Digital businesses have been a strong driver of growth for Axel Springer in the first half of 2015. They accounted for more than 60 percent to the total revenues and increased their share in the consolidated EBITDA to 75 percent. Overall the consolidated revenues of Axel Springer increased by 9.8 percent in the first half of the year. With stable EBITDA in comparison with the strong prior year period, the company remained highly profitable with an EBITDA margin of 16.9 percent. The Executive Board continues to expect higher earnings growth in the second half-year and is confirming its full-year forecast on this basis.
Dr. Mathias Döpfner, Chief Executive Officer of Axel Springer SE: "In the first half-year we continued to invest heavily in digital business models, in Germany and internationally. The strong organic growth of our digital activities confirms our strategic course, and we are reckoning with a significant growth in earnings in the Group for the entire 2015 financial year, as expected."
Axel Springer increased the consolidated revenues in the first half of 2015 by 9.8 percent to EUR 1,577.3 million (PY: EUR 1,436.8 million). This positive development was driven by strong double-digit growth rates in the Classified Ad Models and Marketing Models. Adjusted for consolidation and currency effects, the total revenues increased slightly by 0.7 percent. With a value of EUR 266.7 million, the consolidated EBITDA was on the prior-year level (EUR 266.1 million). A considerable EBITDA increase in Classified Ad Models compensated for declines in earnings for Paid Models and Marketing Models. The EBITDA margin therefore amounted to 16.9 percent in the reporting period compared to 18.5 percent in the first half-year of 2014.
The consolidated net income adjusted for non-recurring effects and amortization from purchase price allocations also remained stable, which amounted to EUR 136.5 million in the first half-year (PY: EUR 138.2 million). The consolidated net income amounted to EUR 111.0 million (PY: EUR 141.6 million). The adjusted earnings per share amounted to EUR 1.09 (PY: EUR 1.12), the earnings per share were EUR 0.81 (PY: EUR 1.17). The average number of employees increased as a result of acquisitions and the development of digital activities by 11.2 percent to 14,781 (PY: 13,295).
The Executive Board is confirming its forecast for the 2015 financial year
For the 2015 financial year, the Executive Board is expecting an increase in the total revenues by an amount in the low to mid single-digit percentage range. The planned increase in advertising revenues will more than compensate for the fall in circulation revenues and other revenues. The Executive Board expects a rise in EBITDA in the high single-digit percentage range. In this case a rise in EBITDA in the Classified Ad Models and Services/Holding segments is expected, whilst EBITDA of Paid Models and Marketing Models is expected to finish below the level of the prior year. Due to a lower rate of adjusted consolidated net income attributed to minorities, the Executive Board expects an increase in the low double-digit percentage range for the adjusted earnings per share.
Sustained high dynamic growth in digital business models
In the first six months Axel Springer benefited from strong growth in the digital business models, both in Germany and abroad. The pro-forma revenues of digital activities rose from EUR 848.4 million to EUR 946.6 million. This amounts to an organic growth of 11.6 percent.
The successful international expansion of the digital business models was also reflected in an increase of foreign revenues by 23.6 percent to EUR 753.9 million (PY: EUR 609.7 million). The company therefore generated 47.8 percent (PY: 42.4 percent) of the total revenues in international markets.
Advancing digitization of business activities led to a 15.3 percent increase in Axel Springer's advertising revenues to EUR 985.9 million (PY: EUR 855.3 million). Digital business models accounted for 80.1 percent of the advertising revenues. Circulation revenues were, as expected, 3.7 percent below the prior-year value (EUR 364.7 million) at EUR 351.1 million due to structural decreases within the print business. Other revenues rose by 10.9 percent to EUR 240.3 million (PY: EUR 216.7 million). This development was driven primarily by increases in the Marketing Models and Paid Models.
Double-digit growth in the Classified Ad Models and Marketing Models
With a revenue increase of 56.8 percent to EUR 355.3 million (PY: EUR 226.6 million), the Classified Ad Models segment remained the Group's most important growth driver. In addition to strong organic growth, consolidation effects were reflected here, amongst other things due to the first-time inclusion of @Leisure, LaCentrale, Jobsite and Yad2. The merger of the two real estate portals Immonet and Immowelt under the new Immowelt Holding AG was completed at the end of June 2015. Axel Springer Digital Classifieds holds a majority share in this company of 55 percent. The organic growth of the Classified Ad Models segment was 13.3 percent in the first half-year on a pro-forma basis.
The Classified Ad Models segment also significantly improved the EBITDA in the first half-year by 45.9 percent. At EUR 147.3 million (PY: EUR 101.0 million), it provided the highest earnings contribution in the Group. The EBITDA increased by 14.9 percent when adjusted for consolidation effects. Furthermore, the segment's EBITDA margin at 41.5 percent (PY: 44.5 percent) was at a high level. The Job sector generated an EBITDA margin of 43.4 percent, Real Estate 50.6 percent, and General/Other 30.1 percent.
In the Paid Models segment, revenues were down 4.1 percent in the first six months to EUR 728.9 million (PY: EUR 760.2 million). Advertising revenues for the segment were 8.5 percent down on the prior year. The strong second quarter of 2014 had an effect here, amongst other things, which was positively influenced by the Football World Cup and a BILD Special Edition. Because of the fall in circulation due to market trends, circulation revenues for Paid Models fell by 3.8 percent. The other revenues of the segment rose by 15.8 percent. Adjusted for consolidation effects, in particular the inclusion of N24, the other revenues increased by 2.3 percent.
The number of digital subscribers to BILD and WELT grew encouragingly, which was approximately 348,000 at the end of June 2015. Of these, around 282,000 were digital subscriptions to BILD and around 66,000 to DIE WELT (IVW Paid Content 6/2015). The expansion of digital subscriptions is one of Axel Springer's strategic priorities in the current financial year. POLITICO Europe has also had a very good start. In July, just three months after the launch, the website politico.eu had over 1.5 million visits and more than 1 million unique visitors. In addition, the Group announced in July that as part of the progressive integration of WELT and N24, all offers and products of both brands will be brought out under the umbrella brand WELT.
The EBITDA for the Paid Models was down in the reporting period by 31.6 percent to EUR 90.8 million (PY: EUR 132.7 million). In addition to the decline in operational revenues and the partially lower margin of the newly acquired business compared to the prior year, increased restructuring expenses also had an effect on this as well as investments in the expansion of our digital journalistic offerings. As a result, the EBITDA margin of the segment fell to 12.5 percent (PY: 17.5 percent).
The Marketing Models segment increased revenues in the reporting period by 15.5 percent to EUR 428.1 million (PY: EUR 370.8 million). Driven by growth in Performance Marketing, the advertising revenues of the segment generated an increase of 10.7 percent. In contrast, the 38.5 percent growth in the other revenues was mainly achieved in the area of Reach Based Marketing.
While the EBITDA in the area of Performance Marketing increased by 8.2 percent, Reach Based Marketing registered a 12.9 percent decline in comparison with the prior year due to higher expenses to strengthen the competitiveness of idealo, the sale of Smart AdServer by the aufeminin group and growth investments in Retale, the US subsidiary of Bonial. Consequently, the EBITDA of the segment declined by 11.9 percent in total to EUR 48.7 million (PY: EUR 55.3 million). The EBITDA margin amounted to 11.4 percent compared to 14.9 percent in the prior year.
Revenues in the Services/Holding segment fell in the first half-year due to market trends by 18.0 percent to EUR 64.9 million (PY: EUR 79.1 million). EBITDA of the segment improved slightly from EUR -22.9 million to EUR -20.1 million.
Financial position influenced by substantial growth investment
In the first six months, free cash flow increased by 5.4 percent to EUR 86.9 million (PY: EUR 82.4 million). The net debt amounted to EUR 993.8 million as of June 30, 2015 compared to EUR 667.8 million at the end of 2014. As of the end of the first half-year, Axel Springer had unutilized short-term and long-term credit facilities amounting to EUR 286.0 million (December 31, 2014: EUR 511.0 million), which the Group can use either for general business purposes as well as for financing possible acquisitions. At the start of July, the financing volume of the existing credit facilities was increased from EUR 900.0 million to EUR 1,200.0 million and the term was extended to 2020 on advantageous conditions. The company's equity ratio at the end of June was 39.0 percent (PY: 42.4 percent).