Speech by Dr. Mathias Döpfner Chairman of the Management Board of Axel Springer AG at the Annual Shareholders Meeting of April 24, 2008

Transcription

1 Speech by Dr. Mathias Döpfner Chairman of the Management Board of Axel Springer AG at the Annual Shareholders Meeting of April 24,

2 Chart 1: Dear shareholders, shareholder representatives, journalists and guests: Welcome to our Annual Shareholders Meeting! As you already know from the Annual Report, 2007 was a bad year for Axel Springer AG, for two reasons. But 2007 was also a good year for Axel Springer AG, for eight reasons. Allow me to begin with the two items of bad news. 1. From today s perspective, we can see that our investment in the mail delivery and logistical business, the acquisition of a majority interest in the PIN Group, was a mistake. I wish to take this opportunity today to explain this unfortunate development in detail. What were the reasons behind this decision? We have been operating in the regional mail delivery business in Hamburg since In November 2004, we acquired a majority interest, together with Verlagsgruppe Georg von Holtzbrinck, in the Berlin-based company PIN AG, the biggest regional mail delivery service in Germany. And in October 2005, we founded the PIN Group AG together with Holtzbrinck, the WAZ Group and the investment company Rosalia. This group was supposed to consolidate the various investments of newspaper publishers in regional mail delivery companies into a nationwide mail delivery company. We contributed our investments in Berlin and Hamburg and received in exchange a 25% stake in PIN Group AG, the same percentage as the other three founding shareholders. As a major shareholder, we were familiar with the company s potential. After all, the Berlin subsidiary of PIN was profitable already in 2003, since then earning a double-digit profit margin. We wanted to enhance our sales and distribution capabilities and improve our access to customers, while benefiting from the last major privatization movement in Germany, in connection with the deregulation of the postal sector. The plan showed a great deal of promise initially. For two years in a row, PIN Group AG exceeded all the growth goals that had been set und was operating profitably already in some regional markets. In June 2006, Verlagsgruppe Madsack contributed its mail delivery business Citipost in Hanover in exchange for a minority interest in PIN Group AG. Other publishing companies followed suit, including the Cologne-Düsseldorf publishers DuMont-Schauberg, Rheinische Post and Girardet, and numerous mail delivery 2

3 services of regional publishers, which were acquired by the PIN Group. Starting with only five revenue-contributing subsidiaries at the beginning of 2006, the PIN Group had grown to 69 such subsidiaries in The Group s revenues doubled over the respective year-ago periods. We wanted to fully consolidate this fast-growing business and use it to forge a powerful new entity. To this end, we negotiated with the other shareholders on the acquisition of a majority interest for more than half a year. In the summer of 2007, when the idea of a minimum wage for postal workers was first raised, we were not intimidated because the average wages paid by the PIN Group were already close to the highest minimum wage proposal of 7.50 euros advocated by the trade unions and some politicians. Furthermore, we believed that the higher wage level itself would lead to offsetting effects in the form of a neutralization of the sales tax privileges enjoyed by Deutsche Post, which amounted to a cost advantage of 19% for the government monopolist prior to the deregulation. All in all, we saw more opportunities than risks. And we were not the only ones to see it that way. When we announced the acquisition of a majority interest in PIN Group AG, the response of the public and our shareholders was overwhelmingly positive. The transaction was perceived as a genuine growth factor in the business of logistics, which is closely related to our core business. Also, this business stood to benefit additionally from the announced deregulation of the postal sector. But in reality, things took a different turn. The government imposed a minimum hourly wage of 9 to 9.80 euros for mail carriers in the postal sector, while at the same time upholding the sales tax privilege for the monopolist Deutsche Post AG. Instead of opening the market, these actions effectively protected the monopoly status of the biggest single shareholder, the Federal Republic of Germany. We simply could not foresee, and neither could the legal experts we consulted, that such a move, which is characteristic of centrally planned economies, would ever be taken in a state based on laws. Could we or should we have foreseen such a development? I think not. But this experience has certainly made us wiser. And there were indeed many surprises in this saga that unfolded in Germany. To quote the Chairman of the German Federal Cartel Office, the minimum wage represents regulatory policy misconduct to a degree that has never before been seen in German economic history. We simply could not be prepared for a minimum wage of this amount. In this context, I also wish to address the founding of the GNBZ trade union, composed of the employees of private-sector mail delivery companies. A few weeks ago, the Cologne public 3

4 prosecutor s office studied the possibility of opening an investigation into so-called start-up financing by the PIN management. In the meantime, the senior public prosecutor has decided not to even open such an investigation due to a lack of initial suspicion, because quite clearly no criminal conduct had taken place. Nonetheless, I wish to take this opportunity to make it absolutely and unconditionally clear that the Management Board of Axel Springer AG never provided or approved financial support to GNBZ or made any attempts to influence the decisions of this trade union. Like others, of course, we had great sympathy for the new union because it would have been the logical prerequisite for a separate collective wage agreement. The Management Board of Axel Springer AG acted in a way that was above reproach, both morally and legally. I would like to make another point as well. Those few who have asserted that the reason why the PIN business model failed was not the minimum wage, but the company s own operating problems and management deficiencies considering that some of the PIN companies were far from profitable even before the minimum wage was introduced those people either misconstrued the facts or simply stated the obvious. It is obvious that many of the acquired subsidiaries were not yet profitable; obviously, there was a great need for integration and restructuring at PIN; and obviously, there were localized management problems here and there. All those facts were known to the shareholders at all times before and after the transaction. PIN was a start-up, a fast-growing company that had only just gotten off the ground. The logical idea was to capture the greatest possible market share as quickly as possible, in order to compete with the government monopolist and make money from the strong, unchallengeable No. 2 position in the mail delivery market, in connection with the last major privatization movement in Germany. The priorities were clear: First grow the business, then integrate, then make profitable. This typical and logical approach to building a new business was destroyed by the effective perpetuation of the German post office monopoly, in a way that simply could not be anticipated in a country that is supposed to operate on the basis of laws. And now, some politicians and unions are especially eager to divert the public s attention away from the fact that this regulatory fiasco was responsible for the destruction of thousands of jobs that had just been created. It is important to understand this context in order to properly assess the statements and publications made in the past and present. In a development that further bolsters our position, the Berlin Administrative Court found in its decision of March 7 of this year that a binding general declaration of a minimum wage of EUR 9.80/9.00 for the mail carriers of the postal sector is not legal. This judgement vindicates the 4

5 correctness of our assessment prior to making the acquisition decision. And it demonstrates quite impressively that we were right to interpret the law in this way. Before even leaving the court room, the German federal government immediately filed an appeal against this decision, so that the legal basis will remain unclear for probably the next twelve to eighteen months, during which time the minimum wage will remain in force. In light of this development, we can likewise affirm the correctness of our decision not to provide any further financing to the PIN Group, a decision that was made in December 2007 after careful analysis in the wake of the political decision to protect the postal monopoly. Considering the fact that the mail delivery sector is extremely sensitive to wage costs, a wage increase of about 30% for the PIN Group AG would have effectively eliminated any possibility of achieving profitability in the early phase of competition. To have continued the business for reasons of prestige or on the basis of vague hopes would have been irresponsible. Furthermore, the polarizing debate concerning the minimum wage would have caused even more harm to Axel Springer AG in other ways and we were not able to rule out the possibility of threats to our otherwise healthy core business. That is why we decided to charge a writedown in the full amount of the PIN investment. And that is why the PIN Group has been presented as discontinued operations in the 2007 financial statements. Consequently, PIN is last year s problem and will no longer represent an economic burden on our future performance. We have learned two basic lessons from the PIN affair. First, we need to focus even more on our core business in areas that are not dependent on political decisions. And second, we need to pursue growth through digitization and internationalization in the future. 2. Let us now touch upon the second item of disappointing news, the share price of Axel Springer AG, which is substantially lower now than it was at the beginning of The PIN writedown is certainly one reason for reduction in the share price. But other contributing factors include the widespread downturn of the capital market in the second half of the year and investors general skepticism about media companies, which has led to a lower valuation of this sector overall. We are certainly not satisfied with the end-of-year share price of 98 euros on December 28, 2007, nor with the recent development of the share price of Axel Springer AG. I am confident, however, that the stock markets will be convinced by Axel Springer s strong performance. As I believe, the operating results of our company for 2007 send a clear message. 5

6 Which brings us to the good news: 1. First of all, we need to mention the company s record earnings, the latest in a line of record-breaking results. This is the fourth record profit in a row. In terms of operating performance, 2007 was the best year in the history of your company. We increased the company s earnings before interest, taxes and amortization well past the threshold of 400 million euros. And we managed to do this in spite of the high level of start-up investments in the print business and especially in the online business, in the total amount of 86.4 million euros. All the employees of our company deserve special thanks for this outstanding performance. 2. The second piece of good news is just as much a historical milestone: The WELT-Group, including BERLINER MORGENPOST, earned a profit in It is the first time in the company s history that the group generated a profit. Only three years ago, the newspapers BERLINER MORGENPOST, WELT and WELT am SONNTAG generated a total net loss in the high double-digit millions. Including the investments WELT KOMPAKT and WELT ONLINE, these newspapers today generate a total profit in the high single-digit millions. Already back in 1998 I announced: First we need a journalistic quality initiative, followed by cost-saving structural changes, then revenue growth. This is a ten-year project, one that is very demanding of our employees, but then we can earn money. And now we have succeeded in achieving this goal. We introduced the first premium German newspaper in a tabloid format, while also continually modernizing and improving our core product; we established the first fully integrated multimedia newsroom and systematically linked our print products with what has since become the fastest-growing German news portal. The development of the WELT- Group is a success story that we are particularly proud of, one that spurs us on to even greater successes. 3. Third: Axel Springer is extremely successful not only from a business perspective, but from a journalistic perspective as well. In the last year, the company and its authors received 36 awards, ranging from the Theodor Wolff-Preis to the Wächterpreis, more than ever received by the company and its authors in a single year. 6

7 4. The fourth piece of good news: Axel Springer s business has become even more international. On a full-year basis, revenues of one in five euros were generated outside Germany in Fifth: Axel Springer now possesses the most successful multimedia brand family in Germany, the BILD Group. We consolidated both newspapers, all the magazines and the online platforms BILD.de and BILD Mobile into a single organizational group. Our goal is to be the pioneer for innovative, multimedia-based networked media management. In 2007, we created the conditions that will allow us to achieve this goal. 6. Furthermore, we sold our financial investment in ProSiebenSat.1 Media AG at a profit. In fact, the price per share was higher than the price negotiated with Haim Saban for purchasing the entire company. After that transaction was rejected by the German Federal Cartel Office, we announced that we would review the financial investment. After weighing all options and negotiating an increase in the shareholding, we finally decided for reasons that actually had nothing to do with PIN s performance to sell the investment. From today s perspective, that was a very effective way to preserve value. 7. But the most important development for your company in 2007 is the subject of the seventh point: the resolute transformation from a print publisher to an integrated multimedia group. In pursuing this transformation, we stuck with our strengths: content, brands, marketing and market places. We advanced the digitization of our existing titles and invested in external growth. Stock analysts proclaimed that we were able to acquire new economy assets at old economy prices: well positioned, fast-growing and above all profitable companies at very reasonable prices. Already in 2007, we generated 8.6% of our revenues from our online activities. But our goals are much higher. In 2010, we want to generate revenues of 400 million euros in our online businesses. At the same time, we are keeping a close eye on profit margins. Already today, in fact, one of our online companies is generating the highest EBITA margin of any business in the group. We intend to pursue this transformation with single-minded resolve and apply our energy and resources to the digital transformation, which I consider to be a matter of survival for any and all media companies. This transformation poses risks, of course, but far more opportunities. I am convinced that Axel Springer has the potential to be one of the big winners of the digital 7

8 transformation of Europe. When it comes to cultural transformation and our online portfolio, we are well ahead of most of our competitors. To put it another way, in the recent words of a stock analyst: Axel Springer is the second-most successful, digitally oriented exchange-listed newspaper and magazine publisher in Europe. 8. I wish to conclude my introductory remarks with an eighth piece of good news: All in all, Axel Springer had a successful year in 2007, despite the writedown in the PIN transaction. At the annual shareholders meeting, therefore, we will propose raising the company dividend to the new record level of 4.00 euros per share. After all, we want you to benefit from the operational success of your company. In the foregoing, I have provided a first impression of the company s performance in the financial year Chart 2: We have set ourselves the goal of becoming a leading multimedia company in Europe, integrating print, online and moving image operations. To this end, we are pursuing the strategy with which you are doubtlessly well familiar. This strategy has three main components: Market leadership in the German-language core business, internationalization and digitization. In 2007, we placed particular emphasis on the last-named component, through our digitization campaign. In this quest, we continue to be guided by our core values, without which there can be no successful business: creativity, entrepreneurship and integrity. We are certain that our core values and the rigorous strategic orientation of our activities to the three core components mentioned above will guarantee profitable growth for the company over the long term. Amidst all the other strategic decisions that had to be made in 2007, profitable growth was the overriding goal, as always. Let us take a look at the most important financial performance indicators for Chart 3: Let us begin with the principal developments in our markets. The print media market was again beset with structural challenges in The gross advertising revenues generated by magazines increased slightly last year, but the gain of only 8

9 0.5% was lower than it had been in the previous year. As you know, the net revenues were lower, in some cases considerably lower. The volume of print ads in super-regional newspapers declined in 2007, as did the paid circulation of daily newspapers in total. Considering this environment, it is a proud accomplishment indeed that WELT KOMPAKT achieved a circulation growth of 30% over a period of two years. Independently of that fact, the market developments have vindicated our strategy of focusing on the total range of a single brand. From reporting and editing to marketing and beyond, we have merged our print and online operations into a single winning team. It is the brand that counts. The range, appeal and revenue-generating capacity of any brand are the decisive factors. And a multimedia brand is bound to be stronger than a monomedia brand. A positive trend was observed in the help wanted ads of the regional subscription newspapers. In line with the general economic upswing, the gross advertising revenues from these kinds of ads increased by around 27% last year. Chart 4: In this market environment, Axel Springer experienced stronger-than-average growth. At approximately 2.6 billion euros, the consolidated revenues were 8.5% higher than the year-ago figure. They were also considerably higher than the consolidated revenues of the earlier years. Thus, we achieved the greatest revenue growth since 2000, which was an exceptional year. It is true, of course, that most of the revenue increase was due to the acquisitions effected last year. That is not surprising. But even on the basis of organic growth, Axel Springer increased its revenues by 1.2%. Chart 5: Where was the revenue growth generated, specifically? We managed to increase both our advertising revenues and our circulation revenues in However, the advertising revenues made the bigger contribution, with an increase of 14.6%. The advertising revenues increased to more than 1.2 billion euros in Allow me to discuss some of the key growth drivers in The increase in the advertising revenues resulted from the first-time consolidation of the newly acquired companies, including the Swiss company Jean Frey AG, the women s portal aufeminin.com, as well as zanox.de 9

10 AG, a market leader in the field of performance-driven marketing, and the very successful price and product search engine idealo.de. In the segment of online business media, the newly acquired companies wallstreet:online and Smarthouse were consolidated for the first time in Chart 6: We achieved a 1.8% increase in our circulation revenues. The existing titles that contributed to the organic growth of circulation revenues included Dziennik, as well as the titles in Hungary and Russia. Among the newly acquired companies, the titles of Jean Frey AG in particular (Beobachter, Bilanz and TV Star) made a very significant contribution to the increase in circulation revenues. Chart 7: Let us now take a look at the operating performance of the individual business segments. In our newspapers, we achieved revenue growth of 2.5% and disproportionately higher earnings growth of 10.5%, continuing the trend of positive results in this segment. The newspaper revenues nearly reached the level of 1.5 billion euros in The EBITA increased by more than 31 million euros to reach about 332 million euros. The profit margin was likewise higher in 2007, rising from the very good prior-year margin of 20.6% to the 22.2% margin achieved in Truly, our newspapers experienced a great deal of success in WELT and WELT KOMPAKT together reported new all-time highs in terms of range and circulation. Over the last three years, the WELT-Group has increased its circulation by more than 30%, reaching unprecedented levels as a result. Bucking the market trend, WELT and WELT am SONNTAG increased their advertising pages by almost 25% in the last three years. The BILD Group generated a new record operating profit for the fifth year in a row. BILD itself made a major contribution to the record profit, with an all-time high of its own. Among the regional newspapers, Hamburger Abendblatt generated its highest profit since the year This newspaper has doubled its earnings since Chart 8: At the beginning of the year, WELT ONLINE underwent an extensive relaunch, which has proved to be extremely successful. The online portal s performance after the relaunch surpassed all our expectations. WELT ONLINE increased its page impressions by 130% and 10

11 its visits by 42%. In the fourth quarter of 2007, the portal registered 99.1 million page impressions, making it the market leader among the online news portals of premium daily newspapers and the fastest-growing news portal in Germany. In 2008, WELT ONLINE has accelerated its dynamic growth still further, reporting more than 163 million page impressions and about 20 million visits in the month of March. With these figures, was well ahead of the online portals of FAZ, Zeit, Süddeutsche, Focus, Stern and n-tv. And with increases of 237% in its page impressions and 162% in its visits over the corresponding yearago quarter, WELT ONLINE is still the fastest-growing news portal in Germany by a wide margin. Chart 9: We subjected BILD.de to a fundamental overhaul in the past year. In the autumn, we assumed full managerial control of this online portal, which had been jointly operated with Deutsche Telekom until that time, by repurchasing the shares that had been held by Deutsche Telekom. That gives us the leeway to position the BILD brand in the Internet in just the way we deem to be right and sensible strategically. Even before that transaction, we made some important changes at BILD.de. For example, we appointed new management, initiated a product innovation process and reorganized the marketing department. The performance of BILD.de has more than demonstrated that we are on the right course. During 2007, BILD.de fortified its position as the leading infotainment portal in the web. On average for the year, BILD.de achieved a 31% increase in visits and an increase of about 26% in page impressions. The ad impressions increased at an even higher rate of more than 35%. The revenues of BILD.de reached a new all-time high. The reorganization of the marketing function boosted the online advertising revenues. More importantly, we integrated new media forms and channels. In the time since the expansion of the video portal, the video downloads increased by 170%. The introduction of BILDmobil exceeded all our expectations. After only two days, we sold more than 40,000 starter sets; and after two weeks, we had sold 100,000. In the meantime, more than 257,000 sets have been activated. Coming from nowhere, the BILDmobil portal has quickly become the biggest WAP portal, with about 9.5 million page impressions in March It generates three times more traffic than the biggest competitor. 11

12 Chart 10: In the Magazines segment, both the revenues and the earnings showed improvement. The segment s revenues increased by 4% to more than 814 million euros. At more than 80 million euros, the EBITA was disproportionately higher, by more than 21%. Thus, the Magazines segment achieved an EBITA margin of almost 10% in The revenue gains in Germany were driven mainly by the positive performance of the auto magazines and women s titles. Internationally, Axel Springer achieved organic growth with its titles in Russia and Hungary. And of course, the first-time consolidation of Jean Frey AG accounted for a major portion of the revenue increase of the Magazines segment. Allow me to mention a few operational highlights of the Magazines segment. Our most important TV listings TV DIGITAL and HÖRZU defended their strong positions in the market and further improved their profitability. Since it was launched in 2004, TV DIGITAL has continually increased its paid circulation to the current level of almost two million copies in clear contrast to the declining trend of this market segment. Thus, TV DIGITAL is the second-biggest TV listing in Germany. And HÖRZU, with a paid circulation of 1.5 million copies, is still the biggest weekly magazine in Germany, after 60 years. Chart 11: The web portal of the COMPUTER BILD Group was completely overhauled in Compared with the previous year, the page impressions were more than 100% higher and the visits were 87% higher. The COMPUTER BILD Group is the Internet Newcomer of the Year in the segment of computer titles, and one of the fastest-growing German websites overall. has continued on a course of growth in the first quarter of 2008, crossing more than 65 million page impressions and 9 million visits for the first time in March In the print sector, COMPUTER BILD 2007 successfully defended its market leadership position and increased its total sales by 3.5%, in clear contrast to the prevailing market trend. The AUTO BILD Group experienced a similar development. Here too, we completely modernized the website and established separate online channels for every member of the brand family, so as to better exploit the cross-media marketing potential. In the print sector, AUTO BILD generated a new record profit with a profit increase of 16% over the previous year. SPORT BILD achieved its highest circulation in seven years, with an increase of 7.9% over the previous year, and that without a European or World Soccer Cup. 12

13 Chart 12: Let us turn our attention now to the company s online activities in total. The digitization campaign is in full swing in every area of our company. We generate revenues of about 222 million euros, representing 8.6% of total Group revenues, from our brand-related online activities and our online investments. In this respect, we are well above the industry average. The organic growth of pro forma revenues amounted to 39% in The traffic generated by our online activities has more than doubled in the last two years. That should make it clear that we do not simply talk about digitization, but are actively pursuing that objective in every area of our company. We have advanced this transformation by acquiring fast-growing, profitable online companies that fit in well with our core competencies. In the following, I will pay particular attention to three important online acquisitions of last year. Chart 13: With the acquisition of aufeminin.com, Europe s leading online platform for women, Axel Springer instantly attained the status of the profitable market leader in the segment of websites for women in France, Germany, Belgium, Spain, Italy and Switzerland. aufeminin is extraordinarily successful. Its portals are highly attractive to major consumer goods manufacturers that wish to reach women in particular. Just think: We are talking about the biggest advertising market in the print sector, in terms of volume. In the fourth quarter of 2007, aufeminin increased its range by 60% over the year-ago quarter. Having already completed the management transition from the company s founders to the new management team, as planned, we will focus on further monetarizing the company s range by establishing local teams and editors in I am certain that we will be able to grow aufeminin s business quickly. The latest figures show that aufeminin s German website has extended its market leadership position. Since the beginning of this year, the visits have increased again, by 9% over the year-ago period to reach about 5.7 million. Chart 14: By acquiring a 60% stake in zanox.de AG, we established a strong position in the market for success-based marketing services. zanox represents a step in the direction of marketing compensation models based on the principle of payment for proven successes, such as a customer contact or a transaction An internationally active company, zanox achieved 13

14 significant revenue growth in Zanox also extended its market leadership position in Germany and lessened the gap with the European market leader in Chart 15: A third example of the successful implementation of our digitization strategy is idealo.de, which successfully extended its position as one of the leading price and product search engines. The number of offers nearly doubled in 2007 and the portal achieved substantial gains in generated traffic. In December, idealo.de was the market leader for the first time, measured by unique audience. Chart 16: Let us now take a look at our international activities. We can say with certainty that our internationalization strategy is paying off. In 2007, Axel Springer generated revenues of one in five euros outside Germany. That is a new record. The international revenues increased by 40% to more than half a billion euros. Aside from organic growth, the acquisitions effected in 2007 represented a significant portion of the overall growth. Chart 17: Dear shareholders, as a result of the business developments outlined above, your company earned a record profit for the fourth year in a row. Groupwide, we increased the EBITA by around 12.5%, from 375 million euros to 422 million euros. That is the best operating result in the history of our company. The EBITA generated in the financial year 2007 is nearly twice as high as the EBITA generated in the historic boom year of The EBITA margin crossed the 16% mark for the first time on a full-year basis. Since 2003, the EBITA margin has risen by more than 75%. To the best of our knowledge, Axel Springer is the most profitable German major publisher, in terms of operating profitability. We understand and are delighted that our competitors are bothered by this fact. Adjusted for the income from the Kirch insolvency that being 33.6 million euros in 2006 and 13 million euros in 2007 the EBITA growth would have been even greater in those two years. By this calculation, the EBITA would have risen by around 20%, from 341 million euros in 2006 to 409 million euros in

15 This excellent performance was due in part to the further optimization of the company s cost structures. By means of rigorous process optimization in our administrative activities, we achieved massive reductions in the cost of services provided, to the benefit of the operating units. According to a study by Gartner, our IT system is one of the best in the world. IT expenses have fallen by more than 30% since 2001, despite the heightened complexity of our business and the increased performance of our systems. Chart 18: Axel Springer achieved a similarly strong increase in its EBITDA, which rose from 434 million euros in 2006 to 470 million euros in That translates to an EBITDA margin of 18.2%. Chart 19: And now we come to the chart that hurts the most! As I mentioned in the beginning, Axel Springer took a writedown on the entire value of its investment in the PIN Group in We had announced in December that the writedowns and other expenses would amount to no more than 620 million euros. And so it was. The loss from discontinued operations came to million euros before taxes and million euros after taxes. This writedown from discontinued operations led to a consolidated net loss of 288 million euros for Chart 20: However, the fact that Axel Springer can absorb such a charge without running into bigger problems attests to the company s operational strength. We are well positioned for the present and for the multimedia future. This assessment is clearly supported by the significant level of positive earnings from continuing operations. Adjusted for non-recurring effects in the noncurrent financial assets and other non-recurring effects, the earnings from continuing operations would have amounted to about 288 million euros in 2007, well above the adjusted year-ago figure of about 265 million euros. Chart 21: At 283 million, the cash flow from operating activities was about 11% higher than the year-ago figure, indicative of a very positive development in

16 Chart 22: As I mentioned in my introductory comments, the Management Board and Supervisory Board are proposing a record dividend of 4.00 euros per share, in consideration of the very good business developments, so that you can participate in the record operating profit for Chart 23: What can we expect in the rest of 2008? Our priorities are clear. We want to further digitize our brands at a fast rate. We laid an excellent foundation in 2007 but we still have much to do. We will carefully integrate the newly acquired companies. And we are making good progress in this respect. We want to make our successful international business even more profitable. This applies to both our print activities and our online activities. We will continue to practice strict cost discipline, as an essential prerequisite of long-term business success. And we will continue our efforts to improve the sense of customer orientation in our company. We have set ourselves the goal of becoming Europe s most customer-friendly media company by the year Chart 24: Economically, our goals are the following: We expect that we will be able to further increase the full-year EBITDA and EBITA, adjusted for non-recurring effects. Such non-recurring effects include the final receipt of a dividend from ProSiebenSat.1 in 2007, for example. We also want to increase our revenues. In the medium-term future, we want to continue earning profit margins of 20% and more in our newspapers business. In the magazines business, we have already nearly achieved our mediumterm goal of 10% plus x. We want to do even better than that. In the online business, we want to generate revenues of 400 million euros and an EBITDA margin of more than 20% in the year This goal is ambitious, but I am sure we can achieve it. 16

17 Digitization and internationalization: Those are still our strategic priorities. And we will stick to the goal of making Axel Springer a leading multimedia company in Europe, integrating print, online and moving image operations. We are extremely well equipped to continue generating profitable growth for your company because we have the best creative talents working for us. Chart 25: Ladies and gentlemen: Please allow me, in conclusion, to recapitulate the most important points I have covered: We increased our revenues by 8.5% to approximately 2.58 billion euros in We increased the EBITA by around 12.5% to the new record level of 422 million euros. We improved the EBITA margin to 16.4%. We want to distribute a record dividend of 4.00 euros per share. The WELT-Group earned a profit for the first time ever. We continued our digitization campaign, while keeping a close eye on the overriding goal of profitable growth. Seven of our ten biggest online assets are profitable. And we succeeded in making our business more international. Of the Group s total revenues, one in five euros is generated outside Germany. In short: In spite of PIN, 2007 was the most successful year operationally in the history of Axel Springer AG. This success and the lessons learned from our experiences in 2007 will only spur us on to further successes in the future. 17