Quarterly Report • Nov 6, 2013
Quarterly Report
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freenet AG · Hollerstraße 126 · 24782 Büdelsdorf
| Key financials | 4 |
|---|---|
| To our shareholders | 7 |
| Letter to shareholders | 9 |
| freenet AG on the capital market | 13 |
| Interim group management report | 17 |
| Overview of the freenet Group's business and operating performance | 19 |
| Assets, financial position and results | 23 |
| Opportunities and risk report | 30 |
| Forecast | 31 |
| Significant events after the reporting date | 31 |
| Transactions with related parties | 32 |
| Condensed interim consolidated financial statements | 35 |
| Overview Consolidated income statement and consolidated statement of |
37 |
| comprehensive income for the period from 1 January to 30 September 2013. | 38 |
| Consolidated balance sheet as of 30 September 2013 Schedule of changes in equity for the period |
40 |
| from 1 January to 30 September 2013 Consolidated statement of cash flows for the period |
42 |
| from 1 January to 30 September 2013 | 43 |
| Selected explanatory notes in accordance with IAS 34 | 44 |
| Further information | 59 |
| Financial calendar | 61 |
| Imprint, contact, publications | 62 |
4
| Figures in € million | |||||
|---|---|---|---|---|---|
| Q1—Q3/2013 | Q1—Q3/2012 | Q3/2013 | Q2/2013 | Q3/2012 | |
| Revenue | 2,374.5 | 2,269.6 | 789.6 | 809.6 | 756.5 |
| Gross profit | 531.5 | 519.7 | 181.6 | 177.0 | 182.3 |
| EBITDA | 263.0 | 263.2 | 92.6 | 85.2 | 92.5 |
| EBIT | 221.3 | 152.1 | 78.6 | 71.7 | 55.5 |
| EBT | 191.4 | 122.0 | 68.8 | 61.5 | 45.8 |
| Group result from continued operations | 179.2 | 131.2 | 63.6 | 55.4 | 49.0 |
| Group result from discontinued operations | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Group result | 179.2 | 131.2 | 63.6 | 55.4 | 49.0 |
| Earnings per share (€) (diluted and undiluted) | 1.40 | 1.02 | 0.50 | 0.43 | 0.38 |
| 30. 9. 2013 | 30. 9. 2012 adjusted1 |
30. 9. 2013 | 30. 6. 2013 | 30. 9. 2012 adjusted1 |
|
|---|---|---|---|---|---|
| Balance sheet total in € million | 2,476.4 | 2,274.1 | 2,476.4 | 2,389.7 | 2,274.1 |
| Shareholders' equity in € million | 1,179.2 | 1,144.2 | 1,179.2 | 1,115.7 | 1,144.2 |
| Equity ratio in % | 47.6 | 50.3 | 47.6 | 46.7 | 50.3 |
| Figures in € million | |||||
|---|---|---|---|---|---|
| Q1—Q3/2013 | Q1—Q3/2012 | Q3/2013 | Q2/2013 | Q3/2012 | |
| Free cash flow2, 3 |
201.6 | 195.9 | 74.9 | 70.4 | 71.9 |
| Depreciation and amortisation | 41.7 | 111.1 | 14.0 | 13.5 | 37.0 |
| Net investments (Capex)3 | 13.1 | 12.2 | 7.0 | 3.4 | 5.7 |
| Net cash3 , 4 |
–471.9 | –512.1 | –471.9 | –537.2 | –512.1 |
Share
| 30. 9. 2013 | 30. 9. 2012 | 30. 9. 2013 | 30. 6. 2013 | 30. 9. 2012 | |
|---|---|---|---|---|---|
| Closing price Xetra (€) | 17.89 | 12.70 | 17.89 | 16.78 | 12.70 |
| Number of ordinary shares (in thousand) | 128,061 | 128,061 | 128,061 | 128,061 | 128,061 |
| Market capitalisation (in €'000s)4 | 2,291,012 | 1,626,375 | 2,291,012 | 2,148,864 | 1,626,375 |
| 30. 9. 2013 | 30. 9. 2012 | 30. 9. 2013 | 30. 6. 2013 | 30. 9. 2012 | |
|---|---|---|---|---|---|
| Employees4 | 4,593 | 3,927 | 4,593 | 4,516 | 3,927 |
| Figures in million | |||||
|---|---|---|---|---|---|
| Q1—Q3/2013 | Q1—Q3/2012 | Q3/2013 | Q2/2013 | Q3/2012 | |
| Mobile Communications customers4 | 13.37 | 14.31 | 13.37 | 13.56 | 14.31 |
| Thereof customer ownership | 8.67 | 8.38 | 8.67 | 8.56 | 8.38 |
| Thereof contract customers | 5.82 | 5.72 | 5.82 | 5.81 | 5.72 |
| Thereof no-frills customers | 2.85 | 2.66 | 2.85 | 2.75 | 2.66 |
| Thereof prepaid customers | 4.70 | 5.93 | 4.70 | 5.00 | 5.93 |
| Gross new customers | 2.43 | 2.60 | 0.79 | 0.86 | 0.84 |
| Net change | –0.71 | –0.88 | –0.19 | –0.15 | –0.15 |
| Q1—Q3/2013 | Q1—Q3/2012 | Q3/2013 | Q2/2013 | Q3/2012 |
|---|---|---|---|---|
| 2,350.7 | 2,223.9 | 781.6 | 801.6 | 741.1 |
| 516.2 | 494.2 | 176.9 | 171.5 | 173.3 |
| 263.8 | 262.2 | 95.1 | 85.6 | 92.9 |
| 224.9 | 154.6 | 81.9 | 73.1 | 57.1 |
| Figures in € | |||||
|---|---|---|---|---|---|
| Q1—Q3/2013 | Q1—Q3/2012 | Q3/2013 | Q2/2013 | Q3/2012 | |
| Contract customer | 22.5 | 23.5 | 22.6 | 22.5 | 23.6 |
| No-frills customer | 3.5 | 3.9 | 3.5 | 3.6 | 3.9 |
| Prepaid customer | 3.0 | 3.0 | 3.2 | 3.0 | 3.1 |
1 The comparative figures in the key financials overview as well as in other tables in this report have been adjusted due to a change of an accounting method, see "Selected explanatory notes", item 2.
2 Free cash flow is defined as cash flow from operating activities, minus investments in property, plant and equipment and intangible assets, plus proceeds from the disposal of property, plant and equipment and intangible assets.
3 This information relates to the overall Group (including discontinued operations).
From left to right: Stephan Esch, Chief Technology Officer (CTO); Christoph Vilanek, Chief Executive Officer (CEO); Joachim Preisig, Chief Financial Officer (CFO)
In the months under review, the strong momentum that already existed in the German telecommunications market has accelerated further. The upcoming or recently completed consolidation among network operators have given the unrelenting competition in our industry a new form: first, it should become a little more transparent and predictable, and second, the prolonged price war in certain market segments should lessen somewhat—mobile communications analysts believe this as well.
As a result of this intense competition, average revenue per user (ARPU) has been on a downward trend for several years across the market, causing the service revenue of mobile communications companies in this area to decline. A substantial contributor to this is the increasing demand by customers for flat rates, with their cost certainty.
So for freenet AG the recent consolidations are very good news. Apart from easing price pressure arise, the impending changes offer us new opportunities to further strengthen our position as Germany's largest network-independent telecommunications provider—for example, by adding to our shop locations to ensure ideal customer proximity and approach.
At the same time we see this as further confirmation of our successful strategy: in our traditional business field with mobilcom-debitel as the main brand, we mainly address valuable contract customers who require a high degree of consultation and individual user profiles, while our no-frills brands serve price-conscious smartphone users in particular.
We are also increasingly tapping into the growing digital lifestyle market with attractive products and services—for example in the field of home automation, entertainment and data security. We do this from our established position as a reseller, which gives us additional revenue and profits without expensive development and infrastructure investments, and thereby guaranteeing our continued independence in advising customers. Against this background, at the beginning of the year we had taken over GRAVIS, Germany's leading provider of Apple products, and MOTION TM, a large online vendor in mobile communications and telecommunications.
The positive developments and figures in the third quarter once again show how well this strategy of prudently expanding both our core business and the innovative digital lifestyle business is going:
The cumulative figures for the first three quarters of 2013—EBITDA of 263.0 million euros and free cash flow of 201.6 million euros—confirm our guidance for the full year 2013. It remains unchanged at 355 million euros in Group EBITDA and free cash flow of 255 million euros.
We want to secure our strong competitive position and high level of profitability long term while also developing growth segments. To do this, in the third quarter we further expanded our range of mobile/digital lifestyle products and services and also made important strategic decisions in sales.
For instance, at the beginning of the quarter we augmented the flat-rates portfolio of our main mobilcom-debitel brand by adding the new Allnet suite of rates. From 9.90 euros per month, they offer service packages for all German mobile networks, tailored to meet individual customer needs, with flat rates for telephony, mobile internet and texts, with optional free roaming minutes and mobile phone options that let customers buy a late-model smartphone at a low price. Meanwhile, in the discount segment we ran specials on our www.crash-tarife.de online sales platform that allowed users to book the AllNet-Starter and AllNet-Spar-Flat tariffs at even better terms.
These measures are accompanied and supported by a further intensification of our marketing activities. They include our bus tour of German cities, which has proven to be a very effective promotional tool over the last three years—for instance, sales have doubled at the mobilcom-debitel shops at each location visited by the bus in the following four weeks. The tour launched in early September with two new visually and technically enhanced "smart trucks" and Sony Mobile as a partner. By the end of October, they had visited 41 cities throughout Germany.
Our no-frills subsidiary klarmobil.de also launched a new campaign in the summer. With the core message of "Günstig in Gut" (A good kind of inexpensive), it focuses on the high level of quality we offer our customers in the low-price segment—with a choice of low tariffs in all German mobile networks and with excellent service, as independent tests repeatedly confirm.
In the digital lifestyle area, we had already successfully launched a wide range of attractive products in the past few quarters, including mobile home-heating control as well as home monitoring via smartphone app; the new mobilcom-debitel Cloud for new and existing customers; and our GameFlat option for mobile use of many of the latest premium games on Gameloft.
In the third quarter, this was followed by another digital lifestyle offering: the new mobilcom-debitel MusicFlat. For 8.99 euros per month on top of their mobile phone tariff, it gives our customers access to over 20 million songs from pop, rock, jazz and classical music via their mobile device, which they can compile into favourites and playlists and listen to on Wi-Fi or offline. Alternatively, MusicFlat is also available for new customers as a complete package with an accompanying smartphone tariff for just 24.99 euros per month.
We also offer customers the most sought-after devices as soon as they come onto the market, always at very competitive prices and across the full range of segments. For example, in the months under review, they ranged from a low-cost Huawei Ascend P6, currently the fastest LTE mobile phone in the world, to the new Apple iPhone 5S, which regardless of the stronger competition from East Asia once again set new sales records in its first few days on sale. Our range also included the iPad 3 and iPad mini at discount prices; to promote these, we launched our first cross-brand campaign between the mobilcom-debitel shops and our GRAVIS subsidiary.
We are systematically developing the longstanding exclusive Apple dealer into a complete digital lifestyle provider. Timed to coincide with the IFA exhibition in Berlin, in early September the GRAVIS flagship store on Ernst-Reuter-Platz, Berlin unveiled two exclusive "shop-in-shop" concessions for the two premium manufacturers Samsung and Sony, featuring the South Korean company's GALAXY Gear Smartwatch and GALAXY Note 3, and Sony's Xperia Z1 smartphone.
We will steadily expand this offer in the months ahead—at other selected GRAVIS stores nationwide and with other choice manufacturers. The idea is to provide customers with integrated product lines including accessories, thereby generating lucrative additional revenue for us that will help cushion the price pressure in our core business of mobile communications.
There is also good news concerning our long-standing successful cooperation with Saturn and Media stores. With effect from 1 August 2013, we signed an early extension to our exclusive sales cooperation with Media-Saturn Deutschland GmbH for a minimum term of three years. As part of the exclusive, nationwide partnership, mobilcom-debitel continues to sell its own mobile communications products and services as well as the original tariffs of the mobile network operators T-Mobile, Vodafone and E-Plus in the electronics markets.
Based on the activities outlined above and our strengthened competitive positioning, we feel we are very well positioned for the upcoming year-end business. We are very optimistic about achieving our targets for 2013 and thus creating the basis for an equally successful year in 2014. We—management and employees of freenet AG—will continue to devote all of our expertise, strength and experience to this.
Christoph Vilanek Joachim Preisig Stephan Esch
Despite the recent slowdown in Germany's economic recovery and macroeconomic conditions continuing uncertain in the euro zone, the German stock market developed positively in the third quarter of 2013. The DAX closed at 8,594 points on 30 September, thus achieving an increase of about eight percent during the quarter. The TecDAX also recorded a significant 13 percent increase during the reporting period to 1,084 points at the end of the quarter.
The freenet share saw a generally erratic price development, and a price increase of about five percent during the reporting period. The share started the third quarter with a Xetra closing price of 17.03 euros, falling to a low of 16.95 euros during early July and peaking in mid-August at 18.60 euros. The quarter finally ended with a closing price of 17.89 euros. The average Xetra closing price during the reporting period was 17.95 euros.
In the past quarter a total 29.9 million freenet shares were traded on the Xetra trading platform, compared with 52.0 million in the second quarter of 2013 and 35.3 million in the first quarter of 2013. This puts the Xetra trading volume nearly on par with the previous year (30.1 million). At the same time, the third-quarter trading volume on alternative trading platforms ("dark-pools") was around 50 percent of the total trading volume, compared to about 48 percent in the second quarter of 2013. The average daily Xetra trading volume amounted to 452,900 units. In the previous quarter an average of 826,000 freenet shares were traded on Xetra, compared to 546,800 units in the first quarter.
In the first nine months of the current financial year, the freenet share price increased by almost 28 percent, in line with its TecDAX benchmark index, which posted gains of nearly 31 percent over the same period.
freenet AG's share capital totals 128,061,016 euros and is divided into 128,061,016 registered shares. Each share represents 1.00 euro of the share capital.
During the reporting period, the company received six voting rights notifications pursuant to section 21 WpHG (German Securities Trading Act):
On 9 August 2013 Polaris Capital Management, LLC, Boston, MA, USA informed us pursuant to section 21 Paragraph 1 WpHG that on 9 August 2013 its share of voting rights in freenet AG, Büdelsdorf, Germany had exceeded the 3-percent reporting threshold and amounted to 3.06 percent on that day (3,921,847 voting rights). 3.06 percent of the voting rights (3,921,847 voting rights) are allocated to the company pursuant to section 22 Paragraph 1, sentence 1, No. 6 WpHG.
On 12 August 2013 Flossbach von Storch SICAV, Strassen, Luxembourg informed us pursuant to section 21 Paragraph 1 WpHG that on 8 August 2013 its share of voting rights in freenet AG, Büdelsdorf, Germany had fallen below the 3-percent reporting threshold and amounted to 2.86 percent on that day (corresponding to 3,668,301 voting rights).
On 15 August 2013 Flossbach von Storch AG, Cologne, Germany informed us pursuant to section 21 Paragraph 1 WpHG that on 9 August 2013 its share of voting rights in freenet AG, Büdelsdorf, Germany had fallen below the 3-percent reporting threshold and amounted to 2.9998 percent on that day (3,841,524 voting rights). 2.81 percent of the voting rights (3,595,124 voting rights) are allocated to the company pursuant to section 22 Paragraph 1, sentence 1, No. 6 WpHG in conjunction with section 22 Paragraph 1 sentence 2. 0.19 percent of the voting rights (246,400 voting rights) are allocated to the company pursuant to section 22 Paragraph 1, sentence 1 WpHG.
On 24 September 2013 Polaris Capital Management, LLC, Boston, MA, USA informed us pursuant to section 21 Paragraph 1 WpHG that on 23 September 2013 its share of voting rights in freenet AG, Büdelsdorf, Germany had fallen below the 3-percent reporting threshold and amounted to 2.96 percent on that day (3,793,247 voting rights). 2.96 percent of the voting rights (3,793,247 voting rights) are allocated to the company pursuant to section 22 Paragraph 1, sentence 1, No. 6 WpHG.
On 1 October 2013 Drillisch AG, Maintal, Germany informed us pursuant to section 21 Paragraph 1 WpHG that on 30 September 2013 its share of voting rights in freenet AG,
Büdelsdorf, Germany had fallen below the 3-percent reporting threshold and amounted to 0.39 percent on that day (500,000 voting rights). 0.39 percent of the voting rights (500,000 voting rights) are allocated to the company pursuant to section 22 Paragraph 1, sentence 1 WpHG.
On 1 October 2013 MSP Holding GmbH, Maintal, Germany informed us pursuant to section 21 Paragraph 1 WpHG that on 30 September 2013 its share of voting rights in freenet AG, Büdelsdorf, Germany had fallen below the 3-percent reporting threshold and amounted to 0.39 percent on that day (500,000 voting rights).
As a result, the shareholder structure for the quarter under review was as follows:
Based on the voting rights notifications received during the quarter under review, free float according to the definition of Deutsche Börse AG has increased from 87.55 percent to 100 percent.
Interim group management report
freenet AG is a service provider in the attractive and fast-growing digital lifestyle market. Key areas here include traditional mobile communications/mobile internet on the one hand—with its own tariffs, products and services and with corresponding offers of the network operators in Germany. In addition, the company offers innovative digital applications related to entertainment and infotainment, data security and home automation—including the latest smartphones, tablets and laptops as devices plus attractive accessories.
The company pursues a multi-brand strategy in addressing private customers as its key target group: given the tough competition in the industry, the main mobilcom-debitel brand is focusing on high-value contract relationships in its customer acquisition and customer base management. In addition, freenet's discount brands also very successfully cater for the no-frills sector.
In the third quarter of 2013, the company continued to expand its offerings in the mobile communications/mobile internet and digital lifestyle area while also launching new sales-, marketing- and customer service-related activities.
As the features available on smartphones and tablets in the digital lifestyle sector become more and more complex, low-cost, transparent flat rates for using them are becoming more and more important for customers. With this in mind, mobilcom-debitel has offered its innovative Allnet suite of tariffs since July.
With the new classic Allnet, comfort Allnet and premium Allnet tariffs, it complements the existing real Allnet tariff and is tailored to the individual needs of users, who can choose between the low-cost E-Plus/O2 networks or Vodafone and Deutsche Telekom's high-end networks (D-network)—the latter for an extra 10 euros per month.
Package prices range from 9.90 euros per month for classic Allnet, which includes unlimited free calls to all German networks; to comfort Allnet for 19.90 euros which additionally includes unlimited mobile internet; to premium Allnet for 39.90 euro, which includes the flat rate for calls and mobile internet as well as a flat rate for SMS texts as well as 100 roaming minutes within the EU. The "Handyoption 10" option can be booked with all three rates, giving the user the latest smartphone of his choice for an extra 10 euros per month. The contract period is 24 months for each tariff.
Until the end of July, the klarmobil.de subsidiary offered the popular AllNet-Spar-Flat at a special introductory price of 19.85 euros per month. It includes a flat rate for calls to landlines and all mobile networks, and for mobile surfing up to 500 MB in D-network quality. This was equivalent to a discount of 10 euros per month on the regular price. In mid-September the company's online sales platform www.crash-tarife.de then offered further limited-time special offers and reduced tariffs.
At the same time, to mark its eighth anniversary, klarmobil.de launched a temporary promotion through the end of October – also for the AllNet-Spar-Flat tariff. New customers with a contract period of 24 months were given either the new Nokia Lumia 520 smartphone free of charge, or a saving of around 80 euros calculated on the basis of four free months—i. e. users only pay 19.85 euros per month for the second, fourth, sixth and eighth month of their contract.
Another offer initially offered until the end of September involved the AllNet-Starter in the O2 network for entry-level smartphone users. It doubled the benefits included in the base tariff price of 9.90 euros to 200 free minutes, 200 free text messages and 200 megabytes of high-speed internet. In addition, as part of a summer promotion, for online contracts before 31 July 2013, mobilcom-debitel offered a 50-euro credit on selected voice and data tariffs.
mobilcom-debitel is steadily expanding its digital lifestyle portfolio. In recent months and quarters the company has focused on this growth area with a number of new applications and products—for example, a mobile app-based home heating control; an IP camera, also app-based; anti-virus programmes for mobile devices; the GameFlat smartphone option for using the latest Gameloft premium games; and most recently with the new mobilcom-debitel Cloud.
At the beginning of August, the new mobilcom-debitel MusicFlat was launched in cooperation with the cloud-based streaming provider JUKE. It is available in two versions: either as an optional add-in to an existing mobilcom-debitel contract for 8.99 euros per month, or as a complete package with a matching smartphone tariff for 24.99 euros per month.
The complete package includes 50 free minutes, at least 3,000 free texts messages, and 500 MB of volume at maximum bandwidth with a top speed of up to 7.2 Mbit/s. It is available on all networks. It lets customers access more than 20 million pop, rock, jazz and classical music tunes in the Dolby Pulse format, create favourites and playlists from them, use MusicFlat via Wi-Fi, and use the playlists in offline mode. Furthermore, customers can also try the MusicFlat as additional option one month for free.
The launch of the music-streaming offer was accompanied by a new TV commercial that ran on all high-reach commercial channels and was additionally supported by a variety of measures at POS. The 35-second spot picked up on the successful "Gemeinsam geht mehr!" (Getting more together!) umbrella campaign and focused on the many smartphone options for freenet's 14 million customers, who are turning the republic into reggae, rock or rap-ublics. By mid-August, the commercial had been played over 500 times, generating about 120 million gross contacts.
In addition, the company scored successes with attractive digital lifestyle hardware offers in the third quarter. The first, at the beginning of the quarter, was for the new Huawei Ascend P6—currently the fastest LTE mobile phone in the world—for a one-off price of 29.95 euros in combination with a variety of mobilcom-debitel flat rates, each of them 29.90 euros per month and including a base minimum of a four-fold, all-inclusive mobile flat rate including 100 roaming minutes within the EU and a free choice of network.
At the end of July this was followed by the first cross-brand campaign by the freenet subsidiaries GRAVIS and mobilcom-debitel: the iPad mini with 16 gigabytes of memory for a discount price of 289 euros. The offer was available from GRAVIS online, GRAVIS stores and all mobilcom-debitel shops.
Finally, at the end of August the Apple iPad 3 was offered for the price of one euro, available exclusively online via www.crash-tarife.de in combination with mobilcom-debitel's Internet-Flat 3000 data tariff, which delivers 3 gigabytes and a maximum bandwidth of up to 7.2 Mbit/s at a monthly price of 19.95 euros in D-network quality.
The months following the acquisition of GRAVIS at the turn of the year 2012/13, have been focused on developing of the long-standing exclusive Apple dealer into a more broadly based digital lifestyle provider. The key objective is to supplement the GRAVIS range with additional high-quality products from other hardware manufacturers.
As a first step at the beginning of September, the collaboration between GRAVIS, Samsung and Sony was launched. The two Asian premium vendors each opened exclusive 20 m² "shop-in-shop" concessions at the GRAVIS store on Ernst-Reuter-Platz in Berlin, to present and sell their range of products lines to digital lifestyle-savvy customers including the very latest GALAXY Gear Smartwatch and GALAXY Note 3 that the South Korean manufacturer had just unveiled at the IFA exhibition, and the Japanese manufacturer's new top-of-the-line smartphone, the Xperia Z1.
The early extension of the successful sales cooperation with Media-Saturn Deutschland marked another important step in strengthening freenet's stationary sales platforms. Under the exclusive partnership, mobilcom-debitel will continue to sell its own tariffs, the original tariffs of the network operators T-Mobile, Vodafone and E-Plus, as well as its own mobile communications products and services at all Media Markt and Saturn stores. With effect from 1 August 2013, the new minimum term of the exclusive contract is three years.
Since 2010, our bus tour through German cities has been an integral part of the mobilcom-debitel marketing mix. With sales doubling at mobilcom-debitel shops in the vicinity of each location visited by the bus for the following four weeks, it has proven a very effective and enduring marketing tool.
Against this background, the company launched its latest tour of Germany on 6 September—the SmartMobil-Tour with Sony Mobile as a tour partner—to coincide with IFA 2013 in Berlin. The tour now includes new hi-tech trucks featuring a wide range of digital presentation options, including a huge LED screen and trailers that can be transformed into a spacious stage with over 200 m² of show area. The thematic focus of the tour, which was reflected accordingly in the design and equipment of the trailer, were the Smart-Home and the new mobilcom-debitel MusicFlat—products that highlight the fascinating facets of the digital lifestyle while also demonstrating the company's expertise as a digital lifestyle provider. The two trucks visited 41 cities throughout Germany by the end of October.
The freenet subsidiary klarmobil.de also launched a new campaign this summer, with the core message of "We are the best of the favorable discounters" precisely summed up by the slogan "Günstig in Gut" (A good kind of inexpensive).
This derives from the company's strategy—like that of the main mobilcom-debitel brand to based its market positioning not solely on price, but also to offer very high mobile communications quality and very good service in the low-price segment. klarmobil.de lets customers choose from a variety of customised tariffs on all German mobile networks including the high-end ones.
The new, low-cost customer hotline emphasises klarmobil.de's focus on combining high quality standards with the price advantages of a discounter. The latest entry-level All-Net-Starter tariff described above, which offers excellent D-network quality for just 9.90 euros per month, goes well with this and once more underlines the "Günstig in Gut" claim.
| 30. 9. 2013 | 30. 6. 2013 | 31. 3. 2013 | 31. 12. 2012 | 30. 9. 2012 |
|---|---|---|---|---|
| 13.37 | 13.56 | 13.71 | 14.08 | 14.31 |
| 8.67 | 8.56 | 8.47 | 8.50 | 8.38 |
| 5.82 | 5.81 | 5.80 | 5.79 | 5.72 |
| 2.85 | 2.75 | 2.67 | 2.71 | 2.66 |
| 4.70 | 5.00 | 5.24 | 5.58 | 5.93 |
| Mobile Communications customers |
Customer ownership base defined as the cumulative volume of postpaid and no-frills customers, again increased, rising by around 107,000 to the current figure of around 8.67 million customers at the end of the third quarter. Compared with the corresponding previous year date, this is equivalent to growth of around 287,000 customers. This means that the positive growth of this key performance indicator for the company again continued in the third quarter of the current financial year.
The increase in the customer ownership base was mainly attributable to no-frills customers, although there was a further increase in the number of postpaid customers in the reporting period. The number of no-frills customers increased strongly, increasing by around 94,000 customers compared with the end of the first half of the year and growth of around 184,000 customers compared with 30 September 2012. In addition, the number of postpaid customers increased in the third quarter 2013 by around 13,000, and by around 104,000 compared with 30 September 2012.
The number of prepaid customers again declined significantly, from 5.00 million at the end of the first half of 2013 to 4.70 million at the end of the third quarter of 2013 (–294,000 customers). Compared with the corresponding previous year reference date (5.93 million customers), the base of prepaid customers has thus declined by 1.23 million. This means that the trend seen in previous quarters has continued.
Compared with the previous quarter reference date, the total number of mobile communications customers declined by around 187,000 as of 30 September; the decline compared with the corresponding previous year reference date was around 937,000.
| Figures in € | |||||
|---|---|---|---|---|---|
| Q3/2013 | Q2/2013 | Q1/2013 | Q4/2012 | Q3/2012 | |
| Contract customers | 22.6 | 22.5 | 22.4 | 22.8 | 23.6 |
| No-frills customers | 3.5 | 3.6 | 3.5 | 3.5 | 3.9 |
| Prepaid-Customers | 3.2 | 3.0 | 2.8 | 2.9 | 3.1 |
The average monthly revenue per postpaid customer (postpaid ARPU) increased in the third quarter of 2013 by 0.1 euros to 22.6 euros compared to the second quarter of 2013. However, compared with the previous year quarter, postpaid ARPU declined by 1.0 euros. It has thus been relatively stable compared with the overall market. As far as no-frills numbers are concerned, the average monthly revenue per user is currently running at 3.5 euros. This is equivalent to a slight decline of 0.1 euros compared with the second quarter of 2013, and a decline of 0.4 euros compared with the third quarter of 2012. This development is mainly due to the continuing price pressure in the German mobile communications market.
At 3.2 euros, prepaid ARPU is 0.2 euros higher than the corresponding figure for the second quarter of 2013. Compared with the previous year quarter, this is equivalent to growth of 0.1 euros.
| Figures in €'000s | |||
|---|---|---|---|
| Q3/2013 | Q3/2012 | Change | |
| Revenue | 789,632 | 756,510 | 33,122 |
| Gross profit | 181,642 | 182,278 | –636 |
| Overhead expenses | –89,052 | –89,775 | 723 |
| EBITDA | 92,590 | 92,503 | 87 |
| EBIT | 78,580 | 55,479 | 23,101 |
| EBT | 68,796 | 45,792 | 23,004 |
| Group result | 63,574 | 48,976 | 14,598 |
In the third quarter of 2013, Group revenue increased by 4.4 percent compared with the corresponding previous year quarter. The fact that GRAVIS and MOTION TM were included in the consolidation group for the first time and the increased share of high-margin revenue more than compensated for the decline in revenue resulting from the reduction in postpaid ARPU. At the same time low-margin revenue from hardware business decreased.
The gross profit margin decreased by 1.1 percentage points compared with Q3/2012, namely to 23.0 percent, primarily due to the fact that the newly consolidated companies GRAVIS and MOTION TM have business models with relatively lower gross profit margins. The gross profit of 181.6 million euros was roughly in line with the level reported for the previous year quarter.
Overhead expenses, which form the difference between gross profit and EBITDA, and which include the items other operating income, other own work capitalised, personnel expenses, other operating expenses, and the share of results in associates, declined by 0.7 million euros compared with Q3/2012. On the one hand, the above acquisitions resulted in higher overhead costs, particularly in the case of personnel expenses and the other operating expenses. On the other hand, there were cost reductions in marketing and also as a result of efficient overhead cost management.
Group earnings from continued operations before depreciation and amortisation, interest and taxes (EBITDA) are stated as 92.6 million euros in the third quarter of 2013, and were thus in line with the corresponding figure for the previous year comparison quarter.
Depreciation and AMORTISATION have declined by 23.0 million euros compared with Q3/2012, to 14.0 million euros. This is almost exclusively attributable to lower depreciation recognised in relation to intangible assets resulting from the purchase price allocation on the occasion of the debitel acquisition, after the depreciation for the main assets expired as of 31 December 2012 as a result of the expiry of the scheduled useful lives.
The INTEREST RESULT, defined as the balance of interest income and interest expenses, amounted to –9.8 million euros in the reporting quarter 2013, and was roughly in line with the figure for the previous year quarter (–9.7 million euros), corresponding to the approximately constant average level of net debt during each quarter compared with the corresponding previous year figure.
Due to the factors detailed above, pre-tax Group earnings (EBT) increased by 23.0 million euros compared with the previous year, to the current figure of 68.8 million euros.
INCOME TAX EXPENSES of 5.2 million euros are reported for the current quarter; compared with income of 3.2 million euros from income taxes in the previous year quarter, this represents a decline of 8.4 million euros, which is mainly due to lower deferred tax income resulting from temporary differences caused by the lower depreciation on intangible assets from the debitel purchase price allocation.
As was the case in the corresponding period of the previous year, the Group earnings reported in the third quarter of 2013 was exclusively attributable to continued operations, and amounted to a total of 63.6 million euros; compared with the figure of 49.0 million euros reported for the previous year comparison quarter, this represents an increase of 29.8 percent.
| Figures in € million | 30. 9. 2013 |
|---|---|
| Non-current assets | 1,835.8 |
| Current assets | 640.6 |
| Balance sheet total | 2,476.4 |
| Figures in € million | 30. 6. 2013 |
| Non-current assets | 1,767.5 |
| Current assets | 622.2 |
| Balance sheet total | 2,389.7 |
| Figures in € million | |
|---|---|
| 30. 9. 2013 | |
| Shareholders' equity | 1,179.3 |
| Non-current and | |
| current liabilities | 1,297.1 |
| Balance sheet total | 2,476.4 |
| Figures in € million | 30. 6. 2013 |
| Shareholders' equity | 1,115.7 |
| Non-current and | |
| current liabilities | 1,274.0 |
| Balance sheet total | 2,389.7 |
The balance sheet total as of 30 September 2013 amounted to 2,476.4 million euros, and thus increased by 86.6 million euros (+3.6 percent) compared with 30 June 2013 (2,389.7 million euros).
On the assets side of the balance sheet, non-current assets increased by 68.3 million euros. This is mainly due to an increase of 55.2 million euros in intangible assets, mostly caused by the extension of the distribution right granted by Media-Saturn Deutschland GmbH.
In current assets, firstly trade accounts receivable have increased by 35.8 million euros to 425.2 million euros. This is mainly attributable to receivables due from network operators arising from accrued annual bonuses. Secondly, liquid funds declined by 26.4 million euros to 100.7 million euros. It has to be borne in mind that, in the previous quarter, the revolving credit line had been utilised to the extent of 60.0 million euros as a result of the dividend payment, whereas the credit line had not been utilised as of 30 September 2013. Last quarter, a total of 40.1 million euros was repaid against the principal of financial debt arrangements. The resultant increase in liquid funds adjusted by the above two elements mainly related to cash flow from operating activities.
On the liabilities side of the balance sheet, gross financial debt declined by 91.6 million euros compared with 30 June 2013, namely to 572.7 million euros. As mentioned above, the extent to which the revolving credit line was utilised declined by 60.0 million euros; in addition, financial debt under the amortising loan declined as a result of a planned repayment of principal of 40.0 million euros. The figure shown in the balance sheet for a corporate bond increased by 7.6 million euros as a result of non-cash-effective interest accruals in the reporting quarter.
The increase of 57.6 million euros in non-current other liabilities is due to the extension of the distribution right granted by Media-Saturn Deutschland GmbH. The current assets trade accounts payable increased by 37.4 million euros to 412.8 million euros. This increase is due to various factors, including the increase in inventories.
The equity ratio increased from 46.7 percent at the end of June 2013 to 47.6 percent at the end of September 2013, mainly as a result of the consolidated net income generated in the reporting quarter. Net financial debt amounted to 471.9 million euros as of 30 September 2013 (30 June 2013: 537.2 million euros). The reduction of 65.2 million euros within the reporting quarter 2013 is mainly attributable to the free cash flow of 74.9 million euros.
| Figures in € million | |||
|---|---|---|---|
| Q3/2013 | Q3/2012 | Change | |
| Cash flow from operating activities | 81.9 | 77.6 | 4.3 |
| Cash flow from investing activities | –7.6 | –5.0 | –2.6 |
| Cash flow from financing activities | –40.7 | –41.5 | 0.8 |
| Change in cash and cash equivalents | 33.6 | 31.1 | 2.5 |
| Free cash flow | 74.9 | 71.9 | 3.0 |
In the third quarter of 2013, the cash flow from operating activities is reported as 81.9 million euros, equivalent to an increase of 4.3 million euros compared with the previous year quarter. With EBITDA virtually constant, this increase is mainly due to the reduced increase in net working capital (down by 10.4 million euros to 2.0 million euros). On the other hand, tax payments increased by 5.0 million euros in the reporting quarter compared with Q3/2012.
Cash flow from investing activities amounted to –7.6 million euros in Q3/2013, compared with –5.0 million euros in the third quarter of 2012. In the reporting quarter, the main investment related to in-house software development in connection with numerous strategic projects as well as IT developments.
In the reporting quarter, cash flow from financing activities improved to –40.7 million euros compared with –41.5 million euros in the comparison period 2012. In the reporting quarter, as was the case in the previous year, the main item in this respect was the scheduled repayment of 40.0 million euros in relation to the amortising loans.
In the third quarter of 2013, the factors detailed above meant that free cash flow amounted to 74.9 million euros, representing an increase of 3.0 million euros compared with the corresponding previous year quarter.
The following overview shows the key indicators of our financial strategy with their current figures compared with the previous year quarter. For all periodic figures such as EBITDA and net interest income, the relevant period is the previous 12 months (i. e. October 2012 to September 2013 and October 2011 to September 2012).
At the end of February 2013, the Executive Board revised its targets when the provisional figures for the financial year 2012 were published: The range of the debt factor was extended from the previous factor of 1.5—2.5 to the current figure of 1.0—2.5, whereas the key performance indicators, interest cover and equity ratio, were not changed.
| Target 2013/14 | Q3/2013 | Q3/2012 | |
|---|---|---|---|
| Debt factor1 | 1.0—2.5 | 1.3 | 1.4 |
| Interest cover | > 5 | 8.5 | 8.6 |
| Equity ratio | > 50% | 47.6% | 50.3% |
1 calculated as the ratio of net debt to EBITDA
The debt factor is currently running at 1.3, which is still within our target range.
Interest cover of 8.5 is still considerably higher than the target level. There has been a minor change compared with the previous year figure, as EBITDA and also average net financial debt (and consequently also net interest income) are running at a comparable level.
As of 30 September 2013, the equity ratio was just below the target of 50 percent. The slight decline with the corresponding 2012 reference date is mainly due to the dividend payment of 172.8 million euros in Q2/2013. We are assuming that this figure will increase slightly in the following two quarters until the next dividend payment.
The number of employees increased slightly to 4,593 at the end of the third quarter of 2013, compared with 4,516 at the end of the second quarter of 2013. At the end of September 2012, the total number of employees was stated as 3,927. The strong increase compared with the previous year is due to the fact that the employees of GRAVIS and MOTION TM have been included since the first quarter of 2013.
In the third quarter of 2013, there were no significant changes compared to the opportunities and risks described in detail under "Opportunities and Risk Report" in the interim report for the second quarter of 2013. The interim report for the second quarter of 2013 is available online at www.freenet-group.de/investor/publications/quarterly-annual-reports.
The Executive Board confirms its guidance for the current financial year as included in the Group Management Report for the financial year 2012. There were no significant changes in the third quarter of 2013.
Accordingly, for the financial years 2013 and 2014 the Executive Board continues to expect a slight increase in customer ownership (postpaid and no-frills customer base), which we have defined as a key performance indicator for the company, with postpaid ARPU expected to stabilise in the region of 23 euros. For the financial year 2013, a rise in Group revenue is expected, with further slight growth in the financial year 2014.
For the financial years 2013 and 2014, the company aims to achieve Group EBITDA of 355 million euros and of 360 million euros respectively, and free cash flow of 255 million euros and of 260 million euros respectively.
There were no significant events after the reporting date.
The following major transactions have taken place between the Group and related parties:
The following major receivables due from and liabilities due to related parties existed as of 30 September 2013:
| Figures in €'000s | ||
|---|---|---|
| 1. 1. 2013 | 1. 1. 2012 | |
| —30. 9. 2013 | —30. 9. 2012 | |
| Sales and income attributable to services | ||
| Joint ventures | ||
| FunDorado GmbH, Hamburg | 171 | 209 |
| Companies with a major influence on freenet AG1 | ||
| b2c.de GmbH, Munich (Drillisch AG Group) | 286 | 920 |
| 457 | 1,129 | |
| Purchased services and onward charging | ||
| Associated companies | ||
| KielNET GmbH Gesellschaft für Kommunikation, Kiel | n/a | 27 |
| Joint ventures | ||
| Fundorado GmbH, Hamburg | 8 | 0 |
| siXXup new Media GmbH, Pulheim | 0 | 98 |
| NetCon Media s.r.o., Hlucin, Czech Republic | 0 | 2 |
| Companies with a major influence on freenet AG1 | ||
| Drillisch AG, Maintal | 0 | 13 |
| eteleon e-solutions AG, Munich (Drillisch AG Group) | 24 | 0 |
| b2c.de GmbH, Munich (Drillisch AG Group) | 3,029 | 13,795 |
| 3,061 | 13,935 |
All transaction prices were negotiated under commercial terms.
If the parties were not classified as related parties under IAS 24, no details were provided (n/a).
| Figures in €'000s | ||
|---|---|---|
| 30. 9. 2013 | 30. 9. 2012 | |
| Receivables from regular transactions | ||
| Joint ventures | ||
| FunDorado GmbH, Hamburg | 57 | 23 |
| siXXup new Media GmbH, Pulheim | 0 | 2 |
| Companies with a major influence on freenet AG1 | ||
| b2c.de GmbH, Munich (Drillisch AG Group) | n/a | 176 |
| 57 | 201 | |
| Liabilities from regular transactions | ||
| Companies with a major influence on freenet AG1 | ||
| b2c.de GmbH, Munich (Drillisch AG Group) | n/a | 469 |
| 0 | 469 |
1 According to a voting rights notification dated 25 March 2013, the voting rights of Drillisch AG, including the shares held by MSP Holding GmbH, totalled 10.43 percent at 20 March 2013. So, because Drillisch AG has not been able to exercise any controlling influence on the freenet Group since 20 March 2013, Drillisch AG and its affiliated companies are no longer classified as related parties. Transactions with companies in the Drillisch group during 2013 were therefore only reported as transactions with related parties if they occurred before 20 March 2013. According to the latest voting rights notification received by freenet from Drillisch AG, dated 1 October 2013, the voting rights of Drillisch AG, including the voting rights of MSP Holding GmbH allocated to it, amounted to 0.39 percent on 30 September 2013.
Condensed interim consolidated financial statements
| Consolidated income statement and consolidated statement of | |
|---|---|
| comprehensive income for the period from 1 January to 30 September 2013 | 38 |
| Consolidated balance sheet as of 30 September 2013 | 40 |
| Schedule of changes in equity for the period | |
| from 1 January to 30 September 2013 | 42 |
| Consolidated statement of cash flows for the period | |
| from 1 January to 30 September 2013 | 43 |
| Selected explanatory notes in accordance with IAS 34 | 44 |
for the period from 1 January to 30 September 2013
| Figures in €'000s | ||||
|---|---|---|---|---|
| Q1—Q3/2013 1. 1. 2013 |
Q1—Q3/2012 1. 1. 2012 |
Q3/2013 1. 7. 2013 |
Q3/2012 1. 7. 2012 |
|
| —30. 9. 2013 | —30. 9. 2012 | —30. 9. 2013 | —30. 9. 2012 | |
| Revenue | 2,374,517 | 2,269,566 | 789,632 | 756,510 |
| Other operating income | 48,893 | 45,629 | 16,353 | 11,402 |
| Other own work capitalised | 6,887 | 4,816 | 4,024 | 1,621 |
| Cost of materials | –1,843,032 | –1,749,885 | –607,990 | – 574,232 |
| Personnel expenses | –126,336 | –117,719 | –44,744 | –39,363 |
| Depreciation and impairment write-downs | –41,718 | –111,100 | –14,010 | –37,024 |
| Other operating expenses | –198,115 | –190,174 | –64,775 | –63,728 |
| Operating result | 221,096 | 151,133 | 78,490 | 55,186 |
| Share of results of associates | 215 | 1,002 | 90 | 293 |
| Interest receivable and similar income | 1,161 | 2,179 | 374 | 696 |
| Interest payable and similar expenses | –31,071 | –32,279 | –10,158 | –10,383 |
| Result before taxes on income | 191,401 | 122,035 | 68,796 | 45,792 |
| Taxes on income | –12,237 | 9,157 | –5,222 | 3,184 |
| Group result from continued operations | 179,164 | 131,192 | 63,574 | 48,976 |
| Group result from discontinued operations | 0 | 0 | 0 | 0 |
| Group result | 179,164 | 131,192 | 63,574 | 48,976 |
| Group result attributable to shareholders of freenet AG | 179,028 | 131,113 | 63,674 | 48,939 |
| Group result attributable to non-controlling interest | 136 | 79 | –100 | 37 |
| Earnings per share in € (undiluted) | 1.40 | 1.02 | 0.50 | 0.38 |
| Earnings per share in € (diluted) | 1.40 | 1.02 | 0.50 | 0.38 |
| Earnings per share from continued operations in € (undiluted) | 1.40 | 1.02 | 0.50 | 0.38 |
| Earnings per share from continued operations in € (diluted) | 1.40 | 1.02 | 0.50 | 0.38 |
| Earnings per share from discontinued operations in € (undiluted) | 0.00 | 0.00 | 0.00 | 0.00 |
| Earnings per share from discontinued operations in € (diluted) | 0.00 | 0.00 | 0.00 | 0.00 |
| Weighted average of shares outstanding in thousand (undiluted) | 128,061 | 128,061 | 128,061 | 128,061 |
| Weighted average of shares outstanding in thousand (diluted) | 128,061 | 128,061 | 128,061 | 128,061 |
Consolidated income statement and consolidated statement of comprehensive income for the period from 1 January to 30 September 2013
| Figures in €'000s | ||||
|---|---|---|---|---|
| Q1—Q3/2013 | Q1—Q3/2012 | Q3/2013 | Q3/2012 | |
| 1. 1. 2013 | 1. 1. 2012 | 1. 7. 2013 | 1. 7. 2012 | |
| —30. 9. 2013 | —30. 9. 2012 | —30. 9. 2013 | —30. 9. 2012 | |
| Group result | 179,164 | 131,192 | 63,574 | 48,976 |
| Change in fair value of held-for-sale financial instruments | –75 | –39 | –10 | –4 |
| Taxes on income recognised directly in equity | 22 | 11 | 3 | 1 |
| Other comprehensive income (not recognised in profit or loss)/ | ||||
| to be reclassified to the income statement in the following periods | –53 | –28 | –7 | –3 |
| Other comprehensive income (not recognised in profit or loss) | –53 | –28 | –7 | –3 |
| Consolidated comprehensive income | 179,111 | 131,164 | 63,567 | 48,973 |
| Consolidated comprehensive income attributable to shareholders of freenet AG | 178,975 | 131,085 | 63,667 | 48,936 |
| Consolidated comprehensive income attributable to non-controlling interest | 136 | 79 | –100 | 37 |
as of 30 September 2013
| Figures in €'000s | |||
|---|---|---|---|
| 30. 9. 2013 | 30. 6. 2013 | 31. 12. 2012 adjusted |
|
| Non-current assets | |||
| Intangible assets | 404,060 | 348,814 | 356,533 |
| Goodwill | 1,122,112 | 1,122,112 | 1,116,680 |
| Property, plant and equipment | 32,227 | 32,729 | 28,316 |
| Investments in associates | 1,390 | 1,300 | 1,425 |
| Other investments | 1,503 | 1,512 | 1,530 |
| Deferred income tax assets | 183,136 | 180,604 | 175,490 |
| Trade accounts receivable | 73,775 | 71,579 | 67,822 |
| Other receivables and other assets | 17,600 | 8,878 | 8,192 |
| 1,835,803 | 1,767,528 | 1,755,988 | |
| Current assets | |||
| Inventories | 75,654 | 63,606 | 56,586 |
| Current income tax assets | 4,057 | 2,555 | 2,470 |
| Trade accounts receivable | 425,228 | 389,422 | 424,537 |
| Other receivables and other assets | 34,896 | 39,526 | 27,140 |
| Cash and cash equivalents | 100,718 | 127,076 | 204,621 |
| Assets of disposal group classified as held-for-sale | 0 | 0 | 7,350 |
| 640,553 | 622,185 | 722,704 | |
| 2,476,356 | 2,389,713 | 2,478,692 |
| Figures in €'000s | |||
|---|---|---|---|
| 30. 9. 2013 | 30. 6. 2013 | 31. 12. 2012 adjusted |
|
| Shareholders' equity | |||
| Share capital | 128,061 | 128,061 | 128,061 |
| Capital reserve | 737,536 | 737,536 | 737,536 |
| Cumulative other comprehensive income | –13,350 | –13,343 | –13,297 |
| Retained earnings | 323,861 | 260,187 | 324,883 |
| Capital and reserves attributable to shareholders of freenet AG |
1,176,108 | 1,112,441 | 1,177,183 |
| Capital and reserves attributable | |||
| to non-controlling interest | 3,134 | 3,234 | 370 |
| 1,179,242 | 1,115,675 | 1,177,553 | |
| Non-current liabilities | |||
| Trade accounts payable | 272 | 272 | 272 |
| Other payables | 65,271 | 7,650 | 49 |
| Borrowings | 517,363 | 517,117 | 556,105 |
| Pension provisions | 45,633 | 45,300 | 44,986 |
| Other provisions | 8,581 | 8,670 | 9,872 |
| 637,120 | 579,009 | 611,284 | |
| Current liabilities | |||
| Trade accounts payable | 412,813 | 375,409 | 412,652 |
| Other payables | 135,207 | 116,436 | 117,714 |
| Current income tax liabilities | 37,248 | 35,379 | 29,257 |
| Borrowings | 55,298 | 147,135 | 100,449 |
| Other provisions | 19,428 | 20,670 | 22,458 |
| Liabilities of disposal group classified as held-for-sale | 0 | 0 | 7,325 |
| 659,994 | 695,029 | 689,855 | |
| 2,476,356 | 2,389,713 | 2,478,692 |
for the period from 1 January to 30 September 2013
| Figures in €'000s adjusted |
Cumulative other comprehensive income |
|||||||
|---|---|---|---|---|---|---|---|---|
| Share capital |
Capital reserve |
Revaluation reserve |
Actuarial val uation reserve in accordance with IAS 19 |
Retained earnings |
Capital and reserves attributable to shareholders of freenet AG |
Capital and reserves attributable to non-controlling interest |
Shareholders' equity |
|
| As of 1. 1. 2012 | 128,061 | 737,536 | 19 | –4,573 | 305,398 | 1,166,441 | 279 | 1,166,720 |
| Dividend payment | 0 | 0 | 0 | 0 | –153,613 | –153,613 | 0 | –153,613 |
| Group result | 0 | 0 | 0 | 0 | 131,113 | 131,113 | 79 | 131,192 |
| Change in fair value of held for-sale financial instruments |
0 | 0 | –28 | 0 | 0 | –28 | 0 | –28 |
| Sub-total: Consolidated comprehensive income |
0 | 0 | –28 | 0 | 131,113 | 131,085 | 79 | 131,164 |
| As of 30. 9. 2012 | 128,061 | 737,536 | –9 | –4,573 | 282,898 | 1,143,913 | 358 | 1,144,271 |
| Figures in €'000s | Cumulative other comprehensive income |
|||||||
|---|---|---|---|---|---|---|---|---|
| Share capital |
Capital reserve |
Revaluation reserve |
Actuarial val uation reserve in accordance with IAS 19 |
Retained earnings |
Capital and reserves attributable to shareholders of freenet AG |
Capital and reserves attributable to non-controlling interest |
Shareholders' equity |
|
| As of 1. 1. 2013 | 128,061 | 737,536 | –13 | –13,284 | 324,883 | 1,177,183 | 370 | 1,177,553 |
| Initial consolidation of subsidiaries |
0 | 0 | 0 | 0 | 0 | 0 | 2,994 | 2,994 |
| Dividend payment | 0 | 0 | 0 | 0 | –172,815 | –172,815 | 0 | –172,815 |
| Acquisition of additional shares in subsidiaries |
0 | 0 | 0 | 0 | 366 | 366 | –366 | 0 |
| Recognition of stock option liabilities connected to |
||||||||
| company acquisitions | 0 | 0 | 0 | 0 | –7,601 | –7,601 | 0 | –7,601 |
| Group result | 0 | 0 | 0 | 0 | 179,028 | 179,028 | 136 | 179,164 |
| Change in fair value of held for-sale financial instruments |
0 | 0 | –53 | 0 | 0 | –53 | 0 | –53 |
| Sub-total: Consolidated comprehensive income |
0 | 0 | –53 | 0 | 179,028 | 178,975 | 136 | 179,111 |
| As of 30. 9. 2013 | 128,061 | 737,536 | –66 | –13,284 | 323,861 | 1,176,108 | 3,134 | 1,179,242 |
for the period from 1 January to 30 September 2013
| Figures in €'000s | 1. 1. 2013 —30. 9. 2013 |
1. 1. 2012 —30. 9. 2012 |
|---|---|---|
| Result from continued and discontinued operations before interest and taxes (EBIT) | 221,311 | 152,135 |
| Adjustments | ||
| Depreciation and impairment on items of fixed assets | 41,718 | 111,100 |
| Share of results of associates | –215 | –1,002 |
| Income from the sale of subsidiaries | –4,009 | 0 |
| Profit/Loss on disposals of fixed assets | –1,119 | 308 |
| Increase in net working capital not attributed to investing or financing activities | –26,420 | –41,091 |
| Other non-cash components | –197 | –28 |
| Income taxes paid | –16,380 | –13,355 |
| Cash flow from operating activities | 214,689 | 208,067 |
| Investments in property, plant and equipment and intangible assets | –13,129 | –12,824 |
| Proceeds from the disposal of property, plant and equipment and intangible assets | 54 | 619 |
| Purchase of subsidiaries | –13,176 | 0 |
| Proceeds from the sale of subsidiaries | 500 | 0 |
| Outflow of funds from deconsolidation | –2,734 | 0 |
| Return of capital from associates | 250 | 1,156 |
| Outflow of funds from other investments | 0 | 152 |
| Interest received | 823 | 1,718 |
| Cash flow from investing activities | –27,412 | –9,179 |
| Dividend payment | –172,815 | –153,613 |
| Payments for the acquisition of minority interests | –5,000 | 0 |
| Cash repayments of borrowings | –84,961 | –80,183 |
| Interest paid | –31,136 | –33,227 |
| Cash flow from financing activities | –293,912 | –267,023 |
| Cash-effective change in cash and cash equivalents | –106,635 | –68,135 |
| Cash and cash equivalents 1. 1. | 207,956 | 85,673 |
| Cash and cash equivalents 30. 9. | 101,321 | 17,538 |
| Composition of cash and cash equivalents Figures in €'000s |
30. 9. 2013 | 30. 9. 2012 |
| Cash and cash equivalents of continued operations | 101,321 | 52,538 |
| Non-cash outflow of funds from changes from proportionate consolidation to at-equity accounting | –603 | 0 |
| Liabilities as part of current finance scheduling due to banks | 0 | –35,000 |
| 100,718 | 17,538 | |
| Composition of free cash flow | ||
| Figures in €'000s | 30. 9. 2013 | 30. 9. 2012 |
| Cash flow from operating activities | 214,689 | 208,067 |
| Investments in property, plant and equipment and intangible assets | –13,129 | –12,824 |
| Proceeds from the disposal of property, plant and equipment and intangible assets | 54 | 619 |
| Free cash flow (FCF) | 201,614 | 195,862 |
The Group has implemented all accounting standards which have been the subject of mandatory adoption starting in the financial year 2013. Of the accounting standards which are the subject of first-time adoption, the following have not had any significant impact on the presentation of the net assets, financial position and results of operations of the Group: Amendment to IAS 12 (Deferred Taxes: Realisation of Underlying Assets), the amendments to IFRS 1 (first-time adoption of the IFRS: Severe Hyperinflation and Removal of Fixed Dates for First-Time Adopters), IFRS 13 (Fair Value Measurement), IFRIC 20 (Stripping Costs in the Production Phase of a Surface Mine), the amendment to IFRS 7 (Financial Instruments Disclosures: Offsetting Financial Assets and Financial Liabilities), the amendment to IFRS 1 (Government Loans) as well as the various amendments as a result of the Annual Improvement Projects 2009-2011 (Improvements to the IFRS).
With regard to the impact of the amended standards IAS 19 (Employee Benefits) and IAS 1 (Presentation of Results—Presentation of the Individual Items of other Comprehensive Income) which are applicable starting in the financial year 2013 as well as the IFRS 11 (Joint Arrangements) which is the subject of voluntary early adoption, please refer to points 2 to 4 in these notes.
For the process of preparing the interim report as of 30 September 2013 and the process of establishing the comparison figures for the previous year, the accounting policies which were used were—with the above mentioned exemptions—the same as those used in the consolidated financial statements 2012. A detailed description of the accounting and valuation policies of the Group is set out in the notes to the consolidated financial statements 2012 of freenet AG.
The adjustment entry to be carried out as of 1 January 2013 has been reflected in the consolidated financial statements of freenet AG in the form of an increase in the pension provisions resulting from the entire disclosure of the cumulative actuarial losses of 18,789 thousand euros, an increase of 5,505 thousand euros in deferred tax assets and also in a reduction of 13,284 thousand euros in equity (cumulative other comprehensive income). In these condensed consolidated interim financial statements, corresponding retrospective adjustments in relation to the period from 1 January to 30 September 2012 have been recognised for the presentation of the balance sheet comparison list as of 31 December 2012 and the comparison list of changes in equity from 1 January to 30 September 2013.
item "Investments in associates". In accordance with the principle of retrospective application, a comparison figure of 1,425 thousand euros is shown as of 31 December 2012. The comparison previous year figures in the income statement have not been retrospectively adjusted for the first nine months of 2012, because they are not of a material nature. In the first nine months of 2012, FunDorado GmbH contributed 3.5 million euros to the consolidated revenue and 0.4 million euros to consolidated net income.
A figure of 12,250 thousand euros was agreed as the cash purchase price. The cash purchase price is subject to adjustments, depending on the net current assets as well as the cash and financial liabilities of the acquired company. The purchase price adjustments which are relevant in this respect have now been defined in a binding manner, resulting in a final cash purchase price after purchase price adjustments of 10,078 thousand euros; this was paid in the first two quarters of 2013.
In addition, there may also be earn-outs in a range of between 0 euros and 6.25 million euros; the exact amount of these earn-outs is based on EBITDA calculated under commercial law for the calendar year 2013 of GRAVIS and, under certain circumstances, may also depend on the commercial law EBITDA of the acquired company achieved for the calendar year 2012.
The purchase price allocation carried out with regard to the acquisition of GRAVIS in accordance with IFRS 3 is final.
The following overview provides information concerning the assets and liabilities of GRAVIS acquired at fair values at the time of initial consolidation:
| Figures in €'000s | Figures in €'000s | ||
|---|---|---|---|
| 31. 1. 2013 | 31. 1. 2013 | ||
| Non-current assets | Non-current liabilities | ||
| Intangible assets | 7,662 | Deferred income tax liabilities | 1,933 |
| Goodwill | 3,594 | ||
| Property, plant | |||
| and equipment | 5,682 | ||
| 16,938 | 1,933 | ||
| Current assets | Current liabilities | ||
| Inventories | 18,842 | Trade accounts payable | 15,328 |
| Trade accounts receivable | 3,791 | Other liabilities and accruals | 4,435 |
| Other receivables and | Current income tax liabilities | 173 | |
| other assets | 1,479 | Borrowings | 5,409 |
| Cash and cash equivalents | 2,044 | Other provisions | 574 |
| 26,156 | 25,919 | ||
| 43,094 | 27,852 |
The anticipated total purchase price (final cash purchase price of 10,078 thousand euros plus the anticipated earn-outs of 5,164 thousand euros) represent the difference between the assets and liabilities of 15,242 thousand euros. The purchase price allocation has resulted in goodwill of 3,594 thousand euros, which is mainly attributable to the competence of GRAVIS to continue to acquire new customers in future, the distribution organisation of GRAVIS and also the workforce of GRAVIS which cannot be recognised separately in the balance sheet. The goodwill was attributed to the cash-generating unit "Mobile communications". The acquired intangible assets mainly comprise customer relations of 4,334 thousand euros as well as trademark rights of 2,262 thousand euros which were recognised as a result of the purchase price allocation. As a result of subsequent depreciation of the intangible assets recognised in the course of purchase price allocation, depreciation of 474 thousand euros has to be recognised in each quarter of the following financial years. No contingent liabilities have been recognised in the purchase price allocation. The fair value of the acquired receivables is stated as 5,270 thousand euros; this figure had been received almost in full as of 30 September 2013. Impairments of 73 thousand euros had been created in relation to gross receivables of 3,864 thousand euros as of the date of acquisition. The Company has not identified any transactions which have to be disclosed separately from the acquisition of the assets and transfer of liabilities.
The aim of the acquisition of GRAVIS is to extend our range of high-quality Apple Lifestyle products in connection with mobile communications and mobile internet; this is consistent with the corporate strategy of our Group of becoming a genuine digital lifestyle provider. At the same time, we are planning to gradually introduce our existing digital lifestyle products in the field of energy, mobile communications services and service products into the GRAVIS distribution system. The planned expansion of mobile communications business in the GRAVIS stores is intended to be achieved by a direct transfer of know how of mobilcom-debitel Shop GmbH.
In segment reporting of the freenet AG Group, GRAVIS is allocated to the segment "Mobile Communications".
With this acquisition, freenet AG has strengthened its distribution force particularly in the field of online operations. With its distribution platform "moon", MOTION TM also provides the necessary system competence for providing sales support to approved dealers.
A figure of 4.0 million euros was agreed as the cash purchase price. The cash purchase price is subject to adjustments, depending on the net current assets as well as the cash and financial liabilities of the acquired company. The purchase price adjustments which are relevant in this respect have now been defined in a binding manner, resulting in a final cash purchase price after purchase price adjustments of 5,065 thousand euros. Of this figure, 4,000 thousand euros were reported as an outflow in the Group in the first quarter of 2013; the remaining figure of 1,065 thousand euros was paid in the third quarter of 2013.
The purchase price allocation carried out with regard to the acquisition of MOTION TM accordance with IFRS 3 is final.
The following overview provides information concerning the assets and liabilities of MOTION TM acquired at fair values at the time of initial consolidation:
| Figures in €'000s | Figures in €'000s | ||
|---|---|---|---|
| 20. 3. 2013 | 20. 3. 2013 | ||
| Non-current assets | Non-controlling interests | ||
| Intangible assets | 4,342 | in shareholders' equity | 2,994 |
| Goodwill | 1,948 | Non-current liabilities | |
| Property, plant and | Borrowings | 337 | |
| equipment | 682 | Deferred income tax liabilities | 1,259 |
| Other provisions | 55 | ||
| 6,972 | 1,651 | ||
| Current assets | Current liabilities | ||
| Inventories | 3,373 | Trade accounts payables | 6,430 |
| Trade accounts receivable | 9,055 | Other liabilities and accruals | 3,765 |
| Other receivables and | Current income tax liabilities | 878 | |
| other assets | 839 | Borrowings | 38 |
| Cash and cash equivalents | 582 | 11,111 | |
| 13,849 | |||
| 20,821 | 15,756 |
The purchase price is the difference between the assets and liabilities of 5,065 thousand euros. Goodwill of 1,948 thousand euros has been calculated using the proportionate holding method. The goodwill is essentially attributable to future earnings opportunities in connection with strengthening our sales capability particularly with regard to online activities. The goodwill was attributed to the cash-generating unit "Mobile communications". The acquired intangible assets mainly comprise customer relations of 3,193 thousand euros as well as trademark rights of 1,105 thousand euros which were recognised as a result of the purchase price allocation. As a result of subsequent depreciation of the intangible assets recognised in the course of purchase price allocation, depreciation of 288 thousand euros has to be recognised in each quarter of the following financial years. No contingent liabilities have been recognised in the purchase price allocation. The fair value of the acquired receivables amounts to 9,894 thousand euros. Impairments of 15 thousand euros had been created in relation to trade accounts receivable with a gross value of 9,070 thousand euros as of the date of the acquisition.
In segment reporting of the freenet AG Group, MOTION TM is allocated to the segment "Mobile Communications".
In connection with the acquisition of MOTION TM, various options have been agreed with regard to a future acquisition of the remaining 49 percent of shares. Among other things, the minority shareholders own options for serving the remaining shares which exist at the time of exercising. A long-term other liability of 7,668 thousand euros was recognised for these options as of 30 September 2013. This liability was recognised for the first time in the second quarter of 2013 against the consolidated cumulative profit of 7,601 thousand euros.
| Figures in €'000s | ||
|---|---|---|
| 1. 1. 2013 | 1. 1. 2012 | |
| —30. 9. 2013 | —30. 9. 2012 | |
| Result before taxes on income of continued operations | 191,401 | 122,035 |
| Interest and similar expenses of continued operations | 31,071 | 32,279 |
| Interest and similar income of continued operations | –1,161 | –2,179 |
| Result of continued and discontinued operations before | ||
| interest and taxes (EBIT) | 221,311 | 152,135 |
| Figures in €'000s | Approach | ||||||
|---|---|---|---|---|---|---|---|
| Valuation category according to IAS 39 |
Carrying amount 30. 9. 2013 |
Amortised cost of purchase |
Cost of purchase |
Fair value in income statement |
Fair value in equity |
Fair value 30. 9. 2013 |
|
| Assets | |||||||
| Cash and cash equivalents | LR | 100,718 | 100,718 | 100,718 | |||
| Total cash and cash equivalents | 100,718 | 100,718 | 100,718 | ||||
| Other financial assets (measured at cost of purchase) |
HFS | 503 | 503 | – | |||
| Other financial assets (measured at fair value) | HFS | 1,000 | 1,000 | 1,000 | |||
| Total other financial assets | 1,503 | ||||||
| Trade accounts receivable |
LR | 499,003 | 499,003 | 499,077 | |||
| Other non-derivative financial assets | LR | 27,626 | 27,626 | 27,626 | |||
| Held-for-sale other assets | HFS | 2,900 | 2,900 | 2,900 | |||
| Derivative financial assets | FIPL | 0 | 0 | 0 | |||
| Non-financial assets | 21,269 | ||||||
| Sum of receivables and other assets | 51,795 |
| Figures in €'000s | Valuation | Approach | |||||
|---|---|---|---|---|---|---|---|
| category according to IAS 39 |
Carrying amount 30. 9. 2013 |
Amortised cost of purchase |
Cost of purchase |
Fair value in income statement |
Fair value in equity |
Fair value 30. 9. 2013 |
|
| Liabilities | |||||||
| Trade accounts payable | FLAC | 413,085 | 413,085 | 413,085 | |||
| Financial debt (liabilities due to banks and shareholders) |
FLAC | 572,192 | 572,192 | 618,954 | |||
| Derivative financial liabilities | FIPL | 0 | 0 | 0 | |||
| Sum of financial liabilities within the scope of IFRS 7 |
572,192 | 618,954 | |||||
| Other non-derivative financial liabilities | FLAC | 110,247 | 110,247 | 110,247 | |||
| Non-financial liabilities | 93,346 | ||||||
| Sum of liabilities and deferrals | 203,593 | ||||||
| Financial instruments not covered by the scope of IFRS 7 |
|||||||
| Present values of liabilities from finance lease according to IAS 17 |
469 | 469 | |||||
| Pension provisions according to IAS 19 | 45,633 | 45,633 | |||||
| Provisions for employee participation programmes according to IFRS 2 |
3,544 | 3,544 | |||||
| Sum of financial instruments not covered by the scope of IFRS 7 |
49,646 | ||||||
| Thereof aggregated by valuation categories according to IAS 39: |
|||||||
| Held-for-sale financial instruments | HFS | 4,403 | 503 | 3,900 | 3,900 | ||
| Loans and receivables | LR | 627,347 | 627,347 | 627,421 | |||
| Financial instruments measured at fair value through profit or loss |
FIPL | 0 | 0 | 0 | |||
| Financial liabilities measured at amortised cost of purchase |
FLAC | –1,095,524 | –1,095,524 | –1,142,286 |
| Figures in €'000s | ||||
|---|---|---|---|---|
| Total | Level 1 | Level 2 | Level 3 | |
| Held-for-sale other assets | 2,900 | 2,900 | 0 | 0 |
| Other financial assets | 1,000 | 1,000 | 0 | 0 |
| Derivative financial receivables | 0 | 0 | 0 | 0 |
| Total | 3,900 | 3,900 | 0 | 0 |
There have not been any shifts with regard to the levels.
The other financial instruments are normally measured at fair value. If it is not possible for the fair value to be reliably determined, the other financial assets are measured at cost of purchase. The shares which are measured at cost of purchase are not listed on a stock exchange, and no active market exists for them. Moreover, there are no plans at present to sell these shares. If there are any indications of lower fair values, these are recognised.
As of 30 September 2013, compared with the corresponding previous quarter reference date, there were significant increases in intangible assets, the current trade accounts payable and the non-current other liabilities, mainly as a result of a new distribution right granted on the occasion of the extension of the cooperation with Media-Saturn Deutschland GmbH. In the balance sheet as of 30 September 2013, the sales rights are recognised under intangible assets with a residual carrying amount of 67.1 million euros (30 June 2013: 11.4 million euros), and the liabilities arising from distribution rights (with the current element shown in trade accounts payable and the non-current element shown in the other liabilities incl. VAT were shown with a total of 87.2 million euros (30 June 2013: 29.4 million euros).
| Figures in €'000s | ||||
|---|---|---|---|---|
| Mobile | Elimination of intersegment |
|||
| Communications | Other/Holding | revenue and cost | Total | |
| Third-party revenue | 2,346,432 | 28,085 | 0 | 2,374,517 |
| Intersegment revenue | 4,305 | 7,389 | –11,694 | 0 |
| Revenue, total | 2,350,737 | 35,474 | –11,694 | 2,374,517 |
| Cost of materials, third parties | –1,830,961 | –12,071 | 0 | –1,843,032 |
| Intersegment cost of materials | –3,619 | –4,217 | 7,836 | 0 |
| Cost of materials, total | –1,834,580 | –16,288 | 7,836 | –1,843,032 |
| Segment Gross profit | 516,157 | 19,186 | –3,858 | 531,485 |
| Other operating income | 43,220 | 8,482 | –2,809 | 48,893 |
| Other own work capitalised | 6,470 | 417 | 0 | 6,887 |
| Personnel expenses | –109,134 | –17,202 | 0 | –126,336 |
| Other operating expenses | –192,944 | –11,838 | 6,667 | –198,115 |
| Share of results of associates | 0 | 215 | 0 | 215 |
| Segment EBITDA | 263,769 | –740 | 0 | 263,029 |
| Depreciation and impairment write-downs | –38,909 | –2,809 | 0 | –41,718 |
| Segment EBIT | 224,860 | –3,549 | 0 | 221,311 |
| Group financial result | –29,910 | |||
| Taxes on income | –12,237 | |||
| Group result from continued operations | 179,164 | |||
| Group result from discontinued operations | 0 | |||
| Group result | 179,164 | |||
| Group result attributable to shareholders of freenet AG | 179,028 | |||
| Group result attributable to non-controlling interest | 136 | |||
| Investments in continued operations | 11,913 | 1,216 | 13,129 |
| Figures in €'000s | ||||
|---|---|---|---|---|
| Mobile | Elimination of intersegment |
|||
| Communications | Other/Holding | revenue and cost | Total | |
| Third-party revenue | 2,220,282 | 49,284 | 0 | 2,269,566 |
| Intersegment revenue | 3,587 | 7,050 | –10,637 | 0 |
| Revenue, total | 2,223,869 | 56,334 | –10,637 | 2,269,566 |
| Cost of materials, third parties | –1,726,198 | –23,687 | 0 | –1,749,885 |
| Intersegment cost of materials | –3,491 | –3,504 | 6,995 | 0 |
| Cost of materials, total | –1,729,689 | –27,191 | 6,995 | –1,749,885 |
| Segment Gross profit | 494,180 | 29,143 | –3,642 | 519,681 |
| Other operating income | 40,454 | 8,444 | –3,296 | 45,629 |
| Other own work capitalised | 4,244 | 623 | –51 | 4,816 |
| Personnel expenses | –97,080 | –20,639 | 0 | –117,719 |
| Other operating expenses | –179,585 | –17,551 | 6,962 | –190,174 |
| Share of results of associates | 0 | 1,002 | 0 | 1,002 |
| Segment EBITDA | 262,213 | 1,022 | 0 | 263,235 |
| Depreciation and impairment write-downs | –107,599 | –3,501 | 0 | –111,100 |
| Segment EBIT | 154,614 | –2,479 | 0 | 152,135 |
| Group financial result | –30,100 | |||
| Taxes on income | 9,157 | |||
| Group result from continued operations | 131,192 | |||
| Group result from discontinued operations | 0 | |||
| Group result | 131,192 | |||
| Group result attributable to shareholders of freenet AG | 131,113 | |||
| Group result attributable to non-controlling interest | 79 | |||
| Investments in continued operations | 9,825 | 2,999 | 12,824 |
26 March 2014¹ Publication of the consolidated financial statements/Annual Report 2013
8 May 2014¹ Publication of interim report for the first quarter of 2014
13 May 2014¹ Annual General Meeting
7 August 2014¹ Publication of interim report for the second quarter of 2014
7 November 2014¹ Publication of interim report for the third quarter of 2014
Hollerstraße 126 24782 Büdelsdorf Germany
Phone: +49 43 31/69-10 00 www.freenet-group.de
Investor Relations Deelbögenkamp 4c 22297 Hamburg Germany
Phone: +49 40/5 13 06-7 78 Fax: +49 40/5 13 06-9 70 [email protected]
The annual report and our interim reports are also available on at: www.freenet-group.de/investor/publications/quarterly-annual-reports/index.html
The English version of the Interim Report is a translation of the German version of the Interim Report. The German version of this Interim Report is legally binding.
Current information concerning freenet AG and the freenet share is available on our website at www.freenet-group.de.
If your mobile phone has QR code recognition software, scanning the code will forward you to the freenet Group website.
freenet AG · Hollerstraße 126 · 24782 Büdelsdorf
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