The results mean the group successfully implemented its strategic and business priorities during the 2016 financial year and achieved its targets; while with targeted investments in the organic growth of the digital business models and additional acquisitions, it has further expanded its position as Europe’s leading digital publisher, Axel Springer said in the announcement.
In this respect, the digital activities have further grown in importance: During the reporting year, they generated 67.4 per cent of total revenues, 84.8 per cent of advertising revenues and 72.5 per cent of the group’s total EBITDA. Adjusted for consolidation and currency effects, revenues from digital media increased by 10.7 per cent.
Owing to the strong organic growth of the digital business models, total revenues increased by 4.1 per cent after adjustment for consolidation and currency effects. Despite significant deconsolidation effects, the reported total revenues for 2016 remained stable at the prior-year level. With a large increase of 6.5 per cent, the EBITDA achieved the high end of the forecast. The adjusted earnings per share increased by 8.5 per cent. The executive board and the supervisory board will propose to the Annual General Meeting for the 2016 business year a dividend increase to EUR 1.90 per share (PY: EUR 1.80).
Dr Mathias Döpfner, chief executive officer of Axel Springer, said “During a successful 2016, we have continued to invest in growth and further expanded our position as Europe’s leading digital publisher. This strategy is paying off: Axel Springer now has the classified ads portfolio with the strongest worldwide revenues and a large number of market-leading offerings. In a rapidly changing world we are, at the same time, seeing a high demand for orientation and reliability, which only strong media brands can provide. This year we are seeking to exploit the potential of our activities even more effectively and focus on further earnings increases.”
The company has also increased growth of the classified ad models and strengthened the position of the paid models. During the financial year just ended, Axel Springer invested, as announced, in the further development of the digital growth projects Business Insider and Upday as well as in the further expansion of the US activities of the Bonial Group. In the 2017 financial year, Axel Springer is prioritising a further increase in profitability. The company will therefore concentrate primarily on making optimal use of the potential from newly acquired and existing businesses and enhancing synergies.
For the first time, Axel Springer published mid-term targets for the paid models segment. The group expects EBITDA to remain stable (EUR 205 million – EUR 225 million) in the years between 2017 and 2019 with slightly regressing revenues.
Details of the results: Group significantly increases EBITDA
With total revenues of EUR 3,290.2 million, Axel Springer attained the previous-year level (EUR 3,294.9 million) and thus fulfilled its intrayear-substantiated revenue forecast. Growth was affected, above all, by deconsolidation effects resulting, inter alia, from integrating the Swiss activities into Ringier Axel Springer Schweiz. Adjusted for consolidation and currency effects, the total revenues increased by 4.1 per cent. The company increased the EBITDA by 6.5 per cent to EUR 595.5 million (PY: EUR 559.0 million). It thus attained the high end of the full-year forecast. The EBITDA margin, already at a high level, improved from 17.0 per cent to 18.1 per cent. In terms of revenue and earnings, Axel Springer benefited again, in particular, from strong growth in the classified ad models.
During the reporting year just ended, consolidated net income increased by 47.7 per cent to EUR 450.0 million (PY: EUR 304.6 million). This resulted in earnings per share of EUR 3.94 (PY: EUR 2.50). The consolidated net income adjusted for non-recurring effects and impairments from purchase price allocations improved to EUR 299.9 million (PY: EUR 279.3 million) and thus increased by 7.4 per cent. The adjusted earnings per share increased by 8.5 per cent to EUR 2.41 compared to EUR 2.22 in the prior year. Axel Springer has thus fulfilled the full-year forecast.
The average number of employees increased, as a result of continuing organic expansion of the digital business and acquisitions, from 15,023 to 15,323.
Forecast for 2017: Revenues and EBITDA to increase
For the 2017 financial year, the group expects an increase in revenues in the mid-single-digit percentage range. The executive board assumes that the planned increase in advertising revenues will more than compensate for the slight decrease in circulation revenues and other revenues. A rise in EBITDA and adjusted earnings per share is expected in the mid to high single-digit percentage range.
In the classified ad models segment, revenues are expected to increase in the low double-digit percentage range, mostly driven by organic growth. Revenues in the paid models segment will prospectively remain approximately at prior year level. The group anticipates the marketing models segment to grow in the high single-digit to low double-digit percentage range. Regarding the Services/Holding segment, the group expects considerably lower revenues due to regressing printing revenues as well as lower rent incomes linked to the sale of building sections at the location Hamburg.
The segments’ EBITDA is expected to develop along the lines of the segments’ total revenues.
The organic growth dynamic of the digital media continues
The increasing importance of the digital business models has been a decisive factor driving the group’s growth. Their pro-forma revenues increased during the reporting year by 7.7 per cent to EUR 2,216.5 million (PY: EUR 2,057.2 million). Adjusted for consolidation and currency effects, the digital media achieved an organic growth of 10.7 per cent.
At the same time, Axel Springer continued to invest in the expansion of its international business during the financial year just ended. With a share of 47.5 per cent (PY: 47.8 per cent) the group generated nearly half of its revenues in international markets. In total, the foreign revenues for 2016 were, at EUR 1,564.3 million, only slightly lower than in the prior year (EUR 1,573.5 million). The decline is attributable to the deconsolidation of Swiss activities in the course of the jointly founded company with Ringier.
Advertising revenues improved during the financial year by 5.5 per cent to EUR 2,223.1 million (PY: EUR 2,107.6 million). This increase was based primarily on growth in the classified ad models and marketing models. At the same time, the digital activities continued to grow. They generated 84.8 per cent of total advertising revenues (PY: 80.4 per cent). The circulation revenues recorded a decrease of 10.4 per cent to EUR 646.9 million (PY: EUR 721.7 million), which was primarily attributable to consolidation effects. After adjustment for consolidation and currency effects, the decrease was 3.5 per cent. The other revenues also decreased, on account of consolidation effects, by 9.8 per cent from EUR 465.7 million to EUR 420.2 million. Adjusted for consolidation and currency effects, the other revenues recorded an increase of 5.0 per cent.
The market-leading classified ads business continues to drive growth
With strong growth in revenues and earnings, the classified ad models segment remained the growth engine for the group during the 2016 financial year. The revenues from the segment increased by 16.8 per cent to EUR 879.5 million (PY: EUR 753.1 million). Thus, Axel Springer has the classified ads business with the strongest worldwide revenues. Alongside strong organic growth, especially in the area of job portals, the consolidation effects resulting from strategic acquisitions were also a contributing factor in this respect, for example from the integration of Immowelt, Land & Leisure and Traum-Ferienwohnungen. All three categories – Jobs, Real Estate and General/Other – recorded double-digit growth rates during the reporting year.
The segment’s EBITDA increased considerably by 16.3 per cent to EUR 354.6 million (PY: EUR 305.0 million). Adjusted for consolidation and currency effects, the EBITDA growth amounted to 11.5 per cent. With an EBITDA margin of 40.3 per cent (PY: 40.5 per cent), the segment remained highly profitable. In this respect, the Job category generated an EBITDA margin of 42.9 per cent, the Real Estate category an EBITDA margin of 44.9 per cent and the General/Other category improved its EBITDA margin to 32.7 per cent.
In the Paid Models segment, Axel Springer accelerated the cross-channel and cross-border establishment of journalistic content and formats during the reporting year. In this respect, the group made significant progress in winning paid subscribers for the digital offerings of BILD and WELT as well as in the international expansion of the segment with offerings such as Business Insider, Politico and Upday. The number of subscribers to the digital BILD and WELT thus increased, as of the end of December 2016, to a total of 421,002 (+9.6 per cent compared to December 2015). Moreover, during 2016, Business Insider reached more than 100 million people worldwide in one month for the first time. The consolidated group increased the number of video requests on digital platforms to an average of approximately 2.7 billion per month.
The Paid Models generated revenues of EUR 1,481.6 million (PY: EUR 1,582.2 million). The decrease of 6.4 per cent is primarily attributable to the deconsolidation of the Swiss activities. Adjusted for consolidation and currency effects, revenues were 1.6 per cent below the prior year. At the same time, there was particularly dynamic growth in digital media from the Paid Models with an organic increase of 14.7 per cent.
Owing to the significant investment in growth, the EBITDA for the segment decreased in line with expectations to EUR 214.4 million (PY: EUR 223.2 million). Adjusted for the investments in Business Insider and UPDAY as well as the consolidation effects resulting from the inclusion of eMarketer, the EBITDA stabilized and was slightly above the prior year’s figure. The EBITDA margin for the segment was 14.5 per cent (PY: 14.1 per cent).
With respect to the Marketing Models segment, the focus was on the further internationalization of the business, particularly on the expansion of the US activities of the Bonial Group. The decline in revenues from the segment during the financial year was solely attributable to the deconsolidation effects resulting from the sale of Talpa Germany and Smart AdServer in 2015 as well as Smarthouse Media in the reporting year. It amounted to EUR 856.2 million and was therefore 2.6 per cent lower than the prior year (EUR 878.9 million). Adjusted for consolidation and currency effects, the segment generated a 7.5 per cent growth in revenues.
The EBITDA recorded a decrease of 6.6 per cent to EUR 82.2 million (PY: EUR 88.0 million), which is also significantly attributable to consolidation and currency effects. When adjusted for these effects, the EBITDA was slightly above the prior-year figure (+0.7 per cent). The EBITDA margin decreased slightly to 9.6 per cent (PY: 10.0 per cent).
In the Services/Holding segment, revenues decreased during the reporting year, owing to market-related effects, by 9.7 per cent to EUR 72.9 million (PY: EUR 80.7 million). The EBITDA improved slightly from EUR -57.1 million during the prior year to EUR -55.7 million.
A solid financial position to realise further growth
The free cash flow during the reporting period amounted to EUR 270.5 million and was therefore 9.8 per cent lower than the prior year (EUR 299.8 million). The net debt was EUR 1,035.2 million as of December 31, 2016 compared to EUR 1,066.6 million as of the end of 2015. As of the end of 2016, the group had unutilised short-term and long-term credit facilities amounting to EUR 840.0 million (December 31, 2015: EUR 902.0 million). Axel Springer therefore continues to be in a very comfortable financial position. As of the reporting date, the company’s equity ratio increased to 40.9 per cent (PY: 38.6 per cent).
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