INTERIM REPORT 2000

1st January, 2000 until 30th June, 2000 Group Key Data

1st half 1st half DM million 2000 1999

Sales 2,734 2,496 Change (%) 9.5 8.0

Results Net profit 158 144 Return on sales (%) 5.8 5.8 Consolidated operating profit 249 232

Balance sheet Balance sheet total 3,321 3,112 Fixed assets 1,597 1,451 Fixed asset cover (%) 73.2 70.2 Liquid assets 713 762 Shareholders’ equity (excl. retained profits) 1,169 1,019 Equity ratio (%) 35.2 32.7 Long-term liabilities 207 186

Capital expenditure 213 133 Depreciation 104 84

Share Share price on 30th June (0) 1,210 970

Employees Average no. of employees 12,909 12,382 Interim report Group and Axel Springer Verlag AG

Axel Springer Verlag performed very successfully in the first half of 2000. The consolidated net profit increased by almost ten per cent compared with the previous year and totalled DM 158 million. In spite of the comprehensive start that has been made on expanding the Internet operations and the initial costs associated with these activities, the Board of Management expects the net profit for the year to reach the same level as in the previous year.

Business Environment

The economic upswing in The German advertising industry record- continued in the first half of 2000. The ed substantial growth again in the first GDP increased by 3.0%. Growth of 2.8% half of 2000. Gross advertising revenues is anticipated for the year as a whole. increased by 13.2 % to DM 17.4 billion This positive development was attribut- in the first six months of the year. Print able to a very large extent to strong media advertising (excluding classified export demand. The competitive position ads) grew by 12.2 % to DM 8.4 billion. of German suppliers outside Euroland Television channels generated 14.5 % improved thanks to the devaluation of higher advertising revenues, while radio the euro. The gradual increase in stations also reported double-digit employment strengthened private con- growth rates (+ 13.2 %). sumption too. Consumer spending only increased slightly, however, due to moderate collectively agreed pay increases and higher energy costs.

1 In the period under review, DM 3.9 bil- Total sales of daily and Sunday news- lion (+ 12.3 %) were spent on newspaper papers dropped by 1.9 %. There was a advertising (excluding classified ads). disproportionately large decrease of Advertising business was particularly 3.1 % in newsstand sales due to lower successful at national newspapers demand for both subscription and (+ 24.6 %) and newsstand papers non-subscription newspapers. (+ 15.0 %). Considerable growth was recorded in sales of classified adver- The trend towards budget-price tising as well, particularly with job newcomers continued with the high- advertisements. circulation TV guides and women's weeklies in the general-interest magazine The gross advertising revenues of segment. Overall demand for the general-interest magazines increased to increasingly large number of magazines DM 4.0 billion (+ 12.9 %). The principal was sluggish. Computer and business beneficiaries here were the business magazines, on the other hand, defied press (+ 38.8 %), computer and online the general market trend once again. magazines (+ 34.1 %), current affairs magazines (+ 15.4 %) and TV guides (+ 10.8 %).

The retail press market did not benefit from the economic upswing in Germany. Compared with the first half of 1999, newspaper and magazine sales volume fell by another two per cent. Total sales revenues stagnated.

2 The Company other hand to develop new multimedia business models. Investment of a Axel Springer Verlag continued to triple-digit DM million amount and the develop successfully in the first half of creation of up to 300 new jobs in the 2000. Sales revenues rose considerably, next two to three years are planned in primarily because of the excellent adver- order to implement this strategy sys- tising business. Cost increases were kept tematically and offensively. relatively low in spite of the impact of German legislation on jobs paying In the television operations a decision less than DM 630 per month and on was taken in June 2000 to establish a fictitious self-employment. family of different channels, consisting of ProSieben, Kabel 1, N24 and SAT.1. Measures to consolidate and improve Axel Springer Verlag holds an interest the position of existing titles were of about 11.5 % in this channel family. continued in the print media field. The The competitive position is being opti- introduction and development of new mised by this co-operation between publications in fast-growing segments channels that have been independent up such as computer and business maga- to now. Axel Springer Verlag and Kirch- zines led to additional success. Media have at the same time decided to grant each other an option to transfer Important decisions were taken in the the shares held by Axel Springer Verlag electronic media field. The crucial to KirchMedia at a later date. activities here involve the reorganisation and strategic reorientation of the Inter- net operations. The objectives of the “two-leg strategy” are on the one hand to safeguard and develop existing news- paper and magazine brands and on the

3 Internationalisation of the company was launched as the first joint project on also continued systematically. Axel 30th March 2000. This increases the Springer Verlag acquired a majority in- number of versions of AUTO BILD that terest in the French publishing company are published in Europe outside Media Mag SA in May. This company Germany to a total of twelve. publishes four magazines, the most important of which is the weekly TV The German newspaper and magazine guide TÉLÉ MAGAZINE with a net paid operations were strengthened again too. circulation of about 513,000 copies. BILD appeared on a national public holiday in Germany for the first time With effect from 1st January 2000, Axel when EXPO 2000 opened. The exhibi- Springer Verlag took over the youth and tion “paper, people, press” opened music magazines MÄDCHEN, POPCORN, in the AXEL SPRINGER PASSAGE in HAMMER and MUSIKEXPRESS/SOUNDS when the EXPO started on as well as the quarterly magazine MISS 1st June 2000 as well. This exhibition is BEAUTY @ND MORE via its subsidiary registered as one of eight EXPO 2000 Axel Springer Young Mediahouse in “Worldwide Projects” in Hamburg and . Some of these publications will be informing the public about the appear in Poland, the Czech Republic, environmental life cycle of a newspaper Hungary and Romania as well. until 31st October 2000.

In Portugal Axel Springer Verlag started Since February 2000, Axel Springer a joint venture with the Portuguese Verlag has been distributing the news- publishing company SVD (Sociedade paper KÖLN EXTRA free of charge in a Vicra Desportiva Lda). The plan is counter-attack intended to combat to co-operate on publishing new general- competition from free daily newspapers. interest magazines on the Portuguese market. A Portuguese edition of AUTO BILD with the name AUTOFOCO was

4 The monthly magazine COMPUTER Net paid circulation, IVW, six-monthly average 2000 BILD SPIELE that was launched in November 1999 maintained its position as market leader for game magazines BILD 4,319,065 BILD AM SONNTAG 2,493,947 in the first half of 2000 too. COMPUTER BILD 1,046,775 COMPUTER BILD SPIELE 635,501 introduced the new weekly BILDWOCHE 495,525 supplement WEBWELT in mid-April. DIE WELT 245,963 It provides information about Internet WELT AM SONNTAG 444,004 developments and trends in the new EURO AM SONNTAG 189,648 economy. FINANZEN 142,292

HAMBURGER ABENDBLATT 299,685 WELT AM SONNTAG is preparing to expand its regional coverage. A separate BERLINER MORGENPOST 171,975 regional edition for Munich is to be B.Z. 262,729 launched this year in addition to the B.Z. AM SONNTAG 150,871 existing Hamburg, and North Rhine-Westphalia editions.

The development of the Axel Springer Verlag business publications was parti- cularly encouraging. The net paid circu- lation of EURO AM SONNTAG amounted to 189,648 copies, an increase of 127 % over the first half of 1999. One of the reasons for the success of EURO AM SONNTAG is its up-to-the-minute news: it is the only business newspaper appearing at the weekend that gives its readers the end-of-the-week share prices at stock exchanges around the world.

5 FINANZEN, the monthly business Net paid circulation, magazine for investors, is also develop- IVW, six-monthly average 2000 ing successfully. The net paid circula- tion increased by 70% over the first half HÖRZU 2,113,432 FUNK UHR 1,175,504 of the previous year and now totals TVNEU 557,730 142,292 copies. AUTO BILD 807,892 The most recent business publication SPORT BILD 573,218 launched by Axel Springer Verlag is BILD DER FRAU 1,755,905 AKTIENRESEARCH, the weekly magazine JOURNAL FÜR DIE FRAU 406,477 for investors. “Professional analyses for ALLEGRA 206,239 private investors” is the motto of the FAMILIE&CO 254,281 magazine, which appeared for the first time on 13th April 2000. Followers of RUTE & ROLLE 77,904 the stock market can, for example, FOTOMAGAZIN 72,451 RALLYE RACING 71,104 obtain the latest share news and profes- TENNIS MAGAZIN 67,382 sional analyses from AKTIENRESEARCH FLIEGERMAGAZIN 46,877 ONLINE. SAVOIR VIVRE 37,115 AERO INTERNATIONAL 32,739 The Jahr Verlag publishing company in GOLF DIGEST 27,739 FLY AND GLIDE 22,987 Hamburg and "top special" – a sub- PHOTO TECHNIK sidiary of Axel Springer Verlag – agreed INTERNATIONAL 8,511 to set up a 50:50 joint venture with MÄDCHEN 320,406 effect from 1st October 2000. This will POPCORN 195,910 help to consolidate and strengthen their MUSIKEXPRESS/SOUNDS 74,635 joint activities on the fiercely competi- HAMMER 56,849 tive market for special-interest maga- zines.

6 The book publishing group Econ Axel Springer Verlag divested two Ullstein List acquired the rights to the operations with backdated effect from next books by the US bestseller author 1st January 2000: in view of the stra- Stephen King and the successful German tegic decision to concentrate on the core author Hera Lind. In June six new titles and high-growth segments of the maga- were added to the COMPUTER BILD zine market, the Medical Tribune pub- book series that is produced in co- lishing group was sold to the Süd- operation with the Ullstein paperback deutscher Verlag publishing house. The publishing company. This series now minority interest of 49 % in the Ringier- contains almost 50 different books Springer joint venture in the Czech about all the major computer subjects. Republic and Slovakia was sold to the majority shareholder Ringier. In the electronic media field Axel Springer Verlag, DEAG Entertainment Axel Springer Verlag is intensifying and START AMADEUS are planning a its traditionally strong commitment to joint venture to establish an electronic Berlin by making a major new invest- marketplace for events, travel and other ment there amounting in total to leisure activities. DM 340 million. A start was made on building an office and business complex Further progress was made in develop- with a total area of 64,000 m2 on the ing interactive media into an Internet existing main Berlin site in May. This full-service provider. The programme is building project is scheduled to be being broadened to include content completed in mid-2003. brokerage (the provision of own and third-party content). Since the beginning of the year, interactive media has been marketing the Teletext programme ZDF TEXT that is produced and broad- cast by the German ZDF channel. This means that interactive media's Teletext portfolio now consists of eight different marketing ranges.

7 Results Share price Index: 3rd January 2000 = 100 The consolidated operating profit amounted to DM 249 million – an in- 140 crease of DM 17 million – thanks to the successful development of the advertis- 120 ing business. The consolidated net profit went up DM 14 million (+ 9.9 %) to 100 DM 158 million. In spite of the com-

prehensive start that has been made on 80 expanding the Internet operations and the initial costs associated with these January 2000 July 2000 activities, the Board of Management expects the net profit for the year to Axel Springer Verlag AG reach the same level as in the previous MDAX year. This depends on continuation of the positive trend in advertising business. increased to EUR 1,535 by mid-March. Liquid assets totalled DM 713 million At the end of June, the price was on 30th June 2000. As a result of the EUR 1,210, which was slightly higher dividends already payed in June and than the price at the beginning of the the high level of investment, they were year but lower than the MDAX index. DM 49 million lower than in the previous year. The long-term liabilities increased Nine companies were included in the by DM 21 million to DM 207 million following consolidated figures for the due to the obtainment of low-interest first time in the last twelve months, loans. while nine companies were eliminated. Two companies were merged as a result The price of the Axel Springer share of restructuring exercises. The previous developed inconsistently: following a year's figures were not adjusted, successful start to the new year with an because the changes would not have initial price of EUR 1,200, the share been significant.

8 Sales The newspapers' advertising business developed very well. The advertising Axel Springer Verlag generated total revenues totalled DM 916 million, an sales of DM 2,734 million in the period increase of DM 95 million (+ 11.6 %). under review. This corresponds to an BILD, DIE WELT, WELT AM SONNTAG, increase of DM 238 million (+ 9.5 %) BERLINER MORGENPOST and compared with the first half of 1999. HAMBURGER ABENDBLATT each con- tributed double-digit growth to this Retail sales contributed DM 31 million increase. (+ 3.1 %) of this increase and reached DM 1,008 million. Advertising revenues amounted to DM 1,213 million and Sales by division were thus up DM 113 million (+ 10.3 %). DM million Other revenues rose by DM 94 million (+ 22.5 %) to total DM 513 million. 1st half 1st half This increase is attributable primarily to 1999 2000 higher sales in the electronic media 3,000 field as well as to better transport and merchandise revenues. 2,500

Total newspaper sales amounted to 2,000 DM 1,520 million, an increase of DM 94 million (+6.6 %) over the previous 1,500 year. Retail revenues (DM 604 million) were the same as in 1999. DIE WELT 1,000 achieved above-average circulation growth (+ 7.5 %) and turned in the best sales 500 figures in a second quarter for 40 years as a result of successful marketing 0 activities. The paid circulation of WELT AM SONNTAG increased by 4.7 % and Total 2,496 2,734 reached its highest level ever. Other revenues Magazines Contract printing Newspapers

9 Sales by segment The magazines increased their sales DM million revenues by DM 50 million (+ 7.6 %) to DM 701 million. Retail sales grew 1st half 1st half by DM 32 million (+ 8.6%) to DM 404 1999 2000 million. This increase is due in parti- 3,000 cular to the new youth and music publications of Axel Springer Young 2,500 Mediahouse, the Hungarian magazines and the Finanzen Verlag publications. 2,000 Advertising revenues generated by the 1,500 magazines increased by DM 18 million (+ 6.4 %) and amounted to DM 297 1,000 million. All the Axel Springer Verlag magazines except the TV guides con- 500 tributed to this increase.

0 The other revenues increased by DM 94 million (+ 22.5 %) and totalled Total 2,496 2,734 DM 513 million. They include book sales of DM 75 million. Adjusted for Miscellaneous the companies eliminated from the Advertisements consolidated accounts, Econ Ullstein Retail List thus recorded an increase of DM 12 million over the same period the previous year. Electronic media sales revenues amounted to DM 109 million, which corresponds to an increase of DM 37 million. This increase is due largely to higher sales with online mar- keting, Teletext and Audiotex. Contract printing sales increased by DM 12 million (+ 10.9 %) to DM 127 million.

10 Expenditure Employees

Total expenditure for the first half of In the first half of 2000 Axel Springer 2000 was DM 221 million (+ 8.8 %) Verlag maintained an average of 12,909 higher than in the same period the employees on the payroll, 527 more previous year. The cost of materials than in the same period the previous increased by DM 84 million (+ 10.2 %). year. The increase in personnel is due Higher expenditure for merchandise and partly to the legislation about fictitious bought-in services was one reason for self-employment that came into force this increase. Paper costs increased by last year as well as to new business DM 5 million (+ 1.6 %) to DM 296 operations. million due to higher consumption. Personnel costs rose by DM 55 million (+ 7.3 %) to DM 805 million because Employees, 1st half 2000 of the larger number of employees. Industrial employees 23.5 %

Editorial staff 25.4 %

Salaried employees 51.1 %

Total 12,909

11 Capital expenditure Investments and depreciation DM million In the first half of 2000 Axel Springer Verlag invested DM 213 million – 1st half DM 80 million more than in the same 2000 period the previous year. 250 Most of the investments (DM 123 mil- 200 lion) were made in tangible and intangible fixed assets. The biggest individual projects were extensions to the printing 150 plants in Ahrensburg and Spandau and the rebuilding of the Essen-Kettwig 100 printing plant.

Investments in financial assets amoun- 50 ted to DM 90 million and were thus DM 61 million higher than in the 0 previous year, partly because of the acquisition of the French publishing Capital expenditure 213 company Media Mag SA. Further investments were made at existing Depreciation subsidiaries. Investments in tangible and intangible Depreciation amounted to DM 104 fixed assets million (1999: DM 84 million). Financial assets

Berlin, August 2000

Axel Springer Verlag AG Board of Management

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