High investments in strategic growth areas / Partnership with KKR opens up new margins / Stable organic revenues in difficult market environment / Digital media increase organic revenues by 4.8 percent / Adjusted EBITDA return of 20.3 percent / Dividend proposal of EUR 1.16 per share
In the 2019 financial year, Axel Springer has created important prerequisites for a new phase of long-term growth. The company consistently pursued its growth and investment strategy, underpinning its goal of becoming a global leader in digital journalism and digital category offerings. In an increasingly challenging economic environment, the company invested in existing businesses and strengthened its market position through complementary acquisitions. Following the completion of the takeover bid in December 2019, Axel Springer also entered into a strategic partnership with KKR, which opens up new scope for the company to accelerate growth.
The annual financial statements for 2019 were characterized by persistently high growth investments, challenging economic conditions, significant consolidation effects and significant restructuring expenses. In the past financial year, group revenues were organically – adjusted for consolidation and currency effects – at the same level as in the previous year. Digital media grew organically at 4.8 percent. Its share of Group revenues increased from 70.6 percent in the previous year to 73.3 percent. Despite high investments and provisions for restructuring, the adjusted EBITDA return in the Group reached 20.3 percent, up from 23.2 percent in the previous year.
Dr. Mathias Döpfner, Chief Executive Officer of Axel Springer SE: “2019 was a special year for Axel Springer. We have laid the foundations for further long-term growth in a challenging market environment. Now we are starting a new phase with our partner KKR. In the future, we will invest massively in digital journalism and digital classifieds in order to become a world leader in both fields.”
Axel Springer’s consolidated revenues in the past financial year amounted to EUR 3,112.1 million, compared to EUR 3,180.7 million in the previous year. Consolidation effects from the sale of the @Leisure Group in mid-2019, aufeminin from April 2018 and print activities in Slovakia from July 2018 had a particular impact. Organic revenues remained stable at a plus of 0.1 percent compared to the previous year. EBITDA adjusted for special effects amounted to EUR 630.6 million (PY: EUR 737.9 million). In an economically challenging environment, Axel Springer thus achieved an adjusted EBITDA return of 20.3 percent (PY: 23.2 percent). Organically, EBITDA decreased by 11.0 percent. This significant decrease is mainly due to provisions for the extensive ongoing restructuring measures in the News Media National subsegment.
Due to the increase in scheduled depreciation, adjusted EBIT fell more than adjusted EBITDA and decreased by 21.5 percent to EUR 414.5 million compared to the prior year (PY: EUR 527.9 million). Here, too, the effects of consolidation and, to a small extent, currency effects had an impact. The organic decline was 16.8 percent. Similar to adjusted EBITDA, the organic decline was mainly caused by provisions for the announced restructuring measures. At 13.3 percent, the margin was below the prior-year level (16.6 percent).
The adjusted consolidated net income amounted to EUR 263.7 million in the past fiscal year (PY: EUR 335.7 million). Axel Springer thus achieved earnings per share of EUR 2.02, after EUR 2.73 in the prior year. Reported net income decreased from EUR 208.4 million to EUR 134.6 million. The reported earnings per share thus amounted to EUR 0.92 (PY: EUR 1.68).
Free cash flow (FCF), excluding the effects of real estate transactions at the company’s locations, decreased in the 2019 fiscal year to EUR 320.1 million (PY: EUR 419.6 million). Net debt within the Group rose to EUR 1,953.0 million as of December 31, 2019, due in part to acquisitions made from EUR 1,249.2 million at the end of 2018. Axel Springer can continue to use long-term credit lines amounting to EUR 1,500.0 million. As of December 31, 2019, the Group had EUR 1,160.5 million (December 31, 2018: EUR 453.0 million) of the existing long-term credit facility as drawdowns. In the 2019 financial year, the Group employed an average of 16,120 people (PY: 16,350).
For the fiscal year 2019, the Executive Board and the Supervisory Board will propose to the annual shareholders’ meeting the distribution of a dividend of EUR 1.16 per share (PY: EUR 2.10).
Investments in digital growth businesses and strategic partnership with KKR
In the 2019 financial year, Axel Springer invested in existing activities and in complementary acquisitions. In the first half of the year, Stepstone expanded its portfolio of expertise with acquisitions of Studydrive, PersonalMarkt Services and the US company Appcast. AVIV Group strengthened its role as Europe’s leading provider of real estate listings with broker-oriented French company MeilleursAgents. In addition, AVIV Group acquired all the minority interests of the Immowelt Group and is now the sole owner. The News Media segment expanded its expertise in paid content technology by acquiring CeleraOne. In terms of the journalistic offerings, Axel Springer will invest 100 million euros in digital growth projects at BILD and WELT over the next three years. The focus is on live coverage, paid content and sports. Internationally, Axel Springer invests among other things in the further growth of Insider Inc. and upday.
Axel Springer has gained a strong partner with KKR in order to invest more in its strategic growth areas in the coming years. KKR’s public takeover bid, announced in June 2019, was completed in December 2019 after all conditions of execution had been in place. KKR now holds 45.0 percent of the shares of Axel Springer SE (as of: February 2020). After the free float has fallen to 3.5 percent, Axel Springer plans to discontinue the stock exchange listing. In this context, KKR announced a delisting offer to the Company’s shareholders on 23 January 2020 at an offer price of EUR 63.00 per share. The deadline for accepting this offer began with the publication of the public delisting offer on 21 February 2020 and will end at the end of 20 March 2020. The Executive Board and Supervisory Board of Axel Springer SE issued a joint reasoned statement on 27 February 2020 on the public delisting offer.
Axel Springer expects Group revenues at previous year’s level in 2020
If the forecast refers to the double-digit percentage range, this refers to the range of at least 10 percent and a maximum of 20 percent, in accordance with the English term “teens”. In contrast, “significantly below the previous year” or “significantly above previous year” deviations of more than 20 percent are meant.
For the 2020 financial year, Axel Springer expects revenues in the Group to develop at the level of the previous year. For adjusted EBITDA, the company anticipates a decrease in the low to mid double-digit percentage range on account of increased investments in future growth. Axel Springer expects adjusted EBIT to decline significantly below the previous year due to increased depreciation and amortization.
Revenues in the Classifieds Media segment are expected to show growth in the low to mid single-digit percentage range. Consolidation effects, in particular from the initial consolidation of Appcast from July 2019 and MeilleursAgents from October 2019, primarily counteract the deconsolidation effect resulting from the sale of the @Leisure Group from June 2019. For adjusted EBITDA, due to increased investments in future growth, a decrease in the high double-digit percentage range is expected. Axel Springer expects adjusted EBIT to result significantly lower than in the previous year due to increased depreciation and amortization.
In the News Media segment, the Group expects a decline in revenues in the low single-digit percentage range for the 2020 financial year, mainly due to market factors. Axel Springer expects adjusted EBITDA to be at the previous year’s level, while the company expects adjusted EBIT to decline in the mid single-digit percentage range due to increased depreciation and amortization.
In the Marketing Media segment, Axel Springer expects an increase in revenues in the low to mid single-digit percentage range. Adjusted EBITDA should be at the previous year’s level. In terms of adjusted EBIT, the Group expects a decline in the low single-digit percentage range.
Revenues for the Services/Holding segment are expected to decline in the high single-digit percentage range. For the adjusted EBITDA, Axel Springer expects a development in line with the prior-year level. In terms of adjusted EBIT, the Group expects an increase (improvement) in the mid single-digit percentage range.
Segments: StepStone and AVIV Group grow despite difficult market environment – digital activities at News Media up to around 43 percent
The results of the Classifieds Media segment in 2019 reflected both significant consolidation effects and the challenging macroeconomic environment. Compared to the previous year, revenues remained stable at EUR 1,213.8 million (PY: EUR 1,212.5 million). Organically, Classifieds Media increased revenues by 3.0 percent. StepStone’s revenue rose organically by 2.7 percent. The activities grouped in the AVIV Group improved organic revenues by 2.8 percent.
Adjusted EBITDA of the segment declined by 3.8 percent to EUR 468.4 million (PY: EUR 487.2 million). Organically, adjusted EBITDA reached the level of the previous year. Adjusted EBITDA had a significant negative consolidation effect from the deconsolidation of the @Leisure Group, as well as negative earnings contributions from newly acquired companies in the StepStone Group and the AVIV Group’s hybrid brokerage activities. Both sub-segments also invested heavily in marketing, products and technology. Classifieds Media achieved an adjusted EBITDA return of 38.6 percent (PY: 40.2 percent). The adjusted EBIT in the Classifieds Media segment decreased by 7.1 percent from EUR 406.7 million to EUR 377.9 million, organically a decline of 2.8 percent was recorded. Depreciation, amortization and impairments increased by 12.5 percent to EUR 90.6 million (PY: EUR 80.5 million).
In the News Media segment, the digital share of revenues increased from 38.5 percent in the previous year to 42.8 percent. BILDplus and WELTplus increased the number of digital subscribers to a total of around 568,000 (PY: 512,000). The digital offerings of Insider Inc. and upday also developed gratifyingly. Due to market-related decreases in the print business as well as consolidation effects, segment revenues fell by 4.4 percent to EUR 1,430.9 million (PY: EUR 1,496.2 million). Organically, revenues decreased by 3.9 percent.
At EUR 138.5 million, adjusted EBITDA was well below the previous year’s figure (EUR 228.2 million). In addition to the decline in revenues in the print business, provisions for the restructuring measures in the News Media National segment were particularly reflected here. Organically, adjusted EBITDA was 37.7 percent down on the prior-year figure. Adjusted EBITDA margin fell from 15.3 percent to 9.7 percent. Adjusted EBIT in the News Media segment decreased by 54.4 percent from EUR 158.2 million to EUR 72.1 million. The more pronounced decline in adjusted EBIT compared to the decline in adjusted EBITDA is due primarily to scheduled depreciation, whose decrease of 5.2 percent to EUR 66.4 million (PY: EUR 70.0 million) under-proportionately.
The Marketing Media segment increased the revenue by 0.8 percent to EUR 421.5 million (PY: EUR 418.3 million). Adjusted for consolidation and currency effects, revenues increased by 9.3 percent. This was helped by noticeable increases at idealo and Awin, among others.
The good business performance led to a significant increase in adjusted EBITDA of 20.3 percent to EUR 107.8 million (previous year: EUR 89.6 million). EBITDA increased organically by 26.1 percent. Marketing Media thus improved the adjusted EBITDA margin from 21.4 percent in the previous year to 25.6 percent. Adjusted EBIT in the Marketing Media segment rose by 26.1 percent from EUR 66.0 million to EUR 83.3 million. Organically it increased by 34.4 percent. Depreciation, amortization and impairments increased by 4.0 percent to EUR 24.5 million in the reporting period (PY: EUR 23.6 million).
Revenues in the Services/Holding segment decreased relative to the comparable prior-year period by 14.4 percent and amounted to EUR 46.0 million (PY: EUR 53.7 million). One of the main factors here was the market-related decline in the print products business. Adjusted EBITDA fell to EUR –84.1 million (PY: EUR –67.0 million). This decrease resulted from the loss of one-off income, lower revenues and higher project expenditure. The adjusted EBIT in the Services/Holding segment amounted to EUR –118.6 million (PY: EUR –103.0 million). Depreciation, amortization and impairments amounting to EUR 34.5 million were below the level of the prior year (EUR 36.0 million).