1 January 30 June INTERIM REPORT 2002

Transcription

1 1 January 30 June INTERIM REPORT 2002

2 Group key data in a million 1st half st half 2001 Sales Change in % Profit Consolidated net income for the period Return on sales in % Consolidated operating profit EBITA 51* 33 Balance sheet Balance sheet total Fixed assets Fixed assets cover in % Cash and cash equivalents Equity Equity ratio in % Liabilities due to banks Capital expenditure Depreciation Share Share price on 30 June (a) Employees Average no. of employees * Before extraordinary items.

3 Interim report Group and Axel Springer Verlag AG Axel Springer Verlag succeeded in increasing its consolidated operating profit to d 42 million in the first half of 2002 from d 34 million in the previous year, in spite of the fact that the economic and market situation continued to be poor. The positive impact of the action taken at an early stage to optimise the portfolio, of the reduction in personnel and of the other cost-cutting measures compensated for the substantial decrease in advertising revenues. Extraordinary items also had a positive effect on the consolidated net income for the period of d 72 million (previous year: d 14 million). Provided that the economy does not deteriorate any further, the Board of Management expects a positive result to be generated for the year as a whole too, due to the cost-cutting measures that have been taken. Business environment The German economy developed negatively in the first half of The Gross Domestic Product decreased by 0.4% in real terms to a billion. While exports managed to grow again, domestic demand remained low. Contrary to expectations, investment did not recover. Capital expenditure on plant, equipment and buildings was down by 5.4%. Private consumption was lower too ( 0.8%). In view of rising health insurance contributions, higher unemployment and general reluctance to spend, private consumption will stagnate over the year as a whole, in spite of relatively high collectively agreed pay increases. 1

4 Depression on the advertising market is continuing According to the ACNielsen Werbeforschung statistics, gross advertising revenues in the classic media fell by a 530 million ( 6.1%) in the first half of The branded goods manufacturers, service providers and major retailers monitored in this context spent a total of a 8.1 billion on advertising. The reduction was attributable primarily to the financial community ( 18.1%), the office/edp/communication industry ( 20.2%), retail and mail-order companies ( 7.6%), food processors ( 7.6%) and beverage manufacturers ( 12.4%). Advertising investments were, on the other hand, up in the motor vehicle, personal products, audio & video and cleaning products markets. Adjusted gross print media advertising revenues (excluding classified ads) declined by 5.4% to a 3.9 billion by comparison with the first six months of the previous year. The biggest drop (7.2%) was recorded in television advertising revenues. Radio advertising sales decreased by 5.5%. Companies spent a 1.8 billion ( 4.8%) on newspaper advertising (excluding classified ads) in the period under review. The in some cases drastic fall in classified advertising business depressed the figures even more. Job recruitment ads alone were down by more than 40% in the first half of There were considerable losses in classified property, motor vehicle and local retail ads too. The adjusted gross advertising revenues of general-interest magazines (excluding city magazines) went down by 6.4% to a 1.9 billion. The business press 2

5 ( 31.1%), online and computer magazines ( 24.0%) and current affairs magazines ( 5.9%) were hit particularly hard. TV guides, on the other hand, succeeded in increasing their advertising sales by 11.2%. Ongoing slump in demand on the retail press markets Consumers have been even more reluctant to spend since the euro was introduced. The reduction in retail sales amounted to 3.7% in real terms. The retail press trade has suffered from the general slump in demand too. Sales volume fell by more than five per cent in the first half of As a result of the active pricing policy adopted by publishers in practically all market segments, press sales have only been about one to two per cent lower than in the previous year, depending on the region. The total paid circulation of daily and Sunday newspapers as recorded by the circulation auditing organisation IVW decreased by 2.2%. The main drop was in newsstand sales, which fell by 5.1%. The number of general-interest magazines registered with IVW declined by 27 to 790. Total sales were down by 3.7%, with a reduction of 6.5% in newsstand sales. Subscription magazines (including membership and club magazines) increased slightly by 0.7%, however. Youth and men s magazines as well as high-quality women s magazines increased their circulation, while competitive pressure in the TV guide and women s magazine segments remained high. 3

6 The company Axel Springer Verlag increased its operating profit in the first half of 2002 in spite of the decline in the economy because the company responded to market developments systematically and at an early date. Cost reductions primarily in the areas of personnel, advertising and marketing, fees, travel costs and external services as well as in the size of publications led to savings of about a 55 million. Efficiency was increased by arranging co-operation between different editorial teams and by combining multimedia units. They can now act even more in line with market and customer requirements. Portfolio optimisation exercises have been continued in 2002 by shutting down or selling non-strategic publications. Axel Springer Verlag has, however, made sure it keeps developing its portfolio in Germany and elsewhere too by expanding operations that have a promising future. New sources of additional revenue, such as coupon business, are being tested and exploited as well. Newspapers BILD celebrated its 50th birthday in June This event received wide coverage in all the media. The biggest daily newspaper in Europe is still as attractive to readers as ever after half a century, as the average circulation of 4.2 million copies demonstrates. BILD AM SONNTAG proved once again to be Germany s biggest Sunday newspaper with circulation of 2.3 million copies and managed to counter the trend by keeping its advertising business stable. Additional young readers were reached with the supplement VIVABAMS. BILD 4

7 and BILD AM SONNTAG succeeded in boosting circulation particularly effectively with the interview duel between the candidates for chancellor in the German general election. Acceptance of the first issue of TIER BILD by readers was excellent. This publication immediately took over as market leader in the animal magazine segment with net paid circulation of about copies. A second issue is being prepared in view of the great success achieved with both readers and advertisers. COMPUTER BILD SPIELE set a new circulation record in April with sales of about copies and underlined its position as market leader in the computer game magazine segment with this performance. Further progress was made in the first half of 2002 on combining the editorial and publishing operations of DIE WELT and BERLINER MORGENPOST: both of the newspapers have been produced by the same editorial team since April BERLINER MORGENPOST with a fresher, more modern, service-oriented layout and extended local coverage since 23 June. Net paid circulation, IVW, six-monthly average 2002 Bild Bild am Sonntag Computer Bild Computer Bild Spiele Die Welt Welt am Sonntag Hamburger Abendblatt Berliner Morgenpost B.Z B.Z. am Sonntag

8 The 125th anniversary of the establishment of Ullstein Verlag and B.Z. was an opportunity to draw attention to the long tradition they have had in Berlin newspaper and publishing history. With a loss of only 1.7% in circulation, HAMBURGER ABENDBLATT proved to be encouragingly resistant to general developments and maintained its leading position on the Hamburg newspaper market. Magazines The magazine operations of Axel Springer Verlag developed positively by comparison with the competition, with the result that the company moved up from third place to become the secondlargest publisher of general-interest magazines in Germany on the basis of gross advertising and retail sales. The first issue of the completely revamped magazine HÖRZU appeared at the beginning of February With the help of the visual and editorial relaunch, the new editor-in-chief succeeded in obtaining new readers in attractive segments, which led to an increase in advertising sales. Contrary to the general trend, BILD DER FRAU managed to increase advertising sales by comparison with the first half of ALLEGRA increased its circulation by 2.5% thanks to the additional pocket format introduced in the summer of last year. MAXIM defended its position as market leader in the men s lifestyle magazine segment after a year of publication with an average circulation of copies. 6

9 An attractive new product was added to the AUTO BILD family at the beginning of the year, when the special-interest magazine AUTO BILD ALLES ALLRAD was launched. DAS NEUE AUTOMOBIL increased its circulation by 21.4% over the second quarter of the previous year following a successful relaunch. The visual redesign and content update of AUTOBILD.DE led in the online field to twice as many page impressions in the first few days alone. The youth magazines POPCORN and YAM! continue to develop exceptionally well on the magazine market: both of them succeeded in achieving high circulation growth of 23.9% and 5.2% respectively. MUSIKEXPRESS recorded circulation growth of 5.9% and increased its appeal by switching to a new layout and by launching a Web site in December Finanzen Verlag responded to the negative development that continued in the financial magazine segment by introducing a new layout for FINANZEN and by integrating AKTIEN & CO in EURO AM SONNTAG. Net paid circulation, IVW, six-monthly average 2002 Hörzu Funk Uhr TVneu Bildwoche Bild der Frau Journal für die Frau Allegra Auto Bild Das neue Automobil Auto Bild Motorsport Sport Bild Maxim Familie&Co Euro am Sonntag Finanzen Popcorn YAM! Mädchen Musikexpress Hammer

10 Operations on foreign markets Optimisation and further development of the portfolio involving concentration on fast-growing core markets was continued in the company s operations on foreign markets too. Since the beginning of this year, Axel Springer Verlag has been publishing the French licensed edition of MEN S HEALTH, the biggest fitness magazine for men in the world. It has reached a leading position among the men s magazines on the second-largest media market in Continental Europe with a net paid circulation of more than copies. The operations in Poland continue to be successful: the business magazine PROFIT that was launched in March 2001 and the general-interest magazine NEWSWEEK POLSKA that appeared for the first time in September last year are maintaining their position as market leader in their respective segment. Axel Springer Verlag sold its majority interest in Sportmagazin Verlag in Austria. Due to the high level of concentration on the Austrian magazine market, there was no realistic prospect of becoming market leader, which would have been essential in the long run. The monthly women s magazine BIEN DANS MA VIE was also launched in France. It is opening up a new market segment by covering an innovative blend of health and women s issues. It is the first women s magazine in France to be published in the practical pocket format. Axel Springer Verlag contributed its Romanian publications the youth magazine POPCORN, the women s magazine OLIVIA and two entertainment magazines to Romanian Publishing Group (RPG), in which the company now holds a 40 % interest. 8

11 Books The restructuring measures in the book operations are starting to produce initial success. Whereas the trade in general suffered from the lower sales that are a feature of the process of structural change in the business, the Axel Springer Verlag book division was able to buck the trend and maintain sales at the previous year s level. Following the combination of administrative and commercial functions at the Econ Ullstein List and Wilhelm Heyne book publishing companies in the previous year, the integration process was continued by adapting the book and publishing portfolio as well as the publishing and sales structures. Electronic Media The steady expansion of the portal BILD.T-ONLINE.DE a joint venture with T-Online International AG, in which Axel Springer Verlag holds a 63 % interest has already produced initial success: BILD.T-ONLINE.DE reached the position of market leader for general-interest portals with about 240 million page impressions in June. As part of the efficiency improvement programme, Axel Springer Verlag pooled its multimedia operations in the newly established unit AS Interactive, which provides customers with comprehensive audiotex, mobile, Internet and TV content and services from a single, integrated source. Axel Springer Verlag contributed its online property operations to the company Immonet GmbH that it established with Ring Deutscher Makler (RDM). This company is as a result one of the largest providers of online property portals in Germany. 9

12 The options for strategic involvement in the TV field are being investigated at the present time. A consortium has been formed for this purpose with Heinrich Bauer Verlag and Bayerische Hypound Vereinsbank with the aim of taking over some of the assets of the insolvent company KirchMedia. A non-binding offer was submitted in this context on 31 July quality, bringing the company closer to its customers and facilitating the more widespread transfer of know-how by means of even more intensive communication between the distribution sectors. Printing and Logistics The initial reinvestment phase in the comprehensive modernisation project at the Ahrensburg rotogravure printing plant was completed. Axel Springer Verlag is responding to the increasingly exacting requirements of the market in the distribution field by carrying out an extensive restructuring exercise that involves the combination and reorganisation of the distribution structure, which has been focussed on individual publications to a large extent up to now. This is improving distribution Results Axel Springer Verlag increased the consolidated operating profit by a 8 million over the same period the previous year to a 42 million in the first half of The positive impact of the action taken at an early stage to optimise the portfolio, of the reduction in personnel and of the other cost-cutting measures compensated for the substantial decrease in advertising revenues. Extraordinary items and tax losses carried forward also had a positive effect on the consolidated net income for the period of a 72 million (previous year: a 14 million). 10

13 Share The price of the Axel Springer share was a 58.5 at the beginning of the year. The share was unable to resist the general stock market developments in the course of the first half of the year. The price at the end of June 2002 was a The consolidated net income for the period was reduced by goodwill amortisation totalling a 26 million. A goodwill charge of a 18 million was on the other hand made with no effect on the income statement as per 30 June Following a decision taken by the Board of Management and the Supervisory Board, Axel Springer Verlag at the end of January 2002 exercised the option agreed with the Kirch Group to sell its indirect shares in ProSiebenSAT.1 Media AG and ISPR Internationale Sportrechte- Verwertungsgesellschaft mbh at the end of the period arranged for the purpose. Axel Springer Verlag took legal action against KirchMedia and Taurus TV to enforce the agreement when the payment period ended on 30 April Axel Springer Verlag AG will continue to own the interests in the above companies until the purchase price has been paid in full. Exercising the put option does not have any impact on the results reported for the first half of The DVFA/SG earnings per share amounted to a 0.97, a figure that was calculated on the basis of the following data: DVFA/SG income Number of shares Share price development Index: 2 January 2002 = st half of 2002 a 33 million 34 million January 2002 July 2002 Axel Springer Verlag AG MDAX

14 Sales Total sales by Axel Springer Verlag in the first half of 2002 amounted to a million and were therefore a 60 million ( 4.2%) lower than in the previous year. Advertising revenues were down a 54 million ( 9.3%) on the previous year at a 528 million. The retail sales of a 548 million did not make up for this reduction, even though they were a 9 million (+ 1.7%) higher. Other revenues decreased by a 15 million ( 4.9%) to a 292 million. The newspapers were hit hardest by the negative development in advertising business: their total sales amounted to a 703 million. This corresponds to a reduction of a 48 million ( 6.4%). The advertising revenues were a 49 million ( 11.3%) lower at a 385 million. The newspapers with a large classified ad business, such as HAMBURGER ABEND- BLATT or BERLINER MORGENPOST, suffered particularly severely from the slump in advertising sales. Retail sales went up by a 1 million (+ 0.3%) due to copy price increases. BILD, DIE WELT, B.Z. AM SONNTAG and HAMBURGER ABENDBLATT were some of the newspapers that contributed to this increase. Total newspaper retail sales amounted to a 318 million. The magazines increased their total sales by a 3 million (+ 0.8%) to a 373 million. They registered a small decrease in advertising business. The revenues were down a 5 million ( 3.4%) at a 143 million. While the women s and men s magazines were unable to resist the generally negative market trend, the TV guides increased their advertising revenues. 12

15 Sales by sectors in a million 1st half 1st half Miscellaneous Advertisements Retail Retail sales rose by a 8 million (+ 3.6%) to a 230 million. Higher sales were achieved by the TV guides, men s and youth magazines and some of the magazines outside Germany. Book sales remained stable at a 77 million, contrary to the market trend. Electronic Media sales increased by a 6 million (+ 15.8%) to a 44 million. Contract printing sales were a 6 million ( 8.3%) lower than in the first half of There was a reduction in merchandise sales (down a 4 million or 12.9%) and transport revenues (down a 8 million Sales by divisions in a million or 13.6%) too st half 1st half Other revenues Contract printing Electronic Media Books Magazines Newspapers

16 Expenditure Total expenditure (before tax and goodwill amortisation) decreased by a 62 million ( 4.3%) to a million. The cost of materials went down by a 40 million to a 467 million. This is attributable Employees 1st half of 2002 primarily to a reduction of a 27 million ( 16.3%) in expenditure on paper. This reduction is due mainly to lower consumption volumes but also to lower paper prices. Personnel costs were a 4 million ( 0.9%) lower at a 450 million. Most of the effect of the savings in the personnel field is being offset by collectively agreed pay increases and newly launched operations. 53.1% Salaried employees 21.9% Industrial employees Total % Editorial staff Employees In the first half of 2002, Axel Springer Verlag had an average of employees (excluding apprentices and trainees), 540 fewer than in the same period the previous year. This reduction is attributable to the restructuring programme that is being carried out throughout the Group and involves a planned cut in personnel of ten per cent by the end of There were employees on 1 July 2002.

17 Investments Axel Springer Verlag invested a 76 million in the first half of 2002 (previous year: a 100 million). Most of the investments (a 71 million) were in tangible and intangible assets. The main individual items were the new office building in Berlin and the modernisation of the Ahrensburg and Spandau printing plants. The investments in financial assets amounted to a 5 million (previous year: a 16 million). Depreciation totalled a 65 million (previous year: a 66 million). Capital expenditure and depreciation in a million st half of Capital expenditure 76 Depreciation 65 Depreciation Investments in tangible and intangible assets Financial assets

18 Prospects Overall economic growth is forecast to be only 0.6% in The advertising market depends on general economic developments and a noticeable change in the trend is not expected before Gross advertising expenditure in the classic media in Germany will probably be two to three per cent lower than in the previous year in The reduction in newspaper classified ad business is likely to be in the double-digit range in 2002 as a whole. Low corporate profitability and consumers continued lack of confidence in a short-term economic recovery are reasons for this. In view of the fact that consumers are still reluctant to spend the central association of the German retail trade (HDE) anticipates a reduction of almost three per cent in real sales in 2002 there are no indications for the time being of an improvement in the demand situation on the retail market for newspapers and magazines. Neither sports events nor the general election campaign have boosted business significantly so far this year. Provided that the economy does not deteriorate any further, the Board of Management expects a positive result to be generated for the year as a whole too, due to the cost-cutting measures that have been taken. There have been no major changes in the risks of future developments since the beginning of the 2002 financial year. Further information can be found in the Management Report of the Group and Axel Springer Verlag AG as per 31 December

19 Interim financial statements Consolidated balance sheet Assets in d A. Fixed assets I. Intangible assets II. Tangible assets III. Financial assets B. Current assets I. Inventories II. Accounts receivable and other assets III. Securities IV. Liquid assets C. Prepaid expenses Equity and liabilities in d A. Equity I. Subscribed capital II. Revenue reserves III. Loss carried forward IV. Consolidated net income for the period (after minority interests; previous year: consolidated net loss) V. Minority interests B. Special reserves with an equity portion C. Provisions D. Liabilities E. Deferred income

20 Consolidated income statement in d Sales Change in inventories of finished goods and work in progress Other operating income Cost of materials Gross profit Personnel costs Depreciation/amortisation of intangible and tangible assets Other operating expenses Income from equity holdings Net interest expenses Depreciation of financial assets Profit from ordinary operations Taxes Consolidated net income for the period of which attributable to minority shareholders

21 Consolidated statement of cash flows in d Consolidated net income for the period Depreciation/appreciation of fixed assets Change in provisions Other expenses with no cash effect Profits from the disposal of fixed assets Change in inventories, accounts receivable and other assets Change in miscellaneous loan capital Cash flow from current business activities Proceeds from the disposal of tangible and financial assets Spending on investments in fixed assets Cash flow from investment activities Change in financial liabilities Other changes Cash flow from financing activities Total cash flows Funds on Funds on / Changes in funds due to differences in the companies consolidated 212 Change in funds with cash effect The flows of funds are divided up into the three different areas of business, investment and financing activities in the consolidated statement of cash flows. Securities held as current assets and liquid assets are shown in the funds at the end of the statement. 19

22 Segment data Newspapers Magazines Books in d million 1st half of st half of st half of 2002 External sales Internal sales Division sales Sales in Germany Sales outside Germany Division sales EBITA* of which depreciation of which income from equity holdings Employees * Before extraordinary items. The standard international indicator EBITA (Earnings before Interest, Tax and Amortisation) is used to indicate the segment results. 20

23 Electronic Miscellaneous/ Consolidated Media Printing consolidation financial statements 1st half of st half of st half of st half of

24 Explanatory notes about the interim financial statements General information The interim report 2002 complies with the German accounting standard no. 6 (DRS 6) interim reporting issued by the German Accounting Standards Committee e.v. (DRSC). Advantage has been taken of the simplification rule when DRS 6 is applied for the first time figures for the previous year do not need to be indicated. The accounting and valuation principles applied in the interim financial statements as per 30 June are the same as those applied in the consolidated financial statements as per 31 December Further information can be found in the consolidated financial statements and Axel Springer Verlag AG financial statements as per 31 December On 10 July 2002, PrintBeteiligungs GmbH filed a suit at the Berlin District Court to have the financial statements of Axel Springer Verlag AG as per 31 December 2001 declared null and void. The reason given for this by the plaintiff is that the financial statements should not have been compiled including the control and profit transfer agreements concluded with 'Axel Springer Verlag' Beteiligungs GmbH and AS Content GmbH that have not taken effect for the time being since they have not been approved by the ordinary shareholders meeting of Axel Springer Verlag AG. At the request of the shareholder Print- Beteiligungs GmbH, the company has arranged to hold an extraordinary shareholders meeting on 24 September 2002 pursuant to 122 of the German Companies Act (AktG). Points on the agenda are a special investigation of the conduct of the management in connection with the exercising of the so-called put option in accordance with 142 of the AktG, the enforcement of claims for damages against the Board of Management pursuant to 147 of the AktG and a special investigation of the conduct of the management in connection with the loss financing of the subsidiaries 'Axel 22

25 Springer Verlag' Beteiligungs GmbH and AS Content GmbH and the compilation of the financial statements for the 2001 financial year. Due to a complaint filed by a competitor, the approval issued by the cartel authorities for the BILD.T-ONLINE.DE joint venture between Axel Springer Verlag AG and T-Online International AG has not yet become legally effective. Consolidated companies 36 subsidiaries in Germany and 28 subsidiaries outside Germany have been included in the consolidated financial statements for the 1st half of 2002 in addition to Axel Springer Verlag AG. Five joint ventures have also been consolidated on a pro rata basis. The changes in the companies consolidated only play a minor role as far as the net worth, financial position and earnings situation of the Group are concerned. Examination by the auditors Our auditors PwC Deutsche Revision Aktiengesellschaft Wirtschaftsprüfungsgesellschaft, Hamburg, have made an examination of the interim report for the period between 1 January and 30 June 2002, with the exception of the figures for the previous year that have been provided for information purposes. The principles for the examination of interim reports by auditors have been observed in doing this. According to these principles, the examination by auditors consists primarily of interviews and analytical auditing procedures. On the basis of its examination, PwC Deutsche Revision Aktiengesellschaft Wirtschaftsprüfungsgesellschaft, Hamburg, confirms that it has become aware of nothing to suggest that the interim report does not present a true and fair view in all the main areas of concern in accordance with the German Commercial Code (HGB) and DRS 6. Berlin, August 2002 Axel Springer Verlag AG Board of Management 23

26 Disclaimer: This interim report contains forward looking statements which involve risks and uncertainties. The actual performance, results and timing of the business of Axel Springer Verlag AG and the Group could differ materially from the performance, results and timing discussed in this interim report. This interim report does not constitute an offer to sell or a solicitation of an offer to purchase any securities of Axel Springer Verlag AG. 24

27 You can obtain further information about the interim report from: Axel Springer Verlag AG Investor Relations Axel-Springer-Platz Hamburg Germany Telephone: (0) Fax: (0) finanzinfo@asv.de The interim report and other information about Axel Springer Verlag are also available on the Internet:

28