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1&1 AG Interim / Quarterly Report 2024
1_10-q_2024-08-08_81737f57-b903-4afa-a7b6-2e9c69c5f92e.pdf
Interim / Quarterly Report
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Half-Year Report
2024
Facts \& Figures
Selected Performance Indicators
| HY1 2024 | HY1 2023 | Change | Q2 2024 | Q2 2023 | Change | Q1 2024 | Q4 2023 | Q3 2023 | |
|---|---|---|---|---|---|---|---|---|---|
| Profit (in €m) | |||||||||
| Sales revenue | 2,015.9 | 1,993.1 | $1.1 \%$ | 991.5 | 972.1 | $2.0 \%$ | 1,024.4 | 1,064.9 | 1,038.7 |
| Service revenue | 1,644.9 | 1,584.6 | $3.8 \%$ | 823.0 | 795.7 | $3.4 \%$ | 821.9 | 824.3 | 834.3 |
| Hardware and other revenues | 371.0 | 408.5 | $-9.2 \%$ | 168.5 | 176.4 | $-4.5 \%$ | 202.5 | 240.6 | 204.4 |
| EBITDA | 326.6 | 352.0 | $-7.2 \%$ | 144.3 | 169.9 | $-15.1 \%$ | 182.3 | 142.7 | 159.1 |
| EBITDA segment Access | 437.6 | 392.8 | $11.4 \%$ | 212.9 | 191.5 | $11.2 \%$ | 224.7 | 201.3 | 192.1 |
| EBITDA segment 1\&1 Mobile Network | $-111.0$ | $-40.8$ | $-68.6$ | $-21.6$ | $-42.4$ | $-58.6$ | $-33.0$ | ||
| EBIT | 196.1 | 254.1 | $-22.8 \%$ | 78.2 | 120.7 | $-35.2 \%$ | 117.9 | 92.1 | 109.6 |
| EBIT excluding PPA writeoffs | 224.7 | 282.7 | $-20.5 \%$ | 92.5 | 135.0 | $-31.5 \%$ | 132.2 | 106.4 | 123.8 |
| EBT | 196.5 | 257.6 | $-23.7 \%$ | 77.7 | 122.8 | $-36.7 \%$ | 118.8 | 94.9 | 112.4 |
| EBT excluding PPA writeoffs | 225.1 | 286.2 | $-21.3 \%$ | 92.0 | 137.1 | $-32.9 \%$ | 133.1 | 109.2 | 126.6 |
| Profit per share (in €) | 0.77 | 1.02 | $-24.5 \%$ | 0.30 | 0.49 | $-38.8 \%$ | 0.47 | 0.35 | 0.42 |
| Profit per share excluding PPA write-offs (in €) | 0.89 | 1.13 | $-21.2 \%$ | 0.36 | 0.54 | $-33.3 \%$ | 0.53 | 0.41 | 0.47 |
| Cash flow (in €m) | |||||||||
| Net inflow of funds from operating activities | $-24.5$ | 23.0 | $-113.0$ | $-76.8$ | $47.1 \%$ | 88.5 | 12.6 | 190.0 | |
| Net outflow of funds in investment sector | 69.5 | $-0.8$ | 138.9 | 92.6 | $50.0 \%$ | $-69.4$ | 56.2 | $-180.6$ | |
| Free cash flow | $-58.5$ | $-58.0$ | $0.9 \%$ | $-137.0$ | $-117.6$ | $16.5 \%$ | 78.5 | $-149.3$ | 137.2 |
| 30/06/2024 | 31/12/2023 | Change | 30/06/2024 | 31/12/2023 | Change | 31/03/2024 | 31/12/2023 | 30/09/2023 | |
| Headcount (incl. management board) | |||||||||
| Total per end of June | 3,321 | 3,320 | $0.0 \%$ | 3,321 | 3,320 | $0.0 \%$ | 3,313 | 3,320 | 3,244 |
| Customer contracts (in millions) | |||||||||
| Access, contracts | 16.35 | 16.26 | $0.6 \%$ | 16.35 | 16.26 | $0.6 \%$ | 16.30 | 16.26 | 16.11 |
| of which mobile internet | 12.36 | 12.25 | $0.9 \%$ | 12.36 | 12.25 | $0.9 \%$ | 12.29 | 12.25 | 12.10 |
| of which broadband (ADSL, VDSL, FTTH) | 3.99 | 4.01 | $-0.5 \%$ | 3.99 | 4.01 | $-0.5 \%$ | 4.01 | 4.01 | 4.01 |
| Balance Sheet (in €m) | |||||||||
| Short-term assets | 1,847.9 | 1,927.8 | $-4.1 \%$ | 1,847.9 | 1,927.8 | $-4.1 \%$ | 1,969.2 | 1,927.8 | 2,043.2 |
| Long-term assets | 6,074.4 | 5,812.5 | $4.5 \%$ | 6,074.4 | 5,812.5 | $4.5 \%$ | 5,868.7 | 5,812.5 | 5,627.4 |
| Equity | 6,016.3 | 5,887.1 | $2.2 \%$ | 6,016.3 | 5,887.1 | $2.2 \%$ | 5,970.4 | 5,887.1 | 5,825.4 |
| Balance sheet total | 7,922.3 | 7,740.3 | $2.4 \%$ | 7,922.3 | 7,740.3 | $2.4 \%$ | 7,837.9 | 7,740.3 | 7,670.6 |
| Equity ratio | $75.9 \%$ | $76.1 \%$ | $75.9 \%$ | $76.1 \%$ | $76.2 \%$ | $76.1 \%$ | $75.9 \%$ |
Contents
2 Facts \& Figures
4 Letter from the Management Board
9 Interim Management Report of 1\&1 Aktiengesellschaft for the First Half of 2024
10 Principles of the Group
13 Course of Business
16 Position of the Group
24 Risks and Opportunities Report
25 Forecast Report
31 Interim Financial Statements for the First Half of 2024
32 Consolidated Comprehensive Income Statement
33 Consolidated Balance Sheet
35 Consolidated Cash Flow Statement
37 Consolidated Changes in Equity Statement
38 Explanatory Comments on the Interim Consolidated Financial Statements 30 June 2024
54 Consolidated Statement of Comprehensive Income, Quartely Development
56 Responsibility Statement
59 Miscellaneous
60 Investor Relations Corner
62 Publications, Information and Order Service
62 Financial Event Calendar
62 Contacts
63 Legal Information
65 Brand portfolio of $1 \& 1$
Letter from the Management Board
Dear Shareholders,
The first half of 2024 was challenging at times for 1\&1. While we achieved significant milestones in expanding and operating our mobile network, we also faced a setback. We managed to increase our service revenue and the number of customer contracts, we fell short of our ambitious targets.
After launching mobile services on our 5G network at the end of 2023, our focus in 2024 was to start the migration of our 12 million plus existing mobile customers and further expanding the antenna sites. In January we started the customer migration as scheduled.
At the end of May, there was a disruption to the mobile network, which placed a heavy burden on our customers and our team and led to one-off additional expenses.
During the fault clearance of the network, it became apparent that central components were not sufficiently dimensioned for further network growth. This has been largely rectified in the meantime, but the delivery of an already planned capacity expansion has now been delayed. In order to maintain sufficient network capacity for new customer contracts, $1 \& 1$ has only migrated a small number of existing customer contracts to the new network since the end of May. Expected savings in the purchase of wholesale services will therefore probably not be realized until October.
The temporary network outage has also slowed down our operational growth. There was an increase in contract terminations, which mainly took effect in June and July. As a result, contract growth in 2024 will be lower than expected, which will be accompanied by lower sales growth, which will also have an impact on earnings.
The expansion of the 1\&1 O-RAN network is progressing steadily. We are pleased that deliveries of antenna sites by our expansion partners continue to increase. By the end of the first half year 2024, we had taken over approximately 1,781 radio masts, which we are equipping with gigabit antennas and connecting to fibre optic networks.
Based on standardised interfaces of the innovative Open RAN technology, we flexibly combine the best and most secure products and services from around 100 partners. This marks the end of the outdated model where single manufacturers provided closed systems. In the 1\&1 O-RAN, there are no black boxes. We remain committed to forging ahead with this approach.
For 30 years now, 1\&1, one of the leading German telecommunications providers, has been a symbol of how innovative and attractive products and service vitalise and mould competition, while simultaneously being recognised for offering good value for its customers' money. Of course, we do not rely on good offerings alone, quality and service are the differentiators for our private and business customers. We were once again delighted to receive an award in the first half of the year that underscores our high standards. 1\&1 received a "very good" rating in the 2024 connect test for mobile hotlines. 1\&1 excelled notably in the categories of "expertise" and "availability". Our discount brand, yourfone, won the alternative providers category with an "outstanding" rating. Additionally, "1\&1 TV" impressed in the IPTV comparison test conducted by the consumer magazine "IMTEST," receiving a "very good" rating with an overall score of 1.2 .
Now for the operating side of the business
1\&1 has continued its path of growth in financial year 2024 and once again increased its customer base, service revenues and EBITDA in the Access operating segment.
The number of customer contracts increased by 90,000 to 16.35 million contracts (31 December 2023: 16.26 million contracts). This growth was driven by newly acquired mobile internet contracts, which totalled 12.36 million by the end of the second quarter of 2024, while the number of our broadband customers fell slightly to 3.99 million connections.
High-margin service revenues amounted to $€ 1.645$ billion in the first half of financial year 2024 (HY1 2023: €1.585 billion), which is 3.8 percent higher than the first half of 2023.
Other sales revenues - essentially from the realisation of hardware sales brought forward (in particular from investments in smartphones that will be reimbursed by the customers over minimum contract terms in the form of higher package prices) declined by -9.2 percent or -€37.5 million to €371.0 million (HY1 2023: €408.5 million). Margins in the hardware business are low. It fluctuates seasonally and its development depends heavily on the attractiveness of new devices and the model cycles of manufacturers.
Total sales of 1\&1 AG increased by 1.1 percent or $€ 22.8$ million to $€ 2.016$ billion (HY1 2023: €1.993 billion).
EBITDA in the operational Access segment increased by 11.4 percent to $€ 437.6$ million in the first half of 2024 (HY1 2023: €392.8 million). At the same time, start-up costs for the 1\&1 mobile network increased to $€-111.0$ million (HY1 2023: €-40.8 million). Of this amount, $€ 14.3$ million are out-of-period expenses from subsequent invoices for additional services for network expansion in 2022 and 2023. Due to these increased start-up costs, the total EBITDA of 1\&1 AG fell by -7.2 percent to $€ 326.6$ million (HY1 2023: €352.0 million), or by -3.2 percent to $€ 340.9$ million, excluding expenses relating to other periods.
Reduced EBITDA and higher depreciation expenses, particularly following the launch of mobile services on the 1\&1 mobile network at the end of 2023, amounting to -€130.4 million (HY1 2023: -€97.9 million), reduced EBIT to $€ 196.1$ million (HY1 2023: €254.1 million). Consequently, earnings per share (EPS) in the first half of 2024 were $€ 0.77$ (HY1 2023: €1.02). Precluding the effects of the PPA writeoffs, the profit per share amounted to $€ 0.89$ (HY1 2023: €1.13).
Free cash flow in the first half of financial year 2024 came to $€-58.5$ million (previous year: -€58.0 million). Free cash flow includes investments in tangible and intangible assets (cash CAPEX) amounting to $€ 34.0$ million (HY1 2023: €81.0 million), which primarily relate to the expansion of our mobile network. The lower investment volume compared to the previous year is due to a phasing effect during the year.
On 2 August 2024 we adjusted our forecast for the 2024 financial year. We now expect service revenue to increase by approximately 3 percent to approximately $€ 3.33$ billion (previously expected: plus approximately 4 percent to approximately $€ 3.37$ billion after $€ 3.243$ billion in 2023). EBITDA in the Access operating segment is expected to increase by approximately 9 percent to approximately $€ 860$ million (previously expected: plus approximately 12 percent to $€ 880$ million, previous year $€ 786.2$ million). Start-up costs for the 1\&1 mobile network are expected to amount to approximately -€174 million due to $€ 14.3$ million in out-of-period expenses (previously expected: approximately -€160 million after $€ 132.4$ million in 2023).
Overall, EBITDA in 2024 is expected to amount to around $€ 686$ million, or $€ 700$ million excluding priorperiod expenses (previously expected: around $€ 720$ million after $€ 653.8$ million in 2023).
We now expect the investment volume (cash capex) to be around $€ 460$ million (previously expected: around $€ 380$ million after $€ 295.6$ million in 2023). This is due to the build-up of our own inventory of network components, which were previously stockpiled by expansion partners.
1\&1 is well positioned for the next steps in the Company's development. We are optimistic about the future. We would like to express our special thanks to all of our employees for their commitment and work and to our shareholders and business partners for the trust they have placed in 1\&1.
Best regards from Montabaur,
Ralph Dommermuth
Markus Huhn
Alessandro Nava
Montabaur, August 2024
Interim Management Report of 1\&1 Aktiengesellschaft for the First Half of 2024
10 Principles of the Group
13 Course of Business
16 Position of the Group
24 Risks and Opportunities Report
25 Forecast Report
Principles of the Group
Business Model
1\&1 - only MBA MVNO on the German mobile market and rollout of the 1\&1 mobile network
The 1\&1 Group, together with 1\&1 Aktiengesellschaft, Montabaur the listed parent company (hereinafter: "1\&1 AG" or, along with its subsidiaries, "1\&1" or "Group"), is a telecommunications provider that operates in Germany and runs its own mobile network. The Group is managed via two business segments: Access and $1 \& 1$ mobile network.
Group structure, strategy and management
For information concerning the Group structure, strategy and management, please refer to the explanations in the consolidated management report of 1\&1 AG for financial year 2023. There have not been any significant changes here from the perspective of the Group.
Business activities
Chargeable contracts with 16.35 million subscribers make 1\&1 one of the leading providers of broadband and mobile services products in Germany.
Company management and group reporting encompass the Access segment and 1\&1 mobile network.
Access segment
The Group's chargeable mobile Internet and broadband products, including the related applications (such as home networks, online storage, telephony, smart home or IPTV) are grouped together in the Access segment. 1\&1 uses the landline network of its affiliate 1\&1 Versatel GmbH, which, like 1\&1, is also part of the United Internet AG Group, and can also market regional networks and broadband household lines from city carriers and Deutsche Telekom pursuant to an agreement with 1\&1 Versatel. The bundled packages provided by 1\&1 Versatel are supplemented with devices, own developments of applications and services to create an extended portfolio that sets the Company apart from its competitors.
Since the launch of mobile services in the 1\&1 mobile network, operating companies in the Access segment have been purchasing wholesale services for new customers from their own network. Wherever 1\&1 does not yet have sufficient network coverage itself during the construction of the network, 1\&1 utilises national roaming wholesale services from Telefónica. From October 2024 at the latest, these national roaming wholesale services will be available from Vodafone.
Until the launch of mobile services in its own network, 1\&1 had access to Telefónica's mobile network in Germany (so-called Mobile Bitstream Access Mobile Virtual Network Operator = MBA MVNO) and utilised capacities of other wholesale providers - e.g. the Vodafone mobile network. The successive migration of these customers to the $1 \& 1$ mobile network started at the beginning of 2024.
The Access products are marketed under well-known brands such as 1\&1, WinSim or Sim.de, each of which addresses specific target groups on the market so that 1\&1 Group covers the entire range from premium rate plans with above-average service standards to low-cost rate plans for price-conscious customers.
1\&1 mobile network segment
The expenditures and income relating to the construction and operation of the Company's own 1\&1 mobile network are disclosed in the $1 \& 1$ mobile network segment.
Upon the launch of mobile services in the 1\&1 mobile network on 8 December 2023, 1\&1 became one of today's four mobile network operators in Germany.
1\&1 is the first network operator in Europe to rely entirely on the new Open RAN technology. At the heart of $1 \& 1$ 's network is a private cloud that is operated in hundreds of cities and features local edge data centres. All network functions are controlled by software running on conventional servers. 1\&1 plans to use gigabit antennas at all antenna sites, which are connected via fibre optic to the 1\&1 edge data centres. This network architecture features minimal latency, which is essential for future real-time applications.
The 1\&1 mobile network uses the 5G frequencies acquired in 2019 in the 2 GHz and 3.6 GHz bandwidths. While the frequency blocks in the 3.6 GHz bandwidth are already available, the frequency blocks in the 2 GHz bandwidth will not become available until 1 January 2026. To bridge this period, 1\&1 has leased additional frequencies in the 2.6 GHz bandwidth from Telefónica until its own frequencies become available.
General economic and industry-related conditions
Development of the overall economy
In its updated economic outlook (World Economic Outlook, July 2024 update), the International Monetary Fund (IMF) expects the global economy to grow by 3.2 percent in 2024, following a growth of 3.3 percent in the previous year (January forecast: 3.1 percent).
However, the IMF experts also foresee increasing tensions in global trade and political uncertainty, which could accelerate inflation through higher import prices across supply chains.
During the year, the IMF has revised its economic forecast for the German market down by -0.3 percentage points and now expects economic output to increase by only 0.2 percent in 2024 (previous year: -0.2 percent). This revision is attributed to ongoing weaknesses in production.
Changes in growth forecasts 2024
| Actual 2023 | January- forecast 2024 |
April-forecast 2024 | July-forecast 2024 | Deviation from January forecast | |
|---|---|---|---|---|---|
| Germany | $-0.2 \%$ | $0.5 \%$ | $0.2 \%$ | $0.2 \%$ | $-0.3$ percentage points |
| World economic | $3.3 \%$ | $3.1 \%$ | $3.2 \%$ | $3.2 \%$ | $+0.1$ percentage points |
Source: International Monetary Fund, World Economic Outlook (Update), January, April and July 2024
Development of the industry
At its 2024 half-year press conference, the industry association Bitkom attested stable growth for the German ITC industry (ITC = information and communications technology) in a difficult overall economic environment.
The Digital Index, jointly compiled by Bitkom and the ifo Institute, stood at +7.9 points in June. This remains above the ifo Business Climate Index for the overall economy, which is still in negative territory at -6.3 points.
General legal conditions/Major events
The legal framework conditions for the business activities of $1 \& 1$ remained essentially constant in the first half of 2024 compared to financial year 2023 and had no significant impact on the business development of $1 \& 1$ Group.
No other significant events with a decisive influence on the course of business occurred in the first half of 2024.
Employees
As at 30 June 2024, 1\&1 Group employed a workforce of 3,321 (31 December 2023: 3,320).
Course of business
Development in the Access segment
As in the financial year 2023, 1\&1 once again invested in the acquisition of new customers and in the retention of current customer relationships in the first half of 2024. Focus of activities was on the marketing of mobile internet contracts.
This enabled the number of chargeable contracts in the Access segment to increase by 90,000 to 16.35 million in the first six months of 2024. The increase in customer contracts can be attributed to the mobile internet business, which amounted to 12.36 million contracts as of 30 June 2024. Broadband contracts slightly decreased to 3.99 million compared to 31 December 2023.
Development of Access contracts in the first half of 2024 (in millions)
| 30/06/2024 | 31/03/2024 | 31/12/2023 | Change HY1 | |
|---|---|---|---|---|
| Access, total contracts | 16.35 | 16.30 | 16.26 | +0.9 |
| of which mobile internet | 12.36 | 12.29 | 12.25 | +0.11 |
| of which broadband lines | 3.99 | 4.01 | 4.01 | -0.02 |
Customer contracts are marketed in the Access reporting segment while the 1\&1 mobile network segment produces infrastructure advance services, so external sales revenues are generated exclusively in the Access segment. The segment reporting is aligned with the internal organisation and reporting structure.
As a result of a temporary outage of the 1\&1 mobile network at the end of May 2024, there was an increase in contract terminations, which mainly took effect in June and July. As a result, contract growth and the associated growth in service revenue and EBITDA in the first half of 2024 was lower than expected.
By 30 June 2024, revenues in the Access segment increased by $€ 22.8$ million to $€ 2,015.9$ million (HY1 2023: $€ 1,993.1$ million), and the high-margin service revenues included in this line item rose by 3.8 percent to $€ 1,644.9$ million (HY1 2023: $€ 1,584.6$ million). The rise in service revenue can be attributed to both an increased number of subscribers and higher-value customer contracts. In the Access segment, the cost of materials declined by $€ 33.9$ million to $€ 1,284.7$ million (HY1 2023: $€ 1,318.6$ million). Gross profit from the Access segment revenue increased from $€ 674.5$ million to $€ 731.2$ million.
Segment EBITDA is at $€ 437.6$ million (HY1 2023: $€ 392.8$ million).
Major revenue and profit indicators in the Access segment (in $€ \mathrm{~m}$ )
| HY1 2024 | HY1 2023 | Change HY1 | |
|---|---|---|---|
| Sales revenue | $2,015.9$ | $1,993.1$ | $+1.1 \%$ |
| Service revenue | $1,644.9$ | $1,584.6$ | $+3.8 \%$ |
| EBITDA | 437.6 | 392.8 | $+11.4 \%$ |
Quarterly development: Change compared to the previous year's quarter in the Access segment (in $€ \mathrm{~m}$ )
| Q2 2024 | Q2 2023 | Change | |
|---|---|---|---|
| Sales revenue | 991.5 | 972.1 | $+2.0 \%$ |
| Service revenue | 823.0 | 795.7 | $+3.4 \%$ |
| EBITDA | 212.9 | 191.5 | $+11.2 \%$ |
1\&1 mobile network segment
In the first half of the financial year 2024, the 1\&1 mobile network segment remained focused on the continued expansion of the 5G mobile network.
With the successful launch of mobile services on the 1\&1 mobile network on 8 December 2023, 1\&1 now operates a fully functional mobile network. Since then, new customers have been directly connected to our network, while the migration of existing customers has been successfully under way since the beginning of 2024.
At the end of May 2024, there was a temporary outage of the $1 \& 1$ mobile network and a related underdimensioning of central components of the $1 \& 1$ network was identified. Although the disruption was quickly resolved, it resulted in unforeseen challenges in daily operations. This caused delays in the migration of existing customers, which we plan to recover.
EBITDA in 1\&1 mobile network segment was at $€-111.0$ million (HY1 2023: $€-40.8$ million). The change results from the planned increase in costs for further expansion and operation of the $1 \& 1$ mobile network, as well as the expenditures associated with the migration of existing customers to $1 \& 1$ 's own mobile network. Additionally, scheduled costs were incurred for preparing the connection of the $1 \& 1$ mobile network with the Vodafone network within the framework of national roaming. In addition, EBITDA in the 1\&1 Mobile Network segment is burdened by out-of-period expenses from subsequent invoices for additional services for network expansion in 2022 and 2023 in the amount of $€ 14.3$ million.
$€ 7.7$ million of revenue was generated in the first six months of the financial year 2024 through the supply of wholesale mobile services to the Access segment.
Cash Capex stands at $€ 26.5$ million (HY1 2023: $€ 74.8$ million). The lower investment volume compared to the previous year is due to delayed invoicing by service providers. Planned investment volume is expected to significantly increase throughout the year.
Position of the Group
Earnings position in the Group
| HY1 2024 $€ \mathrm{~m}$ |
HY1 2023 $€ \mathrm{~m}$ |
|
|---|---|---|
| Sales | $2,015.9$ | $1,993.1$ |
| Cost of sales | $-1,458.7$ | $-1,388.7$ |
| Gross profit | $\mathbf{5 5 7 . 2}$ | $\mathbf{6 0 4 . 4}$ |
| Distribution costs | -262.9 | -254.3 |
| Administration costs | -57.5 | -57.1 |
| Other operating income / expenses | 18.7 | 13.5 |
| Impairment losses | -59.4 | -52.4 |
| Results from operating activities | $\mathbf{1 9 6 . 1}$ | $\mathbf{2 5 4 . 1}$ |
| Financial result | 0.4 | 3.5 |
| Profit before taxes | $\mathbf{1 9 6 . 5}$ | $\mathbf{2 5 7 . 6}$ |
| Tax expenses | -60.1 | -77.6 |
| Consolidated profit | $\mathbf{1 3 6 . 4}$ | $\mathbf{1 8 0 . 0}$ |
The 1\&1 Group continued its growth trajectory in the first half of the financial year 2024. As in previous years, the contract customer business is the growth driver for the 1\&1 Group. In the first half of the financial year 2024, it was possible to increase the number of chargeable contracts in comparison with the previous year by 0.6 percent to 16.35 million contracts.
Revenue increased from $€ 1,993.1$ million in the first half of 2023 by 1.1 percent to $€ 2,015.9$ million in the first half of 2024. The sustainable and high-margin service revenues, which result essentially from the billing of current customer relationships, increased by 3.8 percent to $€ 1,644.9$ million. The positive development of service revenues results from the ongoing rise in the number of contract customers and the related monthly payments. The value of the individual contractual relationships has also increased compared to the previous year.
Other revenues, which consist largely of revenues from the realisation of hardware sales (especially from investments in smartphones that are repaid by customers over the contractual minimum term in the form of higher package prices), recorded a decline of 9.2 percent in the first half of 2024 to $€ 371.0$ million (HY1 2023: €408.5 million). This business fluctuates seasonally and its development depends heavily on the attractiveness of new devices and the model cycles of manufacturers. Regardless, these revenue fluctuations have no significant impact on EBITDA development.
The cost of sales increased in the first half of 2024 by $€ 70.0$ million or 5.0 percent to $€ 1,458.7$ million (HY1 2023: $€ 1,388.7$ million). The cost of sales in the Access business segment fell by 2.6 percent compared to the previous year and amounted to $€ 1,299.8$ million (HY1 2023: $€ 1,334.1$ million). The decline in cost of sales in the Access segment is due in particular to the decline in sales of smartphones and other hardware.
The cost of sales in the 1\&1 mobile network segment amounted to $€ 166,6$ million (HY1 2023: $€ 54.6$ million) and essentially related to the costs of setting up, expanding, and operating the 1\&1 mobile network. Depreciation in cost of sales amounted to $€ 54.6$ million in the first half of 2024, compared to $€ 22.2$ million in the first half of 2023. As in the previous year, the cost of sales includes depreciation on mobile licenses amounting to $€ 20.4$ million. The cost of sales includes $€ 14.3$ million in out-of-period expenses from subsequent invoices for additional services for network expansion in 2022 and 2023.
The gross profit margin came to 27.6 percent (HY1 2023: 30.3 percent). As a result of the higher expenses included in the cost of sales in the 1\&1 Mobile Network segment, the gross profit from revenues fell from $€ 604.4$ million by 7.8 percent or $€ 47.2$ million to $€ 557.2$ million.
Due to intensified marketing activities and new advertising campaigns - also in our new position as the fourth network operator in Germany - distribution costs increased by $€ 8.6$ million to $€ 262.9$ million in the first half of 2024 (HY1 2023: €254.3 million). In relation to revenue, distribution costs in the first half of the financial year 2024 amounted to 13.0 percent (HY1 2023: 12.8 percent).
Administration expenses remained essentially constant over the previous year at $€ 57.5$ million, i.e. 2.9 percent of sales revenue (HY1 2023: €57.1 million corresponds to 2.9 percent of sales revenue).
The other result amounts to $€ 18.7$ million (HY1 2023: 2023: €13.5 million) and consists of other operating income of $€ 20.2$ million (HY1 2023: $€ 16.5$ million) and other operating expenses of $€ 1.5$ million (HY1 2023: $€ 3.0$ million). The increase in other operating income is due in particular to better collection of reminder and chargeback fees.
The impairment on receivables and contract assets amounted to $€ 59.4$ million in the first half of the financial year 2024, compared to $€ 52.4$ million as of 30 June 2023. In relation to sales revenues, the impairment ratio was 2.9 percent (HY1 2023: 2.6 percent).
As of 30 June 2024, EBITDA amounted to $€ 326.6$ million (HY1 2023: €352.0 million). At Group level, EBITDA was 7.2 percent below the value for the comparable period of the previous year due to the constant network expansion and ongoing operation of the $1 \& 1$ mobile network and the associated expenses. The EBITDA margin was 17.7 percent as of 30 June 2024, compared to 16.2 percent in the comparable period.
Earnings before interest and taxes (EBIT) amounted to $€ 196.1$ million as of 30 June 2024 (HY1 2023: $€ 254.1$ million). The EBIT margin came to 9.7 percent (HY1 2023: 12.8 percent). Excluding the effects of PPA depreciation (depreciation on the assets recognised as part of the purchase price allocation in the merger of $1 \& 1$ and Drillisch), the EBIT came to $€ 224.7$ million and the EBIT margin was 11.1 percent (HY1 2023: €282.7 million or EBIT margin 14.2 percent). Here, too, the development results primarily from the increased costs in the $1 \& 1$ mobile network segment.
Financing expenses amounted $€ 8.5$ million (HY1 2023: $€ 4.7$ million). The increase results from the higher interest expenses from finance leasing. At $€ 8.9$ million, financial income was at the level of the previous year (HY1 2023: €8.1 million) and, as in the previous year, includes in particular interest from the investment of free liquidity at United Internet AG as part of short-term liquidity management.
Earnings before taxes (EBT) came to $€ 196.5$ million in the first half of 2024 (HY1 2023: €257.6 million). Tax expenses amounted to $€ 60.1$ million (HY1 2023: $€ 77.6$ million). The tax rate amounted to 30.6 percent (HY1 2023: 30.1 percent).
The consolidated result in the first half of 2024 amounted to $€ 136.4$ million after $€ 180.0$ million in the first half of 2023.
The undiluted profit per share in the first six months of financial year 2024 amounted to $€ 0.77$ (HY1 2023: $€ 1.02$ ). Excluding the effects of the PPA write-offs, the undiluted profit per share in 2024 amounted to $€ 0.89$ (HY1 2023: $€ 1.13$ ).
Major revenue and profit indicators (in $€ \mathrm{~m}$ )
| HY1 2024 | HY1 2023 | Change | |
|---|---|---|---|
| Sales revenue | $2,015.9$ | $1,993.1$ | 22.8 |
| Service revenue | $1,644.9$ | $1,584.6$ | 60.3 |
| EBITDA | 326.6 | 352.0 | -25.4 |
| EBIT | 196.1 | 254.1 | -58.0 |
Financial position in the Group
Development of the key cash flow figures
| $\mathbf{€ m}$ | HY1 2024 | HY1 2023 | Change |
|---|---|---|---|
| Cash flow from operating activities | 266.2 | 260.3 | 5.9 |
| Net inflow of funds from operating activities | -24.5 | 23.0 | -47.5 |
| Cash flow from investments | 69.5 | -0.8 | 70.3 |
| Free cash flow | -58.5 | -58.0 | -0.5 |
| Cash flow from financing sector | -45.4 | -22.7 | -22.7 |
| Cash and cash equivalents as at 30 June | 2.8 | 4.2 | -1.4 |
The net payments from operating activities in the first half of the year were -€24.5 million (HY1 2023: +€23.0 million). Based on a cash flow from operating activities of €266.2 million (HY1 2023: €260.3 million) the change is due mainly to the higher repayment of liabilities. Contributing to this are the reporting date-related changes in trade payables of -€52.6 million as well as advance payments on taxes on income and earnings of -€85.7 million. The changes in assets and liabilities are therefore below the previous year's figure with a balance of -€290.7 million (HY1 2023: -€237.3 million). As in the previous year, the high cash outflow is primarily due to advance payments as part of the allotment agreement with Deutsche Telekom. These payments are expected to be made on a significantly reduced scale from 2025 onwards.
The cash flow from investments includes investments in intangible and tangible assets in the amount of €34.0 million (HY1 2023: €81.3 million). Investments, which will primarily be made in the 1\&1 mobile network, are scheduled to increase over the year 2024 and amount to €460 million for the entire year. Deferrals of €81.1 million were recognised as at 30 June 2024 for assets already in use but for which no final invoice has yet been issued. Also included in the cash flow from investments is the interest received amounting to $€ 11.1$ million (HY1 2023: €5.4 million). The interest received is related to the investment of free liquid funds at United Internet; the increase is primarily due to the increase in interest rates.
Free cash flow, defined as net inflow of funds from operating activities less investments in intangible and tangible assets plus inflow of funds from disposals of intangible and tangible assets, amounted to $€-58.5$ million in the first half of the financial year 2024 and as such was essentially at the level of the first half of the financial year 2023 (HY1 2023: €-58.0 million). As in the previous year, the negative free cash flow is mainly due to one-off payments under the allotment agreement with Deutsche Telekom.
Cash flow from the financing sector included interest paid in the first half of 2024 amounting to $€ 28.9$ million (HY1 2023: €2.6 million). The interest paid came mainly from the payments related to the expansion of white spots. In return, $1 \& 1$ has committed to deferring the purchase price for the 5G frequencies, which is why these payments are like interest and are therefore classified as financing. In addition, the dividend payment of $€ 8.8$ million was made in the first half of the year, as was the case in the first half of 2023, as well as repayments of leasing liabilities of $€ 7.7$ million (HY1 2023: €11.3 million).
The cash and cash equivalents per 30 June 2024 amounted to $€ 2.8$ million (30 June 2023: €4.2 million).
Assets and liabilities in the group
Development of assets, liabilities and equity
| €m | $30 / 06 / 2024$ | $31 / 12 / 2023$ | Change |
|---|---|---|---|
| Short-term assets | $1,847.9$ | $1,927.8$ | -79.9 |
| Long-term assets | $6,074.4$ | $5,812.5$ | 261.9 |
| Total assets | $\mathbf{7 , 9 2 2 . 3}$ | $\mathbf{7 , 7 4 0 . 3}$ | $\mathbf{1 8 2 . 0}$ |
| Short-term liabilities | 675.0 | 716.6 | -41.6 |
| Long-term liabilities | $1,231.0$ | $1,136.6$ | 94.4 |
| Equity | $6,016.3$ | $5,887.1$ | 129.2 |
| Balance sheet total | $\mathbf{7 , 9 2 2 . 3}$ | $\mathbf{7 , 7 4 0 . 3}$ | $\mathbf{1 8 2 . 0}$ |
The balance sheet total increased from $€ 7,740.3$ million as at 31 December 2023 to $€ 7,922.3$ million as at 30 June 2024. On the assets side, the change in the balance sheet total is attributable to a decrease of $€ 79.9$ million in current assets and an increase of $€ 261.9$ million in non-current assets.
At $€ 2.8$ million, cash and cash equivalents are $€ 0.4$ million slightly below the 31 December 2023 value of $€ 3.2$ million.
Trade receivables increased by 7.8 percent over the previous year to $€ 359.3$ million. The increase is due particular to the increasing number of customer contracts and increased sales revenue.
The accounts due from associated companies primarily include receivables related to the investment of free liquidity at United Internet AG. As at the reporting date 30 June 2024, the total of invested liquid funds at United Internet AG amounted to $€ 317.5$ million, compared to $€ 410.0$ million at the end of 2024. The total accounts due from associated companies $€ 327.7$ million as of 30 June 2024, compared to $€ 434.3$ as of 31 December 2023.
Due to the scheduled sale of smartphones and hardware, the value of inventories in the first half of the year of 2024 is $€ 126.3$ million ( 31 December 2023: $€ 178.0$ million), below the level of the comparable period.
Short-term contract assets primarily include receivables from hardware sales and decreased by $€ 27.0$ million compared to the end of the year. Short-term prepaid expenses rose from $€ 250.6$ million to $€ 305.3$ million and relate essentially to contract costs and prepaid utilisation fees that will not be recognised through expenditures until later periods.
Other financial assets increased from $€ 42.6$ million in the previous year to $€ 70.3$ million as at June 30, 2024. The increase of $€ 27.6$ million is due to higher receivables from advertising cost subsidies as at the reporting date as well as an increase in advance payments made in connection with the network expansion. In the first half of 2024, income tax assets amounted to $€ 9.8$ million, staying in line with the same period last year. At $€ 6.4$ million, other non-financial assets were below the 2023 year-end level.
Long-term assets increased by $€ 261.9$ million to $€ 6,074.4$ million. This was partly due to an increase of $€ 149.4$ million in tangible assets, primarily due to the balancing of lease rights for rented antenna sites as part of our network expansion. The reduction of $€ 49.0$ million in intangible assets compared to the 31 December 2023 is primarily the result of scheduled depreciation of assets identified in the 1\&1 purchase price allocation. Goodwill remains unchanged from the previous year at $€ 2,932.9$ million. Long-term contract assets stood at $€ 189.9$ million as of 30 June 2024 (31 December 2023: €206.5 million).
Long-term prepaid expenses, which essentially include advance payments made within the framework of long-term purchasing contracts as well as long-term costs to obtain and fulfil contracts, had a balance of $€ 787.3$ million as of 30 June 2024. This represents an increase of $€ 178.0$ million compared to the end of 2023, due to a one-time payment related to the allotment agreement with Deutsche Telekom.
On the liabilities side, the increase in total assets is attributable to $€ 129.2$ million in equity $€ 52.8$ million in debt. Current liabilities have reduced from $€ 716.6$ million in the previous year to $€ 675.0$ million, whereas long-term debts have increased from $€ 1,136.6$ million to $€ 1,231.0$ million.
Trade accounts payables included in current liabilities rose from $€ 277.1$ million to $€ 312.7$ million. The main reason for this was outstanding payments relating to investments in the 1\&1 mobile network. In addition to the liabilities associated with the $1 \& 1$ mobile network, trade accounts payables primarily consist of outstanding payments to upstream suppliers. Accounts due to associated companies concern companies of the United Internet Group and amount to $€ 134.7$ million (31 December 2023: $€ 165.5$ million). The decline is mainly due to accounts payable to $1 \& 1$ Versatel.
The current other financial liabilities amount to $€ 144.7$ million (31 December 2023: $€ 127.8$ million). Current other non-financial liabilities fell to $€ 8.1$ million as of 30 June 2024 (31 December 2023: $€ 8.9$ million).
Current contract liabilities are unchanged and include short-term liabilities from reimbursement obligations for one-time fees for revoked contracts and deferred income from one-time fees, and amount to $€ 50.8$ million (31 December 2023: $€ 51.6$ million). Long-term contract liabilities in the amount of $€ 10.8$ million (31 December 2023: $€ 11.1$ million) include deferred long-term income from one-time fees.
Long-term debt includes other financial liabilities, which have increased by $€ 89.5$ million to $€ 965.2$ million. The increase is attributed to higher lease liabilities associated with the leasing of antenna sites for the 1\&1 mobile network. Included in the long-term other financial liabilities, unchanged from 31 December 2023, are the frequency liabilities amounting to $€ 702.6$ million.
Deferred tax amounted to $€ 207.8$ million as of 31 December 2023, and $€ 206.0$ million as of 30 June 2024.
Group equity rose from $€ 5,887.1$ million as at 31 December 2023 to $€ 6,016.3$ million as at 30 June 2024. The equity ratio amounts to 75.9 percent as at 30 June 2024 (31 December 2023: 76.1 percent). The subscribed capital is distributed in 176,764,649 no-par shares issued to the bearer with a proportionate share in the share capital of $€ 1.10$. As at the balance sheet date, 1\&1 AG holds 465,000 shares in treasury stock (31 December 2023: 465,000), and the issued share capital of 1\&1 AG amounts to $€ 193.9$ million.
General statement from the Management Board regarding the Group's economic position
Despite a challenging first half of the year, as anticipated, 1\&1 successfully increased the number of chargeable contracts by 90,000 to $€ 16.35$ million, further underpinning its strong position in the German telecommunications market. The 3.8 percent increase in service revenue also reflects a positive operational performance.
The Company's successful development once again demonstrates the advantages of the 1\&1 business model, which is based predominantly on electronic subscriptions with fixed monthly charges and contractually agreed terms. This secures stable and plannable revenues and cash flows, provides protection from
economic fluctuations and opens up financial manoeuvring room so that opportunities arising in existing and new business fields and markets can be exploited.
The Management Board is generally satisfied with the rollout of the mobile network. The construction of the central and local data centres required for the operation of a state-of-the-art and high-performance mobile communications network continues to progress on schedule. Significant progress has also been made in expanding our antenna sites. The migration of existing customers to our mobile network was initiated as planned. However, the disruption in the mobile network at the end of May 2024 underscores the high complexity and challenges of building an entirely new mobile network.
Overall, the Management Board believes that the 1\&1 Group remains in an excellent position for further corporate development. The Board has a positive assessment of the assets and liabilities, the financial position and earnings and is optimistic in its outlook for the future.
Risks and opportunities report
The risk and opportunity policy of 1\&1 Group is oriented to the goal of maintaining and sustainably increasing the Company's value by taking advantage of opportunities and identifying and controlling risks at an early stage. The risk and opportunity management as practised ensures that $1 \& 1$ can carry out its business operations in a controlled corporate environment.
The risk and opportunity management regulates the responsible handling of uncertainties that are always a part of entrepreneurial activities.
Overall statement by the Management Board on the Group's risk and opportunity position
The assessment of the overall risk position is the result of the consolidated consideration of all significant risk fields or single risks, taking into account interdependencies.
The overall risk and opportunity position remained largely stable in the first six months of 2024 compared with the risk and opportunity reporting in the 2023 consolidated financial statements. No risks to the continued existence of $1 \& 1$ as a going concern were identifiable either from single risk positions or from the general risk situation during the reporting period or at the time this half-year financial report was prepared.
By continually expanding the scope of its risk management, 1\&1 counters these risks and limits them, insofar as reasonable, to a minimum by implementing specific actions.
In our 2023 annual report on opportunities and risks, 1\&1 highlighted the risks associated with the continued development and operation of the $1 \& 1$ mobile network. These risks partially materialised in the first half of 2024 due to the network disruption at the end of May. Although we addressed the specific causes of the disruption, the technical complexity of building the mobile network means that future disruptions cannot be entirely ruled out.
Following the disruption, audits identified capacity bottlenecks in the network. As a precaution, 1\&1 scaled back customer migration. Although the migration will be completed later, the delay reduces the cost-saving potential of advance services. As planned, the bottlenecks will be eliminated in the course of the year through a planned expansion of capacity.
We are currently negotiating with our expansion partners in response to the network disruption, which could result in compensation payments. These negotiations also involve discussing claims for unplanned additional costs submitted by one of the partners.
Forecast report
This report contains certain statements oriented to the future which are based on the current assumptions and projections of the Company's management. Various risks, uncertainties and other factors, both known and unknown, can cause the actual results, financial position, development or performance of the Company to deviate substantially from the assessment shown here.
Economic expectations
In its updated economic outlook (World Economic Outlook, July 2024 update), the International Monetary Fund (IMF) expects the global economy to grow by 3.2 percent in 2024 and 3.3 percent in 2025, following growth of 3.3 percent in the previous year. However, the IMF experts also foresee increasing tensions in global trade and political uncertainty, which could accelerate inflation through higher import prices across supply chains.
Economic Projection - Economic Development (in Percent)
| 2025e | 2024e | 2023 | |
|---|---|---|---|
| World | +3.3 | +3.2 | +3.3 |
| Germany | +1.3 | +0.2 | -0.2 |
Source: International Monetary Fund, World Economic Outlook (Update), July 2024
Specifically, the IMF currently expects the global economy to grow by 3.2 percent in 2024 and 3.3 percent in 2025 (previous year: 3.3 percent). In Germany, the IMF expects an increase of 0.2 percent for 2024 and 1.3 percent for 2025 .
Industry/market expectations
At its 2024 half-year press conference, the industry association Bitkom attested stable growth for the ITC industry (ITC = information and communications technology) in a difficult overall economic environment.
The association has updated its forecast for all of 2024, predicting total revenue for the ICT industry to reach $€ 224.8$ billion, a 4.3 percent increase. Looking ahead to 2025, growth is expected to remain strong, with a projected 4.7 percent increase, bringing total revenue to $€ 235.4$ billion.
As in previous years, the "information technology" submarket is expected to experience the greatest growth. According to current forecasts, IT revenues will reach $€ 151.2$ billion in 2024. This corresponds to an increase of 5.4 percent. The strongest increase is expected in software sales, which are expected to rise by 9.8 percent to $€ 46.6$ billion. Artificial intelligence is playing an increasingly important role within this segment, with huge growth of 39.2 percent to $€ 1.5$ billion. Collaboration tools, i.e. applications for cooperation and mobile working, are also posting sales of $€ 1.3$ billion, an increase of 15.1 percent. IT services revenues are expected to grow by 4.5 percent to $€ 51.6$ billion. After a decline in the previous year, the hardware segment is expected to see slight growth of 2.8 percent, reaching $€ 53.0$ billion. A high growth rate is particularly anticipated in the Infrastructure-as-a-Service (IaaS) sector, which includes rented server, network, and storage capacities. This is due to the (foreseeable) slowdown in the growth of mobile PCs, desktop PCs and tablets after the high investments in these devices by companies and private households before the coronavirus pandemic.
The telecommunications submarket is expected to grow moderately by 2.0 percent to $€ 73.7$ billion in 2024. Bitkom calculates that telecommunications services will generate revenues of $€ 52.8$ billion, an increase of 1.8 percent. The devices market is anticipated to grow even more robustly, with a 4.3 percent increase to $€ 12.8$ billion. However, investments in telecommunications infrastructure are expected to decline slightly by 0.3 percent to $€ 8.1$ billion.
Forecast for financial year 2024
With the announcement of 2 August 2024, 1\&1 has updated the forecast for the financial year 2024. The Management Board now expects service revenues to increase by approximately 3 percent to approximately $€ 3.33$ billion in the financial year 2024 (previously expected: plus approximately 4 percent to approximately $€ 3.37$ billion after $€ 3.243$ billion in 2023). Start-up costs in the 1\&1 Mobile Network segment are expected to amount to approximately -€174 million in 2024 (previously expected: approximately -€160 million after -€132.4 million in 2023), due to approximately €14 million in out-of-period expenses. EBITDA in the Access operating segment is expected to increase by approximately 9 percent to approximately $€ 860$ million (previously expected: plus approximately 12 percent to $€ 880$ million, previous year $€ 786.2$ million). Overall, EBITDA in 2024 is expected to be around $€ 686$ million, or $€ 700$ million excluding prior-period expenses (previously expected: around $€ 720$ million after $€ 653.8$ million in 2023)
1\&1 now anticipates an investment volume (cash capex) of around $€ 460$ million (previously expected: approximately $€ 380$ million after $€ 295.6$ million in 2023). The background to this is the build-up of the company's own inventory of network components, which were previously stockpiled by expansion partners.
General statement from the Management Board on presumable development
Following the successful launch of mobile services on the 1\&1 network in 2023, the first half of the year focused on further expanding the $1 \& 1$ mobile network and starting the migration of over 12 million existing customers. Another milestone in the financial year 2024 will be the connection of the $1 \& 1$ mobile network with the Vodafone network within the framework of the national roaming agreement.
The 1\&1 Management Board expects that by operating its own mobile network the company will be more independent from wholesale services providers and, as a result of the more in-depth added value, have a solid foundation for the successful development of the Group. Thanks to its excellent current position in the telecommunications market and to the new opportunities to respond even more precisely to customer needs with tailored products and offerings by operating its own mobile network, the Management Board believes that $1 \& 1$ is well positioned to take the future steps of the Company's development, and the Board is optimistic about the future.
The Management Board expects growth in the second half of the financial year 2024, particularly in the mobile internet sector within the Access segment. Thanks to a business model that is based for the most part on electronic subscriptions, $1 \& 1$ views its position as by and large stable and secure from economic fluctuations. $1 \& 1$ will continue to pursue this sustainable business policy in the coming years.
In view of the successful start to the year and of the situation at the time of the issue of the report as well, the Management Board believes that the Company is well on its way for further growth.
Major accounting, valuation and consolidation principles
The half-year financial report of 1\&1 AG as at 30 June 2024 was prepared, as were the consolidated annual financial statements as at 31 December 2023, in accordance with the International Financial Reporting Standards (IFRS) as they are to be applied in the European Union (EU).
The accounting and valuation principles applied in the half-year financial report are exactly the same as the methods applied as at 31 December 2023 with the exception of the standards that must be applied for the first time, and it must be read in the context of the consolidated financial statements as at 31 December 2023.
Future-oriented statements and forecasts
This half-year financial report contains future-oriented statements that are based on the current expectations, assumptions and forecasts of the 1\&1 AG Management Board and the information available to the Board at this time. The future-oriented statements are subject to various risks and uncertainties and are based on expectations, assumptions and forecasts that may possibly prove to be false in future. 1\&1 AG does not guarantee that the future-oriented statements will prove to be correct, and it neither assumes any obligation nor does it have any intention to adjust or update any future-oriented statements made in this half-year financial report.
Use of assumptions and estimates
During preparation of the half-year financial report, management makes discretionary decisions as well as estimates and assumptions that affect the amounts of the income, expenses, assets and liabilities disclosed on the closing date and the disclosure of contingent liabilities. The uncertainty related to these assumptions and estimates may lead to results that in future require substantial restatements in the carrying value of the relevant assets or liabilities.
Use of financial key performance indicators relevant to business management
Financial key performance indicators such as EBITDA, EBITDA margin, EBIT, EBIT margin or free cash flow are used in addition to the disclosures required by the International Financial Reporting Standards (IFRS) in the Company's annual and interim financial statements to ensure a clear and transparent presentation of 1\&1's business development. Information about the use, definition and calculation of these key performance indicators is available starting on page 59 of the Annual Report 2023 of 1\&1 AG.
The financial key performance indicators relevant for the management of the Group are service revenues, EBITDA according to IFRS and cash Capex. In addition to these financial key performance indicators, the most important non-financial key indicator is the number of customer contracts.
The aforementioned key performance indicators are adjusted for special factors/special effects to the extent necessary for a clear and transparent presentation and are reported under the designation "comparable operating key performance indicators" (e.g. comparable operating EBITDA, comparable operating EBIT or comparable operating EPS). As a rule, the special effects are related solely to those effects that, because of their nature, frequency and/or scope, are capable of negatively affecting the meaningfulness of the financial key performance indicators for the financial and earnings development of the Group. All special effects are pointed out and explained in the relevant sections of the financial statements as part of the roll-over to the
unadjusted financial key performance indicators. No adjustments were necessary for the financial years 2023 and 2024, so the unadjusted figures are comparable.
Miscellaneous
All major subsidiaries are included in the consolidated interim financial statements. The scope of consolidation has not changed compared to the consolidated financial statements per 31 December 2023.
As in the previous year, no companies were sold in the reporting period.
The half-year financial report has not been audited in accordance with section 317 Commercial Code [Handelsgesetzbuch; HGB] or reviewed by an auditor.
Important events after 30 June 2024
There were no significant events after the balance sheet date.
Montabaur, 8 August 2024
Ralph Dommermuth
Markus Huhn
Alessandro Nava
The Management Board
Interim Financial Statement for the First Half of 2024
32 Consolidated Comprehensive Income Statement
33 Consolidated Balance Sheet
35 Consolidated Cash Flow Statement
37 Consolidated Changes in Equity Statement
38 Explanatory Comments on the Interim Consolidated Financial Statements 30 June 2024
55 Consolidated Statement of Comprehensive Income, Quarterly
Development
Consolidated Comprehensive Income Statement
from 1 January to 30 June 2024
| 2024 | 2023 | |
|---|---|---|
| January - June | January - June | |
| $\mathrm{k} €$ | k€ | |
| Sales | 2,015,944 | 1,993,098 |
| Cost of sales | $-1,458,699$ | $-1,388,656$ |
| GROSS PROFIT FROM REVENUES | 557,245 | 604,442 |
| Distribution costs | $-262,862$ | $-254,317$ |
| Administration costs | $-57,501$ | $-57,134$ |
| Other operating expenses | $-1,477$ | $-2,975$ |
| Other operating income | 20,152 | 16,461 |
| Impairment losses from receivables and contract assets | $-59,417$ | $-52,353$ |
| RESULTS FROM OPERATING ACTIVITIES | 196,140 | 254,124 |
| Financing expenses | $-8,470$ | $-4,692$ |
| Financial income | 8,862 | 8,128 |
| PROFIT BEFORE TAXES | 196,532 | 257,560 |
| Tax expenses | $-60,115$ | $-77,590$ |
| CONSOLIDATED PROFIT | 136,417 | 179,970 |
| Profit per share (in €) | ||
| - undiluted | 0.77 | 1.02 |
| - diluted | 0.77 | 1.02 |
| Weighted average number of shares outstanding (in millions) | ||
| - undiluted | 176.30 | 176.30 |
| - diluted | 177.40 | 176.30 |
| Rollover to total consolidated profit | ||
| CONSOLIDATED PROFIT | 136,417 | 179,970 |
| Other results | 0 | 0 |
| TOTAL CONSOLIDATED PROFIT | 136,417 | 179,970 |
Consolidated Balance Sheet
as at 30 June 2024
| $30 / 06 / 2024$ | $31 / 12 / 2023$ | |
|---|---|---|
| k€ | k€ | |
| ASSETS | ||
| Short-term assets | ||
| Cash and cash equivalents | 2,788 | 3,197 |
| Trade accounts receivable | 359,290 | 333,372 |
| Receivables due from associated companies | 327,748 | 434,343 |
| Inventories | 126,285 | 177,999 |
| Contract assets | 639,817 | 666,836 |
| Prepaid expenses | 305,255 | 250,586 |
| Other financial assets | 70,256 | 42,620 |
| Income tax assets | 9,816 | 9,744 |
| Other non-financial assets | 6,640 | 9,106 |
| 1,847,895 | 1,927,803 | |
| Long-term assets | ||
| Other financial assets | 2,705 | 2,566 |
| Tangible assets | 650,400 | 501,029 |
| Intangible assets | 1,511,118 | 1,560,144 |
| Goodwill | 2,932,943 | 2,932,943 |
| Contract assets | 189,865 | 206,497 |
| Prepaid expenses | 787,346 | 609,324 |
| 6,074,377 | 5,812,503 | |
| Total assets | 7,922,272 | 7,740,306 |
| $30 / 06 / 2024$ | $31 / 12 / 2023$ | |
|---|---|---|
| $k €$ | $k €$ |
LIABILITIES AND EQUITY
Short-term liabilities
Trade accounts payable 312,715 277,053
Liabilities due to associated companies 134,662 165,461
Contract liabilities 50,760 51,564
Other provisions 23,818 24,028
Other financial liabilities 144,723 127,787
Other non-financial liabilities 8,063 8,937
Income tax liabilities 312 61,782
675,053 716,612
Long-term liabilities
Contract liabilities 10,755 11,065
Other provisions 49,016 42,016
Other financial liabilities 965,234 875,758
Deferred tax liabilities 205,953 207,781
1,230,958 1,136,620
Total liabilities 1,906,011 1,853,232
Equity
Share capital 194,442 194,442
Treasury shares 512 512
Capital reserves 2,440,899 2,439,314
Cumulative consolidated results 3,382,294 3,254,692
Other equity 862
TOTAL EQUITY 6,016,261 5,887,074
TOTAL LIABILITIES AND EQUITY 7,922,272 7,740,306
Consolidated Cash Flow Statement
from 1 January to 30 June 2024
| 2024 | 2023 | |
|---|---|---|
| January - June | January - June | |
| k€ | k€ | |
| RESULTS FROM OPERATING ACTIVITIES | ||
| Consolidated profit | 136,417 | 179,970 |
| Allowances for rollover of consolidated profit to incoming and outgoing payments | ||
| Allowances for rollover of consolidated profit to incoming and outgoing payments | 87,340 | 54,818 |
| Depreciation on assets capitalised within the framework of corporate acquisitions | 43,089 | 43,089 |
| Personnel expenses from employee stock ownership programmes | 1,585 | 853 |
| Changes in the adjustment items for deferred tax assets | $-1,829$ | $-14,974$ |
| Correction profits / losses from the sale of tangible assets | 1 | 9 |
| Financial result | $-393$ | $-3,436$ |
| Other items not affecting payments | 9 | 0 |
| CASH FLOW FROM OPERATING ACTIVITIES | 266,219 | 260,329 |
| Changes in assets and liabilities | ||
| Change in receivables and other assets | $-51,159$ | $-42,003$ |
| Change in contract assets | 43,652 | $-3,244$ |
| Change in inventories | 51,714 | $-8,144$ |
| Change in prepaid expenses | $-232,692$ | $-254,621$ |
| Change in trade accounts payable | $-45,449$ | 7,101 |
| Change in other provisions | 6,790 | $-586$ |
| Change in income tax liabilities | $-61,470$ | 24,241 |
| Change in other liabilities | 18,018 | $-24,956$ |
| Change in receivables due from / liabilities due to associated companies | $-18,976$ | 61,812 |
| Change in contract liabilities | $-1,114$ | 3,097 |
| Changes in assets and liabilities, total | $-290,686$ | $-237,303$ |
| Net inflow of funds from operating activities | $-24,467$ | 23,026 |
| 2024 | 2023 | |
|---|---|---|
| January - June | January - June | |
| CASH FLOW FROM INVESTMENTS | ||
| Investments in intangible and tangible assets | $-34,030$ | $-81,264$ |
| Inflow of funds from disposal of intangible and tangible assets | 25 | 235 |
| Investments in other financial assets | $-141$ | $-167$ |
| Interest received | 11,128 | 5,375 |
| Repayments from other financial assets | 92,500 | 75,000 |
| Net outflow of funds in investment sector | 69,482 | $-821$ |
| CASH FLOW FROM FINANCING SECTOR | ||
| Dividend payment | $-8,815$ | $-8,815$ |
| Repayment of leasing liabilities and rights of use | $-7,693$ | $-11,288$ |
| Interest payments | $-28,916$ | $-2,620$ |
| Net outflow of funds in financing sector | $-45,424$ | $-22,723$ |
| Net increase/decline in cash and cash equivalents | $-409$ | $-518$ |
| Cash and cash equivalents at beginning of fiscal year | 3,197 | 4,677 |
| Cash and cash equivalents at end of reporting period | 2,788 | 4,159 |
Consolidated Change in Equity Statement
in Financial Years 2024 and 2023
| Share capital | Treasury shares | Capital reserve | Cumulative consolidated results | Other equity | Total equity | |||
|---|---|---|---|---|---|---|---|---|
| Denomination | k€ | Denomination | k€ | k€ | k€ | k€ | k€ | |
| Per 1 January 2023 | 176,764,649 | 194,442 | 465,000 | $-512$ | 2,437,940 | 2,948,557 | $-586$ | 5,579,841 |
| Consolidated profit | 179,970 | 179,970 | ||||||
| Total results | 179,970 | 0 | 179,970 | |||||
| Dividend payments | $-8,815$ | $-8,815$ | ||||||
| Employee stock ownership programme | 853 | 853 | ||||||
| Per 30 June 2023 | 176,764,649 | 194,442 | 465,000 | $-512$ | 2,438,793 | 3,119,712 | $-586$ | 5,751,849 |
| Per 1 January 2024 | 176,764,649 | 194,442 | 465,000 | $-512$ | 2,439,314 | 3,254,692 | $-862$ | 5,887,074 |
| Consolidated profit | 136,417 | 136,417 | ||||||
| Total results | 136,417 | 0 | 136,417 | |||||
| Dividend payments | $-8,815$ | $-8,815$ | ||||||
| Employee stock ownership programme | 1,585 | 1,585 | ||||||
| Per 30 June 2024 | 176,764,649 | 194,442 | 465,000 | $-512$ | 2,440,899 | 3,382,294 | $-862$ | 6,016,261 |
Explanatory Comments on the Interim Consolidated Financial Statements 30 June 2024
1. General Information About the Company and the Financial Statements
1\&1 Group, together with 1\&1 Aktiengesellschaft, Montabaur, the listed parent company (hereinafter: "1\&1 AG" or, along with its subsidiaries, " $1 \& 1$ " or "Group"), is a telecommunications provider operating in Germany. 1\&1 has been operating its own mobile communications network since December 2023.
The address and registered office of 1\&1 AG, the parent company of the group, is Elgendorfer Strasse 57 in 56410 Montabaur, Germany. The Company is registered in the Commercial Register of the Montabaur Local Court under the number HRB 28530.
1\&1 AG is included in the consolidated interim financial statements of United Internet AG, Montabaur.
2. Major accounting, valuation and consolidation principles
The interim report from 1\&1 AG as at 30 June 2024 was prepared, just as the consolidated annual financial statements as at 31 December 2023, in compliance with the International Financial Reporting Standards (IFRS) as they are to be applied in the European Union (EU).
The abbreviated consolidated interim financial statements for the period from 01 January 2024 to 30 June 2024 were prepared in accordance with IAS 34 "Interim Financial Reporting".
The reporting scope chosen for the presentation of these consolidated interim financial statements is abbreviated in comparison with the consolidated annual financial statements and should therefore be read in association with the consolidated annual financial statements as at 31 December 2023. The accounting and valuation methods applied in the abbreviated consolidated interim financial statements are the same as the methods used in the previous year with the exception of the standards whose application has in the interim become mandatory; they are briefly designated below.
2.1 Mandatory application of new accounting standards
Application of the following standards and interpretations as revised or newly issued by the IASB is mandatory for the financial year as of 01 January 2024.
| Standard | Mandatory application for financial years beginning as of | Adoption by EU Commission | |
|---|---|---|---|
| Amendments to: IAS 1 | Amendments to IAS 1 Presentation of Financial Statements: Classification of liabilities as current or non-current liabilities with |
||
| 01/01/2024 | Yes | ||
| Amendments to: IAS 7 and IFRS 7 | Disclosure requirements in connection with supplier finance arrangements | ||
| 01/01/2024 | Yes | ||
| Amendments to: IFRS 16 | Leasing liabilities within the scope of a sale and leaseback | 01/01/2024 | Yes |
There were no significant effects for these financial statements as a result of the changes in IFRS.
2.2 Use of assumptions and estimates
During preparation of the abbreviated consolidated interim financial statements, management makes discretionary decisions, estimates and assumptions that affect the amounts of the income, expenses, assets and liabilities disclosed on the closing date and the disclosure of contingent debts. The uncertainty related to these assumptions and estimates may, however, lead to results that in future require substantial restatements in the carrying value of the relevant assets or liabilities.
The principles for discretionary decisions and estimates are essentially unchanged compared to the consolidated annual financial statements as at 31 December 2023.
The effects of climate change did not have any significant impact on the discretionary decisions and estimates or on the measurement of assets and liabilities in the first half of 2024.
2.3 Miscellaneous
All subsidiaries are included in the consolidated financial statements. The scope of consolidation has remained unchanged in comparison with 31 December 2023.
These consolidated financial statements have not been audited pursuant to section 317 Commercial Code [Handelsgesetzbuch; HGB] or subjected to a review by an independent accountant.
Explanatory Comments on the Comprehensive Income Statement
3. Sales Revenues/Segment Reporting
Segment reporting
Pursuant to IFRS 8, the identification of reporting operating segments is based on the so-called management approach. External reports are prepared on the basis of the internal organisational and management structure of the Group and of the internal financial reporting to the chief operating decision-maker. In 1\&1 Group, the Management Board of 1\&1 AG is responsible for the assessment and management of the segments' business success.
Company management and group reporting encompass the Access segment and 1\&1 mobile network.
In the Access segment, revenues are generated from the offered access services to telecommunication networks, one-time provision fees and the sale of devices and accessories. Revenues include monthly service fees, charges for special features and connection and roaming charges. Revenues are realised on the basis of utilisation units actually used and contract fees less any credit notes and restatements pursuant to reduced prices. The revenues from the sale of hardware and accessories and the related expenditures are realised as soon as the products have been delivered and accepted by the customers.
The monitoring of goodwill in the amount of $€ 2,932,943 \mathrm{k}$ (31 December 2023: €2,932,943k) is the responsibility of the CODM at the level of the "Access" segment.
The EBITDA in the 1\&1 mobile network segment amounted to -€110,976k for the reporting period (previous year: -€40,773k). The change is due to the planned increase in costs associated with the further expansion and operation of the $1 \& 1$ mobile network. Of this amount, $€ 14,300 \mathrm{k}$ relates to out-of-period expenses from subsequent invoices for additional services for network expansion in 2022 and 2023.
$€ 7.706 \mathrm{k}$ of revenue was generated in the first half of the financial year 2024 through the supply of wholesale mobile services to the Access segment.
Management by the 1\&1 AG Management Board is based primarily on key performance indicators. The 1\&1 AG Management Board measures the success of the "Access" segment primarily in terms of service revenues, of the segment cost of materials, the number of chargeable contracts, adjusted earnings before inter-
est, taxes, depreciation and amortisation (comparable operating EBITDA) and cash Capex (investment expenditure), determined on the basis of IFRS accounting methods (IFRS as they are to be applied in the EU). Unadjusted EBITDA for the financial years 2024 and 2023 corresponds to comparable operational EBITDA.
Segment material costs include expenses for purchased services and goods, corresponding to the cost of sales according to the comprehensive income statement, minus personnel expenses, depreciation, and plus commissions to third parties.
Transactions between the segments are charged at market prices.
The segment reporting of 1\&1 Group for the reporting period from 1 January to 30 June 2024 is presented below:
| Access | 1\&1 Mobile Network |
Consolidation | Total | |
|---|---|---|---|---|
| k€ | k€ | k€ | k€ | |
| Service revenue | 1,644,938 | 0 | 0 | 1,644,938 |
| Hardware and other revenues | 370,991 | 15 | 0 | 371,006 |
| Internal sales | 7,706 | $-7,706$ | 0 | |
| Segment revenues | 2,015,929 | 7,721 | $-7,706$ | 2,015,944 |
| Cost of materials for segment | $-1,284,709$ | $-109,143$ | 7,706 | $-1,386,146$ |
| Gross profit for segment | 731,220 | $-101,422$ | 0 | 629,798 |
| Segment EBITDA | 437,545 | $-110,976$ | 0 | 326,569 |
| Customer contracts (in millions) | 16.35 | - | - | 16.35 |
All revenues were realised in Germany.
The segment reporting of 1\&1 Group for the reporting period from 1 January to 30 June 2023 is presented below:
| Access | 1\&1 Mobile Network |
Consolidation | Total | |
|---|---|---|---|---|
| k€ | k€ | k€ | k€ | |
| Service revenue | 1,584,612 | 0 | 0 | 1,584,612 |
| Hardware and other revenues | 408,486 | 0 | 0 | 408,486 |
| Segment revenues | 1,993,098 | 0 | 0 | 1,993,098 |
| Cost of materials for segment | $-1,318,561$ | $-29,060$ | 0 | $-1,347,621$ |
| Gross profit for segment | 674,537 | $-29,060$ | 0 | 645,477 |
| Segment EBITDA | 392,804 | $-40,773$ | 0 | 352,031 |
| Customer contracts (in millions) | 15.96 | - | - | 15.96 |
The roll-over of the total of the segment earnings (EBITDA) to the profit before taxes on income is determined as shown below:
| 2024 January - June € |
2023 January - June k€ |
||
|---|---|---|---|
| Total segment profits (EBITDA) | 326,569 | 352,031 | |
| Write-downs | $-130,429$ | $-97,907$ | |
| Operating profit | $\mathbf{1 9 6 , 1 4 0}$ | $\mathbf{2 5 4 , 1 2 4}$ | |
| Financial result | 392 | 3,436 | |
| Earnings before income taxes | $\mathbf{1 9 6 , 5 3 2}$ | $\mathbf{2 5 7 , 5 6 0}$ |
The customer structure during the reporting period did not reveal any significant concentration on individual customers. There are no customers in 1\&1 Group with whom more than 10 percent of the total external sales revenues is generated.
Additional information on sales revenues
Group sales revenues break down as shown below:
| 2024 January - June €k |
2023 January - June k€ |
|
|---|---|---|
| Service revenues | $1,644,938$ | $1,584,612$ |
| Hardware and other revenues | 371,006 | 408,486 |
| Total | $\mathbf{2 , 0 1 5 , 9 4 4}$ | $\mathbf{1 , 9 9 3 , 0 9 8}$ |
Sales revenues increased by 1.1 percent or $€ 22,846 \mathrm{k}$ to $€ 2,015,944 \mathrm{k}$ in the first half of 2024 (previous year: $€ 1,993,098 \mathrm{k})$.
4. Cost of Sales
Cost of sales increased in the first half of 2024 by $€ 70,043 \mathrm{k}$ or 5.0 percent to $€ 1,458,699 \mathrm{k}$ (previous year: $€ 1,388,656 \mathrm{k}$ ). This mainly relates to expenses for purchased services in the amount of $€ 869,290 \mathrm{k}$ (previous year: $€ 840,661 \mathrm{k}$ ) and expenses for purchased goods in the amount of $€ 393,125 \mathrm{k}$ (previous year: $€ 410,745 \mathrm{k})$.
In the 1\&1 Mobile Network segment, the cost of sales in the interim reporting period 2024 amounted to $€ 166,612 \mathrm{k}$ (previous year: $€ 54,595 \mathrm{k}$ ) and mainly related to costs for the construction and operating of the 1\&1 mobile network. Of this amount, $€ 14,300 \mathrm{k}$ relates to out-of-period expenses from subsequent invoices for additional services for network expansion in 2022 and 2023.
The Access segment accounted for cost of sales of $€ 1,299,793 \mathrm{k}$ (previous year: $€ 1,334,061 \mathrm{k}$ ) for the interim reporting period 2024. This includes cost of sales from internal relationships totalling $€ 7,706 \mathrm{k}$ (previous year: $€ 0 \mathrm{k}$ ).
5. Impairment Losses from Receivables and Contract Assets
Impairment losses on receivables and contract assets increased in comparison with the previous year by $€ 7,064 \mathrm{k}$ from $€ 52,353 \mathrm{k}$ to $€ 59,417 \mathrm{k}$. In relation to sales revenues, the impairment ratio was 2.9 percent (previous year: 2.6 percent).
6. Write-downs
Total amortisation of intangible assets and depreciation on tangible assets during the reporting period 2024 amounted to $€ 130,429 \mathrm{k}$ (previous year: $€ 97,907 \mathrm{k}$ ).
Depreciation and amortisation of assets capitalised in relation to company acquisitions amounted to $€ 43,089 \mathrm{k}$ (previous year: $€ 43,089 \mathrm{k}$ ). Software and software licenses accounted for amortization of around $€ 42,243$ thousand (previous year: $€ 22,590$ thousand). The increase is due in particular to increased investments in software products in connection with the expansion and operation of the company's own mobile communications network. Moreover, write-downs of $€ 20,410 \mathrm{k}$ were taken for the frequency blocks in the 3.6 GHz bandwidth (previous year: $€ 20,410 \mathrm{k}$ ). The amortisation of the acquired frequency blocks in the 2 GHz bandwidth will not commence until the beginning of the allocated term.
7. Personnel Expenses
Personnel expenses for the reporting period 2024 amounted to $€ 124,252 \mathrm{k}$ (previous year: $€ 115,364 \mathrm{k}$ ). As at the balance sheet date 30 June 2024, the number of employees (headcount) was 3,321 (31/12/2023: $3,320)$.
8. Financing expenses/Financial income
Financing expenses amounted to $€ 8,470 \mathrm{k}$ in the first half of the year (previous year: $€ 4,692 \mathrm{k}$ ). This includes interest expenses from leasing liabilities amounting to $€ 5,575 \mathrm{k}$ (previous year: $€ 1,601 \mathrm{k}$ ). This increase mainly stems from the expansion of the network infrastructure.
Additionally, approximately $€ 2,815 \mathrm{k}$ (previous year: $€ 3,025 \mathrm{k}$ ) was attributed to interest-like expenses related to the acquisition of 5G frequencies. These expenses result from the deferral of the frequency liabilities extending the term of the payment obligation for the mobile radio frequencies to 2030.
Financial income amounted to $€ 8,863 \mathrm{k}$ (previous year: $€ 8,128 \mathrm{k}$ ) and, as in the previous year, resulted largely from interest on the financial investment with United Internet $A G$, the increase being due to the higher interest rate level.
Explanatory Comments on the Consolidated Balance Sheet
Explanatory comments are provided solely on the items that display noteworthy differences to the amounts disclosed in the consolidated annual financial statements as at 31 December 2023.
9. Accounts Due from Associated Companies
Accounts due from associated companies in the amount of $€ 327,749 \mathrm{k}$ (31 December 2023: €434,343k) are related to accounts due from member companies of United Internet Group that are not included in 1\&1 Group's consolidated financial statements. Of the disclosed accounts due, €317,500k (31 December 2023: $€ 410,000 \mathrm{k}$ ) relate to accounts due from the short-term investment of free cash and cash equivalents at United Internet AG.
10. Tangible and intangible assets; goodwill
A total of $€ 34,030 \mathrm{k}$ (HY1 2023: €81,264k) was invested in tangible and intangible assets during the interim reporting period. The investments relate essentially to investments in technical equipment for the rollout and operation of the $1 \& 1$ mobile network. Deferrals of $€ 81.1$ million were recognised as at 30 June 2024 for fixed assets already in use but for which no final invoice has yet been issued.
Tangible assets as at the balance sheet date 30 June 2024 break down as follows:
| $30 / 06 / 2024$ | $31 / 12 / 2023$ | |
|---|---|---|
| $€ k$ | $€ k$ | |
| Land and buildings | 194 | 201 |
| Rights of use to fixtures, fittings and equipment | 4,827 | 5,821 |
| Fixtures, fittings and equipment | 170,108 | 54,877 |
| Rights of use to land and buildings | 83,062 | 86,874 |
| Rights of use to network infrastructure | 212,903 | 101,657 |
| Payments on account | 179,306 | 251,599 |
| Tangible assets, net | $\mathbf{6 5 0 , 4 0 0}$ | $\mathbf{5 0 1 , 0 2 9}$ |
Tangible assets rose by $€ 501,029 \mathrm{k}$ from $€ 149,371 \mathrm{k}$ as at 31 December 2023 to $€ 650,400 \mathrm{k}$ as at 30 June 2024. The rise is largely due to investments in the expansion of the $1 \& 1$ mobile network and the leasing of sites for antenna installations.
Intangible assets decreased as planned from $€ 1,560,144 \mathrm{k}$ as of 31 December 2023, to $€ 1,511,118 \mathrm{k}$ as of 30 June 2024, primarily comprising 5G frequencies as well as software and software licenses for the expansion and operation of the $1 \& 1$ mobile network. During the interim reporting period 2024, write-downs of $€ 20,410 \mathrm{k}$ were taken for the frequency blocks in the 3.6 GHz bandwidth. The amortisation of the acquired frequency blocks in the 2 GHz bandwidth will not commence until the beginning of the allocated term.
The goodwill amounts to $€ 2,932,943 \mathrm{k}$ (31 December 2022: €2,932,943k).
11. Prepaid Expenses
Long-term deferred expenses amount to $€ 787,346 \mathrm{k}$ per 30 June 2024 (31 December 2023: €609,324k) and include mainly advance payments made under long-term purchase agreements of $€ 636,032 \mathrm{k}$ ( 31 December 2023: €469.892k) costs to obtain contracts of $€ 105,183 \mathrm{k}$ (31 December 2023: €99,720k) and costs to fulfil contracts of $€ 46,131 \mathrm{k}$ (31 December 2023: €39,712k). Short-term prepaid expenses rose from $€ 250,586 \mathrm{k}$ to $€ 305,255 \mathrm{k}$ and relate essentially to contract costs and prepaid utilisation fees that will not be recognised through expenditures until later periods.
12. Short-term Accounts Due to Associated Companies
Short-term accounts due to associated companies as at 30 June 2024 amount to $€ 134,662 \mathrm{k}$ (31 December 2023: $€ 165.461 \mathrm{k}$ ) and are related to accounts due to associated companies of United Internet Group that are not included in 1\&1 Group's consolidated financial statements and result by and large from wholesale procurements and other service offsets. In addition, 1\&1 AG will be included in the sales tax group of the majority shareholder United Internet AG. This means that sales tax liabilities are also shown under accounts due to associated companies. The decline is mainly due to accounts payable to 1\&1 Versatel.
13. Other Long-term Financial Liabilities
Other long-term financial liabilities per 30 June 2024 in the amount of €965,234k (31 December 2023: $€ 875,758 \mathrm{k}$ ) relate mainly to frequency liabilities in the amount of $€ 702,952 \mathrm{k}$ (31 December 2023: $€ 702,952 \mathrm{k}$ ) and liabilities pursuant to leasing agreements in the amount of $€ 259,818 \mathrm{k}$ (31 December 2023: $€ 170,511 \mathrm{k}$ ). The increase in easing liabilities is for the most part due to the addition of capitalised rights of use for network infrastructure.
14. Share capital/Own shares
The share capital as at 30 June 2024 remains unchanged at $€ 194,441,113.90$. The share capital is distributed in $176,764,649$ no-par shares issued to the bearer with a proportionate share in the share capital of $€ 1.10$ each and represents the share capital of $1 \& 1$ AG.
As of 30 June 2024, 1\&1 AG holds 465,000 shares of its own stock. The nominal value of the treasury shares of $€ 511,500 \mathrm{k}$ is deducted from the share capital of $€ 194,441,113.90$, so that the issued share capital amounts to $€ 193,929,613.90$.
15. Employee stock ownership models
Stock Appreciation Rights Drillisch (SAR Drillisch)
Expenses from the stock appreciation rights Drillisch (SAR Drillisch) amounted to $€ 1,585 \mathrm{k}$ in the first half of 2024 (previous year: $€ 853 \mathrm{k}$ ).
16. Additional Disclosures About the Financial Instruments
The table below presents the carrying value of each category of financial assets and liabilities as at 30 June 2024:
The table below presents the carrying value of each category of financial assets and liabilities as at 30 June 2023:
Cash and cash equivalents, trade accounts receivable, accounts due from associated companies and other short-term financial assets have short remaining terms. Their carrying values on the closing date are consequently close to fair value.
Participations are disclosed at fair value. It is assumed for the remaining other long-term assets, which are disclosed in the balance sheet at amortised cost, that their carrying value is equivalent to fair value.
Trade accounts payable, liabilities due to associated companies and other short-term financial liabilities have short remaining terms; the disclosed values represent approximately the fair values.
It is assumed for the remaining other long-term liabilities, which are disclosed in the balance sheet at amortised cost, that their carrying value is equivalent to fair value.
The measurement of financial assets measured at fair value is based on appropriate valuation techniques. Insofar as available, stock exchange prices on active markets are used. Option price models are primarily used to measure purchase price liabilities.
17. Related party disclosures
Pursuant to IAS 24, persons and companies are regarded as related parties if one of the parties has the possibility to control the other party or to exercise a significant influence. Associated companies and related persons of the Group include Management and Supervisory Boards of 1\&1 AG and their immediate family members, United Internet AG as the top-level controlling company within the sense of IAS 24.13 and the Group undertakings of United Internet Group that are not included in the consolidation of the Group. Moreover, participations on which the Group companies can exercise significant influence (associated companies and their subsidiaries) are classified as related parties. In addition, Mr. Ralph Dommermuth, being the majority shareholder of United Internet AG, is classified as a related party. The Management Board and Supervisory Board of United Internet AG and their immediate family members are also considered as related parties.
The group of related parties remained essentially unchanged in comparison with the consolidated annual financial statements as at 31 December 2023.
As at 30 June 2024, the Management Board members held the following stock in 1\&1 AG:
As at the closing date 30 June 2024, United Internet AG, Montabaur, held 78.32 percent of the stock in 1\&1 AG. As at 30 June 2024, Mr. Ralph Dommermuth in turn holds indirectly through holding companies
54.37 percent of the share capital of United Internet AG as reduced by his own shares of United Internet AG.
The Supervisory Board members held the following stock in 1\&1 AG as at 30 June 2024:
Supervisory Board member Vlasios Choulidis 273,333 no-par-value shares (65,000 of which were held via MV Beteiligungs GmbH), a total of 0.16 percent of the shares of $1 \& 1$ AG.
Of the disclosed sales revenues, $€ 8,491 \mathrm{k}$ (previous year: $€ 7,517 \mathrm{k}$ ) was realised during the reporting period with member companies of United Internet Group that are not members of the consolidation of the 1\&1 Group.
The expenditures in the reporting period of $€ 122,555 \mathrm{k}$ (previous year: $€ 112,277 \mathrm{k}$ ) include expenditures with member companies of United Internet Group that are not members of the consolidation of the 1\&1 Group.
The business premises in Montabaur and Karlsruhe are leased by Mr. Ralph Dommermuth to 1\&1. The resulting payment obligations are at the usual local level. The resulting payment commitments incurred during the reporting period amounted to $€ 3,689 \mathrm{k}$ (previous year: $€ 3,528 \mathrm{k}$ ).
The following table shows rights of use concerning related parties:
| Disposal of the | Carrying value | ||||
|---|---|---|---|---|---|
| Carrying value 31/12/2023 €k | Addition of the fiscal year €k | Write-down €k |
fiscal year | 30/06/2024 | |
| €k | €k | ||||
| Rights of use | 61,986 | 768 | $-3,067$ | $-12$ | 59,675 |
The following table shows leasing liabilities concerning related parties:
| Carrying value 31/12/2023 €k | Addition of the fiscal year €k | Payment / interest €k | Disposal of the | Carrying value | |
|---|---|---|---|---|---|
| fiscal year | 30/06/2024 | ||||
| Lease liabilities | 63,898 | 768 | $-2,578$ | $-12$ | 62,076 |
18. Events after 30 June 2024
There were no significant events after the balance sheet date.
Montabaur, 08 August 2024
1\&1 Aktiengesellschaft
Ralph Dommermuth
Markus Huhn
Alessandro Nava
Consolidated Statement of Comprehensive Income, Quarterly Development
in €m
| $\begin{gathered} 2023 \ \text { Q3 } \end{gathered}$ | $\begin{gathered} 2023 \ \text { Q4 } \end{gathered}$ | $\begin{gathered} 2024 \ \text { Q1 } \end{gathered}$ | $\begin{gathered} 2024 \ \text { Q2 } \end{gathered}$ | $\begin{gathered} 2023 \ \text { Q2 } \end{gathered}$ | |
|---|---|---|---|---|---|
| Sales | 1,038.7 | 1,064.9 | 1,024.4 | 991.5 | 972.1 |
| Cost of sales | $-747.1$ | $-801.9$ | $-725.2$ | $-733.5$ | $-676.1$ |
| GROSS PROFIT FROM REVENUES | 291.6 | 263.0 | 299.2 | 258.0 | 296.0 |
| Distribution costs | $-132.6$ | $-126.3$ | $-129.6$ | $-133.3$ | $-128.2$ |
| Administration costs | $-35.7$ | $-22.8$ | $-29.3$ | $-28.2$ | $-28.9$ |
| Other operating income/ expenses | 11.3 | 6.2 | 8.1 | 10.6 | 7.4 |
| Impairment losses from receivables and contract assets | $-25.0$ | $-28.0$ | $-30.5$ | $-28.9$ | $-25.6$ |
| RESULTS FROM OPERATING ACTIVITIES | 109.6 | 92.1 | 117.9 | 78.2 | 120.7 |
| Financial result | 2.8 | 2.8 | 0.9 | $-0.5$ | 2.1 |
| PROFIT BEFORE TAXES | 112.4 | 94.9 | 118.8 | 77.7 | 122.8 |
| Tax expenses | $-39.4$ | $-32.9$ | $-36.1$ | $-24.0$ | $-36.8$ |
| CONSOLIDATED PROFIT | 73.0 | 62.0 | 82.7 | 53.7 | 86.0 |
| Profit per share (in €) | |||||
| - undiluted | 0.42 | 0.35 | 0.47 | 0.30 | 0.49 |
| - diluted | 0.42 | 0.34 | 0.47 | 0.30 | 0.49 |
| Rollover to total consolidated profit | 73.0 | 62.0 | 82.7 | 53.7 | 86.0 |
| CONSOLIDATED PROFIT | 73.0 | 62.0 | 82.7 | 53.7 | 86.0 |
| Other results | 0.0 | $-0.3$ | 0.0 | 0.0 | 0.0 |
| TOTAL CONSOLIDATED PROFIT | 73.0 | 61.7 | 82.7 | 53.7 | 86.0 |
Responsibility Statement
Responsibility Statement
Declaration in accordance with Section 117 of the German Securities Trading Act (WpHG) in conjunction with Section 115(2) No. 3 WpHG
We hereby declare, to the best of our knowledge, that the interim consolidated financial statements have been prepared in accordance with the applicable accounting principles for interim reporting, adhering to the principles of proper accounting, and provide a true and fair view of the Group's assets, financial position, and results of operations. Furthermore, the interim consolidated management report accurately reflects the business performance, including the results of operations and the position of the Group, providing a true and fair view, and describes the significant opportunities and risks for the Group's anticipated development in the remainder of the financial year.
Montabaur, 08 August 2024
1\&1 Aktiengesellschaft
Ralph Dommermuth
Markus Huhn
Alessandro Nava
Miscellaneous
60 Investor Relations Corner
62 Publications, Information and Order Service
62 Financial Event Calendar
62 Contacts
63 Legal Information
65 Brand portfolio of 1\&1
Investor Relations Corner
1. Investor Relations
1\&1 AG's capital market communication follows the Fair Disclosure principle, ensuring that all shareholders and interested parties are informed of significant developments simultaneously and equally. This continuous work can be tracked by all investor groups on our Investor Relations website, where all relevant reports and publications are available. Many interested parties also reach out personally by email and/or phone.
2. Share Price Development
In the 2024 Stock Market Year
| 2023 year end | $30 / 06 / 2024$ | \% change | |
|---|---|---|---|
| 1\&1 | $€ 18.14$ | $€ 15.94$ | -12.13 |
| DAX | $16,751.64$ | $18,235.45$ | 8.86 |
| SDAX | $13,960.36$ | $14,317.55$ | 2.56 |
| TecDAX | $3,337.41$ | $3,326.63$ | -0.32 |
3. Current Analyst Assessments (Last revised 25 July 2024)
The $1 \& 1$ share is regarded as promising in the capital market, thanks to its strong strategic position in the German telecommunications market.
| Analysis | Rating | Price target | Date |
|---|---|---|---|
| Barclays | "Neutral" | $€ 20.00$ | $29 / 07 / 2024$ |
| Newstreet | "Buy" | $€ 29.00$ | $08 / 07 / 2024$ |
| UBS | "Buy" | $€ 20.50$ | $12 / 06 / 2024$ |
| Bernstein | "Underweight" | $€ 10.20$ | $30 / 05 / 2024$ |
| Redburn | "Neutral" | $€ 17.00$ | $30 / 05 / 2024$ |
An up-to-date overview of analyst recommendations can be found on 1\&1 AG's Investor Relations website. Source: https://www.1und1.ag/investor-relations#die-aktie
4. Shareholder structure
(Last Revised 31 December 2023)
$78.32 \% \mid$ United Internet AG
$78.32 \% \mid$ shs. 138,437,357
| Treasury Shares: | $0.26 \% \mid 1.61$ AG |
|---|---|
| $0.26 \% \mid$ shs. 465,000 |
Supervisory Board: $\quad 0.12 \%$ V. Choulidis
$0.04 \% \mid$ MV Beteiligungs GmbH
$0.16 \% \mid$ shs. 273,333
TGV: $\quad 3.00 \% \mid$ shs. $5,310,917$
Other Shareholders: $\quad 18.26 \% \mid$ shs. $32,278,042$
Free Float as per definition of Dt. Boerse AG: $21.42 \%$
" Presentation of the total positions driven above, based on the most recent notification of voting rights in accordance with Sections 33 ff. of the German Securities Trading Act. Accordingly, only voting rights notifications that have reached at least the first notification threshold of 37 s are taken into account, as well as the FY 2022 report, page 101.
Publications, Information and Order service
This report on the 1st half of 2024 is also available in German.
You can view our annual and quarterly reports, ad hoc announcements, press releases and other publications on the $1 \& 1$ AG website at www.1und1.ag/investor-relations.
Please use our online ordering service on our website at www.1und1.ag/investor-relations#bestellservice.
We will of course also be happy to send you the requested information by post or e-mail and, in addition, to answer your personal questions on the phone.
Financial Event Calendar*
08 August 2024
6-Month Report 2024, Press and Analyst Conference
12 November 2024 Quarterly Release Q3 2024
*These dates are provisional and subject to change.
Contact
If you have any questions about the report and 1\&1 AG, please do not hesitate to contact our Investor Relations/Press Department:
Investor Relations
Elgendorfer Straße 57
56410 Montabaur
| Phone: | $+49(0) 6181 / 412200$ |
|---|---|
| Fax: | $+49(0) 6181 / 412183$ |
| Email: | [email protected] |
Press (Trade Press)
Elgendorfer Straße 57
56410 Montabaur
| Phone: | $+49(0) 6181 / 412620$ |
|---|---|
| Fax: | $+49(0) 6181 / 412183$ |
| Email: | [email protected] |
Legal Information
1\&1 AG is a member of the United Internet Group.
Company's registered office
Elgendorfer Straße 57
56410 Montabaur
Phone: +49 (0) 2602 / 960
Fax: +49 (0) 2602 / 961010
Controller
1\&1 AG
Commercial Register Entry no.:
HRB 28530 Montabaur
VAT Reg. No.: DE 812458592
Tax number: 3065500513
Montabaur-Diez Tax Office
Management Board
Ralph Dommermuth (CEO)
Markus Huhn
Alessandro Nava
Supervisory Board
Kurt Dobitsch (Supervisory Board Chairman)
Norbert Lang (Supervisory Board Deputy Chairman)
Matthias Baldermann
Vlasios Choulidis
Friedrich Joussen
Christine Schöneweis
Note
Rounding-off differences to the mathematically precise values (monetary units, percentages etc.) may occur in tables and in references because of the applied computational methods.
[To facilitate the readability of the text, this report does not use feminine grammatical structures in addition to the masculine forms. 1\&1 points out that the use of the masculine forms must be explicitly understood to include all genders.] This quarterly release is available in German and English. Both versions are available for download at www.1 und1.ag. In case of doubt, the German version prevails.
Disclaimer
This report contains future-oriented statements that reflect the current views of 1\&1's Management Board with regard to future events. These future-oriented statements are based on our plans, estimates and expectations as currently valid. Future-oriented statements are accurate solely in light of circumstances prevailing at the time they are made. Such projections are subject to risks and uncertainties as well as other factors, many of which are beyond the control of 1\&1, that could cause actual results to differ materially from these projections. These risks, uncertainties and other factors are described in detail in our Risk report in 1\&1 AG's annual reports. 1\&1 AG does not intend to update any such future projections.
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For more information such as contact details, please visit:
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1\&1 AG
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56410 Montabaur
Germany
www.1und1.ag