14Annual Report Contents 4 Foreword 78 Report of the Supervisory Board 6 Executive Board 86 Consolidated Financial Statements 87 Responsibility Statement 8 The Axel Springer share 88 Auditor’s Report 89 Consolidated Statement of Financial Position 10 Combined Management Report 91 Consolidated Statement of 12 Fundamentals of the Axel Springer Group Comprehensive Income 22 Economic report 92 Consolidated Statement of Cash Flows 41 Economic position of Axel Springer SE 93 Consolidated Statement of Changes in Equity 44 Events after the reporting date 94 Consolidated Segment Report 45 Report on risks and opportunities 95 Notes to the Consolidated 56 Forecast report Financial Statements 61 Disclosures and explanatory report of the Executive Board pursuant to takeover law 158 Boards 65 Corporate Governance Report Group Key Figures Continuing operations in € millions Change yoy 2014 2013 2012 Group Total revenues 8.4 % 3,037.9 2,801.4 2,737.3 Digital media revenues share 53.2 % 47.5 % 42.4 % 1) EBITDA 11.6 % 507.1 454.3 498.8 1) EBITDA margin 16.7 % 16.2 % 18.2 % 2) Digital media EBITDA share 72.1 % 62.0 % 49.4 % 3) EBIT 9.7 % 394.6 359.7 413.6 Consolidated net income 31.9 % 235.7 178.6 190.7 3) Consolidated net income, adjusted 9.3 % 251.2 229.8 258.6 Segments Revenues Paid Models 2.6 % 1,561.4 1,521.5 1,582.9 Marketing Models 10.8 % 794.1 716.5 662.8 Classified Ad Models 27.2 % 512.0 402.6 330.2 Services/Holding 6.1 % 170.5 160.8 161.4 EBITDA1) Paid Models – 2.4 % 244.2 250.1 301.8 Marketing Models 6.0 % 109.7 103.4 98.1 Classified Ad Models 35.2 % 221.4 163.8 133.6 Services/Holding − – 68.2 – 63.0 – 34.8 Liquidity and financial position 4) Free cash flow – 0.8 % 244.1 246.1 297.3 5) Capex − – 95.9 – 94.5 – 77.3 6) Total assets 16.4 % 5,557.7 4,773.8 4,808.2 6) Equity ratio 42.4 % 47.0 % 46.9 % 6) Net liquidity/debt − – 667.8 – 471.3 – 449.6 Share-related key figures7) 3) 8) Earnings per share, adjusted (in €) 11.2 % 2.01 1.81 2.20 Earnings per share (in €) 27.1 % 1.71 1.34 1.64 Earnings per share (in €), discontinued >100 % 6.37 0.65 0.78 9) Dividend (in €) 0.0 % 1.80 1.80 1.70 Year-end share price (in €) 7.2 % 50.08 46.70 32.29 10) Market capitalization as of December 31 7.2 % 4,954.9 4,620.5 3,189.9 Average number of employees 8.4 % 13,917 12,843 12,080 1) Adjusted for non-recurring effects. 2) EBITDA of Services/Holding segment not allocated to digital media. 3) Adjusted for non-recurring effects and amortization and impairments from purchase price allocations. 4) Cash flow from operating activities minus capital expenditures, plus cash inflows from disposals of intangible assets and property, plant, and equipment. 5) Capital expenditures on intangible assets, property, plant, and equipment, and investment property. 6) As of December 31, 2014 and December 31, 2014, respectively. 7) Quotations based on XETRA closing prices. 8) The earnings per share (basic/diluted) adjusted for non-recurring effects and amortization and impairments from purchase price allocations were calculated on the basis of average weighted shares outstanding in the reporting period (98.9 million). 9) Dividend proposal for the financial year 2014. 10) Based on outstanding shares at the closing price, excluding treasury shares. Annual Report 2014 Foreword Foreword Axel Springer SE When I look back to the 2014 financial year, I initially think The employees within our digital business, previously a - and I ask our shareholders to excuse me for a moment - peripheral part of our company, have become a core of our Christmas celebrations. It was a rather exuberant part of the company now in both an economic and cul- party for all company employees who work in Berlin and tural sense. Axel Springer is now truly a digital publisher. Hamburg. Almost 5,000 people were present. Bands and DJs from Berlin, New York, and Detroit were present. The 53.2 percent of total revenues in the year 2014 was gen- last guests were asked to go home at about 6:30 am. erated from the digital sector. 72.1 percent of our EBITDA The evening was fruitful for two reasons in particular: we was generated online. And 74.5 percent of advertising were able to thank our employees for their contribution to revenue came from marketing digital products. Our objec- an extremely successful and eventful financial year in a tive is clear: we will strive to become the leading digital way they certainly would never forget. It also became publisher. That means to become number one in all mar- clear to us once again how Axel Springer has become a kets in which we are active. This will be done via paid rather different company in a relatively short period of models, marketing models, and classified ad models, as time and just how far-reaching the structural and cultural was the case earlier when as an analog publisher and changes have been. Something is different. This was not leading provider of journalism, this success was monetized just because there were so many new colleagues - two- due to paying readers, advertisers and classified ad cus- thirds of employees had never been to an Axel Springer tomers. That is our business model, that is our strategy. Christmas party. Nor was it just because the average age has fallen dramatically. One could sense something elec- The year began with a turning point for the company and trifying, a different atmosphere. the employees who were affected by it. The sale of our regional newspapers, women's magazines and TV pro- gram guides to FUNKE Mediengruppe for € 920 million was completed, which corresponds to an EBITDA factor of 9.7 before tax. The first two-thirds of the purchase 4 Annual Report 2014 Foreword Axel Springer SE price were transferred in accordance with the agreement. share package was immediately purchased in cash. Axel The resulting restructuring of central and service sectors Springer has a purchase option for the other half. If the was shaping the whole year, which will last into the 2015 option is exercised for granting shares, the result is that financial year. General Atlantic converts its remaining shares in the Classified Ads segment into Axel Springer shares and we At the same time we are also fully concentrating on will again gain 100 percent of profits from this fast- investments in our future growth businesses. growing, highly profitable and strategically exceptionally well-positioned business. The transaction also has a Implementation of successful, digital Paid Models was a beneficial side-effect: It shows that an extremely growth matter of high priority within the Paid Models segment in and value-oriented financial investor wishes to participate 2014. Our core brands BILD and WELT already achieved with a large investment in Axel Springer due to having over 310,000 digital subscribers in December (253,471 greater belief in their appreciation potential in synergy digital subscribers for BILD and 57,736 digital subscrib- compared to the Classified Ads model which is extreme- ers for DIE WELT). This development means that in the ly successful in its own right. face of the ever-expanding reach of both offers and the ever-increasing number of paid offers within the publish- Secondly: the start of preparations for converting the ing sector we are extremely confident. company into a KGaA (partnership limited by shares) was a further item of good news at the end of the year. The complete integration of the WELT Group and N24 Exchange-listed companies such as Merck, Henkel, or into a new multimedia news company for quality journal- Fresenius converted to this legal form years ago with ism is in full swing. great success for their shareholders, and the prerequi- sites should be de facto created so that Axel Springer We have announced that we will invest in English- remains a family business whilst being able to fully profit language journalism portals. With an equity stake in the from the ability to raise capital that is available to ex- US-American online magazine OZY, Axel Springer has change-listed companies. We intend to be able to grow added to its existing early stage investments in Silicon quicker and also be able to potentially carry out large, Valley. Along with POLITICO we are developing a new transformative acquisitions. European media portal for political journalism. It should therefore be possible to understand why we - Within the Marketing Models segment kaufDa has suc- regardless of inherent caution in our culture - look to the ceeded with a promising foray into the US market with future with great confidence - and that during our Retale.com. The Classified Ads portfolio was also en- Christmas celebrations even the Executive Board went hanced with a series of acquisitions including the pur- home in the early hours of the morning. chase of Jobsite, a successful job portal in Great Britain, the takeover of Yad2, the largest classified ads portal in Thank you kindly for the trust and confidence you have Israel, as well as takeovers of LaCentrale, the French placed in our company. classified ad portal for automobiles and @Leisure, the online broker for holiday real estate. Two further strategic courses for the future took place at the end of the year. Firstly: the announcement of the planned reacquisition of Sincerely yours, the 30 percent equity share in our very successful Classi- Mathias Döpfner fied Ads business held by General Atlantic.