Interim Report 1999

INTERIM REPORT 1999

1st January, 1999 until 30th June, 1999 GROUP KEY DATA INTERIM REPORT GROUP AND AXEL SPRINGER VERLAG AG

1st half 1st half Axel Springer Verlag can look back on a successful half-year to 30th June DM million 1999 1998 1999. Despite persistently difficult trading conditions in the retail market Sales 2,496 2,311 and increased expenditure on the titles of the company, the consolidated Change (%) 8.0 4.0 operating profit increased to DM 232 million. On the basis of current Results estimates the Board of Management expects this trend to continue during Net profit 144 129 Return on sales 5.8 5.6 the second half of the year. Consolidated operating profit 232 227 of total advertising expenditure went to Balance sheet television, which accounted for DM 6.6 Balance sheet total 3,112 2,884 billion (5.8 percent up on the previous Fixed assets 1,451 1,319 year). Print media advertising (excluding Fixed asset cover (%) 70.2 65.7 classified ads) grew by 5.2 percent to Liquid assets 762 759 DM 7.5 billion. Newspapers increased Shareholders' equity BUSINESS ENVIRONMENT their advertising revenues by 7.3 percent. (excl. retained profits) 1,019 866 As a percentage of total assets 32.7 30.0 In the first half of 1999 the German Sales of classified advertising also showed Long-term liabilities 186 224 economy showed modest growth, with encouraging growth. This was mainly an increase of 1.1 percent in GDP. The due to the higher volume of advertise- Capital expenditure 133 122 growth in private consumption during ments for jobs and motor vehicles and in- Depreciation 84 106 this period was minimal. However, rising creased placements by national advertisers. disposable incomes are expected to gen- Share erate an increase in private consumption The gross advertising revenues of consum- Share price on 30th June (Euro) 970 680 during the second half of the year. For er magazines increased by 4.1 percent compared with the first half of the pre- Average no. of employees 12,382 12,024 the year as a whole GDP is expected to grow by 1.3 percent. vious year. The principal beneficiaries were titles aimed at devotees of the arts, The business trend in the German ad- nature and science (+14.5 percent), with vertising industry in the first six months computer and online magazines showing of 1999 was encouraging. The main- the highest increase overall. Business stream advertising media recorded a year- magazines and women's magazines also on-year increase in gross sales revenue recorded a gratifying growth in advertis- of DM 820 million to DM 15.4 billion ing sales (+13.6 percent and +7.3 percent (+ 5.6 percent). A substantial proportion respectively).

1 By contrast, demand in the retail sector THE COMPANY In the German newspaper market BILD Net paid circulation, was restrained. Compared with the first was able to maintain its strong market IVW, six-monthly average 1999 Axel Springer Verlag continued to per- half of 1998 sales of newspapers and position. Merchandising activities with ILD form successfully during the first half B 4,448,723 magazines declined in volume by some music CDs, consumer advice books and BILD AM SONNTAG 2,537,123 of 1999. Sales revenues rose noticeably. 2 percent, while sales revenues stagnated. video games were further expanded. COMPUTER BILD 1,114,593 The rise in costs was kept within mod- BILDWOCHE 550,978 Circulation of IVW-registered daily and A series of special features recalling erate limits. Sunday newspapers declined by 1.4 per- the history of East and West Germany, DIE WELT 228,821 cent. This was mainly due to the down- The position of existing titles was consol- published to mark the 50th anniversary WELT AM SONNTAG 424,209 ward trend in news-stand sales (–2.7 per- idated and/or improved through targeted of the German Federal Republic, was FINANZEN 83,588 cent). In the general-interest magazine investments in marketing activities and carried in a 4-page pull-out supplement EURO AM SONNTAG 83,404 segment the established TV guides were editorial measures. In order to develop that appeared twice a week. The series HAMBURGER ABENDBLATT 308,646 hard hit by the launch of two budget- a basis for long-term growth the Group's was accompanied by a travelling exhibi- price newcomers. However, the computer leading position in the German print tion in a number of major German cities, BERLINER MORGENPOST 175,140 magazine and business press segments market was strengthened and its activities which attracted more than 77,000 visitors BZ 278,381 defied the general trend and showed in the business field Electronic Media in Hamburg alone when it was shown in BZ AM SONNTAG 152,467 continuing growth. and in foreign media markets were sys- the AXEL SPRINGER PASSAGE. HÖRZU 2,178,507 tematically expanded. FUNK UHR 1,253,890 BILD AM SONNTAG also retained its TV NEU 700,621 The establishment of two new companies leading position as Germany's favourite based in London – Axel Springer Pub- Sunday newspaper. Since mid-March AUTO BILD 824,646 lishing International Ltd. and Axel BILD AM SONNTAG has also been printed SPORT BILD 559,088 Springer TV International Ltd. – was de- on Gran Canaria, which now joins BILD DER FRAU 1,868,765 signed to focus and coordinate the Group's Mallorca as the second major holiday JOURNAL FÜR DIE FRAU 452,022 strategic and operational activities for resort frequented by large numbers of ALLEGRA 222,964 expansion into international markets. Germans where the title is published locally. Early publication and the inclu- FAMILIE & CO 236,834 sion of the latest German football results RUTE & ROLLE 80,451 have further enhanced the appeal of RALLYE RACING 77,620 ILD AM ONNTAG B S for holiday-makers. FOTOMAGAZIN 75,090 TENNIS MAGAZIN 71,707 FLIEGERMAGAZIN 42,735 SAVOIR VIVRE 33,024 AERO INTERNATIONAL 31,606 GOLF SPORT 29,634 FLY AND GLIDE 22,161

2 3 COMPUTER BILD has established itself as In the fiercely competitive Berlin news- The book-publishing houses owned by The growing importance of the electronic the third profitable title within the BILD paper market Axel Springer Verlag suc- Axel Springer Verlag were reorganized. media for Axel Springer Verlag was group. With an average circulation of ceeded in strengthening its position. New So as to survive in a difficult and highly reflected in the appointment of a new 1.1 million copies, COMPUTER BILD now pricing policies, new deals for advertis- competitive market they were grouped member of the Board of Management. ranks as the leading computer magazine ers placing small ads for property and together under the imprint Econ, Ull- in Europe. motor vehicles and the launch of local stein, List in Berlin/Munich and placed To increase its stake in the television production sector Axel Springer Verlag neighbourhood editions of the BERLINER under unified management. In order to DIE WELT has been developed as a acquired in July a 25% interest (with MORGENPOST have already produced acknowledge the historic association of modern, high-quality national news- positive results. Ullstein with Berlin a new publishing retrospective effect from 1st January paper. Following the new editorial unit was formed in the city from an 1999) in Studio Hamburg Produktion concept introduced in November 1998 The HAMBURGER ABENDBLATT developed amalgamation of the imprints Ullstein für Film und Fernsehen GmbH, one of the paper's circulation increased notice- its classified advertising business and Berlin, Propyläen and Quadriga. Germany's foremost TV and film pro- ably during the first half of 1999. The increased its market leadership overall. duction companies. A joint venture agree- high degree of acceptance among new The successful development of the ment was also signed between Studio readers is reflected in the record number In the magazine sector FUNK UHR was Group's international print activities in Hamburg GmbH and the newly founded of visits to the DIE WELT ONLINE website. improved in quality. The main feature of countries such as Spain, Poland and Metropol Film und Fernseh GmbH in the new-look FUNK UHR is an extended Hungary was continued. A majority share- Berlin. In April of this year the first and improved TV and radio section. holding was acquired in the business current affairs magazine program produced publication specialist Handelszeitung by Axel Springer Verlag was launched on SPORT BILD was also overhauled in the EWSMAKER. In spring. From a topical Wednesday maga- und Finanzrundschau AG, Zurich, with SAT 1 under the title N the same month the Group acquired a zine it was transformed into a modern retrospective effect from 1st January majority shareholding in the US pro- sports magazine containing a great deal 1999. Since the beginning of the year duction company GRB Entertainment of background information and a preview Axel Springer Verlag has also owned Inc., the international market leader in of the weekend's sport. a majority share in the Rumanian magazine publishing house Axel Springer the production of TV documentaries. FAMILIE & CO defied the general down- Editura SRL, which currently publishes ward market trend and increased its cir- seven women's and general-interest culation. The online edition of FAMILIE titles for the Rumanian market. & CO also received a face-lift to mark its third anniversary.

4 5 Booxtra GmbH & Co. KG was set up Results Despite the high level of capital spend- The following corporate data include for the electronic commerce sector with ing, liquid assets as of 30th June 1999 figures relating to the new activities Despite substantial market investments a 25% investment by Axel Springer stood at DM 762 million, virtually un- initiated during the last twelve months. and start-up costs for new activities, the Verlag. The company's Internet bookshop changed from the previous year. As a Principal among these are the Swiss consolidated operating profit rose to BOOXTRA was launched in June. The result of debt repayments, long-term Handelszeitung publishing group, the DM 232 million in the first six months Group also owns a 25% interest in the liabilities were down by 17.3 percent Spanish newspaper publisher HOBBY of 1999 – DM 5 million higher than the newly created WSI Webseek Infoservice to DM 186 million compared with the PRESS, the ECON + LIST publishing excellent results achieved in the first half GmbH & Co. KG, which launched its previous year. group, the television production company of the previous year. The consolidated search and navigation service INFOSEEK Schwartzkopff TV and the production net profit of DM 144 million was The strong business performance of on the Internet in April. company for NEWSMAKER AS Media. 11.7 percent up on the previous year Axel Springer Verlag was duly reflected The previous year's figures have not (DM 129 million). The increase was Just ten months after the devastating in the share price, which rose by nearly been adjusted. The effects of changes due in part to the sale of the company's arson attack on the newspaper printing 33 percent in the first half-year while in the composition of the consolidated 10 percent stake in AOL Germany. plant at Essen-Kettwig the topping-out the MDAX index remained unchanged. group are indicated below, in so far as ceremony for the new production facility The Board of Management expects this they are significant. took place in May. Production has al- trend to continue during the second half ready been resumed in selected areas. of the year – assuming that the economy When the plant is fully re-equipped with continues to expand and that advertising new machinery next year it will be one sales remain buoyant. of the most modern newspaper printing works in Europe. Share price The establishment of the new customer Index: 1st January 1999 = 100 service centre ASDIREKT in Hamburg and Berlin will make it possible to provide an 160

improved 24-hour service to subscribers, 140 readers and advertisers. The quality of customer service in other areas of the 120

company's operations is also kept under 100 constant review. 80

January 1999 July 1999

Axel Springer Verlag AG MDAX

6 7 Sales Sales by division in October 1998, rapidly established Sales by segment DM million itself within its market segment. DM million In the first six months of 1999 sales rose by DM 185 million (8.0 percent) to 1st half 1st half 1st half 1st half 98* 99 The advertising revenues from the Group's 98* 99 2,500 DM 2,496 million. Sales generated by newspaper titles rose by DM 51 million 2,500 the new activities accounted for 5.5 per- (6.6 percent) to DM 821 million. Double- cent of this rise. Retail sales amounted 2,000 digit growth was recorded by WELT AM 2,000 to DM 977 million, which represents a SONNTAG, DIE WELT and HAMBURGER year-on-year increase of DM 12 million ABENDBLATT, as well as the free adver- (1.2 percent). Advertising revenues 1,500 tising titles in Hamburg. The Berlin re- 1,500 grew by DM 81 million (8.0 percent) gional newspapers also achieved a small to DM 1,100 million. Other revenues increase in advertising revenues. On a rose by a substantial DM 92 million 1,000 1,000 less positive note, BILD AM SONNTAG, (28.0 percent) to DM 419 million. This LEIPZIGER VOLKSZEITUNG and OSTSEE- growth in sales was almost entirely due 500 ZEITUNG all reported a fall in revenues. 500 to the expansion of the Group's book- publishing and television activities. The Group's magazine titles achieved 0 sales of DM 651 million - up by 0 The newspapers published by Axel DM 35 million (5.7 percent) on the Springer Verlag generated sales of Total 2,311 2,496 same period last year. Retail sales of ma- Total 2,311 2,496 DM 1,426 million, an increase of gazines rose by DM 5 million (1.3 per- Other revenues DM 58 million (4.3 percent). Retail Magazines cent) to DM 372 million in the first half Miscellaneous Contract printing Newspapers revenues rose by DM 7 million (1.2 per- of 1999. One of the fastest-growing titles Advertisements cent) to DM 605 million. Approximately * Adjusted to take account of Retail changes in statement of book was COMPUTER BILD, which maintained * Adjusted to take account of half this increase was generated by the sales in the following year its position as Germany's top-selling PC changes in statement of book Handelszeitung publishing group. The magazine and set a new circulation record sales in the following year general decline in newspaper sales compared with the same period in 1998. affected the titles of the Axel Springer The newly acquired titles from the Spanish Verlag just as it affected its competitors. publishing house HOBBY PRESS also However, the net paid circulation of helped to boost sales. Despite a fall in cir- DIE WELT and WELT AM SONNTAG rose culation, BILD DER FRAU, AUTO BILD and by 5.2 percent and 3.3 percent respec- SPORT BILD all maintained their leading tively, significantly improving the market positions within their respective segments. position of both titles. The business The same applies to HÖRZU and FUNK UHR. journal EURO AM SONNTAG, launched

8 9 Advertising revenues generated by the Other revenues for the first half-year Expenditure Employees Group's magazines grew by DM 30 mil- totalled DM 419 million, a year-on-year Total expenditure for the first half-year In the first six months of 1999 Axel lion (12.1 percent) to DM 279 million. increase of DM 92 million (28.0 per- rose by DM 176 million (7.5 percent) Springer Verlag maintained an average The largest single increase was achieved cent). Sales of book titles accounted for compared with 1998. DM 126 million of 12,382 employees on the payroll. By by COMPUTER BILD. The women's titles DM 73 million. The substantial growth (5.4 percent) was attributable to new comparison with the first half of 1998 and FAMILIE & CO also performed well of DM 53 million in book sales com- activities. The cost of materials increased the total number of employees increased in this regard. In the fiercely contested pared with the first six months of 1998 by 15.0 percent to DM 817 million; by 358. Without the additional personnel market for TV and radio guides, HÖRZU is attributable to the acquisition of the excluding the newly consolidated com- taken on in connection with the Group's and FUNK UHR recorded significant gains ECON + LIST publishing group and panies, the figure rose by 6.0 percent new activities, the total number would in revenues, while AUTO BILD and the Mail Order Kaiser. Electronic media to DM 753 million. The rise was large- have fallen by 243. special-interest titles saw a decline in sales rose by DM 29 million in the same ly due to the increased use of outside their advertising sales. period to DM 72 million. This increase printing facilities while the printing is largely due to the start of in-house plant at Essen-Kettwig was out of television productions and the acquisition action. The additional costs incurred Employees, 1st half 1999 of the television production company as a result of the fire damage are fully Schwartzkopff TV. Contract printing covered by insurance. Paper costs in- sales amounted to DM 115 million, vir- creased by DM 10 million (3.6 percent) Hourly paid Journalists tually unchanged from the previous year. employees 23.9 % to DM 291 million as a result of higher 24.8 % consumption. Personnel costs rose by DM 40 million to DM 750 million - an increase of 5.6 percent - or by DM 11 million (1.6 percent) to DM 722 million if the newly consolidated companies are excluded. Salaried employees 51.3 %

Total 12,382

10 11 Capital expenditure Capital expenditure and depreciation In the first six months of the current DM million financial year Axel Springer Verlag in-

1st half vested a total of DM 133 million (com- 99 pared with DM 122 million in the first 150 half of 1998).

120 DM 104 million was invested in tangible and intangible fixed assets. The major item of capital expenditure was the re- 90 building of the printing plant at Essen- Kettwig, which was destroyed by arson

60 in July 1998.

Investments in financial assets – exclud- 30 ing the consolidated new acquisitions – amounted to DM 29 million (first half If you require further information 0 of 1998: DM 33 million). The principal about this Interim Report, please contact: items of expenditure were the acquisition Capital expenditure 1 33 of GRB Entertainment Inc. and the Axel Springer Verlag AG Rumanian magazine publisher Axel Finance and Accounting / Depreciation Springer Editura SRL, together with the Corporate Controlling Investments in tangible and intangible formation of a new company, Booxtra Axel-Springer-Platz 1 fixed assets GmbH & Co. KG. In the first half of Financial assets 1999 depreciation totalled DM 84 mil- 20350 Hamburg lion (1998: DM 106 million). Tel.: + 49 - (0) 40 - 3 47-2 35 23 Berlin, August 1999 Fax: + 49 - (0) 40 - 3 47-2 42 89

Axel Springer Verlag AG http://www.asv.de Board of Management

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