Düsseldorf In the year after the arrival of the American investor KKR, a lot is changing at media company Axel Springer. On Wednesday, the Board of Directors, which will soon be reduced from five to four heads, read the balance figures on the phone – and no longer, as in previous years, at a conference in the Axel Springer skyscraper in Berlin.
And not just because of the coronavirus epidemic. The figures were also known, unlike previous years. The company had notified them as part of the withdrawal of the stock market in February. Only one thing remained the same: the CEO’s optimism. “Now comes axel Springer’s most exciting phase,” says Mathias Döpfner, who has led the Group since 2002.
Tension is always present in the media group. The company, which employs about 16,000 people, is at a crossroads. Axel Springer (“Image”, “World”) will have to change radically, combining two different goals.
On the one hand, there is the trueness of axel Springer’s journalistic legacy, for which his widow Friede Springer stands, who manages 42.6 percent of the shares. And on the other hand, there is the expansion of the growth areas, the digital division, which is supposedly the real goal of the American financial investor. KKR now owns 45 percent of the shares.
In between is CEO Döpfner, who owns 2.8 percent of the shares, but for whom there is no longer a real marketplace after the deletion. Friede Springer, KKR and Döpfner have agreed not to sell their respective shares. The hedge fund wants to invest its money in Springer for at least five years, after which the withdrawal can begin. Whoever takes over the KKR shares, or follows an asset deal, for example, or whether passing on it to another powerful co-owner is an option, remains open at this time.
Initially, the group will be restructured. Döpfner has already made a strong proposal. The media house, whose revenue fell 2.2 percent last year to 3.1 billion euros and adjusted profit (EBITDA) changed 14.5 percent to 630.6 million euros. Springer now accounts for 73 percent of his sales at digital companies. This mainly includes digital advertisements in the real estate and job creation sector, but also journalistic offers from “Business Insider” and “Upday”. Springer’s market capitalisation is currently 6.8 billion euros.
“We need innovation, investment, technological skills, but also a long haul,” Döpfner said during the conference call. He is planning a strategic reorientation that is so expensive that it would have punished the stock market. Hence the path of deletion. After the free float fell to 3.5 percent, the retreat from stock market trading began.
There are conflicting explanations about the direction of conversion. Capital market observers believe that a split between the two fields of journalism and category of transactions is convincing. Precisely because of the different business sectors. Döpfner rejected recent rumors in the industry about a transfer of the publishing house to a foundation. “This is a big fundamental misunderstanding,” he said Wednesday. Observers sometimes see things differently. According to a media consultant, the rumor has its rationality, because investor KKR has “little interest in the journalistic business”.
Classic media business is caring child
The situation is not hopeless – despite all the cries of discomfort. “We still value the future of media houses very positively,” says a media expert at a consultancy. However, high consumer demand is experiencing an increasingly difficult situation among companies, which have to take a new path in generating revenue.
This is no different with Springer. The classic media business, bundled into the News Media National division under the auspices of Chief Executive Stephanie Caspar, is the group’s child concerns. Revenue fell 4.4 percent to 1.4 billion euros last year, while profit fell 39.3 percent to 138.5 million euros. The management is now cracking down.
A volunteer program is currently underway to encourage employees to leave the company. Management is patient and has expanded the programs. Döpfner does not currently expect to be terminated for operational reasons, but does not want to exclude them. The planned savings amount to around EUR 50 million and the Group is still keeping a record of the number of jobs lost. While “Business Insider” and “Upday” are among the oft-quoted success stories, the “Bild” group is trumping with ambitious moving image plans under editor-in-chief Julian Reichelt, there is little concrete news about the future of the “Welt” group.
In general, Springer says that he plans to invest 100 million euros in digital projects at Bild and “Welt” over the next three years. This is about live coverage, paid content and sports. Springer goes Bundesliga? Certainly not. Döpfner made it clear that he found it “totally impossible” that Springer would become one of the great players in football. Instead, he pointed to possible rights to new sports, such as e-sports.
Gabriel Mohr, media expert at consulting firm Arthur D. Little, appreciates Springer’s development. Other media outlets had made the mistake of sticking to the print edited newspaper for too long and did not recognize the need to provide readers with digital information or vacancies. “In the future, there will be a new definition of media houses,” he says.
The new, promising Springer business is bundled into the so-called Classifieds Media. Under the responsibility of ceo Andreas Wiele, the portfolio includes fast-growing brokerage platforms such as Stepstone (job ads) and Immonet (real estate). However, by the end of May 2020, although the withdrawal of the stock market is likely to take place, Wiele will leave the company and join KKR’s global senior advisory board. With Wiele’s departure, the number of springer board members will be reduced to four.
The ambitions are great: Springer wants to become the “world leader in digital journalism and digital category business”. Döpfner left no doubt that this could not only be done by organic growth. But he didn’t want to mention specific investment projects. The board also left uncommented speculation that he was interested in the classifieds division of the online ebay market, which had been going on for months. “Big announcements are not our kind,” the CEO said instead.
There will probably be even fewer announcements in the future. The reporting of quarterly figures is no longer reported. “The departure of the capital market is a turning point,” Döpfner said. Springer’s been on the stock market for 35 years. The company will now have to adapt to a new era.
More: Restructuring of the group depresses profit at Axel Springer – stock market withdrawal decided