09Annual Report Contents Foreword 2 Report of the Supervisory Board 107 Management Board 6 ullstein bild: Freedom 112 Axel Springer: Multimedially integrated 8 Consolidated Financial Statements 132 Auditor’s Report 133 The Axel Springer share 30 Consolidated Statement of 134 Financial Position Management Report of the Group and Consolidated Statement of 136 Management Report of Axel Springer AG 32 Comprehensive Income Business model, structure, and market position 33 Consolidated Statement of Cash Flows 137 Strategy and success monitoring 39 Consolidated Statement of Changes in Equity 138 Employees 43 Social responsibility 47 Notes to the Annual Financial Statements 140 Business development and performance 51 Financial situation and balance sheet 77 Boards 182 Economic position of Axel Springer AG 79 Profit utilization proposal 81 Glossary 184 Risk and Opportunities Report 81 Events after the balance sheet date 86 Outlook 87 Disclosures pursuant to Sections 289 (4), 91 315 (4) HGB and Explanatory Report pursuant to Section 176 (1) (1) AktG Declaration on Corporate Governance 94 pursuant to Section 289a HGB and Corporate Governance Report GroupGroup Key KeyFigure s Figures GroupGroup Key Figures Change in € millions 2005 2006 2007 2008 2009 yoy Revenues 2,391.5 2,375.9 2,577.9 2,728.5 2,611.6 – 4.3 % International revenues 383.7 383.2 537.2 596.8 547.6 – 8.2 % International revenues as percent of total revenues 16.0 % 16.1 % 20.8 % 21.9 % 21.0 % Pro forma revenues Digital Media 543.5 569.0 4.7 % Digital Media revenues as percent of total revenues (Pro forma) 18.8 % 21.0 % 1) EBITDA 413.6 433.9 470.0 486.2 333.7 – 31.4 % EBITDA-margin1) 17.3% 18.3% 18.2% 17.8% 12.8% Consolidated net profit/loss 231.4 290.8 – 288.4 571.1 313.8 – 45.0 % 2) Consolidated net profit/loss, adjusted 202.1 205.0 234.6 254.6 152.6 – 40.0 % 3) Total assets 2,612.0 3,124.0 3,826.9 2,809.1 2,934.3 4.5 % 3) Equity 1,185.0 1,795.1 1,211.8 1,067.7 1,196.8 12.1 % Equity ratio3) 45.4% 57.5% 31.7% 38.0% 40.8% Free cash flow 220.2 233.9 238.7 219.7 231.3 5.3 % Net debt/liquidity 327.2 477.4 – 743.1 – 369.5 – 193.0 - 4) Earnings per share (in €) 7.33 9.13 – 9.70 18.54 10.19 – 45.0 % 2)4)5) Earnings per share, adjusted (in €) 6.79 6.88 7.88 8.55 5.13 – 40.0 % 6) Dividend (in €) 1.70 3.50 4.00 4.40 4.40 0.0 % Year-end share price (in €) 108.00 136.45 98.00 51.39 75.05 46.0 % Average number of employees 10,166 9,733 10,348 10,666 10,740 0.7 % 1) Adjusted for non-recurring effects and effects of purchase price allocations. 2) Adjusted for significant, non-operating items. 3) The figures as of December 31, 2008 were adjusted for the effects of the changed accounting method for pension commitments. 4) Diluted. 5) The adjusted diluted earnings per share for all years presented herein were calculated on the basis of the weighted average shares outstanding (diluted) in fiscal year 2009. 6) Dividend proposal for the fiscal year 2009. Revenues 4.3 % below prior year International and Digital Share more than 20 % Double-digit EBITDA margin despite recession in € millions in € millions Circulation Advertising Other International Revenues Digital Media Revenues EBITDA margin in % as Percent of Total as Percent of Total Revenues Revenues (Pro forma) 17.8 % 264.7 296.9 486.2 1,248.1 1,138.5 12.8 % 21.9 % 21.0 % 21.0 % 333.7 18.8 % 1,215.8 1,176.2 2,728.5 2008 2009 2,611.6 2008 2009 2008 2009 2008 2009 Axel Springer is one of the leading integrated multimedia print, online, and Web-TV companies in Europe. The core of our business is not to print on paper, but excellent journalism. Every medium, whether print or digital, is subject to different playing rules, but content quality is what always counts. Our business has always been and will always be about news, opinions and well-told stories. By our networked processes and by transcending media boundaries we are linking the different worlds together. 2 Foreword “We widened the lead over our competitors, built on the strength of our brands, and actively promoted digitization.” Dr. Mathias Döpfner Chairman and Chief Executive Officer It makes sense to weatherproof your house before the Our strategy remains unchanged too, since 2001 already. storm hits. And that is exactly what we at Axel Springer We continued to pursue our stated goals with single- have been done intensively in the last seven years, why minded resolve in 2009: The expansion of our market we have built up the digital business of the future and leadership position in the German-language core busi- reorganized our existing activities. The operating envi- ness, internationalization, and digitization. A glance at the ronment in 2009 was something of an acid test as to news, which was full of reports about emergency short- how strong Axel Springer AG really is. The degree to term measures and desperate restructuring plans in the which we passed this test is a matter for you, our share- media industry, makes it clear that such goals were holders, to decide. rather the exception than the rule in 2009. Fortunately, we at Axel Springer began to address the underlying The media industry faced strong headwinds in 2009, challenges a long time ago. For example, the disciplined especially in the advertising market. Depending on the cost management we have practiced for many years survey, net advertising revenues plummeted 10 % to 12 % made an important contribution to our bottom line in worldwide and 7 % to 13 % in Germany. The Central 2009. And yet, our cost savings and restructuring efforts Association of the German Advertising Industry has were precisely targeted. Counter to the industry trend, called it the “worst advertising slump in the history of the the size of our workforce actually increased, by 0.7 %, German Federal Republic.” And the circulation market especially in the promising future business of digital was under intense pressure, too. media. I was especially pleased that numerous employ- ees became shareholders of our company by taking Surely, it would have been easier to reach a double-digit advantage of the bonus share and share ownership profit margin under more favorable conditions. In fact, we programs. It is good to know that our employees are set this goal for ourselves seven years ago, anticipating bound to Axel Springer in an entrepreneurial partnership, an economically healthier environment. But the employ- particularly in these times, when creativity is more impor- ees of Axel Springer AG achieved this goal in the midst tant than ever. of the worst financial and media crisis to date. We gen- erated an operating profit (EBITDA) of € 333.7 million. At last year’s annual shareholders’ meeting, I announced Based on total revenues of € 2,611.6 million, that corre- that Axel Springer intended to widen the lead over its sponds to an EBITDA margin of 12.8 %. competitors, build on the strength of our brands, and actively promote digitization, even though it would not be Amid this environment, the positive development of Axel possible to match the record results of the prior year. Springer’s equity ratio sent a rare, anti-cyclical signal, A necessary prerequisite was the strict focus on our high rising from 38.0 % in 2008 to 40.8 % in 2009. The divi- reach and national brands. In light of this, it made sense dend is intended to remain unchanged from 2008. The to part with the company’s minority interests in regional Management Board and Supervisory Board will propose newspapers, sell the company’s youth magazines, and to the annual shareholders’ meeting that the company closely integrate the music titles with the WELT Group. In pay a dividend of € 4.40 per share, again the highest true anti-cyclical fashion, we launched a marketing cam- dividend that Axel Springer has ever paid. paign for BILD and WELT towards the end of 2009. The first fruits of our reach-driven strategy are directly was expanded to include women’s magazines (FORBES measurable. Based on gross market shares in the German WOMAN) and the Internet (FORBES online). advertising market, our integrated marketing unit Axel Springer Media Impact widened its lead significantly over And that brings us to digitization. With revenues of our competitors in the print media business. While the € 470.4 million, the Digital Media segment was the next-biggest print marketer generated 34 % fewer reve- Group’s third-biggest revenue contributor in fiscal year nues than Axel Springer Media Impact in 2008, that lead 2009, for the first time ever. On a pro-forma basis (in- widened to 45 % in 2009. BILD defied the general trend cluding the full-year consolidation of our acquisitions of the gross print advertising market impressively: While StepStone and Digital Window), the revenues of the the latter declined by 6.3 % in 2009, BILD's advertising Digital Media segment amounted to € 569.0 million. revenues rose by 6.5 %. Especially our strong revenue- Thus, Axel Springer generates one of every five euros in producing titles expanded their reach in their respective its online business. That is an extremely high percentage, markets, including BILD am SONNTAG (+ 4.2%), BILD compared to our competitors’ figures.