Ströer AG: Positive business performance in the fourth quarter after a challenging year overall

Cologne, 26 March 2013

Ströer Media AG pursued its growth strategy in fiscal year 2012 by investing selectively in its core markets. With the roll-out and expansion of the Out-of-Home Channel in train stations and shopping malls in Germany, Ströer has created one of the world’s largest digital product offerings with a national reach. In Turkey, Ströer invested in expanding its range of billboard products and was able to report significant additional revenue already in the fourth quarter.

Overall, however, Ströer Media AG’s operating result fell short of the prior year due to challenging economic conditions and weaker media markets in Ströer’s core countries.

Against this background, consolidated revenue decreased by 2.9% from EUR 577.1m in the prior year to EUR 560.6m. Slight growth in Turkey was contrasted by declining revenue in other segments. Adjusted for changes in the investment portfolio and exchange rate effects, organic growth in the Group was -4.0% (prior year: 4.8%).

This drop in revenue combined with an increase in the cost of sales reduced operational EBITDA to EUR 107.0m (prior year: EUR 132.3m). As a result, the operational EBITDA margin fell to 19.1% after 22.9% in the prior year.

Despite the decrease in the operating result, profit or loss for the period advanced by EUR 1.8m due to improvements in the financial and tax result. Nevertheless, the Group closed fiscal year 2012 with a loss of EUR 1.8m, compared with a loss of EUR 3.6m in the prior year.

Net debt, another key performance indicator for the Group, declined slightly overall by EUR 2.1m in the fiscal year to EUR 302.1m, as Ströer was able to offset the reduction in its operating result on the cash flow side. The leverage ratio (ratio between net debt and operational EBITDA) increased slightly to 2.8 only due to the drop in EBITDA.

“2012 was a year of transition in which we enhanced our business through targeted growth investments in Germany and abroad in view of the continuing digitalization of the media landscape. The roll-out and expansion of our Out-of-Home Channel in Germany’s largest train stations and in ECE’s shopping malls has enabled us to set new standards in digital out-of-home advertising,” said Udo Müller, CEO of Ströer. “We have laid the foundation for further growth. The importance of out-of-home advertising – whether analog or digital – will steadily increase due to the digitalization of media.”

In the past fiscal year, Ströer adjusted the pace of its investments to reflect the challenging environment and invested selectively in specific growth projects in Germany and abroad. The Group focused mainly on the roll-out of more digital advertising media and premium billboards and is seeing positive trends in the digital segment in particular. Overall, Ströer reduced its investments by 18.1% to EUR 42.6m (prior year: EUR 52.0m).

Operating segments

Ströer Germany

Revenue in the Ströer Germany segment fell by EUR 15.7m to EUR 411.7m, which meant that operational EBITDA decreased by EUR 17.8m year on year to EUR 97.5m. Although higher lease payments and running costs were partly offset by a slight decline in administrative expenses, the Group was unable to prevent an overall reduction in both operational EBITDA and the operational EBITDA margin, which fell to 23.7%.

By contrast, the regional business performed well. Revenue in the transport product group was up by EUR 2.7m, primarily due to positive contributions from the Out-of-Home Channel. Overall, the proportion of segment revenue generated by digital media rose to 9.2% (prior year: 8.5%).

Ströer Turkey

The Ströer Turkey segment generated revenue of EUR 91.3m in fiscal year 2012, a slight increase of EUR 2.3m year on year. This was not only attributable to positive exchange rate effects of EUR 1.4m in 2012, but also to a clear improvement in business activities in the fourth quarter. This growth contrasted with decreases in full year revenue of EUR 2.5m from discontinued low-margin sales agreements. Adjusted for exchange rate fluctuations and termination of such sales agreements, rannual evenue grew by 2.7% on a like-for-like basis.
Despite the slight revenue growth, operational EBITDA in the Turkish segment fell by EUR 7.5m to EUR 12.9m, primarily due to the higher cost of sales resulting from increased lease payments under the new Istanbul billboard contract. Overall, the operational EBITDA margin declined to 14.1%.

Other segment

The “Other” segment includes Ströer’s Polish out-of-home activities and the western European giant poster business of the blowUP division. The segment closed fiscal year 2012 with a EUR 1.3m decline in operational EBITDA to EUR 4.4m and a drop in the operational EBITDA margin to 7.5%, which were chiefly attributable to lower revenue in the markets. At -6.0%, the segment’s organic growth was significantly below the prior-year figure.

Outlook
The economic situation in the eurozone will remain uncertain this year. Against this background, the advertising sector remains volatile and will be shaped by short-term bookings by our customers. For the first quarter 2013, we expect to see a continuation of the positive momentum already witnessed in the last quarter in Turkey and Germany and thus anticipate an increase of the organic group revenue of +5%. In the second quarter we expect to see - due to currently reluctant client bookings - a temporary halt in the slight upward trend estimated for the full-year.