No. 550 135, 575 423
ISIN DE0005501357, DE0005754238
Reuters SPRGn.F
Bloomberg SPR GY