Quarterly Report • May 14, 2014
Quarterly Report
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| Q1-2014 | Q1-2013 | Change | |
|---|---|---|---|
| EUR'000 | EUR'000 | ||
| Sales | 11,063 | 7,978 | 39% |
| EBITDA | 1,377 | 873 | 58% |
| EBITDA margin | 12% | 11% | +1pp |
| EBIT | 1,116 | 705 | 58% |
| EBIT margin | 10% | 9% | +1pp |
| Financial income | 587 | 356 | 65% |
| Net income | 1,865 | 769 | 143% |
| Earnings per share (EUR) | 0.14 | 0.06 | 133% |
| Employees (incl. freelancer) | 443 | 325 | 36% |
| Liquid assets | 26,525 | 23,184 | 14% |
| Operating cash flow | 2,941 | -2,049 | – |
The following Group Management Report provides information on the performance of the SYZYGY Group (hereinafter referred to as "SYZYGY" or the "Group"). The consolidated financial statements on which the Group Management Report is based have been prepared in accordance with International Financial Reporting Standards (IFRS). The financial year corresponds to the calendar year.
SYZYGY is an international service group for digital marketing with some 400 permanent employees on the balance sheet date. Group consists of SYZYGY Aktiengesellschaft and its ten subsidiaries: SYZYGY Deutschland GmbH, SYZYGY UK Ltd, uniquedigital GmbH, Unique Digital Marketing Ltd, the design studios Hi-ReS! London Ltd, Hi-ReS! New York Inc, Hi-ReS!
Hamburg GmbH, Hi-ReS! Berlin GmbH and Mediopoly Ltd. Although Hi-ReS! Hamburg is not operational at present, it continues to exist as a legal entity. Effective February 6, the stake in Ars Thanea was increased from 26 per cent to its present level of 70 per cent, with the result that the agency is fully consolidated in this financial report for the first time.
As a provider of technological, creative and media services focusing on digital marketing, SYZYGY helps major international companies to use digital media as an innovative communication and marketing tool. The Group's operating units cover the entire value chain: from strategic consulting to project planning, concepts and design to technical realisation of platforms, websites, online campaigns, and mobile applications. Digital illustrations and animations, search engine marketing and online media planning round off the range of services.
The Group's focus is on the automotive, telecommunications/IT and retail and consumer goods industries, as well as financial services.
The SYZYGY Group has a decentralised organisational structure. As the management holding company, SYZYGY AG manages the subsidiaries on the basis of financial and corporate targets (management by objectives). The management teams in the individual companies operate largely independently, within the constraints of their targets and budgets.
A control and reporting system is in place for management and monitoring purposes. It compares the financial figures against the budget on a monthly basis, while also highlighting key opportunities and risks. The key financial figures are billings, sales, earnings before taxes and interest (EBIT) and financial income for SYZYGY AG.
SYZYGY pursues a value-oriented style of corporate management based on sustainability. The objective is to expand the Group over the long term and successfully develop its activities.
Indicators for the first quarter of 2014 point to a pick-up in the global economy and significant growth in SYZYGY's core markets.
In the Eurozone, there are firmer signs of a moderate recovery. As the market situation improved and new business increased, the Markit Purchasing Managers Index rose in March for the ninth month in a row.
The leading research institutes – ifo, Insee and Istat – believe that the recovery of the European economy, which was still very tentative in 2013, accelerated slightly in the first quarter of 2014. They put the gross domestic product (GDP) of the Eurozone countries at 0.4 per cent above the prior quarter, representing the strongest growth since Q1 2011.
The German economy likewise posted growth at the start of the year, due partly to the mild winter. While the ifo Business Climate Index for Germany's commercial sector initially rose in January and February, the mood darkened in March as the Crimea crisis escalated. Survey respondents nevertheless remained satisfied with the current business situation.
Economic research institute DIW Berlin reported that GDP grew by 0.7 per cent compared with Q4 2013. The international economic organisation OECD assumes a growth rate of 0.9 per cent.
The UK's economic climate continued to improve. According to the British Chambers of Commerce, GDP grew by 0.7 per cent (OECD: 0.8%), maintaining the momentum of the previous quarters. The drivers of this trend were continued consumer spending and a buoyant property market.
Statistics for the performance of the advertising market in the first quarter of 2014 were largely unavailable when this report was being prepared. Given the general economic recovery, the Winter Olympics as an attractive advertising platform and positive forecasts for the year 2014 as a whole, it is nonetheless likely that companies increased their marketing budgets.
According to information provider Nielsen, for example, the gross advertising market in Germany saw sales growth of 2.9 per cent. Mobile advertising formats generated a particularly high growth rate of 24 per cent as companies increasingly incorporate this medium into their communications mix.
SYZYGY reports billings and sales. The sales figures are arrived at by deducting media costs from billings. Media costs are incurred in the online marketing subsidiaries as transitory items on the revenue and expenses side.
In the period under review, the Group achieved strong growth of 39 per cent with regard to both figures compared with the first quarter of 2013. Billings amounted to EUR 27.4 million, while sales totalled EUR 11.1 million. All segments contributed to this growth.
SYZYGY generated 42 per cent of its sales from clients in the automotive industry, 13 percentage points more than in the prior-year quarter. This is due to significant expansion of the client relationship with Mazda and acquiring BMW as a customer. The retail and consumer goods sector accounted for 23 per cent of sales, an almost unchanged figure, while 13 per cent was attributable to companies from the IT/ telecommunications sector. 7 per cent of sales were generated by customers in the finance sector. The remaining 15 per cent came from firms that cannot be assigned to any of these core areas.
The SYZYGY Group generated 64 per cent of its sales with its ten largest customers, up four percentage points on the same quarter of 2013.
The cost of sales rose by 42 per cent to EUR 7.8 million. This was slightly in excess of sales growth, since more work was outsourced to freelancers due to the very strong order book. Gross margin thus fell by three percentage points to 29 per cent.
General administrative expenses of EUR 1.2 million were 17 per cent above the previous year's figure. Expenses related to the increase of the stake in Ars Thanea and restructuring within the Group were the primary reason for this increase.
Sales and marketing costs rose by around a fifth to EUR 1.0 million. This increase is due to two factors: firstly, the first-time full consolidation of Ars Thanea, which invested heavily in promotional campaigns to advertise its new iPad/iPhone game "Another Case Solved"; secondly, the Group expanded its annual social media campaign "20things" and added new elements. The objective was to boost the appeal of the worldwide image campaign and secure its long-term success. Group companies also continued to invest in business development activities, which added to sales and marketing costs.
Depreciation of fixed assets amounted to EUR 0.3 million.
Due to its higher overall profitability, the SYZYGY Group markedly improved its operating income, which rose by 58 per cent to EUR 1.1 million. The EBIT margin rose by one percentage point to 10 per cent.
SYZYGY generated financial income of EUR 0.6 million (+65%) in the period under review. The realisation of gains on securities of around EUR 0.3 million made a significant contribution to this income. The result corresponds to a return of 9 per cent on average available liquidity reserves.
At EUR 2.4 million, the SYZYGY Group's pre-tax income was 122 per cent above the level of the comparative quarter. In addition to strong EBIT and financial income, revaluation effects resulting from first-time consolidation of Ars Thanea amounting to EUR 0.7 million contributed to the good result: in February 2014, SYZYGY increased its stake (held since 2011) in the Polish agency from 26 per cent to its current level of 70 per cent. Since the enterprise value rose between the two acquisition dates, the shares already held were re-valued as part of full consolidation. The resulting increase in assets is recognised as a separate item in the consolidated statement of comprehensive income and is recorded as goodwill in the balance sheet.
A tax rate of 29 per cent on taxable earnings resulted in net income of EUR 1.9 million for the period covered by the report, representing a rise of 143 per cent compared with Q1 2013. The increase in value arising from full consolidation of Ars Thanea is not subject to any taxation.
EUR 1.8 million of net income is attributable to the shareholders of SYZYGY AG. With an average of 12,740,011 shares qualifying for participation, this represents basic earnings per share of EUR 0.14 (+133%).
Taking outstanding options into account, the average number of shares qualifying for participation in the profits is 12,857,428. Accordingly, diluted earnings per share are likewise EUR 0.14.
In line with the management approach, SYZYGY uses geographical criteria to report segments and thus distinguishes between Germany and the UK. "Other segments" are also reported for the first time in Q1 2014, comprising Ars Thanea and Hi-ReS! New York. Neither company fulfils the size criteria set out in IFRS 8.13 to qualify as an independent geographical segment.
All segments performed very well in the period under review and contributed to the growth of the SYZYGY Group.
The German agencies boosted their sales by 17 per cent to EUR 6.6 million. Operating income increased in step with sales, to EUR 0.9 million, resulting in an EBIT margin of 14 per cent.
The UK segment performed particularly well in the first quarter of 2014, with sales up 68 per cent to EUR 3.9 million. The main factors in this respect were the acquisition of new clients and a significant expansion of existing client relationships to include additional markets. Operating income grew much more strongly to EUR 0.8 million (+228%), with the EBIT margin improving to 21 per cent.
Sales of EUR 0.9 million were generated in the other segments. Operating income amounted to EUR 0.2 million, representing an EBIT margin of 22 per cent.
The breakdown of sales by segment was as follows in the first quarter: 58 per cent of revenue was generated by the German companies, 34 per cent by the UK agencies and 8 per cent by Ars Thanea and Hi-ReS! New York.
With regard to EBIT, 48 per cent came from the Germany segment, 41 per cent from the UK and 11 per cent from the other segments.
SYZYGY had liquidity reserves totalling EUR 26.5 million as at the balance sheet date, 7 per cent more than as at December 31, 2013. While securities holdings remained almost unchanged, liquid funds increased by EUR 1.7 million to EUR 8.4 million (+25%) due to positive net income.
68 per cent of funds were invested in corporate bonds, while 32 per cent were accounted for by bank and overnight deposits. The average residual maturity of the bonds was 7.3 years.
Total cash flow of the SYZYGY Group amounted to EUR 1.7 million in the first three months of the year.
An inflow of EUR 2.9 million resulted from the Group's operating activities. Net income for the period of EUR 1.9 million and advance payments of EUR 2.1 million received from clients were the main positive factors in this respect.
Cash flow was reduced chiefly due to a rise of EUR 1.2 million in accounts receivable.
Cash flow from investment operations was negative at EUR 1.7 million. SYZYGY paid around EUR 1.0 million in cash to acquire the additional shares in Ars Thanea. As part of investment management, securities totalling EUR 6.4 million were bought and securities worth EUR 5.9 million were sold, resulting in an outflow of liquid funds of EUR 0.5 million.
SYZYGY received around EUR 0.4 million from financing activities because treasury shares were sold to the company's minority shareholders in the course of acquiring Ars Thanea.
SYZYGY invested EUR 0.2 million in intangible assets and fixed assets in the first quarter of 2014. In addition to investment in equipment for employees, the amount includes expenses incurred at Hi-ReS! New York due to leasing and fitting out new offices.
No research and development expenses were incurred in the period under review.
Total assets of the SYZYGY Group rose by EUR 6.0 million to EUR 72.2 million (+9%) in the first three months of the year.
Non-current assets increased by 14 per cent to EUR 28.8 million. The acquisition of Ars Thanea was the main factor here. It led both to a rise in goodwill to EUR 23.1 million (+18%) and to an increase in intangible assets to EUR 3.2 million (+22%).
With regard to current assets, liquid funds increased by 25 per cent to EUR 8.4 million due to positive net income.
Strong business performance led to accounts receivable also increasing, to EUR 15.1 million (+15%), of which EUR 0.5 million is attributable to Ars Thanea. Following full consolidation of the agency, SYZYGY currently no longer holds any long-term equity interests.
At EUR 50.9 million, equity was EUR 2.3 million or 5 per cent above the figure as at December 31, 2013, corresponding to an equity ratio of 71 per cent.
A rise in retained earnings of EUR 1.8 million had a positive impact. The sale of 75,000 treasury shares to the minority shareholders of Ars Thanea also led to a drop of EUR 0.3 million in the corresponding deduction item to its present level of EUR 0.2 million. Since the proceeds of the sale exceeded the acquisition costs, the difference of around EUR 0.1 million was allocated to additional paid-in capital.
Current liabilities totalled EUR 19.4 million, representing a 13 per cent rise compared with year-end 2013.
Due to the particular reporting date, advance payments received increased by EUR 2.1 million to EUR 5.1 million (+68%), since online marketing clients made more payments on account in the first quarter.
SYZYGY established additional provisions amounting to EUR 2.4 million in the period covered by the report, of which EUR 0.3 million was for tax provisions and EUR 2.1 million for other provisions. In contrast, accounts payable fell by EUR 2.2 million to EUR 5.9 million.
The substantial rise in the volume of orders and the first-time full consolidation of Ars Thanea resulted in a sharp rise in the number of employees. The companies in the SYZYGY Group had a total of 394 permanent employees as at the reporting date, 29 per cent more than in the same quarter of the prior year. 219 persons were employed in the German companies (56%), 119 in the UK agencies (30%), 53 at Ars Thanea (13%) and three at Hi-ReS! New York.
Some 40 freelance employees also worked for the Group.
Including the freelancers, an average of 430 persons worked for the SYZYGY Group in the first quarter. Annualised sales per head were EUR 103,000.
The full consolidation of Ars Thanea resulted in some modest changes in the percentages of employees by function. Design accounted for 19 per cent of employees as at the balance sheet date, 4 percentage points more than in the same quarter of the previous year. In contrast, the percentage of staff employed in online marketing fell by the same number of percentage points, i.e. 4, to 23 per cent. Technology-related roles (18%) and strategy consulting (9%) remained almost unchanged. 17 per cent of employees (+2 pp) were responsible for project management, while 13 per cent (-2 pp) of the workforce were employed in administration.
As with any private-sector business, the SYZYGY Group is subject to factors over which it has no control. Changes in the general economic environment and sentiment, both actual and perceived, can have a positive or negative impact on the Group's growth.
All statements about the future of the Group are based on information and findings that were known and available at the time this Annual Report was prepared. Since this information is subject to constant change, forecasts invariably involve a number of uncertainties. As a result, actual results may differ.
The SYZYGY Group draws up its forecasts on the basis of its organic development. Acquisitions can have a positive or negative effect on the future growth of the Group.
Business performance can also benefit from the acquisition of major new clients and from expanding existing client relationships by gaining additional budgets above and beyond scheduled projects.
SYZYGY currently expects moderate growth in the Group's core markets. Although there has recently been a slight downturn in sentiment indicators against the background of the uncertain situation in Ukraine, experts currently believe there is no acute risk to the general upward trend.
Germany is again expected to grow more strongly than other European countries. In its updated forecast, the German Council of Economic Experts estimates that the Eurozone will grow at a rate of 1.3 per cent; in Germany, GDP is expected to increase by 1.9 per cent. The forecasts by the Halle Institute for Economic Research are comparable, at 1.2 per cent and 2.0 per cent respectively.
In the UK, the forecasts published by the British Chambers of Commerce average 2.8 per cent for the whole year, with individual forecasts ranging from 2.1 to 3.3 per cent. Criticism is directed at the quality and sustainability of the economy's performance, which is primarily driven by consumer spending. In view of falling saving rates and rising levels of debt among private households, experts expect the recovery to weaken over the medium term.
The general state of the economy is one of the main factors that determines companies' willingness to invest in marketing campaigns. In view of the positive economic outlook at present, SYZYGY expects advertising budgets to rise in 2014. It is also to be expected that online advertising will continue to grow as a proportion of total budgets.
For the overall German market, forecasts range from 0.9 per cent (Jäschke Operational Media, JOM) through 1.2 per cent (ZenithOptimedia) to 1.8 per cent (Magna Global). Forecasts for online advertising diverge to an even greater extent: JOM expects growth rates in the "lower single-digit range", while Magna Global and ZenithOptimedia come in with much higher figures of around 9 per cent.
Growth is expected to be somewhat higher in the UK, which is one of the top 5 advertising markets in the world, along with Germany. eMarketer and AA/WARC believe that advertising spend will rise by a total of 5.3 per cent. GroupM's forecast of 6.0 per cent is even more optimistic.
Forecasts for online advertising range from 10.1 per cent (AA/WARC) to around 14 per cent (GroupM and eMarketer). Almost half of all spending (48%) will thus be allocated to Internet advertising in the UK in 2014.
Experts agree that digital marketing will continue to gain hugely in importance. Companies recognise that digital platforms play a major role in acquiring customers and generating loyalty. There is no change in the trend towards cutting the advertising budgets for traditional media – especially newspapers and magazines – and reallocating them to the Internet.
Backed by many years' in-depth expertise in media, creative design and technology, the SYZYGY Group is well positioned to support large companies in facing these challenges and tapping into the potential of new technologies.
The SYZYGY Group expects to be able to increase its sales in the current financial year by at least 15 per cent to EUR 40.0 million. Around EUR 1.5 million of that amount will be attributable to Ars Thanea. Based on budget figures, the two business segments, Germany and the UK, will make roughly equal contributions to sales growth.
Operating income will grow disproportionately, with the forecast of a 60 per cent rise to EUR 3.2 million. The increase in earnings is due to the higher profitability of the German and UK segments and the elimination of adverse factors.
Earnings per share are likely to be EUR 0.30.
Any acquisitions, which continue to be part of the SYZYGY Group's growth strategy, may affect these forecasts positively or negatively.
Bad Homburg v. d. H., April 30, 2014 SYZYGY AG
The Management Board
| Assets | 31.03.2014 | 31.03.2013 | 31.12.2013 |
|---|---|---|---|
| EUR'000 | EUR'000 | EUR'000 | |
| Non-current assets | |||
| Goodwill | 23,115 | 19,427 | 19,537 |
| Fixed assets, net | 3,233 | 2,897 | 2,657 |
| Fixed asset investments | 0 | 925 | 641 |
| Other assets | 597 | 495 | 583 |
| Deferred tax assets | 1,845 | 2,046 | 1,845 |
| Total non-current assets | 28,790 | 25,790 | 25,263 |
| Current assets | |||
| Cash and cash equivalents | 8,419 | 1,699 | 6,728 |
| Marketable securities | 18,106 | 21,485 | 18,078 |
| Accounts receivable, net | 15,064 | 10,140 | 12,944 |
| Prepaid expenses and other current assets | 1,781 | 2,314 | 3,124 |
| Total current assets | 43,370 | 35,638 | 40,874 |
| Total assets | 72,160 | 61,428 | 66,137 |
| Equity and Liabilities | 31.03.2014 | 31.03.2013 | 31.12.2013 |
| EUR'000 | EUR'000 | EUR'000 | |
| Equity | |||
| Common stock* | 12,828 | 12,828 | 12,828 |
| Additional paid-in capital | 20,294 | 20,207 | 20,207 |
| Own shares | -226 | -116 | -554 |
| Accumulated other comprehensive income | -374 | -871 | -355 |
| Retained earnings | 18,570 | 17,468 | 16,789 |
| Minorities | -165 | -308 | -238 |
| Total Equity | 50,927 | 49,208 | 48,677 |
| Non-current liabilities | |||
| Long term liability | 1,644 | 134 | 132 |
| Deferred tax liabilities | 146 | 89 | 88 |
| Total non-current liabilities | 1,790 | 223 | 220 |
| Current liabilities | |||
| Tax accruals and liabilities | 1,611 | 875 | 1,344 |
| Accrued expenses | 6,367 | 3,311 | 4,240 |
| Customer advances | 5,081 | 1,455 | 3,023 |
| Accounts payable | 5,903 | 5,896 | 8,118 |
| Other current liabilities | 481 | 460 | 515 |
| Total current liabilities | 19,443 | 11,997 | 17,240 |
| Total liabilities and equity | 72,160 | 61,428 | 66,137 |
* Contingent capital EUR 1,200,000 (Prior year: EUR 1,200,000).
| Q1-2014 | Q1-2013 | Change | |
|---|---|---|---|
| EUR'000 | EUR'000 | ||
| Billings | 27,386 | 19,760 | 39% |
| Media costs | -16,323 | -11,782 | 39% |
| Sales | 11,063 | 7,978 | 39% |
| Cost of revenues | -7,807 | -5,494 | 42% |
| Sales and marketing expenses | -1,026 | -836 | 23% |
| General and administrative expenses | -1,150 | -986 | 17% |
| Other operating income/expense, net | 36 | 43 | -16% |
| Operating profit | 1,116 | 705 | 58% |
| Financial income, net | 587 | 356 | 65% |
| Revaluation effects from first consolidation of Ars Thanea |
650 | 0 | – |
| Income before taxes | 2,353 | 1,061 | 122% |
| Income taxes | -488 | -292 | 67% |
| Net income of the period | 1,865 | 769 | 143% |
| Items that will not be reclassified to profit and loss: | 0 | 0 | – |
| Items that will or may be reclassified to profit and loss: | |||
| Currency translation adjustment | 151 | -365 | -141% |
| Net unrealized gains/losses on mark. sec., net of tax | -170 | -241 | -29% |
| Other comprehensive income | -19 | -606 | -97% |
| Comprehensive income of the period | 1,846 | 163 | 1,033% |
| thereof income share to other shareholders | 84 | -48 | – |
| thereof income share to shareholders of SYZYGY AG | 1,762 | 211 | 735% |
| Earnings per share from total operations (basic in EUR) | 0.14 | 0.06 | 133% |
| Earnings per share from total operations (diluted in EUR) | 0.14 | 0.06 | 133% |
| Accum. other compre hensive income |
||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| in EUR'000 | Number of shares (in 1,000) |
Common stock | Additional paid-in capital |
Own shares | Retained earnings | Foreign exchange currency |
Unrealised gains and losses |
to shareholders of Equity attributable SYZYGY AG |
Minority interest | Total equity |
| 01 January 2013 | 12,828 12,828 20,207 | -116 16,651 | -1,393 | 1,128 49,305 | -260 49,045 | |||||
| Comprehensive income |
3,339 | -218 | 128 | 3,249 | 22 | 3,271 | ||||
| Dividend | -3,201 | -3,201 | -3,201 | |||||||
| Purchase of own shares |
-438 | -438 | -438 | |||||||
| 31 December 2013 | 12,828 12,828 20,207 | -554 16,789 | -1,611 | 1,256 48,915 | -238 48,677 | |||||
| 01 January 2014 | 12,828 12,828 20,207 | -554 16,789 | -1,611 | 1,256 48,915 | -238 48,677 | |||||
| Comprehensive income |
1,781 | 151 | -170 | 1,762 | 84 | 1,846 | ||||
| Changes in first consolidation and shares |
-11 | -11 | ||||||||
| Sale of own shares | 87 | 328 | 415 | 415 | ||||||
| 31 March 2014 | 12,828 12,828 20,294 | -226 18,570 | -1,460 | 1,086 51,092 | -165 50,927 |
| Q1-2014 | Q1-2013 | 2013 | |
|---|---|---|---|
| EUR'000 | EUR'000 | EUR'000 | |
| Net income of the period | 1,865 | 769 | 3,361 |
| Adjustments to reconcile income from continuing operations to net cash provided by operating activities |
|||
| – Writedown of marketable securities | 57 | 0 | 0 |
| – Depreciation on fixed assets | 261 | 168 | 754 |
| – Profit and loss on sale of securities | -275 | -132 | -980 |
| – Profit (-)/loss (+) on sale of fixed assets | 21 | 0 | 262 |
| – Revaluation effects from first consolidation of Ars Thanea | -650 | 0 | 0 |
| – Income of at equity investments | 0 | 0 | -99 |
| – Other non-cash income and expenses | 475 | 315 | 250 |
| Changes in operating assets and liabilities: | |||
| – Accounts receivable and other assets | -1,221 | -284 | -3,542 |
| – Customer advances | 2,054 | -1,135 | 434 |
| – Accounts payable and other liabilities | -174 | -1,673 | 1,312 |
| – Tax accruals and payables, deferred taxes | 528 | -77 | -458 |
| Cash flows provided by operating activities | 2,941 | -2,049 | 1,294 |
| Changes in other non-current assets | -10 | 15 | -69 |
| Investments in fixed assets | -205 | -287 | -892 |
| Purchases of marketable securities | -6,420 | -10,103 | -24,074 |
| Proceeds from sale of marketable securities | 5,930 | 8,052 | 27,898 |
| Income from at equity investments | -987 | 0 | 114 |
| Cash flows used in investing activities | -1,692 | -2,323 | 2,977 |
| Dividend | 0 | 0 | -3,201 |
| Cash inflows from issuance of share capital from minority shareholders |
-11 | 0 | 0 |
| Changes in treasury stock | 415 | 0 | -438 |
| Cash flows from financing activities | 404 | 0 | -3,639 |
| Total | 1,653 | -4,372 | 632 |
| Cash and cash equivalents at the beginning of the period | 6,728 | 6,103 | 6,103 |
| Changes from first consolidation | 44 | 0 | 0 |
| Exchange rate differences | -6 | -32 | -7 |
| Cash and cash equivalents at the end of the period | 8,419 | 1,699 | 6,728 |
Pursuant to the provisions of section 37 y WpHG (German Securities Trading Act) in conjunction with section 37 w para. 2 WpHG, the financial report of SYZYGY AG for the first three months of 2014 comprises interim consolidated financial statements and an interim Group Management Report. The interim consolidated financial statements were prepared in accordance with the requirements of International Financial Reporting Standards (IFRS) for interim financial reporting as applicable within the European Union. The interim financial statements were prepared in compliance with IAS 34. Accordingly, the company elected to produce a short-form report, compared with the consolidated financial statements as at December 31, 2013. The Management Report was prepared in accordance with the applicable requirements of the WpHG.
The same accounting and consolidation principles were applied as described in the notes to the financial statements in the 2013 annual report. Individual items in the balance sheet and consolidated statement of comprehensive income are likewise presented using the same valuation principles as described and applied in the annual report for 2013. The financial figures and associated information must therefore be read in conjunction with the annual report on the consolidated financial statements for 2013.
The interim consolidated financial statements have not been subject to an auditor's review, in accordance with section 37 w para. 5 WpHG.
SYZYGY is an international agency group for digital marketing. SYZYGY AG acts as a management holding company by providing central services relating to strategy, planning, technology development, accounting, IT infrastructure and finance. SYZYGY AG also supports the subsidiaries in new business activities and generates sales from projects with third parties. As operating entities, the subsidiaries are responsible for providing consultancy and other services. With branches in Bad Homburg, Berlin, Frankfurt/ Main, Hamburg, London, Warsaw and New York, the Group's subsidiaries offer major companies an integrated portfolio of corporate Internet solutions, from strategic consulting to project planning, concepts, design and technical realisation. SYZYGY's services are complemented by search engine marketing and online media planning. As a service provider for technology, creative input and media, SYZYGY enables clients to use digital media as innovative tools for communication and marketing. The Group's business focus is on the automotive, telecommunications/IT, retail and consumer goods, and financial services industries.
As at March 31, 2014, the following subsidiaries were included in the consolidated financial statements of SYZYGY AG and fully consolidated:
In order to strengthen and extend the range of services and achieve greater international expansion, SYZYGY AG acquired a further 44 per cent of Ars Thanea on February 6, 2014. It now holds 70 per cent of the shares. Control of financial and corporate policy was transferred on February 6, 2014. Under IFRS 3.62 the acquisition led to an increase in liquid assets of kEUR 44, the acquisition of current assets of kEUR 593 and of non-current assets of kEUR 93. Liabilities totalling kEUR 766 were also acquired. Distribution of all the profit reserves to shareholders in the form of a dividend, which was approved on February 5, 2014, and a loss in January 2014 led to negative equity of kEUR 36.
Up to this point in time, SYZYGY has paid a purchase price of kEUR 987 in cash for Ars Thanea. In return, Ars Thanea's other shareholders undertook to purchase a total of 75,000 shares from SYZYGY. This transfer was completed in February 2014. The purchase price will increase under corresponding earn-out clauses if defined income targets are achieved between 2016 and 2018. Based on the latest budgeting, the Company expects to make an earn-out payment of around kEUR 1,512 in 2019.
The "old" shares (26 per cent) were remeasured at fair value, resulting in a figure of kEUR 1,181. The difference of kEUR 650 between this amount and the acquisition costs of PLN 2,400,000 (or kEUR 531 as at the date of acquisition) was recorded in financial income. There were also exchange rate effects of kEUR 35, which were recognised in the income statement in other operating income.
A difference of around kEUR 3,751 was allocated to a trademark right (kEUR 200), the development of an intangible asset (kEUR 132), the stated earnings before taxes for the order backlog (kEUR 35) and reverse deferred tax liabilities (kEUR 70). The residual difference is reported as goodwill of kEUR 3,454, denominated in PLN. In line with IFRS 3, the final purchase price allocation must be concluded no later than one year after the transaction has been completed and will therefore be verified as at December 31, 2014.
Information on general consolidation principles is provided in the 2013 annual report from page 51 onwards.
Application of IFRS 8 requires segment reporting in accordance with the Group's management approach. SYZYGY thus bases segment reporting on geographical criteria.
As the holding company, SYZYGY AG mainly delivers services to the operating units and therefore needs to be considered separately. Sales that SYZYGY AG generates with third parties are reported under the Germany segment, as is the pro rata operating income.
The Germany segment comprises SYZYGY Deutschland GmbH, uniquedigital GmbH, Hi-ReS! Hamburg GmbH and Hi-ReS! Berlin GmbH. The UK segment consists of SYZYGY UK Ltd, Unique Digital Marketing Ltd, Hi-ReS! London Ltd and Mediopoly Ltd. Hi-ReS! New York Inc and Ars Thanea ska are summarised in other segments as they cannot be allocated to either of the geographical segments.
The individual segments apply the same accounting principles as the consolidated entity.
The criteria used by SYZYGY AG to assess the performance of the segments include sales and operating income (EBIT). Transactions between segments, which are charged at market prices, were eliminated.
Segment assets are equivalent to total assets plus the goodwill attributable to the respective segment, less receivables attributable to companies in the same segment.
Segment investments comprise investments in intangible assets and fixed assets.
Segment liabilities correspond to total liabilities excluding equity, less liabilities attributable to companies in the same segment.
| 31.03.2014 in EUR'000 |
Germany | UK | Other segments | functions and consolidation Central |
Total |
|---|---|---|---|---|---|
| Billings | 15,486 | 9,079 | 3,198 | -377 | 27,386 |
| Media costs | -8,868 | -5,171 | -2,284 | 0 | -16,323 |
| Sales | 6,618 | 3,908 | 914 | -377 | 11,063 |
| of which internal sales | 450 | 165 | 26 | -641 | 0 |
| Operating income (EBIT) | 945 | 810 | 203 | -842 | 1,116 |
| Financial income | 9 | -1 | 0 | 579 | 587 |
| Assets | 25,445 | 23,422 | 7,549 | 15,744 | 72,160 |
| of which goodwill | 8,841 | 10,765 | 3,509 | 0 | 23,115 |
| Investments | 65 | 43 | 259 | 2 | 369 |
| Depreciations and amortisation | 147 | 33 | 10 | 71 | 261 |
| Segment liabilities | 15,796 | 6,213 | 4,039 | -4,815 | 21,233 |
| Employees as per balance sheet date | 197 | 119 | 56 | 22 | 394 |
| 31.03.2013 in EUR'000 |
Germany | UK | Other segments | functions and consolidation Central |
Total |
|---|---|---|---|---|---|
| Billings | 14,277 | 5,468 | 98 | -83 | 19,760 |
| Media costs | -8,639 | -3,143 | 0 | 0 | -11,782 |
| Sales | 5,638 | 2,325 | 98 | -83 | 7,978 |
| of which internal sales | 242 | 44 | 0 | -286 | 0 |
| Operating income (EBIT) | 805 | 247 | -100 | -247 | 705 |
| Financial income | 12 | 1 | 0 | 343 | 356 |
| Assets | 18,905 | 19,454 | 92 | 22,977 | 61,428 |
| of which goodwill | 8,841 | 10,586 | 0 | 0 | 19,427 |
| Investments | 279 | 7 | 1 | 0 | 287 |
| Depreciations and amortisation | 125 | 35 | 4 | 4 | 168 |
| Segment liabilities | 8,724 | 7,032 | 409 | -3,945 | 12,220 |
| Employees as per balance sheet date | 183 | 95 | 7 | 20 | 305 |
As at March 31, 2014, SYZYGY held 50,000 treasury shares. SYZYGY is authorised to resell or call in treasury shares or to offer treasury shares to third parties in the course of acquiring companies. Treasury shares do not entitle the Company to any dividend or voting rights. The extent of the share buyback is shown as a separate item to be deducted from equity. During the first quarter of 2014 75,000 treasury shares have been sold to the minority shareholders of Ars Thanea. The profit on sale of treasury share amounted to kEUR 87 and was accounted in other comprehensive income, not affecting net income.
Transactions in shares in their own organisation by board members of listed companies are called directors' dealings. In the period under review, board members did not buy or sell any SYZYGY shares.
Current holdings of shares and transactions carried out in the period under review are disclosed in the following tables:
| Management board: shares number of shares |
Marco Seiler |
Andrew Stevens |
Total |
|---|---|---|---|
| As per December 31, 2013 | 538,121 | 325,000 | 863,121 |
| Purchases | 0 | 0 | 0 |
| Sales | 0 | 0 | 0 |
| As per March 31, 2014 | 538,121 | 325,000 | 863,121 |
| Supervisory board: shares number of shares |
Michael Mädel |
Wilfried Beeck |
Thomas Strerath |
Total |
|---|---|---|---|---|
| As per December 31, 2013 | 12,000 | 120,000 | 0 | 132,000 |
| Purchases | 0 | 0 | 0 | 0 |
| Sales | 0 | 0 | 0 | 0 |
| As per March 31, 2014 | 12,000 | 120,000 | 0 | 132,000 |
| Management board: options number of shares |
Marco Seiler |
Andrew Stevens |
Total |
|---|---|---|---|
| As per December 31, 2013 | 120,000 | 120,000 | 240,000 |
| Additions | 0 | 0 | 0 |
| Sales | 0 | 0 | 0 |
| As per March 31, 2014 | 120,000 | 120,000 | 240,000 |
The members of the Supervisory Board do not hold any options.
As at March 31, 2014, the shareholders' structure has slightly changed compared to December 31, 2013. The WPP Group holds nearly 30 per cent, Marco Seiler continued to hold 4.2 per cent and Andrew Stevens 2.5 per cent of the shares. Since 0.4 per cent of the shares are held as treasury stock, the free float amounts to 62.9 per cent. As at the reporting date, the total number of shares is 12,828,450.
Bad Homburg v. d. H., April 30, 2014 SYZYGY AG
The Management Board
Investor Relations Im Atzelnest 3 61352 Bad Homburg t +49 6172 9488-251 f +49 6172 9488-272
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